<PAGE>
As filed with the Securities and Exchange Commission on October 29, 1999
Registration Nos. 33-36528;
811-6161
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
---
Pre-Effective Amendment No. ___ / /
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Post-Effective Amendment No. 43 / X /
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
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Amendment No. 45 / X /
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PIMCO FUNDS: MULTI-MANAGER SERIES
(Exact Name of Registrant as Specified in Charter)
840 Newport Center Drive, Newport Beach, CA 92660
(Address of principal executive offices) (Zip code)
(949) 760-4867
(Registrant's telephone number, including area code)
Name and address
of agent for service: Copies to:
- --------------------- ----------
Stephen J. Treadway Newton B. Schott, Jr., Joseph B. Kittredge, Esq.
c/o PIMCO Funds Esq. Ropes & Gray
Distributors LLC c/o PIMCO Funds One International Place
2187 Atlantic Street Distributors LLC Boston, Massachusetts
Stamford, Connecticut 2187 Atlantic Street 02110
06902 Stamford, Connecticut
06902
It is proposed that this filing will become effective (check appropriate box):
/ / Immediately upon filing pursuant to paragraph (b)
---
/ X / On November 1, 1999 pursuant to paragraph (b)
---
/ / 60 days after filing pursuant to paragraph (a)(1)
---
/ / On November 1, pursuant to paragraph (a)(1)
---
/ / 75 days after filing pursuant to paragraph (a)(2)
---
/ / On [date] pursuant to paragraph (a)(2) of rule 485
---
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
<PAGE>
[Front Cover]
PIMCO Funds Prospectus
Multi-Manager Series
November 1, 1999
Institutional and Administrative
Share Classes
This Prospectus describes 21 mutual funds offered by PIMCO Funds: Multi-Manager
Series.
The Funds provide access to the professional investment advisory services
offered by PIMCO Advisors L.P. and its investment management affiliates. You
can call the Trust at 1-800-927-4648 to find out more about the Funds and other
funds in the PIMCO Funds family. You can also visit our website at
www.pimcofunds.com.
The Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary Information..................................................... 3
Fund Descriptions, Performance and Fees.............................. 5
International Fund................................................. 6
Capital Appreciation Fund.......................................... 8
Mid-Cap Growth Fund................................................ 10
Small-Cap Growth Fund.............................................. 12
Micro-Cap Growth Fund.............................................. 14
Core Equity Fund................................................... 16
Mid-Cap Equity Fund................................................ 18
International Growth Fund.......................................... 20
Equity Income Fund................................................. 22
Value Fund......................................................... 24
Value 25 Fund...................................................... 26
Small-Cap Value Fund............................................... 28
Growth Fund........................................................ 30
Target Fund........................................................ 32
Opportunity Fund................................................... 34
Innovation Fund.................................................... 36
Renaissance Fund................................................... 38
Enhanced Equity Fund............................................... 40
Tax-Efficient Equity Fund.......................................... 42
Structured Emerging Markets Fund................................... 44
Tax-Efficient Structured Emerging Markets Fund..................... 46
Summary of Principal Risks........................................... 48
Management of the Funds................................................. 53
Investment Options (Institutional and Administrative Class Shares)...... 61
Purchases, Redemptions and Exchanges.................................... 62
How Fund Shares Are Priced.............................................. 68
Fund Distributions...................................................... 69
Tax Consequences........................................................ 71
Characteristics and Risks of Securities and Investment Techniques....... 72
Financial Highlights.................................................... 82
</TABLE>
-2-
<PAGE>
Summary Information
PIMCO Funds offers unique access to the investment expertise of PIMCO Advisors
L.P. and its affiliates. As of March 31, 1999, PIMCO Advisors and its
affiliates managed approximately $248.7 billion, including assets for 42 of the
200 largest U.S. corporations. The firm's institutional heritage is reflected
in the PIMCO Funds offered in this Prospectus. The table below compares certain
investment characteristics of the Funds. More detailed information is provided
under "Fund Descriptions, Performance and Fees" below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Sub-Adviser and Fund Investment Objective Main Investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Blairlogie Capital Management
International Capital appreciation through investment in Common stocks of foreign (non-U.S.)
an international portfolio; income is issuers (developed and emerging markets)
incidental
- --------------------------------------------------------------------------------------------------------------------------------
Cadence Capital Management
Capital Appreciation Growth of capital Common 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 Growth of capital Common stocks of companies with market
capitalizations of more than $500 million
(excluding the largest 200 companies) that
have improving fundamentals and whose
stock is reasonably valued by the market
- --------------------------------------------------------------------------------------------------------------------------------
Small-Cap Growth Growth of capital Common stocks of companies with market
capitalizations of $50 million to $1
billion that have improving fundamentals
and whose stock is reasonably valued by
the market
- --------------------------------------------------------------------------------------------------------------------------------
Micro-Cap Growth Long-term growth of capital 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
- --------------------------------------------------------------------------------------------------------------------------------
Columbus Circle Investors
Core Equity Long-term growth of capital, with income Common stocks of companies with market
as a secondary objective capitalizations of more than $10 billion
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Long-term growth of capital Common stocks of companies with market
capitalizations of $1 billion to $10 billion
- --------------------------------------------------------------------------------------------------------------------------------
International Growth Long-term capital appreciation An international portfolio of equity and
equity-related securities
- --------------------------------------------------------------------------------------------------------------------------------
NFJ Investment Group
Equity Income Current income as a primary objective; Common stocks of companies with market
long-term growth of capital as a secondary capitalizations of more than $2 billion
objective that have below-average price to earnings
ratios and higher dividend yields relative
to their industry groups
- --------------------------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital and income Common stocks of companies with market
capitalizations of more than $2 billion
that are undervalued relative to their
industry groups
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Sub-Adviser and Fund Investment Objective Main Investments
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Value 25 Long-term growth of capital and income Approximately 25 common stocks with market
capitalizations of between $1 billion and
$5 billion and below-average price to
earnings ratios relative to their industry
groups and equity markets generally
- --------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Long-term growth of capital and income Common stocks of companies with market
capitalizations of between $100 million
and $1 billion and below-average price to
earnings ratios relative to their industry
groups
- --------------------------------------------------------------------------------------------------------------------------------
PIMCO Equity Advisors
Growth Long-term growth of capital; income is Common stocks of companies with market
incidental capitalizations of at least $5 billion
- --------------------------------------------------------------------------------------------------------------------------------
Target Capital appreciation; no consideration Common stocks of companies with market
given to income capitalizations of between $1 billion and
$10 billion
- --------------------------------------------------------------------------------------------------------------------------------
Opportunity Capital appreciation; no consideration Common stocks of companies with market
given to income capitalizations of less than $2 billion
- --------------------------------------------------------------------------------------------------------------------------------
Innovation Capital appreciation; no consideration Common stocks of technology-related
given to income companies
- --------------------------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital and income Common stocks having below-average
valuations where the company's business
fundamentals are improving
- --------------------------------------------------------------------------------------------------------------------------------
Parametric Portfolio Associates
Enhanced Equity A total return which equals or exceeds the Common stocks represented in the S&P 500
total return performance of an index Index
(currently the S&P 500 Index) representing
the performance of a reasonably broad
spectrum of common stocks that are
publicly traded in the U.S.
- --------------------------------------------------------------------------------------------------------------------------------
Tax-Efficient Equity Maximum after-tax growth of capital A broadly diversified portfolio of at
least 250 common stocks of companies
represented in the S&P 500 Index
- --------------------------------------------------------------------------------------------------------------------------------
Structured Emerging Long-term growth of capital Common stocks of companies located in
Markets emerging market countries
- --------------------------------------------------------------------------------------------------------------------------------
Tax-Efficient Structured Same as the Structured Emerging Markets Common stocks of companies located in
Emerging Markets Fund, except the Fund seeks to achieve emerging market countries
superior after-tax returns by employing a
variety of tax-efficient management
strategies
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
FUND DESCRIPTIONS, PERFORMANCE AND FEES
The Funds provide a broad range of investment choices. The summaries below
identify each Fund's investment objective, principal investments and strategies,
and principal risks. A more detailed "Summary of Principal Risks" describing
principal risks of investing in the Funds begins after the Fund Summaries. The
summaries also show the fees and expenses you may pay if you buy and hold
Institutional Class or Administrative Class shares of the Funds.
It is possible to lose money on investments in the Funds. An investment in a
Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
-5-
<PAGE>
PIMCO International Fund
Investment Objective
Seeks capital appreciation through investment in an international portfolio;
income is an incidental consideration
Fund Focus
Common stocks of foreign (non-U.S.) issuers
Approximated Number of Holdings
150-200
Approximate Capitalization Range
Over $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in an international
portfolio of common stocks, which may or may not pay dividends. The Fund may
also invest in other types of equity securities, including preferred stocks and
convertible securities, and may invest in fixed income securities.
The portfolio manager uses a "top down" approach in selecting investments for
the Fund. He first determines country allocations for the Fund by considering
such factors as the condition and growth potential of the various economies and
securities markets, currency and taxation considerations and other financial,
social, national and political factors. The portfolio manager then notifies
Blairlogie's country specialists of the desired country weightings and the
specialists select stocks within each country according to growth, quality and
value characteristics.
The Fund normally invests in securities traded principally in developed foreign
securities markets, with particular emphasis on Japanese, European, Pacific and
Australian securities markets. However, the Fund has no prescribed limits on
geographic asset distribution and may invest in any foreign securities market in
the world. The Fund will also invest in emerging markets and may invest in
securities of foreign issuers traded on U.S. markets. The Fund will normally not
invest in securities of U.S. issuers traded on U.S. securities markets.
The Fund invests most of its assets in foreign securities which trade primarily
in currencies other than the U.S. dollar. It may also invest directly in foreign
currencies, use derivatives and invest up to 10% of its assets in other
investment companies.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in foreign and domestic fixed
income securities and equity securities principally traded in the U.S.,
including securities of U.S. issuers. This would be inconsistent with the Fund's
investment objective and principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Foreign Investment Risk . Derivatives Risk
. Currency Risk . Concentration Risk
. Market Risk . Leveraging Risk
. Issuer Risk . Interest Rate Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Average Annual Total Returns table show performance of the Fund's Class C
shares, which are offered in a different prospectus. This is because the Fund
has not offered Institutional Class or Administrative Class shares for a full
calendar year. Although Class C, Institutional Class and Administrative Class
shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class C performance
would be lower than Institutional Class or Administrative Class performance
because of the higher sales charges and expenses paid by Class C shares. The
returns in the bar chart and the information to its right do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class C shares in the
Average Annual Total Returns table reflect the impact of sales charges. For
periods prior to the inception of Institutional Class and Administrative Class
shares (9/30/98), the Average Annual Total Returns table also shows estimated
historical performance for those classes based on the performance of the Fund's
Class C shares. The Class C performance has been adjusted to reflect that there
are no sales charges and lower distribution and/or service (12b-1) fees (if
any), administrative fees and other expenses paid by Institutional Class and
Administrative Class shares. The Fund had different sub-advisers during the
periods prior to November 15, 1994, and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-6-
<PAGE>
PIMCO International Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart.]
28.51% -15.50% 19.92% -5.84% 33.47% -8.16% 5.79% 5.76% 1.85% 8.27%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 5.34%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 16.44%
Lowest (7/1/98 - 9/30/98) -22.16%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (8/25/86)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class C 7.30 2.53 6.37 6.41
- --------------------------------------------------------------------------------
Institutional Class 9.68% 3.74% 7.61% 7.65%
- --------------------------------------------------------------------------------
Administrative Class 9.10% 3.43% 7.31% 7.36%
- --------------------------------------------------------------------------------
MSCI EAFE Index* 20.33% 9.50% 5.85% 9.09%
- --------------------------------------------------------------------------------
Lipper International Fund 12.99% 7.81% 9.15% 9.77%
Average*
</TABLE>
* The Morgan Stanley Capital International EAFE (Europe, Australasia, Far East)
("MSCI EAFE") Index is a widely recognized, unmanaged index of foreign
developed and emerging market stocks. It is not possible to invest directly in
the index. The Lipper International Fund Average is calculated by Lipper
Analytical Services, Inc. It is a total return performance average of funds
tracked by Lipper that invest their assets in securities whose primary trading
markets are outside of the United States. It does not take into account sales
charges. The Fund began operations on 8/25/86. Index comparisons begin on
8/31/86.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund None
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these
assumptions.
<TABLE>
<CAPTION>
EXAMPLE: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.55% 0.50% None 1.05% 107 $334 $579 $1,283
- --------------------------------------------------------------------------------------------------------------------------------
Administrative 0.55 0.50 0.25% 1.30 132 412 713 1,568
</TABLE>
-7-
<PAGE>
PIMCO Capital Appreciation Fund
Investment Objective
Seeks growth of capital
Fund Focus
Larger capitalization common stocks
Approximated Number of Holdings
60-100
Approximate Capitalization Range
At least $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of larger
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of the 1,000 largest capitalization stocks in the U.S. market for a
series of both growth and value criteria (such as dividend growth, earnings
growth, equity growth, earnings momentum and earnings surprise). The team
selects stocks by subjecting the top 10% of the stocks in the screened universe
to a rigorous, fundamental analysis. The Fund's capitalization criteria applies
at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median ranking, have negative
earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Growth Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (7/31/96), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-8-
<PAGE>
PIMCO Capital Appreciation Fund
Calendar Year Total Returns-Institutional Shares
[Plot points for bar chart.]
7.51% 17.70% -4.26% 37.14% 26.79% 34.22% 17.59%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -0.92%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 19.68%
Lowest (7/1/98 - 9/30/98) -14.16%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (3/8/91)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 17.59% 21.32% 19.74%
- -----------------------------------------------------------------------------
Administrative Class 17.26% 21.02% 19.45%
- -----------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- -----------------------------------------------------------------------------
Lipper Capital Appreciation Fund 20.49% 15.02% 14.91%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Capital Appreciation Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that have an investment objective of maximum
capital appreciation. It does not take into account sales charges. The Fund
began operations on 3/8/91. Index comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund None
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
EXAMPLE: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $72 $224 $390 $ 871
- --------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-9-
<PAGE>
PIMCO Mid-Cap Growth Fund
Investment Objective
Seeks growth of capital
Fund Focus
Medium capitalization common stocks
Approximated Number of Holdings
60-100
Approximate Capitalization Range
Over $500 million (excluding the largest 200
companies)
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of medium
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations over $500
million, but excluding the 200 largest capitalization companies. The screen
involves a series of both growth and value criteria (such as dividend growth,
earnings growth, equity growth, earnings momentum and earnings surprise). The
team selects stocks by subjecting the top 10% of the stocks in the screened
universe to a rigorous, fundamental analysis. The Fund's capitalization criteria
applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median screen ranking, have
negative earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Growth Securities Risk
. Smaller Company Risk
. Liquidity Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (11/30/94), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-10-
<PAGE>
PIMCO Mid-Cap Growth Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
9.18% 15.77% -2.36% 37.29% 23.36% 34.17% 7.93%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -8.22%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 17.77%
Lowest (7/1/98 - 9/30/98) -14.40%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year 5 Years (8/26/91)
- ----------------------------------------------------------------------------
Institutional Class 7.93% 19.08% 18.23%
- ----------------------------------------------------------------------------
Administrative Class 7.81% 18.81% 17.95%
- ----------------------------------------------------------------------------
Russell Mid-Cap Index* 10.09% 17.34% 17.18%
- ----------------------------------------------------------------------------
Lipper Mid-Cap Fund Average* 12.39% 14.86% 14.76%
* The Russell Mid-Cap Index is an unmanaged index of middle capitalization U.S.
stocks. It is not possible to invest directly in the index. The Lipper Mid-Cap
Fund Average is calculated by Lipper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 8/26/91. Index comparisons begin on 8/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholders Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example:Assuming you either redeem or do not redeem your
shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $72 $224 $390 $ 871
- ------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-11-
<PAGE>
PIMCO Small-Cap Growth Fund
Investment Objective
Seeks growth of capital
Fund Focus
Smaller capitalization common stocks
Approximated Number of Holdings
60-100
Approximate Capitalization Range
$50 million to $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of smaller
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations between $50
million and $1 billion. The screen involves a series of both growth and value
criteria (such as dividend growth, earnings growth, equity growth, earnings
momentum and earnings surprise). The team selects stocks by subjecting the top
10% of the stocks in the screened universe to a rigorous, fundamental analysis.
The Fund's capitalization criteria applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median screen ranking, have
negative earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Smaller Company Risk
. Issuer Risk . Liquidity Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (9/27/95), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-12-
<PAGE>
PIMCO Small-Cap Growth Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
16.69% 24.45% 0.54% 21.85% 16.84% 26.72% -8.50%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -10.21%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/97 - 6/30/97) 18.48%
Lowest (7/1/98 - 9/30/98) -24.84%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year 5 Years (1/7/91)
- -------------------------------------------------------------------------
Institutional Class -8.50% 10.66% 18.44%
- -------------------------------------------------------------------------
Administrative Class -8.89% 10.49% 18.22%
- -------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 17.37%
- -------------------------------------------------------------------------
Lipper Small-Cap Fund Average* -0.23% 13.12% 17.69%
* The Russell 2000 Index is a capitalization weighted broad based index of 2,000
small capitalization U.S. stocks. It is not possible to invest directly in the
index. The Lipper Small-Cap Fund Average is calculated by Lipper Analytical
Services, Inc. It is a total return performance average of funds tracked by
Lipper that invest primarily in companies with market capitalizations of less
than $1 billion at the time of investment. It does not take into account sales
charges. The Fund began operations on 1/7/91. Index comparisons begin on
12/31/90.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholdet Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do
not redeem your shares at the end of each
period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 1.00% 0.25% None 1.25% $127 $397 $686 $1,511
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 1.00 0.25 0.25% 1.50 153 474 818 1,791
</TABLE>
-13-
<PAGE>
PIMCO Micro-Cap Growth Fund
Investment Objective
Seeks long-term growth of capital
Fund Focus
Very small capitalization common stocks
Approximated Number of Holding
60-100
Approximate Capitalization Range
Less than $100 million
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of very
small capitalization companies that have improving fundamentals (such as growth
of earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations less than
$100 million. The screen involves a series of both growth and value criteria
(such as dividend growth, earnings growth, equity growth, earnings momentum and
earnings surprise). The team selects stocks by subjecting the top 10% of the
stocks in the screened universe to a rigorous, fundamental analysis. The Fund's
capitalization criteria applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median screen ranking, have
negative earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Smaller Company Risk
. Issuer Risk . Liquidity Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (4/1/96), performance information shown
in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-14-
<PAGE>
PIMCO Micro-Cap Growth Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
1.02% 36.25% 23.83% 36.69% -3.88%
1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -6.99%
QUARTERLY RETURN INFORMATION
(for periods shown in the bar chart)
Highest (7/1/97 - 9/30/97) 21.61%
Lowest (7/1/98 - 9/30/98) -20.71%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year 5 Years (6/25/93)
- ------------------------------------------------------------------------------
Institutional Class -3.88% 17.50% 19.21%
- ------------------------------------------------------------------------------
Administrative Class -4.08% 17.21% 18.92%
- ------------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 12.95%
- ------------------------------------------------------------------------------
Lipper Micro-Cap Fund Average* 3.87% 11.94% 13.11%
* The Russell 2000 Index is a capitalized weighted broad based index of small
capitalization U.S. stocks. It is not possible to invest directly in the index.
The Lipper Micro-Cap Fund Average is calculated by Lipper Analytical Services,
Inc. It is a total return performance average of funds tracked by Lipper that
invest primarily in companies with market capitalizations of less than $300
million at the time of investment. It does not take into account sales charges.
The Fund began operations on 6/25/93. Index comparisons begin on 6/30/93.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end
of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 1.25% 0.25% None 1.50% $153 $474 $818 $1,791
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 1.25 0.25 0.25% 1.75 178 551 949 2,062
</TABLE>
-15-
<PAGE>
Core Equity Fund
Investment Objective
Seeks long-term growth of capital, with income as a secondary objective
Fund Focus
Large capitalization common stocks
Approximated Number of Holdings
40
Approximate Capitalization Range
More than $10 billion
Divedend Frequency
At least annually
Principal Investments and Strategies
The Fund seeks to achieve its investment objective by normally investing at
least 65% of its assets in common stocks of companies with market
capitalizations of more than $10 billion at the time of investment.
The Fund usually invests in approximately 40 common stocks. The Fund attempts
to achieve a higher total return performance than the S&P 500 Index over a
reasonable measurement period. In selecting stocks, the portfolio managers use
two distinct investment disciplines. Approximately 50% of the value of the
Fund's portfolio is selected using a "Growth" style. The portfolio manager of
this Growth segment seeks to own companies with well-defined "wealth creating"
characteristics, including superior earnings growth, high profitability and
consistent, predictable earnings. In addition, through fundamental research, the
portfolio manager seeks to identify dominant companies that are gaining market
share, have superior management and possess a sustainable competitive advantage.
The Fund sells stocks in the Growth segment when the portfolio manager believes
that earnings, sentiment and relative performance are disappointing or if an
alternative investment is more attractive. The remainder of the Fund's portfolio
(approximately 50% of its value) is selected using a "Value" style. The
portfolio manager of this Value segment invests primarily in common stocks of
companies having below-average valuations whose business fundamentals are
expected to improve. The portfolio manager determines valuation based on
characteristics such as price to earnings, price to book, and price to cash flow
ratios. The portfolio manager analyzes stocks to identify the key drivers of
financial results and catalysts for change that indicate a company may
demonstrate improving fundamentals in the future. The portfolio manager sells
stocks in the Value segment when he believes that the issuers' business
fundamentals are weakening or when their valuations have become excessive.
The Fund may invest up to 15% of its assets in foreign securities and may buy
and sell foreign currencies. The Fund may also use derivatives. The Fund intends
to be fully invested in common stock (aside from certain cash management
practices) and will not make defensive investments in fixed income securities in
response to unfavorable market and other conditions.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Market Risk . Smaller Company Risk . Currency Risk
. Issuer Risk . Liquidity Risk . Leveraging Risk
. Value Securities Risk . Derivatives Risk . Credit Risk
. Growth Securities Risk . Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (5/31/95), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-16-
<PAGE>
PIMCO Core Equity Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
27.96% 17.95% 25.32% 41.06%
1995 1996 1997 1998
More Recent Return Information
1/1/99-9/30/99 5.33%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 24.90%
Lowest (7/1/98 - 9/30/98) -11.38%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year (12/28/94)
- ---------------------------------------------------------------
Institutional Class 41.06% 27.77%
- ---------------------------------------------------------------
Administrative Class 40.47% 27.41%
- ---------------------------------------------------------------
S&P 500 Index* 28.58% 30.51%
- ---------------------------------------------------------------
Lipper Growth Fund Average* 23.42% 24.41%
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth Fund Average is calculated by
Lipper Analytical Services, Inc. It is a total return performance average of
funds tracked by Lipper that invest in companies with long-term earnings
expected to grow significantly faster than the earnings of the stocks
represented i the major unmanaged stock indexes. It does not take into acount
sales EXPENSES sales charges. The Fund began operations on 12/28/94. Index
comparisons begin on 12/31/94.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholders Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end of
each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.57% 0.25% None 0.82% $ 84 $262 $455 $1,014
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.57 0.25 0.25% 1.07 109 340 590 1,306
</TABLE>
-17-
<PAGE>
PIMCO Mid-Cap Equity Fund
Investment Objective
Seeks long-term growth of capital
Fund Focus
Medium and large capitalization common stocks
Approximated Number of Holdings
40
Approximate Capitalization Range
$1 billion to $10 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund seeks to achieve its investment objective by normally investing at
least 65% of its assets in common stocks of companies with market
capitalizations of $1 billion to $10 billion at the time of investment.
The Fund usually invests in approximately 40 common stocks. In selecting stocks,
the portfolio managers use two distinct investment disciplines. Approximately
50% of the value of the Fund's portfolio is selected using a "Growth" style. The
portfolio manager of this Growth segment seeks to own companies with well-
defined "wealth creating" characteristics, including superior earnings growth,
high profitability and consistent, predictable earnings. In addition, through
fundamental research, the portfolio manager seeks to identify dominant companies
that are gaining market share, have superior management and possess a
sustainable competitive advantage. The Fund sells stocks in the Growth segment
when the portfolio manager believes that earnings, sentiment and relative
performance are disappointing or if an alternative investment is more
attractive. The remainder of the Fund's portfolio (approximately 50% of its
value) is selected using a "Value" style. The portfolio manager of this Value
segment invests primarily in common stocks of companies having below-average
valuations whose business fundamentals are expected to improve. The portfolio
manager determines valuation based on characteristics such as price to earnings,
price to book, and price to cash flow ratios. The portfolio manager analyzes
stocks to identify the key drivers of financial results and catalysts for change
that indicate a company may demonstrate improving fundamentals in the future.
The portfolio manager sells stocks in the Value segment when he believes that
the issuers' business fundamentals are weakening or when their valuations have
become excessive.
The Fund may invest up to 15% of its assets in foreign securities and may buy
and sell foreign currencies. The Fund may also use derivatives. The Fund intends
to be fully invested in common stock (aside from certain cash management
practices) and will not make defensive investments in fixed income securities in
response to unfavorable market and other conditions.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Market Risk . Smaller Company Risk . Currency Risk
. Issuer Risk . Liquidity Risk . Leveraging Risk
. Value Securities Risk . Derivatives Risk . Credit Risk
. Growth Securities Risk . Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (8/21/97), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-18-
<PAGE>
PIMCO Mid-Cap Equity Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
31.72% 17.31% 16.22% 29.89%
1995 1996 1997 1998
Calendar Year End
Most Recent Return Information
1/1/99-9/30/99 8.34%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 22.19%
Lowest (7/1/98 - 9/30/98) -11.53%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year (12/28/94)
- ----------------------------------------------------------------
Institutional Class 29.89% 23.53%
- ----------------------------------------------------------------
Administrative Class 29.56% 23.23%
- ----------------------------------------------------------------
S&P Mid-Cap 400 Index* 19.12% 25.22%
- ----------------------------------------------------------------
Lipper Mid-Cap Fund Average* 12.39% 19.91%
* The S&P Mid-Cap 400 Index is an unmanaged index of middle capitalization U.S.
stocks. It is not possible to invest directly i the index. The Lipper Mid-Cap
Fund Average is calculated by Lipper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 12/28/94. Index comparisons begin on 12/31/94.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end of
each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.63% 0.25% None 0.88% $ 90 $281 $488 $1,084
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.63 0.25 0.25% 1.13 115 359 622 1,375
</TABLE>
-19-
<PAGE>
PIMCO International Growth Fund
Investment Objective
Seeks long-term capital appreciation
Fund Focus
Equity and equity-related securities of foreign (non-U.S.) issuers
Approximated Number of Holdings
[_]
Approximate Capitalization Range
[_]
Dividend Frequency
At least annually
The Fund seeks to achieve its investment objective by normally
investing at least 65% of its assets in an international portfolio
of equity and equity-related securities of companies whose
principal activities are in countries other than the U.S. The Fund
will normally invest in securities traded in non-U.S. securities
markets and in securities of foreign issuers traded on U.S.
markets.
The Fund will normally not invest in securities of U.S. issuers
traded on U.S. securities markets. Otherwise, the Fund may invest in
securities markets of any country in the world, including developed
and emerging markets. The Fund will normally invest at least 65% of
its assets in equity securities of issuers which exhibit growth
characteristics, such as superior earnings growth, high
profitability and consistent, predictable earnings. The Fund may
also invest in issuers which do not exhibit growth characteristics,
but whose securities are thought to be undervalued, based on
characteristics such as price to earnings, price to book and price
to cash flow ratios.
The Fund invests most of its assets in foreign securities which
trade primarily in currencies other than the U.S. dollar. It may
also invest directly in foreign currencies, use derivatives and
invest up to 10% of its assets in other investment companies.
In response to unfavorable market and other conditions, the Fund
may make temporary investments of some or all of its assets in
foreign and domestic fixed income securities and equity securities
principally traded in the U.S., including securities of U.S.
issuers. This would be inconsistent with the Fund's investment
objective and principal strategies.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Foreign Investment Risk . Growth Securities Risk . Concentration Risk
. Emerging Markets Risk . Value Securities Risk . Leveraging Risk
. Currency Risk . Smaller Company Risk . Credit Risk
. Market Risk . Liquidity Risk . Management Risk
. Issuer Risk . Derivatives Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. The Fund's Administrative
Class shares do not have a performance history. Performance information shown in
the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares, adjusted to reflect the
actual distribution and/or service (12b-1 fees) and other expenses paid by
Administrative Class shares. Past performance is no guarantee of future results.
-20-
<PAGE>
PIMCO International Growth Fund
Calendar Year Total Returns
[Plot point for bar chart.]
39.40%
1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 42.56%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 25.14%
Lowest (7/1/98 - 9/30/98) -17.79%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year (12/31/97)
- --------------------------------------------------------------------------
Institutional Class 39.40% 39.40%
- --------------------------------------------------------------------------
Administrative Class 39.06% 39.06%
- --------------------------------------------------------------------------
MSCI EAFE Index* 20.34% 20.34%
- --------------------------------------------------------------------------
Lipper International Fund Average* 12.99% 12.99%
*The Morgan Stanley Capital International EAFE (Europe, Australasia, Far East)
("MSCI EAFE") Index is a widely recognized, unmanaged index of issuers in
countries of Europe, Australia and the Far East. It is not possible to invest
directly in the index. The Lipper International Fund Average is calculated by
Lipper Analytical Services, Inc. It is a total return performance average of
funds tracked by Lipper that invest their assets in securities whose primary
trading markets are outside of the United States. It does not take into account
sales charges. [Administrative Class performance not yet available].
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end of
each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.85% 0.50% None 1.35% $137 $428 $739 $1,624
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.85 0.50 0.25 1.60 163 505 871 1,900
</TABLE>
-21-
<PAGE>
PIMCO Equity Income Fund
Investment Objective
Seeks current income as a primary objective, and long-term growth of capital as
a secondary objective
Fund Focus
Income producing common stocks with potential for capital appreciation
Approximated Number of Holdings
40-50
Approximate Capitalization Range
Over $2 billion
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that are
drug or energy related.
The portfolio managers partition this universe by industry and, through the use
of both fundamental and quantitative research, identify the most undervalued
stocks in each industry. From this group of stocks, the Fund buys approximately
25 stocks with the highest dividend yields.
The portfolio managers then screen the most undervalued companies in each
industry by dividend yield to identify the highest yielding stocks in each
industry. From this group, the Fund buys approximately 25 stocks with the lowest
share price to company earnings (P/E) ratios.
The portfolio managers select stocks for the Fund only if they meet parameters
for fundamental quality, trading liquidity and price momentum. They also use
quantitative models to analyze stocks.
The portfolio managers replace a stock whenever a different stock within the
same industry has a significantly lower P/E ratio or a higher dividend yield
than the Fund's current holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (11/30/94), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-22-
<PAGE>
PIMCO Equity Income Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
14.75% 8.47% -1.61% 33.47% 21.48 31.38% 8.37%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 0.80%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 13.98%
Lowest (7/1/98 - 9/30/98) -10.93%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (3/8/91
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 8.37% 17.83% 16.51%
- ----------------------------------------------------------------------------------------
Administrative Class 8.12% 17.54% 16.22%
- ----------------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- ----------------------------------------------------------------------------------------
Lipper Equity Income Fund Average* 11.90% 16.50% 15.59%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 3/8/91. Index
comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class
shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem
or do not redeem your shares at the
end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $72 $224 $390 $ 871
- --------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-23-
<PAGE>
PIMCO Value Fund
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Undervalued common stocks relative to their industry groups
Approximated Number of Holdings
50
Approximate Capitalization Range
At least $2 billion
Dividend Frequency
Quarterly
Principal investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that are
drug or energy related.
The portfolio managers partition this universe by industry and identify the most
undervalued stocks in each industry. After narrowing the universe to
approximately 150 possible candidates, the portfolio managers select one holding
from each of 50 industry groups.
The portfolio managers select stocks only if they meet parameters for
fundamental quality and trading liquidity. Issue weighting is dependent upon
dividend yield and price momentum considerations. The managers also consider
quantitative models for investment timing purposes.
The Fund's portfolio is generally rebalanced quarterly. The portfolio managers
may also replace companies within the same industry group when a replacement
candidate's valuation reaches a level that is considerably lower the valuation
of an existing holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (8/21/97), performance information
shown in the chart and Average Annual Total Returns table for that class is
based on the performance of the Fund's Institutional Class shares. The prior
Institutional Class performance has been adjusted to reflect the actual
distribution and/or service (12b-1 fees) and other expenses paid by
Administrative Class shares. Past performance is no guarantee of future results.
-24-
<PAGE>
PIMCO Value Fund
Calendar Year Total Returns-Institutional Class Shares
[Plot points for bar chart.]
13.15% 16.41% -4.07% 38.91% 20.34% 26.21% 10.17%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 5.18%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 17.19%
Lowest (7/1/98 - 9/30/98) -13.23%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/30/91)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 10.17% 17.39% 16.74%
- --------------------------------------------------------------------------------------------
Administrative Class 9.77% 17.10% 16.45%
- --------------------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.51%
- --------------------------------------------------------------------------------------------
Lipper Growth and Income Fund Average* 15.80% 18.42% 15.94%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth and Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that combine a growth-of-earnings orientation
and an income requirement for level and/or rising dividends. It does not take
into account sales charges. The Fund began operations on 12/30/91. Index
comparisons begin on 12/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end
of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $72 $224 $390 $ 871
- ----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-25-
<PAGE>
PIMCO Value 25 Fund
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Medium capitalization common stocks
Approximated Number of Holdings
25
Approximate Capitalization Range
Between $1 billion and $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations between $1 billion and $5 billion at the
time of investment and below average P/E ratios relative to their industry
groups.
The Fund normally invests in approximately 25 stocks. The portfolio managers
classify a universe of approximately 2,000 stocks by industry, each of which
have market capitalizations between $1 billion and $5 billion at the time of
investment. They then screen the universe to find the stocks with the lowest P/E
ratios in each industry, subject to application of quality, earnings momentum
and price momentum screens.
The portfolio managers then analyze those stocks which pass the screenings and
conduct fundamental research on those companies that appear to be the most
undervalued by the market. They select approximately 25 stocks, diversified
across industries, on an equal-weighted basis for the Fund.
The Fund's portfolio is generally rebalanced quarterly. The portfolio managers
may also replace companies within the same industry group when a replacement
candidate's valuation reaches a level that is considerably lower than the
valuation of the existing holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Liquidity Risk
. Issuer Risk . Concentration Risk
. Value Securities Risk . Credit Risk
. Smaller Company Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in July 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-26-
<PAGE>
PIMCO Value 25 Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund None
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or
do not redeem your shares at the end of
each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating Expenses
Share Class Fees Fees (12b-1) Fees 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.50% 0.25% None 0.75% $ 77 $240 $417 $ 930
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.50 0.25 0.25% 1.00 102 318 552 1,225
</TABLE>
-27-
<PAGE>
PIMCO Small-Cap Value Fund
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Smaller capitalization common stocks
Approximated Number of Holdings
100
Approximate Capitalization Range
Between $100 million and $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations between $100 million and $1 billion at the
time of investment and below-average P/E ratios relative to the market and their
respective industry groups.
The Fund's initial selection universe consists of approximately 4,500 stocks.
The portfolio managers then apply a screening methodology based upon low P/E
ratios, market capitalizations, trading liquidity and dividend yield to narrow
this universe to approximately 500 stocks divided among approximately 160
industries.
The portfolio managers then analyze this narrowed universe using fundamental
research and a disciplined investment methodology. They select approximately 100
stocks for the Fund, each of which has close to equal weighting in the
portfolio. The portfolio managers also select stocks subject to a 10% limit on
the weighting for any one industry, resulting in a portfolio that has broad
diversification among economic sectors.
The portfolio managers replace a stock if its valuation exceeds the average
valuation of stocks represented in the S&P 500 Index or stocks in its industry
group. The portfolio managers also consider quantitative models for investment
timing purposes.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Liquidity Risk
. Issuer Risk . Credit Risk
. Value Securities Risk . Management Risk
. Smaller Company Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (11/1/95), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-28-
<PAGE>
PIMCO Small-Cap Value Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart.]
18.27% 13.39% -4.07% 24.98% 27.22% 34.47% -9.16%
1992 1993 1994 1995 1996 1997 1998
More Recent Return Information
1/1/99-9/30/99 -4.69%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/97 - 9/30/97) 15.91%
Lowest (7/1/98 - 9/30/98) -18.61%
Average Annual Total Returns (for periods ended 12/31/98)
Fund Inception
1 Year 5 Years (10/1/91)
- ------------------------------------------------------------------------------
Institutional Class -9.16% 13.62% 14.78%
- ------------------------------------------------------------------------------
Administrative Class -9.37% 13.33% 14.49%
- ------------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 14.13%
- ------------------------------------------------------------------------------
Lipper Small-Cap Fund Average* -0.23% 13.12% 14.69%
* The Russell 2000 Index is a capitalization weighted broad based index of 2,000
small capitalization U.S. stocks. It is not possible to invest directly in the
index. The Lipper Small-Cap Fund Average is calculated by Lipper Analytical
Services, Inc. It is a total return performance average of funds tracked by
Lipper that invest primarily in companies with market capitalizations of less
than $1 billion at the time of investment. It does not take into account sales
charges. The Fund began operations on 10/1/91. Index comparisons begin on
9/30/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment-such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
Example: Assuming you either redeem or
do not redeem your shares at the end of
each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.60% 0.25% None 0.85% $ 87 $271 $471 $1,049
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.60 0.25 0.25% 1.10 112 350 606 1,340
</TABLE>
-29-
<PAGE>
PIMCO Growth Fund
Investment Objective
Seeks long-term growth of capital; income is an incidental consideration
Fund Focus
Larger capitalization common stocks
Approximate Number of Holdings
35-40
Approximate Capitalization Range
At least $5 billion
Dividend Frequency
At least annually
Principal Investment and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of at least $5 billion at the time of
investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Growth Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Average Annual Total Returns table show performance of the Fund's Class C
shares, which are offered in a different prospectus. This is because the Fund
did not offer Institutional Class or Administrative Class shares during the
periods shown. Although Class C, Institutional Class and Administrative Class
shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class C performance
would be lower than Institutional Class or Administrative Class performance
because of the higher expenses paid by Class C shares. The returns in the bar
chart and the information to its right do not reflect the impact of sales
charges (loads). If they did, the returns would be lower than those shown.
Unlike the bar chart, performance figures for Class C shares in the Average
Annual Total Returns table reflect the impact of sales charges. The Average
Annual Total Returns table also shows estimated historical performance for
Institutional Class and Administrative Class shares based on the performance of
the Fund's Class C shares. The Class C performance has been adjusted to reflect
that there are no sales charges and lower distribution and/or service (12b-1
fees) fees (if any), administrative fees and other expenses paid by
Institutional Class and Administrative Class shares. Prior to March 6, 1999, the
Fund had a different sub-adviser and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-30-
<PAGE>
PIMCO Growth Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart]
37.45% 0.29% 41.88% 2.08% 9.32% -0.75% 27.47% 17.52% 21.84% 38.90%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 2.66%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 25.12%
Lowest (7/1/90 - 9/30/90) -13.14%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund
Inception
1 Year 5 Years 10 Years (2/24/84)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class 40.47% 21.64% 19.92% 19.33%
- --------------------------------------------------------------------------------------
Administrative Class 40.13% 21.34% 19.63% 19.03%
- --------------------------------------------------------------------------------------
Class C 37.90% 20.27% 18.57% 17.98%
- --------------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.44%
- --------------------------------------------------------------------------------------
Lipper Growth Fund Average* 23.42% 18.74% 16.74% 15.58%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth Fund Average is calculated by
Lipper Analytical Services, Inc. It is a total return performance average of
funds tracked by Lipper that invest in companies with long-term earnings
expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indexes. It does not take into account
sales charges. The Fund began operations on 2/24/84. Index comparisons begin on
12/31/84.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do
not redeem your shares at the end of each
period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.50% 0.25% None 0.75% $ 77 $240 $417 $ 930
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.50 0.25 0.25% 1.00 102 318 552 1,225
</TABLE>
-31-
<PAGE>
PIMCO Target Fund
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Medium capitalization common stocks
Approximated Number Of Holdings
40-60
Approximate Capitalization Range
Between $1 billion and $10 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of between $1 billion and $10 billion at
the time of investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Foreign Investment Risk
. Issuer Risk . Currency Risk
. Growth Securities Risk . Leveraging Risk
. Smaller Company Risk . Interest Rate Risk
. Liquidity Risk . Credit Risk
. Derivatives Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Annual Total Returns table show performance of the Fund's Class A shares, which
are offered in a different prospectus. This is because the Fund did not offer
Institutional Class or Administrative Class shares during the periods shown.
Although Class A, Institutional Class and Administrative Class shares would have
similar annual returns (because all the Fund's shares represent interests in the
same portfolio of securities), Class A performance would be lower than
Institutional Class or Administrative Class performance because of the higher
expenses paid by Class A shares. The returns in the bar chart and the
information to its right do not reflect the impact of sales charges (loads). If
they did, the returns would be lower than those shown. Unlike the bar chart,
performance figures for Class A shares in the Average Annual Total Returns table
reflect the impact of sales charges. The Average Annual Total Returns table also
shows estimated historical performance for Institutional Class and
Administrative Class shares based on the performance of the Fund's Class A
shares. The Class A performance has been adjusted to reflect that there are no
sales charges and lower distribution and/or service (12b-1 fees) fees (if any),
administrative fees and other expenses paid by Institutional Class and
Administrative Class shares. Prior to March 6, 1999, Fund had a different sub-
adviser and would not necessarily have achieved the performance results shown on
the next page under its current investment management arrangements. Past
performance is no guarantee of future results.
-32-
<PAGE>
PIMCO Target Fund
Calendar Year Total Returns-Class A
[Plot points for bar chart]
24.52% 3.09% 30.31% 15.68% 15.44% 23.27%
1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 8.62%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 21.18%
Lowest (7/1/98 - 9/30/98) -13.15%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/17/92)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 24.64% 18.67% 19.94%
- --------------------------------------------------------------------------------------
Administrative Class 24.33% 18.37% 19.65%
- --------------------------------------------------------------------------------------
Class A 17.32% 16.76% 18.27%
- --------------------------------------------------------------------------------------
S&P Mid-Cap 400 Index* 19.12% 18.85% 18.02%
- --------------------------------------------------------------------------------------
Lipper Mid-Cap Fund Average* 12.24% 14.88% 14.74%
</TABLE>
* The S&P Mid-Cap 400 Index is an unmanaged index of middle capitalization U.S.
stocks. It is not possible to invest directly in the index. The Lipper Mid-Cap
Fund Average is calculated by Lipper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 12/17/92. Index comparisons begin on 12/31/92.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.55% 0.25% None 0.80 $ 82 $255 $444 $ 990
- -----------------------------------------------------------------------------------------------------------------------------
Administrative 0.55 0.25 0.25% 1.05 107 334 579 1,283
</TABLE>
-33-
<PAGE>
PIMCO Opportunity Fund
Investment Objective
Seeks Capital Appreciation; no consideration is given to income
Fund Focus
Smaller Capitalization Common Stocks
Approximated Number Of Holdings
60-100
Approximate Capitalization Range
Between $100 Million And $2 Billion
Dividend Frequency
At least annually
Principal Investments And Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of less than $2 billion at the time of
investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Foreign Investment Risk
. Issuer Risk . Currency Risk
. Value Securities Risk . Leveraging Risk
. Growth Securities Risk . Interest Rate Risk
. Smaller Company Risk . Credit Risk
. Liquidity Risk . Management Risk
. Derivatives Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Annual Total Returns table show performance of the Fund's Class C shares, which
are offered in a different prospectus. This is because the Fund did not offer
Institutional Class or Administrative Class shares during the periods shown.
Although Class C, Institutional Class and Administrative Class shares would have
similar annual returns (because all the Fund's shares represent interests in the
same portfolio of securities), Class C performance would be lower than
Institutional Class or Administrative Class performance because of the higher
expenses paid by Class C shares. The returns in the bar chart and the
information to its right do not reflect the impact of sales charges (loads). If
they did, the returns would be lower than those shown. Unlike the bar chart,
performance figures for Class C shares in the Average Annual Total Returns table
reflect the impact of sales charges. The Average Annual Total Returns table also
shows estimated historical performance for Institutional Class and
Administrative Class shares based on the performance of the Fund's Class C
shares. The Class C performance has been adjusted to reflect that there are no
sales charges and lower distribution and/or service (12b-1 fees) fees (if any),
administrative fees and other expenses paid by Institutional Class and
Administrative Class shares. Prior to March 6, 1999, the Fund had a different
sub-adviser and would not necessarily have achieved the performance results
shown on the next page under its current investment management arrangements.
Past performance is no guarantee of future results.
-34-
<PAGE>
PIMCO Opportunity Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart]
30.65% -7.34% 68.08% 28.46% 36.16% -4.74% 41.43% 11.54% -4.75% 1.29%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 12.55%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (1/1/91 - 3/31/91) 29.00%
Lowest (7/1/98 - 9/30/98) -25.54%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (2/24/84)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class 2.48% 8.97% 19.19% 17.72%
- -----------------------------------------------------------------------------------
Administrative Class 2.22% 8.70% 18.90% 17.43%
- -----------------------------------------------------------------------------------
Class C 0.47% 7.73% 17.84% 16.39%
- -----------------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 12.92% 11.92%
- -----------------------------------------------------------------------------------
Lipper Capital Appreciation Fund 19.99% 14.97% 14.15% 12.88%
Average*
</TABLE>
* The Russell 2000 Index is a capitalization weighted broad based index of 2,000
small capitalization U.S. stocks. It is not possible to invest directly in the
index. The Lipper Capital Appreciation Fund Average is calculated by Lipper
Analytical Services, Inc. It is a total return performance average of funds
tracked by Lipper that have an investment objective of maximum capital
appreciation. It does not take into account sales charges. The Fund began
operations on 2/24/84. Index comparisons begin on 2/29/84.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class
shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.65% 0.25% None 0.90% 92 $287 $498 $1,108
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.65 0.25 0.25% 1.15 117 365 633 1,398
</TABLE>
-35-
<PAGE>
PIMCO Innovation Fund
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Common Stocks Of Technology-related Companies
Approximated Number Of Holdings
40
Approximate Capitalization Range
Over $200 Million
Dividend Frequency
At Least Annually
Principal Investments And Strategies
The Fund normally invests 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. Although the Fund emphasizes companies which utilize technologies,
it is not required to invest exclusively in companies in a particular business
sector or industry.
The portfolio manager seeks to identify quality technology-related companies
using proprietary research that focuses on company fundamentals, and makes buy
and sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Concentration Risk
. Growth Securities Risk . Leveraging Risk
. Smaller Company Risk . Interest Rate Risk
. Liquidity Risk . Credit Risk
. Derivatives Risk . Management Risk
. Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Annual Total Returns table show performance of the Fund's Class A shares, which
are offered in a different prospectus. This is because the Fund did not offer
Institutional Class or Administrative Class shares during the periods shown.
Although Class A, Institutional Class and Administrative Class shares would have
similar returns (because all the Fund's shares represent interests in the same
portfolio of securities), Class A performance would be lower than Institutional
Class or Administrative Class performance because of the higher expenses paid by
Class A shares. The returns in the bar chart and the information to its right do
not reflect the impact of sales charges (loads). If they did, the returns would
be lower than those shown. Unlike the bar chart, performance figures for Class A
shares in the Average Annual Total Returns table reflect the impact of sales
charges. The Average Annual Total Returns table also shows estimated historical
performance for Institutional Class and Administrative Class shares based on the
performance of the Fund's Class A shares. The Class A performance has been
adjusted to reflect that there are no sales charges and lower distribution
and/or service (12b-1 fees) fees (if any), administrative fees and other
expenses paid by Institutional Class and Administrative Class shares. Prior to
March 6, 1999, the Fund had a different sub-adviser and would not necessarily
have achieved the performance results shown on the next page under its current
investment management arrangements. Past performance is no guarantee of future
results.
-36-
<PAGE>
PIMCO Innovation Fund
Calendar Year Total Returns-Class A Shares
45.33% 23.60% 9.03% 79.41%
1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 32.91%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 -12/3198) 37.19%
Lowest (1/1/97 -3/31/97) -12.56%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (12/22/94)
- --------------------------------------------------------------------
<S> <C> <C>
Institutional Class 80.11% 37.12%
- --------------------------------------------------------------------
Administrative Class 79.67% 36.78%
- --------------------------------------------------------------------
Class A 69.54% 34.67%
- --------------------------------------------------------------------
S&P 500 Index* 28.58% 30.51%
- --------------------------------------------------------------------
Lipper Science and Technology 51.44% 25.21%
Fund Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Science and Technology Fund Average
is calculated by Lipper Analytical Services, Inc. It is a total return
performance average of funds tracked by Lipper that invest 65% of their assets
in science and technology stocks. It does not take into account sales charges.
The Fund began operations on 12/22/94. Index comparisons begin on 12/31/94.
[Administrative Class performance not yet available].
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Institutional 0.65% 0.25% None 0.90% $ 92 $287 $498 $1,108
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative 0.65 0.25 0.25% 1.15 117 365 633 1,398
</TABLE>
-37-
<PAGE>
PIMCO Renaissance Fund
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Undervalued stocks with improving business fundamentals
Approximated Number of Holdings
50-70
Approximate Capitalization Range
All capitalizations
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with below-average valuations whose business fundamentals are expected
to improve.
In selecting investments for the Fund, the portfolio manager determines the
valuation of stocks based on characteristics such as price-to-earnings,
price-to-book and price-to-cash flow ratios. The portfolio manager analyzes
stocks to identify key drivers of financial results and catalysts for change,
which may indicate that a company's business fundamentals are improving.
The portfolio manager sells a stock when he believes that the company's business
fundamentals are weakening.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Value Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Institutional Class shares (12/30/97) and Administrative Class
shares (8/31/98), performance information shown in the bar chart (including the
information to its right) and in the Average Annual Total Returns table for
those classes is based on the performance of the Fund's Class C shares, which
are offered in a different prospectus. The prior Class C performance has been
adjusted to reflect the actual fees and expenses paid by Institutional Class and
Administrative Class shares, including no sales charges (loads) and lower
distribution and/or service (12b-1 fees) (if any) and administrative fees. Prior
to May 7, 1999, the Fund had a different sub-adviser and would not necessarily
have achieved the performance results shown on the next page under its current
investment management arrangements. Past performance is no guarantee of future
results.
-38-
<PAGE>
PIMCO Renaissance Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart]
12.45% -14.47% 34.75% 9.02% 22.62% -3.95% 29.06% 25.82% 36.42% 11.83%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 0.37%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 18.51%
Lowest (7/1/98 - 9/30/98) -16.52%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (4/18/88)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional Class 11.83% 18.93% 15.22% 14.83%
- -----------------------------------------------------------------------------------------------
Administrative Class 11.58% 18.64% 14.93% 14.55%
- -----------------------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.87%
- -----------------------------------------------------------------------------------------------
Lipper Equity Income Fund Average* 11.90% 16.50% 14.32% 14.23%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 4/18/88. Index
comparisons begin on 4/30/88.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class
shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional 0.60% 0.25% None 0.85% $ 87 $271 $471 $1,049
Administrative 0.60 0.25 0.25% 1.10 112 350 606 1,340
</TABLE>
-39-
<PAGE>
PIMCO Enhanced Equity Fund
Investment Objective
Seeks to provide a total return which equals or exceeds the total return
performance of an index (currently the S&P 500 Index) that represents the
performance of a reasonably broad spectrum of common stocks that are publicly
traded in the U.S.
Fund Focus
A portion of the common stocks represented in the S&P 500 Index
Approximated Number of Holdings
100-200
Approximate Capitalization Range
At least $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks
represented in the S&P 500 Index. The Fund usually invests in between 100 and
200 stocks.
The portfolio managers use quantitative techniques to select stocks which
provide risk-controlled exposure to the S&P 500 (in terms of volatility and
diversification across industry sectors), while offering the potential for
above-average returns relative to the index.
The portfolio managers rank the stocks in the S&P 500 by their exposure to both
growth and value factors, including company revenues and cash flows, stock
price, reported and estimated earnings, analyst ratings and earnings estimates
revisions. The rankings give more weight to stocks with rising earnings
expectations, reasonable valuation of those earnings and positive investor
sentiment.
Using these rankings, the portfolio managers construct a sector-neutral
portfolio designed to have above-average return potential and no greater
volatility than the S&P 500. The Fund relies on a computer optimization model to
achieve diversification and risk control relative to the S&P 500. The portfolio
managers attempt to maintain this balance through frequent and modest
restructuring of the portfolio.
The Fund may invest in stocks of foreign issuers if included in the S&P 500. The
Fund may also use derivatives.
The Fund may change the index upon which it bases its performance without
shareholder approval, although it does not expect to make such a change under
ordinary circumstances.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Among the principal risks of investing in the Fund are:
. Market Risk . Foreign Investment Risk
. Issuer Risk . Currency Risk
. Value Securities Risk . Leveraging Risk
. Growth Securities Risk . Credit Risk
. Derivatives Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares. For periods prior to the
inception of Administrative Class shares (8/21/97), performance information
shown in the Average Annual Total Returns table for that class is based on the
performance of the Fund's Institutional Class shares. The prior Institutional
Class performance has been adjusted to reflect the actual distribution and/or
service (12b-1 fees) and other expenses paid by Administrative Class shares.
Past performance is no guarantee of future results.
-40-
<PAGE>
PIMCO Enhanced Equity Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart]
6.60% 3.71% -0.49% 34.42% 21.15% 30.85% 26.51%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 3.34%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 22.48%
Lowest (7/1/98 - 9/30/98) -13.13%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund
Inception
1 Year 5 Years (2/11/91)
- --------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 26.51% 21.82% 17.39%
- --------------------------------------------------------------
Administrative Class 26.14% 21.50% 17.09%
- --------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 20.42%
- --------------------------------------------------------------
Lipper Growth and Income Fund 15.80% 18.42% 16.93%
Average*
</TABLE>
*The S&P 500 Index is an unmanaged index of common stocks. It is not possible to
invest directly in the index. The Lipper Growth and Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that combine a growth-of-earnings orientation
and an income requirement for level and/or rising dividends. It does not take
into account sales charges. The Fund began operations on 2/11/91. Index
comparisons begin on 1/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not redeem
your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $ 72 $ 224 $ 390 $ 871
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-41-
<PAGE>
PIMCO Tax-Efficient Equity Fund
Investment Objective
Seeks maximum after-tax growth of capital
Fund Focus
A portion of the common stocks represented in the S&P 500 Index
Approximated Number of Holdings
At least 250
Approximate Capitalization Range
Over $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund attempts to provide a total return which exceeds the return of the S&P
500 Index by investing in a broadly diversified portfolio of at least 250 common
stocks. The Fund also attempts to achieve superior after-tax returns for its
shareholders by using a variety of tax-efficient management strategies.
Normally, the Fund invests at least 95% of its assets in stocks represented in
the S&P 500 Index. The Fund's portfolio is designed to have certain
characteristics that are similar to those of the index, including such measures
as dividend yield, P/E ratio, relative volatility, economic sector exposure,
return on equity and market price-to-book value ratio. The portfolio managers
attempt to produce a higher total return than the S&P 500 by using quantitative
security selection techniques. There is no assurance that the Fund's investment
performance will equal or exceed that of the S&P 500.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions. The Fund may
use derivatives.
Quantitative Security Selection Techniques.
The portfolio managers use a proprietary quantitative model that ranks companies
based on long-term (5-10 years) price appreciation potential. They analyze
factors such as growth of sustainable earnings and dividend behavior. Stocks in
the top 50% of the model's ranking are considered for purchase by the Fund. The
Fund sells stocks selected from the bottom 20% of the model's ranking based on
cost, current market value and anticipated benefit of replacement. The portfolio
managers' sell discipline also focuses on reducing realized capital gains as
indicated below.
Tax-Efficient Strategies.
The portfolio managers utilize a range of active tax management strategies
designed to minimize the Fund's taxable distributions, including low portfolio
turnover and favoring investments in low-dividend, growth-oriented companies.
The portfolio managers also identify specific shares of stock to be sold that
have the lowest tax cost. When prudent, stocks are also sold to realize capital
losses in order to offset realized capital gains.
Additional tax-efficient strategies include regular portfolio rebalancing to
capture available tax credits and the use of derivative hedging techniques so
that the Fund can reduce its exposure to price declines without having to sell
appreciated securities. In limited circumstances, the Fund may also distribute
appreciated securities to shareholders to meet redemption requests so as to
avoid realizing capital gains.
Despite the use of these tax-efficient strategies, the Fund may realize gains
and shareholders will incur tax liability from time to time.
Principal Risks
Among the principal risks of investing in the Fund are:
.Market Risk .Derivatives Risk
.Issuer Risk .Leveraging Risk
.Value Securities Risk .Credit Risk
.Growth Securities Risk .Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in July 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-42-
<PAGE>
PIMCO Tax-Efficient Equity Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as None
sales charges (loads), redemption fees or exchange fees):
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not redeem
your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (12b-1) Fees Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.25% None 0.70% $ 72 $ 224 $ 390 $ 871
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25 0.25% 0.95 97 303 525 1,166
</TABLE>
-43-
<PAGE>
PIMCO Structured Emerging Markets Fund
Investment Objective
Seeks long-term growth of capital
Fund Focus
Common stocks of emerging market issuers
Approximated Number of Holdings
More than 300
Approximate Capitalization Range
All capitalizations
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies located in, or whose business relates to, emerging markets. The Fund
is normally exposed to roughly 20 emerging market countries and invests in more
than 200 stocks. The Fund intends to be fully invested in common stock (aside
from certain cash management practices) and will not make defensive investments
in fixed income securities in response to unfavorable market and other
conditions, except that the Fund may invest up to 5% of its net assets in debt
securities of emerging market issuers.
The International Finance Corporation Investable Composite Index is the primary
source for identifying emerging market countries for the Fund. The portfolio
managers may identify other emerging market countries on the basis of market
capitalization and liquidity, as well their inclusion (or consideration for
inclusion) as emerging market countries in other broad-based market indexes.
The portfolio managers follow a disciplined and systematic investment process
that emphasizes diversification and fairly consistent allocation among
countries, industries and issuers.
The portfolio managers select countries based on factors such as level of
development and equity market institutions, with primary emphasis on GNP per
capita, local economic diversification, and freedom of investment flows. They
assign equal weight to most countries represented in the portfolio unless the
size of a country's equity market is prohibitive. Countries with smaller equity
markets (i.e., less than $5 billion of market capitalization) are assigned one-
half the weight of countries with larger equity markets.
The portfolio managers divide all issuers in each eligible country into the
following five broad economic sector groups: financial, industrial, consumer,
utilities and natural resources. The Fund attempts to maintain exposure across
all five sectors in each country.
The portfolio managers select individual stocks based on such factors as
liquidity, industry representation, performance relative to industry and long-
term profitability.
The Fund invests most of its assets in foreign securities which trade primarily
in currencies other than the U.S. dollar. It may also invest directly in foreign
currencies and use derivatives.
Principal Risks
Among the principal risks of investing in the Fund are:
.Foreign Investment Risk (particularly .Liquidity Risk
emerging market securities risk) .Derivatives Risk
.Currency Risk .Concentration Risk
.Market Risk .Leveraging Risk
.Issuer Risk .Credit Risk
.Value Securities Risk .Management Risk
.Growth Securities Risk
.Smaller Company Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in June 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-44-
<PAGE>
PIMCO Structured Emerging Markets Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment):
Fund Reimbursement Fee Imposed on Purchases, Redemptions and Exchanges 1.00%*
(as a percentage of offering, redemption or exchange price)
______________
* Unless a waiver applies, you will be charged a "Fund Reimbursement Fee" when
you purchase, sell (redeem) or exchange Institutional Class or Administrative
Class shares of the Fund. The fee will be equal to 1.00% of the net asset value
of the shares purchased, redeemed or exchanged. Fund Reimbursement Fees are paid
to and retained by the Fund and are not sales charges (loads). See "Purchases,
Redemptions and Exchanges -- Fund Reimbursement Fees."
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your shares at the end of
each period.*
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.50% None 0.95% $ 299 $ 511 $ 741 $ 1,402
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.50 0.25% 1.20 324 588 872 1,684
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you do not redeem your shares.*
Year
Share Class 1 3 5 10
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $ 196 $ 400 $ 620 $ 1,255
- -------------------------------------------------------------------------
Administrative 221 477 753 1,540
- -------------------------------------------------------------------------
</TABLE>
* The Examples assume the payment of a 1.00% 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 "Purchases, Redemptions and Exchanges -- Fund
Reimbursement Fees."
-45-
<PAGE>
PIMCO Tax-Efficient Structured Emerging Markets Fund
Investment Objective
Seeks long-term growth of capital. The Fund also seeks to achieve superior after
tax returns for its shareholders by using tax-efficient management strategies.
Fund Focus
Common stocks of emerging market issuers
Approximate Capitalization Range
All capitalizations
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies located in, or whose business relates to, emerging markets. The Fund
is normally exposed to roughly 20 emerging market countries and invests in more
than 200 stocks. The Fund intends to be fully invested in common stock (aside
from certain cash management practices) and will not make defensive investments
in fixed income securities in response to unfavorable market and other
conditions, except that the Fund may invest up to 5% of its net assets in debt
securities of emerging market issuers.
The International Finance Corporation Investable Composite Index is the primary
source for identifying emerging market countries for the Fund. The portfolio
managers may identify other emerging market countries on the basis of market
capitalization and liquidity, as well their inclusion (or consideration for
inclusion) as emerging market countries in other broad-based market indexes.
The portfolio managers follow a disciplined and systematic investment process
that emphasizes diversification and fairly consistent allocation among
countries, industries and issuers.
The portfolio managers select countries based on factors such as level of
development and equity market institutions, with primary emphasis on GNP per
capita, local economic diversification, and freedom of investment flows. They
assign equal weight to most countries represented in the portfolio unless the
size of a country's equity market is prohibitive. Countries with smaller equity
markets (i.e., less than $5 billion of market capitalization) are assigned one-
half the weight of countries with larger equity markets.
The portfolio managers divide all issuers in each eligible country into the
following five broad economic sector groups: financial, industrial, consumer,
utilities and natural resources. The Fund attempts to maintain exposure across
all five sectors in each country.
The portfolio managers select individual stocks based on such factors as
liquidity, industry representation, performance relative to industry and long-
term profitability.
The Fund invests most of its assets in foreign securities which trade primarily
in currencies other than the U.S. dollar. It may also invest directly in foreign
currencies and use derivatives.
Tax-Efficient Strategies.
The portfolio managers utilize a range of active tax management strategies
designed to minimize the Fund's taxable distributions, including low portfolio
turnover and favoring investments in low-dividend, growth-oriented companies.
The portfolio managers also identify specific shares of stock to be sold that
have the lowest tax cost. When prudent, stocks are also sold to realize capital
losses in order to offset realized capital gains.
Additional tax-efficient strategies include regular portfolio rebalancing to
capture available tax credits and the use of derivative hedging techniques so
that the Fund can reduce its exposure to price declines without having to sell
appreciated securities. In limited circumstances, the Fund may also distribute
appreciated securities to shareholders to meet redemption requests so as to
avoid realizing capital gains.
Despite the use of these tax-efficient strategies, the Fund may realize gains
and shareholders will incur tax liability from time to time.
Principal Risks
Among the principal risks of investing in the Fund are:
.Foreign Investment Risk (particularly .Liquidity Risk
emerging market securities risk) .Derivatives Risk
.Currency Risk .Concentration Risk
.Market Risk .Leveraging Risk
.Issuer Risk .Credit Risk
.Value Securities Risk .Management Risk
.Growth Securities Risk
.Smaller Company Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in June 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-46-
<PAGE>
PIMCO Tax-Efficient Structured Emerging Markets Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Institutional Class or Administrative Class shares of the Fund
Shareholder Fees (fees paid directly from your investment):
Fund Reimbursement Fee Imposed on Purchases, Redemptions and Exchanges 1.00%*
(as a percentage of offering, redemption or exchange price)
______________
*Unless a waiver applies, you will be charged a "Fund Reimbursement Fee" when
you purchase, sell (redeem) or exchange Institutional Class or Administrative
Class shares of the Fund. The fee will be equal to 1.00% of the net asset value
of the shares purchased, redeemed or exchanged. Fund Reimbursement Fees are paid
to and retained by the Fund and are not sales charges (loads). See "Purchases,
Redemptions and Exchanges -- Fund Reimbursement Fees."
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual funds. The
Examples assume that you invest $10,000 in the noted class of shares for the
time periods indicated, your investment has a 5% return each year and the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your shares at the end of
each period.*
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional 0.45% 0.50% None 0.95% $ 299 $ 511 $ 741 $ 1,402
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.50 0.25% 1.20 324 588 872 1,684
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you do not redeem your shares.*
Year
Share Class 1 3 5 10
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $ 196 $ 400 $ 620 $ 1,255
- -------------------------------------------------------------------------
Administrative 221 477 753 1,540
- -------------------------------------------------------------------------
</TABLE>
* The Examples assume the payment of a 1.00% 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 "Purchases, Redemptions and Exchanges -- Fund
Reimbursement Fees."
-47-
<PAGE>
Summary of Principal Risks
The value of your investment in a Fund changes with the values of that
Fund's investments. Many factors can affect those values. The factors that are
most likely to have a material effect on a particular Fund's portfolio as a
whole are called "principal risks." The principal risks of each Fund are
identified in the Fund Summaries and are summarized in this section. Each Fund
may be subject to additional principal risks and risks other than those
described below because the types of investments made by each Fund can change
over time. Securities and investment techniques mentioned in this summary and
described in greater detail under "Characteristics and Risks of Securities and
Investment Techniques" appear in BOLD TYPE. That section and "Investment
Objectives and Policies" in the Statement of Additional Information also include
more information about the Funds, their investments and the related risks.
. Market Risk. Each of the Funds normally invests most of its assets in
common stocks and/or other equity securities. A principal risk of investing in
each Fund is that the equity securities in its portfolio will decline in value
due to factors affecting equity securities markets generally or particular
industries represented in those markets. The values of equity securities may
decline due to general market conditions which are not specifically related to a
particular company, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may also decline
due to factors which affect a particular industry or industries, such as labor
shortages or increased production costs and competitive conditions within an
industry.
. Issuer Risk. The values of equity securities may decline for a number of
reasons which directly relate to the issuing company, such as management
performance, financial leverage and reduced demand for the issuer's goods or
services.
. Value Securities Risk. Each Fund may invest in companies that may not be
expected to experience significant earnings growth, but whose securities its
portfolio manager believes are selling at a price lower than their true value.
The [Core Equity, Mid-Cap Equity,] Equity Income, Value, Value 25, Renaissance
and Small-Cap Value Funds place particular emphasis on value securities.
Companies that issue value securities may have experienced adverse business
developments or may be subject to special risks that have caused their
securities to be out of favor. If a portfolio manager's assessment of a
company's prospects is wrong, or if the market does not recognize the value of
the company, the price of its securities may decline or may not approach the
value that the portfolio manager anticipates.
. Growth Securities Risk. Each Fund may invest in equity securities of
companies that its portfolio manager believes will experience relatively rapid
earnings growth. The Core Equity, Mid-Cap Equity, International Growth, Growth,
Target, Opportunity and Innovation Funds place particular emphasis on growth
securities. Growth securities typically trade at higher multiples of current
earnings than other securities. Therefore, the values of growth securities may
be more sensitive to changes in current or expected earnings than the values of
other securities.
-48-
<PAGE>
. Smaller Company Risk. The general risks associated with equity securities
and liquidity risk are particularly pronounced for securities of COMPANIES WITH
SMALLER MARKET CAPITALIZATIONS. These companies may have limited product lines,
markets or financial resources or they may depend on a few key employees.
Securities of smaller companies may trade less frequently and in lesser volume
than more widely held securities and their values may fluctuate more sharply
than other securities. They may also trade in the over-the-counter market or on
a regional exchange, or may otherwise have limited liquidity. The Small-Cap
Growth, Micro-Cap Growth, Small-Cap Value and Opportunity Funds generally have
the greatest exposure to this risk. The Mid-Cap Growth, Mid-Cap Equity, Value 25
and Target Funds also have substantial exposure to this risk because they invest
substantial assets in companies with medium-sized market capitalizations, which
are smaller and generally less-seasoned than the largest companies.
. Liquidity Risk. All of the Funds are subject to liquidity risk. Liquidity
risk exists when particular investments are difficult to purchase or sell,
possibly preventing a Fund from selling such ILLIQUID SECURITIES at an
advantageous time or price. Funds with principal investment strategies that
involve securities of COMPANIES WITH SMALLER MARKET CAPITALIZATIONS, FOREIGN
SECURITIES, DERIVATIVES or securities with substantial market and/or credit risk
tend to have the greatest exposure to liquidity risk.
. Derivatives Risk. All Funds except the Capital Appreciation, Mid-Cap
Growth, Small-Cap Growth, Micro-Cap Growth, Equity Income, Value, Value 25 and
Small-Cap Value Funds may use DERIVATIVES, which are financial contracts whose
value depends on, or is derived from, the value of an underlying asset,
reference rate or index. The various derivative instruments that the Funds may
use are referenced under "Characteristics and Risks of Securities and Investment
Techniques - Derivatives" in this Prospectus and described in more detail under
"Investment Objectives and Policies" in the Statement of Additional Information.
The Funds will sometimes use derivatives as part of a strategy designed to
reduce exposure to other risks, such as interest rate or currency risk. The
Funds may also use derivatives for leverage, which increases opportunities for
gain but also involves greater risk of loss. A Fund's use of derivative
instruments involves risks different from, or greater than, the risks associated
with investing directly in securities and other traditional investments.
Derivatives are subject to a number of risks described elsewhere in this
section, such as liquidity risk, market risk and credit risk. They also involve
the risk of mispricing or improper valuation and the risk that changes in the
value of the derivative may not correlate perfectly with the underlying asset,
rate or index. Also, suitable derivative transactions may not be available in
all circumstances and there can be no assurance that a Fund will engage in these
transactions to reduce exposure to other risks when that would be beneficial.
. Foreign Investment Risk. Funds that invest in FOREIGN SECURITIES, and
particularly the International, International Growth, Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds, may experience more
rapid and extreme changes in value than Funds that invest exclusively in
securities of U.S. companies. The securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, issuers of foreign securities are usually
not subject to the same degree of regulation as U.S. issuers. Reporting,
accounting and auditing standards of foreign countries differ, in some cases
significantly, from U.S. standards. Also, nationalization, expropriation or
confiscatory taxation,
-49-
<PAGE>
currency blockage, political changes or diplomatic developments could adversely
affect a Fund's investments in a foreign country. In the event of
nationalization, expropriation or other confiscation, a Fund could lose its
entire investment in foreign securities. Adverse conditions in certain regions
such as Southeast Asia can also adversely affect securities of other countries
whose economies appear to be unrelated.
Foreign investment risk may be particularly high to the extent that a Fund
invests in EMERGING MARKET SECURITIES of issuers based in countries with
developing economies. These securities may present market, credit, currency,
liquidity, legal, political and other risks different from, or greater than, the
risks of investing in developed foreign countries. The Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds normally invest most
of their assets in emerging market securities and are particularly sensitive to
these risks. The International and International Growth Funds may also invest
significant portions of their assets in emerging market securities.
To the extent that a Fund, such as the International, International Growth,
Structured Emerging Markets or Tax-Efficient Structured Emerging Markets Funds,
invests a significant portion of its assets in a concentrated geographic area
like Eastern Europe or Asia, the Fund will generally have more exposure to
regional economic risks associated with foreign investments.
. Currency Risk. The International, International Growth, Growth, Target,
Opportunity, Innovation, Renaissance, Structured Emerging Markets and Tax-
Efficient Structured Markets Funds may invest directly in foreign currencies and
in securities that trade in, and receive revenues in, foreign currencies. To the
extent that they do so, these Funds will be subject to the risk that those
currencies will decline in value relative to the U.S. Dollar, or, in the case of
hedging positions, that the U.S. Dollar will decline in value relative to the
currency being hedged. Currency rates in foreign countries may fluctuate
significantly over short periods of time for a number of reasons, including
changes in interest rates, intervention (or the failure to intervene) by U.S. or
foreign governments, central banks or supranational entities such as the
International Monetary Fund, or by the imposition of currency controls or other
political developments in the U.S. or abroad.
. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. Funds such as the
Value 25 Fund that invest in a relatively small number of issuers are more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a more diversified Fund might be. Some of those issuers also may
present substantial credit or other risks. The International, International
Growth, Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets Funds may be subject to this risk to the extent that they concentrate
their assets in securities denominated in a particular foreign currency or in a
concentrated geographic area outside the U.S. Similarly, the Innovation Fund is
vulnerable to events affecting companies which use innovative technologies to
gain a strategic, competitive advantage in their industry and companies that
provide and service those technologies because it normally concentrates its
investments in those companies.
. Leveraging Risk. When a Fund is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Fund will be more volatile and
all other risks will tend to be compounded. This is because leverage tends to
exaggerate the effect of any increase or decrease in the
-50-
<PAGE>
value of a Fund's portfolio securities. Each Fund may take on leveraging risk by
using REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS, by investing
collateral from LOANS OF PORTFOLIO SECURITIES or through the use of WHEN-ISSUED,
DELAYED-DELIVERY OR FORWARD COMMITMENT TRANSACTIONS. Certain funds may also take
on leveraging risk by using DERIVATIVES. The use of leverage may also cause a
Fund to liquidate portfolio positions when it would not be advantageous to do so
in order to satisfy its obligations or to meet segregation requirements.
. Interest Rate Risk. To the extent that Funds purchase fixed income
securities for investment or defensive purposes, they will be subject to
interest rate risk, a market risk relating to investments in fixed income
securities such as bonds and notes. As interest rates rise, the value of fixed
income securities in a Fund's portfolio are likely to decrease.
. Credit Risk. All of the Funds are subject to credit risk. This is the
risk that the issuer or the guarantor of a fixed income security, or the
counterparty to a DERIVATIVES contract, REPURCHASE AGREEMENT or a LOAN OF
PORTFOLIO SECURITIES, is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are
subject to varying degrees of credit risk, which are often reflected in their
CREDIT RATINGS.
. Management risk. Each Fund is subject to management risk because it is
an actively managed investment portfolio. PIMCO Advisors, the Sub-Advisers and
each individual portfolio manager will apply investment techniques and risk
analyses in making investment decisions for the Funds, but there can be no
guarantee that these will produce the desired results.
-51-
<PAGE>
Management of the Funds
The business affairs of the Funds are managed under the direction of the Trust's
Board of Trustees. Information about the Trustees and the Trust's executive
officers is included in the Statement of Additional Information under the
heading "Management of the Trust."
Investment Adviser And Administrator
PIMCO Advisors serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator") for the Funds.
Subject to the supervision of the Board of Trustees, PIMCO Advisors is
responsible for managing, either directly or through others selected by it, the
investment activities of the Funds and the Funds' business affairs and other
administrative matters.
PIMCO Advisors is located at 800 Newport Center Drive, Newport Beach,
California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of September 30, 1999, PIMCO Advisors
and its subsidiary partnerships had more than $256 billion in assets under
management.
PIMCO Advisors has retained investment management firms ("Sub-Advisers") to
manage each Fund's investments, except that the PIMCO Equity Advisors division
of PIMCO Advisors manages the investments of the Growth, Target, Opportunity,
Innovation and Renaissance Funds (PIMCO Equity Advisors is also referred to as a
"Sub-Adviser" in this capacity). See "Sub-Advisers" below.
PIMCO Advisors has retained its affiliate, Pacific Investment Management
Company, to provide various administrative and other services required by the
Funds in its capacity as sub-administrator. PIMCO Advisors and the sub-
administrator may retain other affiliates to provide certain of these services.
. Advisory Fees. Each Fund pays PIMCO Advisors fees in return for
providing or arranging for the provisions of investment advisory services. In
the case of Funds for which PIMCO Advisors has retained a separate Sub-Adviser,
PIMCO Advisors (and not the Fund) pays a portion of the advisory fees it
receives to the Sub-Adviser in return for its services.
For the fiscal year ended June 30, 1999, the Funds paid monthly advisory
fees to PIMCO Advisors at the following annual rates (stated as a percentage of
the average daily net assets of each Fund taken separately):
-52-
<PAGE>
<TABLE>
<CAPTION>
Advisory
Fund Fees
- ------------------------------------------------------------------------------------------
<S> <C>
Capital Appreciation, Mid-Cap Growth, Equity Income, Value, Enhanced .45%
Equity, Tax-Efficient Equity, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets
- ------------------------------------------------------------------------------------------
Value 25 and Growth Funds .50%
- ------------------------------------------------------------------------------------------
International and Target Funds .55%
- ------------------------------------------------------------------------------------------
Core Equity Fund .57%
- ------------------------------------------------------------------------------------------
Small-Cap Value and Renaissance Funds .60%
- ------------------------------------------------------------------------------------------
Mid-Cap Equity Fund .63%
- ------------------------------------------------------------------------------------------
Opportunity and Innovation Funds .65%
- ------------------------------------------------------------------------------------------
International Growth Fund .85%
- ------------------------------------------------------------------------------------------
Small-Cap Growth Fund 1.00%
- ------------------------------------------------------------------------------------------
Micro-Cap Growth Fund 1.25%
- ------------------------------------------------------------------------------------------
</TABLE>
. Administrative Fees. The Funds pay for the administrative services they
require under a fee structure which is essentially fixed. Institutional and
Administrative Class shareholders of the Funds pay a single administrative fee
to PIMCO Advisors, computed as a percentage of the Fund's assets attributable in
the aggregate to those classes of shares. PIMCO Advisors, in turn, provides or
procures administrative services for Institutional and Administrative Class
shareholders and also bears the costs of various third-party services required
by the Funds, including audit, custodial, portfolio accounting, legal transfer
agency and printing costs. The result of this fee structure is an expense level
for Institutional and Administrative Class shareholders of each Fund that, with
limited exceptions, is precise and predictable under ordinary circumstances.
For the fiscal year ended June 30, 1999, the Funds paid PIMCO Advisors
monthly administrative fees at the following annual rates (stated as a
percentage of the average daily net assets attributable in the aggregate to the
Fund's Institutional and Administrative Class shares):
<TABLE>
<CAPTION>
Fund Administrative Fees
- ----------------------------------------------------------------------
<S> <C>
International, International Growth, .50%
Structured Emerging Markets and
Tax-Efficient Structured Emerging
Markets Funds
- ----------------------------------------------------------------------
All Other Funds .25%
- ----------------------------------------------------------------------
</TABLE>
-53-
<PAGE>
Sub-Advisers
Each Sub-Adviser has full investment discretion and makes all determinations
with respect to the investment of a Fund's assets. The following provides
summary information about each Sub-Adviser, including the Fund(s) it manages and
its investment specialty.
<TABLE>
<CAPTION>
Sub-Adviser* Funds Investment Specialty
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Blairlogie Capital Management ("Blairlogie") International International stocks using
4th Floor, 125 Princes Street Scottish standards of prudent
Edinburgh EH2 4AD, Scotland investment management with modern
quantitative analytical tools
- -------------------------------------------------------------------------------------------------------------------------
Cadence Capital Management ("Cadence") Capital Appreciation, Growth and blend of stocks of
Exchange Place, 53 State Street Mid-Cap Growth, Small-Cap companies that the Sub-Adviser
Boston, MA 02109 Growth and Micro-Cap Growth believes are trading at a
- -------------------------------------------------------------------------------------------------------------------------
NFJ Investment Group ("NFJ") Equity Income, Value, Value Value stocks that the Sub-Adviser
2121 San Jacinto, Suite 1840 25 and Small-Cap Value believes are undervalued and/or
Dallas, TX 75201 offer above-average dividend
yields
- -------------------------------------------------------------------------------------------------------------------------
Pimco Equity Advisors division of PIMCO Advisors Core Equity, Mid-Cap Equity, Disciplined approach to
("PIMCO Equity Advisors") International Growth, identifying quality growth
33 Maiden Lane Growth, Target, Opportunity, companies
New York, NY 10038 Innovation and Renaissance
- -------------------------------------------------------------------------------------------------------------------------
Parametric Portfolio Associates ("Parametric") Enhanced Equity, Stocks, using
7310 Columbia Center, 701 Fifth Avenue Tax-Efficient Equity, quantitatively-driven fundamental
Seattle, WA 98104 Structured Emerging Markets analysis and economic methods,
and Tax-Efficient Structured with a specialty in tax-efficient
Emerging Markets products
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
* With the exception of Blairlogie, each sub-Adviser is either a division or a
sub-partnership of PIMCO Advisors.
-54-
<PAGE>
The following provides additional information about each Sub-Adviser and
the individual Portfolio Manager(s) who have primary responsibility for managing
the Funds' investments.
Blairlogie provides advisory services to mutual funds and institutional
accounts. Blairlogie Capital Management Ltd., the predecessor investment adviser
the Blairlogie, commenced operations in 1992. Accounts managed by Blairlogie had
combined assets as of September 30, 1999 of approximately $903 million.
Blairlogie is an indirect majority-owned subsidiary of the Alleghany
Corporation, and is not an affiliate of PIMCO Advisors. Blairlogie was formerly
an affiliated sub-partnership of PIMCO Advisors. On April 30, 1999, PIMCO
Advisors sold all of its ownership interest in Blairlogie to subsidiaries of the
Alleghany Corporation. PIMCO Advisors retained Blairlogie as the Sub-Adviser of
the International Fund subsequent to this transaction pursuant to a new
portfolio management agreement between PIMCO Advisors and Blairlogie.
. Individual Portfolio Manager. The following individual has primarily
responsibility for the International Fund.
<TABLE>
<CAPTION>
Portfolio
Fund Manager Since Recent Professional Experience
<S> <C> <C> <C>
International James Smith 1994 Managing Director and Chief Investment Officer
of Blairlogie.
</TABLE>
Cadence, an affiliated sub-partnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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,
1999 of approximately $6.5 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for each of the noted Funds.
<TABLE>
<CAPTION>
Portfolio
Fund Managers Since Recent Professional Experience
<S> <C> <C> <C>
Capital Appreciation David B. Breed 1991 (Inception) Managing Director, Chief Executive Officer and
founding partner of Cadence. Member of the
Management Board of PIMCO Advisors
William B. Bannick 1992 Managing Director and Executive Vice President
of Cadence.
Katherine A. Burdon 1993 Managing Director and Portfolio Manager at
Cadence.
Peter B. McManus 1994 Director of Fund Management at Cadence.
Previously, he served as a Vice President of
Bank of Boston from 1991 to 1994.
Mid-Cap Messrs. Breed, Bannick Same as Capital See above.
Growth and McManus and Appreciation
Ms. Burdon Fund
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Small-Cap Messrs. Breed, Bannick Same as Capital See above.
Growth and McManus and Appreciation
Ms. Burdon Fund
Micro-Cap Messrs. Breed, Bannick Same as Capital See above.
Growth and McManus and Appreciation
Ms. Burdon Fund
</TABLE>
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NFJ, an affiliated sub-partnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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, 1999 of
approximately $2.2 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for the noted Funds.
<TABLE>
<CAPTION>
Portfolio
Fund Manager Since Recent Professional Experience
<S> <C> <C> <C>
Equity Income Chris Najork 1991 (Inception) Managing Director and founding partner of NFJ.
Benjamin Fischer 1991 (Inception) Managing Director and founding partner of NFJ.
Value Messrs. Najork 1991 (Inception) See above.
and Fischer
Paul A. Magnuson 1995 Research analyst at NFJ. Previously, he was
with NationsBank Texas from 1985 to 1992,
serving in various capacities including as
Financial Analyst.
Value 25 Messrs. Najork and 1998 (Inception) See above.
Fischer
Cliff Hoover 1998 (Inception) Principal at NFJ. Previously, he served as
Vice President Corporate Banking at Credit
Lyonnais from 1991 to 1997
Small-Cap Value Messrs. Najork and 1991 (Inception) See above.
Fischer
Mr. Magnuson 1995 See above.
</TABLE>
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PIMCO Equity Advisors, a division of PIMCO Advisors, provides equity-
related advisory services to mutual funds and institutional accounts. See
"Investment Adviser and Administrator" above for additional information about
PIMCO Advisors.
. Individual Portfolio Managers. The following individuals of PIMCO Equity
Advisors have primary responsibility for the noted Funds. A different sub-
advisory firm served as Sub-Adviser for each of the Growth, Target, Opportunity
and Innovation Funds prior to March 6, 1999, for the Renaissance Fund prior
to May 7, 1999, and for the Core Equity, Mid-Cap Equity and International Growth
Fund prior to July 1, 1999.
<TABLE>
<CAPTION>
Portfolio
Fund Managers Since Recent Professional Experience
<S> <C> <C> <C>
Growth Kenneth W. Corba 1999 Managing Director and Chief Investment Officer of
PIMCO Equity Advisors and a Member of the
Management Board of PIMCO Advisors. Prior to
joining PIMCO Advisors, he was with Eagle Asset
Management from 1995 to 1998, serving in various
capacities including as Chief Investment Officer
and Portfolio Manager. He was with Stein Roe and
Farnham Inc. from 1984 to 1995, serving in various
capacities including as Senior Vice President and
Portfolio Manager.
Target Mr. Corba 1999 See above.
Opportunity Michael F. Gaffney 1999 Managing Director of PIMCO Equity Advisors. Prior
to joining PIMCO Advisors, he was with Alliance
Capital Management L.P. from 1993 to 1999, serving
in various capacities including as Senior Vice
President and Portfolio Manager.
Innovation Dennis P. McKechnie 1998 Portfolio Manager of PIMCO Equity Advisors. Prior
to joining PIMCO Advisors, he was with Columbus
Circle from 1991 to 1999, serving in various
capacities including as Portfolio Manager.
Renaissance John K. Schneider 1999 Senior Portfolio Manager of PIMCO Equity Advisors.
Prior to joining PIMCO Advisors, he was a partner
and Portfolio Manager of Schneider Capital
Management (from 1996 to 1999).
Core Equity Messrs. Corba and Schneider 1999 See above.
Mid-Cap Equity Messrs. Corba and Schneider 7/99 See above.
International Growth David Stein 7/99 Senior Portfolio Manager of PIMCO Equity Advisors. He also serves as
Managing Director of Parametric. He has been with Parametric since
1996 where he leads the investment, research and product development
activities. Previously, he served in Investment Research at GTE
Corporation from 1995 to 1996, in Equity Research at Vanguard Group
from 1994 to 1995 and in Investment Research at IBM Corporation from
1977 to 1994.
Cliff Quisenberry 7/99 Portfolio Manager of PIMCO Equity Advisors. He also serves as
Vice President and Global Portfolio Manager of Parametric. He joined
Parametric in 1998 where he heads international investments in both
developed and emerging markets. Previously, he served as Vice
President and Portfolio Manager at Cutler & Co. from 1990 to 1994 and
as a Securities Analyst and Portfolio Manager at Fred Alger
Management from 1987 to 1998.
</TABLE>
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<PAGE>
Parametric, an affiliated sub-partnership of PIMCO Advisors, provides
advisory services to mutual funds and institutional accounts. 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, 1999 of approximately $3.9 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for each of the noted Funds.
<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Enhanced Equity David Stein 1998 (Inception) Managing Director of Parametric. Previously, he
served in Investment Research at GTE Corporation
from 1995 to 1996, in Equity Research at Vanguard
Group from 1994 to 1995 and in Investment Research
at IBM Corporation from 1977 to 1994.
Tom Seto 1998 (Inception) Vice President of Parametric. Previously, he was
with Barclays Global Investors from 1991 to 1998,
serving in various capacities including as head of
U.S. Equity Index Investments and Portfolio
Manager.
Cliff Quisenberry 1998 (Inception) Vice President of Parametric. Previously, he
served as Vice President and Portfolio Manager at
Cutler & Co. from 1990 to 1994 and as a Securities
Analyst and Portfolio Manager at Fred Alger
Management from 1987 to 1998.
Tax-Efficient Messrs. Stein, Seto 1998 (Inception) See above.
Equity and Quisenberry
Structured Emerging Messrs. Stein, Seto 1998 (Inception) See above.
Markets and Quisenberry
Tax-Efficient Structured Messrs. Stein, Seto 1998 (Inception) See above.
Emerging Markets and Quisenberry
</TABLE>
Distributor
The Trust's Distributor is PIMCO Funds Distributors LLC, 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.
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<PAGE>
Investment Options
(Institutional Class and Administrative Class Shares)
The Trust offers investors Institutional Class and Administrative Class
shares of the Funds in this Prospectus.
The Trust does not charge any sales charges (loads) or other fees in
connection with purchases, sales (redemptions) or exchanges of Institutional
Class or Administrative Class shares, except that a 1.00% Fund Reimbursement Fee
may apply to transactions involving shares of the Structured Emerging Markets
and Tax-Efficient Structured Emerging Markets Funds. See "Purchases,
Redemptions and Exchanges -- Fund Reimbursement Fees" below.
Administrative Class shares are generally subject to a higher level of
operating expenses than Institutional Class shares due to the additional service
and/or distribution fees paid by Administrative Class shares as described below.
Therefore, Institutional Class shares will generally pay higher dividends and
have a more favorable investment return than Administrative Class shares.
. Service and Distribution Fees - Administrative Class Shares. The Trust
has adopted an Administrative Services Plan for the Administrative Class shares
of each Fund. It has also adopted a Distribution Plan for the Administrative
Class shares of each Fund except for the Capital Appreciation and Small-Cap
Growth Funds. Each Plan has been adopted in accordance with the requirements of
Rule 12b-1 under the Investment Company Act of 1940 and is administered in
accordance with that rule. However, shareholders do not have the voting rights
set forth in Rule 12b-1 with respect to the Administrative Services Plan.
Each Plan allows the Funds to use its Administrative Class assets to
reimburse financial intermediaries that provide services relating to
Administrative Class shares. The Distribution Plan permits reimbursement for
expenses in connection with the distribution and marketing of Administrative
Class shares and/or the provision of shareholder services to Administrative
Class shareholders. The Administrative Services Plan permits reimbursement for
services in connection with the administration of plans or programs that use
Administrative Class shares of the Funds as their funding medium and for related
expenses.
In combination, the Plans permit a Fund to make total reimbursements at an
annual rate of up to .25% of the Fund's average daily net assets attributable to
its Administrative Class shares. The same entity may not receive both
distribution and administrative services fees with respect to the same
Administrative Class assets, but may receive fees under each Plan with respect
to separate assets. Because these fees are paid out of a Fund's Administrative
Class assets on an ongoing basis, over time they will increase the cost of an
investment in Administrative Class shares and may cost an investor more than
other types of sales charges.
. Arrangements with Service Agents. Institutional Class and
Administrative Class shares of the Funds may 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 and/or
distribution fees paid with respect to Administrative Class shares. Service
agents may impose additional or different conditions than the
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Trust on purchases, redemptions or exchanges of Fund shares by their customers.
Service agents may also independently establish and charge their customers
transaction fees, account fees and other amounts in connection with purchases,
sales and redemptions of Fund shares in addition to any fees charged by the
Trust. These additional fees would increase the cost of the customer's
investment and lower investment returns. 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,
redemptions and exchanges. Shareholders who are customers of service agents
should consult their service agents for information regarding these fees and
conditions.
Purchases, Redemptions and Exchanges
Purchasing Shares
Investors may purchase Institutional Class and Administrative Class shares
of the Funds at the relevant net asset value ("NAV") of that class without a
sales charge or other fee, except that a 1.00% Fund Reimbursement Fee may apply
to transactions involving shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds. See "Fund Reimbursement Fees"
below.
Institutional Class shares are offered primarily for direct investment by
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations and high net worth individuals.
Institutional Class shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to their customers' investments in the Funds.
Administrative Class shares are offered primarily through employee benefit
plan alliances, broker-dealers and other intermediaries, and each Fund pays
service and/or distribution fees to these entities for services they provide to
Administrative Class shareholders.
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.
. Investment Minimums. 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. The minimum initial investment may be
waived for Institutional or Administrative Class shares offered to clients of
PIMCO Equity Advisors, Cadence, 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
Institutional Class shares offered through fee-based programs sponsored and
maintained by a registered broker-dealer and approved by the Distributor in
which each investor pays an asset based fee at an annual rate of at least 0.50%
of the assets in the account to a financial intermediary for investment advisory
and/or administrative services.
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<PAGE>
The Trust and the Distributor may waive the minimum initial investment for
other categories of investors in their discretion.
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.
. Timing of Purchase Orders and Share Price Calculations. 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
Exchange, on a day the Trust is open for business, will be effected at that
day's NAV. An order received after the close of regular trading on the Exchange
will be effected at the NAV 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 and
communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the
following business day will be effected at the NAV 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.
. Initial Investment. Investors may open an account by completing and
signing a Client Registration Application and mailing it to PIMCO Funds at 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 described below, an investor may purchase Institutional Class and
Administrative Class shares only by wiring federal funds to the Trust's Transfer
Agent, National Financial Data Services, 330 West 9th Street, 4th Floor, Kansas
City, Missouri 64105. Before wiring federal funds, the investor must telephone
the Trust at 1-800-927-4648 to receive instructions for wire transfer and must
provide the following information: name of authorized person, shareholder name,
shareholder account number, name of Fund and share class, amount being wired,
and wiring bank name.
An investor may purchase shares without first wiring federal funds if the
proceeds of the investment are derived from an advisory account the investor
maintains 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.
. Additional Investments. An investor may purchase additional
Institutional Class and Administrative Class shares of the Funds at any time by
calling the Trust and wiring federal funds to the Transfer Agent as outlined
above.
. Other Purchase Information. Purchases of a Fund's Institutional Class
and Administrative Class shares will be made in full and fractional shares. In
the interest of economy and convenience, certificates for shares will not be
issued.
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<PAGE>
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.
An investor should purchase and sell shares of the Funds for long-term
investment purposes only. The Trust and PIMCO Advisors 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. Investors should inquire as to
whether shares of a particular Fund are available for offer and sale in the
investor's 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.
Subject to the approval of the Trust, an investor may purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with the 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 PIMCO Advisors or a Sub-
Adviser intends to retain the security in the Fund as an investment. Assets
purchased by a Fund in such a transaction will be valued in generally the same
manner as they would be valued for purposes of pricing the Fund's shares, if
such assets were included in the Fund's assets at the time of purchase. The
Trust reserves the right to amend or terminate this practice at any time.
. Investment Limitations. Shares of the Micro-Cap Growth Fund 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 this Fund. This restriction may be changed or eliminated at any time
at the discretion of the Trust's Board of Trustees.
. 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.
. 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 "Fund Reimbursement Fee,"
both at the time of purchase and at the time of redemption,
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<PAGE>
equal to 1.00% of the net asset value of the shares purchased or redeemed. Fund
Reimbursement Fees are not paid separately, but are deducted automatically from
the amount invested or the amount to be received in connection with a
redemption. Fund Reimbursement Fees are paid to and retained by the Funds to
defray certain costs described below and are not paid to or retained by PIMCO
Advisors, the Fund's Sub-Adviser, or the Distributor. 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 and exchanges of shares
acquired by these reinvestments are subject to Fund Reimbursement Fees unless a
waiver applies.
The purpose of the Fund Reimbursement Fees is to defray the costs
associated with investing the proceeds of the sale of the Fund's shares (in the
case of purchases) or the costs associated with the sale of portfolio securities
to satisfy redemption requests (in the case of redemptions), thereby insulating
existing shareholders from such costs. The amount of a Fund Reimbursement Fee
represents the Sub-Adviser'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. 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.
Waiver of Fund Reimbursement Fees. Former participants in the Parametric
Portfolio Associates Emerging Markets Trust will not be subject to Fund
Reimbursement Fees with respect to any shares of the Structured Emerging Markets
and Tax-Efficient Structured Emerging Markets 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.
Redeeming Shares
. Redemptions by Mail. An investor may redeem (sell) Institutional Class
and Administrative Class shares by submitting a written request to PIMCO Funds
at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660. The
redemption request should state 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. An investor that
elects this option on the Client Registration Application (or subsequently in
writing) may request redemptions of shares by calling the Trust at 1-800-927-
4648, by sending a facsimile to 1-949-760-4456, or by other
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means of wire communication. Investors should state the Fund and class from
which the shares are to be redeemed, the number or dollar amount of the shares
to be redeemed and the account number. Redemption requests of an amount of $10
million or more may be initiated by telephone, but must be confirmed in writing
by an authorized party prior to processing.
In electing a telephone redemption, the investor authorizes Pacific
Investment Management and the Transfer Agent to act on telephone instructions
from any person representing himself to be the investor, and reasonably believed
by Pacific Investment Management or the Transfer Agent to be genuine. Neither
the Trust nor the 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. The Trust or
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions if it fails to employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. 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 "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 NAV 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 NAV of the shares
redeemed. See "Fund Reimbursement Fees" above.
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Redemption proceeds will ordinarily be wired to the investor's bank within
three business days after the redemption request, but may take up to seven
business days. Redemption proceeds will be sent by wire only to the bank name
designated on the Client Registration Application. The Trust may suspend the
right of redemption or postpone the payment date at times when the Exchange is
closed, or during certain other periods as permitted under the federal
securities laws.
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application that
are required to effect a redemption, and accompanied by a signature guarantee
from any eligible guarantor institution, as determined in accordance with the
Trust's procedures. Shareholders should inquire as to whether a particular
institution is an eligible guarantor institution. 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
An investor may exchange Institutional Class or Administrative Class shares
of a Fund for shares of the same class of any other Fund or other series of the
Trust that offers that class based on the respective NAVs of the shares
involved. An exchange may be made by following the redemption procedure
described above under "Redemptions by Mail" or, if the investor has elected the
telephone redemption option, by calling the Trust at 1-800-927-4648. An
investor may also exchange shares of a Fund 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.
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Unless eligible for a waiver, shareholders who exchange their Institutional
Class or Administrative Class shares of a Fund for the same class of shares of
the Structured Emerging Markets or Tax-Efficient Structured Emerging Markets
Fund will be subject to a Fund Reimbursement Fee of 1.00% of the NAV of the
shares of these Funds acquired in connection with the exchange. Also,
shareholders who exchange shares of the Structured Emerging Markets Fund or Tax-
Efficient Structured Emerging Markets Fund for shares of any other Fund will be
subject to a Fund Reimbursement Fee of 1.00% of the NAV of the shares of these
Funds redeemed in connection with the exchange. See "Fund Reimbursement Fees"
above.
An investor may exchange shares only with respect to Funds or other
eligible series that are registered in the investor's state of residence 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 "Tax Consequences" in this Prospectus and
"Taxation" in the Statement of Additional Information.
The Trust reserves the right to refuse exchange purchases if, in the
judgment of PIMCO Advisors, 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 PIMCO Advisors to be detrimental to the
Trust or a particular Fund. Currently, the Trust limits the number of "round
trip" exchanges investors 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. The Trust reserves the right to impose additional restrictions on
exchanges at any time, although it will attempt to give shareholders prior
notice whenever it is reasonably able to do so.
How Fund Shares Are Priced
The Trust calculates the net asset value ("NAV") of a Fund's Institutional
and Administrative Class shares by taking the total value of the Fund's assets
attributable to the particular class, subtracting the Fund's liabilities
attributable to the class, and dividing by the Fund's total number shares of
that class outstanding. Fund shares are valued as of the close of regular
trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (the
"Exchange") each day the Exchange is open.
The Funds value their portfolio securities and other investments for which
market quotations are readily available at market value. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Board of Trustees, with
reference to fixed income securities with more readily attainable prices and
durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Exchange traded options, futures, and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other portfolio securities and assets are valued at
their fair value as determined in good faith by the Trustees or persons acting
at their direction.
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Fund investments quoted in foreign currencies are translated into U.S.
dollars using foreign exchange quotations provided by independent dealers. As a
result, the NAV of a Fund's shares may be affected by changes in the value of
foreign currencies in relation to the U.S. dollar. Because foreign markets may
be open at different times than the Exchange, the NAV of a Fund's shares may
change on days when the Exchange is closed and an investor is not able to buy,
redeem or exchange shares. In particular, the calculation of the NAV of the
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 NAV calculations. Information that becomes known to the Trust
or its agents after NAV is calculated on a particular day may be considered in
pricing Fund shares thereafter, but will not be used to retroactively adjust the
price of a security as determined earlier that day or on a prior day. The
values of portfolio securities may be affected by events that occur between the
time the securities are valued and the close of regular trading on the Exchange.
These events may not be reflected in the Funds' NAV calculations. If events
occur during this period that have a material effect on the value of portfolio
securities held by a Fund, the securities may be valued at their fair value as
determined by PIMCO Advisors or a Sub-Adviser and approved in good faith by the
Board of Trustees.
Under certain circumstances, the per share NAV of the Administrative Class
shares of the Funds may be lower than the per share NAV of the Institutional
Class shares as a result of the daily expense accruals of the service and/or
distribution fees paid by Administrative Class shares. Generally, for Funds
that pay income dividends, those dividends are expected to differ over time by
approximately the amount of the expense accrual differential between the two
classes.
Fund Distributions
Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. A shareholder begins earning dividends
on Fund shares the day after the Trust receives the shareholder's purchase
payment. Dividends paid by each Fund with respect to each class of shares are
calculated in the same manner and at the same time, but dividends on
Administrative Class shares are expected to be lower than dividends on
Institutional Class shares as a result of the service and/or distribution fees
applicable to Administrative Class shares. The following shows when each Fund
intends to declare and distribute income dividends to shareholders of record.
<TABLE>
<CAPTION>
Fund At Least Annually Quarterly
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income, Value and Renaissance Funds .
- --------------------------------------------------------------------------------------------
All other Funds .
</TABLE>
In addition, each Fund distributes any net capital gains it earns from the
sale of portfolio securities to shareholders no less frequently than annually.
Net short-term capital gains may be paid more frequently.
A Fund's dividend and capital gain distributions with respect to a
particular class of shares will automatically be reinvested in additional shares
of the same class of the Fund at NAV unless the
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shareholder elects to have the distributions paid in cash.
Shareholders do not pay any sales charges or other fees (including Fund
Reimbursement Fees) on shares received through the reinvestment of Fund
distributions. However, shareholders of the Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds who receive additional shares
through the reinvestment of distributions will pay a Fund Reimbursement Fee if
they subsequently redeem or exchange those shares. See "Purchases, Redemptions
and Exchanges - Fund Reimbursement Fees."
For further information on distribution options, please contact the Trust
at 1-800-927-4648.
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Tax Consequences
. Taxes on Fund distributions. A shareholder subject to U.S. federal
income tax will be subject to tax on Fund distributions whether they are paid in
cash or reinvested in additional shares of the Funds. For federal income tax
purposes, Fund distributions will be taxable to the shareholder as either
ordinary income or capital gains.
Fund dividends (i.e., distributions of investment income) are taxable to
shareholders as ordinary income. Federal taxes on Fund distributions of gains
are determined by how long the Fund owned the investments that generated the
gains, rather than how long the shareholder owned the shares. Distributions of
gains from investments that a Fund owned for more than 12 months will generally
be taxable to shareholders as capital gains. Distributions of gains from
investments that the Fund owned for 12 months or less will generally be taxable
as ordinary income.
Fund distributions are taxable to shareholders even if they are paid from
income or gains earned by a Fund prior to the shareholder's investment and thus
were included in the price paid for the shares. For example, a shareholder who
purchases shares on or just before the record date of a Fund distribution will
pay full price for the shares and may receive a portion of the investment back
as a taxable distribution.
. Taxes on redemptions or exchanges of shares. Any gain resulting from the
sale of Fund shares will generally be subject to federal income tax. When a
shareholder exchanges shares of a Fund for shares of another series, the
transaction will be treated as a sale of the Fund shares for these purposes, and
any gain on those shares will generally be subject to federal income tax.
. A Note on the Tax-Efficient Equity and Tax-Efficient Structured Emerging
Markets Funds. As noted under "Summary Information" above, the Tax-Efficient
Equity and Tax-Efficient Structured Emerging Markets Funds utilize a number of
tax-efficient management techniques designed to minimize taxable distributions.
For instance, the Funds generally seek to minimize realized gains and, when
realizing gains, attempt to realize gains that will be taxed as capital gains
(i.e., on investments owned for more than 12 months). Although the Funds
attempt to minimize taxable distributions, they may be expected to earn and
distribute taxable income and realize and distribute capital gains from time to
time.
This section relates only to federal income tax; the consequences under
other tax laws may differ. Shareholders should consult their tax advisors as to
the possible application of foreign, state and local income tax laws to Trust
dividends and capital distributions. Please see the Statement of Additional
Information for additional information regarding the tax aspects of investing in
a Fund.
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Characteristics and Risks of Securities and
Investment Techniques
This section provides additional information about some of the principal
investments and related risks of the Funds described under "Summary Information"
above. It also describes characteristics and risks of additional securities
and investment techniques that may be used by the Funds from time to time. Most
of these securities and investment techniques are discretionary, which means
that the portfolio managers can decide whether to use them or not. This
Prospectus does not attempt to disclose all of the various types of securities
and investment techniques that may be used by the Funds. As with any mutual
fund, investors in the Funds must rely on the professional investment judgment
and skill of PIMCO Advisors, the Sub-Advisers and the individual portfolio
managers. Please see "Investment Objectives and Policies" in the Statement of
Additional Information for more detailed information about the securities and
investment techniques described in this section and about other strategies and
techniques that may be used by the Funds.
Fixed Income Securities and Defensive Strategies
Fixed income securities are obligations of the issuer to make payments of
principal and/or interest on future dates, and include corporate and government
bonds, notes, certificates of deposit, commercial paper, convertible securities
and mortgage-backed and other asset-backed securities.
The Capital Appreciation, Mid-Cap Growth, Small-Cap Growth, Micro-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 in
common stock. Each of these Funds may maintain a portion of its assets
(normally not more than 10%) in U.S. Government securities, high quality fixed
income securities, money market obligations and cash to pay certain Fund
expenses and to meet redemption requests. It is the policy of these Funds to be
as fully invested in common stock as practicable at all times, except that the
Structured Emerging Markets and Tax-Efficient Structured Emerging Markets Funds
may invest up to 5% of their respective net assets in fixed income securities of
emerging market issuers. This means that these Funds will not invest in fixed
income securities as a defensive investment strategy and therefore may be
particularly vulnerable to general declines in stock prices.
The International, Growth, Target, Opportunity, Innovation and Renaissance
Funds will each invest primarily in common stocks, and may also invest in other
kinds of equity securities, including preferred stocks and securities (including
fixed income 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 of its
assets in fixed income securities. These Funds may also invest up to 100% of
their assets in short-term U.S. Government securities and other money market
instruments for temporary defensive purposes. The International and
International Growth Funds may also invest up to 100% of its assets in other
domestic fixed income, foreign fixed income and equity securities principally
traded in the U.S., including obligations issued or guaranteed by a foreign
government or its agencies, authorities or instrumentalities, corporate bonds
and American Depository Receipts, for temporary defensive purposes. These
temporary defensive strategies would be inconsistent with the investment
objective and principal investment strategies of each of these Funds and may
affect the Fund's ability to achieve its investment objective.
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Companies With Smaller Market Capitalizations
Each of the Funds may invest in securities of companies with market
capitalizations that are small compared to other publicly traded companies. The
Small-Cap Growth, Micro-Cap Growth, Small-Cap Value and Opportunity Funds invest
primarily in smaller companies and are particularly sensitive to the risks
described below. The Mid-Cap Growth, Mid-Cap Equity, Value 25 and Target Funds
also have substantial exposure to these risks because they invest primarily in
companies with medium-sized market capitalizations, which are smaller than the
largest companies.
Companies which are smaller and less well-known or seasoned than larger,
more widely held companies may offer greater opportunities for capital
appreciation, but may also involve risks different from, or greater than, risks
normally associated with larger companies. Larger 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 than smaller companies.
Smaller companies may have limited product lines, markets or financial resources
or may depend on a small, inexperienced management group. Securities of smaller
companies may trade less frequently and in lesser volume than more widely held
securities and their values may fluctuate more abruptly or erratically than
securities of larger companies. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity.
These securities may therefore be more vulnerable to adverse market developments
than securities of larger companies. Also, there may be less publicly available
information about smaller companies or less market interest in their securities
as compared to larger companies, and it may take longer for the prices of the
securities to reflect the full value of a company's earnings potential or
assets.
Because securities of smaller companies may have limited liquidity, a Fund
may have difficulty establishing or closing out its positions in smaller
companies at prevailing market prices. 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. For these
reasons, 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
smaller capitalization securities, which could adversely affect performance.
Foreign Securities
The 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 fixed income 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 agencies and supranational entities. The Core
Equity, Mid-Cap Equity, Growth, Target, Opportunity, Innovation and Renaissance
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
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<PAGE>
are excluded for purposes of these limitations), and may invest without limit in
securities of foreign issuers that are traded in U.S. markets. The Enhanced
Equity Fund may invest in common stocks of foreign issuers if included in the
S&P 500 Index.
Investing in foreign securities involves special risks and considerations
not typically associated with investing in U.S. securities. Shareholders should
consider carefully the substantial risks involved for Funds that invest in
securities issued by foreign companies and governments of foreign countries.
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; and political
instability. 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 foreign securities markets may change independently of
each other. Also, 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. Investments in foreign securities may also involve higher custodial
costs than domestic investments and additional transaction costs with respect to
foreign currency conversions. Changes in foreign exchange rates also will
affect the value of securities denominated or quoted in foreign currencies.
Emerging Market Securities. Each of the Funds that may invest in foreign
securities may invest in securities of issuers based in countries with
developing (or "emerging market") economies. The Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds normally invest most of their
assets in emerging market securities. The International and International
Growth Funds may also invest significant portions of their assets in emerging
market securities. Investing in emerging market securities imposes risks
different from, or greater than, risks of investing in domestic securities or in
foreign, developed countries. These risks include: smaller market
capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign investment;
and possible repatriation of investment income and capital. In addition,
foreign investors may be required to register the proceeds of sales, and future
economic or political crises could lead to price controls, forced mergers,
expropriation or confiscatory taxation, seizure, nationalization or the creation
of government monopolies. The currencies of emerging market countries may
experience significant declines against the U.S. dollar, 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.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. 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
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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 be delayed 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. Each of the International, International Growth, Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds may invest
a portion of its 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.
Foreign Currencies
A Fund that invests directly in foreign currencies or in securities that
trade in, or receive revenues in, foreign currencies will be subject to currency
risk. The International, International Growth, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds are particularly sensitive to
this risk.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by supply and demand and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors. 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. For example, significant uncertainty surrounds the
recent introduction of the euro (a common currency unit for the European Union)
in January 1999 and the effect it may have 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.
Foreign Currency Transactions. The International, Core Equity, Mid-Cap
Equity, International Growth, Growth, Target, Opportunity, Innovation,
Renaissance, Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets Funds may enter into forward foreign currency exchange contracts to
reduce the risks of adverse changes in foreign exchange rates. In addition, the
International, International Growth, Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds may buy and sell foreign currency
futures contracts and options on foreign currencies and foreign currency
futures. A forward foreign currency exchange contract, which involves an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract, reduces a Fund's 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 receive for the duration of the contract. The
effect on the value of a Fund is similar to selling securities denominated in
one currency
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and purchasing securities denominated in another currency. 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 to hedge against foreign exchange risk, to increase exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
currency to another. 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 International, International Growth, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds may also enter into these
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one currency to another. To the
extent that it does so, a 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, International Growth, Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets 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. The Fund will segregate assets determined
to be liquid by PIMCO Advisors or a Sub-Adviser 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.
Convertible Securities
Each Fund may invest in convertible securities. Convertible securities are
generally preferred stocks and other securities, including fixed income
securities and warrants, that are convertible into or exercisable for common
stock at either a stated price or a stated rate. The price of a convertible
security will normally vary in some proportion to changes in the price of the
underlying common stock because of this conversion or exercise feature.
However, the value of a convertible security may not increase or decrease as
rapidly as the underlying common stock. A convertible security will normally
also provide income and is subject to interest rate risk. 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.
Credit Ratings and Unrated Securities
The Funds may invest in securities based on their credit ratings assigned
by rating agencies such as Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Services ("S&P"). Moody's, S&P and other rating
agencies are private services that provide ratings of the credit quality of
fixed income securities, including convertible securities. The Appendix to the
Statement of Additional Information describes the various ratings assigned to
fixed income securities by Moody's and S&P. Ratings assigned by a rating agency
are not absolute standards of credit quality and do not evaluate market risk.
Rating agencies may fail to make timely changes in credit ratings and an
issuer's current financial condition may be better or worse than a rating
indicates. A Fund will not necessarily sell a security when its rating is
reduced below its rating at the time of purchase. PIMCO
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Advisors and the Sub-Advisers do not rely solely on credit ratings, and develop
their own analysis of issuer credit quality.
A Fund may purchase unrated securities (which are not rated by a rating
agency) if its portfolio manager determines that the security is of comparable
quality to a rated security that the Fund may purchase. Unrated securities may
be less liquid than comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's comparative credit
rating.
Derivatives
Each Fund (except the Capital Appreciation, Mid-Cap Growth, Small-Cap
Growth, Micro-Cap Growth, Equity Income, Value, Value 25 and Small-Cap Value
Funds may, but is not required to, use a number of derivative instruments for
risk management purposes or as part of its investment strategies. Generally,
derivatives are financial contracts whose value depends upon, or is derived
from, the value of an underlying asset, reference rate or index, and may relate
to stocks, bonds, interest rates, currencies or currency exchange rates,
commodities, and related indexes. A Fund may not employ any of these strategies
and there is no assurance that any derivatives strategy used by a Fund will
succeed.
Examples of derivative instruments that the Funds may use include options
contracts, futures contracts, options on futures contracts and swap agreements.
The International, Core Equity, Mid-Cap Equity, International Growth, Growth,
Target, Opportunity, Innovation, Renaissance, Tax-Efficient Equity, Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds may
purchase and sell (write) call and put options on securities, securities indexes
and foreign currencies. Each of these Funds may purchase and sell futures
contracts and options thereon with respect to securities, securities indexes and
foreign currencies. The Enhanced Equity Fund may purchase and write options on
securities indexes and enter into securities index futures contracts and options
on securities index futures contracts. The International Growth, Tax-Efficient
Equity, Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets may enter into swap agreements with respect to securities indexes. A
description of these and other derivative instruments that the Funds may use are
described under "Investment Objectives and Policies" in the Statement of
Additional Information.
A Fund's use of derivative instruments involves risks different from, or
greater than, the risks associated with investing directly in securities and
other more traditional investments. A description of various risks associated
with particular derivative instruments is included in "Investment Objectives and
Policies" in the Statement of Additional Information. The following provides a
more general discussion of important risk factors relating to all derivative
instruments that may be used by the Funds and that have been discussed above
under "Summary of Principal Risks - Derivative Risks."
Management Risk Derivative products are highly specialized instruments
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.
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Credit Risk The use of a derivative instrument 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 derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately 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 component, adverse
changes in the value or level of the underlying asset, 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 a 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. To limit leverage
risk, each Fund will segregate assets determined to be liquid by PIMCO Advisors
or a Sub-Adviser 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 derivative instruments.
Lack of Availability Because the markets for certain derivative instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances for risk management or other purposes. There is no assurance that
a Fund will engage in derivatives transactions at any time or from time to time.
A Fund's ability to use derivatives may also be limited by certain regulatory
and tax considerations.
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 a Fund's interest. If a portfolio manager
incorrectly forecasts the values of securities, currencies or interest rates or
other economic factors in using derivatives for a Fund, the Fund might have been
in a better position if it had not entered into the transaction at all. 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 other Fund investments. A Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. Also, the value of derivatives may
not correlate perfectly, or at all, with the value of the assets, reference
rates or indexes they are designed to closely track. In addition, a Fund's use
of derivatives 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.
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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 a
number of conditions are satisfied, including that the loan is fully
collateralized. Please see "Investment Objectives and Policies" in the
Statement of Additional Information for details. When a Fund lends portfolio
securities, its investment performance will continue to reflect changes in the
value of the securities loaned, and the Fund will also receive a fee or interest
on the collateral. Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. A Fund may pay lending fees to
the party arranging the loan.
Short Sales
Each Fund may make short sales as part of its overall portfolio management
strategies or to offset a potential decline in the value of a security. A short
sale involves the sale of a security that is borrowed from a broker or other
institution to complete the sale. A Fund may only enter into short selling
transactions if the security sold short is held in the Fund's portfolio or if
the Fund has the right to acquire the security 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 a Fund to the risk that it will be required to acquire, convert or
exchange securities to replace the borrowed securities (also known as "covering"
the short position) at a time when the securities sold short have appreciated in
value, thus resulting in a loss to the Fund.
When-Issued, Delayed Delivery and Forward Commitment Transactions
Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase such securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a risk
of loss if the value of the securities declines prior to the settlement date.
This risk is in addition to the risk that the Fund's other assets will decline
in the value. Therefore, these transactions may result in a form of leverage
and increase a Fund's overall investment exposure. 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 to cover these positions.
Repurchase Agreements
Each Fund may enter into repurchase agreements, in which the Fund purchases
a security from a bank or broker-dealer that agrees to repurchase the security
at the Fund's cost plus interest within a specified time. If the party agreeing
to repurchase should default, the Fund will seek to sell the securities which it
holds. This 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 its portfolio maintained in cash. Repurchase agreements
maturing in more than seven days are considered illiquid securities.
-78-
<PAGE>
Reverse Repurchase Agreements and Other Borrowings
Each Fund may enter into reverse repurchase agreements, subject to the
Fund's limitations on borrowings. A reverse repurchase agreement involves the
sale of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. A Fund will segregate assets determined to be liquid by PIMCO
Advisors or a Sub-Adviser in accordance with procedures established by the Board
of Trustees to cover its obligations under reverse repurchase agreements. 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. Reverse repurchase agreements and other forms of
borrowings may create leveraging risk for a Fund.
Portfolio Turnover
With the exception of the Tax-Efficient Equity and Tax-Efficient Structured
Emerging Markets Funds, the length of time a Fund has held a particular security
is not generally a consideration in investment decisions. A change in the
securities held by a Fund is known as "portfolio turnover." Each Fund may
engage in frequent and active trading of portfolio securities to achieve its
investment objective, particularly during periods of volatile market movements,
although the Tax-Efficient Equity and Tax-Efficient Structured Emerging Markets
Funds will generally attempt to limit portfolio turnover as part of their tax-
efficient management strategies. 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 also result in
realization of taxable capital gains, including short-term capital gains (which
are generally taxed at ordinary income tax rates).
Illiquid Securities
Each Fund may invest in securities that are illiquid so long as not more
than 15% of the value of the Fund's net assets (taken at market value at the
time of investment) would be invested in such securities. Certain illiquid
securities may require pricing at fair value as determined in good faith under
the supervision of the Board of Trustees. A portfolio manager may be subject to
significant delays in disposing of illiquid securities, and transactions in
illiquid securities may entail registration expenses and other transaction costs
that are higher than 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. Please see "Investment
Objectives and Policies" in the Statement of Additional Information for a
listing of various securities that are generally considered to be illiquid for
these purposes. Restricted securities, i.e., securities subject to legal or
contractual restrictions on resale, may be illiquid. However, some restricted
securities (such as securities issued pursuant to Rule 144A under the Securities
Act of 1933 and certain commercial paper) may be treated as liquid, although
they may be less liquid than registered securities traded on established
secondary markets.
Investment in Other Investment Companies
The International and International Growth Funds may invest up to 10% of
their assets in
-79-
<PAGE>
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. Each of the other Funds may invest up to 5% of its
assets in other investment companies. As a shareholder of an investment company,
a Fund may indirectly bear service and other fees which are in addition to the
fees the Fund pays its service providers.
Year 2000 Readiness Disclosure
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, this could have an adverse impact on the Funds' operations
and services provided to shareholders. PIMCO Advisors, the Sub-Advisers, the
Distributor, the Trust's shareholder servicing and transfer agent and 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.
Changes in Investment Objectives And Policies
The investment objective of each of the International, Value 25,
International Growth, Growth, Target, Opportunity, Innovation, Renaissance, Tax-
Efficient Equity and Tax-Efficient Structured Emerging Markets 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. Unless otherwise stated, all other
investment policies of the Funds may be changed by the Board of Trustees without
shareholder approval. If there is a change in a Fund's investment objective or
policies, 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.
Percentage Investment Limitations
Unless otherwise stated, all percentage limitations on Fund investments
listed in this Prospectus will apply at the time of investment. A Fund would not
violate these limitations unless an excess or deficiency occurs or exists
immediately after and as a result of an investment.
Other Investments And Techniques
The Funds may invest in other types of securities and use a variety of
investment techniques and strategies which are not described in this Prospectus.
These securities and techniques may subject the Funds to additional risks.
Please see the Statement of Additional Information for additional information
about the securities and investment techniques described in this Prospectus and
about additional securities and techniques that may be used by the Funds.
-80-
<PAGE>
Financial Highlights
The financial highlights table is intended to help a shareholder
understand the financial performance of Institutional and
Administrative Class shares of each Fund for the past 5 years or,
if the class is less than 5 years old, since the class of shares
was first offered. Certain information reflects financial results
for a single Fund share. The total returns in the table represent
the rate that an investor would have earned or lost on an
investment in a particular class of shares of a Fund, assuming
reinvestment of all dividends and distributions. This information
has been audited by PricewaterhouseCoopers LLP, whose report,
along with each Fund's financial statements, are included in the
Trust's annual report to shareholders. The annual report is
incorporated by reference in the Statement of Additional
Information and is available free of charge upon request from the
Distributor.
The Mega-Cap Fund did not offer Institutional or Administrative
Class shares during the periods shown.
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Year or Value Net Unrealized Income from from Net Excess of Net from Net
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized
Ended of Period Income (Loss) Investments Operations Income Income Capital Gains
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renaissance Fund (i)
Institutional Class
06/30/99 $19.07 $ 0.06 (a) $ 1.43 (a) $ 1.49 $ 0.00 $ 0.00 $(2.33)
12/30/97-06/30/98 16.73 0.05 2.29 2.34 0.00 0.00 0.00
Administrative Class
08/31/98-06/30/99 15.37 0.02 (a) 5.12 (a) 5.14 0.00 0.00 (2.33)
Growth Fund (i)
Institutional Class
03/31/99-06/30/99 $31.27 $(0.01)(a) $(0.02)(a) $(0.03) $ 0.00 $ 0.00 $ 0.00
Administrative Class
03/31/99-06/30/99 31.27 (0.04)(a) 0.00(a) (0.04) 0.00 0.00 0.00
Core Equity Fund (i)
Institutional Class
06/30/99 $20.39 $(0.04)(a) $ 5.24 (a) $ 5.20 $ 0.00 $ 0.00 $(0.73)
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
06/30/99 20.32 (0.03)(a) 5.11 (a) 5.08 0.00 0.00 (0.73)
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
Target Fund (i)
Institutional Class
03/31/99-06/30/99 $16.34 $(0.02)(a) $ 1.42(a) $ 1.40 $ 0.00 $ 0.00 $ 0.00
Administrative Class
03/31/99-06/30/99 16.34 (0.03)(a) 1.42(a) 1.39 0.00 0.00 0.00
Mid-Cap Equity Fund (i)
Institutional Class
06/30/99 $13.53 $(0.03)(a) $ 2.99 (a) $ 2.96 $ 0.00 $ 0.00 $(0.65)
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
07/01/98-05/27/99(b) 13.50 (0.05)(a) 1.71 (a) 1.66 0.00 0.00 (0.65)
08/21/97-06/30/98 15.27 (0.05)(a) 2.37 (a) 2.32 0.00 0.00 (4.09)
Opportunity Fund (i)
Institutional Class
03/31/99-06/30/99 $21.40 $(0.03)(a) $ 2.89 (a) $ 2.86 $ 0.00 $ 0.00 $ 0.00
Administrative Class
03/31/99-06/30/99 21.40 (0.05)(a) 2.91 (a) 2.86 0.00 0.00 0.00
Innovation Fund (i)
Institutional Class
03/05/99-06/30/99 $32.73 $(0.05)(a) $ 4.82 (a) $ 4.77 $ 0.00 $ 0.00 $ 0.00
International Growth
Fund (i)
Institutional Class
06/30/99 $13.55 $(0.02)(a) $ 3.56 (a) $ 3.54 $(0.02) $ 0.00 $(1.03)
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.
(b) All Administrative Class shares of the Mid-Cap Equity Fund were redeemed
on May 27, 1999.
(i) The information provided for the Renaissance, Growth, Core Equity, Target,
Mid-Cap Equity, Opportunity, Innovation and International Growth Funds
reflects results of operations under the Funds' former Sub-Adviser through
May 7, March 6, June 30, March 6, June 30, March 6, March 6 and June 30,
respectively; the Funds would not necessarily have achieved the
performance results shown above under their current investment management
arrangements.
-81-
<PAGE>
<TABLE>
<CAPTION>
Fund Ratio of Net
Distributions Reimbursement Ratio of Investment
in Excess of Tax Basis Fee Added To Net Asset Net Assets Expenses to Income (Loss)
Net Realized Return of Total Paid-In- Value End End of Average Net to Average Portfolio
Capital Gains Capital Distributions Capital 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 $ (2.33) $ 0.00 $18.23 10.24% $ 136 0.86% 0.38% 221%
0.00 0.00 0.00 0.00 19.07 13.99 851 0.86* 0.55* 192
0.00 0.00 (2.33) 0.00 18.18 36.41 427 1.09* 0.13* 221
$0.00 $0.00 $ 0.00 $ 0.00 $31.24 (0.10)% $ 948 0.74%* (0.19)%* 131%
0.00 0.00 0.00 0.00 31.23 (0.13) 6,164 0.97* (0.53)* 131
$0.00 $0.00 $ (0.73) $ 0.00 $24.86 26.34% $ 1,184 1.01% (0.20)% 95%
0.00 0.00 (1.30) 0.00 20.39 41.83 1,915 0.83 0.20 120
0.00 0.00 (0.81) 0.00 15.55 21.59 6,444 0.87 0.23 139
0.00 0.00 (0.33) 0.00 13.55 9.41 10,452 0.82* 0.53* 73
0.00 0.00 (0.06) 0.00 12.72 27.86 7,791 0.82* 0.79* 123
0.00 0.00 (0.73) 0.00 24.67 25.84 15 1.08 (0.17) 95
0.00 0.00 (1.30) 0.00 20.32 41.54 128,666 1.08 (0.07) 120
0.00 0.00 (0.80) 0.00 15.53 21.20 29,332 1.13 (0.03) 139
0.00 0.00 (0.31) 0.00 13.56 9.23 33,575 1.07* 0.28 * 73
0.00 0.00 (0.02) 0.00 12.73 11.34 24,645 1.06* 0.34 * 58
$0.00 $0.00 $ 0.00 $ 0.00 $17.74 8.57% $ 1,298 0.79%* (0.39)%* 229%
0.00 0.00 0.00 0.00 17.73 8.51 5,513 1.02* (0.61)* 229
$0.00 $0.00 $ (0.65) $ 0.00 $15.84 23.18% $ 7,399 0.89% (0.22)% 273%
0.00 0.00 (4.09) 0.00 13.53 30.40 8,488 0.89 (0.25) 268
0.00 0.00 (1.87) 0.00 14.04 9.61 7,591 1.15 (0.43) 202
0.00 0.00 (0.37) 0.00 14.66 16.72 8,378 0.88* (0.32)* 97
0.00 0.00 (0.02) 0.00 12.92 29.34 8,357 0.88* 0.24* 132
0.00 0.00 (0.65) 0.00 14.51 13.12 0 1.14* (0.45)* 273
0.00 0.00 (4.09) 0.00 13.50 19.65 2,371 1.13* (0.49)* 268
$0.00 $0.00 $ 0.00 $ 0.00 $24.26 13.36% $ 417 0.88%* (0.54)%* 175%
0.00 0.00 0.00 0.00 24.26 13.36 2,010 1.12* (0.82)* 175
$0.00 $0.00 $ 0.00 $ 0.00 $37.50 14.57% $ 444 0.88%* (0.15)%* 119%
$0.00 $0.00 $ (1.05) $ 0.00 $16.04 28.62% $ 8,408 1.39% (0.15)% 269%
0.00 0.00 0.00 0.00 13.55 35.50 6,822 1.36* 0.08* 60
</TABLE>
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<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Year or Value Net Unrealized Income from from Net Excess of Net from Net
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized
Ended of Period Income (Loss) Investments Operations Income Income Capital Gains
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation
Fund
Institutional Class
06/30/99 $26.13 $ 0.16 (a) $ 2.35 (a) $ 2.51 $ (0.15) $0.00 $ (1.65)
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)
Administrative Class
06/30/99 25.99 0.09 (a) 2.34 (a) 2.43 (0.13) 0.00 (1.65)
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
06/30/99 $24.09 $ 0.12 (a) $ (0.11)(a) $ 0.01 $ (0.02) $0.00 $ (1.07)
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)
Administrative Class
06/30/99 23.96 0.06 (a) (0.06)(a) 0.00 (0.01) 0.00 (1.07)
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
Small-Cap Growth Fund
Institutional Class
06/30/99 $14.01 $(0.01)(a) $ (2.12)(a) $(2.13) $ 0.00 $0.00 $ 0.00
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)
Administrative Class
06/30/99 13.97 (0.04)(a) (2.12)(a) (2.16) 0.00 0.00 0.00
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
Micro-Cap Growth Fund
Institutional Class
06/30/99 $23.66 $(0.14)(a) $(2.89 )(a) $(3.03) $ 0.00 $0.00 $ 0.00
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
Administrative Class
06/30/99 23.52 (0.19)(a) (2.88)(a) (3.07) 0.00 0.00 0.00
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
Equity Income Fund
Institutional Class
06/30/99 $16.09 $ 0.44 (a) $ 1.28 (a) $ 1.72 $ (0.43) $0.00 $ (1.76)
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)
Administrative Class
06/30/99 16.08 0.41 (a) 1.28 (a) 1.69 (0.40) 0.00 (1.76)
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)
</TABLE>
- -------
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
-83-
<PAGE>
<TABLE>
<CAPTION>
Fund Ratio of Net
Distributions Reimbursement Ratio of Investment
in Excess of Tax Basis Fee Added to Net Asset Net Assets Expenses to Income (Loss)
Net Realized Return of Total Paid-In- Value End End of Average Net to Average Portfolio
Capital Gains Capital Distributions Capital 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 $ (1.80) $0.00 $26.84 10.57 % $645,967 0.71% 0.64 % 120%
0.00 0.00 (1.80) 0.00 26.13 32.97 805,856 0.71 0.64 75
0.00 0.00 (2.23) 0.00 21.19 31.52 536,187 0.71 1.02 87
0.00 0.00 (1.18) 0.00 18.10 14.65 348,728 0.70* 1.33* 73
0.00 0.00 (0.18) 0.00 16.94 28.47 236,220 0.70 1.22 83
0.00 0.00 (0.18) 0.00 13.34 0.15 165,441 0.70 1.17 77
0.00 0.00 (1.78) 0.00 26.64 10.30 229,831 0.95 0.38 120
0.00 0.00 (1.82) 0.00 25.99 32.55 132,384 0.96 0.39 75
0.00 0.00 (2.22) 0.00 21.16 38.26 3,115 0.96* 0.66* 87
$ 0.00 $0.00 $ (1.09) $0.00 $23.01 0.33 % $581,544 0.70% 0.54 % 85%
0.00 0.00 (1.41) 0.00 24.09 26.16 437,985 0.71 0.46 66
0.00 0.00 (4.34) 0.00 20.28 30.58 291,374 0.71 0.53 82
0.00 0.00 (0.57) 0.00 19.44 10.37 231,011 0.70* 1.11* 79
0.00 0.00 (0.07) 0.00 18.16 30.54 189,320 0.70 0.43 78
0.00 0.00 (0.07) 0.00 13.97 0.58 121,791 0.70 0.45 61
0.00 0.00 (1.08) 0.00 22.88 0.31 104,337 0.95 0.30 85
0.00 0.00 (1.41) 0.00 23.96 25.75 73,614 0.95 0.22 66
0.00 0.00 (4.32) 0.00 20.24 30.23 2,066 0.96 0.28 82
0.00 0.00 (0.54) 0.00 19.44 10.17 1,071 0.95* 0.89* 79
0.00 0.00 (0.02) 0.00 18.17 36.64 892 0.94* 0.23* 72
$(0.47) $0.00 $ (0.47) $0.00 $11.41 (14.99)% $ 66,393 1.25% (0.09)% 94%
0.00 0.00 (1.88) 0.00 14.01 19.33 47,641 1.26 (0.20) 77
0.00 0.00 (10.59) 0.00 13.40 22.82 33,390 1.32 (0.05) 129
0.00 0.00 (1.60) 0.00 20.83 7.22 32,954 1.25* (0.20)* 59
0.00 0.00 (1.43) 0.00 21.02 17.39 73,977 1.25 (0.27) 86
0.00 0.00 (0.64) 0.00 19.38 4.62 50,425 1.25 (0.33) 66
(0.47) 0.00 (0.47) 0.00 11.34 (15.26) 2,229 1.50 (0.33) 94
0.00 0.00 (1.88) 0.00 13.97 18.90 981 1.49 (0.51) 77
0.00 0.00 (10.59) 0.00 13.41 23.12 1 1.54 (0.36) 129
0.00 0.00 (1.60) 0.00 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
$(0.63) $0.00 $ (0.63) $0.00 $20.00 (12.66)% $234,439 1.50% (0.71)% 73%
0.00 0.00 (2.62) 0.00 23.66 33.95 257,842 1.51 (0.50) 72
0.00 0.00 (2.03) 0.00 19.85 20.05 164,139 1.52 (0.49) 84
0.00 0.00 (0.34) 0.00 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
(0.63) 0.00 (0.63) 0.00 19.82 (12.91) 3,000 1.75 (0.97) 73
0.00 0.00 (2.62) 0.00 23.52 33.70 4,779 1.76 (0.74) 72
0.00 0.00 (2.03) 0.00 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 $ (2.19) $0.00 $15.62 12.56 % $123,012 0.71% 3.00% 76%
0.00 0.00 (2.51) 0.00 16.09 21.84 138,650 0.71 2.71 45
0.00 0.00 (2.52) 0.00 15.41 27.67 121,138 0.72 3.03 45
0.00 0.00 (0.82) 0.00 14.36 16.35 116,714 0.70* 3.41 * 52
0.00 0.00 (0.79) 0.00 13.09 19.36 118,015 0.70 3.83 46
0.00 0.00 (0.46) 0.00 11.75 2.25 92,365 0.70 3.77 36
0.00 0.00 (2.16) 0.00 15.61 12.31 13,797 0.96 2.80 76
0.00 0.00 (2.47) 0.00 16.08 21.58 11,699 0.96 2.45 45
0.00 0.00 (2.48) 0.00 15.40 27.40 8,145 0.97 2.79 45
0.00 0.00 (0.84) 0.00 14.35 16.08 6,097 0.95* 3.19 * 52
0.00 0.00 (0.73) 0.00 13.13 25.69 140 0.95* 3.43 * 43
</TABLE>
-84-
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Year or Value Net Unrealized Income from from Net Excess of Net from Net
Period Beginning Investment Gain (Loss) on Investment Investment Investment Realized
Ended of Period Income (Loss) Investments Operations Income Income Capital Gains
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Value Fund
Institutional Class
06/30/99 $15.66 $0.28 (a) $ 1.36 (a) $ 1.64 $(0.28) $0.00 $(1.72)
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)
Administrative Class
06/30/99 15.65 0.26 (a) 1.32 (a) 1.58 (0.25) 0.00 (1.72)
08/21/97-06/30/98 15.66 0.19 (a) 1.65 (a) 1.84 (0.22) 0.00 (1.63)
Value 25 Fund
Institutional Class
07/10/98-06/30/99 $10.00 $0.15 (a) $(1.10)(a) $(0.95) $(0.06) $0.00 $ 0.00
Small-Cap Value Fund
Institutional Class
06/30/99 $17.68 $0.32 (a) $(1.29)(a) $(0.97) $(0.21) $0.00 $ 0.00
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)
Administrative Class
06/30/99 17.63 0.29 (a) (1.30)(a) (1.01) (0.20) 0.00 0.00
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
06/30/99 $12.64 $0.08 (a) $ 1.91 (a) $ 1.99 $(0.06) $0.00 $(1.61)
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)
Administrative Class
06/30/99 12.59 0.05 (a) 1.90 (a) 1.95 (0.06) 0.00 (1.61)
08/21/97-06/30/98 17.53 0.05 (a) 2.85 (a) 2.90 (0.11) 0.00 (7.73)
Tax-Efficient Equity
Fund
Administrative Class
09/30/98-06/30/99 $ 8.65 $0.03 (a) $ 2.93 (a) $ 2.96 $ 0.00 $0.00 $ 0.00
Structured Emerging
Markets Fund
Institutional Class
09/30/98-06/30/99 $10.00 $0.15 (a) $ 2.57 (a) $ 2.72 $(0.07) $0.00 $(0.28)
Tax-Efficient Structured
Emerging Markets Fund
Institutional Class
09/30/98-06/30/99 $10.00 $0.16 (a) $ 3.10 (a) $ 3.26 $(0.06) $0.00 $ 0.00
International Fund
Institutional Class
09/30/98-12/31/98 $10.47 $0.14 (a) $ 2.16 (a) $ 2.30 $ 0.00 $0.00 $(1.15)
Administrative Class
09/30/98-12/31/98 10.47 0.09 (a) 2.15 (a) 2.24 0.00 0.00 (1.15)
</TABLE>
- -------
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
-85-
<PAGE>
<TABLE>
<CAPTION>
Fund Ratio of Net
Distributions Reimbursement Ratio of Investment
in Excess of Tax Basis Fee Added to Net Asset Net Assets Expenses to Income (Loss)
Net Realized Return of Total Paid-In- Value End End of Average Net to Average Portfolio
Capital Gains Capital Distributions Capital 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 $(2.00) $ 0.00 $15.30 12.30 % $69,181 0.71% 1.99% 101%
0.00 0.00 (1.87) 0.00 15.66 19.35 83,219 0.71 1.59 77
0.00 0.00 (0.81) 0.00 14.81 26.38 74,613 0.73 2.02 71
0.00 0.00 (1.94) 0.00 12.46 16.24 52,727 0.70* 2.40* 29
0.00 0.00 (1.50) 0.00 12.53 24.98 14,443 0.70 2.50 71
0.00 0.00 (0.39) 0.00 11.55 0.15 15,442 0.70 2.34 44
0.00 0.00 (1.97) 0.00 15.26 11.91 23,164 0.95 1.81 101
0.00 0.00 (1.85) 0.00 15.65 12.71 10,349 0.96* 1.40* 77
$ 0.00 $0.00 $(0.06) $ 0.00 $ 8.99 (9.48)% $ 229 0.85%* 1.89%* 182%
$(0.45) $0.00 $(0.66) $ 0.00 $16.05 (5.11)% $59,132 0.85% 2.12% 60%
0.00 0.00 (0.89) 0.00 17.68 17.77 47,432 0.85 1.65 41
0.00 0.00 (2.51) 0.00 15.78 31.99 34,639 0.90 1.92 48
0.00 0.00 (0.95) 0.00 14.20 16.35 29,017 0.85* 2.12* 35
0.00 0.00 (1.17) 0.00 13.10 19.88 35,093 0.85 2.25 50
0.00 0.00 (0.38) 0.00 12.07 (2.89) 31,236 0.85 2.23 48
(0.45) 0.00 (0.65) 0.00 15.97 (5.40) 21,002 1.10 1.92 60
0.00 0.00 (0.87) 0.00 17.63 17.41 10,751 1.10 1.39 41
0.00 0.00 (2.50) 0.00 15.76 31.70 5,916 1.16 1.68 48
0.00 0.00 (0.93) 0.00 14.20 15.64 4,433 1.10* 1.86* 35
$ 0.00 $0.00 $(1.67) $ 0.00 $12.96 17.95 % $42,619 0.71% 0.66% 34%
0.00 0.00 (7.84) 0.00 12.64 32.33 36,584 0.71 0.63 65
0.00 0.00 (3.73) 0.00 16.46 31.45 44,838 0.74 1.31 91
0.00 0.00 (0.54) 0.00 15.91 14.21 83,425 0.70* 1.58* 53
0.00 0.00 (0.42) 0.00 14.44 24.46 73,999 0.70 1.91 21
0.00 0.00 (0.30) 0.00 11.99 1.83 65,915 0.70 2.20 44
0.00 0.00 (1.67) 0.00 12.87 17.63 24,015 0.96 0.41 34
0.00 0.00 (7.84) 0.00 12.59 23.85 10,409 0.95* 0.47* 65
$ 0.00 $0.00 $ 0.00 $ 0.00 $11.61 34.28 % $ 3,391 0.92%* 0.31%* 13%
$ 0.00 $0.00 $(0.35) $ 0.05 $12.42 29.21 % $46,577 0.95% 1.56% 30%
$ 0.00 $0.00 $(0.06) $ 0.05 $13.25 33.39 % $72,509 0.95% 1.57% 28%
$ 0.00 $0.00 $(1.15) $ 0.00 $11.62 23.07 % $ 3,627 1.09%* 1.70%* 55%
0.00 0.00 (1.15) 0.00 11.56 22.47 15,797 1.34* 1.06* 55
</TABLE>
-86-
<PAGE>
[Back Cover Page]
PIMCO FUNDS: MULTI-MANAGER SERIES
The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the Funds.
The SAI and the financial statements included in the Funds' most recent annual
report to shareholders are incorporated by reference into this Prospectus, which
means they are part of this Prospectus for legal purposes. The Funds' annual
report discusses the market conditions and investment strategies that
significantly affected each Fund's performance during its last fiscal year.
You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling the Trust at 1-800-927-
4648 or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by writing
to:
PIMCO Funds: Multi-Manager Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Web site at www.sec.gov. You may
get copies of this information, with payment of a duplication fee, by writing
the Public Reference Section of the Commission, Washington, D.C. 20549-6009. You
may need to refer to the Trust's file number under the Investment Company Act,
which is 811-6161.
You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.
[LOGO]
-87-
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
Institutional and Administrative Class Shares
Supplement dated ______________, 1999 to the
Prospectus for Institutional and Administrative Class Shares
dated November 1, 1999
- --------------------------------------------------------------------------------
Note: This document supplements the PIMCO Funds: Multi-Manager Series Prospectus
for Institutional and Administrative Class Shares (the "Institutional
Prospectus") dated November 1, 1999, which was filed as part of Post-Effective
Amendment No. 43 to the Trust's Registration Statement on Form N-1A on October
29, 1999.
- --------------------------------------------------------------------------------
DISCLOSURE RELATED TO PIMCO MEGA-CAP FUND
The following Fund Summary for the PIMCO Mega-Cap Fund is added to the
Institutional Prospectus.
1
<PAGE>
PIMCO Mega-Cap Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Approximate
Investments and Seeks long-term Very large Capitalization Range
Strategies growth of capital capitalization At least $5 billion
common stocks
Approximate Dividend Frequency
Number of At least annually
Holdings
40-60
The Fund seeks to achieve its investment objective by normally
investing at least 65% of its assets in common stocks of companies
with market capitalizations of at least $5 billion that have
improving fundamentals (such as high and rising returns on equity
and growth of earnings and dividends) and whose stock is
reasonably valued by the market (based on factors including
price to earnings ratios).
The portfolio management team begins the investment process by
screening the universe of the 250 largest capitalization stocks in
the U.S. market for a series of both growth and value criteria
(such as dividend growth, earnings growth, equity growth, relative
growth of earnings over time (earnings momentum) and the company's
history of meeting earnings targets (earnings surprise)). The team
selects stocks by subjecting the top 10% of the stocks in the
screened universe to a rigorous, fundamental analysis. The Fund's
capitalization criteria applies at the time of investment.
The portfolio management team rescreens the universe frequently
and seeks to consistently achieve a favorable balance of growth
and value characteristics for the Fund. The team replaces stocks
when they fall below the median ranking, have negative earnings
surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside
from certain cash management practices) and will not make
defensive investments in fixed income securities in response to
unfavorable market and other conditions.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Market Risk . Value Securities Risk . Credit Risk
. Issuer Risk . Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
- --------------------------------------------------------------------------------
Performance The Fund commenced operations in September 1999 and does not yet
Information have a full calendar year of performance. Thus, no bar chart or
Average Annual Total Returns table is included for the Fund.
2
<PAGE>
PIMCO Mega-Cap Fund (continued)
- --------------------------------------------------------------------------------
Fees and These tables describe the fees and expenses you may pay if you buy
Expenses and hold Institutional Class or Administrative Class shares of the
of the Fund:
Fund
Shareholder Fees (fees paid directly from your investment) None
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)
<TABLE>
<CAPTION>
Distribution Total Annual
Advisory and/or Service Other Fund Operating Fee Net
Share Class Fees (12b-1) Fees Expenses(/1/) Expenses Waiver(/2/) Expenses (/2/)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Institutional 0.45% None 0.55% 1.00% 0.30% 0.70%
------------------------------------------------------------------------------------------------------------
Administrative 0.45 0.25% 0.55% 1.25% 0.30% 0.95%
------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Other Expenses, which are based on estimated amounts for the
Fund's initial fiscal year, reflect a 0.25% Administrative Fee
paid by the class and 0.30% representing the Fund's
organizational expenses as attributed to the class
("Organizational Expenses").
(2) Net Expenses reflect the effect of a contractual agreement by
PIMCO Advisors to waive, reduce or reimburse its
Administrative Fees for each class in an amount that, in
essence, is equal to the Fund's Organizational Expenses
attributed to the class. Because the Organizational Expenses
will all be accounted for in the Fund's initial fiscal year,
the Fund's reasonable expectation is that the relevant
conditions will not continue after the Fund's fiscal year
ending June 30, 2000.
Examples. The Examples below are intended to help you compare the
cost of investing in Institutional Class or Administrative Class
shares of the Fund with the costs of investing in other mutual
funds. The Examples assume that you invest $10,000 in the noted
class of shares for the time periods indicated, and then redeem
all your shares at the end of those periods. The Examples also
assume that your investment has a 5% return each year, the
reinvestment of all dividends and distributions, and the Fund's
operating expenses remain the same. Although your actual costs may
be higher or lower, the Examples show what your costs would be
based on these assumptions.(/1/)
<TABLE>
<CAPTION>
Share Class Year 1 Year 3
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Institutional $72 $224
-----------------------------------------------------------------------------------
Administrative 97 303
-----------------------------------------------------------------------------------
</TABLE>
(1) The Examples are based on the Net Expenses shown in the
preceding table.
3
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The disclosure for the PIMCO Mega-Cap Fund under this section is the same
as for the PIMCO Capital Appreciation Fund.
MANAGEMENT OF THE FUNDS
The disclosure for the PIMCO Mega-Cap Fund under this section is the same
as for the PIMCO Capital Appreciation Fund, except that Messrs. Breed, Bannick,
McManus and Ms. Burdon have managed the Fund since 1999.
INVESTMENT OPTIONS (INSTITUTIONAL AND ADMINISTRATIVE CLASS SHARES), PURCHASES,
REDEMPTIONS AND EXCHANGES, HOW FUND SHARES ARE PRICED, FUND DISTRIBUTIONS, TAX
CONSEQUENCES, CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES
AND FINANCIAL HIGHLIGHTS
The disclosure for the PIMCO Mega-Cap Fund under these sections is the same
as for the PIMCO Capital Appreciation Fund.
4
<PAGE>
[Front Cover]
PIMCO Funds Prospectus
Multi-Manager Series
November 1, 1999
Share Classes
A, B and C
This Prospectus describes 15 mutual funds offered by PIMCO Funds: Multi-Manager
Series. The Funds provide access to the professional investment advisory
services offered by PIMCO Advisors L.P. and its investment management
affiliates. You can call PIMCO Funds Distributors LLC, the Funds' Distributor,
at 1-800-426-0107 to find out more about the Funds and other funds in the PIMCO
Funds family. You can also visit our Web site at www.pimcofunds.com.
The Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determine if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
<TABLE>
Table of Contents
<S> <C>
Summary Information.......................................................
Fund Descriptions, Performance and Fees.................................
Growth Fund..........................................................
Target Fund..........................................................
Opportunity Fund.....................................................
Capital Appreciation Fund............................................
Mid-Cap Growth Fund..................................................
Small-Cap Growth Fund................................................
Equity Income Fund...................................................
Renaissance Fund.....................................................
Value Fund...........................................................
Value 25 Fund........................................................
Small-Cap Value Fund.................................................
Tax-Efficient Equity Fund............................................
International Fund...................................................
Innovation Fund......................................................
Precious Metals Fund.................................................
Summary of Principal Risks.............................................
Management of the Funds...................................................
Investment Options (Class A, B and C Shares)..............................
How Fund Shares Are Priced................................................
How to Buy and Sell Shares................................................
Fund Distributions........................................................
Tax Consequences..........................................................
Characteristics and Risks of Securities...................................
and Investment Techniques..............................................
Financial Highlights......................................................
</TABLE>
-2-
<PAGE>
Summary Information
The table below compares certain investment characteristics of the Funds. Other
important characteristics are described in the individual Fund Summaries
beginning on Page 5.
<TABLE>
<CAPTION>
Approximate Approximate
PIMCO Investment Main Number of Capitalization
Fund Objective Investments Holdings Range
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Stock Funds
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Long-term growth of capital; Common stocks of companies with market 35-40 At least $5 billion
income is incidental capitalizations of at least $5 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Target Capital appreciation; no Common stocks of companies with market 40-60 Between $1 billion
consideration given to income capitalizations of between $1 billion and $10 billion
and $10 billion
- ------------------------------------------------------------------------------------------------------------------------------------
Opportunity Capital appreciation; no Common stocks of companies with market 60-100 Between $100
consideration given to income capitalizations of between $100 million million and $2
and $2 billion billion
- ------------------------------------------------------------------------------------------------------------------------------------
Blend Stock Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Appreciation Growth of capital Common stocks of companies with market 60-100 At least $1 billion
capitalizations of at least $1 billion
that have improving fundamentals and
whose stock is reasonably valued by the
market
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Growth of capital Common stocks of companies with market 60-100 Over $500 million
capitalizations of more than $500 (excluding the
million (excluding the largest 200 largest 200
companies) that have improving companies)
fundamentals and whose stock is
reasonably valued by the market
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Growth Growth of capital Common stocks of companies with market 60-100 $50 million to
capitalizations of $50 million to $1 $1 billion
billion that have improving
fundamentals and whose stock is
reasonably valued by the market
- ------------------------------------------------------------------------------------------------------------------------------------
Value Stock Funds
- -----------------------------------------------------------------------------------------------------------------------------------
Equity Income Current income as a primary Common stocks of companies with market 40-50 Over $2 billion
objective; long-term growth capitalizations of more than $2 billion
of capital as a secondary that have below-average price to
objective earnings ratios and higher dividend
yields relative to their industry groups
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Approximate Approximate
PIMCO Investment Main Number of Capitalization
Fund Objective Investments Holdings Range
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Renaissance Long-term growth of capital Common stocks having below-average 50-70 All capitalizations
and income valuations where the company's business
fundamentals are improving
- ------------------------------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital Common stocks of companies with market 50 Over $2 billion
and income capitalizations of more than $2 billion
that are undervalued relative to their
industry groups
- ------------------------------------------------------------------------------------------------------------------------------------
Value 25 Long-term growth of capital Approximately 25 common stocks of 25 Between $1 billion
and income companies with market capitalizations and $5 billion
of between $1 billion and $5 billion
and below-average price to earnings
ratios relative to their industry
groups and equity markets generally
- ------------------------------------------------------------------------------------------------------------------------------------
Small-Cap Value Long-term growth of capital Common stocks of companies with market 100 Between $100
and income capitalizations of between $100 million million and $1
and $1 billion and below-average price billion
to earnings ratios relative to their
industry groups
- ------------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Stock Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Efficient Equity Maximum after-tax growth of A broadly diversified portfolio of at At least 250 Over $5 billion
capital least 250 common stocks of companies
represented in the S&P 500 Index
- ------------------------------------------------------------------------------------------------------------------------------------
International Stock Funds
- ------------------------------------------------------------------------------------------------------------------------------------
International Capital appreciation through Common stocks of foreign (non-U.S.) 150-200 Over $5 billion
investment in an issuers (developed and emerging markets)
international portfolio;
income is incidental
- ------------------------------------------------------------------------------------------------------------------------------------
Sector-Related Stock Funds
- ------------------------------------------------------------------------------------------------------------------------------------
Innovation Capital appreciation; no Common stocks of technology-related 40 Over $200 million
consideration given to income companies
- ------------------------------------------------------------------------------------------------------------------------------------
Precious Capital appreciation; no Common stocks of precious 50 Between $50 million
Metals consideration given to income metals-related companies and $7 billion
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE>
Fund Descriptions, Performance and Fees
The Funds provide a broad range of investment choices. The summaries below
identify each Fund's investment objective, principal investments and strategies,
and principal risks. A more detailed "Summary of Principal Risks" describing
principal risks of investing in the Funds begins after the Fund Summaries. The
summaries also show the fees and expenses you may pay if you buy and hold Class
A, B or C shares of the Funds.
It is possible to lose money on investments in the Funds. An investment in
a Fund is not a deposit of a bank and is not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other government agency.
-5-
<PAGE>
PIMCO Growth Fund Fund Category - Growth Stocks
Investment Objective
Seeks long-term growth of capital; income is an incidental consideration
Fund Focus
Larger capitalization common stocks
Approximated Number of Holdings
35-40
Approximate Capitalization Range
At least $5 billion
Dividend Frequency
At least annually
Principal Investments And Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of at least $5 billion at the time of
investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives. In
response to unfavorable market and other conditions, the Fund may make temporary
investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Growth Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class C shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A shares (10/26/90) and
Class B shares (5/23/95), performance information shown in the Average Annual
Total Returns table for those classes is based on the performance of the Fund's
Class C shares. The prior Class C performance has been adjusted to reflect the
actual sales charges, distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A and B shares. Prior to March 6, 1999,
the Fund had a different sub-adviser and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-6-
<PAGE>
[Plot point for bar charts]
PIMCO Growth Fund
Calendar Year Total Returns-Class C
[Plot points for bar charts]
37.45% 0.29% 41.88% 2.08% 9.32% -0.75% 27.47% 17.52% 21.84% 38.90%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 2.66%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 25.12%
Lowest (7/1/90 - 9/30/90) -13.14%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (2/24/84)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares 32.24% 19.82% 18.77% 18.40%
- -----------------------------------------------------------------------------------
B Shares 33.88% 20.08% 18.83% 18.44%
- -----------------------------------------------------------------------------------
C Shares 37.90% 20.27% 18.57% 17.98%
- -----------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.44%
- -----------------------------------------------------------------------------------
Lipper Growth Fund Average* 23.42% 18.74% 16.74% 15.58%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth Fund Average is calculated by
Lipper Analytical Services, Inc. It is a total return performance average of
funds tracked by Lipper that invest in companies with long-term earnings
expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indexes. It does not take into account
sales charges. The Fund began operations on 2/24/84. Index comparisons begin on
2/29/84.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment): CLASS A CLASS B CLASS C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
EXAMPLE: Assuming you EXAMPLE: Assuming you do
redeem your shares at not redeem your shares.
the end of each period.
Distribution Total Annual
Admini- and/or Fund Operating Year Year
Advisory strative Service Expenses
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ 1 3 5 10 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .50% .40% .25% 1.15% $661 $895 $1,148 $1,871 $661 $895 $1,148 $1,871
- ---------------------------------------------------------------------------------------------------------------------------
B Shares .50 .40 1.00 1.90 693 897 1,226 1,930 193 597 1,026 1,930
- ---------------------------------------------------------------------------------------------------------------------------
C Shares .50 .40 1.00 1.90 293 597 1,026 2,222 193 597 1,026 2,222
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-7-
<PAGE>
Fund Category - Growth Stocks
PIMCO Target Fund
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Medium capitalization common stocks
Approximated Number Of Holdings
40-60
Approximate Capitalization Range
Between $1 billion and $10 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of between $1 billion and $10 billion at
the time of investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Foreign Investment Risk
. Issuer Risk . Currency Risk
. Growth Securities Risk . Leveraging Risk
. Smaller Company Risk . Interest Rate Risk
. Liquidity Risk . Credit Risk
. Derivatives Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class B shares (5/22/95),
performance information shown in the Average Annual Total Returns table for that
class is based on the performance of the Fund's Class A shares. The prior Class
A performance has been adjusted to reflect the actual sales charges,
distribution and/or service (12b-1) fees, administrative fees and other expenses
paid by Class B shares. Prior to March 6, 1999, the Fund had a different sub-
adviser and would not necessarily have achieved the performance results shown on
the next page under its current investment management arrangements. Past
performance is no guarantee of future results.
-8-
<PAGE>
PIMCO Target Fund
Calendar Year Total Returns
[Plot points for bar chart]
24.52% 3.09% 30.31% 15.68% 15.44% 23.27%
1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 8.62%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 21.18%
Lowest (7/1/98 - 9/30/98) -13.15%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
FUND INCEPTION
1 Year 5 Years (12/17/92)
- --------------------------------------------------------------------
<S> <C> <C> <C>
A Shares 17.32% 16.76% 18.27%
- --------------------------------------------------------------------
B Shares 18.27% 16.99% 18.48%
- --------------------------------------------------------------------
C Shares 22.27% 17.20% 18.48%
- --------------------------------------------------------------------
S&P Mid-Cap 400 Index* 19.12% 18.85% 18.02%
- --------------------------------------------------------------------
Lipper Mid-Cap Fund Average* 12.39% 14.86% 14.68%
</TABLE>
* The S&P Mid-Cap 400 Index is an unmanaged index of middle capitalization U.S.
stocks. It is not possible to invest directly in the index. The Lipper Mid-Cap
Fund Average is calculated by Lipper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 12/17/92. Index comparisons begin on 12/31/92.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment): Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
_____________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
EXAMPLE: Assuming you EXAMPLE: Assuming you do
redeem your shares at not redeem your shares.
the end of each period.
Distribution Total Annual
Admini- and/or Fund Operating Year Year
Advisory strative Service Expenses
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ 1 3 5 10 1 3 5 10
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .55% .40% .25% 1.20% $666 $910 $1,173 $1,925 $666 $910 $1,173 $1,925
- -------------------------------------------------------------------------------------------------------------------------------
B Shares .55 .40 1.00 1.95 698 912 1,252 1,984 198 612 1,052 1,984
- -------------------------------------------------------------------------------------------------------------------------------
C Shares .55 .40 1.00 1.95 298 612 1,052 2,275 198 612 1,052 2,275
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-9-
<PAGE>
Fund Category - Growth Stocks
PIMCO Opportunity Fund
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Smaller capitalization common stocks
Approximated Number Of Holdings
60-100
Approximate Capitalization Range
Between $100 million and $2 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of less than $2 billion at the time of
investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietary research that focuses on company fundamentals, and makes buy and
sell decisions using PIMCO Equity Advisors' disciplined investment process. The
Fund may also invest in other kinds of equity securities, including preferred
stocks and convertible securities, and may invest in fixed income securities.
The Fund may invest up to 15% of its assets in foreign securities and may buy
and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Foreign Investment Risk
. Issuer Risk . Leveraging Risk
. Value Securities Risk . Currency Risk
. Growth Securities Risk . Interest Rate Risk
. Smaller Company Risk . Credit Risk
. Liquidity Risk . Management Risk
. Derivatives Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class C shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A shares (12/17/90) and
Class B shares (4/1/99), performance information shown in the Average Annual
Total Returns table for those classes is based on the performance of the Fund's
Class C shares. The prior Class C performance has been adjusted to reflect the
actual sales charges, distribution and/or service (12b-1) fees, administrative
fees and other expenses paid by Class A and B shares. Prior to March 6, 1999,
the Fund had a different sub-adviser and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-10-
<PAGE>
PIMCO Opportunity Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart]
30.65% -7.34% 68.08% 28.46% 36.16% -4.74% 41.43% 11.54% -4.75% 1.29%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 12.55%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (1/1/91 - 3/31/91) 28.66%
Lowest (7/1/98 - 9/30/98) -25.78%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (2/24/84)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares -3.62% 7.30% 18.03% 16.79%
- --------------------------------------------------------------------------------------------
B Shares -2.82% 7.51% 18.09% 16.82%
- --------------------------------------------------------------------------------------------
C Shares 0.47% 7.73% 17.84% 16.39%
- --------------------------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 12.92% 11.92%
- --------------------------------------------------------------------------------------------
Lipper Capital Appreciation Fund 20.49% 15.02% 14.08% 12.85%
Average*
</TABLE>
* The Russell 2000 Index is a capitalization weighted broad based index of 2,000
small capitalization U.S. stocks. It is not possible to invest directly in the
index. The Lipper Capital Appreciation Fund Average is calculated by Lipper
Analytical Services, Inc. It is a total return performance average of funds
tracked by Lipper that have an investment objective of maximum capital
appreciation. It does not take into account sales charges. The Fund began
operations on 2/24/84. Index comparisons begin on 2/29/84.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B CLass C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/1/ 5%/2/ 1%/3/
</TABLE>
________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you Example: Assuming you do
redeem your shares at not redeem your shares.
the end of each period.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .65% .40% .25% 1.30% 675 $939 $1,224 $2,032 675 $939 $1,224 $2,032
- -----------------------------------------------------------------------------------------------------------------------------------
B SHARES .65 .40 1.00 2.05 708 943 1,303 2,091 208 643 1,103 2,091
- -----------------------------------------------------------------------------------------------------------------------------------
C Shares .65 .40 1.00 2.05 308 643 1,103 2,379 208 643 1,103 2,379
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-11-
<PAGE>
PIMCO Capital Appreciation Fund Fund Category - Blend Stocks
Investment Objective
Seeks growth of capital
Fund Focus
Larger capitalization common stocks
Approximated Number of Holdings
60-100
Approximate Capitalization Range
At least $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of larger
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of the 1,000 largest capitalization stocks in the U.S. market for a
series of both growth and value criteria (such as dividend growth, earnings
growth, equity growth, earnings momentum and earnings surprise). The team
selects stocks by subjecting the top 10% of the stocks in the screened universe
to a rigorous, fundamental analysis. The Fund's capitalization criteria applies
at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median ranking, have negative
earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Growth Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A, B and C shares
(1/20/97), performance information shown in the bar chart and tables for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.
-12-
<PAGE>
PIMCO Capital Appreciation Fund
Calendar Year Total Returns-Class A
[Plot points for bar chart]
7.08% 17.24% -4.64% 36.61% 26.29% 33.72% 17.18%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -1.25%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 19.59%
Lowest (7/1/98 - 9/30/98) -14.22%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (3/8/91)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
A Shares 10.73% 19.49% 18.42%
- ----------------------------------------------------------------------
B Shares 11.33% 19.78% 18.48%
- ----------------------------------------------------------------------
C Shares 15.32% 19.96% 18.40%
- ----------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- ----------------------------------------------------------------------
Lipper Capital Appreciation Fund 20.49% 15.02% 14.91%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Capital Appreciation Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that have an investment objective of maximum
capital appreciation. It does not take into account sales charges. The Fund
began operations on 3/8/91. Index comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/1/ 5%/2/ 1%/3/
</TABLE>
______________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you do not
your shares at the end of redeem your shares.
each period.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .45% .40% .25% 1.10% $656 $880 $1,123 $1,816 $656 $880 $1,123 $1,816
- -----------------------------------------------------------------------------------------------------------------------------------
B Shares .45 .40 1.00 1.85 688 882 1,201 1,876 188 582 1,001 1,876
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares .45 .40 1.00 1.85 288 582 1,001 2,169 188 582 1,001 2,169
</TABLE>
1. Administrative fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-13-
<PAGE>
PIMCO Mid-Cap Growth Fund Fund Category - Blend Stocks
Investment Objective
Seeks growth of capital
Fund Focus
Medium capitalization common stocks
Approximated Number Of Holdings
60-100
Approximate Capitalization Range
Over $500 million (excluding the largest 200 companies)
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of medium
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations over $500
million, but excluding the 200 largest capitalization companies. The screen
involves a series of both growth and value criteria (such as dividend growth,
earnings growth, equity growth, earnings momentum and earnings surprise). The
team selects stocks by subjecting the top 10% of the stocks in the screened
universe to a rigorous, fundamental analysis. The Fund's capitalization criteria
applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median screen ranking, have
negative earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Smaller Company Risk
. Issuer Risk . Liquidity Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A, B and C shares
(1/13/97), performance information shown in the bar chart and tables for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.
-14-
<PAGE>
PIMCO Mid-Cap Growth Fund
Calendar Year Total Returns-Class A
[Plot points for bar charts]
8.75% 15.32% -2.75% 36.76% 22.87% 33.62% 7.46%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -8.45%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 17.57%
Lowest (7/1/98 - 9/30/98) -14.50%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (8/26/91)
- --------------------------------------------------------------------------
<S> <C> <C> <C>
A Shares 1.55% 17.27% 16.85%
- --------------------------------------------------------------------------
B Shares 1.66% 17.52% 16.89%
- --------------------------------------------------------------------------
C Shares 5.66% 17.73% 16.89%
- --------------------------------------------------------------------------
Russell Mid-Cap Index* 10.09% 17.34% 17.18%
- --------------------------------------------------------------------------
Lipper Mid-Cap Fund Average* 12.39% 14.86% 14.76%
</TABLE>
* The Russell Mid-Cap Index is an unmanaged index of middle capitalization U.S.
stocks. It is not possible to invest directly in the index. The Lipper Mid-Cap
Fund Average is calculated by Lipper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 8/26/91. Index comparisons begin on 8/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment): Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you do
your shares at the end of each not redeem your shares.
period.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .45% .40% .25% 1.10% $656 $ 880 $1,123 $1,816 $656 $880 $1,123 $1,816
- ------------------------------------------------------------------------------------------------------------------------------------
B Shares .45 .40 1.00 1.85 688 882 1,201 1,876 188 582 1,001 1,876
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares .45 .40 1.00 1.85 288 582 1,001 2,169 188 582 1,001 2,169
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-15-
<PAGE>
PIMCO Small-Cap Growth Fund Fund Category - Blend Stocks
Investment Objective
Seeks growth of capital
Fund Focus
Smaller capitalization
common stocks
Approximated Number of Holdings
60-70
Approximate Capitalization Range
$50 million to $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of smaller
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations between $50
million and $1 billion. The screen involves a series of both growth and value
criteria (such as dividend growth, earnings growth, equity growth, earnings
momentum and earnings surprise). The team selects stocks by subjecting the top
10% of the stocks in the screened universe to a rigorous, fundamental analysis.
The Fund's capitalization criteria applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median screen ranking, have
negative earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Smaller Company Risk
. Issuer Risk . Liquidity Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Institutional Class shares, which are offered in a
different prospectus. This is because the Fund did not offer Class A, B or C
shares during the period listed. Although Institutional Class and Class A, B and
C shares would have similar annual returns (because all of the Fund's shares
represent interests in the same portfolio of securities), Institutional Class
performance would be higher than Class A, B or C performance because of the
lower expenses paid by Institutional Class shares. The returns in the bar chart
and the information to its right do not reflect the impact of sales charges
(loads). If they did, the returns would be lower than those shown. Unlike the
bar chart, performance figures for Class A, B and C shares in the Total Average
Total Returns table reflect the impact of sales charges. The Average Annual
Total Returns table shows estimated historical performance for Class A, B and C
shares, based on the performance of the Fund's Institutional Class shares,
adjusted to reflect the actual sales charges (loads) distribution and/or service
(12b-1) Fees, administrative Fees, and other Expenses paid by Class A, B and C
shares. The prior Institutional Class performance has been adjusted to reflect
the actual sales charges (in the Average Total Returns table only), distribution
and/or service (12b-1) fees, administrative fees and other expenses paid by
Class A, B and C shares. Past performance is no guarantee of future results.
-16-
<PAGE>
PIMCO Small-Cap Growth Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart]
16.69% 24.45% 0.54% 21.85% 16.84% 26.72% -8.50%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -10.21%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/97 - 6/30/97) 18.48%
Lowest (7/1/98 - 9/30/98) -24.84%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund
Inception
1 Year 5 Year (8/26/91)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
A Shares -13.89% 8.98% 18.44%
- ----------------------------------------------------------------------
B Shares -13.90% 9.23% 17.14%
- ----------------------------------------------------------------------
C Shares -10.43% 9.40% 17.10%
- ----------------------------------------------------------------------
Institutional Class -8.50% 10.66% 18.44%
- ----------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 17.37%
- ----------------------------------------------------------------------
Lipper Small-Cap Fund Average* -0.23% 13.12% 17.69%
- ----------------------------------------------------------------------
</TABLE>
* The Russell 2000 Index is a capitalization weighted broad based index of small
capitalization U.S. stocks. It is not possible to invest directly in the index.
The Lipper Small-Cap Fund Average is calculated by Lipper Analytical Services,
Inc. It is a total return performance average of funds tracked by Lipper that
invest primarily in companies with market capitalizations of less than $1
billion at the time of investment. It does not take into account sales charges.
The Fund began operations on 1/7/91. Index comparisons begin on 12/31/90. [Class
A, Class B and Class C share performance not yet available].
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment): Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you
your shares at the end of each do not redeem your
period. shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares 1.00% .40% .25% 1.65% $709 $1,042 $1,398 $2,397 $ 709 $1,042 $1,398 $2,397
- ------------------------------------------------------------------------------------------------------------------------------------
B Shares 1.00 .40 1.00 2.40 743 1,048 1,480 2,456 243 748 1,280 2,456
- ------------------------------------------------------------------------------------------------------------------------------------
C Shares 1.00 .40 1.00 2.40 343 748 1,280 2,736 243 748 1,280 2,736
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-17-
<PAGE>
PIMCO Equity Income Fund Fund Category - Value Stocks
Investment Objective
Seeks current income as a
primary objective, and
long-term growth of
capital as a secondary
objective
Fund Focus
Income producing common
stocks with potential for
capital appreciation
Approximate Number of Holdings
40-50
Approximate Capitalization Range
Over $2 billion
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that are
drug or energy related.
The portfolio managers partition this universe by industry and, through the use
of both fundamental and quantitative research, identify the most undervalued
stocks in each industry. From this group of stocks, the Fund buys approximately
25 stocks with the highest dividend yields.
The portfolio managers then screen the most undervalued companies in each
industry by dividend yield to identify the highest yielding stocks in each
industry. From this group, the Fund buys approximately 25 stocks with the lowest
share price to company earnings (P/E) ratios.
The portfolio managers select stocks for the Fund only if they meet parameters
for fundamental quality, trading liquidity and price momentum. They also use
quantitative models to analyze stocks.
The portfolio managers replace a stock whenever a different stock within the
same industry has a significantly lower P/E ratio or a higher dividend yield
than the Fund's current holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A, B and C shares
(1/20/97), performance information shown in the bar chart and tables for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.
-18-
<PAGE>
PIMCO Equity Income Fund
Calendar Year Total Returns-Class A
[Plot points for bar chart]
14.29% 8.03% -2.00% 32.94% 21.00% 30.88% 8.03%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 0.51%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 13.92%
Lowest (7/1/98 - 9/30/98) -10.98%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (3/8/91)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
A Shares 2.09% 16.07% 15.22%
- ----------------------------------------------------------------------------
B Shares 2.52% 16.30% 15.28%
- ----------------------------------------------------------------------------
C Shares 6.36% 16.53% 15.21%
- ----------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- ----------------------------------------------------------------------------
Lipper Equity Income Fund 11.90% 16.50% 15.59%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 3/8/91. Index
comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
<TABLE>
<CAPTION>
Shareholder Fees (fees paid directly from your investment): Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem Example: Assuming you
your shares at the end of each do not redeem your
of each period. shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .45% .40% .25% 1.10% $656 $880 $1,123 $1,816 $656 $880 $1,123 $1,816
- -----------------------------------------------------------------------------------------------------------------------------------
B Shares .45 .40 1.00 1.85 688 882 1,201 1,876 188 582 1,001 1,876
- -----------------------------------------------------------------------------------------------------------------------------------
C Shares .45 .40 1.00 1.85 288 582 1,001 2,169 188 582 1,001 2,169
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-19-
<PAGE>
PIMCO Renaissance Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of
capital and income
Fund Focus
Undervalued stocks with improving business
fundamentals
Approximated Number of Holdings
50-70
Approximate Capitalization Range
All capitalizations
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with below-average valuations whose business fundamentals are expected
to improve.
In selecting investments for the Fund, the portfolio manager determines the
valuation of stocks based on characteristics such as price-to-earnings, price-
to-book and price-to-cash flow ratios. The portfolio manager analyzes stocks to
identify key drivers of financial results and catalysts for change, which may
indicate that a company's business fundamentals are improving.
The portfolio manager sells a stock when he believes that the company's business
fundamentals are weakening.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives. In
response to unfavorable market and other conditions, the Fund may make temporary
investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Value Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class C shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A shares (2/1/91) and Class
B shares (5/22/95), performance information shown in the Average Annual Total
Returns table for those classes is based on the performance of the Fund's Class
C shares. The prior Class C performance has been adjusted to reflect the actual
sales charges, distribution and/or service (12b-1) fees, administrative fees and
other expenses paid by Class A and B shares. Prior to May 7, 1999, the Fund had
a different sub-adviser and would not necessarily have achieved the performance
results shown on the next page under its current investment management
arrangements. Past performance is no guarantee of future results.
-20-
<PAGE>
PIMCO Renaissance Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart]
11.17% -15.46 33.24% 7.78% 21.23% -5.05 27.61% 24.40% 34.90% 10.72%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year Ended
More Recent Return Information
1/1/99-9/30/99 -0.49%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 18.37%
Lowest (7/1/98 - 9/30/98) -16.77%
Average Annual Total Returns (for periods ended 12/31/98))
<TABLE>
Fund Inception
1 Year 5 Years 10 Years (4/18/88)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares 5.37% 17.17% 14.14% 13.80%
- --------------------------------------------------------------------------------
B Shares 5.73% 17.39% 14.18% 13.84%
- --------------------------------------------------------------------------------
C Shares 9.76% 17.62% 13.93% 13.54%
- --------------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.87%
- --------------------------------------------------------------------------------
Lipper Equity Income Fund 10.90% 16.50% 14.32% 14.30%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 4/18/88. Index
comparisons begin on 4/30/88.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
_________________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your EXAMPLE: Assuming you do not
shares at the end of each period. redeem your shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .60% .40% .25% 1.25% $ 670 $925 $1,199 $1,978 $ 670 $925 $1,199 $1,978
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .60 .40 1.00 2.00 703 927 1,278 2,038 203 627 1,078 2,038
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .60 .40 1.00 2.00 303 627 1,078 2,327 203 627 1,078 2,327
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-21-
<PAGE>
PIMCO Value Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Undervalued common stocks relative to their industry groups
Approximated Number of Holdings
50
Approximate Capitalization Range
At least $2 billion
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that are
drug or energy related.
The portfolio managers partition this universe by industry and identify the most
undervalued stocks in each industry. After narrowing the universe to
approximately 150 possible candidates, the portfolio managers select one holding
from each of 50 industry groups.
The portfolio managers select stocks only if they meet parameters for
fundamental quality and trading liquidity. Issue weighting is dependent upon
dividend yield and price momentum considerations. The managers also consider
quantitative models for investment timing purposes.
The Fund's portfolio is generally rebalanced quarterly. The portfolio managers
may also replace companies within the same industry group when a replacement
candidate's valuation reaches a level that is considerably lower the valuation
of an existing holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A, B and C shares
(1/13/97), performance information shown in the bar chart and tables for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.
-22-
<PAGE>
PIMCO Value Fund
Calendar Year Total Returns
[Plot points for bar chart]
12.70% 15.94% -4.46% 36.37 19.87% 25.71% 9.76%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 4.80%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 17.10%
Lowest (7/1/98 - 9/30/98) -13.27%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/30/91)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
A Shares 3.72% 15.62% 15.35%
- ------------------------------------------------------------------------
B Shares 4.14% 15.86% 15.43%
- ------------------------------------------------------------------------
C Shares 8.06% 16.08% 15.43%
- ------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.51%
- ------------------------------------------------------------------------
Lipper Growth and Income Fund 15.80% 18.42% 15.94%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth and Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that combine a growth-of-earnings orientation
and an income requirement for level and/or rising dividends. It does not take
into account sales charges. The Fund began operations on 12/30/91. Index
comparisons begin on 12/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
_______________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do not
shares at the end of each period. redeem your shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .45% .40% .25% 1.10% $656 $880 $1,123 $1,816 $656 $880 $1,123 $1,816
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .45 .40 1.00 1.85 688 882 1,201 1,876 188 582 1,001 1,876
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .45 .40 1.00 1.85 288 582 1,001 2,169 188 582 1,001 2,169
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-23-
<PAGE>
PIMCO Value 25 Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Medium capitalization common stocks
Approximated Number of Holdings
25
Approximate Capitalization Range
Between $1 billion and $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with medium market capitalizations and below-average P/E ratios
relative to their industry groups.
The Fund normally invests in approximately 25 stocks. The portfolio managers
classify a universe of approximately 2,000 stocks by industry, each of which
have market capitalizations between $1 billion and $5 billion at the time of
investment. They then screen the universe to find the stocks with the lowest P/E
ratios in each industry, subject to application of quality, earnings momentum
and price momentum screens.
The portfolio managers then analyze those stocks which pass the screenings and
conduct fundamental research on those companies that appear to be the most
undervalued by the market. They select approximately 25 stocks, diversified
across industries, on an equal-weighted basis for the Fund.
The Fund's portfolio is generally rebalanced quarterly. The portfolio managers
may also replace companies within the same industry group when a replacement
candidate's valuation reaches a level that is considerably lower than the
valuation of the existing holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Liquidity Risk
. Issuer Risk . Credit Risk
. Value Securities Risk . Management Risk
. Smaller Company Risk
. Concentration Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in July 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-24-
<PAGE>
PIMCO Value 25 Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
___________________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do
shares at the end of each period. not redeem your shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees (1) (12b-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>
A Shares .50% .40% .25% 1.15% $661 $895 $1,148 $1,871 $661 $895 $1,148 $1,871
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .50 .40 1.00 1.90 693 897 1,226 1,930 193 597 1,026 1,930
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .50 .40 1.00 1.90 293 597 1,026 2,222 193 597 1,026 2,222
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-25-
<PAGE>
PIMCO Small-Cap Value Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Smaller capitalization common stocks
Approximated Number of Holdings
100
Approximate Capitalization Range
Between $50 million and $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations between $100 million and $1 billion at the
time of investment and below-average P/E ratios relative to the market and their
respective industry groups.
The Fund's initial selection universe consists of approximately 4,500 stocks.
The portfolio managers then apply a screening methodology based upon low P/E
ratios, market capitalizations, trading liquidity and dividend yield to narrow
this universe to approximately 500 stocks divided among approximately 160
industries.
The portfolio managers then analyze this narrowed universe using fundamental
research and a disciplined investment methodology. They select approximately 100
stocks for the Fund, each of which has close to equal weighting in the
portfolio. The portfolio managers also select stocks subject to a 10% limit on
the weighting for any one industry, resulting in a portfolio that has broad
diversification among economic sectors.
The portfolio managers replace a stock if its valuation exceeds the average
valuation of stocks represented in the S&P 500 Index or stocks in its industry
group. The portfolio managers also consider quantitative models for investment
timing purposes.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Liquidity Risk
. Issuer Risk . Credit Risk
. Value Securities Risk . Management Risk
. Smaller Company Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A, B and C shares
(1/20/97), performance information shown in the bar chart and tables for those
classes is based on the performance of the Fund's Institutional Class shares,
which are offered in a different prospectus. The prior Institutional Class
performance has been adjusted to reflect the actual sales charges (in the
Average Total Returns table only), distribution and/or service (12b-1) fees,
administrative fees and other expenses paid by Class A, B and C shares. Past
performance is no guarantee of future results.
-26-
<PAGE>
PIMCO Small-Cap Value Fund
Calendar Year Total Returns-CLASS A
18.27% 13.39% -4.07% 24.98% 27.22% 34.47% -9.48%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -4.98%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (7/1/97 - 9/30/97) 15.81%
Lowest (7/1/98 - 9/30/98) -18.71%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (10/1/91)
- ------------------------------------------------------------------------
<S> <C> <C> <C>
A Shares -14.46% 11.90% 13.44%
- ------------------------------------------------------------------------
B Shares -14.50% 12.08% 13.51%
- ------------------------------------------------------------------------
C Shares -11.06% 12.33% 13.48%
- ------------------------------------------------------------------------
Russell 2000 Index* -2.55% 11.86% 14.13%
- ------------------------------------------------------------------------
Lipper Small-Cap Fund Average* -0.23% 13.12% 14.69%
</TABLE>
* The Russell 2000 Index is a capitalization weighted broad based index of
2,000 small capitalization U.S. stock. It is not possible to invest directly in
the index. The Lipper Small-Cap Fund Average is calculated by Lipper Analytical
Services, Inc. It is a total return performance average of funds tracked by
Lipper that invest primarily in companies with market capitalizations of less
than $1 billion at the time of investment. It does not take into account sales
charges. The Fund began operations on 9/30/91. Index comparisons begin on
10/1/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
________________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do
shares at the end of each period. not redeem your shares.
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year Year
Share Class Fees Fees/(1)/ (12b-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>
A Shares .60% .40% .25% 1.25% $670 $925 $1,199 $1,978 $670 $925 $1,199 $1,978
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .60 .40 1.00 2.00 703 927 1,278 2,038 203 627 1,078 2,038
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .60 .40 1.00 2.00 303 627 1,078 2,327 203 627 1,078 2,327
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-27-
<PAGE>
PIMCO Tax-Efficient Equity Fund Fund Category - Enhanced Index
Investment Objective
Seeks maximum after-tax growth of capital
Fund Focus
A portion of the common stocks represented in the S&P 500 Index
Approximated Number of Holdings
At least 250
Approximate Capitalization Range
Over $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund attempts to provide a total return which exceeds the return of the S&P
500 Index by investing in a broadly diversified portfolio of at least 250 common
stocks. The Fund also attempts to achieve superior after-tax returns for its
shareholders by using a variety of tax-efficient management strategies.
Normally, the Fund invests at least 95% of its assets in stocks represented in
the S&P 500 Index. The Fund's portfolio is designed to have certain
characteristics that are similar to those of the index, including such measures
as dividend yield, P/E ratio, relative volatility, economic sector exposure,
return on equity and market price-to-book value ratio. The portfolio managers
attempt to produce a higher total return than the S&P 500 by using quantitative
security selection techniques. There is no assurance that the Fund's investment
performance will equal or exceed that of the S&P 500.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions. The Fund may
use derivatives.
Quantitative Security Selection Techniques.
The portfolio managers use a proprietary quantitative model that ranks companies
based on long-term (5-10 years) price appreciation potential. They analyze
factors such as growth of sustainable earnings and dividend behavior. Stocks in
the top 50% of the model's ranking are considered for purchase by the Fund. The
Fund sells stocks selected from the bottom 20% of the model's ranking based on
cost, current market value and anticipated benefit of replacement. The portfolio
managers' sell discipline also focuses on reducing realized capital gains as
indicated below.
Tax-Efficient Strategies.
The portfolio managers utilize a range of active tax management strategies
designed to minimize the Fund's taxable distributions, including low portfolio
turnover and favoring investments in low-dividend, growth-oriented companies.
The portfolio managers also identify specific shares of stock to be sold that
have the lowest tax cost. When prudent, stocks are also sold to realize capital
losses in order to offset realized capital gains.
Additional tax-efficient strategies include regular portfolio rebalancing to
capture available tax credits and the use derivative hedging techniques so that
the Fund can reduce its exposure to price declines without having to sell
appreciated securities. In limited circumstances, the Fund may also distribute
appreciated securities to shareholders to meet redemption requests so as to
avoid realizing capital gains.
Despite the use of these tax-efficient strategies, the Fund may realize gains
and shareholders will incur tax liability from time to time.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Derivatives Risk
. Issuer Risk . Leveraging Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in July 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-28-
<PAGE>
PIMCO Tax-Efficient Equity Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
-------- -------- --------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%(1) 5%(2) 1%(3)
</TABLE>
________________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your Example: Assuming you do
shares at the end of each period. not redeem your shares.
Admini- Distribution Total Annual Year Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12b-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>
A Shares .45% .40% .25% 1.10% $656 $880 $1,123 $1,816 $656 $880 $1,123 $1,816
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .45 .40 1.00 1.85 688 882 1,201 1,876 188 582 1,001 1,876
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .45 .40 1.00 1.85 288 582 1,001 2,169 188 582 1,001 2,169
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-29-
<PAGE>
PIMCO International Fund Fund Category - International Stocks
Investment Objective
Seeks capital appreciation through investment in an international portfolio;
income is an incidental consideration
Fund Focus
Common stocks of foreign (non-U.S.) issuers
Approximated Number of Holdings
150-200
Approximate Capitalization Range
Over $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in an international
portfolio of common stocks, which may or may not pay dividends. The Fund may
also invest in other types of equity securities, including preferred stocks and
convertible securities, and may invest in fixed income securities.
The portfolio manager uses a "top down" approach in selecting investments for
the Fund. He first determines country allocations for the Fund by considering
such factors as the condition and growth potential of the various economies and
securities markets, currency and taxation considerations and other financial,
social, national and political factors. The portfolio manager then notifies
Blairlogie's country specialists of the desired country weightings and the
specialists select stocks within each country according to growth, quality and
value characteristics.
The Fund normally invests in securities traded principally in developed foreign
securities markets, with particular emphasis on Japanese, European, Pacific and
Australian securities markets. However, the Fund has no prescribed limits on
geographic asset distribution and may invest in any foreign securities market in
the world. The Fund will also invest in emerging markets and may invest in
securities of foreign issuers traded on U.S. markets. The Fund will normally not
invest in securities of U.S. issuers traded on U.S. securities markets.
The Fund invests most of its assets in foreign securities which trade primarily
in currencies other than the U.S. dollar. It may also invest directly in foreign
currencies, use derivatives and invest up to 10% of its assets in other
investment companies.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in foreign and domestic fixed
income securities and equity securities principally traded in the U.S.,
including securities of U.S. issuers. This would be inconsistent with the Fund's
investment objective and principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Foreign Investment Risk . Derivatives Risk
. Currency Risk . Concentration Risk
. Market Risk . Leveraging Risk
. Issuer Risk . Interest Rate Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
. Liquidity Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class C shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A shares (2/1/91) and Class
B shares (5/22/95), performance information shown in the Average Annual Total
Returns table for those classes is based on the performance of the Fund's Class
C shares. The prior Class C performance has been adjusted to reflect the actual
sales charges, distribution and/or service (12b-1) fees, administrative fees and
other expenses paid by Class A and B shares. Past performance is no guarantee of
future results.
-30-
<PAGE>
PIMCO International Fund
Calendar Year Total Returns
[Plot points for bar chart]
28.51% -15.50% 19.92% -5.84% 33.47% -8.16% 5.79% 5.76% 1.85% 8.27%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 4.46%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 16.44%
Lowest (7/1/98 - 9/30/98) -22.16%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (8/25/86)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares 3.30% 2.18% 6.58% 6.74%
- -------------------------------------------------------------------------------------------
B Shares 3.39% 2.22% 6.38% 6.42%
- -------------------------------------------------------------------------------------------
C Shares 7.30% 2.53% 6.37% 6.41%
- -------------------------------------------------------------------------------------------
MSCI EAFE Index* 20.33% 9.50% 5.85% 9.09%
- -------------------------------------------------------------------------------------------
Lipper International Fund Average* 12.99% 7.81% 9.15% 9.77%
</TABLE>
* The Morgan Stanley Capital International EAFE (Europe, Australasia, Far East)
("MSCI EAFE") Index is a widely recognized, unmanaged index of foreign developed
and emerging market stocks. It is not possible to invest directly in the index.
The Lipper International Fund Average is calculated by Lipper Analytical
Services, Inc. It is a total return performance average of funds tracked b
Lipper that invest their assets in securities whose primary trading markets are
outside of the United States. It does not take into account sales charges. The
Fund began operations on 8/25/86. Index comparisons begin on 8/31/86.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund:
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your
shares at the end of each period.
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .55% .65% .25% 1.45% $689 $983 $1,299 $2,190
- ---------------------------------------------------------------------------------------------------------------------------
B Shares .55 .65 1.00 2.20 723 988 1,380 2,249
- ---------------------------------------------------------------------------------------------------------------------------
C Shares .55 .65 1.00 2.20 323 688 1,180 2,534
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you do not redeem
your shares at the end of each period.
Year
Share Class 1 3 5 10
- --------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares $689 $983 $1,299 $2,190
- --------------------------------------------------------
B Shares 223 688 1,180 2,249
- --------------------------------------------------------
C Shares 233 688 1,180 2,534
- --------------------------------------------------------
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-31-
<PAGE>
PIMCO Innovation Fund Fund Category - Sector-Related Stocks
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Common stocks of technology-related companies
Approximated Number of Holdings
40
Approximate Capitalization Range
Over $200 million
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests 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. Although the Fund emphasizes companies which utilize technologies,
it is not required to invest exclusively in companies in a particular business
sector or industry.
The portfolio manager seeks to identify quality technology-related companies
using proprietary research that focuses on company fundamentals, and makes buy
and sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Concentration Risk
. Growth Securities Risk . Leveraging Risk
. Smaller Company Risk . Interest Rate Risk
. Liquidity Risk . Credit Risk
. Derivatives Risk . Management Risk
. Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class A shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class B shares (5/22/95),
performance information shown in the Average Annual Total Returns table for that
class is based on the performance of the Fund's Class A shares. The prior Class
A performance has been adjusted to reflect the actual sales charges,
distribution and/or service (12b-1) fees, administrative fees and other expenses
paid by Class B shares. Prior to March 6, 1999, the Fund had a different sub-
adviser and would not necessarily have achieved the performance results shown on
the next page under its current investment management arrangements. Past
performance is no guarantee of future results.
-32-
<PAGE>
PIMCO Innovation Fund
Calendar Year Total Returns-Class A
[Plot points for bar chart]
45.33% 23.60% 9.03% 69.54%
1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 32.91%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 37.19%
Lowest (1/1/97 - 3/31/97) -12.56%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (12/22/94)
- -------------------------------------------------------------------------------
<S> <C> <C>
A Shares 69.54% 34.67%
- -------------------------------------------------------------------------------
B Shares 73.02% 35.35%
- -------------------------------------------------------------------------------
C Shares 77.13% 35.55%
- -------------------------------------------------------------------------------
S&P 500 Index* 28.58% 30.51%
- -------------------------------------------------------------------------------
Lipper Science and Technology Fund Average* 51.44% 25.21%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Science and Technology Fund Average
is calculated by Lipper Analytical Services, Inc. It is a total return
performance average of funds tracked by Lipper that invest 65% of their assets
in science and technology stocks. It does not take into account sales charges.
The Fund began operations on 12/22/94. Index comparisons begin on 12/31/94.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)
</TABLE>
______________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your
shares at the end of each period.
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .65% .40% .25% 1.30% $675 $939 $1,224 $2,032
- ---------------------------------------------------------------------------------------------------------------------------
B Shares .65 .40 1.00 2.05 708 943 1,303 2,091
- ---------------------------------------------------------------------------------------------------------------------------
C Shares .65 .40 1.00 2.05 308 643 1,103 2,379
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you do not redeem
your shares.
Year
Share Class 1 3 5 10
- --------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares $675 $939 $1,224 $2,032
- --------------------------------------------------------
B Shares 208 643 1,103 2,091
- --------------------------------------------------------
C Shares 208 643 1,103 2,379
- --------------------------------------------------------
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-33-
<PAGE>
PIMCO Precious Metals Fund Fund Category -Sector-related Stocks
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Common stocks of precious metals-related companies
Approximated Number of Holdings
50
Approximate Capitalization Range
Between $50 million and $7 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund concentrates investments in a global portfolio of common stocks of
companies principally engaged in precious-metals related activities. These
include mining, processing, distribution and marketing of precious metals. 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 invests most of its assets in foreign securities which trade primarily
in currencies other than the U.S. dollar and may invest directly in foreign
currencies.
The portfolio manager selects securities for the Fund based on an analysis that
identifies companies that are undervalued relative to the anticipated value of
the precious metals relevant to the company.
The Fund also invests in other kinds of equity securities, including preferred
stocks and convertible securities. The Fund may also use derivatives. Although
the Fund reserves the right to do so at any time, it does not presently intend
to invest more than 10% of its assets directly in precious metals (such as gold
bullion) or in futures contracts on precious metals (such as gold futures) and
related options.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Because the Fund concentrates in the precious metals industry, it is intended
for aggressive investors and is not intended as a complete investment program.
Principal Risks
Among the principal risks of investing in the Fund are:
. Concentration Risk . Smaller Company Risk
. Foreign Investment Risk . Liquidity Risk
. Currency Risk . Derivatives Risk
. Market Risk . Leveraging Risk
. Issuer Risk . Interest Rate Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart and the information to its right show
performance of the Fund's Class C shares, but the returns do not reflect the
impact of sales charges (loads). If they did, the returns would be lower than
those shown. Unlike the bar chart, performance figures for Class A, B and C
shares in the Average Annual Total Returns table reflect the impact of sales
charges. For periods prior to the inception of Class A shares (2/1/91) and Class
B shares (6/15/95), performance information shown in the Average Annual Total
Returns table for those classes is based on the performance of the Fund's Class
C shares. The prior Class C performance has been adjusted to reflect the actual
sales charges, distribution and/or service (12b-1) fees, administrative fees and
other expenses paid by Class A and B shares. Past performance is no guarantee of
future results.
-34-
<PAGE>
PIMCO Precious Metals Fund
Calendar Year Total Returns
[Plot points for bar chart]
16.19% -25.05% 5.35% 12.32% 89.46% -9.66% -4.19% -2.96% -48.04% -8.72%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 3.25%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (4/1/93 - 6/30/93) 36.03%
Lowest (10/1/97 - 12/31/97) -33.81%
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (8/25/86)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares -12.50% -17.02% -5.64% -6.01%
- -------------------------------------------------------------------------------------------
B Shares -13.00% -17.10% -5.61% -5.98%
- -------------------------------------------------------------------------------------------
C Shares -9.61% -16.81% -5.88% -6.26%
- -------------------------------------------------------------------------------------------
Philadelphia Gold and Silver Index* -12.43% -13.21% -2.88% -3.29%
- -------------------------------------------------------------------------------------------
Lipper Gold Oriented Fund Average* -10.95% -13.81% -3.80% -3.44%
</TABLE>
* The Philadelphia Gold and Silver Index is a widely recognized, unmanaged index
of stocks of companies in the gold and silver mining industry. It is not
possible to invest directly in the index. The Lipper Gold Oriented Fund Average
is calculated by Lipper Analytical Services, Inc. It is a total return
performance average of funds tracked by Lipper that invest at least 65% of their
assets in shares of gold mines, gold-oriented mining finance houses, gold coins
or gold bullion. It does not take into account sales charges. The Fund began
operations on 10/10/88. Index comparisons begin on 9/30/88.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Fund
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
-------- -------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you redeem your
shares at the end of each period.
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year
Share Class Fees Fees/(1)/ (12b-1) Fees/(2)/ Expenses 1 3 5 10
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .60% .45% .25% 1.30% $675 $939 $1,224 $2,032
- ---------------------------------------------------------------------------------------------------------------------------
B Shares .60 .45 1.00 2.05 708 943 1,303 2,091
- ---------------------------------------------------------------------------------------------------------------------------
C Shares .60 .45 1.00 2.05 308 643 1,103 2,379
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you do not redeem
your shares.
Year
Share Class 1 3 5 10
- --------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares $675 $939 $1,224 $2,032
- --------------------------------------------------------
B Shares 208 643 1,103 2,091
- --------------------------------------------------------
C Shares 208 643 1,103 2,379
- --------------------------------------------------------
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholders may, depending upon 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.
-35-
<PAGE>
Summary of Principal Risks
The value of your investment in a Fund changes with the values of that
Fund's investments. Many factors can affect those values. The factors that are
most likely to have a material effect on a particular Fund's portfolio as a
whole are called "principal risks." The principal risks of each Fund are
identified in the Fund Summaries and are summarized in this section. Each Fund
may be subject to additional principal risks and risks other than those
described below because the types of investments made by each Fund can change
over time. Securities and investment techniques mentioned in this summary and
described in greater detail under "Characteristics and Risks of Securities and
Investment Techniques" appear in BOLD TYPE. That section and "Investment
Objectives and Policies" in the Statement of Additional Information also include
more information about the Funds, their investments and the related risks.
. Market Risk. Each of the Funds normally invests most of its assets in
common stocks and/or other equity securities. A principal risk of investing in
each Fund is that the equity securities in its portfolio will decline in value
due to factors affecting equity securities markets generally or particular
industries represented in those markets. The values of equity securities may
decline due to general market conditions which are not specifically related to a
particular company, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may also decline
due to factors which affect a particular industry or industries, such as labor
shortages or increased production costs and competitive conditions within an
industry.
. Issuer Risk. The values of equity securities may also decline for a
number of reasons which directly relate to the issuing company, such as
management performance, financial leverage and reduced demand for the issuer's
goods or services.
. Value Securities Risk. Each Fund may invest in companies that may not
be expected to experience significant earnings growth, but whose securities its
portfolio manager believes are selling at a price lower than their true value.
The Equity Income, Renaissance, Value, Value 25 and Small-Cap Value Funds place
particular emphasis on value securities. Companies that issue value securities
may have experienced adverse business developments or may be subject to special
risks that have caused their securities to be out of favor. If a portfolio
manager's assessment of a company's prospects is wrong, or if the market does
not recognize the value of the company, the price of its securities may decline
or may not approach the value that the portfolio manager anticipates.
. Growth Securities Risk. Each Fund may invest in equity securities of
companies that its portfolio manager believes will experience relatively rapid
earnings growth. The Growth, Target, Opportunity and Innovation Funds place
particular emphasis on growth securities. Growth securities typically trade at
higher multiples of current earnings than other securities. Therefore, the
values of growth securities may be more sensitive to changes in current or
expected earnings than the values of other securities.
. Smaller Company Risk. The general risks associated with equity
securities and liquidity risk are particularly pronounced for securities of
COMPANIES WITH SMALLER MARKET CAPITALIZATIONS. These companies may have limited
product lines, markets or financial resources or they may depend on a few key
employees. Securities of smaller companies may trade less frequently and in
lesser volume than more widely held securities and their values may fluctuate
more sharply than other securities. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity. The
Opportunity, Small-Cap Growth and Small-Cap Value Funds generally have the
greatest exposure to this risk. The Target,
-36-
<PAGE>
Mid-Cap Growth and Value 25 Funds also have substantial exposure to this risk
because they invest substantial assets in companies with medium-sized market
capitalizations, which are smaller and generally less-seasoned than the largest
companies.
. Liquidity Risk. All of the Funds are subject to liquidity risk.
Liquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing a Fund from selling such ILLIQUID SECURITIES at an
advantageous time or price. Funds with principal investment strategies that
involve securities of COMPANIES WITH SMALLER MARKET CAPITALIZATIONS, FOREIGN
SECURITIES, DERIVATIVES or securities with substantial market and/or credit risk
tend to have the greatest exposure to liquidity risk.
. Derivatives Risk. All Funds except the Capital Appreciation, Mid-Cap
Growth, Small-Cap Growth, Equity Income, Value, Value 25 and Small-Cap Value
Funds may use DERIVATIVES, which are financial contracts whose value depends on,
or is derived from, the value of an underlying asset, reference rate or index.
The various derivative instruments that the Funds may use are referenced under
"Characteristics and Risks of Securities and Investment Techniques -
Derivatives" in this Prospectus and described in more detail under "Investment
Objectives and Policies" in the Statement of Additional Information. The Funds
will sometimes use derivatives as part of a strategy designed to reduce exposure
to other risks, such as interest rate or currency risk. The Funds may also use
derivatives for leverage, which increases opportunities for gain but also
involves greater risk of loss. A Fund's use of derivative instruments involves
risks different from, or greater than, the risks associated with investing
directly in securities and other traditional investments. Derivatives are
subject to a number of risks described elsewhere in this section, such as
liquidity risk, market risk and credit risk. They also involve the risk of
mispricing or improper valuation and the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index.
Also, suitable derivative transactions may not be available in all circumstances
and there can be no assurance that a Fund will engage in these transactions to
reduce exposure to other risks when that would be beneficial.
. Foreign Investment Risk. Funds that invest in FOREIGN SECURITIES, and
particularly the International and Precious Metals Funds, may experience more
rapid and extreme changes in value than Funds that invest exclusively in
securities of U.S. companies. The securities markets of many foreign countries
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, issuers of foreign securities are usually
not subject to the same degree of regulation as U.S. issuers. Reporting,
accounting and auditing standards of foreign countries differ, in some cases
significantly, from U.S. standards. Also, nationalization, expropriation or
confiscatory taxation, currency blockage, political changes or diplomatic
developments could adversely affect a Fund's investments in a foreign country.
In the event of nationalization, expropriation or other confiscation, a Fund
could lose its entire investment in foreign securities. Adverse conditions in
certain regions such as Southeast Asia can also adversely affect securities of
other countries whose economies appear to be unrelated.
Foreign investment risk may be particularly high to the extent that a Fund
invests in EMERGING MARKET SECURITIES of issuers based in countries with
developing economies. These securities may present market, credit, currency,
liquidity, legal, political and other risks different from, or greater than, the
risks of investing in developed foreign countries. The International Fund may
invest a significant portion of its assets in emerging market securities.
To the extent that a Fund, such as the International or Precious Metals
Fund, invests a significant portion of its assets in a concentrated geographic
area like Eastern Europe or Asia, the Fund will generally have more exposure to
regional economic risks associated with foreign investments.
-37-
<PAGE>
. Currency Risk. The Growth, Target, Opportunity, Renaissance,
International, Innovation and Precious Metals Funds may invest directly in
FOREIGN CURRENCIES and in securities that trade in, and receive revenues in,
foreign currencies. To the extent that they do so, these Funds will be subject
to the risk that those currencies will decline in value relative to the U.S.
Dollar, or, in the case of hedging positions, that the U.S. Dollar will decline
in value relative to the currency being hedged. Currency rates in foreign
countries may fluctuate significantly over short periods of time for a number of
reasons, including changes in interest rates, intervention (or the failure to
intervene) by U.S. or foreign governments, central banks or supranational
entities such as the International Monetary Fund, or by the imposition of
currency controls or other political developments in the U.S. or abroad.
. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. Funds such as the
Value 25 Fund that invest in a relatively small number of issuers are more
susceptible to risks associated with a single economic, political or regulatory
occurrence than a more diversified Fund might be. Some of those issuers also
may present substantial credit or other risks. The International and Precious
Metals Funds may be subject to this risk to the extent that they concentrate
their assets in securities denominated in a particular foreign currency or in a
concentrated geographic area outside the U.S. Similarly, the Precious Metals
Fund is vulnerable to events adversely affecting the PRECIOUS METALS industry
because it will always have at least 25% of its assets invested in that
industry. Based on historical experience, the prices of precious metals and of
securities of companies engaged in precious metals-related activities may be
subject to extreme fluctuations, reflecting wider economic or political
instability or for other reasons. Also, the Innovation Fund is vulnerable to
events affecting companies which use innovative technologies to gain a
strategic, competitive advantage in their industry and companies that provide
and service those technologies because it normally concentrates its investments
in those companies.
. Leveraging Risk. When a Fund is borrowing money or otherwise
leveraging its portfolio, the value of an investment in that Fund will be more
volatile and all other risks will tend to be compounded. This is because
leverage tends to exaggerate the effect of any increase or decrease in the value
of a Fund's portfolio securities. Each Fund may take on leveraging risk by using
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS, by investing collateral from
LOANS OF PORTFOLIO SECURITIES or through the use of WHEN-ISSUED, DELAYED-
DELIVERY OR FORWARD COMMITMENT TRANSACTIONS. Certain Funds may also take on
leveraging risk by using DERIVATIVES. The use of leverage may also cause a Fund
to liquidate portfolio positions when it would not be advantageous to do so in
order to satisfy its obligations or to meet segregation requirements.
. Interest Rate Risk. To the extent that Funds purchase fixed income
securities for investment or defensive purposes, they will be subject to
interest rate risk, a market risk relating to investments in fixed income
securities such as bonds and notes. As interest rates rise, the value of fixed
income securities in a Fund's portfolio are likely to decrease.
. Credit Risk. All of the Funds are subject to credit risk. This is the
risk that the issuer or the guarantor of a fixed income security, or the
counterparty to a DERIVATIVES contract, REPURCHASE AGREEMENT or a LOAN OF
PORTFOLIO SECURITIES, is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are subject
to varying degrees of credit risk, which are often reflected in their CREDIT
RATINGS.
. Management Risk. Each Fund is subject to management risk because it is
an actively managed investment portfolio. PIMCO Advisors, the Sub-Advisers and
each individual portfolio manager will apply
-38-
<PAGE>
investment techniques and risk analyses in making investment decisions for the
Funds, but there can be no guarantee that these will produce the desired
results.
-39-
<PAGE>
Management of the Funds
The business affairs of the Funds are managed under the direction of the Trust's
Board of Trustees. Information about the Trustees and the Trust's executive
officers is included in the Statement of Additional Information under the
heading "Management of the Trust."
Investment Adviser And Administrator
PIMCO Advisors serves as the investment adviser and the administrator (serving
in its capacity as administrator, the "Administrator") for the Funds. Subject
to the supervision of the Board of Trustees, PIMCO Advisors is responsible for
managing, either directly or through others selected by it, the investment
activities of the Funds and the Funds' business affairs and other administrative
matters.
PIMCO Advisors is located at 800 Newport Center Drive, Newport Beach,
California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of September 30, 1999, PIMCO
Advisors and its subsidiary partnerships had more than $256 billion in assets
under management.
PIMCO Advisors has retained investment management firms ("Sub-Advisers") to
manage each Fund's investments, except that the PIMCO Equity Advisors division
of PIMCO Advisors manages the investments of the Growth, Target, Opportunity,
Renaissance and Innovation Funds (PIMCO Equity Advisors is also referred to as a
"Sub-Adviser" in this capacity). See "Sub-Advisers" below.
PIMCO Advisors has retained its affiliate, Pacific Investment Management
Company, to provide various administrative and other services required by the
Funds in its capacity as sub-administrator. PIMCO Advisors and the sub-
administrator may retain other affiliates to provide certain of these services.
. Advisory Fees. Each Fund pays PIMCO Advisors fees in return for
providing or arranging for the provisions of investment advisory services. In
the case of Funds for which PIMCO Advisors has retained a separate Sub-Adviser,
PIMCO Advisors (and not the Fund) pays a portion of the advisory fees it
receives to the Sub-Adviser in return for its services.
-40-
<PAGE>
For the fiscal year ended June 30, 1999, the Funds paid monthly advisory fees
to PIMCO Advisors at the following annual rates (stated as a percentage of the
average daily net assets of each Fund taken separately):
<TABLE>
<CAPTION>
Fund Advisory Fees
===================================================================================
<S> <C>
Capital Appreciation, Mid-Cap Growth, Equity Income, Value and .45%
Tax-Efficient Equity Funds
- -----------------------------------------------------------------------------------
Growth and Value 25 Funds .50%
- -----------------------------------------------------------------------------------
Target and International Funds .55%
- -----------------------------------------------------------------------------------
Renaissance, Small-Cap Value and Precious Metals Funds .60%
- -----------------------------------------------------------------------------------
Opportunity and Innovation Funds .65%
- -----------------------------------------------------------------------------------
Small-Cap Growth Fund 1.00%
- -----------------------------------------------------------------------------------
</TABLE>
. Administrative Fees. The Funds pay for the administrative services they
require under a fee structure which is essentially fixed. Class A, Class B and
Class C shareholders of the Funds pay a single administrative fee to PIMCO
Advisors, computed as a percentage of the Fund's assets attributable in the
aggregate to those classes of shares. PIMCO Advisors, in turn, provides or
procures administrative services for Class A, Class B and Class C shareholders
and also bears the costs of various third-party services required by the Funds,
including audit, custodial, portfolio accounting, legal transfer agency and
printing costs. The result of this fee structure is an expense level for Class
A, Class B and Class C shareholders of each Fund that, with limited exceptions,
is precise and predictable under ordinary circumstances.
. For the fiscal year ended June 30, 1999, the Funds paid PIMCO Advisors
monthly administrative fees at the following annual rates (stated as a
percentage of the average daily net assets attributable in the aggregate to the
Fund's Class A, Class B and Class C shares):
<TABLE>
<CAPTION>
Fund Administrative Fees*
- ------------------------------------------------------------------
<S> <C>
Precious Metals Fund .45%
- ------------------------------------------------------------------
International Fund .65%
- ------------------------------------------------------------------
All Other Funds .40%
- ------------------------------------------------------------------
</TABLE>
* The Administrative Fee rate for each Fund is subject to a reduction of .05%
per year on the average daily net assets attributable in the aggregate to the
Fund's Class A, B and C shares in excess of $2.5 billion.
-41-
<PAGE>
SUB-ADVISERS
Each Sub-Adviser has full investment discretion and makes all determinations
with respect to the investment of a Fund's assets. The following provides
summary information about each Sub-Adviser, including the Fund(s) it manages.
<TABLE>
<CAPTION>
SUB-ADVISER* FUNDS
- ------------------------------------------------------------------------------
<S> <C>
PIMCO EQUITY ADVISORS division of PIMCO Advisors Growth, Target,
("PIMCO Equity Advisors") Opportunity, Renaissance
33 Maiden Lane and Innovation
New York, NY 10038
- --------------------------------------------------------------------------------------
CADENCE CAPITAL MANAGEMENT ("Cadence") Capital Appreciation, Mid-Cap
Exchange Place, 53 State Street Growth and Small-Cap Growth
Boston, MA 02109
- --------------------------------------------------------------------------------------
NFJ INVESTMENT GROUP ("NFJ") Equity Income, Value,
2121 San Jacinto, Suite 1840 Value 25 and Small-Cap Value
Dallas, TX 75201
- --------------------------------------------------------------------------------------
PARAMETRIC PORTFOLIO ASSOCIATES ("Parametric") Tax-Efficient Equity
7310 Columbia Center, 701 Fifth Avenue
Seattle, WA 98104
- --------------------------------------------------------------------------------------
BLAIRLOGIE CAPITAL MANAGEMENT ("Blairlogie") International
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland
- --------------------------------------------------------------------------------------
VAN ECK ASSOCIATES CORPORATION ("Van Eck") Precious Metals
99 Park Avenue
New York, NY 10001
</TABLE>
_________________________
* With the exception of Blairlogie and Van Eck, each Sub-Adviser is either a
division or a sub-partnership of PIMCO Advisors.
The following provides additional information about each Sub-Adviser and the
individual portfolio managers who have primary responsibility for managing the
Funds' investments.
-42-
<PAGE>
PIMCO EQUITY ADVISORS, a division of PIMCO Advisors, provides equity-
related advisory services to mutual funds and institutional accounts. See
"Investment Adviser and Administrator" above for additional information about
PIMCO Advisors.
. Individual Portfolio Managers. The following individuals of PIMCO Equity
Advisors have primary responsibility for the noted Funds. A different sub-
advisory firm served as Sub-Adviser for the Growth, Target, Opportunity and
Innovation Funds prior to March 6, 1999 and for the Renaissance Fund prior to
May 7, 1999.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Growth Kenneth W. Corba 1999 Managing Director and Chief Investment Officer
of PIMCO Equity Advisors and a Member of the
Management Board of PIMCO Advisors. Prior to
joining PIMCO Advisors, he was with Eagle Asset
Management from 1995 to 1998, serving in various
capacities including as Chief Investment Officer
and Portfolio Manager. He was with Stein Roe
and Farnham Inc. from 1984 to 1995, serving in
various capacities including as Senior Vice
President and Portfolio Manager.
Target Mr. Corba 1999 See above.
Opportunity Michael F. Gaffney 1999 Managing Director of PIMCO Equity Advisors.
Prior to joining PIMCO Advisors, he was with
Alliance Capital Management L.P. from 1993 to
1999, serving in various capacities including as
Senior Vice President and Portfolio Manager.
Renaissance John K. Schneider 1999 Senior Portfolio Manager of PIMCO Equity
Advisors. Prior to joining PIMCO Advisors, he
was a partner and Portfolio Manager of Schneider
Capital Management (from 1996 to 1999).
Innovation Dennis P. McKechnie 1998 Portfolio Manager of PIMCO Equity Advisors.
Prior to joining PIMCO Advisors, he was with
Columbus Circle Investors from 1991 to 1999,
serving in various capacities including as
Portfolio Manager.
</TABLE>
-43-
<PAGE>
Cadence, an affiliated subpartnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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,
1999 of approximately $6.5 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for each of the noted Funds.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Capital Appreciation David B. Breed 1991 (Inception) Managing Director, Chief Executive Officer
and founding partner of Cadence. Member of
the Management Board of PIMCO Advisors.
William B. Bannick 1992 Managing Director and Executive Vice
President of Cadence.
Katherine A. Burdon 1993 Managing Director and Portfolio Manager at
Cadence.
Peter B. McManus 1994 Director of Fund Management at Cadence.
Previously, he served as a Vice President
of Bank of Boston from 1991 to 1994.
Mid-Cap Growth Messrs. Breed, Bannick and Same as Capital See above.
McManus and Ms. Burdon Appreciation Fund
Small-Cap Growth Messrs. Breed, Bannick and Same as Capital See above.
McManus and Ms. Burdon Appreciation Fund
</TABLE>
-44-
<PAGE>
NFJ, an affiliated sub-partnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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, 1999 of
approximately $2.2 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for the noted Funds.
<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Equity Income Chris Najork 1991 (Inception) Managing Director and founding partner of NFJ.
Benjamin Fischer 1991 (Inception) Managing Director and founding partner of NFJ.
Value Messrs. Najork 1991 (Inception) See above.
and Fischer
Paul A. Magnuson 1995 Research analyst at NFJ. Previously, he was with
NationsBank Texas from 1985 to 1992, serving in
various capacities including as Financial
Analyst.
Value 25 Messrs. Najork and Fischer 1998 (Inception) See above.
Cliff Hoover 1998 (Inception) Principal at NFJ. Previously, he served as Vice
President Corporate Banking at Credit Lyonnais
from 1991 to 1997.
Small-Cap Value Messrs. Najork and Fischer 1991 (Inception) See above.
Mr. Magnuson 1995 See above.
</TABLE>
-45-
<PAGE>
Parametric, an affiliated sub-partnership of PIMCO Advisors, provides
advisory services to mutual funds and institutional accounts. 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, 1999 of approximately $3.9 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for the Tax-Efficient Equity Fund.
<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
Tax-Efficient Equity David Stein 1998 (Inception) Managing Director of Parametric. Previously,
he served in Investment Research at GTE
Corporation from 1995 to 1996, in Equity
Research at Vanguard Group from 1994 to 1995
and in Investment Research at IBM Corporation
from 1977 to 1994.
Tom Seto 1998 (Inception) Vice President of Parametric. Previously, he
was with Barclays Global Investors from 1991
to 1998, serving in various capacities
including as head of U.S. Equity Index
Investments and Portfolio Manager.
Cliff Quisenberry 1998 (Inception) Vice President of Parametric. Previously, he
served as Vice President and Portfolio Manager
at Cutler & Co. from 1990 to 1994 and as a
Securities Analyst and Portfolio manager at
Fred Alger Management from 1987 to 1988.
</TABLE>
-46-
<PAGE>
Blairlogie provides advisory services to mutual funds and institutional
accounts. Blairlogie Capital Management Ltd., the predecessor investment
adviser the Blairlogie, commenced operations in 1992. Accounts managed by
Blairlogie had combined assets as of September 30, 1999 of approximately $903
million.
Blairlogie is an indirect majority-owned subsidiary of the Alleghany
Corporation, and is not an affiliate of PIMCO Advisors. Blairlogie was formerly
an affiliated sub-partnership of PIMCO Advisors. On April 30, 1999, PIMCO
Advisors sold all of its ownership interest in Blairlogie to subsidiaries of the
Alleghany Corporation. PIMCO Advisors retained Blairlogie as the Sub-Adviser of
the International Fund subsequent to this transaction pursuant to a new
portfolio management agreement between PIMCO Advisors and Blairlogie.
. Individual Portfolio Manager. The following individual has primarily
responsibility for the International Fund.
<TABLE>
<CAPTION>
Fund Portfolio Manager Since Recent Professional Experience
<S> <C> <C> <C>
International James Smith 1994 Managing Director and Chief Investment Officer
of Blairlogie.
</TABLE>
VAN ECK provides advisory services to mutual funds and institutional
accounts. Van Eck commenced operations in 1995. Accounts managed by Van Eck had
combined assets as of September 30, 1999 of approximately $1.2 billion. Van Eck
is an independent management firm and is not an affiliate of PIMCO Advisors.
. Individual Portfolio Manager. The following individual has primary
responsibility for the Precious Metals Fund.
<TABLE>
<CAPTION>
Fund Portfolio manager Since Recent Professional Experience
<S> <C> <C> <C>
Precious Metals Fund Henry J. Bingham 1988 (Inception) Executive Managing Director of Van Eck.
</TABLE>
-47-
<PAGE>
Investment Options (Class A, B and C Shares)
The Trust offers investors Class A, Class B and Class C shares of each Fund in
this Prospectus. Each class of shares is subject to different types and levels
of sales charges than the other classes and bears a different level of expenses.
The class of shares that is best for you depends upon a number of factors,
including the amount and the intended length of your investment. The following
summarizes key information about each class to help you make your investment
decision, including the various expenses associated with each class. More
extensive information about the Trust's multi-class arrangements is included in
the PIMCO Funds Shareholders' Guide for Class A, B and C Shares (the "Guide"),
which is included as part of the Statement of Additional Information and can be
obtained free of charge from the Distributor. See "How to Buy and Sell Shares -
PIMCO Funds Shareholders' Guide" below.
Class A Shares . You pay an initial sales charge of up to 5.50% when you buy
Class A shares. The sales charge is deducted from your
investment so that not all of you purchase payment is invested.
. You may be eligible for a reduction or a complete waiver of
the initial sales charge under a number of circumstances. For
example, you normally pay no sales charge if you purchase
$1,000,000 or more of Class A shares. Please see the Guide for
details.
. Class A shares are subject to lower 12b-1 fees than Class B or
Class C shares. Therefore, Class A shareholders generally pay
lower annual expenses and receive higher dividends than Class B
or Class C shareholders.
. You normally pay no contingent deferred sales charge ("CDSC")
when you redeem Class A shares, although you may pay a 1% CDSC
if you purchase $1,000,000 or more of Class A shares (and
therefore pay no initial sales charge) and then redeem the
shares during the first 18 months after your initial purchase.
The Class A CDSC is waived for certain categories of investors
and does not apply if you are otherwise eligible to purchase
Class A shares without a sales charge. Please see the Guide for
details.
Class B Shares . You do not pay an initial sales charge when you buy Class B
shares. The full amount of your purchase payment is invested
initially.
. You normally pay a CDSC of up to 5% if you redeem Class B
shares during the first six years after your initial purchase.
The amount of the CDSC declines the longer you hold your Class B
shares. You pay no CDSC if you redeem during the seventh year
and thereafter. The Class B CDSC is waived for certain
categories of investors. Please see the Guide for details.
. Class B shares are subject to higher 12b-1 fees than Class A
shares for the first seven years they are held. During this
time, Class B shareholders normally pay higher annual expenses
and receive lower dividends than Class A shareholders.
-48-
<PAGE>
. Class B shares automatically convert into Class A shares after
they have been held for seven years. After the conversion takes
place, the shares are subject to the lower 12b-1 fees paid by
Class A shares.
Class C Shares . You do not pay an initial sales charge when you buy Class C
shares. The full amount of your purchase payment is invested
initially.
. You normally pay a CDSC of 1% if you redeem Class C shares
during the first year after your initial purchase. The Class C
CDSC is waived for certain categories of investors. Please see
the Guide for details.
. Class C shares are subject to higher 12b-1 fees than Class A
shares. Therefore, Class C shareholders normally pay higher
annual expenses and receive lower dividends than Class A
shareholders.
. Class C shares do not convert into any other class of shares.
Because Class B shares convert into Class A shares after seven
years, Class C shares will normally be subject to higher
expenses and will pay lower dividends than Class B shares if the
shares are held for more than seven years.
-49-
<PAGE>
The following provides additional information about the sales charges and
other expenses associated with Class A, Class B and Class C shares.
Initial Sales Charges - Class A Shares
Unless you are eligible for a waiver, the public offering price you pay when you
buy Class A shares of the Funds is the net asset value ("NAV") of the shares
plus an initial sales charge. The initial sales charge varies depending upon
the size of your purchase, as set forth below. No sales charge is imposed where
Class A shares are issued to you pursuant to the automatic reinvestment of
income dividends or capital gains distributions.
All Funds
<TABLE>
<CAPTION>
Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
=======================================================================================
<S> <C> <C>
$0-$49,999 5.82% 5.50%
- ---------------------------------------------------------------------------------------
$50,000-$99,999 4.71% 4.50%
- ---------------------------------------------------------------------------------------
$100,000-$249,999 3.63% 3.50%
- ---------------------------------------------------------------------------------------
$250,000-$499,999 2.56% 2.50%
- ---------------------------------------------------------------------------------------
$500,000-$999,999 2.04% 2.00%
- ---------------------------------------------------------------------------------------
$1,000,000 + 0.00%* 0.00%*
</TABLE>
* As shown, investors that purchase $1,000,000 or more of any Fund's Class A
shares will not pay any initial sales charge on the purchase. However,
purchasers of $1,000,000 or more of Class A shares may be subject to a CDSC of
1% if the shares are redeemed during the first 18 months after their purchase.
See "CDSCs on Class A Shares" below.
Contingent Deferred Sales Charges (CDSCs) - Class B and Class C Shares
Unless you are eligible for a waiver, if you sell (redeem) your Class B or Class
C shares within the time periods specified below, you will pay a CDSC according
to the following schedules.
Class B Shares
<TABLE>
<CAPTION>
Years 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.
-50-
<PAGE>
Class C Shares
<TABLE>
<CAPTION>
Years Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
- ----------------------------------------------------------------------------
<S> <C>
First 1
- ----------------------------------------------------------------------------
Thereafter 0
</TABLE>
CDSCs on Class A Shares
Unless a waiver applies, investors who purchase $1,000,000 or more of Class A
shares (and, thus, purchase the shares without any initial sales charge) will be
subject to a 1% CDSC if the shares are redeemed within 18 months of their
purchase. The Class A CDSC does not apply if you are otherwise eligible to
purchase Class A shares without an initial sales charge or if you are eligible
for a waiver of the CDSC. See "Reductions and Waivers of Initial Sales Charges
and CDSCs" below.
How CDSCs are Calculated
A CDSC is imposed on redemptions of Class B and Class C shares (and where
applicable, Class A shares) on the amount of the redemption which causes the
current value of your account for the particular class of shares of a Fund to
fall below the total dollar amount of your purchase payments subject to the
CDSC. However, 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 your account above the
amount of the purchase payments subject to the CDSC. CDSCs are deducted from
the proceeds of your redemption, not from amounts remaining in your account. In
determining whether a CDSC is payable, it is assumed that the purchase payment
from which the redemption is made is the earliest purchase payment for the
particular class of shares in your account (from which a redemption or exchange
has not already been effected).
For instance, the following example illustrates 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 distributions to $11,000. The
investor then may redeem up to $1,000 from that Fund ($11,000 minus
$10,000) without incurring a CDSC. If the investor should redeem $3,000, a
CDSC would be imposed on $2,000 of the redemption (the amount by which the
investor's account for the Fund was reduced below the amount of the
purchase payment). At the rate of 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 shares of a particular
class of a Fund in the shareholder's account are aggregated, and the current
value of all such shares is aggregated.
-51-
<PAGE>
Reductions and Waivers of Initial Sales Charges and CDSCs
The initial sales charges on Class A shares and the CDSCs on Class A, Class B
and Class C shares may be reduced or waived under certain purchase arrangements
and for certain categories of investors. Please see the Guide for details. The
Guide is available free of charge from the Distributor. See "How to Buy and
Sell Shares - PIMCO Funds Shareholders' Guide" below.
Distribution and Servicing (12b-1) Plans
The Funds pay fees to the Distributor on an ongoing basis as compensation for
the services the Distributor renders and the expenses it bears in connection
with the sale and distribution of Fund shares ("distribution fees") and/or in
connection with personal services rendered to Fund shareholders and the
maintenance of shareholder accounts ("servicing fees"). These payments are made
pursuant to Distribution and Servicing Plans ("12b-1 Plans") adopted by each
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940.
There is a separate 12b-1 Plan for each class of shares offered in this
Prospectus. Class A shares pay only servicing fees. Class B and Class C shares
pay both distribution and servicing fees. The following lists the maximum
annual rates at which the distribution and/or servicing fees may be paid under
each 12b-1 Plan (calculated as a percentage of each Fund's average daily net
assets attributable to the particular class of shares):
<TABLE>
<CAPTION>
Servicing Distribution
All Funds Fee Fee
- -----------------------------------------------------------------------------
<S> <C> <C>
Class A .25% None
- -----------------------------------------------------------------------------
Class B .25% .75%
- -----------------------------------------------------------------------------
Class C .25% .75%
</TABLE>
Because 12b-1 fees are paid out of a Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than sales charges which are deducted at the time of investment.
Therefore, although Class B and Class C shares do not pay initial sales charges,
the distribution fees payable on Class B and Class C shares may, over time, cost
you more than the initial sales charge imposed on Class A shares. Also, because
Class B shares convert into Class A shares after they have been held for seven
years and are not subject to distribution fees after the conversion, an
investment in Class C shares may cost you more over time than an investment in
Class B shares.
-52-
<PAGE>
How Fund Shares Are Priced
The Trust calculates the net asset value ("NAV") of a Fund's Class A, Class B
and Class C shares by taking the total value of the Fund's assets attributable
to the particular class, subtracting the Fund's liabilities attributable to the
class, and dividing by the Fund's total number shares of that class outstanding.
Fund shares are valued as of the close of regular trading (normally, 4:00 p.m.
Eastern time) on the New York Stock Exchange (the "Exchange") each day the
Exchange is open.
The Funds value their portfolio securities and other investments for which
market quotations are readily available at market value. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Board of Trustees, with
reference to fixed income securities with more readily attainable prices and
durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Exchange traded options, futures, and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other portfolio securities and assets are valued at
their fair value as determined in good faith by the Trustees or persons acting
at their direction.
Fund investments quoted in foreign currencies are translated into U.S.
dollars using foreign exchange quotations provided by independent dealers. As a
result, the NAV of a Fund's shares may be affected by changes in the value of
foreign currencies in relation to the U.S. dollar. Because foreign markets may
be open at different times than the Exchange, the NAV of a Fund's shares may
change on days when the Exchange is closed and you are not able to buy, redeem
or exchange shares. In particular, the calculation of the NAV of the
International and Precious Metals Funds may not take place contemporaneously
with the determination of the prices of certain foreign issuers used in NAV
calculations. Information that becomes known to the Trust or its agents after
NAV is calculated on a particular day may be considered in pricing Fund shares
thereafter, but will not be used to retroactively adjust the price of a security
as determined earlier that day or on a prior day. The values of portfolio
securities may be affected by events that occur between the time the securities
are valued and the close of regular trading on the Exchange. These events may
not be reflected in the Funds' NAV calculations. If events occur during this
period that have a material effect on the value of portfolio securities held by
a Fund, the securities may be valued at their fair value as determined by PIMCO
Advisors or a Sub-Adviser and approved in good faith by the Board of
Trustees.
-53-
<PAGE>
How to Buy and Sell Shares
The following section provides basic information about how to buy, sell (redeem)
and exchange shares of the Funds.
PIMCO Funds Shareholders' Guide
More detailed information about the Trust's purchase, sale and exchange
arrangements for Fund shares is provided in the Guide, which is included in the
Statement of Additional Information and can be obtained free of charge from the
Distributor by written request or by calling 1-800-426-0107. The Guide provides
technical information about the basic arrangements described below and also
describes special purchase, sale and exchange features and programs offered by
the Trust, including:
. Automated telephone and wire transfer procedures
. Automatic purchase, exchange and withdrawal programs
. Programs that establish a link from your Fund account to your bank
account
. Special arrangements for tax-qualified retirement plans
. Investment programs which allow you to reduce or eliminate the initial
sales charges on Class A shares
. Categories of investors that are eligible for waivers or reductions of
initial sales charges and CDSCs
Calculation of Share Price and Redemption Payments
When you buy shares of the Funds, you pay a price equal to the NAV of the
shares, plus any applicable sales charge. When you sell (redeem) shares, you
receive an amount equal to the NAV of the shares, minus any applicable CDSC.
NAVs are calculated as of the close of regular trading (normally, 4:00 p.m.
Eastern time) on the Exchange each day the Exchange is open. See "How Fund
Shares Are Priced" above for details. Generally, purchase and redemption orders
for Fund shares are processed at the NAV next calculated after your order is
received by the Distributor. There are certain exceptions where an order is
received by a broker or dealer prior to the close of regular trading on the
Exchange and then transmitted to the Distributor after the NAV has been
calculated for that day (in which case the order may be processed according to
that day's NAV). Please see the Guide for details.
The Trust does not calculate NAVs or process orders on days when the
Exchange is closed. If your purchase or redemption order is received by the
Distributor on a day when the Exchange is closed, it will be processed on the
next succeeding day when the Exchange is open (according to the succeeding day's
NAV).
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Buying Shares
You can buy Class A, Class B or Class C shares of the Funds in the
following ways:
. Through your broker, dealer or other financial intermediary. Your broker,
dealer or other intermediary may establish higher minimum investment
requirements than the Trust and may also independently charge you transaction
fees and additional amounts in return for its services, which will reduce your
return. Shares you purchase through your broker, dealer or other intermediary
will normally be held in your account with that firm.
. Directly from the Trust. To make direct investments, you must open an
account with the Distributor and send payment for your shares either by
mail or through a variety of other purchase options and plans offered by
the Trust.
If you wish to invest directly by mail, please send a check payable to
PIMCO Funds Distributors LLC, along with a completed application form to:
PIMCO Funds Distributors LLC
P.O. Box 9688
Providence, RI 02940-0926
The Trust accepts all purchases by mail subject to collection of checks at
full value and conversion into federal funds. You may make subsequent purchases
by mailing a check to the address above with a letter describing the investment
or with the additional investment portion of a confirmation statement. Checks
for subsequent purchases should be payable to PIMCO Funds Distributors LLC and
should clearly indicate your account number. Please call the Distributor at 1-
800-426-0107 if you have any questions regarding purchases by mail.
The Guide describes a number of additional ways you can make direct
investments, including through the PIMCO Funds Auto-Invest and PIMCO Funds Fund
Link programs. You can obtain a Guide free of charge from the Distributor by
written request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders'
Guide" above.
The Distributor, in its sole discretion, may accept or reject any order for
purchase of Fund shares. No share certificates will be issued unless
specifically requested in writing.
Investment Minimums. The following investment minimums apply for purchases
of Class A, Class B and Class C shares.
<TABLE>
<CAPTION>
Initial Investment Subsequent Investments
- ----------------------------------------------------------------------------
<S> <C> <C>
$2,500 per Fund $100 per Fund
</TABLE>
Lower minimums may apply for certain categories of investors, including
certain tax-qualified retirement plans, and for special investment programs and
plans offered by the Trust, such as the PIMCO Funds Auto-Invest and PIMCO Funds
Fund Link programs. Please see the Guide for details.
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Small Account Fee
Because of the disproportionately high costs of servicing accounts with low
balances, if you have a direct account with the Distributor, you will be charged
a fee at the annual rate of $16 if your account balance falls below a minimum
level of $2,500. However, you will not be charged this fee if the aggregate
value of all of your PIMCO Funds accounts is at least $50,000. Any applicable
small account fee will be deducted automatically from your account in quarterly
installments and paid to the Administrator. Your account will normally be
valued, and any deduction taken, during the last five business days of each
calendar quarter. Lower minimum balance requirements and waivers of the small
account fee apply for certain categories of investors. Please see the Guide for
details.
Minimum Account Size
Due to the relatively high cost to the Funds of maintaining small accounts, you
are asked to maintain an account balance of at least the minimum investment
necessary to open the particular type of account. If your balance remains below
the minimum for three months or longer, the Administrator has the right (except
in the case of employer-sponsored retirement accounts) to redeem your remaining
shares and close your account after giving you 60 days to increase your balance.
Your account will not be liquidated if the reduction in size is due solely to a
decline in market value of your Fund shares or if the aggregate value of all
your PIMCO Funds accounts exceeds $50,000.
Exchanging Shares
You may exchange your Class A, Class B or Class C shares of any Fund for the
same Class of shares of any other Fund or of another series of the Trust or
PIMCO Funds: Pacific Investment Management Series. Shares are exchanged on the
basis of their respective NAVs next calculated after your exchange order is
received by the Distributor. Currently, the Trust does not charge any exchange
fees or charges. Exchanges are subject to the $2,500 minimum initial purchase
requirements for each Fund, except with respect to tax-qualified programs and
exchanges effected through the PIMCO Funds Auto-Exchange plan. If you maintain
your account with the Distributor, you may exchange shares by completing a
written exchange request and sending it to PIMCO Funds Distributors LLC, P.O.
Box 9688, Providence, RI 02940-0926. You can get an exchange form by calling
the Distributor at 1-800-426-0107.
The Guide provides more detailed information about the exchange privilege,
including the procedures you must follow and additional exchange options. The
Guide also describes circumstances under which the Trust may refuse or limit
exchanges. You can obtain a Guide free of charge from the Distributor by
written request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders'
Guide" above. Except as otherwise permitted by the Securities and Exchange
Commission, the Trust will give you 60 days' advance notice if it exercises its
right to terminate or materially modify the exchange privilege.
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Selling Shares
You can sell (redeem) Class A, Class B or Class C shares of the Funds in
the following ways:
. Through your broker, dealer or other financial intermediary. Your
broker, dealer or other intermediary may independently charge you
transaction fees and additional amounts in return for its services, which
will reduce your return.
. Directly from the Trust by Written Request. To redeem shares directly
from the Trust by written request (whether or not the shares are
represented by certificates), you must send the following items to the
Trust's Transfer Agent, First Data Investor Services Group, Inc., P.O. Box
9688, Providence, RI 02940-0926:
(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 of shares to be specifying the
account number and the dollar amount or number redeemed;
(2) for certain redemptions described below, a guarantee of all
signatures on the written request or on the share certificate or
accompanying stock power, if required, as described under "Signature
Guarantee" below;
(3) any share certificates issued for any of the shares to be
redeemed (see "Certificated Shares" below); and
(4) any additional documents which may be required by the Transfer
Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians or
guardians, or if the redemption is requested by anyone other than the
shareholder(s) of record. Transfers of shares are subject to the same
requirements.
A signature guarantee is not required for redemptions of $50,000 or less,
requested by and payable to all shareholders of record for the account, and to
be sent to the address of record for that account. To avoid delay in redemption
or transfer, if you have any questions about these requirements you should
contact the Transfer Agent in writing or call 1-800-426-0107 before submitting a
request. Written redemption or transfer requests will not be honored until all
required documents in the proper form have been received by the Transfer Agent.
You can not redeem your shares by written request to the Trust if they are held
in broker "street name" accounts.
If the proceeds of your redemption (i) exceed $50,000, (ii) are to be paid
to a person other than the record owner, (iii) are to be sent to an address
other than the address of the account on the Transfer Agent's records, or (iv)
are to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or stock
power must be guaranteed as described under "Signature Guarantee" below. The
Distributor may, however, waive the signature guarantee requirement for
redemptions up to $2,500 by a trustee of a qualified retirement plan, the
administrator for which has an agreement with the Distributor.
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The Guide describes a number of additional ways you can redeem your shares,
including:
. Telephone requests to the Transfer Agent
. PIMCO Funds Automated Telephone System (ATS)
. Expedited wire transfers
. Automatic Withdrawal Plan
. PIMCO Funds Fund Link
Unless you specifically elect otherwise, your initial account application
permits you to redeem shares by telephone subject to certain requirements. To
be eligible for ATS, expedited wire transfer, Automatic Withdrawal Plan, and
Fund Link privileges, you must specifically elect the particular option on your
account application and satisfy certain other requirements. The Guide describes
each of these options and provides additional information about selling shares.
You can obtain a Guide free of charge from the Distributor by written request or
by calling 1-800-426-0107.
Other than an applicable CDSC, you will not pay any special fees or charges
to the Trust or the Distributor when you sell your shares. However, if you sell
your shares through your broker, dealer or other financial intermediary, that
firm may charge you a commission or other fee for processing your redemption
request.
Redemptions of Fund shares may be suspended when trading on the Exchange is
restricted or during an emergency which makes it impracticable for the Funds to
dispose of their securities or to determine fairly the value of their net
assets, or during any other period as permitted by the Securities and Exchange
Commission for the protection of investors.
Timing of Redemption Payments
Redemption proceeds will normally be mailed to the redeeming shareholder within
seven calendar days or, in the case of wire transfer or Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on the second or third business day. In
cases where shares have recently been purchased by personal check, redemption
proceeds may be withheld until the check has been collected, which may take up
to 15 days. To avoid such withholding, investors should purchase shares by
certified or bank check or by wire transfer. Under unusual circumstances, the
Trust may delay your redemption payments for more than seven days, as permitted
by law.
Redemptions In Kind
The Trust had agreed 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 may 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 your shares would ever be redeemed in kind. If your shares are
redeemed in kind, you should expect to incur transaction costs upon the
disposition of the securities received in the distribution.
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Certificated Shares
If you are redeeming shares for which certificates have been issued, the
certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee" below. The Trust may request further documentation from
institutions or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians. Your redemption request and stock power must be signed exactly as the
account is registered, including indication of any special capacity of the
registered owner.
Signature Guarantee
When a signature guarantee is called for, you should have "Signature Guaranteed"
stamped under your signature and guaranteed by any of the following entities:
U.S. banks, foreign banks having a U.S. correspondent bank, credit unions,
savings associations, U.S. registered dealers and brokers, municipal securities
dealers and brokers, government securities dealers and brokers, national
securities exchanges, registered securities associations and clearing agencies
(each an "Eligible Guarantor Institution"). The Distributor reserves the right
to reject any signature guarantee pursuant to its written signature guarantee
standards or procedures, which may be revised in the future to permit it to
reject signature guarantees from Eligible Guarantor Institutions that do not,
based on credit guidelines, satisfy such written standards or procedures. The
Trust may change the signature guarantee requirements from time to time upon
notice to shareholders, which may be given by means of a new or supplemented
Prospectus.
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Fund Distributions
Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. You begin earning dividends on Fund
shares the day after the Trust receives your purchase payment. Dividends paid
by each Fund with respect to each class of shares are calculated in the same
manner and at the same time, but dividends on Class B and Class C shares are
expected to be lower than dividends on Class A shares as a result of the
distribution fees applicable to Class B and Class C shares. The following shows
when each Fund intends to declare and distribute income dividends to
shareholders of record.
<TABLE>
<CAPTION>
Fund At Least Annually Quarterly
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Equity Income, Renaissance and Value Funds .
- --------------------------------------------------------------------------------------------
All other Funds .
</TABLE>
In addition, each Fund distributes any net capital gains it earns from the
sale of portfolio securities to shareholders no less frequently than annually.
Net short-term capital gains may be paid more frequently.
You can choose from the following distribution options:
. Reinvest all distributions in additional shares of the same class of
your Fund at NAV. This will be done unless you elect another option.
. Invest all distributions in shares of the same class of any other Fund
or another series of the Trust or PIMCO Funds: Pacific Investment
Management Series which offers that class at NAV. You must have an
account existing in the Fund or series selected for investment with the
identical registered name. You must elect this option on your account
application or by a telephone request to the Transfer Agent at 1-800-
426-0107.
. Receive all distributions in cash (either paid directly to you or
credited to your account with your broker or other financial
intermediary). You must elect this option on your account application
or by a telephone request to the Transfer Agent at 1-800-426-0107.
You do not pay any sales charges on shares you receive through the
reinvestment of Fund distributions.
If you elect to receive Fund distributions in cash and the postal or other
delivery service is unable to deliver checks to your address of record, the
distributions will automatically be invested in the Money Market Fund of PIMCO
Funds: Pacific Investment Management Series until you are located.
For further information on distribution options, please contact your broker
or call the Distributor at 1-800-426-0107.
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Tax Consequences
. Taxes on Fund distributions. If you are subject to U.S. federal income
tax, you will be subject to tax on Fund distributions whether you received them
in cash or reinvested them in additional shares of the Funds. For federal
income tax purposes, Fund distributions will be taxable to you as either
ordinary income or capital gains.
Fund dividends (i.e., distributions of investment income) are taxable to
you as ordinary income. Federal taxes on Fund distributions of gains are
determined by how long the Fund owned the investments that generated the gains,
rather than how long you have owned your shares. Distributions of gains from
investments that a Fund owned for more than 12 months will generally be taxable
to you as capital gains. Distributions of gains from investments that the Fund
owned for 12 months or less will generally be taxable to you as ordinary income.
Fund distributions are taxable to you even if they are paid from income or
gains earned by a Fund prior to your investment and thus were included in the
price you paid for your shares. For example, if you purchase shares on or just
before the record date of a Fund distribution, you will pay full price for the
shares and may receive a portion of your investment back as a taxable
distribution.
. Taxes when you sell (redeem) or exchange your shares. Any gain resulting
from the sale of Fund shares will generally be subject to federal income tax.
When you exchange shares of a Fund for shares of another series, the transaction
will be treated as a sale of the Fund shares for these purposes, and any gain on
those shares will generally be subject to federal income tax.
. Consult your tax advisor about other possible tax consequences. This is a
summary of certain federal income tax consequences of investing in a Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state, local and foreign tax consequences.
. A Note on the Tax-Efficient Equity Fund. As noted under "Summary
Information" above, the Tax-Efficient Equity Fund utilizes a number of tax-
efficient management techniques designed to minimize taxable distributions. For
instance, the Fund generally seeks to minimize realized gains and, when
realizing gains, attempts to realize gains that will be taxed as capital gains
(i.e., on investments owned for more than 12 months). Although the Fund
attempts to minimize taxable distributions, it may be expected to earn and
distribute taxable income and realize and distribute capital gains from time to
time.
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Characteristics and Risks of Securities and
Investment Techniques
This section provides additional information about some of the principal
investments and related risks of the Funds described under "Summary Information"
above. It also describes characteristics and risks of additional securities and
investment techniques that may be used by the Funds from time to time. Most of
these securities and investment techniques are discretionary, which means that
the portfolio managers can decide whether to use them or not. This Prospectus
does not attempt to disclose all of the various types of securities and
investment techniques that may be used by the Funds. As with any mutual fund,
investors in the Funds must rely on the professional investment judgment and
skill of PIMCO Advisors, the Sub-Advisers and the individual portfolio managers.
Please see "Investment Objectives and Policies" in the Statement of Additional
Information for more detailed information about the securities and investment
techniques described in this section and about other strategies and techniques
that may be used by the Funds.
Fixed Income Securities and Defensive Strategies
Fixed income securities are obligations of the issuer to make payments of
principal and/or interest on future dates, and include corporate and government
bonds, notes, certificates of deposit, commercial paper, convertible securities
and mortgage-backed and other asset-backed securities.
The Capital Appreciation, Mid-Cap Growth, Small-Cap Growth, Equity Income,
Value, Value 25, Small-Cap Value and Tax-Efficient Equity Funds intend to be as
fully invested in common stocks as practicable at all times, although they may
maintain a portion of their assets (normally not more than 10%) in U.S.
Government securities, high quality fixed income securities, money market
obligations and cash to pay certain Fund expenses and to meet redemption
requests. This means that these Funds will not invest in fixed income
securities as a defensive investment strategy and therefore they may be
particularly vulnerable to general declines in stock prices.
The Growth, Target, Opportunity, Renaissance, International, Innovation and
Precious Metals Funds will each invest primarily in common stocks, and may also
invest in other kinds of equity securities, including preferred stocks and
securities (including fixed income securities and warrants) convertible into or
exercisable for common stocks. Each of these Funds may invest a portion of its
assets in fixed income securities. These Funds may also invest up to 100% of
their assets in short-term U.S. Government securities and other money market
instruments for temporary defensive purposes. The International Fund may also
invest up to 100% of its assets in other domestic fixed income, foreign fixed
income and equity securities principally traded in the U.S., including
obligations issued or guaranteed by a foreign government or its agencies,
authorities or instrumentalities, corporate bonds and American Depository
Receipts, for temporary defensive purposes. These temporary defensive
strategies would be inconsistent with the investment objective and principal
investment strategies of each of these Funds and may affect the Fund's ability
to achieve its investment objective.
Companies With SMaller Market Capitalizations
Each of the Funds may invest in securities of companies with market
capitalizations that are small compared to other publicly traded companies. The
Opportunity, Small-Cap Growth and Small-Cap Value
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Funds invest primarily in smaller companies and are particularly sensitive to
the risks described below. The Target, Mid-Cap Growth and Value 25 Funds also
have substantial exposure to these risks because they invest primarily in
companies with medium-sized market capitalizations, which are smaller than the
largest companies.
Companies which are smaller and less well-known or seasoned than larger,
more widely held companies may offer greater opportunities for capital
appreciation, but may also involve risks different from, or greater than, risks
normally associated with larger companies. Larger 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 than smaller companies.
Smaller companies may have limited product lines, markets or financial resources
or may depend on a small, inexperienced management group. Securities of smaller
companies may trade less frequently and in lesser volume than more widely held
securities and their values may fluctuate more abruptly or erratically than
securities of larger companies. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity.
These securities may therefore be more vulnerable to adverse market developments
than securities of larger companies. Also, there may be less publicly available
information about smaller companies or less market interest in their securities
as compared to larger companies, and it may take longer for the prices of the
securities to reflect the full value of a company's earnings potential or
assets.
Because securities of smaller companies may have limited liquidity, a Fund
may have difficulty establishing or closing out its positions in smaller
companies at prevailing market prices. 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. For these
reasons, 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
smaller capitalization securities, which could adversely affect performance.
Foreign Securities
The International Fund may invest directly in foreign equity securities;
U.S. dollar- or foreign currency-denominated foreign corporate fixed income
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 agencies and supranational entities. The Precious Metals Fund may
invest primarily in securities of foreign issuers, securities denominated in
foreign currencies, securities principally traded on securities markets outside
of the United States and in securities of foreign issuers that are traded on
U.S. securities markets. The Growth, Target, Opportunity, Renaissance and
Innovation Funds may invest up to 15% of their respective assets in securities
which are traded principally in securities markets outside the United States
(Eurodollar certificates of deposit are excluded for purposes of these
limitations), and may invest without limit in securities of foreign issuers that
are traded in U.S. markets.
Investing in foreign securities involves special risks and considerations
not typically associated with investing in U.S. securities. Shareholders should
consider carefully the substantial risks involved for
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Funds that invest in securities issued by foreign companies and governments of
foreign countries. 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; and political instability. 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 foreign securities
markets may change independently of each other. Also, 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. Investments in foreign
securities may also involve higher custodial costs than domestic investments and
additional transaction costs with respect to foreign currency conversions.
Changes in foreign exchange rates also will affect the value of securities
denominated or quoted in foreign currencies.
Emerging Market Securities. Each of the Funds that may invest in foreign
securities may invest in securities of issuers based in countries with
developing (or "emerging market") economies. The International Fund may invest
significant portions of its assets in emerging market securities. Investing in
emerging market securities imposes risks different from, or greater than, risks
of investing in domestic securities or in foreign, developed countries. These
risks include: smaller market capitalization of securities markets, which may
suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible repatriation of investment
income and capital. In addition, foreign investors may be required to register
the proceeds of sales, and future economic or political crises could lead to
price controls, forced mergers, expropriation or confiscatory taxation, seizure,
nationalization or the creation of government monopolies. The currencies of
emerging market countries may experience significant declines against the U.S.
dollar, 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.
Additional risks of emerging market securities may include: greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems. 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 be delayed 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 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
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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.
Foreign Currencies
A Fund that invests directly in foreign currencies or in securities that
trade in, or receive revenues in, foreign currencies will be subject to currency
risk. The International and Precious Metals Funds are particularly sensitive to
this risk.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by supply and demand and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors. 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. For example, significant uncertainty surrounds the
recent introduction of the euro (a common currency unit for the European Union)
in January 1999 and the effect it may have 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.
Foreign Currency Transactions. The Growth, Target, Opportunity,
Renaissance, International, Innovation and Precious Metals Funds may enter into
forward foreign currency exchange contracts to reduce the risks of adverse
changes in foreign exchange rates. In addition, the International and Precious
Metals Funds may buy and sell foreign currency futures contracts and options on
foreign currencies and foreign currency futures. A forward foreign currency
exchange contract, which involves an obligation to purchase or sell a specific
currency at a future date at a price set at the time of the contract, reduces a
Fund's 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 receive
for the duration of the contract. The effect on the value of a Fund is similar
to selling securities denominated in one currency and purchasing securities
denominated in another currency. Contracts to sell foreign 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 to hedge against
foreign exchange risk, to increase exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one currency to another.
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 International Fund may also enter into these contracts for purposes of
increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one currency to another. To the extent that it does
so, the 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 Fund may use one currency (or a basket of currencies) to hedge
against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. The Fund will segregate assets determined to be liquid by PIMCO
Advisors or a Sub-Adviser in accordance
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with procedures established by the Board of Trustees to cover its obligations
under forward foreign currency exchange contracts entered into for non-hedging
purposes.
Convertible Securities
Each Fund may invest in convertible securities. Convertible securities are
generally preferred stocks and other securities, including fixed income
securities and warrants, that are convertible into or exercisable for common
stock at either a stated price or a stated rate. The price of a convertible
security will normally vary in some proportion to changes in the price of the
underlying common stock because of this conversion or exercise feature.
However, the value of a convertible security may not increase or decrease as
rapidly as the underlying common stock. A convertible security will normally
also provide income and is subject to interest rate risk. 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.
Credit Ratings and Unrated Securities
The Funds may invest in securities based on their credit ratings assigned
by rating agencies such as Moody's Investors Service, Inc. ("Moody's") and
Standard and Poor's Ratings Services ("S&P"). Moody's, S&P and other rating
agencies are private services that provide ratings of the credit quality of
fixed income securities, including convertible securities. The Appendix to the
Statement of Additional Information describes the various ratings assigned to
fixed income securities by Moody's and S&P. Ratings assigned by a rating agency
are not absolute standards of credit quality and do not evaluate market risk.
Rating agencies may fail to make timely changes in credit ratings and an
issuer's current financial condition may be better or worse than a rating
indicates. A Fund will not necessarily sell a security when its rating is
reduced below its rating at the time of purchase. PIMCO Advisors and the Sub-
Advisers do not rely solely on credit ratings, and develop their own analysis of
issuer credit quality.
A Fund may purchase unrated securities (which are not rated by a rating
agency) if its portfolio manager determines that the security is of comparable
quality to a rated security that the Fund may purchase. Unrated securities may
be less liquid than comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's comparative credit
rating.
Derivatives
Each Fund (except the Capital Appreciation, Mid-Cap Growth, Small-Cap
Growth, Equity Income, Value, Value 25 and Small-Cap Value Funds may, but is not
required to, use a number of derivative instruments for risk management purposes
or as part of its investment strategies. Generally, derivatives are financial
contracts whose value depends upon, or is derived from, the value of an
underlying asset, reference rate or index, and may relate to stocks, bonds,
interest rates, currencies or currency exchange rates, commodities, and related
indexes. A Fund may not employ any of these strategies and there is no
assurance that any derivatives strategy used by a Fund will succeed.
Examples of derivative instruments that the Funds may use include options
contracts, futures contracts, options on futures contracts and swap agreements.
The Growth, Target, Opportunity,
-66-
<PAGE>
Renaissance, Tax-Efficient Equity, International, Innovation and Precious Metals
Funds may purchase and sell (write) call and put options on securities,
securities indexes and foreign currencies. The Precious Metals Fund may also
purchase and write options on commodities indexes. Each of these Funds may
purchase and sell futures contracts and options thereon with respect to
securities, securities indexes and foreign currencies. The Precious Metals Fund
may use futures contracts and related options on precious metals (such as gold).
The Tax-Efficient Equity Fund may enter into swap agreements with respect to
securities indexes. A description of these and other derivative instruments that
the Funds may use are described under "Investment Objectives and Policies" in
the Statement of Additional Information.
A Fund's use of derivative instruments involves risks different from, or
greater than, the risks associated with investing directly in securities and
other more traditional investments. A description of various risks associated
with particular derivative instruments is included in "Investment Objectives and
Policies" in the Statement of Additional Information. The following provides a
more general discussion of important risk factors relating to all derivative
instruments that may be used by the Funds and that have been discussed above
under "Summary of Principal Risks - Derivatives Risk."
Management Risk Derivative products are highly specialized instruments
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 instrument 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 derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately 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 component, adverse
changes in the value or level of the underlying asset, 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 a 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. To limit leverage
risk, each Fund will segregate assets determined to be liquid by PIMCO Advisors
or a Sub-Adviser 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 derivative instruments.
Lack of Availability Because the markets for certain derivative instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances for risk management or other purposes. There is no assurance that
a Fund will engage in derivatives transactions at any time or from time to time.
A Fund's ability to use derivatives may also be limited by certain regulatory
and tax considerations.
-67-
<PAGE>
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 a Fund's interest. If a portfolio manager
incorrectly forecasts the values of securities, currencies or interest rates or
other economic factors in using derivatives for a Fund, the Fund might have been
in a better position if it had not entered into the transaction at all. 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 other Fund investments. A Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. Also, the value of derivatives may
not correlate perfectly, or at all, with the value of the assets, reference
rates or indexes they are designed to closely track. In addition, a Fund's use
of derivatives 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.
Precious Metals
The Precious Metals Fund concentrates its investments in the precious
metals industry. Prices of precious metals can be expected to respond to
changes in rates of inflation and to perceptions of economic and political
instability. The values of companies engaged in precious metals-related
activities whose securities are principally traded on foreign securities
exchanges may also be affected by changes in the exchange rate between the
relevant foreign currency and the U.S. dollar. Based on historical experience,
the prices of precious metals and of securities of companies engaged in precious
metals-related activities may be subject to extreme fluctuations, reflecting
wider economic or political instability or for other reasons.
Loans of Portfolio Securities
For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions provided a
number of conditions are satisfied, including that the loan is fully
collateralized. Please see "Investment Objectives and Policies" in the
Statement of Additional Information for details. When a Fund lends portfolio
securities, its investment performance will continue to reflect changes in the
value of the securities loaned, and the Fund will also receive a fee or interest
on the collateral. Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. A Fund may pay lending fees to
the party arranging the loan.
Short Sales
Each Fund may make short sales as part of its overall portfolio management
strategies or to offset a potential decline in the value of a security. A short
sale involves the sale of a security that is borrowed
-68-
<PAGE>
from a broker or other institution to complete the sale. A Fund may only enter
into short selling transactions if the security sold short is held in the Fund's
portfolio or if the Fund has the right to acquire the security 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 a Fund to the risk that it will be required to
acquire, convert or exchange securities to replace the borrowed securities (also
known as "covering" the short position) at a time when the securities sold short
have appreciated in value, thus resulting in a loss to the Fund.
When-Issued, Delayed Delivery and Forward Commitment Transactions
Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase such securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a risk
of loss if the value of the securities declines prior to the settlement date.
This risk is in addition to the risk that the Fund's other assets will decline
in the value. Therefore, these transactions may result in a form of leverage
and increase a Fund's overall investment exposure. 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 to cover these positions.
Repurchase Agreements
Each Fund may enter into repurchase agreements, in which the Fund purchases
a security from a bank or broker-dealer that agrees to repurchase the security
at the Fund's cost plus interest within a specified time. If the party agreeing
to repurchase should default, the Fund will seek to sell the securities which it
holds. This 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 its portfolio maintained in cash. Repurchase agreements
maturing in more than seven days are considered illiquid securities.
Reverse Repurchase Agreements And Other Borrowings
Each Fund may enter into reverse repurchase agreements, subject to the
Fund's limitations on borrowings. A reverse repurchase agreement involves the
sale of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. A Fund will segregate assets determined to be liquid by PIMCO
Advisors or a Sub-Adviser in accordance with procedures established by the Board
of Trustees to cover its obligations under reverse repurchase agreements. 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. Reverse repurchase agreements and other forms of
borrowings may create leveraging risk for a Fund.
-69-
<PAGE>
Portfolio Turnover
With the exception of the Tax-Efficient Equity Fund, the length of time a
Fund has held a particular security is not generally a consideration in
investment decisions. A change in the securities held by a Fund is known as
"portfolio turnover." Each Fund may engage in frequent and active trading of
portfolio securities to achieve its investment objective, particularly during
periods of volatile market movements, although the Tax-Efficient Equity Fund
will generally attempt to limit portfolio turnover as part of its tax-efficient
management strategies. 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 also result in realization of
taxable capital gains, including short-term capital gains (which are generally
taxed at ordinary income tax rates).
Illiquid Securities
Each Fund may invest in securities that are illiquid so long as not more
than 15% of the value of the Fund's net assets (taken at market value at the
time of investment) would be invested in such securities. Certain illiquid
securities may require pricing at fair value as determined in good faith under
the supervision of the Board of Trustees. A Fund 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. Please see "Investment Objectives and
Policies" in the Statement of Additional Information for a listing of various
securities that are generally considered to be illiquid for these purposes.
Restricted securities, i.e., securities subject to legal or contractual
restrictions on resale, may be illiquid. However, some restricted securities
(such as securities issued pursuant to Rule 144A under the Securities Act of
1933 and certain commercial paper) may be treated as liquid, although they may
be less liquid than registered securities traded on established secondary
markets.
Investment in Other Investment Companies
The International Fund may 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. Each of the other Funds may invest up to 5% of its assets in other
investment companies. As a shareholder of an investment company, a Fund may
indirectly bear service and other fees which are in addition to the fees the
Fund pays its service providers.
Year 2000 Readiness Disclosure
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, this could have an adverse impact on the Funds' operations
and services provided to shareholders. PIMCO Advisors, the Sub-Advisers, the
Distributor, the Trust's shareholder servicing and transfer agent and custodian
and certain other service
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<PAGE>
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.
Changes in Investment Objectives and Policies
The investment objective of each of the Growth, Target, Opportunity,
Renaissance, Value 25, Tax-Efficient Equity, International, Innovation and
Precious Metals Funds described in this Prospectus may be changed by the Board
of Trustees without shareholder approval. The investment objective of each other
Fund is fundamental and may not be changed without shareholder approval. Unless
otherwise stated, all other investment policies of the Funds may be changed by
the Board of Trustees without shareholder approval. If there is a change in a
Fund's investment objective or policies, 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.
Percentage Investment Limitations
Unless otherwise stated, all percentage limitations on Fund investments
listed in this Prospectus will apply at the time of investment. A Fund would not
violate these limitations unless an excess or deficiency occurs or exists
immediately after and as a result of an investment.
Other Investments and Techniques
The Funds may invest in other types of securities and use a variety of
investment techniques and strategies which are not described in this Prospectus.
These securities and techniques may subject the Funds to additional risks.
Please see the Statement of Additional Information for additional information
about the securities and investment techniques described in this Prospectus and
about additional securities and techniques that may be used by the Funds.
-71-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand
the financial performance of Class A, Class B and Class C shares
of each Fund for the past 5 years or, if the class is less than 5
years old, since the class of shares was first offered. Certain
information reflects financial results for a single Fund share.
The total returns in the table represent the rate that an investor
would have earned or lost on an investment in a particular class
of shares of a Fund, assuming reinvestment of all dividends and
distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each Fund's
financial statements, are included in the Trust's annual report to
shareholders. The annual report is incorporated by reference in
the Statement of Additional Information and is available free of
charge upon request from the Distributor.
The information provided for each of the Growth, Innovation,
International, Opportunity, Precious Metals, Renaissance and
Target Funds reflects the operational 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
reorganizations, these Funds changed their fiscal year ends from
September 30 to June 30. The expense ratios provided for these
Funds for periods prior to January 17, 1997 reflect fee
arrangements of PIMCO Advisors Funds previously in effect which
differ from the current fee arrangements of the Trust. The Small-
Cap Growth Fund did not offer Class A, B or C shares during the
periods shown.
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in Distributions
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net From Net
Ended 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>
Capital Appreci-
ation Fund
Class A
06/30/99 $26.01 $0.06 (a) $2.33 (a) $2.39 $(0.10) $0.00 $(1.65)
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
06/30/99 25.75 (0.13)(a) 2.32 (a) 2.19 0.00 0.00 (1.65)
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
06/30/99 25.78 (0.13)(a) 2.31 (a) 2.18 0.00 0.00 (1.65)
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
<CAPTION>
Year or Distributions
Period in Excess of
Ended Net Realized
Capital Gains
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Capital Appreci-
ation Fund
Class A
06/30/99 $0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/99 0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/99 0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Equity Income
Fund
Class A
06/30/99 $16.04 $0.39 (a) $1.29 (a) $1.68 $(0.38) $0.00 $(1.76)
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
06/30/99 15.99 0.28 (a) 1.27 (a) 1.55 (0.28) 0.00 (1.76)
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
06/30/99 16.01 0.27 (a) 1.27 (a) 1.54 (0.27) 0.00 (1.76)
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
Equity Income
Fund
Class A
06/30/99 $0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/99 0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/99 0.00
06/30/98 0.00
01/20/97-
06/30/97 0.00
Growth Fund (i)
Class A
06/30/99 $32.62 $(0.14)(a) $5.56 (a) $5.42 $0.00 $0.00 $(3.92)
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)
Class B
06/30/99 30.34 (0.35)(a) 5.08 (a) 4.73 0.00 0.00 (3.92)
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
Growth Fund (i)
Class A
06/30/99 $0.00
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
Class B
06/30/99 0.00
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
</TABLE>
- -------
* Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
(i) The information provided for the Growth Fund reflects results of
operations under the Fund's former Sub-Adviser through March 6, 1999; the
Fund would not necessarily have achieved the performance results shown
above under its current investment management arrangements.
-72-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Tax Basis Net Asset Expenses to Income (Loss) to
Return of Total Value End of Net Assets End Average Net Average Net Portfolio
Capital Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ (1.75) $ 26.65 10.14% $ 91,296 1.10% 0.24% 120%
0.00 (1.77) 26.01 32.39 72,803 1.10 0.27 75
0.00 0.00 21.16 9.58 6,534 1.11* 0.59* 87
0.00 (1.65) 26.29 9.39 55,094 1.85 (0.52) 120
0.00 (1.75) 25.75 31.39 40,901 1.85 (0.47) 75
0.00 0.00 21.10 9.27 3,022 1.85* (0.26)* 87
0.00 (1.65) 26.31 9.34 81,097 1.85 (0.52) 120
0.00 (1.73) 25.78 31.40 71,481 1.85 (0.49) 75
0.00 0.00 21.10 9.27 13,093 1.86* (0.23)* 87
$ 0.00 $ (2.14) $ 15.58 12.26% $ 17,342 1.10% 2.64% 76%
0.00 (2.47) 16.04 21.35 12,954 1.11 2.39 45
0.00 (0.18) 15.39 11.77 1,756 1.13* 2.85* 45
0.00 (2.04) 15.50 11.35 21,732 1.85 1.89 76
0.00 (2.37) 15.99 20.47 15,178 1.85 1.63 45
0.00 (0.16) 15.37 11.45 2,561 1.87* 2.11* 45
0.00 (2.03) 15.52 11.28 26,016 1.85 1.86 76
0.00 (2.36) 16.01 20.51 23,122 1.85 1.60 45
0.00 (0.16) 15.37 11.42 6,624 1.87* 2.15* 45
$ 0.00 $ (3.92) $ 34.12 18.65% $227,638 1.16% (0.44)% 131%
0.00 (4.32) 32.62 41.03 180,119 1.16 (0.27) 123
0.00 (3.51) 27.03 15.93 147,276 1.11* 0.13* 94
0.00 (2.93) 26.58 16.11 151,103 1.11 0.24 104
0.00 (1.19) 25.73 23.70 134,819 1.10 0.50 111
0.00 (1.87) 22.01 1.30 107,269 1.10 0.60 115
0.00 (3.92) 31.15 17.72 133,850 1.90 (1.19) 131
0.00 (4.32) 30.34 39.97 80,719 1.91 (1.02) 123
0.00 (3.51) 25.59 15.32 55,626 1.86* (0.62)* 94
0.00 (2.93) 25.46 15.22 37,256 1.86 (0.51) 104
0.00 0.00 24.94 10.20 7,671 1.90* (0.40)* 111
</TABLE>
-73-
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in Distributions
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net From Net
Ended 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>
Growth Fund
(Cont.)
Class C
06/30/99 $30.33 $(0.35)(a) $5.09 (a) $4.74 $0.00 $0.00 $(3.92)
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)
<CAPTION>
Year or Distributions
Period in Excess of
Ended Net Realized
Capital Gains
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Growth Fund
(Cont.)
Class C
06/30/99 $0.00
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
Innovation Fund
(ii)
Class A
06/30/99 $24.28 $(0.28)(a) $14.72 (a) $14.44 $0.00 $0.00 $(1.26)
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) 4.80 4.74 0.00 0.00 0.00
Class B
06/30/99 23.60 (0.49)(a) 14.24 (a) 13.75 0.00 0.00 (1.26)
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
06/30/99 23.59 (0.48)(a) 14.23 (a) 13.75 0.00 0.00 (1.26)
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) 4.78 4.65 0.00 0.00 0.00
Innovation Fund
(ii)
Class A
06/30/99 $0.00
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
06/30/99 0.00
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
06/30/99 0.00
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
International
Fund (iii)
Class A
06/30/99 $14.33 $0.01 (a) $(0.74)(a) $(0.73) $0.00 $0.00 $(1.15)
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)
Class B
06/30/99 13.46 (0.08)(a) (0.72)(a) (0.80) 0.00 0.00 (1.15)
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
06/30/99 13.45 (0.09)(a) (0.71)(a) (0.80) 0.00 0.00 (1.15)
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)
International
Fund (iii)
Class A
06/30/99 $0.00
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
Class B
06/30/99 0.00
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
06/30/99 0.00
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
Mid-Cap Growth
Fund
Class A
06/30/99 $24.00 $0.03 (a) $(0.13)(a) $(0.10) $(0.01) $0.00 $(1.07)
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
06/30/99 23.77 (0.13)(a) (0.14)(a) (0.27) 0.00 0.00 (1.07)
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
Mid-Cap Growth
Fund
Class A
06/30/99 $0.00
06/30/98 0.00
01/13/97-
06/30/97 0.00
Class B
06/30/99 0.00
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.
(b) Ratio of expenses to average net assets excluding interest expense is
1.45%.
(c) Ratio of expenses to average net assets excluding interest expense is
2.20%.
(d) Ratio of expenses to average net assets excluding interest expense is
2.20%.
(ii) The information provided for the Innovation Fund reflects results of
operations under the Fund's former Sub-Adviser through March 6, 1999; the
Fund would not necessarily have achieved the performance results shown
above under its current investment management arrangements.
(iii) The information provided for the International Fund reflects results of
operations under the Fund's former Sub-Advisers through November 15,
1994; the Fund would not necessarily have achieved the performance
results shown above under its current investment management
arrangements.
-74-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Tax Basis Net Asset Expenses to Income (Loss) to
Return of Total Value End of Net Assets End Average Net Average Net Portfolio
Capital Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ (3.92) $ 31.15 17.76 % $2,064,450 1.90% (1.18)% 131%
0.00 (4.32) 30.33 39.99 1,853,002 1.91 (1.02) 123
0.00 (3.51) 25.58 15.27 1,514,432 1.86* (0.61)* 94
0.00 (2.93) 25.46 15.22 1,450,216 1.86 (0.51) 104
0.00 (1.19) 24.94 22.80 1,290,152 1.90 (0.20) 111
0.00 (1.87) 21.52 0.50 1,085,427 1.90 (0.20) 115
$ 0.00 $ (1.26) $ 37.46 61.36 % $ 313,946 1.30% (0.90)% 119%
0.00 (1.17) 24.28 48.10 85,800 1.31 (0.94) 100
0.00 (0.26) 17.43 2.41 56,215 1.28* (0.68)* 80
0.00 (0.35) 17.26 19.86 50,067 1.31 (0.61) 123
0.00 0.00 14.74 47.40 28,239 1.40* (0.60)* 86
0.00 (1.26) 36.09 60.17 351,876 2.05 (1.64) 119
0.00 (1.17) 23.60 46.95 81,130 2.06 (1.69) 100
0.00 (0.26) 17.10 1.79 51,472 2.03* (1.43)* 80
0.00 (0.35) 17.04 18.99 33,778 2.06 (1.36) 123
0.00 0.00 14.66 24.10 6,509 2.30* (1.70)* 86
0.00 (1.26) 36.08 60.20 580,251 2.05 (1.65) 119
0.00 (1.17) 23.59 46.97 219,258 2.06 (1.69) 100
0.00 (0.26) 17.09 1.73 162,889 2.03* (1.43)* 80
0.00 (0.35) 17.04 19.08 137,752 2.06 (1.36) 123
0.00 0.00 14.65 46.50 63,952 2.20* (1.40)* 86
$ 0.00 $ (1.15) $ 12.45 (4.31)% $ 18,865 1.55%(b) 0.05% 55%
0.00 (1.12) 14.33 9.95 12,510 1.48 0.41 60
0.00 (0.39) 14.26 12.82 18,287 1.51* 0.58* 59
0.00 0.00 13.03 6.89 20,056 1.41 0.49 110
0.00 (0.24) 12.19 (3.70) 17,951 1.50 0.60 170
0.00 (0.23) 12.92 8.20 23,289 1.40 0.30 55
0.00 (1.15) 11.51 (5.15) 9,478 2.29 (c) (0.67) 55
0.00 (1.12) 13.46 9.17 8,956 2.22 (0.37) 60
0.00 (0.39) 13.56 12.17 8,676 2.26* 0.18* 59
0.00 0.00 12.48 6.21 5,893 2.16 (0.26) 110
0.00 0.00 11.75 4.00 503 2.30* (0.10)* 170
0.00 (1.15) 11.50 (5.15) 101.320 2.30 (d) (0.75) 55
0.00 (1.12) 13.45 9.18 132,986 2.22 (0.43) 60
0.00 (0.39) 13.55 12.18 168,446 2.25* (0.25)* 59
0.00 0.00 12.47 6.13 203,544 2.16 (0.26) 110
0.00 (0.24) 11.75 (4.50) 215,349 2.20 (0.20) 170
0.00 (0.23) 12.56 7.40 294,492 2.20 (0.50) 55
$ 0.00 $ (1.08) $ 22.82 (0.13)% $ 124,680 1.10% 0.15% 85%
0.00 (1.37) 24.00 25.71 57,164 1.11 0.07 66
0.00 0.00 20.24 11.58 12,184 1.11* 0.17* 82
0.00 (1.07) 22.43 (0.86) 84,698 1.85 (0.62) 85
0.00 (1.33) 23.77 24.76 84,535 1.86 (0.68) 66
0.00 0.00 20.17 11.19 28,259 1.85* (0.58)* 82
</TABLE>
-75-
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in Distributions
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net From Net
Ended Beginning Investment Gain (Loss) on From Investment Investment Investment Realized Capital
of Period Income (Loss) Investments Operations Income Income Gains
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year or Distributions
Period in Excess of
Ended Net Realized
Capital Gains
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mid-Cap Growth
Fund (Cont.)
Class C
06/30/99 $23.77 $(0.13)(a) $(0.13)(a) $(0.26) $0.00 $0.00 $(1.07)
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
<S> <C>
Mid-Cap Growth
Fund (Cont.)
Class C
06/30/99 $0.00
06/30/98 0.00
01/13/97-
06/30/97 0.00
Opportunity Fund
(iv)
Class A
06/30/99 $31.33 $(0.21)(a) $0.46 (a) $0.25 $0.00 $0.00 $(4.62)
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)
Class B
03/31/99-
06/30/99 21.40 (0.09)(a) 2.89 (a) 2.80 0.00 0.00 0.00
Class C
06/30/99 28.86 (0.37)(a) 0.32 (a) (0.05) 0.00 0.00 (4.62)
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)
Opportunity Fund
(iv)
Class A
06/30/99 $0.00
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
Class B
03/31/99-
06/30/99 0.00
Class C
06/30/99 0.00
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
Precious Metals
Fund (v)
Class A
06/30/99 $5.33 $0.13 (a) $(0.45)(a) $(0.32) $(0.09) $(0.02) $0.00
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
09/30/96 12.33 0.03 (0.24) (0.21) 0.00 0.00 0.00
09/30/95 14.14 0.07 (1.88) (1.81) 0.00 0.00 0.00
09/30/94 10.32 0.08 3.74 3.82 0.00 0.00 0.00
Class B
06/30/99 5.01 0.08 (a) (0.42)(a) (0.34) (0.09) (0.03) 0.00
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
06/30/99 5.00 0.10 (a) (0.43)(a) (0.33) (0.11) (0.03) 0.00
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
09/30/96 11.90 (0.07) (0.21) (0.28) 0.00 0.00 0.00
09/30/95 13.75 (0.02) (1.83) (1.85) 0.00 0.00 0.00
09/30/94 10.11 (0.02) 3.66 3.64 0.00 0.00 0.00
Renaissance Fund
(vi)
Class A
06/30/99 $19.10 $(0.01)(a) $1.45 (a) $1.44 $0.00 $0.00 $(2.33)
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)
Class B
06/30/99 19.06 (0.13)(a) 1.39 (a) 1.26 0.00 0.00 (2.33)
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
Precious Metals
Fund (v)
Class A
06/30/99 $0.00
06/30/98 0.00
10/01/96-
06/30/97 (0.17)
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
Class B
06/30/99 0.00
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
06/30/99 0.00
06/30/98 0.00
10/01/96-
06/30/97 (0.17)
09/30/96 0.00
09/30/95 0.00
09/30/94 0.00
Renaissance Fund
(vi)
Class A
06/30/99 $0.00
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
Class B
06/30/99 0.00
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.
(b) Ratio of expenses to average net assets excluding interest expense is
1.26%.
(c) Ratio of expenses to average net assets excluding interest expense is
2.06%.
(d) Ratio of expenses to average net assets excluding interest expense is
2.06%.
(e) Ratio of expenses to average net assets excluding interest expense is
1.25%.
(f) Ratio of expenses to average net assets excluding interest expense is
2.05%.
(g) Ratio of expenses to average net assets excluding interest expense is
2.05%.
(iv) The information provided for the Opportunity Fund reflects results of
operations under the Fund's former Sub-Adviser through March 6, 1999;
the Fund would not necessarily have achieved the performance results
shown above under its current investment management arrangements.
(v) 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.
(vi) The information provided for the Renaissance Fund reflects results of
operations under the Fund's former Sub-Adviser through May 7, 1999; the
Fund would not necessarily have achieved the performance results shown
above under its current investment management arrangements.
-76-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Tax Basis Net Asset Expenses to Income to
Return of Total Value End of Net Assets End Average Net Average Net Portfolio
Capital Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(1.07) $22.44 (0.82)% $112,507 1.85% (0.63)% 85%
0.00 (1.33) 23.77 24.70 140,438 1.86 (0.68) 66
0.00 0.00 20.18 11.25 53,686 1.86* (0.58)* 82
$0.00 $(4.62) $26.96 3.98 % $121,507 1.31% (0.86)% 175%
0.00 (1.94) 31.33 13.87 200,935 1.31 (0.88) 86
0.00 (4.91) 29.35 (8.87) 213,484 1.25* (0.12)* 69
0.00 (7.73) 37.36 18.35 134,859 1.13 (0.32) 91
0.00 (0.87) 39.08 39.70 120,830 1.20 (0.40) 102
(0.11) (2.37) 28.87 (6.70) 95,261 1.10 (0.60) 78
0.00 0.00 24.20 13.08 251 2.03* (1.65)* 175
0.00 (4.62) 24.19 3.20 308,877 2.06 (1.62) 175
0.00 (1.94) 28.86 13.01 500,011 2.06 (1.63) 86
0.00 (4.91) 27.38 (9.40) 629,446 1.97* (0.95)* 69
0.00 (7.73) 35.38 17.47 800,250 1.88 (1.07) 91
0.00 (0.87) 37.64 38.60 715,191 1.90 (1.10) 102
(0.11) (2.37) 28.04 (7.40) 553,460 1.90 (1.40) 78
$0.00 $(0.11) $4.90 (6.06)% $7,826 1.46%(e) 2.40 % 62%
0.00 0.00 5.33 (39.64) 4,709 1.31(b) 0.70 56
0.00 (0.17) 8.83 (26.05) 4,016 1.37* 0.33* 46
0.00 0.00 12.12 (1.70) 6,245 1.32 0.19 35
0.00 0.00 12.33 (12.80) 7,670 1.40 0.60 9
0.00 0.00 14.14 37.00 11,229 1.30 0.60 11
0.00 (0.12) 4.55 (6.89) 3,921 2.21 (f) 1.63 62
0.00 0.00 5.01 (40.50) 3,889 2.11 (c) (0.07) 56
0.00 (0.17) 8.42 (26.40) 4,248 2.13* (0.33)* 46
0.00 0.00 11.62 (2.35) 2,218 2.07 (0.56) 35
0.00 0.00 11.90 2.50 251 2.20* (0.20)* 9
0.00 (0.14) 4.53 (6.73) 11,491 2.20 (g) 1.92 62
0.00 0.00 5.00 (40.69) 16,943 2.11 (d) (0.07) 56
0.00 (0.17) 8.43 (26.31) 25,113 2.15* (0.41)* 46
0.00 0.00 11.62 (2.35) 37,609 2.07 (0.56) 35
0.00 0.00 11.90 (13.50) 42,341 2.20 (0.20) 9
0.00 0.00 13.75 36.00 62,825 2.10 (0.20) 11
$0.00 $(2.33) $18.21 9.94 % $90,445 1.26% (0.04)% 221%
0.00 (3.61) 19.10 30.98 85,562 1.26 0.35 192
0.00 (2.37) 17.73 27.53 33,606 1.23* 0.95* 131
0.00 (1.08) 16.08 22.37 20,631 1.25 1.60 203
0.00 (0.33) 14.14 16.10 12,933 1.30 2.90 177
0.00 (0.55) 12.50 1.40 14,942 1.30 2.70 175
0.00 (2.33) 17.99 8.94 126,576 2.00 (0.78) 221
0.00 (3.55) 19.06 29.99 100,688 2.01 (0.39) 192
0.00 (2.30) 17.77 26.88 37,253 1.97* 0.20* 131
0.00 (0.93) 16.12 21.54 15,693 2.00 0.85 203
0.00 (0.08) 14.13 13.30 1,760 2.10* 2.20* 177
</TABLE>
-77-
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in Distributions
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net From Net
Ended Beginning Investment Gain (Loss) on From Investment Investment Investment Realized Capital
of Period Income (Loss) Investments Operations Income Income Gains
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year or Distributions
Period in Excess of
Ended Net Realized
Capital Gains
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renaissance Fund
(Cont.)
Class C
06/30/99 $18.96 $(0.13)(a) $1.41 (a) $1.28 $0.00 $0.00 $(2.33)
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)
<S> <C>
Renaissance Fund
(Cont.)
Class C
06/30/99 $0.00
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
Small-Cap Value
Fund
Class A
06/30/99 $17.58 $0.26 (a) $(1.29)(a) $(1.03) $(0.17) $0.00 $0.00
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
06/30/99 17.43 0.14 (a) (1.27)(a) (1.13) (0.06) 0.00 0.00
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
06/30/99 17.44 0.14 (a) (1.27)(a) (1.13) (0.04) 0.00 0.00
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
Target Fund
(vii)
Class A
06/30/99 $16.35 $(0.09)(a) $2.44 (a) $2.35 $0.00 $0.00 $(0.98)
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)
Class B
06/30/99 15.34 (0.19)(a) 2.27 (a) 2.08 0.00 0.00 (0.98)
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
06/30/99 15.34 (0.19)(a) 2.26 (a) 2.07 0.00 0.00 (0.98)
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)
Tax-Efficient
Equity Fund
Class A
07/10/98-
06/30/99 $10.00 $0.03 (a) $1.56 (a) $1.59 $0.00 $0.00 $0.00
Class B
07/10/98-
06/30/99 10.00 (0.05)(a) 1.56 (a) 1.51 0.00 0.00 0.00
Class C
07/10/98-
06/30/99 10.00 (0.05)(a) 1.56 (a) 1.51 0.00 0.00 0.00
Value Fund
Class A
06/30/99 $15.64 $0.24 (a) $1.35 (a) $1.59 $(0.22) $0.00 $(1.72)
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
06/30/99 15.63 0.12 (a) 1.35 (a) 1.47 (0.12) 0.00 (1.72)
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
Small-Cap Value
Fund
Class A
06/30/99 $(0.45)
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class B
06/30/99 (0.45)
06/30/98 0.00
01/20/97-
06/30/97 0.00
Class C
06/30/99 (0.45)
06/30/98 0.00
01/20/97-
06/30/97 0.00
Target Fund
(vii)
Class A
06/30/99 $0.00
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
Class B
06/30/99 0.00
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
06/30/99 0.00
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
Tax-Efficient
Equity Fund
Class A
07/10/98-
06/30/99 $0.00
Class B
07/10/98-
06/30/99 0.00
Class C
07/10/98-
06/30/99 0.00
Value Fund
Class A
06/30/99 $0.00
06/30/98 0.00
01/13/97-
06/30/97 0.00
Class B
06/30/99 0.00
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.
(vii) The information provided for the Target Fund reflects results of
operations under the Fund's former Sub-Adviser through March 6, 1999; the Fund
would not necessarily have achieved the performance results shown above under
its current investment management arrangements.
-78-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Tax Basis Net Asset Expenses to Income (Loss) to
Return of Total Value End of Net Assets End Average Net Average Net Portfolio
Capital Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ (2.33) $ 17.91 9.12 % $442,049 2.00% (0.79)% 221%
0.00 (3.54) 18.96 29.98 469,797 2.01 (0.37) 192
0.00 (2.29) 17.69 26.86 313,226 1.97* 0.21* 131
0.00 (0.94) 16.05 21.52 230,058 2.00 0.85 203
0.00 (0.24) 14.09 15.20 174,316 2.10 2.10 177
0.00 (0.46) 12.47 0.70 178,892 2.00 2.00 175
$ 0.00 $ (0.62) $ 15.93 (5.50)% $107,569 1.25% 1.74 % 60%
0.00 (0.89) 17.58 17.33 75,070 1.25 1.27 41
0.00 0.00 15.75 12.34 6,563 1.30* 1.94* 48
0.00 (0.51) 15.79 (6.22) 96,994 2.00 0.95 60
0.00 (0.85) 17.43 16.40 110,833 2.00 0.53 41
0.00 0.00 15.71 12.05 11,077 2.04* 1.23* 48
0.00 (0.49) 15.82 (6.21) 112,926 2.00 0.95 60
0.00 (0.85) 17.44 16.42 130,466 2.00 0.52 41
0.00 0.00 15.71 12.05 20,637 2.05* 1.13* 48
$ 0.00 $ (0.98) $ 17.72 15.69 % $170,277 1.21% (0.57)% 229%
0.00 (4.45) 16.35 27.49 157,277 1.22 (0.49) 226
0.00 (2.07) 16.82 11.19 150,689 1.20* (0.31)* 145
0.00 (1.78) 17.11 16.50 156,027 1.18 (0.34) 141
0.00 (0.16) 16.40 26.50 121,915 1.20 (0.10) 128
0.00 (0.12) 13.13 4.20 90,527 1.20 (0.30) 104
0.00 (0.98) 16.44 14.93 78,659 1.95 (1.31) 229
0.00 (4.45) 15.34 26.45 76,194 1.96 (1.24) 226
0.00 (2.07) 16.14 10.58 67,531 1.94* (1.05)* 145
0.00 (1.78) 16.58 15.58 49,851 1.93 (1.09) 141
0.00 0.00 16.06 15.30 7,554 2.00* (0.90)* 128
0.00 (0.98) 16.43 14.86 910,494 1.95 (1.31) 229
0.00 (4.45) 15.34 26.53 952,728 1.96 (1.24) 226
0.00 (2.07) 16.13 10.52 969,317 1.94* (1.06)* 145
0.00 (1.78) 16.58 15.66 974,948 1.93 (1.09) 141
0.00 (0.16) 16.05 25.60 780,355 2.00 (0.90) 128
0.00 (0.12) 12.95 3.40 556,043 2.00 (1.10) 104
$ 0.00 $ 0.00 $ 11.59 15.90% $ 6,579 1.11%* 0.25%* 13%
0.00 0.00 11.51 15.10 6,370 1.85* (0.50)* 13
0.00 0.00 11.51 15.10 10,742 1.84* (0.52)* 13
$ 0.00 $ (1.94) $ 15.29 11.93 % $ 22,267 1.11% 1.68 % 101%
0.00 (1.81) 15.64 18.86 21,742 1.11 1.19 77
0.00 (0.10) 14.80 13.19 15,648 1.11* 1.71* 71
0.00 (1.84) 15.26 11.05 36,314 1.85 0.85 101
0.00 (1.70) 15.63 17.98 35,716 1.86 0.45 77
0.00 (0.06) 14.80 12.93 25,433 1.86* 0.96* 71
</TABLE>
-79-
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in Distributions
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net From Net
Ended Beginning Investment Gain (Loss) on From Investment Investment Investment Realized Capital
of Period Income (Loss) Investments Operations Income Income Gains
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year or Distributions
Period in Excess of
Ended Net Realized
Capital Gains
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Value Fund
(Cont.)
Class C
06/30/99 $ 15.63 $ 0.12 (a) $ 1.35 (a) $ 1.47 $ (0.12) $ 0.00 $ (1.72)
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
<S> <C>
Value Fund
(Cont.)
Class C
06/30/99 $ 0.00
06/30/98 0.00
01/13/97-
06/30/97 0.00
Value 25 Fund
Class A
07/10/98-
06/30/99 $ 10.00 $ 0.13 (a) $(1.12)(a) $ (0.99) $ (0.05) $ 0.00 $ 0.00
Class B
07/10/98-
06/30/99 10.00 0.07 (a) (1.12)(a) (1.05) (0.03) 0.00 0.00
Class C
07/10/98-
06/30/99 10.00 0.07 (a) (1.12)(a) (1.05) (0.02) 0.00 0.00
Value 25 Fund
Class A
07/10/98-
06/30/99 $ 0.00
Class B
07/10/98-
06/30/99 0.00
Class C
07/10/98-
06/30/99 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 interest expense is
1.90%.
(c) Ratio of expenses to average net assets excluding interest expense is
1.90%.
(d) Ratio of expenses to average net assets excluding interest expense is
1.15%.
-80-
<PAGE>
<TABLE>
<CAPTION>
Tax Ratio of Net
Basis Ratio of Investment
Return Net Asset Expenses to Income (Loss) to
of Total Value End of Net Assets End Average Net Average Net Portfolio
Capital Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $(1.84) $15.26 11.04 % $80,594 1.85% 0.83% 101%
0.00 (1.70) 15.63 17.98 88,235 1.86 0.45 77
0.00 (0.06) 14.80 13.02 64,110 1.86* 0.97* 71
$0.00 $(0.05) $8.96 (9.85)% $287 1.23%(d)* 1.60*% 1.82%
0.00 (0.03) 8.92 (10.47) 840 1.99 (b)* 0.88* 1.82
0.00 (0.02) 8.93 (10.50) 833 1.99 (c)* 0.89* 1.82
</TABLE>
-81-
<PAGE>
[Back Cover Page]
PIMCO Funds: Multi-Manager Series
The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the Funds.
The SAI and the financial statements included in the Funds' most recent annual
report to shareholders are incorporated by reference into this Prospectus, which
means they are part of this Prospectus for legal purposes. The Funds' annual
report discusses the market conditions and investment strategies that
significantly affected each Fund's performance during its last fiscal year.
The SAI includes the PIMCO FUNDS SHAREHOLDERS' GUIDE FOR CLASS A, B AND C
SHARES, a separate booklet which contains more detailed information about Fund
purchase, redemption and exchange options and procedures and other information
about the Funds. You can get a free copy of the Guide together with or
separately from the rest of the SAI.
You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling 1-800-426-0107, or by
writing to:
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Web site at WWW.SEC.GOV. You may
get copies of this information, with payment of a duplication fee, by writing
the Public Reference Section of the Commission, Washington, D.C. 20549-6009. You
may need to refer to the Trust's file number under the Investment Company Act,
which is 811-6161.
You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.
[LOGO]
File no. 811-6161
-82-
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
Class A, B and C Prospectus
Supplement dated __________, 1999 to the
Prospectus for Class A, Class B and Class C Shares
dated November 1, 1999
DISCLOSURE RELATING TO THE PIMCO INTERNATIONAL GROWTH FUND
________________________________________________________________________________
Note: This document supplements the PIMCO Funds: Multi-Manager Series
Prospectus for Class A, Class B and Class Shares (the "Retail Prospectus") dated
November 1, 1999, which was filed as part of Post-Effective Amendment No. 43 to
the Trust's Registration Statement on Form N-1A on October 29, 1999.
________________________________________________________________________________
SUMMARY INFORMATION
The following Fund Summary for the International Growth Fund is added to
the Retail Prospectus.
<PAGE>
PIMCO International Growth Fund
- --------------------------------------------------------------------------------
Principal Investment Objective Fund Focus Approximate
Investments Seeks long-term Equity and Capitalization Range
and capital equity-related [ ]
Strategies appreciation securities of
foreign (non- Dividend Frequency
U.S.) issuers At least annually
Approximate Number of Holdings
[ ]
The Fund seeks to achieve its investment objective by normally
investing at least 65% of its assets in an international portfolio
of equity and equity-related securities of companies whose
principal activities are in countries other than the U.S. The Fund
will normally invest in securities traded in non-U.S. securities
markets and in securities of foreign issuers traded on U.S.
markets.
The Fund will normally not invest in securities of U.S. issuers
traded on U.S. securities markets. Otherwise, the Fund may invest in
securities markets of any country in the world, including developed
and emerging markets. The Fund will normally invest at least 65% of
its assets in equity securities of issuers which exhibit growth
characteristics, such as superior earnings growth, high
profitability and consistent, predictable earnings. The Fund may
also invest in issuers which do not exhibit growth characteristics,
but whose securities are thought to be undervalued, based on
characteristics such as price to earnings, price to book and price
to cash flow ratios.
The Fund invests most of its assets in foreign securities which
trade primarily in currencies other than the U.S. dollar. It may
also invest directly in foreign currencies, use derivatives and
invest up to 10% of its assets in other investment companies.
In response to unfavorable market and other conditions, the Fund
may make temporary investments of some or all of its assets in
foreign and domestic fixed income securities and equity securities
principally traded in the U.S., including securities of U.S.
issuers. This would be inconsistent with the Fund's investment
objective and principal strategies.
- --------------------------------------------------------------------------------
Principal Among the principal risks of investing in the Fund, which could
Risks adversely affect its net asset value, yield and total return, are:
. Foreign Investment Risk . Growth Securities Risk . Concentration Risk
. Emerging Markets Risk . Value Securities Risk . Leveraging Risk
. Currency Risk . Smaller Company Risk . Credit Risk
. Market Risk . Liquidity Risk . Management Risk
. Issuer Risk . Derivatives Risk
Please see "Summary of Principal Risks" following the Fund
Summaries for a description of these and other risks of investing
in the Fund.
<PAGE>
- --------------------------------------------------------------------------------
Performance The following shows summary performance information for the Fund
Information in a bar chart and an Average Annual Total Returns table. The
information provides some indication of the risks of investing in
the Fund by showing changes in its performance from year to year
and by showing how the Fund's average annual returns compare with
the returns of a broad-based securities market index and an index
of similar funds. The bar chart and the information to its right
show performance of the Fund's Institutional Class shares. The
Fund's Administrative Class shares do not have a performance
history. Performance information shown in the Average Annual Total
Returns table for that class is based on the performance of the
Fund's Institutional Class shares, adjusted to reflect the actual
distribution and/or service (12b-1 fees) and other expenses paid
by Administrative Class shares. Prior to July 1, 1999, the Fund
had a different sub-adviser and would not necessarily have
achieved the performance results shown below under its current
investment management arrangements. Past performance is no
guarantee of future results.
Calendar Year Total Returns -- Institutional Class
More Recent Return
Information
--------------------
1/1/99-9/30/99 42.56%
[PLOT POINTS FOR BAR CHART]
Highest and Lowest
Quarter Returns
(for periods shown
in the bar chart)
--------------------
39.40% Highest (10/1/98-
1998 12/31/98) 25.14%
--------------------
Lowest (7/1/98-
9/30/98) -17.79%
Calendar Year End (through 12/31)
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year (12/31/97)(/3/)
-----------------------------------------------------------------------
<S> <C> <C>
Institutional Class 39.40% 39.40%
-----------------------------------------------------------------------
Administrative Class 39.06% 39.06%
-----------------------------------------------------------------------
MSCI EAFE Index(/1/) 20.34% 20.34%
-----------------------------------------------------------------------
Lipper International Fund Average(/2/) 13.05% 13.05%
-----------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International EAFE (Europe,
Australasia, Far East) ("MSCI EAFE") Index is a widely
recognized, unmanaged index of issuers in countries of
Europe, Australia and the Far East. It is not possible to
invest directly in the index.
(2) The Lipper International Fund Average is a total return
performance average of funds tracked by Lipper Analytical
Services, Inc. that invest their assets in securities whose
primary trading markets are outside of the United States. It
does not take into account sales charges.
(3) The Fund began operations on 12/31/97. Index comparisons begin
on .
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class A, B or C Shares of the Fund
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class A Class B Class C
------- ------- -------
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) 5.50% None None
Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price) 1%/(1)/ 5%/(2)/ 1%/(3)/
</TABLE>
- ---------------------
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Fund with the
costs of investing in other mutual funds. The Examples assume that you invest
$10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Fund's operating expenses remain
the same. Although your actual costs may be higher or lower, the Examples show
what your costs would be based on these assumptions.
<TABLE>
Example: Assuming you redeem your shares at
the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Share Class Fees Fees/(1)/ (12B-1) Fees /(2)/ Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A Shares .85% .65% .25% 1.75% $718 $1,071 $1,447 $2,499
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares .85 .65 1.00 2.50 753 1,079 1,531 2,558
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares .85 .65 1.00 2.50 353 779 1,331 2,836
<CAPTION>
Example: Assuming you do not redeem your shares.
Year
Share Class 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Shares $718 $1,071 $1,447 $2,499
- ----------------------------------------------------------------------------------------------------------------------------------
B Shares 253 779 1,331 2,558
- ----------------------------------------------------------------------------------------------------------------------------------
C Shares 253 779 1,331 2,836
</TABLE>
1. Administrative Fees 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.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a
Class B or Class C shareholder may, depending upon 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.
<PAGE>
SUMMARY OF PRINCIPAL RISKS
The value of your investment in the International Growth Fund changes with
the values of the Fund's investments. Many factors can affect those values. The
factors that are most likely to have a material effect on the International
Growth Fund's portfolio as a whole are called "principal risks." The principal
risks of the International Growth Fund are identified in the Fund Summary and
are summarized in this section. The International Growth Fund may be subject to
additional principal risks and risks other than those described below because
the types of investments made by the Fund can change over time. Securities and
investment techniques mentioned in this summary and described in greater detail
under "Characteristics and Risks of Securities and Investment Techniques" in the
Retail Prospectus appear in BOLD TYPE. That section and "Investment Objectives
and Policies" in the Statement of Additional Information also include more
information about the International Growth Fund, its investments and the related
risks.
. Foreign Investment Risk. Because the International Growth Fund invests
in FOREIGN SECURITIES, it may experience more rapid and extreme changes in value
than funds that invest exclusively in securities of U.S. companies. The
securities markets of many foreign countries are relatively small, with a
limited number of companies representing a small number of industries.
Additionally, issuers of foreign securities are usually not subject to the same
degree of regulation as U.S. issuers. Reporting, accounting and auditing
standards of foreign countries differ, in some cases significantly, from U.S.
standards. Also, nationalization, expropriation or confiscatory taxation,
currency blockage, political changes or diplomatic developments could adversely
affect the International Growth Fund's investments in a foreign country. In the
event of nationalization, expropriation or other confiscation, the International
Growth Fund could lose its entire investment in foreign securities. Adverse
conditions in certain regions such as Southeast Asia can also adversely affect
securities of other countries whose economies appear to be unrelated.
To the extent that the International Growth Fund invests a significant
portion of its assets in a concentrated geographic area like Eastern Europe or
Asia, it will generally have more exposure to regional economic risks associated
with foreign investments.
. Emerging Market Risk. Foreign investment risk may be particularly high
to the extent that the International Growth Fund invests in EMERGING MARKET
SECURITIES of issuers based in countries with developing economies. These
securities may present market, credit, currency, liquidity, legal, political and
other risks different from, or greater than, the risks of investing in developed
foreign countries. The International Growth Fund may invest significant portions
of its assets in emerging market securities.
. Currency Risk. The International Growth Fund may invest directly in
FOREIGN CURRENCIES and in securities that trade in, and receive revenues in,
foreign currencies. To the extent that it does, the International Growth Fund
will be subject to the risk that those currencies will decline in value relative
to the U.S. Dollar, or, in the case of hedging positions, that the U.S. Dollar
will decline in value relative to the currency being hedged. Currency rates in
foreign countries may fluctuate significantly over short periods of time for a
number of reasons, including changes in interest rates, intervention (or the
failure to intervene) by U.S. or foreign governments, central banks or
supranational entities such as the International Monetary Fund, or by the
imposition of currency controls or other political developments in the U.S. or
abroad.
. Market Risk. The International Growth Fund normally invests most of its
assets in common stocks and/or other equity securities. A principal risk of
investing in the International Growth Fund is that
<PAGE>
the equity securities in its portfolio will decline in value due to factors
affecting equity securities markets generally or particular industries
represented in those markets. The values of equity securities may decline due to
general market conditions which are not specifically related to a particular
company, such as real or perceived adverse economic conditions, changes in the
general outlook for corporate earnings, changes in interest or currency rates or
adverse investor sentiment generally. They may also decline due to factors which
affect a particular industry or industries, such as labor shortages or increased
production costs and competitive conditions within an industry.
. Issuer Risk. The values of equity securities may decline for a number of
reasons which directly relate to the issuing company, such as management
performance, financial leverage and reduced demand for the issuer's goods or
services.
. Growth Securities Risk. The International Growth Fund may invest in
equity securities of companies that its portfolio manager believes will
experience relatively rapid earnings growth. Growth securities typically trade
at higher multiples of current earnings than other securities. Therefore, the
values of growth securities may be more sensitive to changes in current or
expected earnings than the values of other securities.
. Value Securities Risk. The International Growth Fund may invest in
companies that may not be expected to experience significant earnings growth,
but whose securities its portfolio manager believes are selling at a price lower
than their true value. Companies that issue value securities may have
experienced adverse business developments or may be subject to special risks
that have caused their securities to be out of favor. If the portfolio
manager's assessment of a company's prospects is wrong, or if the market does
not recognize the value of the company, the price of its securities may decline
or may not approach the value that the portfolio manager anticipates.
. Smaller Company Risk. The general risks associated with equity
securities and liquidity risk are particularly pronounced for securities of
companies with SMALLER MARKET CAPITALIZATIONS. These companies may have limited
product lines, markets or financial resources or they may depend on a few key
employees. Securities of smaller companies may trade less frequently and in
lesser volume than more widely held securities and their values may fluctuate
more sharply than other securities. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity.
. Liquidity Risk. The International Growth Fund is subject to liquidity
risk. Liquidity risk exists when particular investments are difficult to
purchase or sell, possibly preventing the International Growth Fund from selling
such ILLIQUID SECURITIES at an advantageous time or price. Because the
International Growth Fund's principal investment strategies involve securities
of companies with SMALLER MARKET CAPITALIZATIONS, FOREIGN SECURITIES,
DERIVATIVES or securities with substantial market and/or credit risk, it may
have substantial exposure to liquidity risk.
. Derivatives Risk. The International Growth Fund may use DERIVATIVES,
which are financial contracts whose value depends on, or is derived from, the
value of an underlying asset, reference rate or index. The various derivative
instruments that the International Growth Fund may use are referenced under
"Characteristics and Risks of Securities and Investment Techniques -
Derivatives" in the Retail Prospectus and described in more detail under
"Investment Objectives and Policies" in the Statement of Additional Information.
The International Growth Fund will sometimes use derivatives as part of a
strategy designed to reduce exposure to other risks, such as interest rate or
currency risk. The International Growth Fund may also use derivatives for
leverage, which increases opportunities for gain but also involves greater risk
of loss. The International Growth Fund's use of derivative instruments
<PAGE>
involves risks different from, or greater than, the risks associated with
investing directly in securities and other traditional investments. Derivatives
are subject to a number of risks described elsewhere in this section, such as
liquidity risk, market risk and credit risk. They also involve the risk of
mispricing or improper valuation and the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index.
Also, suitable derivative transactions may not be available in all circumstances
and there can be no assurance that the International Growth Fund will engage in
these transactions to reduce exposure to other risks when that would be
beneficial.
. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. The International
Growth Fund may be subject to this risk to the extent it concentrates its assets
in securities denominated in a particular foreign currency or in a concentrated
geographic area outside the U.S. Similarly, if the International Growth Fund
invests in a relatively small number of issuers, it is more susceptible to risks
associated with a single economic, political or regulatory occurrence than a
more diversified fund might be. Some of those issuers also may present
substantial credit or other risks.
. Leveraging Risk. When the International Growth Fund is borrowing money
or otherwise leveraging its portfolio, the value of an investment in the Fund
will be more volatile and all other risks will tend to be compounded. This is
because leverage tends to exaggerate the effect of any increase or decrease in
the value of the International Growth Fund's portfolio securities. The
International Growth Fund may take on leveraging risk by using REVERSE
REPURCHASE AGREEMENTS AND OTHER BORROWINGS, by investing collateral from LOANS
OF PORTFOLIO SECURITIES or through the use of WHEN-ISSUED, DELAYED-DELIVERY OR
FORWARD COMMITMENT TRANSACTIONS. The International Growth Fund may also take on
leveraging risk by using derivatives. The use of leverage may also cause the
International Growth Fund to liquidate portfolio positions when it would not be
advantageous to do so in order to satisfy its obligations or to meet segregation
requirements.
. Credit Risk. The International Growth Fund is subject to credit risk.
This is the risk that the issuer or the guarantor of a fixed income security, or
the counterparty to a DERIVATIVES contract, REPURCHASE AGREEMENT or a LOAN OF
PORTFOLIO SECURITIES, is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are
subject to varying degrees of credit risk, which are often reflected in their
CREDIT RATINGS.
. Management Risk. The International Growth Fund is subject to management
risk because it is an actively managed investment portfolio. PIMCO Advisors,
the International Growth Fund's Sub-Adviser and the individual portfolio manager
will apply investment techniques and risk analyses in making investment
decisions for the Fund, but there can be no guarantee that these will produce
the desired results.
MANAGEMENT OF THE FUNDS
"Management of the Funds" is amended by adding the following disclosure.
INVESTMENT ADVISER AND ADMINISTRATOR
PIMCO Advisors serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator") for the
International Growth Fund. Subject to the supervision of the Board of Trustees,
PIMCO Advisors is responsible for managing, either directly or through others
<PAGE>
selected by it, the investment activities of the Fund and the Fund's business
affairs and other administrative matters.
PIMCO Equity Advisors a division of PIMCO Advisors (the "Sub-Adviser"),
manages the International Growth Fund's investments. See "Sub-Adviser" below.
PIMCO Advisors has retained its affiliate, Pacific Investment Management
Company, to provide various administrative and other services required by the
Fund in its capacity as sub-administrator. PIMCO Advisors and the sub-
administrator may retain other affiliates to provide certain of these services.
. Advisory Fees. The International Growth Fund pays PIMCO Advisors fees
in return for providing or arranging for the provisions of investment advisory
services.
For the fiscal year ended June 30, 199_, the International Growth Fund paid
monthly advisory fees to PIMCO Advisors at the annual rates (stated as a
percentage of the average daily net assets of the Fund) of .85%.
. Administrative Fees. For the fiscal year ended June 30, 199_, the
International Growth Fund paid PIMCO Advisors monthly administrative fees at the
annual rate (stated as a percentage of the average daily net assets attributable
in the aggregate to the International Growth Fund's Class A, Class B and Class C
shares) of .65%.
Sub-Advisers
The following provides summary information about the Sub-Adviser, including
its investment specialty. The Sub-Adviser is a sub-partnership of PIMCO
Advisors.
<TABLE>
<CAPTION>
Sub-Adviser* Fund Investment Specialty
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PIMCO Equity Advisors International Growth Disciplined approach to
1345 Avenue of the Americas identifying quality growth
50th Floor companies
New York, NY 10105
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
David Stein, Senior Portfolio Manager at PIMCO Equity Advisors, and Cliff
Quisenberry, Portfolio Manager at PIMCO Equity Advisors, manage the investments
of the International Growth Fund. Information about PIMCO Equity Advisors is
located in the Retail Prospectus under "Management of the Funds." Information
about Messrs. Stein and Quisenberry is located in the Retail Prospectus under
"Management of the Funds--Sub-Advisers--Parametric" in the Retail Prospectus.
(Messrs. Stein and Quisenberry are also Managing Director and Vice President,
respectively, of Parametric Portfolio Associates, an affiliated sub-partnership
of the Trust which serves as sub-adviser to several other series of the Trust.)
INVESTMENT OPTIONS (CLASS A, B AND C SHARES)
"Investment Options (Class A, B and C Shares)" is amended by adding the
following disclosure.
Class A, Class B and Class C shares of the International Growth Fund
are not currently offered for purchase by investors.
HOW FUND SHARES ARE PRICED
Disclosure relating to how Class A, B and C shares of the International
Growth Fund are priced is included in the section "How Fund Shares are Priced"
in the Retail Prospectus.
HOW TO BUY AND SELL SHARES
"How to Buy and Sell Shares" is amended by adding the following disclosure.
Class A, Class B and Class C shares of the International Growth Fund are
not currently offered for purchase by investors.
FUND DISTRIBUTIONS
"Fund Distributions" is amended by adding the following disclosure.
The International Growth Fund intends to declare and distribute income
dividends to shareholders of record at least annually.
CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES
The International Growth Fund invests in and/or utilizes the following
securities and investment techniques, which are more fully described in the
Retail Prospectus: "Fixed Income Securities and Defensive Strategies,"
"Companies with Smaller Market Capitalizations," "Foreign Securities," "Foreign
Currencies," "Convertible Securities," "Credit Ratings and Unrated Securities,"
"Derivatives," "Loans of Portfolio Securities," "Short Sales," "When-Issued,
Delayed Delivery and Forward Commitment Transactions," "Repurchase Agreements,"
"Reverse Repurchase Agreements and Other Borrowings," "Portfolio Turnover" and
"Illiquid Securities." In addition, the Fund may invest up to 10% of its assets
in securities of other investment companies.
<PAGE>
FINANCIAL HIGHLIGHTS
Class A, B and C shares of the International Growth Fund have not yet been
offered for purchase by investors and financial information is not available for
these classes of shares.
<PAGE>
[Front Cover]
PIMCO Funds Prospectus
Multi-Manager Series
November 1, 1999
Share Class
D
This Prospectus describes 8 mutual funds offered by PIMCO Funds: Multi-Manager
Series. The Funds provide access to the professional investment advisory
services offered by PIMCO Advisors L.P. and its investment management
affiliates.
The Prospectus explains what you should know about the Funds before you invest.
Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Summary Information....................................................
Fund Descriptions, Performance and Fees.............................
Growth Fund......................................................
Capital Appreciation Fund........................................
Mid-Cap Growth Fund..............................................
Equity Income Fund...............................................
Renaissance Fund.................................................
Value Fund.......................................................
Tax-Efficient Equity Fund........................................
Innovation Fund..................................................
Summary of Principal Risks..........................................
Management of the Funds................................................
How Fund Shares Are Priced.............................................
How to Buy and Sell Shares.............................................
Fund Distributions.....................................................
Tax Consequences.......................................................
Characteristics and Risks of Securities................................
and Investment Techniques...........................................
Financial Highlights...................................................
</TABLE>
-2-
<PAGE>
Summary Information
The table below compares certain investment characteristics of the Funds. Other
important characteristics are described in the individual Fund Summaries
beginning on Page 5.
<TABLE>
<CAPTION>
Approximate Approximate
PIMCO Investment Main Number of Capitalization
Fund Objective Investments Holdings Range
- ---------------------------------------------------------------------------------------------------------------------------
Growth Stock Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth Long-term growth of Common stocks of companies with 35-40 At least $5 billion
capital; income is market capitalizations of at least $5
incidental billion
- ---------------------------------------------------------------------------------------------------------------------------
Blend Stock Funds
- ---------------------------------------------------------------------------------------------------------------------------
Capital Growth of capital Common stocks of companies with 60-100 At least $1 billion
Appreciation 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 with 60-100 Over $500 million
Growth market capitalizations of more than (excluding the
$500 million (excluding the largest largest 200
200 companies) that have improving companies)
fundamentals and whose stock is
reasonably valued by the market
- ---------------------------------------------------------------------------------------------------------------------------
Value Stock Funds
- ---------------------------------------------------------------------------------------------------------------------------
Equity Current income as a Common stocks of companies with 40-50 Over $2 billion
Income primary objective; long- market capitalizations of more than
term growth of capital as $2 billion that have below-average
a secondary objective price to earnings ratios and higher
dividend yields relative to their
industry groups
- ---------------------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of Common stocks having below- 50-70 All capitalizations
capital and income average valuations where the
company's business fundamentals
are improving
- ---------------------------------------------------------------------------------------------------------------------------
Value Long-term growth of Common stocks of companies with 50 Over $2 billion
capital and income market capitalizations of more than
$2 billion that are undervalued
relative to their industry groups
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
Approximate Approximate
PIMCO Investment Main Number of Capitalization
Fund Objective Investments Holdings Range
- ---------------------------------------------------------------------------------------------------------------------------
Enhanced Index Stock Funds
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Efficient Maximum after-tax growth A broadly diversified portfolio of at At least 250 Over $5 billion
Equity of capital least 200 common stocks of
companies represented in the S&P
500 Index
- ---------------------------------------------------------------------------------------------------------------------------
Sector-related Stock Funds
- ---------------------------------------------------------------------------------------------------------------------------
Innovation Capital appreciation; no Common stocks of technology- 40 Over $200 million
consideration given to related companies
income
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Fund Descriptions, Performance and Fees
The Funds provide a broad range of investment choices. The Fund Summaries below
identify each Fund's investment objective, principal investments and strategies,
and principal risks. A more detailed "Summary of Principal Risks" describing
principal risks of investing in the Funds begins after the Fund Summaries. The
Fund Summaries also show the fees and expenses you may pay if you buy and hold
Class D shares of the Funds.
It is possible to lose money on investments in the Funds. An investment in
a Fund is not a deposit of a bank and is not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other government agency.
-4-
<PAGE>
PIMCO Growth Fund Fund Category - Growth Stocks
Investment Objective
Seeks long-term growth of capital; income is an incidental consideration
Fund Focus
Larger capitalization common stocks
Approximated Number of Holdings
35-40
Approximate Capitalization Range
At least $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of at least $5 billion at the time of
investment.
The Fund focuses on stocks of companies that the portfolio manager believes will
experience relatively rapid earnings growth.
The portfolio manager seeks to identify quality growth companies using
proprietaryresearch that focuses on company fundamentals, and makes buy and sell
decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreignsecurities and
may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Growth Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds. The bar chart, the information to its right and the
Average Annual Total Returns table show performance of the Fund's Class C
shares, which are offered in a different prospectus. This is because the Fund
did not offer Class D shares during the periods listed. Although Class D and
Class C shares would have similar annual returns (because all of the Fund's
shares represent interests in the same portfolio of securities), Class D
performance would be higher than Class C performance because of the lower
expenses paid by Class D shares. The Class C performance in the bar chart and
the information to its right do not reflect the impact of sales charges (loads).
If they did, the returns would be lower than those shown. Unlike the bar chart,
performance figures for Class C shares in the Average Annual Total Returns table
reflect the impact of sales charges.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares based on the performance of Class C shares,
adjusted to reflect that there are no sales charges and lower distribution
and/or service (12b-1) fees paid by Class D shares. Prior to March 6, 1999, the
Fund had a different sub-adviser and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-5-
<PAGE>
PIMCO Growth Fund
Calendar Year Total Returns-Class C
[Plot points for bar charts]
37.45% 0.29% 41.88% 2.08% 9.32% -0.75% 27.47% 17.52% 21.84% 36.90%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year Total Returns
More Recent Return Information
1/1/99-9/30/99 2.66%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98 - 12/31/98) 25.12%
Lowest (7/1/90 - 9/30/90) -13.14%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (2/24/84)
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class C 37.90% 20.27% 18.57% 17.98%
- ----------------------------------------------------------------------------
Class D 39.92% 21.16% 19.45% 18.84%
- ----------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.44%
- ----------------------------------------------------------------------------
Lipper Growth Fund Average* 23.42% 18.74% 16.74% 15.58%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not
possible to invest directly in the index. The Lipper Growth Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that invest in companies with long-term
earnings expected to grow significantly faster than the earnings of the stocks
represented in the major unmanaged stock indexes. It does not take into account
sales charges. The Fund began operations on 2/24/84. Index comparisons begin on
2/29/84.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund
Shareholder fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Fees Fees/(1)/ (12b-1) Fees/(1)/ Expenses 1 3 5 10
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.50% 0.40% 0.25% 1.15% $ 117 $ 365 $ 633 $ 1,398
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of .65% per year under the
administration agreement regardless of whether a portion or none of the .25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-6-
<PAGE>
PIMCO Capital Appreciation Fund Fund Category -Blend Stocks
Investment Objective
Seeks growth of capital
Fund Focus
Larger capitalization common stocks
Approximated Number Of Holdings
60-100
Approximate CapitalizatioN Range
At least $1 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of larger
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of the 1,000 largest capitalization stocks in the U.S. market for a
series of both growth and value criteria (such as dividend growth, earnings
growth, equity growth, earnings momentum and earnings surprise). The team
selects stocks by subjecting the top 10% of the stocks in the screened universe
to a rigorous, fundamental analysis. The Fund's capitalization criteria applies
at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth and value characteristics for the Fund.
The team replaces stocks when they fall below the median ranking, have negative
earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Growth Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Institutional Class shares, which are
offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Institutional Class
shares, adjusted to reflect the higher distribution and/or service (12b-1) fees
and administrative fees paid by Class D shares. Past performance is no guarantee
of future results.
-7-
<PAGE>
Pimco Capital Appreciation Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar charts]
7.51% 17.70% -4.26% 37.14% 26.79% 34.22% 17.59%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -0.92%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 19.68%
Lowest (07/1/98-09/30/98) -14.16%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
1 Year 5 Years Fund Inception
(3/8/91)
- --------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 17.59% 21.32% 19.74%
- --------------------------------------------------------------
Class D 17.14% 20.84% 19.27%
- --------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- --------------------------------------------------------------
Lipper Capital
Appreciation Fund Average* 20.49% 15.02% 14.91%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not
possible to invest directly in the index. The Lipper Capital appreciation Fund
Average is calculated by Lipper Analytical Services Inc. It is a total return
performance average of funds tracked by Lipper that have an investment objective
of maximum capital appreciation. It does not take into account sales charges.
The Fund began operations on 3/8/91. Index comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Fees Fees/(1)/ (12b-1) Fees/(1)/ Expenses 1 3 5 10
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.45% 0.40% 0.25% 1.10% $ 112 $ 350 $ 606 $ 1,340
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of .65% per year under the
administration agreement regardless of whether a portion or none of the .25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-8-
<PAGE>
Pimco Mid-Cap Growth Fund Fund Category - Blend Stocks
Investment Objective
Seeks growth of capital
Fund Focus
Medium capitalization common stocks
Approximated Number of Holdings
60-100
Approximate Capitalization Range
Over $500 million (excluding the largest 200 companies)
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of medium
capitalization companies that have improving fundamentals (such as growth of
earnings and earnings momentum) and whose stock is reasonably valued by the
market.
The portfolio management team begins the investment process by screening the
universe of companies in the U.S. market with market capitalizations over $500
million, but excluding the 200 largest capitalizationcompanies. The screen
involves a series of both growth and value criteria (such as dividend growth,
earnings growth, equity growth, earnings momentum and earnings surprise). The
team selects stocks by subjecting the top 10% of the stocks in the screened
universe to a rigorous, fundamental analysis. The Fund's capitalization criteria
applies at the time of investment.
The portfolio management team rescreens the universe frequently to consistently
achieve a favorable balance of growth andvalue characteristics for the Fund. The
team replaces stocks when they fall below the median ranking, have negative
earnings surprises or show poor relative price performance.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Smaller Company Risk
. Issuer Risk . Liquidity Risk
. Value Securities Risk . Credit Risk
. Growth Securities Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table showperformance of the Fund's Institutional Class shares, which are
offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Institutional Class
shares, adjusted to reflect the higher distribution and/or service (12b-1) fees
and administrative fees paid by Class D shares. Past performance is no guarantee
of future results.
-9-
<PAGE>
Pimco Mid-Cap Growth Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart]
9.18% 15.77% -2.36% 36.29% 23.36% 33.17% 7.93%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -8.22%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 17.77%
Lowest (7/1/98-09/30/98) -14.40%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (8/26/91)
- -----------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 7.93% 19.08% 18.23%
- -----------------------------------------------------------------
Class D 7.80% 18.68% 17.81%
- -----------------------------------------------------------------
Russell Mid-Cap Index* 10.09% 17.34% 17.18%
- -----------------------------------------------------------------
Lipper Mid-Cap Fund 12.39% 14.86% 14.76%
Average*
</TABLE>
* The Russell Mid-Cap Index is an unmanaged index of middle capitalization
U.S. stocks. It is not possible to invest directly in the index. The Lipper Mid-
Cap Fund Average is calculated by Lopper Analytical Services, Inc. It is a total
return performance average of funds tracked by Lipper that invest primarily in
companies with market capitalizations of less than $5 billion at the time of
investment. It does not take into account sales charges. The Fund began
operations on 8/26/91. Index comparisons begin on 8/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution TotaL Annual Year
Advisory Strative and/or Service Fund Operating
Fees Fees/(1)/ (12b) Fees/(1)/ Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class D Shares 0.45% 0.40% 0.25% 1.10% $ 112 $ 350 $ 606 $ 1,340
</TABLE>
/(1)/ The Fund's 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. Up to .25% per year of the total
fees paid under the administration agreement may be Distribution and/or Service
(12b-1) Fees. The Fund will pay a total of .65% per year under the
administration agreement regardless of whether a portion or none of the .25%
authorized under the plan is paid under the plan. Please see "Management of the
Funds - Investment Adviser and Administrator - Administrative Fees" for details.
The Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-10-
<PAGE>
PIMCO Equity Income Fund Fund Category - Value Stocks
Investment Objective
Seeks current income as a primary objective, and long-term growth of capital as
a secondary objective
Fund Focus
Income producing common stocks with potential for capital appreciation
Approximated Number Of Holdings
40-50
Approximate Capitalization Range
Over $2 billion
Dividend Frequency
Quarterly
Principal Investments And Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
companies with market capitalizations of more than $2 billion at the time
of Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that
are drug or energy related.
The portfolio managers partition this universe by industry and, through the use
of both fundamental and quantitative research, identify the most undervalued
stocks in each industry. From this group of stocks, the Fund buys approximately
25 stocks with the highest dividend yields.
The portfolio managers then screen the most undervalued companies in each
industry by dividend yield to identify the highest yielding stocks in each
industry. From this group, the Fund buys approximately 25 stocks with the lowest
share price to company earnings (P/E) ratios.
The portfolio managers select stocks for the Fund only if they meet parameters
for fundamental quality, trading liquidity and price momentum. They also use
quantitative models to analyze stocks.
The portfolio managers replace a stock whenever a different stock within the
same industry has a significantly lower P/E ratio or a higher dividend yield
than the Fund's current holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Institutional Class shares, which are
offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Institutional Class
shares, adjusted to reflect the higher distribution and/or service (12b-1) fees
and administrative fees paid by Class D shares. Past performance is no guarantee
of future results.
-11-
<PAGE>
PIMCO Equity Income Fund
Calendar Year Total Returns-Institutional Class
14.75% 8.47% -1.61% 33.47% 21.48% 31.38% 8.37%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 0.80%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 13.98%
Lowest (07/1/98-09/30/98) -10.93%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (93/8/91)
- ---------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 8.37% 17.83% 16.51%
- ---------------------------------------------------------------
Class D 8.07% 17.39% 16.06%
- ---------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.58%
- ---------------------------------------------------------------
Lipper Equity Income Fund 11.90% 16.50% 15.59%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 3/8/91. Index
comparisons begin on 2/28/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund.
Shareholders Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual
Advisory strative and/or Service Fund Operating Year
Fees Fees/(1)/ (12b-1) Fees/(1)/ Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.45% 0.40% 0.25% 1.10% $112 $350 $606 $1,340
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of .65% per year under the administration
agreement regardless of whether a portion or none of the .25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-12-
<PAGE>
PIMCO Renaissance Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Undervalued stocks with improving business fundamentals
Approximated Number Of Holdings
50-70
Approximated Capitalization Range
All capitalizations
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with below-average valuations whose business fundamentals are expected
to improved.
In selecting investments for the Fund, the portfolio manager determines the
valuation of stocks based on characteristics such as price-to-earnings, price-
to-book, and price-to-cash flow ratios. The portfolio manager analyzes stocks to
identify key drivers of financial results and catalysts for change, which may
indicate that a company's business fundamentals are improving.
The portfolio manager sells a stock when he believes that the company's business
fundamentals are weakening.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Leveraging Risk
. Value Securities Risk . Interest Rate Risk
. Derivatives Risk . Credit Risk
. Foreign Investment Risk . Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Class C shares, which are offered in a
different prospectus. This is because the Fund has not offered Class D shares
for a full calendar year. Although Class D and Class C shares would have similar
annual returns (because all the Fund's shares represent interests in the same
portfolio of securities), Class D performance would be higher than Class C
performance because of the lower expenses paid by Class D shares.
The Class C performance in the bar chart and the information to its right do not
reflect the impact of sales charges (loads). It they did, the returns would be
lower than those shown. Unlike the bar chart, performance figures for Class C
shares in the Average Annual Total Returns table reflect the impact of sales
charges.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Class C shares,
adjusted to reflect that there are no sales charges and lower distribution
and/or service (12b-1) fees paid by Class D shares. Prior to March 6, 1999, the
Fund had a different sub-adviser and would not necessarily have achieved the
performance results shown on the next page under its current investment
management arrangements. Past performance is no guarantee of future results.
-13-
<PAGE>
PIMCO Renaissance Fund
Calendar Year Total Returns-Class C
[Plot points for bar chart]
11.17% -15.46% 34.22% 8.58% 22.13% -4.34% 28.55% 25.32% 35.89% 11.66%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 -0.49%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 18.37%
Lowest (07/1/98-09/30/98) -16.77%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years 10 Years (4/18/88)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class C 9.76% 17.62% 13.93% 13.54%
- ---------------------------------------------------------------------------
Class D 11.66% 18.52% 14.79% 14.40%
- ---------------------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.21% 18.87%
- ---------------------------------------------------------------------------
Lipper Equity Income Fund 11.90% 16.50% 14.32% 14.23%
Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Equity Income Fund Average is
calculated by Lipper Analytical Services, Inc. It is a total return performance
average of funds tracked by Lipper that seek relatively higher growth of income
through investing 60% or more of their portfolios in equities. It does not take
into account sales charges. The Fund began operations on 4/18/88. Index
comparisons begin on 4/30/88.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund.
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
Annual Fund Operating Expenses (expenses that are deducted from Fund asset based
on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory Strative and/or Service Fund Operating
Fees Fees/(1)/ (12b-1) Fees/(1)/ Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.60% 0.40% 0.25% 1.25% $127 $397 $686 $1,511
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of .65% per year under the administration
agreement regardless of whether a portion or none of the .25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-14-
<PAGE>
PIMCO Value Fund Fund Category - Value Stocks
Investment Objective
Seeks long-term growth of capital and income
Fund Focus
Undervalued common stocks relative to their industry groups
Approximated Number of Holdings
50
Approximated Capitalization Range
over $2 billion
Dividend Frequency
Quarterly
Principal Investments and Strategies
The Fund normally invests at least 65% of its assets in common stocks of
companies with market capitalizations of more than $2 billion at the time of
investment.
The Fund's initial selection universe consists of the 1,000 largest publicly
traded companies in the U.S. The universe also includes American Depository
Receipts (ADRs) that are included in the S&P 500 Index as well as ADRs that are
drug or energy related.
The portfolio managers partition this universe by industry and identify the most
undervalued stocks in each industry. After narrowing the universe to
approximately 150 possible candidates, the portfolio managers select one holding
from each of 50 industry groups.
The portfolio managers select stocks only if they meet parameters for
fundamental quality and trading liquidity. Issue weighting is dependent upon
dividend yield and price momentum considerations. The managers also consider
quantitative models for investment timing purposes.
The Fund's portfolio is generally rebalanced quarterly. The portfolio managers
may also replace companies within the same industry group when a replacement
candidate's valuation reaches a level that is considerably lower the valuation
of an existing holding.
The Fund intends to be fully invested in common stock (aside from certain cash
management practices) and will not make defensive investments in fixed income
securities in response to unfavorable market and other conditions.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk
. Issuer Risk
. Value Securities Risk
. Credit Risk
. Management Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Institutional Class shares, which are
offered in a different prospectus. This is because the Fund has not offered
Class D shares for a full calendar year. Although Class D and Institutional
Class shares would have similar annual returns (because all the Fund's shares
represent interests in the same portfolio of securities), Class D performance
would be lower than Institutional Class performance because of the higher
expenses paid by Class D shares.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Institutional Class
shares, adjusted to reflect the higher distribution and/or service (12b-1) fees
and administrative fees paid by Class D shares. Past performance is no guarantee
of future results.
-15-
<PAGE>
PIMCO Value Fund
Calendar Year Total Returns-Institutional Class
[Plot points for bar chart]
13.15% 16.41% -4.07% 38.91% 20.34% 26.21% 10.17%
1992 1993 1994 1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 5.18%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 17.19%
Lowest (7/1/98-09/30/98) 13.23%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund Inception
1 Year 5 Years (12/30/91)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Institutional Class 10.17% 17.39% 16.74%
- ----------------------------------------------------------------
Class D 9.86% 16.96% 16.30%
- ----------------------------------------------------------------
S&P 500 Index* 28.58% 24.06% 19.51%
- ----------------------------------------------------------------
Lipper Growth and Income
Fund Average* 15.80% 18.42% 15.94%
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Growth and Income Fund Average is
calculated by Lipper Analytical Expense Services, Inc. It is a total return
performance average of funds tracked by Lipper that combine a growth-of-earnings
orientation and an income requirement for level and/or rising dividends. does
not take into account sales charges. The Fund began operations on 12/30/91. Fund
comparisons begin on 12/31/91.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
It hold Class D shares of the Fund
Shareholder Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and /or Service Fund Operating
Fees Fees (12b-1)Fees/(1)/ Expenses 1 3 5 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.45% 0.40% 0.25% 1.10% $112 $350 $606 $1,340
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of .65% per year under the administration
agreement regardless of whether a portion or none of the .25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-16-
<PAGE>
PIMCO Tax-Efficient Equity Fund Fund Category - Enhanced Index
Investment Objective
Seeks maximum after-tax growth of
capital
Fund Focus
A portion of the common stocks
represented in the S&P 500 Index
Approximated Number of Holdings
At least 250
Approximate Capitalization Range
Over $5 billion
Dividend Frequency
At least annually
Principal Investments and Strategies
The Fund attempts to provide a total return which exceeds the return of the S&P
500 Index by investing in a broadly diversified portfolio of at least 250 common
stocks. The Fund also attempts to achieve superior after-tax returns for its
shareholders by using a variety of tax-efficient management strategies.
Normally, the Fund invests at least 95% of its assets in the S&P 500 Index. The
Fund's portfolio is designed to have certain characteristics that are similar to
those of the index, including such measures as dividend yield, P/E ratio,
relative volatility, economic sector exposure, return on equity and market
price-to-book value ratio. The portfolio managers attempt to produce a higher
total return than the S&P 500 by using quantitative security selection
techniques. There is no assurance that the Fund's investment performance will
equal or exceed that of the S&P 500.
The Fund intends to be fully invested in common stock (aside from certain
cash management practices) and will not make defensive investments in fixed
income securities in response to unfavorable market and other conditions. The
Fund may use derivatives.
Quantitative Security Selection Techniques.
The portfolio managers use a proprietary quantitative model that ranks companies
based on long-term (5-10 years) price appreciation potential. They analyze
factors such as growth of sustainable earnings and dividend behavior. Stocks in
the top 50% of the model's ranking are considered for purchase by the Fund. The
Fund sells stocks selected from the bottom 20% of the model's ranking based on
cost, current market value and anticipated benefit of replacement. The portfolio
managers' sell discipline also focuses on reducing realized capital gains as
indicated below.
Tax-Efficient Strategies.
The portfolio managers utilize a range of active tax management strategies
designed to minimize the Fund's taxable distributions, including low portfolio
turnover and favoring investments in low-dividend, growth-oriented companies.
The portfolio managers also identify specific shares of stock to be sold that
have the lowest tax cost. When prudent, stocks are also sold to realize capital
losses in order to offset realized capital gains.
Additional tax-efficient strategies include regular portfolio rebalancing to
capture available tax credits and the use derivative hedging techniques so that
the Fund can reduce its exposure to price declines without having to sell
appreciated securities. In limited circumstances, the Fund may also distribute
appreciated securities to shareholders to meet redemption requests so as to
avoid realizing capital gains.
Despite the use of these tax-efficient strategies, the Fund may realize gains
and shareholders will incur tax liability from time to time.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Leveraging Risk
. Issuer Risk . Credit Risk
. Value Securities Risk . Management Risk
. Growth Securities Risk
. Derivatives Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The Fund commenced operations in July 1998 and does not yet have a full calendar
year of performance to be shown here. Please see "Financial Highlights" in this
Prospectus or "Performance Information" in the Statement of Additional
Information for fiscal year performance information. Past performance is no
guarantee of future results.
-17-
<PAGE>
PIMCO Tax-Equity Fund
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund
Shareholders Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and /or Service Fund Operating
Fees Fees/(1)/ (12B-1) Fees/(1)/ Expenses 1 3 5 10
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.45% 0.40% 0.25% 1.10% $112 $350 $606 $1,340
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of .65% per year under the administration
agreement regardless of whether a portion or none of the .25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-18-
<PAGE>
PIMCO Innovation Fund Fund Category - Sector-Related Stocks
Investment Objective
Seeks capital appreciation; no consideration is given to income
Fund Focus
Common stocks of technology-related companies
Approximate Number of Holdings
40
Approximate Capitalization Range
Over $200 million
Dividend Frequency
At least annually
Principal Investment and Strategies
The Fund normally invests 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. Although the Fund emphasizes companies which utilize technologies,
it is not required to invest exclusively in companies in a particular business
sector or industry.
The portfolio manager seeks to identify quality technology-related companies
using proprietary research that focuses on company fundamentals, and makes buy
and sell decisions using PIMCO Equity Advisors' disciplined investment process.
The Fund may also invest in other kinds of equity securities, including
preferred stocks and convertible securities, and may invest in fixed income
securities. The Fund may invest up to 15% of its assets in foreign securities
and may buy and sell foreign currencies. The Fund may also use derivatives.
In response to unfavorable market and other conditions, the Fund may make
temporary investments of some or all of its assets in high-quality fixed income
securities. This would be inconsistent with the Fund's investment objective and
principal strategies.
Principal Risks
Among the principal risks of investing in the Fund are:
. Market Risk . Currency Risk
. Issuer Risk . Concentration Risk
. Growth Securities Risk . Leveraging Risk
. Smaller Company Risk . Interest Rate Risk
. Liquidity Risk . Credit Risk
. Derivatives Risk . Management Risk
. Foreign Investment Risk
Please see "Summary of Principal Risks" following the Fund Summaries for a
description of these and other risks of investing in the Fund.
Performance Information
The top of the next page shows summary performance information for the Fund in a
bar chart and an Average Annual Total Returns table. The information provides
some indication of the risks of investing in the Fund by showing changes in its
performance from year to year and by showing how the Fund's average annual
returns compare with the returns of a broad-based securities market index and an
index of similar funds.
The bar chart, the information to its right and the Average Annual Total Returns
table show performance of the Fund's Class A shares, which are offered in a
different prospectus. This is because the Fund has not offered Class D shares
for a full calendar year. Although Class D and Class A shares would have similar
annual returns (because all the Fund's shares represent interests in the same
portfolio of securities), Class D performance would be higher than Class A
performance because Class D shares do not pay any sales charges (loads).
The Class A performance in the bar chart and the information to its right do not
reflect the impact of sales charges (loads). It they did, the returns would be
lower than those shown. Unlike the bar chart, performance figures for Class A
shares in the Average Annual Total Returns table reflect the impact of sales
charges.
The Average Annual Total Returns table also shows estimated historical
performance for Class D shares. Prior to the inception of Class D shares
(4/8/98), the performance is based on the performance of Class A shares,
adjusted to reflect that there are no sales charges paid by Class D shares.
Prior to March 6, 1999, the Fund had a different sub-adviser and would not
necessarily have achieved the performance results shown on the next page under
its current investment management arrangements. Past performance is no guarantee
of future results.
-19-
<PAGE>
PIMCO Innovation Fund
Calendar Year Total Returns-Class A
[Plot points for bar chart]
45.33% 23.60% 9.03% 79.41%
1995 1996 1997 1998
Calendar Year End
More Recent Return Information
1/1/99-9/30/99 32.91%
Quarterly Return Information
(for periods shown in the bar chart)
Highest (10/1/98-12/31/98) 37.19%
Lowest (1/1/97-3/31/97) -12.56%
Average Annual Total Returns (for periods ended 12/31/98)
<TABLE>
<CAPTION>
Fund
1 Year Inception
(12/22/94)
- ---------------------------------------------------------
<S> <C> <C>
Class A 69.54% 34.67%
- ---------------------------------------------------------
Class D 79.65% 36.63%
- ---------------------------------------------------------
S&P 500 Index* 28.58% 30.51%
- ---------------------------------------------------------
Lipper Science and Technology 51.44% 25.21%
Fund Average*
</TABLE>
* The S&P 500 Index is an unmanaged index of common stocks. It is not possible
to invest directly in the index. The Lipper Science and Technology Fund Average
is calculated by Lipper Analytical Services, Inc. It is a total return
performance average of funds tracked by Lipper that invest 65% of their assets
in science and technology stocks. It does not take into account sales charges.
The Fund began operations on 12/22/94. Index comparisons begin on 12/31/94.
Your Expenses
The information below describes the fees and expenses you may pay if you buy and
hold Class D shares of the Fund
Shareholders Fees (fees paid directly from your investment - such as
sales charges (loads), redemption fees or exchange fees): None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class D shares of the Fund with the costs of
investing in other mutual funds. The Examples assume that you invest $10,000 in
Class D shares for the time periods indicated, your investment has a 5% return
each year and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, the Examples show what your costs would be
based on these assumptions.
<TABLE>
Example: Assuming you either redeem or do not
redeem your shares at the end of each period.
Admini- Distribution Total Annual Year
Advisory strative and/or Service Fund Operating
Fees Fees/(1)/ (12b-1) Fees/(1)/ Expenses 1 3 5 10
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class D Shares 0.65% 0.40% 0.25% 1.30% $132 $412 $713 $1,568
</TABLE>
(1) The Fund's 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. Up to .25% per year of the total fees
paid under the administration agreement may be Distribution and/or Service (12b-
1) Fees. The Fund will pay a total of .65% per year under the administration
agreement regardless of whether a portion or none of the .25% authorized under
the plan is paid under the plan. Please see "Management of the Funds -
Investment Adviser and Administrator - Administrative Fees" for details. The
Fund intends to treat any fees paid under the plan as "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. (the "NASD"). To the extent that such fees 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.
-20-
<PAGE>
Summary of Principal Risks
The value of your investment in a Fund changes with the values of that
Fund's investments. Many factors can affect those values. The factors that are
most likely to have a material effect on a particular Fund's portfolio as a
whole are called "principal risks." The principal risks of each Fund are
identified in the Fund Summaries and are summarized in this section. Each Fund
may be subject to additional principal risks and risks other than those
described below because the types of investments made by each Fund can change
over time. Securities and investment techniques mentioned in this summary and
described in greater detail under "Characteristics and Risks of Securities and
Investment Techniques" appear in BOLD TYPE. That section and "Investment
Objectives and Policies" in the Statement of Additional Information also include
more information about the Funds, their investments and the related risks.
. Market Risk. Each of the Funds normally invests most of its assets in
common stocks and/or other equity securities. A principal risk of investing in
each Fund is that the equity securities in its portfolio will decline in value
due to factors affecting equity securities markets generally or particular
industries represented in those markets. The values of equity securities may
decline due to general market conditions which are not specifically related to a
particular company, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may also decline
due to factors which affect a particular industry or industries, such as labor
shortages or increased production costs and competitive conditions within an
industry.
. Issuer Risk. The values of equity securities may decline for a number of
reasons which directly relate to the issuing company, such as management
performance, financial leverage and reduced demand for the issuer's goods and
services.
. Value Securities Risk. Each Fund may invest in companies that may not be
expected to experience significant earnings growth, but whose securities its
portfolio manager believes are selling at a price lower than their true value.
The Equity Income, Renaissance and Value Funds place particular emphasis on
value securities. Companies that issue value securities may have experienced
adverse business developments or may be subject to special risks that have
caused their securities to be out of favor. If a portfolio manager's assessment
of a company's prospects is wrong, or if the market does not recognize the value
of the company, the price of its securities may decline or may not approach the
value that the portfolio manager anticipates.
. Growth Securities Risk. Each Fund may invest in equity securities of
companies that its portfolio manager believes will experience relatively rapid
earnings growth. The Growth and Innovation Funds places particular emphasis on
growth securities. Growth securities typically trade at higher multiples of
current earnings than other securities. Therefore, the values of growth
securities may be more sensitive to changes in current or expected earnings than
the values of other securities.
. Smaller Company Risk. The general risks associated with equity
securities and liquidity risk are particularly pronounced for securities of
COMPANIES WITH SMALLER MARKET CAPITALIZATIONS. These companies may have limited
product lines, markets or financial resources or they may depend on a few key
employees. Securities of smaller companies may trade less frequently and in
lesser volume than more widely held securities and their values may fluctuate
more sharply than other securities. They may also trade in the over-the-counter
market or on a regional exchange, or may otherwise have limited liquidity.
-21-
<PAGE>
The Mid-Cap Growth Fund has substantial exposure to this risk because it invests
primarily in companies with medium-sized market capitalizations, which are
smaller and generally less-seasoned than the largest companies.
. Liquidity Risk. All of the Funds are subject to liquidity risk.
Liquidity risk exists when particular investments are difficult to purchase or
sell, possibly preventing a Fund from selling such ILLIQUID SECURITIES at an
advantageous time or price. Funds with principal investment strategies that
involve securities of companies with SMALLER MARKET CAPITALIZATIONS, FOREIGN
SECURITIES, DERIVATIVES or securities with substantial market and/or credit risk
tend to have the greatest exposure to liquidity risk.
. Derivatives Risk. The Growth, Renaissance, Tax-Efficient Equity and
Innovation Funds may use DERIVATIVES, which are financial contracts whose value
depends on, or is derived from, the value of an underlying asset, reference rate
or index. The various derivative instruments that the Funds may use are
referenced under "Characteristics and Risks of Securities and Investment
Techniques - Derivatives" in this Prospectus and described in more detail under
"Investment Objectives and Policies" in the Statement of Additional Information.
The Funds will sometimes use derivatives as part of a strategy designed to
reduce exposure to other risks, such as interest rate or currency risk. The
Funds may also use derivatives for leverage, which increases opportunities for
gain but also involves greater risk of loss. A Fund's use of derivative
instruments involves risks different from, or greater than, the risks associated
with investing directly in securities and other traditional investments.
Derivatives are subject to a number of risks described elsewhere in this
section, such as liquidity risk, market risk and credit risk. They also involve
the risk of mispricing or improper valuation and the risk that changes in the
value of the derivative may not correlate perfectly with the underlying asset,
rate or index. Also, suitable derivative transactions may not be available in
all circumstances and there can be no assurance that a Fund will engage in these
transactions to reduce exposure to other risks when that would be beneficial.
. Foreign Investment Risk. The Growth, Renaissance and Innovation Funds
may invest in FOREIGN SECURITIES, and therefore may experience more rapid and
extreme changes in value than Funds that invest exclusively in securities of
U.S. companies. The securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, issuers of foreign securities are usually not subject
to the same degree of regulation as U.S. issuers. Reporting, accounting and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, political changes or diplomatic developments could
adversely affect a Fund's investments in a foreign country. In the event of
nationalization, expropriation or other confiscation, a Fund could lose its
entire investment in foreign securities. Adverse developments in certain regions
such as Southeast Asia can also adversely affect securities of other countries
whose economies appear to be unrelated.
Foreign investment risk associated with the Growth, Renaissance and
Innovation Funds may be particularly high to the extent that these Funds invest
in EMERGING MARKET SECURITIES of issuers based in countries with developing
economies. These securities may present market, credit, currency, liquidity,
legal, political and other risks different from, or greater than, the risks of
investing in developed foreign countries.
To the extent that a Fund invests a significant portion of its assets in a
concentrated geographic area like Eastern Europe or Asia, the Fund will
generally have more exposure to regional economic risks associated with foreign
investments.
-22-
<PAGE>
. Currency Risk. The Growth, Renaissance and Innovation Funds may invest
directly in foreign currencies and in securities that trade in, and receive
revenues in, foreign currencies. To the extent that they do so, these Funds will
be subject to the risk that those currencies will decline in value relative to
the U.S. Dollar, or, in the case of hedging positions, that the U.S. Dollar will
decline in value relative to the currency being hedged. Currency rates in
foreign countries may fluctuate significantly over short periods of time for a
number of reasons, including changes in interest rates, intervention (or the
failure to intervene) by U.S. or foreign governments, central banks or
supranational entities such as the International Monetary Fund, or by the
imposition of currency controls or other political developments in the U.S. or
abroad.
. Concentration Risk. Concentration of investments in a small number of
issuers, industries or foreign currencies increases risk. To the extent that a
Fund invests in a relatively small number of issuers it will be more susceptible
to risks associated with a single economic, political or regulatory occurrence
than a more diversified Fund might be. Some of those issuers also may present
substantial credit or other risks. The Innovation Fund is vulnerable to events
affecting companies which use innovative technologies to gain a strategic,
competitive advantage in their industry and companies that provide and service
those technologies because it normally concentrates its investments in those
companies.
. Leveraging Risk. When a Fund is borrowing money or otherwise leveraging
its portfolio, the value of an investment in that Fund will be more volatile and
all other risks will tend to be compounded. This is because leverage tends to
exaggerate the effect of any increase or decrease in the value of a Fund's
portfolio securities. Each Fund may take on leveraging risk by using REVERSE
REPURCHASE AGREEMENTS AND OTHER BORROWINGS, by investing collateral from LOANS
OF PORTFOLIO SECURITIES or through the use of WHEN-ISSUED, DELAYED-DELIVERY OR
FORWARD COMMITMENT TRANSACTIONS. The Growth, Renaissance, Tax-Efficient Equity
and Innovation Funds may also take on leveraging risk by using DERIVATIVES. The
use of leverage may also cause a Fund to liquidate portfolio positions when it
would not be advantageous to do so in order to satisfy its obligations or to
meet segregation requirements.
. Interest Rate Risk. To the extent the Growth, Renaissance and
Innovation Funds purchase fixed income securities for investment or defensive
purposes, they will be subject to interest rate risk, a market risk relating to
investments in fixed income securities such as bonds and notes. As interest
rates rise, the value of fixed income securities in a Fund's portfolio are
likely to decrease.
. Credit Risk. All of the Funds are subject to credit risk. This is the
risk that the issuer or the guarantor of a fixed income security, or the
counterparty to a DERIVATIVES contract, REPURCHASE AGREEMENT or a LOAN OF
PORTFOLIO SECURITIES, is unable or unwilling to make timely principal and/or
interest payments, or to otherwise honor its obligations. Securities are subject
to varying degrees of credit risk, which are often reflected in their CREDIT
RATINGS.
. Management Risk. Each Fund is subject to management risk because it is
an actively managed investment portfolio. PIMCO Advisors, the Sub-Advisers and
each individual portfolio manager will apply investment techniques and risk
analyses in making investment decisions for the Funds, but there can be no
guarantee that these will produce the desired results.
-23-
<PAGE>
Management of the Funds
The business affairs of the Funds are managed under the direction of the Trust's
Board of Trustees. Information about the Trustees and the Trust's executive
officers is included in the Statement of Additional Information under the
heading "Management of the Trust."
Investment Adviser and Administrator
PIMCO Advisors serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator") for the Funds.
Subject to the supervision of the Board of Trustees, PIMCO Advisors is
responsible for managing, either directly or through others selected by it, the
investment activities of the Funds and the Funds' business affairs and other
administrative matters.
PIMCO Advisors is located at 800 Newport Center Drive, Newport Beach,
California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of September 30, 1999, PIMCO Advisors
and its subsidiary partnerships had more than $256 billion in assets under
management.
PIMCO Advisors has retained investment management firms ("Sub-Advisers") to
manage each Fund's investments, except that the PIMCO Equity Advisors division
of PIMCO Advisors manages the investments of the Growth, Renaissance and
Innovation Funds (PIMCO Equity Advisors is also referred to as a "Sub-Adviser"
in this capacity). See "Sub-Advisers" below.
PIMCO Advisors has retained its affiliate, Pacific Investment Management
Company, to provide various administrative and other services required by the
Funds in its capacity as sub-administrator. PIMCO Advisors and the sub-
administrator may retain other affiliates to provide certain of these services.
. Advisory Fees. Each Fund pays PIMCO Advisors fees in return for
providing or arranging for the provisions of investment advisory services. In
the case of Funds for which PIMCO Advisors has retained a separate Sub-Adviser,
PIMCO Advisors (and not the Fund) pays a portion of the advisory fees it
receives to the Sub-Adviser in return for its services.
For the fiscal year ended June 30, 1999, the Funds paid monthly advisory
fees to PIMCO Advisors at the following annual rates (stated as a percentage of
the average daily net assets of each Fund taken separately):
<TABLE>
<CAPTION>
Advisory
Fund Fees
==================================================================
<S> <C>
Capital Appreciation, Mid-Cap Growth, Equity Income, .45%
Value and Tax-Efficient Equity Funds
- ------------------------------------------------------------------
Growth Fund .50%
- ------------------------------------------------------------------
Renaissance Fund .60%
- ------------------------------------------------------------------
Innovation Fund .65%
</TABLE>
-24-
<PAGE>
. Administrative Fees. The Funds pay for the administrative services they
require under a fee structure which is essentially fixed. Class D shareholders
of the Funds pay a single administrative fee to PIMCO Advisors, computed as a
percentage of the Fund's assets attributable in the aggregate to Class D shares.
PIMCO Advisors, in turn, provides or procures administrative services for Class
D shareholders and also bears the costs of various third-party services required
by the Funds, including audit, custodial, portfolio accounting, legal transfer
agency and printing costs. The result of this fee structure is an expense level
for Class D shareholders of each Fund that, with limited exceptions, is precise
and predictable under ordinary circumstances. 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).
For the fiscal year ended June 30, 1999, the Funds paid PIMCO Advisors
monthly administrative fees at the following annual rates (stated as a
percentage of the average daily net assets attributable in the aggregate to the
Fund's Class A, Class B and Class C shares):
<TABLE>
<CAPTION>
Fund Administrative Fees*
==================================================
<S> <C>
All Funds .65%
</TABLE>
* As described below under "12b-1 Plan for Class D Shares," the
administration agreement includes a plan adopted in conformity with Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act") which provides for the
payment of up to .25% of the .65% Administrative Fee Rate as reimbursement for
expenses in respect of activities that may be deemed to be primarily intended to
result in the sale of Class D shares. In the "Summary Information" section
above, the "Annual Fund Operating Expenses" table provided under "Your Expenses"
for each Fund shows the .65% Administrative Fees rate under two separate columns
entitled "Administrative Fees" (.40%) and "Distribution and/or Service (12b-1)
Fees" (.25%).
. 12b-1 Plan for Class D Shares. 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 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 distribution of Class D shares and/or
the provision of shareholder services. Because 12b-1 fees would be paid out of a
Fund's Class D share assets on an ongoing basis, over time these fees would
increase the cost of your investment in Class D shares and may cost you more
than other types of sales charges.
-25-
<PAGE>
Sub-Advisers
Each Sub-Adviser has full investment discretion and makes all determinations
with respect to the investment of a Fund's assets. The following provides
summary information about each Sub-Adviser, including the Fund(s) it manages.
<TABLE>
<CAPTION>
Sub-Adviser* Funds
- --------------------------------------------------------------------------
<S> <C>
PIMCO Equity Advisors Division of PIMCO Growth, Renaissance
Advisors ("PIMCO Equity Advisors") and Innovation
33 Maiden Lane
New York, NY 10038
- --------------------------------------------------------------------------
Cadence Capital Management ("Cadence") Capital Appreciation
Exchange Place, 53 State Street and Mid-Cap Growth
Boston, MA 02109
- --------------------------------------------------------------------------
NFJ Investment Group ("NFJ") Equity Income and Value
2121 San Jacinto, Suite 1840
Dallas, TX 75201
- --------------------------------------------------------------------------
Parametric Portfolio Associates ("Parametric") Tax-Efficient Equity
7310 Columbia Center, 701 Fifth Avenue
Seattle, WA 98104
</TABLE>
_________________________________
* Each Sub-Adviser is either a division or a sub-partnership of PIMCO
Advisors.
-26-
<PAGE>
The following provides additional information about each Sub-Adviser and
the individual portfolio managers who have primary responsibility for managing
the Funds' investments.
PIMCO Equity Advisors, a division of PIMCO Advisors, provides equity-
related advisory services to mutual funds and institutional accounts. See
"Investment Adviser and Administrator" above for additional information about
PIMCO Advisors.
. Individual Portfolio Managers. The following individuals of PIMCO Equity
Advisors have primary responsibility for the noted Funds. A different sub-
advisory firm served as Sub-Adviser for the Growth and Innovation Funds prior to
March 6, 1999 and for the Renaissance Fund prior to May 1999.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Growth Kenneth W. Corba 1999 Managing Director and Chief Investment
Officer of PIMCO Equity Advisors and a
Member of the Management Board of
PIMCO Advisors. Prior to joining PIMCO
Advisors, he was with Eagle Asset
Management from 1995 to 1998, serving in
various capacities including as Chief
Investment Officer and Portfolio Manager.
He was with Stein Roe and Farnham Inc.
from 1984 to 1995, serving in various
capacities including as Senior Vice
President and Portfolio Manager.
Renaissance John K. Schneider 1999 Senior Portfolio Manager of PIMCO Equity
Advisors. Prior to joining PIMCO
Advisors, he was a partner and Portfolio
Manager of Schneider Capital Management
(from 1996 to 1999).
Innovation Dennis P. McKechnie 1998 Portfolio Manager of PIMCO Equity
Advisors. Prior to joining PIMCO
Advisors, he was with Columbus Circle
Investors from 1991 to 1999, serving in
various capacities including as Portfolio
Manager.
</TABLE>
-27-
<PAGE>
Cadence, an affiliated sub-partnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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,
1999 of approximately $6.5 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for each of the noted Funds.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Capital Appreciation David B. Breed 1991 (Inception) Managing Director, Chief Executive
Officer and founding partner of Cadence.
Member of the Management Board of
PIMCO Advisors
William B. Bannick 1992 Managing Director and Executive Vice
President of Cadence.
Katherine A. Burdon 1993 Managing Director and Portfolio Manager
at Cadence.
Peter B. McManus 1994 Director of Fund Management at Cadence.
Previously, he served as a Vice President
of Bank of Boston from 1991 to 1994.
Mid-Cap Growth Messrs. Breed, Same as Capital See above.
Bannick and McManus and Appreciation Fund
Ms. Burdon
</TABLE>
NFJ, an affiliated sub-partnership of PIMCO Advisors, provides advisory
services to mutual funds and institutional accounts. 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, 1999 of
approximately $2.2 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for the noted Funds.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Equity Income Chris Najork 1991 (Inception) Managing Director and founding partner
of NFJ.
Benjamin Fischer 1991 (Inception) Managing Director and founding partner
of NFJ.
Value Messrs. Najork 1991 (Inception) See above.
and Fischer
Paul A. Magnuson 1995 Research analyst at NFJ. Previously, he
was with NationsBank Texas from 1985 to
1992, serving in various capacities
including as Financial Analyst.
</TABLE>
-28-
<PAGE>
Parametric, an affiliated sub-partnership of PIMCO Advisors, provides
advisory services to mutual funds and institutional accounts. 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, 1999 of approximately $3.9 billion.
. Individual Portfolio Managers. The following individuals share primary
responsibility for the Tax-Efficient Equity Fund.
<TABLE>
<CAPTION>
Fund Portfolio Managers Since Recent Professional Experience
<S> <C> <C> <C>
Tax-Efficient Equity David Stein 1998 (Inception) Managing Director of Parametric.
Previously, he served in Investment
Research at GTE Corporation from 1995 to
1996, in Equity Research at Vanguard
Group from 1994 to 1995 and in Investment
Research at IBM Corporation from 1977 to
1994.
Tom Seto 1998 (Inception) Vice President of Parametric. Previously,
he was with Barclays Global Investors from
1991 to 1998, serving in various capacities
including as head of U.S. Equity Index
Investments and Portfolio Manager.
Cliff Quisenberry 1998 (Inception) Vice President of Parametric. Previously,
he served as Vice President and Portfolio
Manager at Cutler & Co. (from 1990 to
1994) and as a Securities Analyst and
Portfolio Manager at Fred Alger
Management (from 1987 to 1988).
</TABLE>
-29-
<PAGE>
How Fund Shares Are Priced
The Trust calculates the net asset value ("NAV") of a Fund's Class D shares by
taking the total value of the Fund's assets attributable to Class D shares,
subtracting the Fund's liabilities attributable to that class, and dividing by
the Fund's total number of Class D shares outstanding. Fund shares are valued
as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New
York Stock Exchange (the "Exchange") each day the Exchange is open.
The Funds value their portfolio securities and other investments for which
market quotations are readily available at market value. Certain fixed income
securities for which daily market quotations are not readily available may be
valued, pursuant to guidelines established by the Board of Trustees, with
reference to fixed income securities with more readily attainable prices and
durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Exchange traded options, futures, and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other portfolio securities and assets are valued at
their fair value as determined in good faith by the Trustees or persons acting
at their direction.
Fund investments quoted in foreign currencies are translated into U.S.
dollars using foreign exchange quotations provided by independent dealers. As a
result, the NAV of a Fund's shares may be affected by changes in the value of
foreign currencies in relation to the U.S. dollar. Because foreign markets may
be open at different times than the Exchange, the NAV of a Fund's shares may
change on days when the Exchange is closed and you are not able to buy, redeem
or exchange shares. Information that becomes known to the Trust or its agents
after NAV is calculated on a particular day may be considered in pricing Fund
shares thereafter, but will not be used to retroactively adjust the price of a
security as determined earlier that day or on a prior day. The values of
portfolio securities may be affected by events that occur between the time the
securities are valued and the close of regular trading on the Exchange. These
events may not be reflected in the Funds' NAV calculations. If events occur
during this period that have a material effect on the value of portfolio
securities held by a Fund, the securities may be valued at their fair value as
determined by PIMCO Advisors or a Sub-Adviser and approved in good faith by the
Board of Trustees.
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<PAGE>
How to Buy and Sell Shares
The following section provides basic information about how to buy, sell (redeem)
and exchange Class D shares of the Funds.
General Information
. Financial Service Firms. Broker-dealers, registered investment
advisers and other financial service firms provide varying investment products,
programs or accounts, 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 maintenance services required by your account,
including, without limitation, transfers of registration and dividend payee
changes. Firms may also perform other functions, including generating
confirmation statements and disbursing cash dividends, and may arrange with
their clients for other investment or administrative services. Your firm may
independently establish and charge you transaction fees and/or other additional
amounts for such services, which could reduce your investment returns on Class D
shares of the Funds.
Your financial service firm may have omnibus accounts and similar
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 the Funds, PIMCO Advisors or an affiliate (normally not to exceed an annual
rate of 0.35% of a Fund's average daily net assets attributable 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 establish certain privileges with respect to purchases, redemptions and
exchanges of Class D shares or the reinvestment of dividends. Please contact
your firm for information.
This Prospectus should be read in connection with your firm's materials
regarding its fees and services.
. Calculation of Share Price and Redemption Payments. When you buy or
sell (redeem) Class D shares of the Funds, you pay or receive a price equal to
the NAV of the shares. NAVs are calculated as of the close of regular trading
(normally, 4:00 p.m. Eastern time) on the Exchange each day the Exchange is
open. See "How Fund Shares Are Priced" above for details. Generally, purchase
and redemption orders for Fund shares are processed at the NAV next calculated
after your order is received by the Distributor. In addition, orders received
by the Distributor from financial service firms after NAV is determined that day
will be processed at that day's NAV 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.,
Eastern time).
The Trust does not calculate NAVs or process orders on days when the
Exchange is closed. If your purchase or redemption order is received by the
Distributor on a day when the Exchange is closed, it will be processed on the
next succeeding day when the Exchange is open (according to the succeeding day's
NAV).
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<PAGE>
Buying Shares
Class D shares of each Fund are continuously offered through financial
service firms, such as broker-dealers or registered investment advisers, with
which the 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
"Financial Service Firms" above.
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. If you wish to purchase shares of the Funds directly from
the Trust or the Distributor, you should inquire about the other classes of
shares offered by the Trust. Please call the Distributor at 1-888-87-PIMCO for
information about other investment options.
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. 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 accounts
only through your financial service firm. In certain circumstances, 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 relationship with your firm). In such circumstances, please contact the
Distributor at 1-888-87-PIMCO for information about your account. In the
interest of economy and convenience, certificates for Class D shares will not be
issued.
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 Exchange is restricted or during an emergency which makes it
impracticable for the Funds to dispose of their securities or to determine
fairly the value of their net assets, or during any other period as permitted by
the Securities and Exchange Commission for the protection of investors.
. Investment Minimums. The following investment minimums apply for
purchases of Class D shares.
<TABLE>
<CAPTION>
Initial Investment Subsequent Investments
- --------------------------------------------
<S> <C>
$2,500 per Fund $100 per Fund
</TABLE>
Your financial service firm may impose different investment minimums than
the Trust. For example, if your firm maintains an omnibus account with a
particular Fund, the firm may impose higher or lower investment minimums than
the Trust when you invest in Class D shares of the Fund through your firm.
Please contact your firm for information.
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<PAGE>
Exchanging Shares
You may exchange your Class D shares of any Fund for Class D shares of any
other Fund or series of PIMCO Funds: Pacific Investment Management Series that
offers Class D shares. Shares are exchanged on the basis of their respective
NAVs next calculated after your exchange order is received by the Distributor.
Currently, the Trust does not charge any exchange fees or charges. Your
financial service firm may impose various fees and charges, investment minimums
and other requirements with respect to exchanges. Please contact your financial
service firm to exchange your shares and for additional information about the
exchange privilege.
The Trust reserves the right to refuse exchange purchases if, in the
judgment of PIMCO Advisors, 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 PIMCO Advisors 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 has no current intention 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' advance notice to your financial service firm of any termination or
material modification of the exchange privilege.
Selling Shares
You can sell (redeem) Class D shares through your financial service firm on
any day the Exchange is open. You do not pay any fees or other charges to the
Trust or the Distributor when you sell your shares, although your financial
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 contact the Distributor at 1-888-87-PIMCO for
information regarding how to sell your shares directly to the Trust.
Your financial service firm is obligated to transmit your redemption orders
to the Distributor promptly and is responsible for ensuring that your redemption
request is in proper form. Your financial service firm will be responsible for
furnishing all necessary documentation to the Distributor or the Trust's
transfer agent and may charge you for its services. 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. Redemptions of Fund shares may be suspended when
trading on the Exchange is restricted or during an emergency which makes it
impracticable for the Funds to dispose of their securities or to determine
fairly the value of their net assets, or during any other period as permitted by
the Securities and Exchange Commission for the protection of investors. Under
these and other unusual circumstances, the Trust may suspend redemptions or
postpone payment for more than seven days, as permitted by law.
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<PAGE>
Redemptions in Kind
The Trust had agreed 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 may 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 your shares would ever be redeemed in kind. If your shares are
redeemed in kind, you should expect to incur transaction costs upon the
disposition of the securities received in the distribution.
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<PAGE>
Fund Distributions
Each Fund distributes substantially all of its net investment income to
shareholders in the form of dividends. You begin earning dividends on Fund
shares the day after the Trust receives your purchase payment. Dividends paid
by each Fund with respect to its Class D shares are calculated in the same
manner and at the same time. The following shows when each Fund intends to
declare and distribute income dividends to shareholders of record.
<TABLE>
<CAPTION>
At Least
Fund Annually Quarterly
- ---------------------------------------------------------------------------------
<S> <C> <C>
Growth, Capital Appreciation, Mid-Cap Growth, Tax-
Efficient Equity and Innovation Funds .
- ---------------------------------------------------------------------------------
Equity Income, Renaissance and Value Funds .
</TABLE>
In addition, each Fund distributes any net capital gains it earns from the
sale of portfolio securities to shareholders no less frequently than annually.
Net short-term capital gains may be paid more frequently.
You can choose from the following distribution options:
. Reinvest all distributions in additional Class D shares of your Fund
at NAV. This will be done unless you elect another option.
. Invest all distributions in Class D shares of any other Fund or
another series of the Trust or PIMCO Funds: Pacific Investment
Management Series which offers Class D shares at NAV. You must have an
account existing in the Fund or series selected for investment with
the identical registered name. This option must be elected when your
account is set up.
. Receive all distributions in cash (either paid directly to you or
credited to your account with your financial service firm). This
option must be elected when your account is set up.
You financial service firm may offer additional distribution reinvestment
programs or options. Please contact your firm for details.
You do not pay any sales charges on shares you receive through the
reinvestment of Fund distributions. If you elect to receive Fund distributions
in cash and the postal or other delivery service is unable to deliver checks to
your address of record, the distributions will automatically be invested in the
Money Market Fund of PIMCO Funds: Pacific Investment Management Series until
you are located.
For further information on distribution options, please contact your
financial service firm or call the Distributor at 1-888-87-PIMCO.
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<PAGE>
Tax Consequences
. Taxes on Fund distributions. If you are subject to U.S. federal income
tax, you will be subject to tax on Fund distributions whether you received them
in cash or reinvested them in additional shares of the Funds. For federal
income tax purposes, Fund distributions will be taxable to you as either
ordinary income or capital gains.
Fund dividends (i.e., distributions of investment income) are taxable to
you as ordinary income. Federal taxes on Fund distributions of gains are
determined by how long the Fund owned the investments that generated the gains,
rather than how long you have owned your shares. Distributions of gains from
investments that a Fund owned for more than 12 months will generally be taxable
to you as capital gains. Distributions of gains from investments that the Fund
owned for 12 months or less will generally be taxable to you as ordinary income.
Fund distributions are taxable to you even if they are paid from income or
gains earned by a Fund prior to your investment and thus were included in the
price you paid for your shares. For example, if you purchase shares on or just
before the record date of a Fund distribution, you will pay full price for the
shares and may receive a portion of your investment back as a taxable
distribution.
. Taxes when you sell (redeem) or exchange your shares. Any gain resulting
from the sale of Fund shares will generally be subject to federal income tax.
When you exchange shares of a Fund for shares of another series, the transaction
will be treated as a sale of the Fund shares for these purposes, and any gain on
those shares will generally be subject to federal income tax.
. Consult your tax advisor about other possible tax consequences. This is a
summary of certain federal income tax consequences of investing in a Fund. You
should consult your tax advisor for more information on your own tax situation,
including possible state, local and foreign tax consequences.
. A Note on the Tax-Efficient Equity Fund. As noted under "Summary
Information" above, the Tax-Efficient Equity Fund utilizes a number of tax-
efficient management techniques designed to minimize taxable distributions. For
instance, the Fund generally seeks to minimize realized gains and, when
realizing gains, attempts to realize gains that will be taxed as capital gains
(i.e., on investments owned for more than 12 months). Although the Fund
attempts to minimize taxable distributions, it may be expected to earn and
distribute taxable income and realize and distribute capital gains from time to
time.
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<PAGE>
Characteristics and Risks of Securities and
Investment Techniques
This section provides additional information about some of the principal
investments and related risks of the Funds described under "Summary Information"
above. It also describes characteristics and risks of additional securities and
investment techniques that may be used by the Funds from time to time. Most of
these securities and investment techniques are discretionary, which means that
the portfolio managers can decide whether to use them or not. This Prospectus
does not attempt to disclose all of the various types of securities and
investment techniques that may be used by the Funds. As with any mutual fund,
investors in the Funds must rely on the professional investment judgment and
skill of PIMCO Advisors, the Sub-Advisers and the individual portfolio managers.
Please see "Investment Objectives and Policies" in the Statement of Additional
Information for more detailed information about the securities and investment
techniques described in this section and about other strategies and techniques
that may be used by the Funds.
Fixed Income Securities and Defensive Strategies
Fixed income securities are obligations of the issuer to make payments of
principal and/or interest on future dates, and include corporate and government
bonds, notes, certificates of deposit, commercial paper, convertible securities
and mortgage-backed and other asset-backed securities.
The Capital Appreciation, Mid-Cap Growth, Equity Income, Value and Tax-
Efficient Equity Funds intend to be as fully invested in common stocks as
practicable at all times, although they may maintain a portion of their assets
(normally not more than 10%) in U.S. Government securities, high quality fixed
income securities, money market obligations and cash to pay certain Fund
expenses and to meet redemption requests. This means that these Funds will not
invest in fixed income securities as a defensive investment strategy and
therefore they may be particularly vulnerable to general declines in stock
prices.
The Growth, Renaissance and Innovation Funds will each invest primarily in
common stocks, and may also invest in other kinds of equity securities,
including preferred stocks and securities (including fixed income securities and
warrants) convertible into or exercisable for common stocks. Each of these
Funds may also invest a portion of its assets in fixed income securities. These
Funds may also invest up to 100% of their respective assets in short-term U.S.
Government securities and other money market instruments for temporary defensive
purposes. These temporary defensive strategies would be inconsistent with the
investment objective and principal investment strategies of each of these Funds
and may affect the Fund's ability to achieve its investment objective.
Companies With Smaller Market Capitalizations
Each of the Funds may invest in securities of companies with market
capitalizations that are small compared to other publicly traded companies. The
Mid-Cap Growth Fund has substantial exposure to the risks described below
because it invests primarily in companies with medium-sized market
capitalizations, which are smaller than the largest companies.
Companies which are smaller and less well-known or seasoned than larger,
more widely held companies may offer greater opportunities for capital
appreciation, but may also involve risks different
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<PAGE>
from, or greater than, risks normally associated with larger companies. Larger
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 than smaller
companies. Smaller companies may have limited product lines, markets or
financial resources or may depend on a small, inexperienced management group.
Securities of smaller companies may trade less frequently and in lesser volume
than more widely held securities and their values may fluctuate more abruptly or
erratically than securities of larger companies. They may also trade in the
over-the-counter market or on a regional exchange, or may otherwise have limited
liquidity. These securities may therefore be more vulnerable to adverse market
developments than securities of larger companies. Also, there may be less
publicly available information about smaller companies or less market interest
in their securities as compared to larger companies, and it may take longer for
the prices of the securities to reflect the full value of a company's earnings
potential or assets.
Because securities of smaller companies may have limited liquidity, a Fund
may have difficulty establishing or closing out its positions in smaller
companies at prevailing market prices. 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. For these
reasons, 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
smaller capitalization securities, which could adversely affect performance.
Foreign Securities
The Growth, Renaissance and Innovation Funds may invest up to 15% of their
respective assets in securities which are traded principally in securities
markets outside the United States (Eurodollar certificates of deposit are
excluded for purposes of these limitations), and may invest without limit in
securities of foreign issuers that are traded in U.S. markets.
Investing in foreign securities involves special risks and considerations
not typically associated with investing in U.S. securities. Shareholders should
consider carefully the substantial risks involved for Funds that invest in
securities issued by foreign companies and governments of foreign countries.
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; and political
instability. 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 foreign securities markets may change independently of
each other. Also, 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. Investments in foreign securities may also involve higher custodial
costs than domestic investments and additional transaction costs with respect to
foreign currency conversions. Changes in foreign exchange rates also will
affect the value of securities denominated or quoted in foreign currencies.
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<PAGE>
Emerging Market Securities. To the extent that the Growth, Renaissance and
Innovation Funds invest in foreign securities, these Funds may invest in
securities of issuers based in countries with developing (or "emerging market")
economies. Investing in emerging market securities imposes risks different
from, or greater than, risks of investing in domestic securities or in foreign,
developed countries. These risks include: smaller market capitalization of
securities markets, which may suffer periods of relative illiquidity;
significant price volatility; restrictions on foreign investment; and possible
repatriation of investment income and capital. In addition, foreign investors
may be required to register the proceeds of sales and future economic or
political crises could lead to price controls, forced mergers, expropriation or
confiscatory taxation, seizure, nationalization or the creation of government
monopolies. The currencies of emerging market countries may experience
significant declines against the U.S. dollar, 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.
Additional risks of emerging market securities may include: greater social,
economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; companies that are
newly organized and small; differences in auditing and financial reporting
standards, which may result in unavailability of material information about
issuers; and less developed legal systems.
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 be
delayed in disposing of a portfolio security. Such a delay could result in
possible liability to a purchaser of the security.
Foreign Currencies
To the extent that the Growth, Renaissance and Innovation Funds invest
directly in foreign currencies or in securities that trade in, or receive
revenues in, foreign currencies, these Funds will be subject to currency risk.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by supply and demand and the
relative merits of investments in different countries, actual or perceived
changes in interest rates and other complex factors. 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. For example, significant uncertainty surrounds the
recent introduction of the euro (a common currency unit for the European Union)
in January 1999 and the effect it may have 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.
Foreign Currency Transactions. The Growth, Renaissance and Innovation
Funds may enter into forward foreign currency exchange contracts to reduce the
risks of adverse changes in foreign exchange rates. A forward foreign currency
exchange contract, which involves an obligation to purchase or sell a specific
currency at a future date at a price set at the time of the contract, reduces a
Fund's exposure to
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<PAGE>
changes in the value of the currency it will deliver and increases its exposure
to changes in the value of the currency it will receive for the duration of the
contract. The effect on the value of a Fund is similar to selling securities
denominated in one currency and purchasing securities denominated in another
currency. Contracts to sell foreign 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 to hedge against foreign exchange risk, to
increase exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one currency to another. 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.
Convertible Securities
Each Fund may invest in convertible securities. Convertible securities are
generally preferred stocks and other securities, including fixed income
securities and warrants, that are convertible into or exercisable for common
stock at either a stated price or a stated rate. The price of a convertible
security will normally vary in some proportion to changes in the price of the
underlying common stock because of this conversion or exercise feature.
However, the value of a convertible security may not increase or decrease as
rapidly as the underlying common stock. A convertible security will normally
also provide income and is subject to interest rate risk. 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.
Credit Ratings and Unrated Securities
The Funds may invest in securities based on their credit ratings assigned
by rating agencies such as Moody's Investors Service, Inc. ("Moody's") and
Standard & Poor's Ratings Services ("S&P"). Moody's, S&P and other rating
agencies are private services that provide ratings of the credit quality of
fixed income securities, including convertible securities. The Appendix to the
Statement of Additional Information describes the various ratings assigned to
fixed income securities by Moody's and S&P. Ratings assigned by a rating agency
are not absolute standards of credit quality and do not evaluate market risk.
Rating agencies may fail to make timely changes in credit ratings and an
issuer's current financial condition may be better or worse than a rating
indicates. A Fund will not necessarily sell a security when its rating is
reduced below its rating at the time of purchase. PIMCO Advisors and the Sub-
Advisers do not rely solely on credit ratings, and develop their own analysis of
issuer credit quality.
A Fund may purchase unrated securities (which are not rated by a rating
agency) if its portfolio manager determines that the security is of comparable
quality to a rated security that the Fund may purchase. Unrated securities may
be less liquid than comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's comparative credit
rating.
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<PAGE>
Derivatives
Each Fund (except the Capital Appreciation, Mid-Cap Growth, Equity Income
and Value Funds) may, but is not required to, use a number of derivative
instruments for risk management purposes or as part of its investment
strategies. Generally, derivatives are financial contracts whose value depends
upon, or is derived from, the value of an underlying asset, reference rate or
index, and may relate to stocks, bonds, interest rates, currencies or currency
exchange rates, commodities, and related indexes. A Fund may not employ any of
these strategies and there is no assurance that any derivatives strategy used by
a Fund will succeed.
Examples of derivative instruments that the Funds may use include options
contracts, futures contracts, options on futures contracts and swap agreements.
The Growth, Renaissance, Tax-Efficient Equity and Innovation Funds may purchase
and sell (write) call and put options on securities, securities indexes and
foreign currencies. Each of these Funds may purchase and sell futures contracts
and options thereon with respect to securities, securities indexes and foreign
currencies. The Tax-Efficient Equity Fund may enter into swap agreements with
respect to securities indexes. A description of these and other derivative
instruments that the Funds may use are described under "Investment Objectives
and Policies" in the Statement of Additional Information.
A Fund's use of derivative instruments involves risks different from, or
greater than, the risks associated with investing directly in securities and
other more traditional investments. A description of various risks associated
with particular derivative instruments is included in "Investment Objectives and
Policies" in the Statement of Additional Information. The following provides a
more general discussion of important risk factors relating to all derivative
instruments that may be used by the Funds and that have been discussed above
under "Summary of Principal Risks - Derivatives Risk."
Management Risk Derivative products are highly specialized instruments
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 instrument 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 derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately 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 component, adverse
changes in the value or level of the underlying asset, 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 a 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. To limit leverage risk,
each Fund will segregate assets determined to be liquid by PIMCO Advisors or
a
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<PAGE>
Sub-Adviser 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 derivative instruments.
Lack of Availability Because the markets for certain derivative instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances for risk management or other purposes. There is no assurance that
a Fund will engage in derivatives transactions at any time or from time to time.
A Fund's ability to use derivatives may also be limited by certain regulatory
and tax considerations.
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 a Fund's interest. If a portfolio manager
incorrectly forecasts the values of securities, currencies or interest rates or
other economic factors in using derivatives for a Fund, the Fund might have been
in a better position if it had not entered into the transaction at all. 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 other Fund investments. A Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to a Fund. In addition, a Fund's use of
derivatives 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.
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 a
number of conditions are satisfied, including that the loan is fully
collateralized. Please see "Investment Objectives and Policies" in the
Statement of Additional Information for details. When a Fund lends portfolio
securities, its investment performance will continue to reflect changes in the
value of the securities loaned, and the Fund will also receive a fee or interest
on the collateral. Securities lending involves the risk of loss of rights in
the collateral or delay in recovery of the collateral if the borrower fails to
return the security loaned or becomes insolvent. A Fund may pay lending fees to
the party arranging the loan.
Short Sales
Each Fund may make short sales as part of its overall portfolio management
strategies or to offset a potential decline in the value of a security. A short
sale involves the sale of a security that is borrowed from a broker or other
institution to complete the sale. A Fund may only enter into short selling
transactions if the security sold short is held in the Fund's portfolio or if
the Fund has the right to acquire the security without the payment of further
consideration. For these purposes, a Fund may also hold or
-42-
<PAGE>
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 a Fund to the risk that it will be required to
acquire, convert or exchange securities to replace the borrowed securities (also
known as "covering" the short position) at a time when the securities sold short
have appreciated in value, thus resulting in a loss to the Fund.
When-Issued, Delayed Delivery and Forward Commitment Transactions
Each Fund may purchase securities which it is eligible to purchase on a
when-issued basis, may purchase and sell such securities for delayed delivery
and may make contracts to purchase such securities for a fixed price at a future
date beyond normal settlement time (forward commitments). When-issued
transactions, delayed delivery purchases and forward commitments involve a risk
of loss if the value of the securities declines prior to the settlement date.
This risk is in addition to the risk that the Fund's other assets will decline
in the value. Therefore, these transactions may result in a form of leverage
and increase a Fund's overall investment exposure. 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 to cover these positions.
Repurchase Agreements
Each Fund may enter into repurchase agreements, in which the Fund purchases
a security from a bank or broker-dealer that agrees to repurchase the security
at the Fund's cost plus interest within a specified time. If the party agreeing
to repurchase should default, the Fund will seek to sell the securities which it
holds. This 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 its portfolio maintained in cash. Repurchase agreements
maturing in more than seven days are considered illiquid securities.
Reverse Repurchase Agreements and Other Borrowings
Each Fund may enter into reverse repurchase agreements, subject to the
Fund's limitations on borrowings. A reverse repurchase agreement involves the
sale of a security by a Fund and its agreement to repurchase the instrument at a
specified time and price, and may be considered a form of borrowing for some
purposes. A Fund will segregate assets determined to be liquid by PIMCO
Advisors or a Sub-Adviser in accordance with procedures established by the Board
of Trustees to cover its obligations under reverse repurchase agreements. 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. Reverse repurchase agreements and other forms of
borrowings may create leveraging risk for a Fund.
Portfolio Turnover
With the exception of the Tax-Efficient Equity Fund, the length of time a
Fund has held a particular security is not generally a consideration in
investment decisions. A change in the securities held by a Fund is known as
"portfolio turnover." Each Fund may engage in frequent and active trading of
portfolio securities to achieve its investment objective, particularly during
periods of volatile market
-43-
<PAGE>
movements, although the Tax-Efficient Equity Fund will generally attempt to
limit portfolio turnover as part of its tax-efficient management strategies.
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 also result in realization of taxable capital gains,
including short-term capital gains (which are generally taxed at ordinary income
tax rates).
Illiquid Securities
Each Fund may invest in securities that are illiquid so long as not more
than 15% of the value of the Fund's net assets (taken at market value at the
time of investment) would be invested in such securities. Certain illiquid
securities may require pricing at fair value as determined in good faith under
the supervision of the Board of Trustees. A Fund 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. Please see "Investment Objectives and
Policies" in the Statement of Additional Information for a listing of various
securities that are generally considered to be illiquid for these purposes.
Restricted securities, i.e., securities subject to legal or contractual
restrictions on resale, may be illiquid. However, some restricted securities
(such as securities issued pursuant to Rule 144A under the Securities Act of
1933 and certain commercial paper) may be treated as liquid, although they may
be less liquid than registered securities traded on established secondary
markets.
Investment in Investment Companies
Each of the Funds may invest up to 5% of its assets in other investment
companies. As a shareholder of an investment company, a Fund may indirectly
bear service and other fees which are in addition to the fees the Fund pays its
service providers.
Year 2000 Readiness Disclosure
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, this could have an adverse impact on the Funds' operations
and services provided to shareholders. PIMCO Advisors, the Sub-Advisers, the
Distributor, the Trust's shareholder servicing and transfer agent and 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.
-44-
<PAGE>
Changes in Investment Objectives and Policies
The investment objective of each of the Growth, 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.
Unless otherwise stated, all other investment policies of the Funds may be
changed by the Board of Trustees without shareholder approval. If there is a
change in a Fund's investment objective or policies, 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.
Percentage Investment Limitations
Unless otherwise stated, all percentage limitations on Fund investments
listed in this Prospectus will apply at the time of investment. A Fund would
not violate these limitations unless an excess or deficiency occurs or exists
immediately after and as a result of an investment.
Other Investments and Techniques
The Funds may invest in other types of securities and use a variety of
investment techniques and strategies which are not described in this Prospectus.
These securities and techniques may subject the Funds to additional risks.
Please see the Statement of Additional Information for additional information
about the securities and investment techniques described in this Prospectus and
about additional securities and techniques that may be used by the Funds.
-45-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand
the financial performance of Class D shares of each Fund since the
class of shares was first offered. Certain information reflects
financial results for a single Fund share. The total returns in
the table represent the rate that an investor would have earned or
lost on an investment in Class D shares of a Fund, assuming
reinvestment of all dividends and distributions. This information
has been audited by PricewaterhouseCoopers LLP, whose report,
along with each Fund's financial statements, are included in the
Trust's annual report to shareholders. The annual report is
incorporated by reference in the Statement of Additional
Information and is available free of charge upon request from the
Distributor. The Growth Fund did not offer Class D shares during
the periods shown.
<TABLE>
<CAPTION>
Net Realized/ Total Income Dividends Distributions
Year or Net Asset Value Net Unrealized (Loss) From Net From Net
Period Beginning Investment Gain (Loss) on From Investment Investment Realized Capital
Ended of Period Income (Loss) Investments Operations Income Gains
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Appreciation Fund
06/30/99 $ 26.01 $ 0.06 (a) $ 2.34 (a) $ 2.40 $ (0.13) $ (1.65)
04/08/98-06/30/98 25.41 0.02 (a) 0.58 (a) 0.60 0.00 0.00
Equity Income Fund
06/30/99 $ 16.04 $ 0.40 (a) $ 1.27 (a) $ 1.67 $ (0.36) $ (1.76)
04/08/98-06/30/98 16.71 0.09 (a) (0.66)(a) (0.57) (0.10) 0.00
Innovation Fund (i)
06/30/99 $ 24.28 $ (0.29)(a) $ 14.79 (a) $ 14.50 $ 0.00 $ (1.26)
04/08/98-06/30/98 21.50 (0.05)(a) 2.83 (a) 2.78 0.00 0.00
Mid-Cap Growth Fund
06/30/99 $ 23.99 $ 0.03 (a) $ (0.04)(a) $ (0.01) $ (0.01) $ (1.07)
04/08/98-06/30/98 23.97 0.00 (a) 0.02 (a) 0.02 0.00 0.00
Renaissance Fund (i)
06/30/99 $ 19.10 $ 0.00 (a) $ 1.45 (a) $ 1.45 $ 0.00 $ (2.33)
04/08/98-06/30/98 18.99 0.01 (a) 0.10 (a) 0.11 0.00 0.00
Tax-Efficient Equity Fund
07/10/98-06/30/99 $ 10.00 $ 0.03 (a) $ 1.56 (a) $ 1.59 $ 0.00 $ 0.00
Value Fund
06/30/99 $ 15.64 $ 0.23 (a) $ 1.37 (a) $ 1.60 $ (0.23) $ (1.72)
04/08/98-06/30/98 15.99 0.04 (a) (0.34)(a) (0.30) (0.05) 0.00
</TABLE>
- -------
* Annualized
(a)Per share amounts based upon average number of shares outstanding during the
period.
(i) The information provided for the Innovation and Renaissance Funds reflects
results of operations under the Funds' former Sub-Adviser through March 6,
1999 and May 7, 1999, respectively; the Funds would not necessarily have
achieved the performance results shown above under their current investment
management arrangements.
-46-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ditributionss Ratio of Investment
i Excess ofn Net Asset Expenses to Income (Loss) to
Nt Realizede Total Value End of Net Assets End Average Net Average Net Portfolio
Caital Gainsp Distributions Period Total Return of Period (000s) Assets Assets Turnover Rate
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ (1.78) $ 26.63 10.17% $ 339 1.10% 0.24% 120%
0.00 0.00 26.01 2.36 118 1.10* 0.27* 75
$ 0.00 $ (2.12) $ 15.59 12.21% $ 106 1.10% 2.73% 76%
0.00 (0.10) 16.04 (3.43) 104 1.10* 2.23* 45
$ 0.00 $ (1.26) $ 37.52 61.62% $ 18,366 1.30% (0.89)% 119%
0.00 0.00 24.28 12.93 139 1.30* (0.99)* 100
$ 0.00 $ (1.08) $ 22.90 0.25% $ 359 1.10% 0.16% 85%
0.00 0.00 23.99 0.08 142 1.10* 0.03* 66
$ 0.00 $ (2.33) $ 18.22 10.01% $ 192 1.25% (0.02)% 221%
0.00 0.00 19.10 0.58 126 1.25* 0.21* 192
$ 0.00 $ 0.00 $ 11.59 15.90% $ 869 1.11%* 0.30%* 13%
$ 0.00 $ (1.95) $ 15.29 12.00% $ 118 1.10% 1.61% 101%
0.00 (0.05) 15.64 (1.85) 98 1.10* 1.23* 77
</TABLE>
-47-
<PAGE>
[Back Cover Page]
PIMCO FUNDS: Multi-Manager Series
The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the Funds.
The SAI and the financial statements included in the Funds' most recent annual
report to shareholders are incorporated by reference into this Prospectus, which
means they are part of this Prospectus for legal purposes. The Funds' annual
report discusses the market conditions and investment strategies that
significantly affected each Fund's performance during its last fiscal year.
You may get free copies of any of these materials, request other information
about a Fund, or make shareholder inquiries by calling 1-888-87-PIMCO, or by
writing to:
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902
You may also contact your financial service firm for additional information.
You may review and copy information about the Trust, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust on the Commission's Web site at www.sec.gov. You
may get copies of this information, with payment of a duplication fee, by
writing the Public Reference Section of the Commission, Washington, D.C. 20549-
6009. You may need to refer to the Trust's file number under the Investment
Company Act, which is 811-6161.
You can also visit our Web site at www.pimcofunds.com for additional information
about the Funds.
[LOGO]
File no. 811-6161
-48-
<PAGE>
[Front Cover]
PIMCO Funds Prospectus
Asset Allocation ACTIVELY MANAGED PORTFOLIOS OF SELECT PIMCO FUNDS
Series
November 1, 1999
Institutional and Administrative
Share Classes
This Prospectus describes three actively managed mutual fund portfolios offered
by PIMCO Funds: Multi-Manager Series. Each Portfolio invests in a diversified
portfolio of other 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.
90/10 Portfolio
Seeks long-term capital appreciation. The Portfolio normally invests
approximately 90% of its assets in PIMCO Stock Funds and 10% in PIMCO Bond
Funds.
60/40 Portfolio
Seeks long-term capital appreciation and current income. The Portfolio normally
invests approximately 60% of its assets in PIMCO Stock Funds and 40% in PIMCO
Bond Funds.
30/70 Portfolio
Seeks current income, with long-term capital appreciation as a secondary
objective. The Portfolio normally invests approximately 30% of its assets in
PIMCO Stock Funds and 70% in PIMCO Bond Funds.
Investors may call the Trust at 1-800-927-4648 to find out more about the
Portfolios and other funds in the PIMCO Funds family, and may also visit our
website at www.pimcofunds.com.
The Prospectus explains what you should know about the Portfolios before
investing. Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Summary Information........................................................................ 3
Investment Objectives and Summary of Principal Investment Strategies.................. 3
A Note on Performance Information..................................................... 4
Summary of Principal Risks............................................................ 5
Your Expenses......................................................................... 7
Investment Objectives and Principal Investment Strategies.................................. 9
Underlying Funds........................................................................... 14
Additional Information About Principal Risks............................................... 19
Other Risk Information..................................................................... 26
Management of the Portfolios............................................................... 27
Investment Options (Institutional Class and Administrative Class Shares)................... 31
Purchases, Redemptions and Exchanges....................................................... 32
How Portfolio Shares Are Priced............................................................ 37
Portfolio Distributions.................................................................... 38
Tax Consequences........................................................................... 38
Financial Highlights....................................................................... 40
</TABLE>
-2-
<PAGE>
Summary Information
This summary section identifies each Portfolio's investment objective,
principal investments and strategies, and principal risks. A more detailed
description of the Portfolios and their investment strategies and related risks
is provided later in the Prospectus under "Investment Objectives and Principal
Investment Strategies," "Underlying Funds" and "Additional Information About
Principal Risks."
Investment Objectives and Summary of Principal Investment Strategies
The Portfolios are intended for investors who prefer to have their asset
allocation decisions made by professional money managers. As shown in the chart
below, each Portfolio has a distinct investment objective which it seeks to
achieve by investing according to specified equity and fixed income targets and
ranges among certain Funds in the PIMCO Funds family. The PIMCO Funds in which
the Portfolios invest are called Underlying Funds in this Prospectus.
Some of the Underlying Funds invest primarily in equity securities and are
called Underlying Stock Funds. Other Underlying Funds invest primarily in fixed
income securities, including money market instruments, and are called Underlying
Bond Funds. The Portfolios are named according to 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 Underlying Bond Funds.
<TABLE>
<CAPTION>
Investment Objective Allocation Strategy
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
90/10 PORTFOLIO Seeks 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, with a typical allocation range of
80% - 100% in equity and 0% - 20% in fixed income (including
money market).
- ---------------------------------------------------------------------------------------------------------------------------------
60/40 PORTFOLIO Seeks long-term capital appreciation Under normal conditions, approximately 60% of the Portfolio's
and current income assets will be allocated among Underlying Stock Funds and 40%
among Underlying Bond Funds, with a typical allocation range of
50% - 70% in equity and 30% - 50% in fixed income (including
money market).
- ---------------------------------------------------------------------------------------------------------------------------------
30/70 PORTFOLIO Seeks current income, with long-term Under normal conditions, approximately 30% of the Portfolio's
capital appreciation as a secondary assets will be allocated among Underlying Stock Funds and 70%
objective among Underlying Bond Funds, with a typical allocation range of
25% - 35% in equity and 65% - 75% in fixed income (including
money market).
</TABLE>
-3-
<PAGE>
Each Portfolio normally invests all of its assets in Underlying Funds. A
Portfolio may invest in any or all of the Underlying Funds, but will normally
invest in only a portion of the Underlying Funds at any particular time. It
would not be unusual for a Portfolio to invest more than 25% of its assets in a
single Underlying Fund. The Portfolios have the authority to change their
equity and fixed income allocation targets and ranges and the available universe
of Underlying Funds without shareholder approval.
In response to unfavorable market and other conditions, each Portfolio may
temporarily invest up to 100% of its assets in PIMCO Money Market Fund (and
thereby deviate from its asset allocation range) for defensive purposes. Each
Portfolio may also borrow money for temporary or emergency purposes. These
practices would be inconsistent with the Portfolio's investment objective and
principal strategies.
Asset Allocation Strategies. PIMCO Advisors L.P. serves as the investment
adviser to the Portfolios. PIMCO Advisors' Asset Allocation Committee
determines how the Portfolios allocate and reallocate their assets among the
Underlying Funds.
The Asset Allocation Committee uses both quantitative and qualitative
processes to develop allocation strategies for the Portfolios. The strategies
focus on broad diversification among major asset classes and sub-classes held by
the Underlying Funds, including those categorized by region, investment style,
market capitalization, sector, credit quality and duration. The Committee
analyzes economic and market data and also collects and synthesizes multiple
proprietary models maintained by the portfolio managers of the Underlying Funds.
The Committee uses this information to identify the Underlying Funds it expects
will provide consistent, quality performance in the various asset classes and
sub-classes and to identify and implement modest, value-added tactical shifts
for the Portfolios.
The cost of investing in a Portfolio will generally be higher than the cost
of investing in mutual funds that do not invest primarily in other mutual funds.
By investing in the Portfolios, you will indirectly bear fees and expenses
charged at the Underlying Fund level in addition to the Portfolio's direct fees
and expenses.
A Note on Performance Information
There is no calendar year performance information shown in this Prospectus for
the Portfolios because they have not been in operation for a full calendar year.
Please see "Financial Highlights" in this Prospectus or "Performance
Information" in the Statement of Additional Information for fiscal year
performance information. Past performance is no guarantee of future
results.
-4-
<PAGE>
Summary of Principal Risks
A Portfolio's return and net asset value will go up and down, and it is
possible to lose money on investments in the Portfolios. Also, an investment in
a Portfolio is not a deposit of a bank and is not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other government agency. This
section summarizes the principal risks of investing in the Portfolios and
provides a risk/return comparison of the Portfolios to help you make your
investment decision.
Principal Risks
---------------
The principal risks of investing in the Portfolios are summarized below. A
fuller discussion of these and other risks is provided later in the Prospectus
under "Additional Information About Principal Risks" and "Other Risk
Information."
. Underlying Fund Risks. The value of your investment in a Portfolio is
directly related to the investment performance of the Underlying Funds in which
it invests and the value of your Portfolio shares will go down if there is a
decline in the aggregate share value of these Underlying Funds. The performance
of the Underlying Funds, in turn, depends upon the performance of the securities
and other instruments in which these Funds invest. Therefore, the principal
risks of investing in a Portfolio are closely related to the principal risks
associated with the Underlying Funds and their investments.
Each Portfolio invests all of its assets in a combination of Underlying
Stock Funds and Underlying Bond Funds in accordance with the Portfolio's
equity/fixed income allocation targets and ranges. Because a Portfolio's
allocation among the Underlying Funds will vary from time to time, each
Portfolio may be subject to principal risks associated with any or all of the
Underlying Funds at different times and to different degrees.
The principal risks associated with the Underlying Stock Funds include the
risk that the equity securities in a Fund's portfolio will decline in value due
to factors affecting the issuing companies, their industries, or the equity
markets generally. They also include special risks associated with securities
of companies with smaller market capitalizations, "value" securities (issued by
companies that are thought to be undervalued by the market) or "growth"
securities (issued by companies that are expected to experience relatively rapid
earnings growth).
The principal risks associated with the Underlying Bond Funds include the
risk that interest rates will rise or fall in ways not anticipated by the Fund's
portfolio manager. For instance, if interest rates were to rise, the values of
fixed-income securities held by a Fund would typically fall. They also include
the risk that the issuer of a fixed income security will be unable or unwilling
to make timely principal and/or interest payments, or to otherwise honor its
obligations. This credit risk is particularly acute for Underlying Funds which
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.
There are additional principal risks that are common to some or all of the
Underlying Funds, including those associated with investments in foreign and
emerging market securities and foreign
-5-
<PAGE>
currencies, investments in illiquid securities, the use of various derivative
instruments (such as futures contracts, options and swap agreements) and the use
of leverage. For additional information about the principal risks associated
with the Portfolios and the Underlying Funds, please see "Additional Information
About Principal Risks" and "Underlying Funds" in this Prospectus.
. Management/Allocation Risk. A Portfolio's investment performance also
depends upon how its assets are allocated and reallocated among specific
Underlying Funds according to the Portfolio's equity/fixed income allocation
targets and ranges. PIMCO Advisors' Asset Allocation Committee attempts to
identify asset classes and sub-classes represented by the Underlying Funds that
will provide consistent, quality performance for the Portfolios, but there is no
guarantee that the Committee's allocation techniques will produce the desired
results. It is possible that the Committee will focus on Underlying Funds that
underperform other available Funds under various market conditions.
Risk/Return Comparison
----------------------
You should choose among the Portfolios based on personal objectives,
investment time horizon, tolerance for risk and personal financial
circumstances. Generally, over the long term, the total return of a portfolio
that invests primarily in equity securities has historically been greater than
the total return of a portfolio that invests primarily in fixed income
securities. However, an equity portfolio is generally subject to greater market
risk and price volatility than a fixed income portfolio and is considered to be
a more aggressive investment. Based on these assumptions, the following chart
gives some indication of the comparative risk/return potential of the Portfolios
according to their equity/fixed income allocation targets. Note that these
assumptions may not be correct in future market conditions and the chart may not
give an accurate picture of the comparative risk/return of the Portfolios.
------------------------------------------------------------------------------
Higher Risk and Price Volatility / Higher Long-Term Capital Appreciation
Potential / Lower Income Potential
90/10 PORTFOLIO might be suitable if you have a relatively long time
horizon, seek capital appreciation potential and have a fairly high
tolerance for risk and volatility.
60/40 PORTFOLIO might be suitable if you have a shorter time horizon, seek
a balance of income and capital appreciation and have less tolerance for
risk and volatility.
30/70 PORTFOLIO might be suitable if you seek a higher level of current
income combined with some potential for capital appreciation and have a
lower tolerance for risk and volatility.
Lower Risk and Price Volatility / Lower Long-Term Capital Appreciation
Potential / Higher Income Potential
-----------------------------------------------------------------------------
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.
-6-
<PAGE>
Your Expenses
The following tables describe the fees and expenses you may pay if you buy and
hold Institutional or Administrative Class shares of the Portfolios.
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 invest only in Institutional Class shares of the Underlying Funds and
do not pay any sales charges or 12b-1 fees in connection with their investments
in the Underlying Funds. The Portfolios do, however, indirectly bear their
proportionate share of the fees and expenses (including advisory and
administrative fees) paid by Institutional Class shareholders of the Underlying
Funds. Because the Underlying Funds have different fee and expense levels and
each Portfolio will have different investment allocations among the Underlying
Funds at different times, the cost to a Portfolio of investing in the Underlying
Funds will vary over time. Therefore, your expenses of investing in a Portfolio
will also vary.
Shareholder Fees (fees paid directly from your investment --
such as sales charges (loads), redemption fees or exchange fees): None
Annual Portfolio Operating Expenses (expenses that are deducted from
Portfolio assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Institutional or Administrative Class shares of
the Portfolios with the cost of investing in other mutual funds. The Examples
assume that you invest $10,000 in the noted class of shares for the time periods
indicated, your investment has a 5% return each year and the Portfolio's
operating expenses remain the same. Although your actual costs may be higher or
lower, the Examples show what your costs would be based on these
assumptions.
-7-
<PAGE>
<TABLE>
<CAPTION>
Example: Assuming you
either redeem or do not
redeem your shares at
Total the end of each period./(3)/
Annual
Admini- Distribution Underlying Portfolio Year
Institutional Advisory strative and/or Service Fund Operating 1 3 5 10
Class Shares Fees Fees /(1)/ (12b-1) Fees Expenses /(2)/ Expenses /(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90/10 Portfolio None 0.15% None 0.76% 0.91% $93 $290 $504 $1,120
- ------------------------------------------------------------------------------------------------------------------------------------
60/40 Portfolio None 0.15 None 0.65 0.80 82 255 444 990
- ------------------------------------------------------------------------------------------------------------------------------------
30/70 Portfolio None 0.15 None 0.55 0.70 72 224 390 871
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Example: Assuming you
either redeem or do not
redeem your shares at
Total the end of each period./(3)/
Annual
Admini- Distribution Underlying Portfolio Year
Administrative Advisory strative and/or Service Fund Operating 1 3 5 10
Class Shares Fees Fees /(1)/ (12b-1) Fees Expenses /(2)/ Expenses /(1)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
90/10 Portfolio None 0.15% 0.25% 0.76% 1.16% $118 $368 $638 $1,409
- ------------------------------------------------------------------------------------------------------------------------------------
60/40 Portfolio None 0.15 0.25% 0.67 1.05 107 334 579 1,283
- ------------------------------------------------------------------------------------------------------------------------------------
30/70 Portfolio None 0.15 0.25% 0.55 0.95 97 303 525 1,166
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1. The Administrative Fee for each Portfolio shown in the table does not reflect
a fee waiver of 0.05% currently in effect. Reflecting the fee waiver, the actual
Administrative Fees for each Portfolio are estimated to be 0.10%, and Total
Annual Portfolio Operating Expenses are expected to be as follows: Institutional
Class shares -- 90/10 Portfolio: .86%; 60/40 Portfolio: .75%; and 30/70
Portfolio: .65%; and Administrative Class Shares -- 90/10 Portfolio: 1.11%;
60/40 Portfolio: 1.00%; and 30/70 Portfolio: .90%.
2. Based on estimated expenses for the current fiscal year. Underlying Fund
Expenses for each Portfolio are estimated based upon a recent allocation of each
Portfolio's assets among the Underlying Funds and upon the total annual
operating expenses of Institutional Class shares 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 Annual
Portfolio Operating Expenses and the Examples set forth above are based on
estimates of the Underlying 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.
3. The Examples do not reflect a fee waiver of 0.05% currently in effect.
Reflecting the fee waiver, the Examples for 1, 3, 5 and 10 years, respectively,
are as follows: Institutional Class shares--90/10 Portfolio: $88, $274, $477 and
$1,061; 60/40 Portfolio: $77, $240, $417 and $930; and 30/70 Portfolio: $66,
$208, $362 and $810; and Administrative Class shares---90/10 Portfolio: $113,
$353, $612 and $1,352; 60/40 Portfolio: $102, $318, $552 and $1,225; and 30/70
Portfolio: $92, $287, $498 and $1,108.
-8-
<PAGE>
Investment Objectives and Principal
Investment Strategies
The investment objective and principal investment strategies 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 managers. Each Portfolio seeks
to achieve its investment objective by investing according to specified equity
and fixed income targets and 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.
Portfolio Descriptions
90/10 Portfolio seeks 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 seeks 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 seeks current income. Long-term capital appreciation is a
secondary objective. Under normal conditions, approximately 30% of the
Portfolio's assets will be allocated among Underlying 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 shareholder approval.
PIMCO Advisors serves as the investment adviser to the Portfolios 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, policies and
strategies of the Underlying Funds to determine which Funds, in combination with
others, are appropriate in light of the Portfolio's investment objective. PIMCO
Advisors then makes allocation decisions among these Underlying Funds in an
attempt to achieve the Portfolio's objective. The table below illustrates the
equity and fixed income allocation targets and typical ranges for each Portfolio
under normal market conditions.
-9-
<PAGE>
Equity and Fixed Income Ranges
(as a percentage of each Portfolio's average net assets)
<TABLE>
<CAPTION>
PIMCO FUNDS TARGET TYPICAL
Asset Allocation Series Allocation 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 allocation 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.
Each Portfolio invests all of its assets in Underlying Funds and may invest
in any or all of the Funds. However, it is expected that a Portfolio will
invest 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 "Additional Information About Principal Risks" below for
a description of the Underlying Funds and their attendant risks. The particular
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 is also subject to certain
investment restrictions that are described under "Investment Restrictions" in
the Statement of Additional Information.
-10-
<PAGE>
Overview of Asset Allocation
PIMCO Advisors' Asset Allocation Committee determines how the Portfolios' assets
are allocated and reallocated from time to time among the Underlying Funds. The
individuals who constitute the Asset 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 and
David Young. Please see "Management of the Portfolios" for a description of
PIMCO Advisors and the individuals 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 and achieve broadly diversified Portfolios. The Asset
Allocation Committee meets regularly to analyze various economic and market
data. The Committee also collects and synthesizes multiple proprietary models
maintained by sub-advisers of 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:
. It identifies the desired tactical allocation ranges for the
Portfolios around long-term strategic broad asset class and sub-class
targets.
. It identifies individual Funds among the Underlying Funds that are
expected to provide consistent, quality performance in the various
asset classes and sub-classes identified for the Portfolios.
. 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
value-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.
Through asset allocation, PIMCO Advisors can combine the equity and fixed
income investment styles set forth below in providing broadly diversified
Portfolios.
-11-
<PAGE>
Equity Portion of the Portfolios
The equity portion of each Portfolio will be allocated among a number of
Underlying Stock Funds which provide a broad range of equity-based investment
objectives and strategies. By allocating 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
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 investment
objectives and strategies, please see "Underlying Funds."
Fixed Income Portion of the Portfolios
The fixed income portion of each Portfolio will be allocated among a number of
Underlying Bond Funds which provide a broad range of fixed income-based
investment objectives and strategies. By allocating assets among these Funds,
the fixed income portions of the Portfolios can be diversified in multiple ways,
including the following:
By Region
. U.S. Fixed Income
. Foreign Fixed Income
By Sector/investment Specialty
. Governments
. Mortgages
. Corporate
. Inflation Indexed
-12-
<PAGE>
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 investment
objectives and strategies, please see "Underlying Funds."
Changes in Investment Objectives and Policies
The investment objective and the allocation targets and ranges of each Portfolio
described in this Prospectus may be changed by the Board of Trustees without
shareholder approval. If there is a change in a Portfolio's investment objective
or allocation target or range, shareholders should consider whether the
Portfolio remains an appropriate investment in light of their then current
financial positions and needs.
Portfolio Turnover
A change in the securities held by a Portfolio is known as "portfolio turnover."
Because PIMCO Advisors does not expect to reallocate the Portfolios' assets
among the Underlying Funds on a frequent 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 expenses
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 correspondingly 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.
Shareholders in the Portfolios may also bear expenses directly or indirectly
through sales of securities held by the Portfolios and the Underlying Funds
which result in realization of taxable capital gains.
-13-
<PAGE>
UNDERLYING FUNDS
Each Portfolio invests all of its assets in Underlying Funds. Accordingly, 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
Underlying Fund will be achieved. Shares of the Underlying Funds are not offered
in this Prospectus.
Advisory Arrangements for The Underlying Funds
PIMCO Advisors serves as investment adviser for each of the Underlying Stock
Funds, except that its affiliate, Pacific Investment Management Company
("Pacific Investment Management"), is the sole investment adviser to PIMCO
StocksPLUS Fund. The PIMCO Equity Advisors division of PIMCO Advisors manages
the investments of several of the Underlying Stock Funds. PIMCO Advisors retains
sub-advisory firms to manage the portfolios of other Underlying Stock Funds.
These firms include Columbus Circle Investors, Cadence Capital Management, NFJ
Investment Group and Parametric Portfolio Associates, each of which is an
affiliate of PIMCO Advisors, and Blairlogie Capital Management, which is not an
affiliate. Pacific Investment Management is the sole investment adviser to each
Underlying Bond Fund. For a complete description of the advisory and sub-
advisory arrangements for the Underlying Funds, please see the Statement of
Additional Information and the Underlying Fund prospectuses, which are
incorporated herein by reference and are available free of charge by telephoning
the Trust at 1-800-927-4648.
Underlying Stock Funds
The following provides a concise description of the investment objective and
main investments of each Underlying Stock Fund. 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 Trust at
1-800-927-4648.
<TABLE>
<CAPTION>
PIMCO
Fund Name Investment Objective Main Investments
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Stock Funds Growth Long-term growth of capital; income is Common stocks of companies with market
incidental capitalizations of at least $5 billion
--------------------------------------------------------------------------------------------------------------
Target Capital appreciation; no consideration Common stocks of companies with market
given to income capitalizations between $1 billion and $10
billion
--------------------------------------------------------------------------------------------------------------
Opportunity Capital appreciation; no consideration Common stocks of companies with market
given to income capitalizations of less than $2 billion
- -----------------------------------------------------------------------------------------------------------------------------------
Blend Stock Funds Capital Appreciation Growth of capital Common stocks of companies with market
capitalizations of at least $1 billion
that have improving fundamentals and whose
stock is reasonably valued by the market
--------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mid-Cap Growth Growth of capital Common stocks of companies with market
capitalizations of more than $500 million
(excluding the largest 200 companies) that
have improving fundamentals and whose
stock is reasonably valued by the market
--------------------------------------------------------------------------------------------------------------
Small-Cap Growth Growth of capital Common stocks of companies with market
capitalizations of $50 million to $l
billion that have improving fundamentals
and whose stock is reasonably valued by
the market
--------------------------------------------------------------------------------------------------------------
Micro-Cap Growth Long-term growth of capital 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
- -----------------------------------------------------------------------------------------------------------------------------------
Value Stock Funds Equity Income Current income as a primary objective; Common stocks of companies with market
long-term growth of capital as a capitalizations of more than $2 billion
secondary objective that have below-average price to
earnings ratios and higher dividend yields
relative to their industry groups
--------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital and income Common stocks having below-average
valuations where the company's business
fundamentals are improving
--------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital and income Common stocks of companies with market
capitalizations of more than $2 billion
that are undervalued relative to their
industry groups
--------------------------------------------------------------------------------------------------------------
Value 25 Long-term growth of capital and income Approximately 25 common stocks of
companies with market capitalizations
between $1 billion and $5 billion and
below-average price to earnings ratios
relative to their industry groups
--------------------------------------------------------------------------------------------------------------
Small-Cap Value Long-term growth of capital and income Common stocks of companies with market
capitalizations between $100 million and
$l billion and below-average price to
earnings ratios relative to their industry
groups
- -----------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Tax-Efficient Equity Maximum after-tax growth of capital A broadly diversified portfolio of at
Stock Funds least 250 common stocks of companies
represented in the S&P 500 Index/(1)/
--------------------------------------------------------------------------------------------------------------
Enhanced Equity A total return which equals or exceeds Common stocks represented in the S&P 500
the total return performance of an index Index
(currently the S&P 500 Index) representing
the performance of a reasonably broad
spectrum of common stocks that are publicly
traded in the U.S.
--------------------------------------------------------------------------------------------------------------
StocksPLUS Total return which exceeds that of the S&P 500 Index derivatives backed by a
S&P 500 Index portfolio of short-term fixed income
securities
- -----------------------------------------------------------------------------------------------------------------------------------
International International Capital appreciation through investment Common stocks of foreign (non-U.S.)
Stock Funds in an international portfolio; income is issuers (developed and emerging markets)
incidental
--------------------------------------------------------------------------------------------------------------
International Growth Long-term capital appreciation An international portfolio of equity and
equity-related securities
--------------------------------------------------------------------------------------------------------------
Structured Emerging Long-term growth of capital Common stocks of companies located in
Markets emerging market countries
--------------------------------------------------------------------------------------------------------------
Tax-Efficient Same as the Structured Emerging Markets Common stocks of companies located in
Structured Emerging Fund, except that the Fund seeks to emerging market countries
Markets achieve superior after-tax returns by
employing a variety of tax-efficient
management strategies
- -----------------------------------------------------------------------------------------------------------------------------------
SECTOR-RELATED Innovation Capital appreciation; no consideration Common stocks of technology-related
STOCK FUNDS given to income companies
1. The Standard & Poor's 500 Composite Stock Price Index.
</TABLE>
-15-
<PAGE>
Underlying Bond Funds
The following provides a concise description of the investment objective,
main investments and other information relating to each Underlying Bond Fund.
For a complete description of the 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>
PIMCO
Fund Name Investment Objective Main Investments Duration Credit Quality (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short Money Market Maximum current income, Money market instruments less than or Min 95% Aaa or
Duration consistent with preservation equal to 90 days Prime 1; less than
Bond Funds of capital and daily dollar-weighted or equal to 5% Aa
liquidity average maturity or Prime 2
-------------------------------------------------------------------------------------------------------------------
Short-Term Maximum current income, Money market instruments 0-1 yr B to Aaa; max 10%
consistent with preservation and short maturity fixed below Baa
of capital and daily income securities
liquidity
-------------------------------------------------------------------------------------------------------------------
Low Duration Maximum total return, Short and intermediate 1-3 yrs B to Aaa; max 10%
consistent with preservation maturity fixed income below Baa
of capital and prudent securities
investment management
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Moderate Maximum total return, Short and intermediate 2-5 yrs B to Aaa; max 10%
Duration Bond Duration consistent with preservation maturity fixed income below Baa
Fund of capital and prudent securities
investment management
-------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return, Intermediate maturity 3-6 yrs B to Aaa; max 10%
consistent with preservation fixed income securities below Baa
of capital and prudent
investment management
-------------------------------------------------------------------------------------------------------------------
Total Return II Same as Total Return Fund Same as Total Return Fund, 3-6 yrs Baa to Aaa
except quality and foreign
issuer restrictions
- -----------------------------------------------------------------------------------------------------------------------------------
Long Long-Term U.S. Maximum total return, Long-term maturity fixed greater than or A to Aaa
Duration Government consistent with preservation income securities equal to 8 yrs
Bond Funds of capital and prudent
investment management
- ----------------------------------------------------------------------------------------------------------------------------------
International Global Bond Maximum total return, Intermediate maturity U.S. 3-7 yrs B to Aaa; max 10%
Bond Funds consistent with preservation and foreign fixed income below Baa
of capital and prudent securities
investment management
-------------------------------------------------------------------------------------------------------------------
Foreign Bond Maximum total return, Intermediate maturity 3-7 yrs B to Aaa; max 10%
consistent with preservation hedged foreign fixed below Baa
of capital and prudent income securities
investment management
-------------------------------------------------------------------------------------------------------------------
Emerging Markets Maximum total return, Emerging market fixed 0-8 yrs B to Aaa
Bond consistent with preservation income securities
of capital and prudent
investment management
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Foreign (2)
- ------------------------------------------
<S> <C>
Short 0%
Duration
Bond Funds
- ------------------------------------------
0-5%
- ------------------------------------------
0-20%
- ------------------------------------------
Intermediate 0-20%
Duration Bond
Fund
- ------------------------------------------
0-20%
- ------------------------------------------
0%
- ------------------------------------------
Long 0%
Duration
Bond Funds
- ------------------------------------------
International 25-75%
Bond Funds
- ------------------------------------------
greater than or
equal to 85%
- ------------------------------------------
greater than or
equal to 80%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
High Yield High Yield Maximum current income, Higher yielding fixed income 2-6 yrs B to Aaa 0%
Bond Funds consistent with preservation of securities min 65%
capital and prudent investment below Baa
management
- -----------------------------------------------------------------------------------------------------------------------------------
Inflation- Real Return Maximum real return, consistent Inflation-indexed fixed income N/A B to Aaa 0-35%
Indexed Bond Bond with preservation of capital and securities max 10%
Funds prudent investment management below Baa
</TABLE>
1. As rated by Moody's Investors Service, Inc., or if unrated, determined 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 Global Bond, Foreign Bond and
Emerging Markets Bond Funds. Percentage limitations for these three Funds
relate to securities of foreign issuers, denominated in any currency. Each
Underlying Bond Fund (except PIMCO Total Return II and Long-Term U.S.
Government Funds) may invest beyond these limits in U.S. dollar-denominated
securities of foreign issuers.
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 issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; corporate debt securities, including convertible
securities and corporate commercial paper; mortgage-backed and other asset-
backed securities; inflation-indexed bonds issued by 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, including rates of interest that vary inversely at a multiple of a
designated or floating rate, or that vary according to changes in relative
values of currencies. Most of the Underlying Bond Funds may (but are not
required to) make substantial use of derivative instruments 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.
Certain Other Miscellaneous Investment Practices of the Underlying Funds
In addition to purchasing the securities listed above under "Primary
Investments," some or all of the Underlying Funds may to varying extents: lend
portfolio securities; enter into repurchase agreements and reverse repurchase
agreements; purchase and sell securities on a when-issued or delayed delivery
basis; enter into forward 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 agreements; invest in foreign
securities; and buy or sell foreign currencies 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 "Investment Objectives and Policies" in the Statement of
Additional Information and
-17-
<PAGE>
the Underlying Fund prospectuses, which are incorporated herein by reference and
are available free of charge by telephoning the Trust at 1-800-927-4648.
Additional Underlying Funds
In addition to the Funds listed above, a Portfolio may invest in additional
Underlying Funds that may become available for investment in the future at the
discretion of PIMCO Advisors and without shareholder approval.
-18-
<PAGE>
Additional Information About Principal Risks
The Portfolios have different investment objectives and policies and
degrees of potential investment risk and reward depending upon their allocation
strategies. You should choose a Portfolio based on personal objectives,
investment time horizon, tolerance for risk and personal financial
circumstances.
As noted in the Summary Information section above, the risks associated
with investing in the Portfolios are closely related to the risks associated
with the securities and other investments held by the Underlying Funds. The
ability of a Portfolio to achieve its investment objective will depend upon the
ability of the Underlying Funds to achieve their objectives and 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. The extent to which the investment
performance and risks associated with a particular Portfolio correlate to those
of a particular Underlying Fund will depend upon the extent to which the
Portfolio's assets are allocated from time to time for investment in the
Underlying Fund. There can be no assurance that the investment objectives of any
of the Portfolios or the Underlying Funds will be achieved.
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.
The following summarizes principal risks associated with investments in the
Underlying Funds and, indirectly, with your investment in a Portfolio. The
summary is not intended to be exhaustive. For a more complete description of
these risks, please refer to the Statement of Additional Information and the
Underlying Fund prospectuses, which are incorporated herein by reference and are
available free of charge by telephoning the Trust at 1-800-927-4648.
. Market Risk. The market price of securities owned by an Underlying Fund
may go up or down, sometimes rapidly or unpredictably. Securities may decline in
value due to factors affecting securities markets generally or particular
industries represented in the securities markets. The value of a security may
decline due to general market conditions which are not specifically related to a
company or industry, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may also decline
due to factors which affect a particular industry or industries, such as labor
shortages or increased production costs and competitive conditions within an
industry. Equity securities generally have greater price volatility than fixed
income securities and the Underlying Stock Funds are particularly sensitive to
these market risks.
. Issuer Risk. The value of a security may decline for a number of reasons
which directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods or services. The price
volatility of equity securities is generally more pronounced than the volatility
of fixed income securities in response to matters relating to a particular
issuer, although
-19-
<PAGE>
the values of fixed income securities can decline dramatically
in response to certain types of issuer risks, such as those described under
"Credit Risk" below.
. Value Securities Risk. Each Underlying Stock Fund may invest in
companies that may not be expected to experience significant earnings growth,
but whose securities the Fund's portfolio manager believes are selling at a
price lower than their true value. PIMCO Equity Income, Renaissance, Value,
Value 25 and Small-Cap Value Funds place particular emphasis on value
securities. Companies that issue value securities may have experienced adverse
business developments or may be subject to special risks that have caused their
securities to be out of favor. If a portfolio manager's assessment of a
company's prospects is wrong, or if the market does not recognize the value of
the company, the price of its securities may decline or may not approach the
value that the portfolio manager anticipates.
. Growth Securities Risk. Each Underlying Stock Fund may invest in equity
securities of companies that its portfolio manager believes will experience
relatively rapid earnings growth. PIMCO Growth, Target, Opportunity,
International Growth and Innovation Funds place particular emphasis on growth
securities. Growth securities typically trade at higher multiples of current
earnings than other securities. Therefore, the values of growth securities may
be more sensitive to changes in current or expected earnings than the values of
other securities.
. Smaller Company Risk. The general risks associated with equity
securities and liquidity risk are particularly pronounced for securities of
companies with market capitalizations that are small compared to other publicly
traded companies. These companies may have limited product lines, markets or
financial resources or they may depend on a few key employees. Securities of
smaller companies may trade less frequently and in lesser volume than more
widely held securities and their values may fluctuate more sharply than other
securities. They may also trade in the over-the-counter market or on a regional
exchange, or may otherwise have limited liquidity. PIMCO Opportunity, Small-Cap
Growth, Micro-Cap Growth and Small-Cap Value Funds generally have the greatest
exposure to this risk. PIMCO Target, Mid-Cap Growth and Value 25 Funds also have
substantial exposure to this risk because they invest mainly in companies with
medium-sized market capitalizations, which are smaller and generally less-
seasoned than the largest companies.
. Interest Rate Risk. Each of the Underlying Bond Funds is particularly
sensitive to interest rate risk, a market risk relating to investments in fixed
income securities such as bonds and notes. 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 income 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, during
periods of rising interest rates, the value of fixed income securities generally
decline.
"Duration" is one measure of the expected life of a fixed income 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
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<PAGE>
will generally 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 (assuming 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 interest rate 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
durations precisely when that is least advantageous (i.e., when interest rates
are rising).
Certain types of securities in which the Underlying Funds may invest are
particularly sensitive to fluctuations in prevailing interest rates and have
relatively high levels of interest rate risk. These include various mortgage-
related securities (for instance, the interest-only or "IO" class of a stripped
mortgage-backed security) and "zero 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 and the Underlying Fund prospectuses for a description of these and
other fixed income securities that are particularly sensitive to market risk.
. Credit Risk. All of the Underlying Funds are subject to credit risk.
This is the risk that the issuer or the guarantor of a fixed income security, or
the counterparty to a derivatives contract, repurchase agreement or a loan of
portfolio securities, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations.
The Underlying Funds that invest in fixed income securities (particularly
the Underlying Bond Funds) 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 governments. Even certain U.S. Government securities are
subject to credit risk.
Securities are subject to varying degrees of credit risk, which are often
reflected in their credit ratings. 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
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Services
("S&P"), or are determined to be of comparable quality to securities so rated.
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, high yield securities typically entail greater potential price
volatility and may be less liquid than higher-rated securities. High yield
securities may be regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. They may
also be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher-rated securities.
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<PAGE>
Accordingly, Underlying Bond Funds which invest a significant portion of their
assets in high yield securities (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.
. Foreign Investment Risk. Many Underlying Funds (in particular, 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 denominated in
foreign currencies (together, "foreign securities"). These Funds may experience
more rapid and extreme changes in value than Funds that invest exclusively in
securities of U.S. companies. Investing in foreign securities involves special
risks not typically associated with investing in U.S. securities. These risks
include: relatively small securities markets in many foreign countries, with a
limited number of securities representing a small number of issuers; 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; and political instability.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. The securities markets, values of securities, yields, and
risks associated with foreign securities markets may change independently of
each other. Also, 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. Investments in foreign securities may also involve higher
custodial costs than domestic investments and additional transaction costs with
respect to foreign currency conversions. Changes in foreign exchange rates also
will affect the value of securities denominated or quoted in foreign currencies.
In the event of nationalization, expropriation or other confiscation, an
Underlying Fund could lose its entire investment in foreign securities. Adverse
conditions in certain regions such as Southeast Asia can also adversely affect
securities of other countries whose economies appear to be unrelated.
Certain Underlying Funds also may invest in sovereign debt issued by
governments, their agencies or instrumentalities, or other government-related
entities. Holders of sovereign debt may be requested to participate in the
rescheduling of such debt and to extend further loans to governmental entities.
In addition, there is no bankruptcy proceeding by which defaulted sovereign debt
may be collected.
Emerging Market Securities. 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 issuers based in
countries with developing or "emerging market" economies. These securities may
present market, credit, currency, liquidity, legal, political and other risks
different from, or greater than, risks of investing in domestic securities or in
foreign, developed countries. These risks include: smaller market
capitalization of securities markets, which may suffer
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<PAGE>
periods of relative illiquidity; significant price volatility; restrictions on
foreign investment; and possible repatriation of investment income and capital.
In addition, foreign investors may be required to register the proceeds of
sales, and future economic or political crises could lead to price controls,
forced mergers, expropriation or confiscatory taxation, seizure, nationalization
or the creation of government monopolies. The currencies of emerging market
countries may experience significant declines against the U.S. dollar, 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.
Additional risks of emerging markets securities may include: greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; risks of companies
that may be newly organized and small; differences in auditing and financial
reporting standards, which may result in unavailability of material information
about issuers; and less developed legal systems. 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 be delayed in disposing of a portfolio
security. Such a delay could result in possible liability to a purchaser of the
security.
. Currency Risk. Underlying Funds that invest in fixed income securities
denominated 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 that trade in, and receive revenues in, foreign currencies (in
particular, PIMCO International, International Growth, Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds) are subject to the
risk that those currencies will decline in value relative to the U.S. Dollar,
or, in the case of hedging positions, that the U.S. Dollar will decline in value
relative to the currency being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for a number of reasons,
including changes in interest rates, intervention (or the failure to intervene)
by U.S. or foreign governments, central banks or supranational entities such as
the International Monetary Fund, or by the imposition of currency controls or
other political developments in the U.S. or abroad. For example, significant
uncertainty surrounds the recent 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. For a more complete
discussion of currency risk (including those associated with the euro), please
see "Investment Objectives and Policies - Foreign Currencies" in the Statement
of Additional Information.
. Derivatives Risk. Many of the Underlying Funds may, but are not required
to, use a number of derivative instruments for risk management purposes or as
part of their investment strategies. These include options contracts, futures
contracts, options on futures contracts and swap agreements. Generally,
derivatives are financial contracts whose value depends upon, or is derived
from, the value of an underlying asset, reference rate or index, and may relate
to stocks, bonds, interest rates,
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<PAGE>
currencies or currency exchange rates, commodities, and related indexes. An
Underlying Fund's use of derivative instruments involves risks different from,
or greater than, the risks associated with investing directly in securities and
other traditional investments. Also, an Underlying Fund may not employ any of
these strategies and there is no assurance that any derivatives strategy used by
a Fund will succeed.
A description of the various derivative instruments in which the Underlying
Funds may invest and the risks associated with each instrument is included in
the Underlying Fund prospectuses and in the Statement of Additional Information.
The following provides a more general discussion of important risk factors
relating to all derivative instruments that may be used by the Underlying Funds.
Management Risk Derivative products are highly specialized instruments
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 instrument 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 derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately 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 component, adverse
changes in the value or level of the underlying asset, 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. To
limit leverage risk, the Underlying Funds observe asset segregation requirements
to cover their obligations under derivative instruments.
Lack of Availability Because the markets for certain derivative instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances for risk management or other purposes. There is no assurance that
an Underlying Fund will engage in derivatives transactions at any time or from
time to time. A Fund's ability to use derivatives may also be limited by
certain regulatory and tax considerations.
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 an Underlying
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<PAGE>
Fund's interest. If a portfolio manager incorrectly forecasts the values of
securities, currencies or interest rates or other economic factors in using
derivatives for an Underlying Fund, the Fund might have been in a better
position if it had not entered into the transaction at all. 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 other Fund investments. An Underlying Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to an Underlying Fund. In addition, an
Underlying Fund's use of derivatives may also 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.
. Liquidity Risk. Many of the Underlying Funds are subject to liquidity
risk. Liquidity risk exists when particular investments are difficult to
purchase or sell, possibly preventing a Fund from selling out of these illiquid
securities at an advantageous time or price. Underlying Funds with principal
investment strategies that involve securities of companies with smaller market
capitalizations, foreign securities, derivatives or securities with substantial
market and/or credit risk tend to have the greatest exposure to liquidity risk.
. Leveraging Risk. When an Underlying Fund is borrowing money or
otherwise leveraging its portfolio, the value of an investment in that Fund will
be more volatile and all other risks will tend to be compounded. This is
because leverage tends to exaggerate the effect of any increase or decrease in
the value of an Underlying Fund's portfolio securities. Many of the Underlying
Funds may take on leveraging risk by using reverse repurchase agreements, dollar
rolls and other borrowings, by investing collateral from loans of portfolio
securities or through the use of when-issued, delayed-delivery or forward
commitment transactions. Certain Underlying Funds may also take on leveraging
risk by using derivatives. The use of leverage may also cause an Underlying
Fund to liquidate portfolio positions when it may not be advantageous to do so
to satisfy its obligations or to meet segregation requirements.
. Management Risk. Each Underlying Fund is subject to management risk
because it is an actively managed investment portfolio. PIMCO Advisors, Pacific
Investment Management and the sub-advisers that manage investments of the
Underlying Funds will apply investment techniques and risk analyses in making
investment decisions for the Funds, but there can be no guarantee that they will
produce the desired results.
. A Note on PIMCO Stocksplus Fund. While the investment objective of
PIMCO StocksPLUS Fund is to achieve a total return which exceeds the total
return performance of the S&P
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500 Index, 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 Underlying Bond
Funds. To the extent that the Fund invests in S&P 500 Index derivatives backed
by a portfolio of fixed income securities, under certain conditions, generally
in a market where the value of both S&P 500 Index derivatives and fixed income
securities are declining, the Fund may experience greater losses than would be
the case if it were to invest directly in a portfolio of S&P 500 Index stocks.
Other Risk Information
Potential Conflicts of Interest
PIMCO Advisors has broad discretion to allocate and reallocate the Portfolios'
assets among the Underlying Funds consistent with the Portfolios' investment
objectives and policies and asset allocation ranges. Although PIMCO Advisors
does not charge an investment advisory fee for its asset allocation services,
PIMCO Advisors and its affiliates indirectly receive fees (including investment
advisory and administrative fees) from the Underlying Funds in which the
Portfolios invest. 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 Advisors 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 fulfilling their fiduciary duties to both the Portfolios and the
Underlying Funds.
Year 2000 Readiness Disclosure
Many of the services provided to the Portfolios and the Underlying 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, this could have an adverse impact
on the operations of the Portfolios or the Underlying Funds and services
provided to shareholders. PIMCO Advisors, Pacific Investment Management, the
sub-advisers to the Underlying Funds, the Trust's distributor, shareholder
servicing and transfer agent and custodian, and certain other service providers
to the Portfolios and the Underlying 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 operations of the Portfolios and the Underlying Funds 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 or fixed income markets or economies, generally.
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<PAGE>
Management of the Portfolios
The business affairs of the Portfolios are managed under the direction of the
Trust's Board of Trustees. Information about the Trustees and the Trust's
executive officers is included in the Statement of Additional Information under
the heading "Management of the Trust."
Investment Adviser and Administrator
PIMCO Advisors serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator") for the
Portfolios. Subject to the supervision of the Board of Trustees, PIMCO Advisors
is responsible for managing, either directly or through others selected by it,
the investment activities of the Portfolios and the Portfolios' business affairs
and other administrative matters.
PIMCO Advisors is located at 800 Newport Center Drive, Newport Beach,
California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of March 31, 1999, PIMCO Advisors
and its subsidiary partnerships had more than $248.7 billion in assets under
management.
. Asset Allocation Committee. PIMCO Advisors' Asset Allocation Committee
is responsible for determining how the Portfolios' assets are allocated and
reallocated from time to time among the Underlying Funds. The following
provides information about the individuals who comprise the Asset Allocation
Committee and are primarily responsible for making asset allocation and other
investment decisions for the Portfolios.
Asset Allocation
Committee Member Since* Recent Professional Experience
William D. Cvengros 1998 Chief Executive Officer, President and a
Member of the Management Board of PIMCO
Advisors and a Trustee of the Trust.
Previously, he was President of the
Trust and a Director and the Vice
Chairman and Chief Investment Officer of
Pacific Life Insurance Company (from
January 1990 to November 1994).
Timothy R. Clark 1998 Vice President of PIMCO Advisors and a
Senior Vice President of PIMCO Funds
Distributors LLC. Previously, he was
President of Katonah Capital Management,
Inc. (from July 1995 to December 1996)
and served in various capacities at
Zweig Advisors Inc. (from September 1989
to July 1995).
Robert S. Venable 1998 Vice President of PIMCO Advisors.
Previously, he was a Vice President and
portfolio manager at Pacific Investment
Management (from August 1992 to August
1996).
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<PAGE>
David Young 1998 Vice President in Account Management at
Pacific Investment Management. He has
served in various capacities with
Pacific Investment Management and its
affiliates since January 1994.
Previously, he was a Vice President and
portfolio manager at Analytic Investment
Management, Inc. (from September 1988 to
January 1994).
* Each individual has served on the Committee since the inception of each
Portfolio in September 1998.
PIMCO Advisors has retained its affiliate, Pacific Investment Management,
to provide various administrative and other services required by the Portfolios
in its capacity as sub-administrator. PIMCO Advisors and the sub-administrator
may retain other affiliates to provide certain of these services.
. Advisory Fees. The Portfolios do not pay any fees to PIMCO Advisors
under the Trust's investment advisory agreement in return for the advisory and
asset allocation services provided by PIMCO Advisors. The Portfolios do,
however, indirectly pay their 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. Institutional Class and Administrative Class
shareholders of the Portfolios pay a single administrative fee to PIMCO
Advisors, computed as a percentage of the Portfolio's assets attributable in the
aggregate to those classes of shares. PIMCO Advisors, in turn, provides or
procures administrative services for Institutional Class and Administrative
Class shareholders and also bears the costs of various third-party services
required by the Portfolios, including audit, custodial, portfolio accounting,
legal, transfer agency and printing costs.
For its services as Administrator, PIMCO Advisors is entitled to receive
monthly fees from each Portfolio at the annual rate of 0.15% based on the
average daily net assets attributable in the aggregate to the Portfolio's
Institutional Class and Administrative Class shares. In order to reduce
Portfolio expenses, PIMCO Advisors has voluntarily undertaken to waive a portion
of the administrative fee it is entitled to receive for Institutional and
Administrative Class shares of each Portfolio until further notice. As a
result, while the waiver is in effect, each Portfolio will pay administrative
fees to PIMCO Advisors at the annual rate of 0.10%, calculated in the manner
specified above. The Portfolios also indirectly pay their proportionate share
of the administrative fees charged by PIMCO Advisors and Pacific Investment
Management to the Underlying Funds in which the Portfolios invest. See
"Underlying Fund Expenses" below.
Distributor
The Trust's Distributor is PIMCO Funds Distributors LLC, 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.
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Underlying Fund Expenses
The expenses associated with investing in a "fund of funds," such as the
Portfolios, are generally higher than those for mutual 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 Portfolios are structured to reduce expenses incurred at the Underlying
Fund level as follows:
. The Portfolios do not pay any fees for asset allocation or advisory
services under the Trust's investment advisory agreement.
. The Underlying Funds invest in Institutional Class shares of the
Underlying Funds, which are not subject to any sales charges or 12b-1
fees.
The following table summarizes the annual expenses borne by Institutional
Class shareholders of the Underlying Funds (based on estimates for the current
fiscal year). Because the Portfolios invest in Institutional Class shares of
the Underlying Funds, shareholders of each Portfolio indirectly 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 "Summary
Information - Your Expenses."
Annual Underlying Fund Expenses
(Based on the average daily net
assets attributable to a Fund's
Institutional Class shares):
<TABLE>
<CAPTION>
Advisory Admini- Total Fund
Underlying PIMCO Fund Fees strative Fees Operating Expenses
<S> <C> <C> <C>
Growth 0.50% 0.25% 0.75%
Target 0.55 0.25 0.80
Opportunity 0.65 0.25 0.90
Capital Appreciation 0.45 0.25 0.70
Mid-Cap Growth 0.45 0.25 0.70
Small-Cap Growth 1.00 0.25 1.25
Micro-Cap Growth 1.25 0.25 1.50
Equity Income 0.45 0.25 0.70
Renaissance 0.60 0.25 0.85
Value 0.45 0.25 0.70
Value 25 0.50 0.25 0.75
Small-Cap Value 0.60 0.25 0.85
Tax-Efficient Equity 0.45 0.25 0.70
Enhanced Equity 0.45 0.25 0.70
StocksPLUS 0.40 0.25 0.65
International 0.55 0.50 1.05
International Growth 0.85 0.50 1.35
Structured Emerging Markets 0.45 0.50 0.95
Tax-Efficient Structured Emerging Markets 0.45 0.50 0.95
Innovation 0.65 0.25 0.90
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Money Market 0.15 0.20 0.35
Short-Term 0.25 0.20 0.45
Low Duration 0.25 0.18 0.43
Moderate Duration 0.25 0.20 0.45
Total Return 0.25 0.18 0.43
Total Return II 0.25 0.25 0.50
Long-Term U.S. Government 0.25 0.25 0.50
Global Bond 0.25 0.30 0.55
Foreign Bond 0.25 0.25 0.50
Emerging Markets Bond 0.45 0.40 0.85
High Yield 0.25 0.25 0.50
Real Return Bond 0.25 0.27 0.52
</TABLE>
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<PAGE>
Investment Options
(Institutional Class and Administrative Class Shares)
The Trust offers investors Institutional Class and Administrative Class
shares of the Portfolios in this Prospectus.
The Trust does not charge any sales charges (loads) or other fees in
connection with purchases, sales (redemptions) or exchanges of Institutional
Class or Administrative Class shares. Administrative Class shares are generally
subject to a higher level of operating expenses than Institutional Class shares
due to the additional service and/or distribution fees paid by Administrative
Class shares as described below. Therefore, Institutional Class shares will
generally pay higher dividends and have a more favorable investment return than
Administrative Class shares.
. Service and Distribution Fees - Administrative Class Shares. The Trust
has adopted both an Administrative Services Plan and a Distribution Plan for the
Administrative Class shares of each Portfolio. Each Plan has been adopted in
accordance with the requirements of Rule 12b-1 under the Investment Company Act
of 1940 and is administered in accordance with that rule. However, shareholders
do not have the voting rights set forth in Rule 12b-1 with respect to the
Administrative Services Plan.
Each Plan allows the Portfolios to use their Administrative Class assets to
reimburse financial intermediaries that provide services relating to
Administrative Class shares. The Distribution Plan permits reimbursement for
expenses in connection with the distribution and marketing of Administrative
Class shares and/or the provision of shareholder services to Administrative
Class shareholders. The Administrative Services Plan permits reimbursement for
services in connection with the administration of plans or programs that use
Administrative Class shares of the Portfolios as their funding medium and for
related expenses.
In combination, the Plans permit a Portfolio to make total reimbursements
at an annual rate of up to .25% of the Portfolio's average daily net assets
attributable to its Administrative Class shares. The same entity may not receive
both distribution and administrative services fees with respect to the same
Administrative Class assets, but may receive fees under each Plan with respect
to separate assets. Because these fees are paid out of a Portfolio's
Administrative Class assets on an ongoing basis, over time they will increase
the cost of an investment in Administrative Class shares and may cost an
investor more than other types of sales charges.
. Arrangements with Service Agents. Institutional Class and Administrative
Class shares of the Portfolios may be offered through certain brokers and
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 and/or distribution fees paid
with respect to Administrative Class shares. Service agents may impose
additional or different conditions than the Trust on purchases, redemptions or
exchanges of Portfolio shares by their customers. Service agents may also
independently establish and charge their customers transaction fees, account
fees and other amounts in connection with purchases, sales and redemptions of
Portfolio shares in addition to
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<PAGE>
any fees charged by the Trust. These additional fees would increase the cost of
the customer's investment and lower investment returns. 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, redemptions and exchanges. Shareholders who are customers of service
agents should consult their service agents for information regarding these fees
and conditions.
Purchases, Redemptions and Exchanges
Purchasing Shares
Investors may purchase Institutional Class and Administrative Class shares
of the Portfolios at the relevant net asset value ("NAV") of that class without
a sales charge or other fee.
Institutional Class shares are offered primarily for direct investment by
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations and high net worth individuals.
Institutional Class shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to their customers' investments in the Portfolios.
Administrative Class shares are offered primarily through employee benefit
plan alliances, broker-dealers and other intermediaries, and each Portfolio pays
service and/or distribution fees to these entities for services they provide to
Administrative Class shareholders.
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 Portfolio and will not require a Portfolio to
pay any type of administrative payment per participant account to any third
party.
. Investment Minimums. 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 Portfolio. Shares may also be offered to
clients of PIMCO Advisors, including PIMCO Equity Advisors, Cadence Capital
Management, NFJ Investment Group, Pacific Investment Management, Parametric
Portfolio Associates, and their affiliates, and to the benefit plans of PIMCO
Advisors and its affiliates. In addition, the minimum initial investment does
not apply to Institutional Class shares offered through fee-based programs
sponsored and maintained by a registered broker-dealer and approved by the
Distributor in which each investor pays an asset based fee at an annual rate of
at least 0.50% of the assets in the account to a financial intermediary for
investment advisory and/or administrative services.
The Trust and the Distributor may waive the minimum initial investment for
other categories of investors in their discretion.
-32-
<PAGE>
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.
. Timing of Purchase Orders and Share Price Calculations. 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
Exchange, on a day the Trust is open for business, will be effected at that
day's NAV. An order received after the close of regular trading on the Exchange
will be effected at the NAV 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 and
communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the
following business day will be effected at the NAV 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.
. Initial Investment. Investors may open an account by completing and
signing a Client Registration Application and mailing it to PIMCO Funds at 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 described below, an investor may purchase Institutional Class and
Administrative Class shares only by wiring federal funds to the Trust's Transfer
Agent, National Financial Data Services, 330 West 9th Street, 4th Floor, Kansas
City, Missouri 64105. Before wiring federal funds, the investor must telephone
the Trust at 1-800-927-4648 to receive instructions for wire transfer and must
provide the following information: name of authorized person, shareholder name,
shareholder account number, name of Portfolio and share class, amount being
wired, and wiring bank name.
An investor may purchase shares without first wiring federal funds if the
proceeds of the investment are derived from an advisory account the investor
maintains 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.
. Additional Investments. An investor may purchase additional
Institutional Class and Administrative Class shares of the Portfolios at any
time by calling the Trust and wiring federal funds to the Transfer Agent as
outlined above.
. Other Purchase Information. Purchases of a Portfolio'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.
-33-
<PAGE>
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Portfolios 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.
An investor should purchase and sell shares of the Portfolios for long-term
investment purposes only. The Trust and PIMCO Advisors each reserves the right
to restrict purchases of Portfolio 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. Investors should inquire as to
whether shares of a particular Portfolio are available for offer and sale in the
investor's 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.
. Retirement Plans. Shares of the Portfolios 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
Portfolio 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.
Redeeming Shares
. Redemptions by Mail. An investor may redeem (sell) Institutional Class
and Administrative Class shares by submitting a written request to PIMCO Funds
at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660. The
redemption request should state the Portfolio 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. An investor that
elects this option on the Client Registration Application (or subsequently in
writing) may request redemptions of shares 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 Portfolio and class from which the
shares are to be redeemed, the number or dollar amount of the shares to be
redeemed and the account number.
-34-
<PAGE>
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 or the Transfer Agent to be genuine. Neither
the Trust nor the 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. The Trust or
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
telephone transactions if it fails to employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. 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 "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 Portfolio shares
are effected at the NAV 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.
Redemption proceeds 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
-35-
<PAGE>
suspend the right of redemption or postpone the payment date at times when the
Exchange is closed, or during certain other periods as permitted under the
federal securities laws.
For shareholder protection, a request to change information contained in an
account registration (for example, a request to change the bank designated to
receive wire redemption proceeds) must be received in writing, signed by the
minimum number of persons designated on the Client Registration Application that
are required to effect a redemption, and accompanied by a signature guarantee
from any eligible guarantor institution, as determined in accordance with the
Trust's procedures. Shareholders should inquire as to whether a particular
institution is an eligible guarantor institution. 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 Portfolio solely in cash 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 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 Portfolio in lieu of cash. Except for Portfolios 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
An investor may exchange Institutional Class or Administrative Class shares
of a Portfolio for shares of the same class of any other Portfolio or other
series of the Trust that offers that class based on the respective NAVs of the
shares involved. An exchange may be made by following the redemption procedure
described above under "Redemptions by Mail" or, if the investor has elected the
telephone redemption option, by calling the Trust at 1-800-927-4648. An
investor may also exchange shares of a Portfolio for shares of the same class of
a series of PIMCO Funds: Pacific Investment Management Series ("PIMS"), 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 PIMS at
the same address and telephone number as the Trust.
An investor may exchange shares only with respect to Portfolios or other
eligible series that are registered in the investor's state of residence or
where an exemption from registration is available. An
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<PAGE>
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 "Tax Consequences" in
this Prospectus and "Taxation" in the Statement of Additional Information.
The Trust reserves the right to refuse exchange purchases if, in the
judgment of PIMCO Advisors, the purchase would adversely affect a Portfolio and
its shareholders. In particular, a pattern of exchanges characteristic of
"market-timing" strategies may be deemed by PIMCO Advisors to be detrimental to
the Trust or a particular Portfolio. Currently, the Trust limits the number of
"round trip" exchanges investors may make. An investor makes a "round trip"
exchange when the investor purchases shares of a particular Portfolio,
subsequently exchanges those shares for shares of a different Portfolio, another
series of the Trust or PIMS, 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 exchange back into the shares of the
originally purchased Portfolio) more than six round trip exchanges in any
twelve-month period. The Trust reserves the right to impose additional
restrictions on exchanges at any time, although it will attempt to give
shareholders prior notice whenever it is reasonably able to do so.
How Portfolio Shares Are Priced
The Trust calculates the net asset value ("NAV") of a Portfolio's Institutional
and Administrative Class shares by taking the total value of the Portfolio's
assets attributable to the particular class, subtracting the Portfolio's
liabilities attributable to the class, and dividing by the Portfolio's total
number of shares of that class outstanding. Portfolio shares are valued as of
the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York
Stock Exchange (the "Exchange") each day the Exchange is open.
The assets of each Portfolio consist of shares of the Underlying Funds,
which are valued at their respective NAVs at the time of valuation of the
Portfolios' shares. The Underlying Funds generally value their portfolio
securities and other investments for which market quotations are readily
available at market value. Certain fixed income securities held by an
Underlying Fund for which daily market quotations are not readily available may
be valued, pursuant to guidelines established by the Fund's Board of Trustees,
with reference to fixed income securities with more readily attainable prices
and durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Exchange traded options, futures, and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other portfolio securities and assets held by an
Underlying Fund are valued at their fair value as determined in good faith by
the Fund's Board of Trustees or persons acting at the Board's direction.
Underlying Fund investments quoted in foreign currencies are translated
into U.S. dollars using foreign exchange quotations provided by independent
dealers. As a result, the NAV of an Underlying Fund's shares may be affected by
changes in the value of foreign currencies in relation to the U.S. dollar. To
the extent that the Underlying Funds invest in foreign securities, these
securities may be
-37-
<PAGE>
listed on foreign exchanges that may be open at different times than the
Exchange. As a result, to the extent that a Portfolio invests in Underlying
Funds that hold foreign securities, the NAV of the Portfolio's shares may change
at times when you can not buy, redeem or exchange shares.
Portfolio Distributions
Each Portfolio distributes substantially all of its net investment income to
shareholders in the form of dividends. A shareholder begins earning dividends
on Portfolio shares the day after the Trust receives the shareholder's purchase
payment. 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
Administrative Class shares are expected to be lower than dividends on
Institutional Class shares as a result of the distribution fees applicable to
Administrative Class shares. The following shows when each Portfolio intends to
declare and distribute income dividends to shareholders of record.
At Least
Portfolio Annually Quarterly Monthly
- -----------------------------------------------------------------------------
90/10 Portfolio .
- -----------------------------------------------------------------------------
60/40 Portfolio .
- -----------------------------------------------------------------------------
30/70 Portfolio .
- -----------------------------------------------------------------------------
In addition, each Portfolio distributes any net capital gains it earns from
the sale of portfolio securities to shareholders no less frequently than
annually. Net short-term capital gains may be paid more frequently.
A Portfolio's dividend and capital gain distributions with respect to a
particular class of shares will automatically be reinvested in additional shares
of the same class of the Portfolio at NAV unless the shareholder elects to have
the distributions paid in cash. Shareholders do not pay any sales charges or
other fees on shares received through the reinvestment of Portfolio dividends.
For further information on distribution options, please contact the Trust
at 1-800-927-4648.
Tax Consequences
. Taxes on Portfolio distributions. A shareholder subject to U.S. federal
income tax will be subject to tax on Portfolio distributions whether they are
paid in cash or reinvested in additional shares. For federal income tax
purposes, Portfolio distributions will be taxable to the shareholder as either
ordinary income or capital gains.
-38-
<PAGE>
Portfolio dividends (i.e., distributions of investment income) are taxable
to shareholders as ordinary income. Federal taxes on Portfolio distributions of
gains are determined by how long the Portfolio owned the investments that
generated the gains, rather than how long the shareholder owned the shares.
Distributions of gains from investments that a Portfolio owned for more than 12
months will generally be taxable to shareholders as capital gains.
Distributions of gains from investments that the Portfolio owned for 12 months
or less will generally be taxable as ordinary income.
Portfolio distributions are taxable to shareholders even if they are paid
from income or gains earned by a Portfolio prior to the shareholder's investment
and thus were included in the price paid for the shares. For example, a
shareholder who purchases shares on or just before the record date of a
Portfolio distribution will pay full price for the shares and may receive a
portion of the investment back as a taxable distribution.
The Portfolios' 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.
. Taxes on redemptions or exchanges of shares. Any gain resulting from the
sale of Portfolio shares will generally be subject to federal income tax. When
a shareholder exchanges shares of a Portfolio for shares of another series, the
transaction will be treated as a sale of the Portfolio shares for these
purposes, and any gain on those shares will generally be subject to federal
income tax.
This is a summary of certain federal income tax consequences of investing
in a Portfolio. Shareholders should consult their tax advisors for more
information regarding the tax aspects of investing in a Portfolio, including
possible state, local and foreign tax consequences.
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<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand
the financial performance of Institutional Class and
Administrative Class shares of each Portfolio since the class of
shares was first offered. Certain information reflects financial
results for a single Portfolio share. The total returns in the
table represent the rate that an investor would have earned or
lost on an investment in a particular class of shares of a
Portfolio, assuming reinvestment of all dividends and
distributions. This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with each
Portfolio's financial statements, are included in the Trust's
annual report to shareholders. The annual report is incorporated
by reference in the Statement of Additional Information and is
available free of charge upon request from the Distributor.
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Distributions
Year or Value Net Unrealized Income from from Net from Net
Period Beginning Investment Gain (Loss) on Investment Investment Realized
Ended of Period Income Investments Operations Income Capital Gains
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
90/10 Portfolio
Institutional
Class
02/26/99-
06/30/99 $10.91 $0.05(a) $1.23(a) $1.28 $ 0.00 $0.00
Administrative
Class
02/26/99-
06/30/99 10.91 0.04(a) 1.23(a) 1.27 0.00 0.00
60/40 Portfolio
Institutional
Class
02/26/99-
06/30/99 $10.55 $0.09(a) $0.73(a) $0.82 $(0.10) $0.00
Administrative
Class
02/26/99-
06/30/99 10.55 0.09(a) 0.72(a) 0.81 (0.09) 0.00
30/70 Portfolio
Institutional
Class
02/26/99-
06/30/99 $10.09 $0.15(a) $0.23(a) $0.38 $(0.14) $0.00
Administrative
Class
02/26/99-
06/30/99 10.09 0.14(a) 0.23(a) 0.37 (0.13) 0.00
</TABLE>
- -------
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
(b) The information provided under Ratio of Expenses to Average Net Assets
reflects a voluntary fee waiver of 0.05% currently in effect. If this
waiver was not reflected, Ratio of Expenses to Average Net Assets would be
0.15% for Institutional Class shares and 0.40% for Administrative Class
shares of each Portfolio.
-40-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Tax Basis Net Asset Net Assets Expenses to Income (Loss)
Return of Total Value End End of Average Net to Average Portfolio
Capital Distributions of Period Total Return Period (000s) Assets Net Assets Turnover Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $12.19 11.73% $11 0.10%*(b) 1.17%* 48%
0.00 0.00 12.18 11.64 11 0.35*(b) 0.95* 48
$0.00 $(0.10) $11.27 7.80% $11 0.10%*(b) 2.52%* 39%
0.00 (0.09) 11.27 7.71 11 0.35*(b) 2.44* 39
$0.00 $(0.14) $10.33 3.78% $10 0.10%*(b) 4.20%* 37%
0.00 (0.13) 10.33 3.70 10 0.35*(b) 4.03* 37
</TABLE>
-41-
<PAGE>
[Back Cover Page]
PIMCO Funds Asset Allocation Series
Actively managed portfolios of select PIMCO Funds
The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the
Portfolios and the Underlying Funds. In addition, the current Trust prospectus
and the prospectus of PIMCO Funds: Pacific Investment Management Series
relating to Institutional Class shares of the Underlying Funds contain
additional information about the Underlying Funds. The SAI, the financial
statements included in the Portfolios' most recent annual report to
shareholders, and the Underlying Fund prospectuses are incorporated by reference
into this Prospectus, which means they are part of this Prospectus for legal
purposes. The Portfolios' annual report discusses the market conditions and
investment strategies that significantly affected each Portfolio's performance
during its last fiscal year.
You may get free copies of any of these materials, request other information
about a Portfolio or the Underlying Funds, or make shareholder inquiries by
calling the Trust at 1-800-927-4648 or PIMCO Infolink Audio Response Network at
1-800-987-4626, or by writing to:
PIMCO Multi-Manager Series
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
You may review and copy information about the Trust, the Portfolios and the
Underlying Funds, including the SAI and the Underlying Fund prospectuses, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust, the Portfolios and the Underlying Funds on the
Commission's Web site at www.sec.gov. You may get copies of this information,
with payment of a duplication fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. You may need to refer to the
Trust's file number under the Investment Company Act, which is 811-6161.
You can also visit our Web site at www.pimcofunds.com for additional information
about the Portfolios and the Underlying Funds.
[LOGO]
File No. 811-6161
-42-
<PAGE>
[Front Cover]
PIMCO Funds Prospectus
Asset Allocation ACTIVELY MANAGED PORTFOLIOS OF SELECT PIMCO FUNDS
Series
November 1, 1999
Share Classes
A, B and C
This Prospectus describes three actively managed mutual fund portfolios offered
by PIMCO Funds: Multi-Manager Series. Each Portfolio invests in a diversified
portfolio of other 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.
90/10 Portfolio
Seeks long-term capital appreciation. The Portfolio normally invests
approximately 90% of its assets in PIMCO Stock Funds and 10% in PIMCO Bond
Funds.
60/40 Portfolio
Seeks long-term capital appreciation and current income. The Portfolio normally
invests approximately 60% of its assets in PIMCO Stock Funds and 40% in PIMCO
Bond Funds.
30/70 Portfolio
Seeks current income, with long-term capital appreciation as a secondary
objective. The Portfolio normally invests approximately 30% of its assets in
PIMCO Stock Funds and 70% in PIMCO Bond Funds.
You can call PIMCO Funds Distributors LLC, the Portfolios' Distributor, at 1-800
- -426-0107 to find out more about the Portfolios and other funds in the PIMCO
Funds family. You can also visit our website at www.pimcofunds.com.
The Prospectus explains what you should know about the Portfolios before you
invest. Please read it carefully.
Neither the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary Information .......................................................
Investment Objectives and Summary of Principal Investment Strategies ...
A Note on Performance Information ......................................
Summary of Principal Risks .............................................
Your Expenses ..........................................................
Investment Objectives and Principal Investment Strategies .................
Underlying Funds ..........................................................
Additional Information About Principal Risks ..............................
Other Risk Information ....................................................
Management of the Portfolios ..............................................
Investment Options (Class A, B and C Shares) ..............................
How Portfolio Shares Are Priced ...........................................
How to Buy and Sell Shares ................................................
Portfolio Distributions ...................................................
Tax Consequences ..........................................................
Financial Highlights ......................................................
</TABLE>
-2-
<PAGE>
Summary Information
This summary section identifies each Portfolio's investment objective,
principal investments and strategies, and principal risks. A more detailed
description of the Portfolios and their investment strategies and related risks
is provided later in the Prospectus under "Investment Objectives and Principal
Investment Strategies," "Underlying Funds" and "Additional Information About
Principal Risks."
Investment Objectives and Summary of Principal Investment Strategies
The Portfolios are intended for investors who prefer to have their asset
allocation decisions made by professional money managers. As shown in the chart
below, each Portfolio has a distinct investment objective which it seeks to
achieve by investing according to specified equity and fixed income targets and
ranges among certain Funds in the PIMCO Funds family. The PIMCO Funds in which
the Portfolios invest are called Underlying Funds in this Prospectus.
Some of the Underlying Funds invest primarily in equity securities and are
called Underlying Stock Funds. Other Underlying Funds invest primarily in fixed
income securities, including money market instruments, and are called Underlying
Bond Funds. The Portfolios are named according to 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 Underlying Bond Funds.
<TABLE>
<CAPTION>
Investment Objective Allocation Strategy
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
90/10 PORTFOLIO Seeks 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, with a typical allocation range of
80% - 100% in equity and 0% - 20% in fixed income (including
money market).
________________________________________________________________________________________________________________________________
60/40 PORTFOLIO Seeks long-term capital appreciation and Under normal conditions, approximately 60% of the Portfolio's
current income assets will be allocated among Underlying Stock Funds and 40%
among Underlying Bond Funds, with a typical allocation range of
50% - 70% in equity and 30% - 50% in fixed income (including
money market).
___________________________________________________________________________________________________________________________________
30/70 PORTFOLIO Seeks current income, with long-term Under normal conditions, approximately 30% of the Portfolio's
capital appreciation as a secondary assets will be allocated among Underlying Stock Funds and 70%
objective among Underlying Bond Funds, with a typical allocation range of
25% - 35% in equity and 65% - 75% in fixed income (including
money market).
</TABLE>
-3-
<PAGE>
Each Portfolio normally invests all of its assets in Underlying Funds. A
Portfolio may invest in any or all of the Underlying Funds, but will normally
invest in only a portion of the Underlying Funds at any particular time. It
would not be unusual for a Portfolio to invest more than 25% of its assets in a
single Underlying Fund. The Portfolios have the authority to change their equity
and fixed income allocation targets and ranges and the available universe of
Underlying Funds without shareholder approval.
In response to unfavorable market and other conditions, each Portfolio may
temporarily invest up to 100% of its assets in PIMCO Money Market Fund (and
thereby deviate from its asset allocation range) for defensive purposes. Each
Portfolio may also borrow money for temporary or emergency purposes. These
practices would be inconsistent with the Portfolio's investment objective and
principal strategies.
Asset Allocation Strategies. PIMCO Advisors L.P. serves as the investment
adviser to the Portfolios. PIMCO Advisors' Asset Allocation Committee determines
how the Portfolios allocate and reallocate their assets among the Underlying
Funds.
The Asset Allocation Committee uses both quantitative and qualitative
processes to develop allocation strategies for the Portfolios. The strategies
focus on broad diversification among major asset classes and sub-classes held by
the Underlying Funds, including those categorized by region, investment style,
market capitalization, sector, credit quality and duration. The Committee
analyzes economic and market data and also collects and synthesizes multiple
proprietary models maintained by the portfolio managers of the Underlying Funds.
The Committee uses this information to identify the Underlying Funds it expects
will provide consistent, quality performance in the various asset classes and
sub-classes and to identify and implement modest, value-added tactical shifts
for the Portfolios.
The cost of investing in a Portfolio will generally be higher than the cost
of investing in mutual funds that do not invest primarily in other mutual funds.
By investing in the Portfolios, you will indirectly bear fees and expenses
charged at the Underlying Fund level in addition to the Portfolio's direct fees
and expenses.
A Note on Performance Information
There is no calendar year performance information shown in this Prospectus for
the Portfolios because they have not been in operation for a full calendar year.
Please see "Financial Highlights" in this Prospectus or "Performance
Information" in the Statement of Additional Information for fiscal year
performance information. Past performance is no guarantee of future results.
-4-
<PAGE>
Summary of Principal Risks
A Portfolio's return and net asset value will go up and down, and it is
possible to lose money on investments in the Portfolios. Also, an investment in
a Portfolio is not a deposit of a bank and is not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other government agency. This
section summarizes the principal risks of investing in the Portfolios and
provides a risk/return comparison of the Portfolios to help you make your
investment decision.
Principal Risks
---------------
The principal risks of investing in the Portfolios are summarized below. A
fuller discussion of these and other risks is provided later in the Prospectus
under "Additional Information About Principal Risks" and "Other Risk
Information."
. Underlying Fund Risks. The value of your investment in a Portfolio is
directly related to the investment performance of the Underlying Funds in which
it invests and the value of your Portfolio shares will go down if there is a
decline in the aggregate share value of these Underlying Funds. The performance
of the Underlying Funds, in turn, depends upon the performance of the securities
and other instruments in which these Funds invest. Therefore, the principal
risks of investing in a Portfolio are closely related to the principal risks
associated with the Underlying Funds and their investments.
Each Portfolio invests all of its assets in a combination of Underlying
Stock Funds and Underlying Bond Funds in accordance with the Portfolio's
equity/fixed income allocation targets and ranges. Because a Portfolio's
allocation among the Underlying Funds will vary from time to time, each
Portfolio may be subject to principal risks associated with any or all of the
Underlying Funds at different times and to different degrees.
The principal risks associated with the Underlying Stock Funds include the
risk that the equity securities in a Fund's portfolio will decline in value due
to factors affecting the issuing companies, their industries, or the equity
markets generally. They also include special risks associated with securities of
companies with smaller market capitalizations, "value" securities (issued by
companies that are thought to be undervalued by the market) or "growth"
securities (issued by companies that are expected to experience relatively rapid
earnings growth).
The principal risks associated with the Underlying Bond Funds include the
risk that interest rates will rise or fall in ways not anticipated by the Fund's
portfolio manager. For instance, if interest rates were to rise, the values of
fixed-income securities held by a Fund would typically fall. They also include
the risk that the issuer of a fixed income security will be unable or unwilling
to make timely principal and/or interest payments, or to otherwise honor its
obligations. This credit risk is particularly acute for Underlying Funds which
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.
There are additional principal risks that are common to some or all of the
Underlying Funds, including those associated with investments in foreign and
emerging market securities and foreign
-5-
<PAGE>
currencies, investments in illiquid securities, the use of various derivative
instruments (such as futures contracts, options and swap agreements) and the use
of leverage. For additional information about the principal risks associated
with the Portfolios and the Underlying Funds, please see "Additional Information
About Principal Risks" and "Underlying Funds" in this Prospectus.
. Management/Allocation Risk. A Portfolio's investment performance also
depends upon how its assets are allocated and reallocated among specific
Underlying Funds according to the Portfolio's equity/fixed income allocation
targets and ranges. PIMCO Advisors' Asset Allocation Committee attempts to
identify asset classes and sub-classes represented by the Underlying Funds that
will provide consistent, quality performance for the Portfolios, but there is no
guarantee that the Committee's allocation techniques will produce the desired
results. It is possible that the Committee will focus on Underlying Funds that
underperform other available Funds under various market conditions.
Risk/Return Comparison
----------------------
You should choose among the Portfolios based on personal objectives,
investment time horizon, tolerance for risk and personal financial
circumstances. Generally, over the long term, the total return of a portfolio
that invests primarily in equity securities has historically been greater than
the total return of a portfolio that invests primarily in fixed income
securities. However, an equity portfolio is generally subject to greater market
risk and price volatility than a fixed income portfolio and is considered to be
a more aggressive investment. Based on these assumptions, the following chart
gives some indication of the comparative risk/return potential of the Portfolios
according to their equity/fixed income allocation targets. Note that these
assumptions may not be correct in future market conditions and the chart may not
give an accurate picture of the comparative risk/return of the Portfolios.
--------------------------------------------------------------------
Higher Risk and Price Volatility / Higher Long-Term Capital
Appreciation Potential / Lower Income Potential
90/10 PORTFOLIO might be suitable if you have a
relatively long time horizon, seek capital
appreciation potential and have a fairly high
tolerance for risk and volatility.
60/40 PORTFOLIO might be suitable if you have a
shorter time horizon, seek a balance of income and
capital appreciation and have less tolerance for
risk and volatility.
30/70 PORTFOLIO might be suitable if you seek a
higher level of current income combined with some
potential for capital appreciation and have a lower
tolerance for risk and volatility.
Lower Risk and Price volatility / Lower Long-Term Capital
Appreciation Potential / Higher Income Potential
--------------------------------------------------------------------
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.
-6-
<PAGE>
Your Expenses
The following tables describe the fees and expenses you may pay if you buy and
hold Class A, B or C shares of the Portfolios.
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 invest only in Institutional Class shares of the Underlying Funds and
do not pay any sales charges or 12b-1 fees in connection with their investments
in the Underlying Funds. The Portfolios do, however, indirectly bear their
proportionate share of the fees and expenses (including advisory and
administrative fees) paid by Institutional Class shareholders of the Underlying
Funds. Because the Underlying Funds have different fee and expense levels and
each Portfolio will have different investment allocations among the Underlying
Funds at different times, the cost to a Portfolio of investing in the Underlying
Funds will vary over time. Therefore, your expenses of investing in a Portfolio
will also vary.
Shareholder Fees (fees paid directly from your investment):
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------ ------
<S> <C> <C> <C>
Maximum Sales Charge (load) Imposed on Purchases
(as a percentage of offering price)
90/10 Portfolio and 60/40 Portfolio 5.50% None None
30/70 Portfolio 4.50% None None
Maximum Contingent Deferred Sales Charge (Load) ("CDSC") 1%(1) 5%(2) 1%(3)
(as a percentage of original purchase price)
</TABLE>
__________________
1. Imposed only in certain circumstances where Class A shares are purchased
without a front-end sales charge at the time of purchase.
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 "Investment Options (Class A, B and C Shares) - Contingent Deferred Sales
Charges (CDSCs) - Class B Shares."
3. The CDSC on Class C shares is imposed only on shares redeemed in the first
year.
-7-
<PAGE>
Annual Portfolio Operating Expenses (expenses that are deducted from
Portfolio assets):
Information about the Examples. The Examples below are intended to help you
compare the cost of investing in Class A, B or C shares of the Portfolios with
the cost of investing in other mutual funds. The Examples assume that you
invest $10,000 in the noted class of shares for the time periods indicated, your
investment has a 5% return each year and the Portfolio's operating expenses
remain the same. Although your actual costs may be higher or lower, the
Examples show what your costs would be based on these assumptions.
<TABLE>
<CAPTION>
Example: Assuming
you redeem your
shares at the end of
Total each period.
PIMCO Funds Admini- Distribution Underlying Portfolio
Asset Allocation Advisory strative and/or Service Fund Operating Year
Series Fees Fees /1/ (12b-1) Fees /2/ Expenses /3/ Expenses /3/ 1 3 5 10
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A
Shares 90/10 Portfolio None .40% .25% .76% 1.41% $686 $972 $1,279 $2,148
-------------------------------------------------------------------------------------------------------------------------
60/40 Portfolio None .40 .25 .65 1.30 675 939 1,224 2,032
-------------------------------------------------------------------------------------------------------------------------
30/70 Portfolio None .40 .25 .55 1.20 567 814 1,080 1,839
-------------------------------------------------------------------------------------------------------------------------
Class B
Shares 90/10 Portfolio None .40 1.00 .76 2.16 719 976 1,359 2,207
-------------------------------------------------------------------------------------------------------------------------
60/40 Portfolio None .40 1.00 .65 2.05 708 943 1,303 2,091
-------------------------------------------------------------------------------------------------------------------------
30/70 Portfolio None .40 1.00 .55 1.95 698 912 1,252 1,984
-------------------------------------------------------------------------------------------------------------------------
Class C
Shares 90/10 Portfolio None .40 1.00 .76 2.16 319 676 1,159 2,493
-------------------------------------------------------------------------------------------------------------------------
60/40 Portfolio None .40 1.00 .65 2.05 308 643 1,103 2,379
-------------------------------------------------------------------------------------------------------------------------
30/70 Portfolio None .40 1.00 .55 1.95 298 612 1,052 2,275
<CAPTION>
Example: Assuming
you do not redeem
your shares.
Year
1 3 5 10
-------------------------------------------
<S> <C> <C> <C> <C>
CLASS A
Shares 686 $972 $1,279 $2,148
-------------------------------------------
675 939 1,224 2,032
-------------------------------------------
567 814 1,080 1,839
-------------------------------------------
Class B
Shares 219 676 1,159 2,207
-------------------------------------------
208 643 1,103 2,091
-------------------------------------------
198 612 1,052 1,984
-------------------------------------------
Class C
Shares 219 676 1,159 2,493
-------------------------------------------
208 643 1,103 2,379
-------------------------------------------
198 612 1,052 2,275
</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
Portfolio's Class A, Class B and Class C shares exceed $2.5 billion.
2. Due to the 12b-1 distribution fee imposed on Class B and Class C
shares, a Class B or Class C shareholder may, depending upon 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.
3. Based on estimated expenses for the current fiscal year. Underlying
Fund Expenses for each Portfolio are estimated based upon a recent
allocation of each Portfolio's assets among the Underlying Funds and upon
the total annual operating expenses of Institutional Class shares 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 Annual Portfolio Operating Expenses and the Examples set
forth above are based on estimates of the Underlying 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.
-8-
<PAGE>
Investment Objectives And Principal
Investment Strategies
The investment objective and principal investment strategies 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 managers. Each Portfolio seeks
to achieve its investment objective by investing according to specified equity
and fixed income targets and 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.
Portfolio Descriptions
90/10 Portfolio seeks 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 seeks 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 seeks current income. Long-term capital appreciation is a
secondary objective. Under normal conditions, approximately 30% of the
Portfolio's assets will be allocated among Underlying 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 shareholder approval.
PIMCO Advisors serves as the investment adviser to the Portfolios 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, policies and
strategies of the Underlying Funds to determine which Funds, in combination with
others, are appropriate in light of the Portfolio's investment objective. PIMCO
Advisors then makes allocation decisions among these Underlying Funds in an
attempt to achieve the Portfolio's objective. The table below illustrates the
equity and fixed income allocation targets and typical ranges for each Portfolio
under normal market conditions.
-9-
<PAGE>
Equity And Fixed Income Ranges
(as a percentage of each Portfolio's average net assets)
<TABLE>
<CAPTION>
PIMCO Funds Target Typical
Asset Allocation Series Allocation 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 allocation 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.
Each Portfolio invests all of its assets in Underlying Funds and may invest
in any or all of the Funds. However, it is expected that a Portfolio will
invest 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 "Additional Information About Principal Risks" below for
a description of the Underlying Funds and their attendant risks. The particular
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 is also subject to certain
investment restrictions that are described under "Investment Restrictions" in
the Statement of Additional Information.
-10-
<PAGE>
Overview of Asset Allocation
PIMCO Advisors' Asset Allocation Committee determines how the Portfolios' assets
are allocated and reallocated from time to time among the Underlying Funds. The
individuals who constitute the Asset 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 and
David Young. Please see "Management of the Portfolios" for a description of
PIMCO Advisors and the individuals 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 and achieve broadly diversified Portfolios. The Asset
Allocation Committee meets regularly to analyze various economic and market
data. The Committee also collects and synthesizes multiple proprietary models
maintained by sub-advisers of 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:
. It identifies the desired tactical allocation ranges for the
Portfolios around long-term strategic broad asset class and sub-class
targets.
. It identifies individual Funds among the Underlying Funds that are
expected to provide consistent, quality performance in the various
asset classes and sub-classes identified for the Portfolios.
. 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
value-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.
Through asset allocation, PIMCO Advisors can combine the equity and fixed
income investment styles set forth below in providing broadly diversified
Portfolios.
-11-
<PAGE>
Equity Portion of the Portfolios
The equity portion of each Portfolio will be allocated among a number of
Underlying Stock Funds which provide a broad range of equity-based investment
objectives and strategies. By allocating 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
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 investment
objectives and strategies, please see "Underlying Funds."
Fixed Income Portion of the Portfolios
The fixed income portion of each Portfolio will be allocated among a number of
Underlying Bond Funds which provide a broad range of fixed income-based
investment objectives and strategies. By allocating assets among these Funds,
the fixed income portions of the Portfolios can be diversified in multiple ways,
including the following:
By Region
. U.S. Fixed Income
. Foreign Fixed Income
By Sector/Investment Specialty
. Governments
. Mortgages
. Corporate
. Inflation Indexed
-12-
<PAGE>
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 investment
objectives and strategies, please see "Underlying Funds."
Changes in Investment Objectives and Policies
The investment objective and the allocation targets and ranges of each Portfolio
described in this Prospectus may be changed by the Board of Trustees without
shareholder approval. If there is a change in a Portfolio's investment
objective or allocation target or range, shareholders should consider whether
the Portfolio remains an appropriate investment in light of their then current
financial positions and needs.
Portfolio Turnover
A change in the securities held by a Portfolio is known as "portfolio turnover."
Because PIMCO Advisors does not expect to reallocate the Portfolios' assets
among the Underlying Funds on a frequent 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 expenses
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 correspondingly 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.
Shareholders in the Portfolios may also bear expenses directly or indirectly
through sales of securities held by the Portfolios and the Underlying Funds
which result in realization of taxable capital gains.
-13-
<PAGE>
Underlying Funds
Each Portfolio invests all of its assets in Underlying Funds. Accordingly, 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
Underlying Fund will be achieved. Shares of the Underlying Funds are not
offered in this Prospectus.
Advisory Arrangements for the Underlying Funds
PIMCO Advisors serves as investment adviser for each of the Underlying Stock
Funds, except that its affiliate, Pacific Investment Management Company
("Pacific Investment Management"), is the sole investment adviser to PIMCO
StocksPLUS Fund. The PIMCO Equity Advisors division of PIMCO Advisors manages
the investments of several of the Underlying Stock Funds. PIMCO Advisors
retains sub-advisory firms to manage the portfolios of other Underlying Stock
Funds. These firms include Columbus Circle Investors, Cadence Capital
Management, NFJ Investment Group and Parametric Portfolio Associates, each of
which is an affiliate of PIMCO Advisors, and Blairlogie Capital Management,
which is not an affiliate. Pacific Investment Management is the sole investment
adviser to each Underlying Bond Fund. For a complete description of the
advisory and sub-advisory arrangements for the Underlying Funds, please see the
Statement of Additional Information and 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.
Underlying Stock Funds
The following provides a concise description of the investment objective and
main investments of each Underlying Stock Fund. 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>
PIMCO
Fund Name Investment Objective Main Investments
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Stock Growth Long-term growth of capital; Common stocks of companies with market
Funds income is incidental capitalizations of at least $5 billion
-------------------------------------------------------------------------------------------------------------
Target Capital appreciation; no Common stocks of companies with market
consideration given to income capitalizations between $1 billion and $10 billion
-------------------------------------------------------------------------------------------------------------
Opportunity Capital appreciation; no Common stocks of companies with market
consideration given to income capitalizations of less than $2 billion
- ---------------------------------------------------------------------------------------------------------------------------------
Blend Stock Capital Growth of capital Common stocks of companies with market
Funds Appreciation capitalizations of at least $1 billion that have
improving fundamentals and whose stock is reasonably
valued by the market
-------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Growth of capital Common stocks of companies with market capitalizations
of more than $500 million (excluding the largest 200
companies) that have improving fundamentals and whose
stock is reasonably valued by the market
-------------------------------------------------------------------------------------------------------------
Small-Cap Growth Growth of capital Common stocks of companies with market capitalizations
of $50 million to $l billion that have improving
fundamentals and whose stock is reasonably valued by
the market
-------------------------------------------------------------------------------------------------------------
Micro-Cap Growth Long-term growth of capital 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
- ---------------------------------------------------------------------------------------------------------------------------------
Value Stock Equity Income Current income as a primary Common stocks of companies with market capitalizations
Funds objective; long-term growth of of more than $2 billion that have below-average price
capital as a secondary objective to earnings ratios and higher dividend yields relative
to their industry groups
-------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital and Common stocks having below-average valuations where
income the company's business fundamentals are improving
-------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital and Common stocks of companies with market capitalizations
income of more than $2 billion that are undervalued relative
to their industry groups
-------------------------------------------------------------------------------------------------------------
Value 25 Long-term growth of capital and Approximately 25 common stocks of companies with
income market capitalizations between $1 billion and $5
billion and below-average price to earnings ratios
relative to their industry groups
-------------------------------------------------------------------------------------------------------------
Small-Cap Value Long-term growth of capital and Common stocks of companies with market capitalizations
income between $100 million and $l billion and below-average
price to earnings ratios relative to their industry
groups
- ---------------------------------------------------------------------------------------------------------------------------------
Enhanced Index Tax-Efficient Maximum after-tax growth of A broadly diversified portfolio of at least 250 common
Stock Funds Equity capital stocks of companies represented in the S&P 500
Index(1)
-------------------------------------------------------------------------------------------------------------
Enhanced Equity A total return which equals or Common stocks represented in the S&P 500 Index
exceeds the total return
performance of an index
(currently the S&P 500 Index)
representing the performance of
a reasonably broad spectrum of
common stocks that are publicly
traded in the U.S.
-------------------------------------------------------------------------------------------------------------
StocksPLUS Total return which exceeds that S&P 500 Index derivatives backed by a portfolio of
of the S&P 500 Index short-term fixed income securities
- ---------------------------------------------------------------------------------------------------------------------------------
International International Capital appreciation through Common stocks of foreign (non-U.S.) issuers (developed
Stock Funds investment in an international and emerging markets)
portfolio; income is incidental
-------------------------------------------------------------------------------------------------------------
International Long-term capital appreciation An international portfolio of equity and
Growth equity-related securities
-------------------------------------------------------------------------------------------------------------
Structured Long-term growth of capital Common stocks of companies located in emerging market
Emerging countries
Markets
-------------------------------------------------------------------------------------------------------------
Tax-Efficient Same as the Structured Common stocks of companies located in emerging market
Structured Emerging Markets Fund, except countries
Emerging Markets that the Fund seeks to
achieve superior after-tax
returns by employing a
variety of tax-efficient
management strategies
- ---------------------------------------------------------------------------------------------------------------------------------
Sector-Related Innovation Capital appreciation; no Common stocks of technology-related companies
Stock Funds consideration given to
income
</TABLE>
1. The Standard & Poor's 500 Composite Stock Price Index.
-15-
<PAGE>
Underlying Bond Funds
The following provides a concise description of the investment objective,
main investments and other information relating to each Underlying Bond Fund.
For a complete description of the 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>
PIMCO
Fund Name Investment Objective Main Investments Duration Credit Quality (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short Money Market Maximum current income, Money market instruments less than or Min 95% Aaa or
Duration consistent with preservation equal to 90 days Prime 1; less than
Bond Funds of capital and daily dollar-weighted or equal to 5% Aa
liquidity average maturity or Prime 2
-------------------------------------------------------------------------------------------------------------------
Short-Term Maximum current income, Money market instruments 0-1 yr B to Aaa; max 10%
consistent with preservation and short maturity fixed below Baa
of capital and daily income securities
liquidity
-------------------------------------------------------------------------------------------------------------------
Low Duration Maximum total return, Short and intermediate 1-3 yrs B to Aaa; max 10%
consistent with preservation maturity fixed income below Baa
of capital and prudent securities
investment management
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Moderate Maximum total return, Short and intermediate 2-5 yrs B to Aaa; max 10%
Duration Bond Duration consistent with preservation maturity fixed income below Baa
Fund of capital and prudent securities
investment management
-------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return, Intermediate maturity 3-6 yrs B to Aaa; max 10%
consistent with preservation fixed income securities below Baa
of capital and prudent
investment management
-------------------------------------------------------------------------------------------------------------------
Total Return II Same as Total Return Fund Same as Total Return Fund, 3-6 yrs Baa to Aaa
except quality and foreign
issuer restrictions
- -----------------------------------------------------------------------------------------------------------------------------------
Long Long-Term U.S. Maximum total return, Long-term maturity fixed greater than or A to Aaa
Duration Government consistent with preservation income securities equal to 8 yrs
Bond Funds of capital and prudent
investment management
- -----------------------------------------------------------------------------------------------------------------------------------
International Global Bond Maximum total return, Intermediate maturity U.S. 3-7 yrs B to Aaa; max 10%
Bond Funds consistent with preservation and foreign fixed income below Baa
of capital and prudent securities
investment management
-------------------------------------------------------------------------------------------------------------------
Foreign Bond Maximum total return, Intermediate maturity 3-7 yrs B to Aaa; max 10%
consistent with preservation hedged foreign fixed below Baa
of capital and prudent income securities
investment management
-------------------------------------------------------------------------------------------------------------------
Emerging Markets Maximum total return, Emerging market fixed 0-8 yrs B to Aaa
Bond consistent with preservation income securities
of capital and prudent
investment management
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Foreign (2)
- ------------------------------------------
<S> <C>
Short 0%
Duration
Bond Funds
0-5%
0-20%
Intermediate 0-20%
Duration Bond
Fund
0-20%
0%
Long 0%
Duration
Bond Funds
International 25-75%
Bond Funds
greater than or
equal to 85%
greater than or
equal to 80%
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield High Yield Maximum current income, Higher yielding fixed 2-6 yrs B to Aaa; min 65% 0%
Bond Funds consistent with preservation of income securities below Baa
capital and prudent investment
management
- ------------------------------------------------------------------------------------------------------------------------------------
Inflation Real Return Maximum real return, Inflation-indexed fixed N/A B to Aaa; max 10% 0-35%
- -Indexed Bond Bond consistent with preservation income securities below Baa
Funds of capital and prudent
investment management
</TABLE>
1. As rated by Moody's Investors Service, Inc., or if unrated, determined 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 Global Bond, Foreign Bond and
Emerging Markets Bond Funds. Percentage limitations for these three Funds
relate to securities of foreign issuers, denominated in any currency. Each
Underlying Bond Fund (except PIMCO Total Return II and Long-Term U.S.
Government Funds) may invest beyond these limits in U.S. dollar-denominated
securities of foreign issuers.
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 issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; corporate debt securities, including convertible
securities and corporate commercial paper; mortgage-backed and other asset-
backed securities; inflation-indexed bonds issued by 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, including rates of interest that vary inversely at a multiple of a
designated or floating rate, or that vary according to changes in relative
values of currencies. Most of the Underlying Bond Funds may (but are not
required to) make substantial use of derivative instruments 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.
Certain Other Miscellaneous Investment Practices of the Underlying Funds
In addition to purchasing the securities listed above under "Primary
Investments," some or all of the Underlying Funds may to varying extents: lend
portfolio securities; enter into repurchase agreements and reverse repurchase
agreements; purchase and sell securities on a when-issued or delayed delivery
basis; enter into forward 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 agreements; invest in foreign
securities; and buy or sell foreign currencies 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 "Investment Objectives and Policies" in
the Statement of Additional Information and
-17-
<PAGE>
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.
Additional Underlying Funds
In addition to the Funds listed above, a Portfolio may invest in additional
Underlying Funds that may become available for investment in the future at the
discretion of PIMCO Advisors and without shareholder approval.
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<PAGE>
Additional Information About Principal Risks
The Portfolios have different investment objectives and policies and
degrees of potential investment risk and reward depending upon their allocation
strategies. You should choose a Portfolio based on personal objectives,
investment time horizon, tolerance for risk and personal financial
circumstances.
As noted in the Summary Information section above, the risks associated
with investing in the Portfolios are closely related to the risks associated
with the securities and other investments held by the Underlying Funds. The
ability of a Portfolio to achieve its investment objective will depend upon the
ability of the Underlying Funds to achieve their objectives and 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. The extent to which the investment
performance and risks associated with a particular Portfolio correlate to those
of a particular Underlying Fund will depend upon the extent to which the
Portfolio's assets are allocated from time to time for investment in the
Underlying Fund. There can be no assurance that the investment objectives of
any of the Portfolios or the Underlying Funds will be achieved.
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.
The following summarizes principal risks associated with investments in the
Underlying Funds and, indirectly, with your investment in a Portfolio. The
summary is not intended to be exhaustive. For a more complete description of
these risks, please refer to the Statement of Additional Information and 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.
. Market Risk. The market price of securities owned by an Underlying Fund
may go up or down, sometimes rapidly or unpredictably. Securities may decline
in value due to factors affecting securities markets generally or particular
industries represented in the securities markets. The value of a security may
decline due to general market conditions which are not specifically related to a
company or industry, such as real or perceived adverse economic conditions,
changes in the general outlook for corporate earnings, changes in interest or
currency rates or adverse investor sentiment generally. They may also decline
due to factors which affect a particular industry or industries, such as labor
shortages or increased production costs and competitive conditions within an
industry. Equity securities generally have greater price volatility than fixed
income securities and the Underlying Stock Funds are particularly sensitive to
these market risks.
. Issuer Risk. The value of a security may decline for a number of reasons
which directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods or services. The price
volatility of equity securities is generally more pronounced than the volatility
of fixed income securities in response to matters relating to a particular
issuer, although
-19-
<PAGE>
the values of fixed income securities can decline dramatically in response to
certain types of issuer risks, such as those described under "Credit Risk"
below.
. Value Securities Risk. Each Underlying Stock Fund may invest in
companies that may not be expected to experience significant earnings growth,
but whose securities the Fund's portfolio manager believes are selling at a
price lower than their true value. PIMCO Equity Income, Renaissance, Value,
Value 25 and Small-Cap Value Funds place particular emphasis on value
securities. Companies that issue value securities may have experienced adverse
business developments or may be subject to special risks that have caused their
securities to be out of favor. If a portfolio manager's assessment of a
company's prospects is wrong, or if the market does not recognize the value of
the company, the price of its securities may decline or may not approach the
value that the portfolio manager anticipates.
. Growth Securities Risk. Each Underlying Stock Fund may invest in equity
securities of companies that its portfolio manager believes will experience
relatively rapid earnings growth. PIMCO Growth, Target, Opportunity,
International Growth and Innovation Funds place particular emphasis on growth
securities. Growth securities typically trade at higher multiples of current
earnings than other securities. Therefore, the values of growth securities may
be more sensitive to changes in current or expected earnings than the values of
other securities.
. Smaller Company Risk. The general risks associated with equity
securities and liquidity risk are particularly pronounced for securities of
companies with market capitalizations that are small compared to other publicly
traded companies. These companies may have limited product lines, markets or
financial resources or they may depend on a few key employees. Securities of
smaller companies may trade less frequently and in lesser volume than more
widely held securities and their values may fluctuate more sharply than other
securities. They may also trade in the over-the-counter market or on a regional
exchange, or may otherwise have limited liquidity. PIMCO Opportunity, Small-Cap
Growth, Micro-Cap Growth and Small-Cap Value Funds generally have the greatest
exposure to this risk. PIMCO Target, Mid-Cap Growth and Value 25 Funds also
have substantial exposure to this risk because they invest mainly in companies
with medium-sized market capitalizations, which are smaller and generally less-
seasoned than the largest companies.
. Interest Rate Risk. Each of the Underlying Bond Funds is particularly
sensitive to interest rate risk, a market risk relating to investments in fixed
income securities such as bonds and notes. 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 income 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, during
periods of rising interest rates, the value of fixed income securities generally
decline.
"Duration" is one measure of the expected life of a fixed income security.
When interest rates are falling, a portfolio with a shorter duration
-20-
<PAGE>
will generally 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 (assuming 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 interest rate 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
durations precisely when that is least advantageous (i.e., when interest rates
are rising).
Certain types of securities in which the Underlying Funds may invest are
particularly sensitive to fluctuations in prevailing interest rates and have
relatively high levels of interest rate risk. These include various mortgage-
related securities (for instance, the interest-only or "IO" class of a stripped
mortgage-backed security) and "zero 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 and the Underlying Fund prospectuses for a description of these and
other fixed income securities that are particularly sensitive to market risk.
. Credit Risk. All of the Underlying Funds are subject to credit risk.
This is the risk that the issuer or the guarantor of a fixed income security, or
the counterparty to a derivatives contract, repurchase agreement or a loan of
portfolio securities, will be unable or unwilling to make timely principal
and/or interest payments, or to otherwise honor its obligations.
The Underlying Funds that invest in fixed income securities (particularly
the Underlying Bond Funds) 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 governments. Even certain U.S. Government securities are
subject to credit risk.
Securities are subject to varying degrees of credit risk, which are often
reflected in their credit ratings. 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
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Services
("S&P"), or are determined to be of comparable quality to securities so rated.
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, high yield securities typically entail greater potential price
volatility and may be less liquid than higher-rated securities. High yield
securities may be regarded as predominately speculative with respect to the
issuer's continuing ability to meet principal and interest payments. They may
also be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher-rated securities.
-21-
<PAGE>
Accordingly, Underlying Bond Funds which invest a significant portion of their
assets in high yield securities (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.
. Foreign Investment Risk. Many Underlying Funds (in particular, 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 denominated in
foreign currencies (together, "foreign securities"). These Funds may experience
more rapid and extreme changes in value than Funds that invest exclusively in
securities of U.S. companies. Investing in foreign securities involves special
risks not typically associated with investing in U.S. securities. These risks
include: relatively small securities markets in many foreign countries, with a
limited number of securities representing a small number of issuers; 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; and political instability.
Individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. The securities markets, values of securities, yields, and
risks associated with foreign securities markets may change independently of
each other. Also, 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. Investments in foreign securities may also involve higher custodial
costs than domestic investments and additional transaction costs with respect to
foreign currency conversions. Changes in foreign exchange rates also will affect
the value of securities denominated or quoted in foreign currencies. In the
event of nationalization, expropriation or other confiscation, an Underlying
Fund could lose its entire investment in foreign securities. Adverse conditions
in certain regions such as Southeast Asia can also adversely affect securities
of other countries whose economies appear to be unrelated.
Certain Underlying Funds also may invest in sovereign debt issued by
governments, their agencies or instrumentalities, or other government-related
entities. Holders of sovereign debt may be requested to participate in the
rescheduling of such debt and to extend further loans to governmental entities.
In addition, there is no bankruptcy proceeding by which defaulted sovereign debt
may be collected.
Emerging Market Securities. 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 issuers based in
countries with developing or "emerging market" economies. These securities may
present market, credit, currency, liquidity, legal, political and other risks
different from, or greater than, risks of investing in domestic securities or in
foreign, developed countries. These risks include: smaller market capitalization
of securities markets, which may suffer
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<PAGE>
periods of relative illiquidity; significant price volatility; restrictions on
foreign investment; and possible repatriation of investment income and capital.
In addition, foreign investors may be required to register the proceeds of
sales, and future economic or political crises could lead to price controls,
forced mergers, expropriation or confiscatory taxation, seizure, nationalization
or the creation of government monopolies. The currencies of emerging market
countries may experience significant declines against the U.S. dollar, 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.
Additional risks of emerging markets securities may include: greater
social, economic and political uncertainty and instability; more substantial
governmental involvement in the economy; less governmental supervision and
regulation; unavailability of currency hedging techniques; risks of companies
that may be newly organized and small; differences in auditing and financial
reporting standards, which may result in unavailability of material information
about issuers; and less developed legal systems. 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 be delayed in disposing of a portfolio
security. Such a delay could result in possible liability to a purchaser of the
security.
. Currency Risk. Underlying Funds that invest in fixed income securities
denominated 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 that trade in, and receive revenues in, foreign currencies (in
particular, PIMCO International, International Growth, Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets Funds) are subject to the
risk that those currencies will decline in value relative to the U.S. Dollar,
or, in the case of hedging positions, that the U.S. Dollar will decline in value
relative to the currency being hedged. Currency rates in foreign countries may
fluctuate significantly over short periods of time for a number of reasons,
including changes in interest rates, intervention (or the failure to intervene)
by U.S. or foreign governments, central banks or supranational entities such as
the International Monetary Fund, or by the imposition of currency controls or
other political developments in the U.S. or abroad. For example, significant
uncertainty surrounds the recent 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. For a more complete
discussion of currency risk (including those associated with the euro), please
see "Investment Objectives and Policies - Foreign Currencies" in the Statement
of Additional Information.
. Derivatives Risk. Many of the Underlying Funds may, but are not required
to, use a number of derivative instruments for risk management purposes or as
part of their investment strategies. These include options contracts, futures
contracts, options on futures contracts and swap agreements. Generally,
derivatives are financial contracts whose value depends upon, or is derived
from, the value of an underlying asset, reference rate or index, and may relate
to stocks, bonds, interest rates,
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<PAGE>
currencies or currency exchange rates, commodities, and related indexes. An
Underlying Fund's use of derivative instruments involves risks different from,
or greater than, the risks associated with investing directly in securities and
other traditional investments. Also, an Underlying Fund may not employ any of
these strategies and there is no assurance that any derivatives strategy used by
a Fund will succeed.
A description of the various derivative instruments in which the Underlying
Funds may invest and the risks associated with each instrument is included in
the Underlying Fund prospectuses and in the Statement of Additional Information.
The following provides a more general discussion of important risk factors
relating to all derivative instruments that may be used by the Underlying Funds.
Management Risk Derivative products are highly specialized instruments 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 instrument 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 derivative
instrument is difficult to purchase or sell. If a derivative transaction is
particularly large or if the relevant market is illiquid (as is the case with
many privately 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 component, adverse
changes in the value or level of the underlying asset, 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. To
limit leverage risk, the Underlying Funds observe asset segregation requirements
to cover their obligations under derivative instruments.
Lack of Availability Because the markets for certain derivative instruments
(including markets located in foreign countries) are relatively new and still
developing, suitable derivatives transactions may not be available in all
circumstances for risk management or other purposes. There is no assurance that
an Underlying Fund will engage in derivatives transactions at any time or from
time to time. A Fund's ability to use derivatives may also be limited by certain
regulatory and tax considerations.
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 an Underlying
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<PAGE>
Fund's interest. If a portfolio manager incorrectly forecasts the values of
securities, currencies or interest rates or other economic factors in using
derivatives for an Underlying Fund, the Fund might have been in a better
position if it had not entered into the transaction at all. 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 other Fund investments. An Underlying Fund may also
have to buy or sell a security at a disadvantageous time or price because the
Fund is legally required to maintain offsetting positions or asset coverage in
connection with certain derivatives transactions.
Other risks in using derivatives include the risk of mispricing or improper
valuation of derivatives and the inability of derivatives to correlate perfectly
with underlying assets, rates and indexes. Many derivatives, in particular
privately negotiated derivatives, are complex and often valued subjectively.
Improper valuations can result in increased cash payment requirements to
counterparties or a loss of value to an Underlying Fund. In addition, an
Underlying Fund's use of derivatives may also 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.
. Liquidity Risk. Many of the Underlying Funds are subject to liquidity
risk. Liquidity risk exists when particular investments are difficult to
purchase or sell, possibly preventing a Fund from selling out of these illiquid
securities at an advantageous time or price. Underlying Funds with principal
investment strategies that involve securities of companies with smaller market
capitalizations, foreign securities, derivatives or securities with substantial
market and/or credit risk tend to have the greatest exposure to liquidity risk.
. Leveraging Risk. When an Underlying Fund is borrowing money or
otherwise leveraging its portfolio, the value of an investment in that Fund will
be more volatile and all other risks will tend to be compounded. This is because
leverage tends to exaggerate the effect of any increase or decrease in the value
of an Underlying Fund's portfolio securities. Many of the Underlying Funds may
take on leveraging risk by using reverse repurchase agreements, dollar rolls and
other borrowings, by investing collateral from loans of portfolio securities or
through the use of when-issued, delayed-delivery or forward commitment
transactions. Certain Underlying Funds may also take on leveraging risk by using
derivatives. The use of leverage may also cause an Underlying Fund to liquidate
portfolio positions when it may not be advantageous to do so to satisfy its
obligations or to meet segregation requirements.
. Management Risk. Each Underlying Fund is subject to management risk
because it is an actively managed investment portfolio. PIMCO Advisors, Pacific
Investment Management and the sub-advisers that manage investments of the
Underlying Funds will apply investment techniques and risk analyses in making
investment decisions for the Funds, but there can be no guarantee that they will
produce the desired results.
. A Note on PIMCO StocksPLUS Fund. While the investment objective of
PIMCO StocksPLUS Fund is to achieve a total return which exceeds the total
return performance of the S&P
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<PAGE>
500 Index, 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 Underlying Bond
Funds. To the extent that the Fund invests in S&P 500 Index derivatives backed
by a portfolio of fixed income securities, under certain conditions, generally
in a market where the value of both S&P 500 Index derivatives and fixed income
securities are declining, the Fund may experience greater losses than would be
the case if it were to invest directly in a portfolio of S&P 500 Index stocks.
Other Risk Information
Potential Conflicts of Interest
PIMCO Advisors has broad discretion to allocate and reallocate the Portfolios'
assets among the Underlying Funds consistent with the Portfolios' investment
objectives and policies and asset allocation ranges. Although PIMCO Advisors
does not charge an investment advisory fee for its asset allocation services,
PIMCO Advisors and its affiliates indirectly receive fees (including investment
advisory and administrative fees) from the Underlying Funds in which the
Portfolios invest. 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 Advisors 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
fulfilling their fiduciary duties to both the Portfolios and the Underlying
Funds.
Year 2000 Readiness Disclosure
Many of the services provided to the Portfolios and the Underlying 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, this could have an adverse impact
on the operations of the Portfolios or the Underlying Funds and services
provided to shareholders. PIMCO Advisors, Pacific Investment Management, the
sub-advisers to the Underlying Funds, the Distributor, the Trust's shareholder
servicing and transfer agent and custodian and certain other service providers
to the Portfolios and the Underlying 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 operations of the Portfolios and the Underlying Funds 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 or fixed income markets or economies, generally.
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Management of the Portfolios
The business affairs of the Portfolios are managed under the direction of the
Trust's Board of Trustees. Information about the Trustees and the Trust's
executive officers is included in the Statement of Additional Information under
the heading "Management of the Trust."
Investment Adviser and Administrator
PIMCO Advisors serves as the investment adviser and the administrator
(serving in its capacity as administrator, the "Administrator") for the
Portfolios. Subject to the supervision of the Board of Trustees, PIMCO Advisors
is responsible for managing, either directly or through others selected by it,
the investment activities of the Portfolios and the Portfolios' business affairs
and other administrative matters.
PIMCO Advisors is located at 800 Newport Center Drive, Newport Beach,
California 92660. Organized in 1987, PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. As of September 30, 1999, PIMCO Advisors
and its subsidiary partnerships had more than $256 billion in assets under
management.
. Asset Allocation Committee. PIMCO Advisors' Asset Allocation Committee
is responsible for determining how the Portfolios' assets are allocated and
reallocated from time to time among the Underlying Funds. The following provides
information about the individuals who comprise the Asset Allocation Committee
and are primarily responsible for making asset allocation and other investment
decisions for the Portfolios.
<TABLE>
<CAPTION>
Asset Allocation
Committee Member Since* Recent Professional Experience
<S> <C> <C>
William D. Cvengros 1998 Chief Executive Officer, President and a Member of the Management Board of
PIMCO Advisors and a Trustee of the Trust. Previously, he was President of
the Trust and a Director and the Vice Chairman and Chief Investment Officer
of Pacific Life Insurance Company (from January 1990 to November 1994).
Timothy R. Clark 1998 Vice President of PIMCO Advisors and a Senior Vice President of PIMCO Funds
Distributors LLC. Previously, he was President of Katonah Capital
Management, Inc. (from July 1995 to December 1996) and served in various
capacities at Zweig Advisors Inc. (from September 1989 to July 1995.
Robert S. Venable 1998 Vice President of PIMCO Advisors. Previously, he was a Vice President and
portfolio manager at Pacific Investment Management (from August 1992 to
August 1996).
</TABLE>
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<TABLE>
<S> <C> <C>
David Young 1998 Vice President in Account Management at Pacific Investment Management. He
has served in various capacities with Pacific Investment Management and its
affiliates since January 1994. Previously, he was a Vice President and
portfolio manager at Analytic Investment Management, Inc. (from September
1988 to January 1994).
</TABLE>
* Each individual has served on the Committee since the inception of each
Portfolio in September 1998.
PIMCO Advisors has retained its affiliate, Pacific Investment Management,
to provide various administrative and other services required by the Portfolios
in its capacity as sub-administrator. PIMCO Advisors and the sub-administrator
may retain other affiliates to provide certain of these services.
. Advisory Fees. The Portfolios do not pay any fees to PIMCO Advisors
under the Trust's investment advisory agreement in return for the advisory and
asset allocation services provided by PIMCO Advisors. The Portfolios do,
however, indirectly pay their 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 pay for the administrative services
they require under a fee structure which is essentially fixed. Class A, Class B
and Class C shareholders of the Portfolios pay a single administrative fee to
PIMCO Advisors, computed as a percentage of the Portfolio's assets attributable
in the aggregate to those classes of shares. PIMCO Advisors, in turn, provides
or procures administrative services for Class A, Class B and Class C
shareholders and also bears the costs of various third-party services required
by the Portfolios, including audit, custodial, portfolio accounting, legal,
transfer agency and printing costs.
For its services as Administrator, PIMCO Advisors 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 $2.5 billion and 0.35% based on such net assets in excess
of $2.5 billion. The Portfolios also indirectly pay their proportionate share of
the administrative fees charged by PIMCO Advisors and Pacific Investment
Management to the Underlying Funds in which the Portfolios invest. See
"Underlying Fund Expenses" below.
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<PAGE>
Underlying Fund Expenses
The expenses associated with investing in a "fund of funds," such as the
Portfolios, are generally higher than those for mutual 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 Portfolios are structured to reduce expenses incurred at the Underlying
Fund level as follows:
. The Portfolios do not pay any fees for asset allocation or advisory
services under the Trust's investment advisory agreement.
. The Underlying Funds invest in Institutional Class shares of the
Underlying Funds, which are not subject to any sales charges or 12b-1
fees.
The following table summarizes the annual expenses borne by Institutional
Class shareholders of the Underlying Funds (based on estimates for the current
fiscal year). Because the Portfolios invest in Institutional Class shares of the
Underlying Funds, shareholders of each Portfolio indirectly 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 "Summary Information - Your
Expenses."
<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 PIMCO Fund Fees strative Fees Operating Expenses
<S> <C> <C> <C>
Growth 0.50% 0.25% 0.75%
Target 0.55 0.25 0.80
Opportunity 0.65 0.25 0.90
Capital Appreciation 0.45 0.25 0.70
Mid-Cap Growth 0.45 0.25 0.70
Small-Cap Growth 1.00 0.25 1.25
Micro-Cap Growth 1.25 0.25 1.50
Equity Income 0.45 0.25 0.70
Renaissance 0.60 0.25 0.85
Value 0.45 0.25 0.70
Value 25 0.50 0.25 0.75
Small-Cap Value 0.60 0.25 0.85
Tax-Efficient Equity 0.45 0.25 0.70
Enhanced Equity 0.45 0.25 0.70
StocksPLUS 0.40 0.25 0.65
International 0.55 0.50 1.05
International Growth 0.85 0.50 1.35
Structured Emerging Markets 0.45 0.50 0.95
Tax-Efficient Structured Emerging Markets 0.45 0.50 0.95
Innovation 0.65 0.25 0.90
</TABLE>
-29-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Money Market 0.15 0.20 0.35
Short-Term 0.25 0.20 0.45
Low Duration 0.25 0.18 0.43
Moderate Duration 0.25 0.20 0.45
Total Return 0.25 0.18 0.43
Total Return II 0.25 0.25 0.50
Long-Term U.S. Government 0.25 0.25 0.50
Global Bond 0.25 0.30 0.55
Foreign Bond 0.25 0.25 0.50
Emerging Markets Bond 0.45 0.40 0.85
High Yield 0.25 0.25 0.50
Real Return Bond 0.25 0.27 0.52
</TABLE>
-30-
<PAGE>
Investment Options (Class A, B and C Shares)
The Trust offers investors Class A, Class B and Class C shares of each Portfolio
in this Prospectus. Each class of shares is subject to different types and
levels of sales charges than the other classes and bears a different level of
expenses.
The class of shares that is best for you depends upon a number of factors,
including the amount and the intended length of your investment. The following
summarizes key information about each class to help you make your investment
decision, including the various expenses associated with each class. More
extensive information about the Trust's multi-class arrangements is included in
the PIMCO Funds Shareholders' Guide for Class A, B and C Shares (the "Guide"),
which is included as part of the Statement of Additional Information and can be
obtained free of charge from the Distributor. See "How to Buy and Sell Shares -
PIMCO Funds Shareholders' Guide" below.
Class A Shares .You pay an initial sales charge of up to 5.50% when you buy
Class A shares. The sales charge is deducted from your
investment so that not all of you purchase payment is
invested.
.You may be eligible for a reduction or a complete waiver of
the initial sales charge under a number of circumstances.
For example, you normally pay no sales charge if you
purchase $1,000,000 or more of Class A shares. Please see
the Guide for details.
.Class A shares are subject to lower 12b-1 fees than Class B
or Class C shares. Therefore, Class A shareholders generally
pay lower annual expenses and receive higher dividends than
Class B or Class C shareholders.
.You normally pay no contingent deferred sales charge
("CDSC") when you redeem Class A shares, although you may
pay a 1% CDSC if you purchase $1,000,000 or more of Class A
shares (and therefore pay no initial sales charge) and then
redeem the shares during the first 18 months after your
initial purchase. The Class A CDSC is waived for certain
categories of investors and does not apply if you are
otherwise eligible to purchase Class A shares without a
sales charge. Please see the Guide for details.
Class B Shares .You do not pay an initial sales charge when you buy Class B
shares. The full amount of your purchase payment is invested
initially.
.You normally pay a CDSC of up to 5% if you redeem Class B
shares during the first six years after your initial
purchase. The amount of the CDSC declines the longer you
hold your Class B shares. You pay no CDSC if you redeem
during the
-31-
<PAGE>
seventh year and thereafter. The Class B CDSC is waived for
certain categories of investors. Please see the Guide for
details.
.Class B shares are subject to higher 12b-1 fees than Class
A shares for the first seven years they are held. During
this time, Class B shareholders normally pay higher annual
expenses and receive lower dividends than Class A
shareholders.
.Class B shares automatically convert into Class A shares
after they have been held for seven years. After the
conversion takes place, the shares are subject to the lower
12b-1 fees paid by Class A shares.
Class C Shares .You do not pay an initial sales charge when you buy Class C
shares. The full amount of your purchase payment is invested
initially.
.You normally pay a CDSC of 1% if you redeem Class C shares
during the first year after your initial purchase. The Class
C CDSC is waived for certain categories of investors. Please
see the Guide for details.
.Class C shares are subject to higher 12b-1 fees than Class
A shares. Therefore, Class C shareholders normally pay
higher annual expenses and receive lower dividends than
Class A shareholders.
.Class C shares do not convert into any other class of
shares. Because Class B shares convert into Class A shares
after seven years, Class C shares will normally be subject
to higher expenses and will pay lower dividends than Class B
shares if the shares are held for more than seven years.
-32-
<PAGE>
The following provides additional information about the sales charges and
other expenses associated with Class A, Class B and Class C shares.
Initial Sales Charges - Class A Shares
Unless you are eligible for a waiver, the public offering price you pay when you
buy Class A shares of the Portfolios is the net asset value ("NAV") of the
shares plus an initial sales charge. The initial sales charge varies depending
upon the size of your purchase, as set forth below. No sales charge is imposed
where Class A shares are issued to you pursuant to the automatic reinvestment of
income dividends or capital gains distributions.
90/10 Portfolio and 60/40 Portfolio
<TABLE>
<CAPTION>
Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
============================================================================================
<S> <C> <C>
$0-$49,999 5.82% 5.50%
- --------------------------------------------------------------------------------------------
$50,000-$99,999 4.71% 4.50%
- --------------------------------------------------------------------------------------------
$100,000-$249,999 3.63% 3.50%
- --------------------------------------------------------------------------------------------
$250,000-$499,999 2.56% 2.50%
- --------------------------------------------------------------------------------------------
$500,000-$999,999 2.04% 2.00%
- --------------------------------------------------------------------------------------------
$1,000,000 + 0.00%* 0.00%*
</TABLE>
30/70 Portfolio
<TABLE>
<CAPTION>
Initial Sales Charge Initial Sales Charge
Amount of as % of Net as % of Public
Purchase Amount Invested Offering Price
============================================================================================
<S> <C> <C>
$0-$49,999 4.71% 4.50%
- --------------------------------------------------------------------------------------------
$50,000-$99,999 4.17% 4.00%
- --------------------------------------------------------------------------------------------
$100,000-$249,999 3.63% 3.50%
- --------------------------------------------------------------------------------------------
$250,000-$499,999 2.56% 2.50%
- --------------------------------------------------------------------------------------------
$500,000-$999,999 2.04% 2.00%
- --------------------------------------------------------------------------------------------
$1,000,000 + 0.00%* 0.00%*
</TABLE>
* As shown, investors that purchase $1,000,000 or more of any Portfolio's Class
A shares will not pay any initial sales charge on the purchase. However,
purchasers of $1,000,000 or more of Class A shares may be subject to a CDSC of
1% if the shares are redeemed during the first 18 months after their purchase.
See "CDSCs on Class A Shares" below.
-33-
<PAGE>
Contingent Deferred Sales Charges (CDSCs) - Class B and Class C Shares
Unless you are eligible for a waiver, if you sell (redeem) your Class B or Class
C shares within the time periods specified below, you will pay a CDSC according
to the following schedules.
Class B Shares
<TABLE>
<CAPTION>
Years 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.
Class C Shares
<TABLE>
<CAPTION>
Years Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
- -------------------------------------------------------------
<S> <C>
First 1
- -------------------------------------------------------------
Thereafter 0
</TABLE>
CDSCs on Class A Shares
Unless a waiver applies, investors who purchase $1,000,000 or more of Class A
shares (and, thus, purchase the shares without any initial sales charge) will be
subject to a 1% CDSC if the shares are redeemed during the first 18 months after
their purchase. The Class A CDSC does not apply if you are otherwise eligible to
purchase Class A shares without an initial sales charge or if you are eligible
for a waiver of the CDSC. See "Reductions and Waivers of Initial Sales Charges
and CDSCs" below.
How CDSCs are Calculated
A CDSC is imposed on redemptions of Class B and Class C shares (and where
applicable, Class A shares) on the amount of the redemption which causes the
current value of your account for the particular class of shares of a Portfolio
to fall below the total dollar amount of your purchase payments subject to the
CDSC. However, 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
-34-
<PAGE>
derived from increases in the value of your account above the amount of the
purchase payments subject to the CDSC. CDSCs are deducted from the proceeds of
your redemption, not from amounts remaining in your account. In determining
whether a CDSC is payable, it is assumed that the purchase payment from which
the redemption is made is the earliest purchase payment for the particular class
of shares in your account (from which a redemption or exchange has not already
been effected).
For instance, the following example illustrates 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 Portfolio 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 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 Portfolio was reduced below
the amount of the purchase payment). At the rate of 5%, the C lass B CDSC
would be $100.
In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all shares of a particular
class of a Portfolio in the shareholder's account are aggregated, and the
current value of all such shares is aggregated.
Reductions and Waivers of Initial Sales Charges and CDSCs
The initial sales charges on Class A shares and the CDSCs on Class A, Class B
and Class C shares may be reduced or waived under certain purchase arrangements
and for certain categories of investors. Please see the Guide for details. The
Guide is available free of charge from the Distributor. See "How to Buy and Sell
Shares - PIMCO Funds Shareholders' Guide" below.
Distribution and Servicing (12b-1) Plans
The Portfolios pays fees to the Distributor on an ongoing basis as compensation
for the services the Distributor renders and the expenses it bears in connection
with the sale and distribution of Portfolio shares ("distribution fees") and/or
in connection with personal services rendered to Portfolio shareholders and the
maintenance of shareholder accounts ("servicing fees"). These payments are made
pursuant to Distribution and Servicing Plans ("12b-1 Plans") adopted by each
Portfolio pursuant to Rule 12b-1 under the Investment Company Act of 1940.
-35-
<PAGE>
There is a separate 12b-1 Plan for each class of shares offered in this
Prospectus. Class A shares pay only servicing fees. Class B and Class C shares
pay both distribution and servicing fees. The following lists the maximum annual
rates at which the distribution and/or servicing fees may be paid under each
12b-1 Plan (calculated as a percentage of each Portfolio's average daily net
assets attributable to the particular class of shares):
<TABLE>
<CAPTION>
Servicing Distribution
All Portfolios Fee Fee
- -----------------------------------------------------------------
<S> <C> <C>
Class A .25% None
- -----------------------------------------------------------------
Class B .25% .75%
- -----------------------------------------------------------------
Class C .25% .75%
</TABLE>
Because 12b-1 fees are paid out of a Portfolio's assets on an ongoing
basis, over time these fees will increase the cost of your investment and may
cost you more than sales charges which are deducted at the time of investment.
Therefore, although Class B and Class C shares do not pay initial sales charges,
the distribution fees payable on Class B and Class C shares may, over time, cost
you more than the initial sales charge imposed on Class A shares. Also, because
Class B shares convert into Class A shares after they have been held for seven
years and are not subject to distribution fees after the conversion, an
investment in Class C shares may cost you more over time than an investment in
Class B shares.
-36-
<PAGE>
How Portfolio Shares Are Priced
The Trust calculates the net asset value ("NAV") of a Portfolio's Class A, Class
B and Class C shares by taking the total value of the Portfolio's assets
attributable to the particular class, subtracting the Portfolio's liabilities
attributable to the class, and dividing by the Portfolio's total number of
shares of that class outstanding. Portfolio shares are valued as of the close of
regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock
Exchange (the "Exchange") each day the Exchange is open.
The assets of each Portfolio consist of shares of the Underlying Funds,
which are valued at their respective NAVs at the time of valuation of the
Portfolios' shares. The Underlying Funds generally value their portfolio
securities and other investments for which market quotations are readily
available at market value. Certain fixed income securities held by an Underlying
Fund for which daily market quotations are not readily available may be valued,
pursuant to guidelines established by the Fund's Board of Trustees, with
reference to fixed income securities with more readily attainable prices and
durations comparable to the securities being valued. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Exchange traded options, futures, and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other portfolio securities and assets held by an
Underlying Fund are valued at their fair value as determined in good faith by
the Fund's Board of Trustees or persons acting at the Board's direction.
Underlying Fund investments quoted in foreign currencies are translated
into U.S. dollars using foreign exchange quotations provided by independent
dealers. As a result, the NAV of an Underlying Fund's shares may be affected by
changes in the value of foreign currencies in relation to the U.S. dollar. To
the extent that the Underlying Funds invest in foreign securities, these
securities may be listed on foreign exchanges that may be open at different
times than the Exchange. As a result, to the extent that a Portfolio invests in
Underlying Funds that hold foreign securities, the NAV of the Portfolio's shares
may change at times when you can not buy, redeem or exchange shares.
-37-
<PAGE>
How to Buy and Sell Shares
The following section provides basic information about how to buy, sell (redeem)
and exchange shares of the Portfolios.
PIMCO Funds Shareholders' Guide
More detailed information about the Trust's purchase, sale and exchange
arrangements for Portfolio shares is provided in the Guide, which is included in
the Statement of Additional Information and can be obtained free of charge from
the Distributor by written request or by calling 1-800-426-0107. The Guide
provides technical information about the basic arrangements described below and
also describes special purchase, sale and exchange features and programs offered
by the Trust, including:
. Automated telephone and wire transfer procedures
. Automatic purchase, exchange and withdrawal programs
. Programs that establish a link from your Portfolio account to your bank
account
. Special arrangements for tax-qualified retirement plans
. Investment programs which allow you to reduce or eliminate the initial
sales charges on Class A shares
. Categories of investors that are eligible for waivers or reductions of
initial sales charges and CDSCs
Calculation of Share Price and Redemption Payments
When you buy shares of the Portfolios, you pay a price equal to the NAV of the
shares, plus any applicable sales charge. When you sell (redeem) shares, you
receive an amount equal to the NAV of the shares, minus any applicable CDSC.
NAVs are calculated as of the close of regular trading (normally, 4:00 p.m.
Eastern time) on the Exchange each day the Exchange is open. See "How Portfolio
Shares Are Priced" above for details. Generally, purchase and redemption orders
for Portfolio shares are processed at the NAV next calculated after your order
is received by the Distributor. There are certain exceptions where an order is
received by a broker or dealer prior to the close of regular trading on the
Exchange and then transmitted to the Distributor after the NAV has been
calculated for that day (in which case the order may be processed according to
that day's NAV). Please see the Guide for details.
The Trust does not calculate NAVs or process orders on days when the
Exchange is closed. If your purchase or redemption order is received by the
Distributor on a day when the Exchange is closed, it will be processed on the
next succeeding day when the Exchange is open (according to the succeeding day's
NAV).
-38-
<PAGE>
Buying Shares
You can buy Class A, Class B or Class C shares of the Portfolios in the
following ways:
. Through your broker, dealer or other financial intermediary. Your
broker, dealer or other intermediary may establish higher minimum
investment requirements than the Trust and may also independently charge
you transaction fees and additional amounts in return for its services,
which will reduce your return. Shares you purchase through your broker,
dealer or other intermediary will normally be held in your account with
that firm.
. Directly from the Trust. To make direct investments, you must open an
account with the Distributor and send payment for your shares either by
mail or through a variety of other purchase options and plans offered by
the Trust.
If you wish to invest directly by mail, please send a check payable to
PIMCO Funds Distributors LLC, along with a completed application form to:
PIMCO Funds Distributors LLC
P.O. Box 9688
Providence, RI 02940-0926
The Trust accepts all purchases by mail subject to collection of checks at
full value and conversion into federal funds. You may make subsequent purchases
by mailing a check to the address above with a letter describing the investment
or with the additional investment portion of a confirmation statement. Checks
for subsequent purchases should be payable to PIMCO Funds Distributors LLC and
should clearly indicate your account number. Please call the Distributor at 1-
800-426-0107 if you have any questions regarding purchases by mail.
The Guide describes a number of additional ways you can make direct
investments, including through the PIMCO Funds Auto-Invest and PIMCO Funds Fund
Link programs. You can obtain a Guide free of charge from the Distributor by
written request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders'
Guide" above.
The Distributor, in its sole discretion, may accept or reject any order for
purchase of Portfolio shares. No share certificates will be issued unless
specifically requested in writing.
Investment Minimums. The following investment minimums apply for purchases
of Class A, Class B and Class C shares.
<TABLE>
<CAPTION>
Initial Investment Subsequent Investments
- --------------------------------------------------------------
<S> <C>
$2,500 per Portfolio $100 per Portfolio
</TABLE>
-39-
<PAGE>
Lower minimums may apply for certain categories of investors, including
certain tax-qualified retirement plans, and for special investment programs and
plans offered by the Trust, such as the PIMCO Funds Auto-Invest and PIMCO Funds
Fund Link programs. Please see the Guide for details.
Small Account Fee
Because of the disproportionately high costs of servicing accounts with low
balances, if you have a direct account with the Distributor, you will be charged
a fee at the annual rate of $16 if your account balance falls below a minimum
level of $2,500. However, you will not be charged this fee if the aggregate
value of all of your PIMCO Funds accounts is at least $50,000. Any applicable
small account fee will be deducted automatically from your account in quarterly
installments and paid to the Administrator. Your account will normally be
valued, and any deduction taken, during the last five business days of each
calendar quarter. Lower minimum balance requirements and waivers of the small
account fee apply for certain categories of investors. Please see the Guide for
details.
Minimum Account Size
Due to the relatively high cost to the Portfolios of maintaining small accounts,
you are asked to maintain an account balance of at least the minimum investment
necessary to open the particular type of account. If your balance remains below
the minimum for three months or longer, the Administrator has the right (except
in the case of employer-sponsored retirement accounts) to redeem your remaining
shares and close your account after giving you 60 days to increase your balance.
Your account will not be liquidated if the reduction in size is due solely to a
decline in market value of your Portfolio shares or if the aggregate value of
all your PIMCO Funds accounts exceeds $50,000.
Exchanging Shares
You may exchange your Class A, Class B or Class C shares of any Portfolio for
the same Class of shares of any other Portfolio or of another series of the
Trust or PIMCO Funds: Pacific Investment Management Series. Shares are exchanged
on the basis of their respective NAVs next calculated after your exchange order
is received by the Distributor. Currently, the Trust does not charge any
exchange fees or charges. Exchanges are subject to the $2,500 minimum initial
purchase requirements for each Portfolio, except with respect to tax-qualified
programs and exchanges effected through the PIMCO Funds Auto-Exchange plan. If
you maintain your account with the Distributor, you may exchange shares by
completing a written exchange request and sending it to PIMCO Funds Distributors
LLC, P.O. Box 9688, Providence, RI 02940-0926. You can get an exchange form by
calling the Distributor at 1-800-426-0107.
The Guide provides more detailed information about the exchange privilege,
including the procedures you must follow and additional exchange options. The
Guide also describes circumstances under which the Trust may refuse or limit
exchanges. You can obtain a Guide free of charge from the Distributor by written
request or by calling 1-800-426-0107. See "PIMCO Funds Shareholders' Guide"
above. Except as otherwise permitted by the Securities and Exchange Commission,
the Trust
-40-
<PAGE>
will give you 60 days' advance notice if it exercises its right to terminate or
materially modify the exchange privilege.
Selling Shares
You can sell (redeem) Class A, Class B or Class C shares of the Portfolios in
the following ways:
. Through your broker, dealer or other financial intermediary. Your broker,
dealer or other intermediary may independently charge you transaction fees
and additional amounts in return for its services, which will reduce your
return.
. Directly From The Trust By Written Request. To redeem shares directly
from the Trust by written request (whether or not the shares are
represented by certificates), you must send the following items to the
Trust's Transfer Agent, First Data Investor Services Group, Inc., P.O. Box
9688, Providence, RI 02940-0926:
(1) a written request for redemption signed by all registered owners
exactly as the account is registered on the Transfer Agent's
records, including fiduciary titles, if any, and specifying the
account number and the dollar amount or number of shares to be
redeemed;
(2) for certain redemptions described below, a guarantee of all
signatures on the written request or on the share certificate or
accompanying stock power, if required, as described under
"Signature Guarantee" below;
(3) any share certificates issued for any of the shares to be
redeemed (see "Certificated shares" below); and
(4) any additional documents which may be required by the Transfer
Agent for redemption by corporations, partnerships or other
organizations, executors, administrators, trustees, custodians or
guardians, or if the redemption is requested by anyone other than
the shareholder(s) of record. Transfers of shares are subject to
the same requirements.
A signature guarantee is not required for redemptions of $50,000 or less,
requested by and payable to all shareholders of record for the account, and to
be sent to the address of record for that account. To avoid delay in redemption
or transfer, if you have any questions about these requirements you should
contact the Transfer Agent in writing or call 1-800-426-0107 before submitting a
request. Written redemption or transfer requests will not be honored until all
required documents in the proper form have been received by the Transfer Agent.
You can not redeem your shares by written request if they are held in broker
"street name" accounts.
-41-
<PAGE>
If the proceeds of your redemption (i) exceed $50,000, (ii) are to be paid
to a person other than the record owner, (iii) are to be sent to an address
other than the address of the account on the Transfer Agent's records, or (iv)
are to be paid to a corporation, partnership, trust or fiduciary, the
signature(s) on the redemption request and on the certificates, if any, or stock
power must be guaranteed as described under "Signature Guarantee" below. The
Distributor may, however, waive the signature guarantee requirement for
redemptions up to $2,500 by a trustee of a qualified retirement plan, the
administrator for which has an agreement with the Distributor.
The Guide describes a number of additional ways you can redeem your shares,
including:
. Telephone requests to the Transfer Agent
. PIMCO Funds Automated Telephone System (ATS)
. Expedited wire transfers
. Automatic Withdrawal Plan
. PIMCO Funds Fund Link
Unless you specifically elect otherwise, your initial account application
permits you to redeem shares by telephone subject to certain requirements. To
be eligible for ATS, expedited wire transfer, Automatic Withdrawal Plan, and
Fund Link privileges, you must specifically elect the particular option on your
account application and satisfy certain other requirements. The Guide describes
each of these options and provides additional information about selling shares.
You can obtain a Guide free of charge from the Distributor by written request or
by calling 1-800-426-0107.
Other than an applicable CDSC, you will not pay any special fees or charges
to the Trust or the Distributor when you sell your shares. However, if you sell
your shares through your broker, dealer or other financial intermediary, that
firm may charge you a commission or other fee for processing your redemption
request.
Redemptions of Portfolio shares may be suspended when trading on the
Exchange is restricted or during an emergency which makes it impracticable for
the Portfolios to dispose of their securities or to determine fairly the value
of their net assets, or during any other period as permitted by the Securities
and Exchange Commission for the protection of investors.
Timing Of Redemption Payments
Redemption proceeds will normally be mailed to the redeeming shareholder within
seven calendar days or, in the case of wire transfer or Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on the second or third business day. In
cases where shares have recently been purchased by personal check, redemption
proceeds may be withheld until the check has been collected, which may take up
to 15 days. To avoid such withholding, investors should purchase shares by
certified or bank check or by wire transfer. Under unusual circumstances, the
Trust may delay your redemption payments for more than seven days, as permitted
by law.
-42-
<PAGE>
Redemptions in Kind
The Trust had agreed to redeem shares of each Portfolio solely in cash 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 may 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. If your shares are redeemed in kind, you may incur transaction
costs upon the disposition of the securities received in the distribution.
Certificated Shares
If you are redeeming shares for which certificates have been issued, the
certificates must be mailed to or deposited with the Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "Signature
Guarantee" below. The Trust may request further documentation from
institutions or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians. Your redemption request and stock power must be signed exactly as the
account is registered, including indication of any special capacity of the
registered owner.
Signature Guarantee
When a signature guarantee is called for, you should have "Signature Guaranteed"
stamped under your signature and guaranteed by any of the following entities:
U.S. banks, foreign banks having a U.S. correspondent bank, credit unions,
savings associations, U.S. registered dealers and brokers, municipal securities
dealers and brokers, government securities dealers and brokers, national
securities exchanges, registered securities associations and clearing agencies
(each an "Eligible Guarantor Institution"). The Distributor reserves the right
to reject any signature guarantee pursuant to its written signature guarantee
standards or procedures, which may be revised in the future to permit it to
reject signature guarantees from Eligible Guarantor Institutions that do not,
based on credit guidelines, satisfy such written standards or procedures. The
Trust may change the signature guarantee requirements from time to time upon
notice to shareholders, which may be given by means of a new or supplemented
Prospectus.
-43-
<PAGE>
Portfolio Distributions
Each Portfolio distributes substantially all of its net investment income to
shareholders in the form of dividends. You begin earning dividends on Portfolio
shares the day after the Trust receives your purchase payment. 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 expected to be lower than dividends on Class A shares as a result of the
distribution fees applicable to Class B and Class C shares. The following shows
when each Portfolio intends to declare and distribute income dividends to
shareholders of record.
<TABLE>
<CAPTION>
At Least
Portfolio Annually Quarterly Monthly
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
90/10 Portfolio .
_____________________________________________________________________________________________
60/40 Portfolio .
_____________________________________________________________________________________________
30/70 Portfolio .
_____________________________________________________________________________________________
</TABLE>
In addition, each Portfolio distributes any net capital gains it earns from
the sale of portfolio securities to shareholders no less frequently than
annually. Net short-term capital gains may be paid more frequently.
You can choose from the following distribution options:
. Reinvest all distributions in additional shares of the same class of
your Portfolio at NAV. This will be done unless you elect another
option.
. Invest all distributions in shares of the same class of any other
Portfolio or another series of the Trust or PIMCO Funds: Pacific
Investment Management Series which offers that class at NAV. You must
have an account existing in the Portfolio or series selected for
investment with the identical registered name. You must elect this
option on your account application or by a telephone request to the
Transfer Agent at 1-800-426-0107.
. Receive all distributions in cash (either paid directly to you or
credited to your account with your broker or other financial
intermediary). You must elect this option on your account application
or by a telephone request to the Transfer Agent at 1-800-426-0107.
You do not pay any sales charges on shares you receive through the
reinvestment of Portfolio distributions.
-44-
<PAGE>
If you elect to receive Portfolio distributions in cash and the postal or
other delivery service is unable to deliver checks to your address of record,
the distributions will automatically be invested in the Money Market Fund of
PIMCO Funds: Pacific Investment Management Series until you are located.
For further information on distribution options, please contact your broker
or call the Distributor at 1-800-426-0107.
Tax Consequences
. Taxes on Portfolio distributions. If you are subject to U.S. federal
income tax, you will be subject to tax on Portfolio distributions whether you
received them in cash or reinvested them in additional shares. For federal
income tax purposes, Portfolio distributions will be taxable to you as either
ordinary income or capital gains.
Portfolio dividends (i.e., distributions of investment income) are taxable
to you as ordinary income. Federal taxes on Portfolio distributions of gains
are determined by how long the Portfolio owned the investments that generated
the gains, rather than how long you have owned your shares. Distributions of
gains from investments that a Portfolio owned for more than 12 months will
generally be taxable to you as capital gains. Distributions of gains from
investments that the Portfolio owned for 12 months or less will generally be
taxable to you as ordinary income.
Portfolio distributions are taxable to you even if they are paid from
income or gains earned by a Portfolio prior to your investment and thus were
included in the price you paid for your shares. For example, if you purchase
shares on or just before the record date of a Portfolio distribution, you will
pay full price for the shares and may receive a portion of your investment back
as a taxable distribution.
The Portfolios' 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.
. Taxes when you sell (redeem) or exchange your shares. Any gain resulting
from the sale of Portfolio shares will generally be subject to federal income
tax. When you exchange shares of a Portfolio for shares of another series, the
transaction will be treated as a sale of the Portfolio shares for these
purposes, and any gain on those shares will generally be subject to federal
income tax.
. Consult your tax advisor about other possible tax consequences. This is a
summary of certain federal income tax consequences of investing in a Portfolio.
You should consult your tax advisor for more information on your own tax
situation, including possible state, local and foreign tax consequences.
-45-
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand
the financial performance of Class A, Class B and Class C shares
of each Portfolio since the class of shares was first offered.
Certain information reflects financial results for a single
Portfolio share. The total returns in the table represent the rate
that an investor would have earned or lost on an investment in a
particular class of shares of a Portfolio, assuming reinvestment
of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP, whose report, along with
each Portfolio's financial statements, are included in the Trust's
annual report to shareholders. The annual report is incorporated
by reference in the Statement of Additional Information and is
available free of charge upon request from the Distributor.
<TABLE>
<CAPTION>
Year or Net Realized/ Dividends Dividends in
Period Net Asset Value Net Unrealized Total Income From Net Excess of Net
Ended Beginning Investment Gain (Loss) on From Investment Investment Investment
of Period Income (Loss) Investments Operations Income Income
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
90/10 Portfolio
Class A
09/30/98-06/30/99 $10.00 $0.16(a) $2.19(a) $2.35 $(0.15) $(0.03)
Class B
09/30/98-06/30/99 10.00 0.16(a) 2.13(a) 2.29 (0.15) (0.03)
Class C
09/30/98-06/30/99 10.00 0.07(a) 2.22(a) 2.29 (0.15) (0.03)
60/40 Portfolio
Class A
09/30/98-06/30/99 $10.00 $0.31(a) $1.23(a) $1.54 $(0.27) $0.00
Class B
09/30/98-06/30/99 10.00 0.16(a) 1.31(a) 1.47 (0.22) 0.00
Class C
09/30/98-06/30/99 10.00 0.18(a) 1.29(a) 1.47 (0.23) 0.00
30/70 Portfolio
Class A
09/30/98-06/30/99 $10.00 $0.58(a) $0.11(a) $0.69 $(0.36) $0.00
Class B
09/30/98-06/30/99 10.00 0.32(a) 0.31(a) 0.63 (0.31) 0.00
Class C
09/30/98-06/30/99 10.00 0.26(a) 0.36(a) 0.62 (0.32) 0.00
</TABLE>
- -------
* Annualized
(a) Per share amounts based upon average number of shares outstanding during
the period.
-46-
<PAGE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Net Asset Expenses to Income (Loss) to
Total Value End of Net Assets End Average Net Average Net Portfolio
Ditributionss Period Total Return of Period (000s) Assets Assets Turnover Rate
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$(0.18) $12.17 23.69% $ 647 0.65%* 1.91%* 48%
(0.18) 12.11 23.03 1,920 1.40* 1.87* 48
(0.18) 12.11 23.03 7,969 1.40* 0.77* 48
$(0.27) $11.27 15.50% $2,196 0.65%* 3.76%* 39%
(0.22) 11.25 14.83 3,653 1.40* 1.92* 39
(0.23) 11.24 14.82 9,826 1.40* 2.14* 39
$(0.36) $10.33 6.91% $ 407 0.65%* 7.54%* 37%
(0.31) 10.32 6.29 1,738 1.40* 4.09* 37
(0.32) 10.30 6.27 4,969 1.40* 3.39* 37
</TABLE>
-47-
<PAGE>
[Back Cover Page]
PIMCO Funds Asset Allocation Series
Actively managed portfolios of select PIMCO Funds
The Trust's Statement of Additional Information ("SAI") and annual and semi-
annual reports to shareholders include additional information about the
Portfolios and the Underlying Funds. In addition, the current Trust prospectus
and the prospectus of PIMCO Funds: Pacific Investment Management Series
relating to Institutional Class shares of the Underlying Funds contain
additional information about the Underlying Funds. The SAI, the financial
statements included in the Portfolios' most recent annual report to
shareholders, and the Underlying Fund prospectuses are incorporated by reference
into this Prospectus, which means they are part of this Prospectus for legal
purposes. The Portfolios' annual report discusses the market conditions and
investment strategies that significantly affected each Portfolio's performance
during its last fiscal year.
The SAI includes the PIMCO Funds Shareholders' Guide for Class A, B AND C
Shares, a separate booklet which contains more detailed information about
Portfolio purchase, redemption and exchange options and procedures and other
information about the Portfolios. You can get a free copy of the Guide together
with or separately from the rest of the SAI.
You may get free copies of any of these materials, request other information
about a Portfolio or the Underlying Funds, or make shareholder inquiries by
calling 1-800-426-0107, or by writing to:
PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, Connecticut 06902
You may review and copy information about the Trust, the Portfolios and the
Underlying Funds, including the SAI and the Underlying Fund prospectuses, at the
Securities and Exchange Commission's public reference room in Washington, D.C.
You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the Trust, the Portfolios and the Underlying Funds on the
Commission's Web site at www.sec.gov. You may get copies of this information,
with payment of a duplication fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009. You may need to refer to the
Trust's file number under the Investment Company Act, which is 811-6161.
You can also visit our Web site at www.pimcofunds.com for additional information
about the Portfolios and the Underlying Funds.
[LOGO]
File No. 811-6161
-48-
<PAGE>
PIMCO FUNDS: MULTI-MANAGER SERIES
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the prospectuses of PIMCO Funds: Multi-Manager Series
(the "Trust"), as supplemented from time to time. Through five Prospectuses, the
Trust offers up to six classes of shares of each of its "Funds" and five classes
of shares of each of its "Portfolios" (each as defined herein). Class A, Class B
and Class C shares of certain Funds are offered through the "Class A, B and C
Prospectus," dated November 1, 1999, Class D shares of certain Funds are offered
through the "Class D Prospectus," dated November 1, 1999, and Institutional and
Administrative Class shares of certain Funds are offered through the
"Institutional Prospectus," dated November 1, 1999. Class A, Class B and Class C
shares of the Portfolios are offered through the "Retail Portfolio Prospectus,"
dated November 1, 1999, and Institutional and Administrative Class Shares of the
Portfolios are offered through the "Institutional Portfolio Prospectus," dated
November 1, 1999. The Class A, B and C Prospectus, the Class D Prospectus, the
Institutional Prospectus, the Retail Portfolio Prospectus and the Institutional
Portfolio Prospectus are collectively referred to herein as the
"Prospectuses."
Audited financial statements for the Trust, as of June 30, 1999, including
notes thereto, and the reports of PricewaterhouseCoopers LLP thereon, are
incorporated herein by reference from the Trust's five June 30, 1999 Annual
Reports. Because the Portfolios invest a portion of their assets in series of
PIMCO Funds ("PIMS"), the PIMS Prospectus for Institutional Class shares, dated
August 1, 1999 and as from time to time amended or supplemented (the "PIMS
Prospectus"), and the PIMS Statement of Additional Information, dated August 31,
1999 and as from time to time amended or supplemented, are also incorporated
herein by reference. See "Investment Objectives and Policies--Investment
Strategies of the Portfolios--Incorporation by Reference" in this Statement of
Additional Information. A copy of the applicable Prospectus and the Annual
Report corresponding to such Prospectus, and the PIMCO Funds Shareholders' Guide
for Class A, B and C Shares (the "Guide"), which is a part of this Statement of
Additional Information, may be obtained free of charge at the addresses and
telephone number(s) listed below.
Class A, B and C, Class D,
--------------------------
Institutional and Institutional and Retail Portfolio Prospectuses,
------------------------------- ---------------------------------
Portfolio Prospectuses, Annual Reports, the Guide
----------------------- -------------------------
Annual Reports and the PIMS and the Prospectus and
--------------------------- ----------------------
Prospectus and Statement of Statement of Additional
--------------------------- -----------------------
Additional Information Information
----------------------
PIMCO Funds PIMCO Funds Distributors LLC
840 Newport Center Drive 2187 Atlantic Street
Suite 300 Stamford, Connecticut 06902
Newport Beach, California 92660 Telephone: Class A, B and C
1-800-426-0107
Telephone: 1-800-927-4648 Class D - 1-888-87-PIMCO
1-800-987-4626 (PIMCO Retail Portfolio -
1-800-426-0107
Infolink Audio Response
Network)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE TRUST............................................................................ 1
INVESTMENT OBJECTIVES AND POLICIES................................................... 1
U.S. Government Securities...................................................... 1
Borrowing....................................................................... 2
Preferred Stock................................................................. 3
Corporate Debt Securities....................................................... 3
High Yield Securities ("Junk Bonds")............................................ 3
Loan Participations and Assignments............................................. 5
Participation on Creditors Committees........................................... 5
Variable and Floating Rate Securities........................................... 5
Mortgage-Related and Asset-Backed Securities.................................... 6
Convertible Securities.......................................................... 10
Equity-Linked Securities........................................................ 10
Foreign Securities.............................................................. 11
Foreign Currencies.............................................................. 13
Bank Obligations................................................................ 14
Commercial Paper................................................................ 15
Money Market Instruments........................................................ 15
Derivative Instruments.......................................................... 15
When-Issued, Delayed Delivery and Forward Commitment Transactions............... 23
Warrants to Purchase Securities................................................. 23
Repurchase Agreements........................................................... 24
Securities Loans................................................................ 24
Stocks of Small and Medium Capitalization Companies............................. 24
Illiquid Securities............................................................. 25
Inflation-Indexed Bonds......................................................... 25
Delayed Funding Loans and Revolving Credit Facilities........................... 26
Catastrophe Bonds............................................................... 27
Hybrid Instruments.............................................................. 27
Precious Metals and Metal-Indexed Notes......................................... 28
Investment Strategies of the Portfolios - Incorporation by Reference............ 29
INVESTMENT RESTRICTIONS.............................................................. 29
Fundamental Investment Restrictions............................................. 29
Non-Fundamental Investment Restrictions......................................... 32
MANAGEMENT OF THE TRUST.............................................................. 34
Trustees and Officers........................................................... 34
Trustees' Compensation.......................................................... 37
Portfolio Management Agreements................................................. 42
Fund Administrator.............................................................. 45
DISTRIBUTION OF TRUST SHARES......................................................... 50
Distributor and Multi-Class Plan................................................ 50
Distribution and Servicing Plans for Class A, Class B and Class C Shares........ 52
Payments Pursuant to Class A Plans.............................................. 55
Payments Pursuant to Class B Plans.............................................. 57
Payments Pursuant to Class C Plans.............................................. 59
Distribution and Administrative Services Plans for Administrative Class Shares.. 62
Payments Pursuant to the Administrative Plan.................................... 63
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Plan for Class D Shares......................................................... 64
Purchases, Exchanges and Redemptions............................................ 65
PORTFOLIO TRANSACTIONS AND BROKERAGE................................................. 68
Investment Decisions and Portfolio Transactions................................. 68
Brokerage and Research Services................................................. 69
Portfolio Turnover.............................................................. 71
NET ASSET VALUE...................................................................... 72
TAXATION............................................................................. 73
Distributions................................................................... 74
Sales of Shares................................................................. 75
Backup Withholding.............................................................. 75
Options, Futures, Forward Contracts and Swap Agreements......................... 76
Foreign Currency Transactions................................................... 76
Foreign Taxation................................................................ 76
Original Issue Discount and Pay-In-Kind Securities.............................. 77
Other Taxation.................................................................. 77
OTHER INFORMATION.................................................................... 78
Capitalization.................................................................. 78
Performance Information......................................................... 79
Calculation of Yield............................................................ 80
Year 2000 Readiness Disclosure.................................................. 98
Compliance Efforts Related to the Euro.......................................... 99
Voting Rights................................................................... 99
Certain Ownership of Trust Shares............................................... 100
Custodian....................................................................... 100
Independent Accountants......................................................... 101
Legal Counsel................................................................... 101
Registration Statement.......................................................... 101
Financial Statements............................................................ 101
APPENDIX
DESCRIPTION OF SECURITIES RATINGS............................................... A-1
PIMCO Funds Shareholders' Guide For Class A, B and C Shares.......................... SG-1
</TABLE>
-ii-
<PAGE>
THE TRUST
PIMCO Funds: Multi-Manager Series (the "Trust"), is an open-end management
investment company ("mutual fund") that currently consists of twenty-six
separate diversified investment series. The following twenty-three series (the
"Funds") invest directly in common stocks and other securities and instruments:
the Equity Income Fund, the Value Fund, the Renaissance Fund, the Tax-Efficient
Equity Fund, the Enhanced Equity Fund, the Growth Fund, the Value 25 Fund, the
Mega-Cap Fund, the Capital Appreciation Fund, the Mid-Cap Growth Fund, the Core
Equity Fund, the Mid-Cap Equity Fund, the Target Fund, the Small-Cap Value Fund,
the Small-Cap Growth Fund, the Opportunity Fund, the Micro-Cap Growth Fund, the
Innovation Fund, the International Fund, the International Growth Fund, the Tax-
Efficient Structured Emerging Markets Fund, the Structured Emerging Markets Fund
and the Precious Metals Fund. Three additional series, 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," and together
with the 90/10 Portfolio and the 60/40 Portfolio, the "Portfolios"), are so-
called "funds-of-funds" which invest all of their assets in certain of the Funds
and other series in the PIMCO Funds family.
The Trust was organized as a Massachusetts business trust on August 24,
1990. On January 17, 1997, the Trust and PIMCO Advisors Funds, a separate trust,
were involved in a transaction in which certain series of PIMCO Advisors Funds
reorganized into series of the Trust. In connection with this transaction, the
Trust changed its name from PIMCO Funds: Equity Advisors Series to its current
name. Prior to being known as PIMCO Funds: Equity Advisors Series, the Trust was
named PIMCO Advisors Institutional Funds, PFAMCO Funds and PFMACO Fund.
INVESTMENT OBJECTIVES AND POLICIES
In addition to the principal investment strategies and the principal risks
of the Funds and Portfolios described in the Prospectuses, each Fund may employ
other investment practices and may be subject to additional risks which are
described below. Because the following is a combined description of investment
strategies and risks for all the Funds and Portfolios, certain strategies and/or
risks described below may not apply to particular Funds and/or Portfolios.
Unless a strategy or policy described below is specifically prohibited by the
investment restrictions listed in the Prospectuses, under "Investment
Restrictions" in this Statement of Additional Information, or by applicable law,
a Fund or Portfolio may engage in each of the practices described below.
The 90/10 Portfolio, 60/40 Portfolio and 30/70 Portfolio invest all of
their assets in certain Funds and series of PIMCO Funds ("PIMS"), an open-end
series management investment company advised by Pacific Investment Management
Company ("Pacific Investment Management"), an affiliate of PIMCO Advisors. PIMS
is referred to in the Prospectuses as PIMCO Funds: Pacific Investment Management
Series. These Funds and other series in which the Portfolios invest are referred
to in this Statement as "Underlying PIMCO Funds." By investing in Underlying
PIMCO Funds, the Portfolios may have an indirect investment interest in some or
all of the securities and instruments described below depending upon how their
assets are allocated among the Underlying PIMCO Funds. The Portfolios may also
have an indirect investment interest in other securities and instruments
utilized by the Underlying PIMCO Funds which are series of PIMS. These
securities and instruments are described in the current PIMS prospectus for
Institutional Class and Administrative Class shares and in the PIMS statement of
additional information. The PIMS prospectus and statement of additional
information are incorporated in this document by reference. See "Investment
Strategies of the Portfolios--Incorporation by Reference" below.
The Funds' sub-advisers, which are responsible for making investment
decisions for the Funds, are referred to in this section and the remainder of
this Statement of Additional Information as "Sub-Advisers." As discussed below
under "Management of the Trust--Investment Adviser," the PIMCO Equity Advisors
division of PIMCO Advisors is also referred to as a "Sub-Adviser."
U.S. Government Securities
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Funds' shares. Some U.S.
-1-
<PAGE>
Government securities, such as Treasury bills, notes and bonds, and securities
guaranteed by the Government National Mortgage Association ("GNMA"), are
supported by the full faith and credit of the United States; others, such as
those of the Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Federal National
Mortgage Association ("FNMA"), are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; and still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. U.S. Government securities include securities
that have no coupons, or have been stripped of their unmatured interest coupons,
individual interest coupons from such securities that trade separately, and
evidences of receipt of such securities. Such securities may pay no cash income,
and are purchased at a deep discount from their value at maturity. Because
interest on zero coupon securities is not distributed on a current basis but is,
in effect, compounded, zero coupon securities tend to be subject to greater
market risk than interest-paying securities of similar maturities. Custodial
receipts issued in connection with so-called trademark zero coupon securities,
such as CATs and TIGRs, are not issued by the U.S. Treasury, and are therefore
not U.S. Government securities, although the underlying bond represented by such
receipt is a debt obligation of the U.S. Treasury. Other zero coupon Treasury
securities (e.g., STRIPs and CUBEs) are direct obligations of the U.S.
Government.
Borrowing
Subject to the limitations described under "Investment Restrictions" below,
a Fund may be permitted to borrow for temporary purposes and/or for investment
purposes. Such a practice will result in leveraging of a Fund's assets and may
cause a Fund to liquidate portfolio positions when it would not be advantageous
to do so. This borrowing may be unsecured. Provisions of the Investment Company
Act of 1940, as amended ("1940 Act"), require a Fund to maintain continuous
asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed, with an exception for
borrowings not in excess of 5% of the Fund's total assets made for temporary
administrative purposes. As noted under "Investment Restrictions," certain Funds
are subject to limitations on borrowings which are more strict than those
imposed by the 1940 Act. Any borrowings for temporary administrative purposes in
excess of 5% of the Fund's total assets must maintain continuous asset coverage.
If the 300% asset coverage should decline as a result of market fluctuations or
other reasons, a Fund may be required to sell some of its portfolio holdings
within three days to reduce the debt and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell
securities at that time. Borrowing will tend to exaggerate the effect on net
asset value of any increase or decrease in the market value of a Fund's
portfolio. Money borrowed will be subject to interest costs which may or may not
be recovered by appreciation of the securities purchased. A Fund also may be
required to maintain minimum average balances in connection with such borrowing
or to pay a commitment or other fee to maintain a line of credit; either of
these requirements would increase the cost of borrowing over the stated interest
rate.
From time to time, the Trust may enter into, and make borrowings for
temporary purposes related to the redemption of shares under, a credit agreement
with third-party lenders. Borrowings made under such a credit agreement will be
allocated among the Funds and Portfolios pursuant to guidelines approved by the
Board of Trustees.
In addition to borrowing for temporary purposes, a Fund may enter into
reverse repurchase agreements if permitted to do so under its investment
restrictions. A reverse repurchase agreement involves the sale of a portfolio-
eligible security by a Fund, coupled with its agreement to repurchase the
instrument at a specified time and price. The Fund will segregate assets
determined to be liquid by the Adviser or the Fund's Sub-Adviser in accordance
with procedures established by the Board of Trustees and equal (on a daily mark-
to-market basis) to its obligations under reverse repurchase agreements with
broker-dealers (but not banks). However, reverse repurchase agreements involve
the risk that the market value of securities retained by the Fund may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase. Reverse repurchase agreements will be subject to the
Funds' limitations on borrowings as specified under "Investment Restrictions"
below.
-2-
<PAGE>
Preferred Stock
All Funds may invest in preferred stock. Preferred stock is a form of
equity ownership in a corporation. The dividend on a preferred stock is a fixed
payment which the corporation is not legally bound to pay. Certain classes of
preferred stock are convertible, meaning the preferred stock is convertible into
shares of common stock of the issuer. By holding convertible preferred stock, a
Fund can receive a steady stream of dividends and still have the option to
convert the preferred stock to common stock.
Corporate Debt Securities
All Funds may invest in corporate debt securities and/or hold their assets
in these securities for cash management purposes. The investment return of
corporate debt securities reflects interest earnings and changes in the market
value of the security. The market value of a corporate debt obligation may be
expected to rise and fall inversely with interest rates generally. There also
exists the risk that the issuers of the securities may not be able to meet their
obligations on interest or principal payments at the time called for by an
instrument.
A Fund's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Fund, or, if unrated, are deemed to
be comparable in quality to corporate debt securities in which the Fund may
invest. The rate of return or return of principal on some debt obligations may
be linked or indexed to the level of exchange rates between the U.S. dollar and
a foreign currency or currencies.
Among the corporate debt securities in which the Funds may invest are
convertible securities. A convertible debt security is a bond, debenture, note,
or other security that entitles the holder to acquire common stock or other
equity securities of the same or a different issuer. A convertible security
generally entitles the holder to receive interest paid or accrued until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to non-
convertible debt securities. Convertible securities rank senior to common stock
in a corporation's capital structure and, therefore, generally entail less risk
than the corporation's common stock.
A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by a Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party.
High Yield Securities ("Junk Bonds")
Certain of the Funds may invest in debt/fixed income securities of domestic
or foreign issuers that meet minimum ratings criteria set forth for a Fund, or,
if unrated, are of comparable quality in the opinion of the Fund's Sub-Adviser.
A description of the ratings categories used is set forth in the Appendix to
this Statement of Additional Information.
A security is considered to be below "investment grade" quality if it is
either (1) not rated in one of the four highest rating categories by one of the
Nationally Recognized Statistical Rating Organizations ("NRSROs") (i.e., rated
Ba or below by Moody's Investors Service, Inc. ("Moody's") or BB or below by
Standard & Poor's Ratings Services ("S&P")) or (2) if unrated, determined by the
relevant Sub-Adviser to be of comparable quality to obligations so rated.
Certain 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 Sub-Adviser to be
of comparable quality. In addition, certain of these Funds may invest in
convertible securities rated below B by Moody's or S&P (or, if unrated,
considered by the Sub-Adviser to be of comparable quality). Securities
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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 Funds that invests in high yield securities reserves the right to do
so at any time, as of the date of this Statement of Additional Information, none
of these Funds invest or has the present intention to invest more than 5% of its
assets in high yield securities or junk bonds. Investment in high yield
securities generally provides greater income and increased opportunity for
capital appreciation than investments in higher quality securities, but it also
typically entails greater price volatility as well as principal and income risk.
High yield securities are regarded as predominantly speculative with respect to
the issuer's continuing ability to meet principal and interest payments. The
market for these securities is relatively new, and many of the outstanding high
yield securities have not endured a major business recession. A long-term track
record on default rates, such as that for investment grade corporate bonds, does
not exist for this market. Analysis of the creditworthiness of issuers of high
yield securities may be more complex than for issuers of higher quality
debt/fixed income securities. Each Fund of the Trust that may purchase high
yield securities may continue to hold such securities following a decline in
their rating if in the opinion of the Adviser or the Sub-Adviser, as the case
may be, it would be advantageous to do so. Investments in high yield securities
that are eligible for purchase by certain of the Funds are described as
"speculative" by both Moody's and S&P.
Investing in high yield securities involves special risks in addition to
the risks associated with investments in higher rated fixed income securities.
While offering a greater potential opportunity for capital appreciation and
higher 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 Sub-Adviser's creditworthiness analysis than would be the case if the
Fund were investing in higher quality securities.
High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities are likely to be sensitive to adverse
economic downturns or individual corporate developments. A projection of an
economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield security prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt/fixed income securities. If an issuer of high
yield securities defaults, in addition to risking payment of all or a portion of
interest and principal, the Funds investing in such securities may incur
additional expenses to seek recovery. In the case of high yield securities
structured as zero-coupon or pay-in-kind securities, their market prices are
affected to a greater extent by interest rate changes, and therefore tend to be
more volatile than securities which pay interest periodically and in cash. Even
though such securities do not pay current interest in cash, a Fund nonetheless
is required to accrue interest income on these investments and to distribute the
interest income on a current basis. Thus, a Fund could be required at times to
liquidate other investments in order to satisfy its distribution requirements.
Prices of high yield/high risk securities have been found to be less
sensitive to interest rate changes than more highly rated investments, but more
sensitive to economic downturns or individual corporate developments. The
secondary market on which high yield securities are traded may be less liquid
than the market for higher grade securities. Less liquidity in the secondary
trading market could adversely affect the price at which the Funds could sell a
high yield security, and could adversely affect the daily net asset value of the
shares. Lower liquidity in secondary markets could adversely affect the value
of high yield/high risk securities held by the Funds. While lower rated
securities typically are less sensitive to interest rate changes than higher
rated securities, the market prices of high yield/high risk securities
structured as "zero coupon" or "pay-in-kind" securities may be affected to a
greater extent by interest rate changes. See Appendix A to this Statement of
Additional Information for further information regarding high yield/high risk
securities. For instance, adverse publicity and investor perceptions, whether
or not based on fundamental analysis, may decrease the values and liquidity of
high yield securities, especially in a thinly traded market. When secondary
markets for high yield securities are less liquid than the market
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for higher grade securities, it may be more difficult to value the securities
because such valuation may require more research, and elements of judgment may
play a greater role in the valuation because there is less reliable, objective
data available.
Debt securities are purchased and sold principally in response to current
assessments of future changes in business conditions and the levels of interest
rates on debt/fixed income securities of varying maturities, the availability of
new investment opportunities at higher relative yields, and current evaluations
of an issuer's continuing ability to meet its obligations in the future. The
average maturity or duration of the debt/fixed income securities in a Fund's
portfolio may vary in response to anticipated changes in interest rates and to
other economic factors. Securities may be bought and sold in anticipation of a
decline or a rise in market interest rates. In addition, a Fund may sell a
security and purchase another of comparable quality and maturity (usually, but
not always, of a different issuer) at approximately the same time to take
advantage of what are believed to be short-term differentials in values or
yields.
Loan Participations and Assignments
Certain Funds may invest in fixed- and floating-rate loans arranged through
private negotiations between an issuer of debt instruments and one or more
financial institutions ("lenders"). Generally, a Fund's investments in loans are
expected to take the form of loan participations and assignments of portions of
loans from third parties.
Large loans to corporations or governments may be shared or syndicated
among several lenders, usually banks. A Fund may participate in such syndicates,
or can buy part of a loan, becoming a direct lender. Participations and
assignments involve special types of risk, including liquidity risk and the
risks of being a lender. If a Fund purchases a participation, it may only be
able to enforce its rights through the lender, and may assume the credit risk of
the lender in addition to the borrower. In assignments, a Fund's rights against
the borrower may be more limited than those held by the original lender.
Participation on Creditors Committees
A Fund may from time to time participate on committees formed by creditors
to negotiate with the management of financially troubled issuers of securities
held by the Fund. Such participation may subject a Fund to expenses such as
legal fees and may make the Fund an "insider" of the issuer for purposes of the
federal securities laws, and therefore may restrict the Fund's ability to trade
in or acquire additional positions in a particular security when it might
otherwise desire to do so. Participation by a Fund on such committees also may
expose the Fund to potential liabilities under the federal bankruptcy laws or
other laws governing the rights of creditors and debtors. A Fund would
participate on such committees only when the Adviser and the relevant Sub-
Adviser believe that such participation is necessary or desirable to enforce the
Fund's rights as a creditor or to protect the value of securities held by the
Fund.
Variable and Floating Rate Securities
Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate.
Certain of the Funds may invest in floating rate debt instruments
("floaters"). The interest rate on a floater is a variable rate which is tied to
another interest rate, such as a money-market index or U.S. Treasury bill rate.
The interest rate on a floater resets periodically, typically every six months.
Because of the interest rate reset feature, floaters provide a Fund with a
certain degree of protection against rises in interest rates, but generally do
not allow the Fund to participate fully in appreciation resulting from any
general decline in interest rates.
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Certain Funds may also invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security generally will exhibit greater
price volatility than a fixed rate obligation of similar credit quality. See
"Mortgage-Related and Asset-Backed Securities" below.
Mortgage-Related and Asset-Backed Securities
All Funds that may purchase debt securities for investment purposes 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. Mortgage-related securities are interests in pools of residential or
commercial mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations. 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
depending part upon the ability of the Sub-Adviser to forecast interest rates
and other economic factors correctly. See "Mortgage Pass-Through Securities"
below. Certain debt securities are also secured with collateral consisting of
mortgage-related securities. See "Collateralized Mortgage Obligations" below.
Mortgage Pass-Through Securities. Mortgage Pass-Through Securities are
securities representing interests in "pools" of mortgage loans secured by
residential or commercial real property. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential or commercial mortgage loans, net of any fees
paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
property, refinancing or foreclosure, net of fees or costs which may be
incurred. Some mortgage-related securities (such as securities issued by the
Government National Mortgage Association ("GNMA")) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
The 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. 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. 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 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"). The principal governmental guarantor of mortgage-related
securities is the GNMA. GNMA is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. GNMA is authorized to
guarantee, with the full faith and credit of the U.S. Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan
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institutions, commercial banks and mortgage bankers) and backed by pools of
mortgages insured by the Federal Housing Administration (the "FHA"), or
guaranteed by the Department of Veterans Affairs (the "VA").
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the FNMA and the FHLMC. FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved seller/services which
include state and federally chartered savings and loan associations, mutual
savings banks, commercial banks, and credit unions and mortgage bankers. Pass-
through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government. Instead, they are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations.
FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a government-
sponsored corporation formerly owned by the twelve Federal Home Loan Banks and
now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the U.S. Government. Instead, they are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create pass-
through pools of conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or services of the underlying mortgage loans as
well as the guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools. However, timely
payment of interest and principal of these pools may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance and letters of credit. The insurance and guarantees are issued
by governmental entities, private insurers and the mortgage poolers. Such
insurance and guarantees, and the creditworthiness of the issuers thereof, will
be considered in determining whether a mortgage-related security meets the
Trust's investment quality standards. There can be no assurance that the private
insurers or guarantors can meet their obligations under the insurance policies
or guarantee arrangements. A Fund may buy mortgage-related securities without
insurance or guarantees if, through an examination of the loan experience and
practices of the originator/servicers and poolers, the Sub-Adviser determines
that the securities meet the Fund's quality standards. Although the market for
such securities is becoming increasingly liquid, securities issued by certain
private organizations may not be readily marketable. A Fund will not purchase
mortgage-related securities or any other assets which in the Sub-Adviser's
opinion are illiquid if, as a result, more than 15% of the value of the Fund's
net assets (taken at market value at the time of investment) will be invested in
illiquid securities.
Mortgage-related securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to a Fund's
industry concentration restrictions, see "Investment Restrictions," by virtue of
the exclusion from that test available to all U.S. Government securities. In the
case of privately issued mortgage-related securities, the Funds take the
position that mortgage-related securities do not represent interests in any
particular "industry" or group of industries. The assets underlying such
securities may be represented by a portfolio of first lien residential mortgages
(including both whole mortgage loans and mortgage participation interests) or
portfolios of mortgage pass-through securities issued or guaranteed by GNMA,
FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in turn
be insured or guaranteed by the FHA or the VA. In the case of private issue
mortgage-related securities whose underlying assets are neither U.S. Government
securities nor U.S. Government-insured mortgages, to the extent that real
properties securing such assets may be located in the same geographical region,
the security may be subject to a greater risk of default than other comparable
securities in the event of adverse economic, political or business developments
that may affect such region and, ultimately, the ability of residential
homeowners to make payments of principal and interest on the underlying
mortgages.
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Collateralized Mortgage Obligations ("CMOs"). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semi-annually. CMOs may
be collateralized by whole mortgage loans, but are more typically collateralized
by portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begin to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.
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.
FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made
semi-annually, as opposed to monthly. The amount of principal payable on each
semi-annual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any payment date are paid to the holders of the CMOs
as additional sinking fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's minimum
sinking fund requirement, the rate at which principal of the CMOs is actually
repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans
during any semi-annual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCS. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.
Commercial Mortgage-Backed Securities. 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
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underlying mortgage loans. These risks reflect the effects of local and other
economic conditions on real estate markets, the ability of tenants to make loan
payments, and the ability of a property to attract and retain tenants.
Commercial mortgage-backed securities may be less liquid and exhibit greater
price volatility than other types of mortgage- or asset-backed securities.
Other Mortgage-Related Securities. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including CMO residuals or stripped mortgage-backed
securities. Other mortgage-related securities may be equity or debt securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
CMO Residuals. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
IO class of stripped mortgage-backed securities. See "Other Mortgage-Related
Securities--Stripped Mortgage-Backed Securities." In addition, if a series of a
CMO includes a class that bears interest at an adjustable rate, the yield to
maturity on the related CMO residual will also be extremely sensitive to changes
in the level of the index upon which interest rate adjustments are based. As
described below with respect to stripped mortgage-backed securities, in certain
circumstances a Fund may fail to recoup some or all of its initial investment in
a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has developed fairly recently and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not,
have been registered under the Securities Act of 1933, as amended (the "1933
Act"). CMO residuals, whether or not registered under the 1933 Act, may be
subject to certain restrictions on transferability, and may be deemed "illiquid"
and subject to a Fund's limitations on investment in illiquid securities.
Stripped Mortgage-Backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose entities
of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the "IO"
class), while the other class will receive all of the principal (the "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Fund's yield to maturity from
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these securities. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to recoup some or all of
its initial investment in these securities even if the security is in one of the
highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were developed fairly recently. As a result, established trading markets have
not yet developed and, accordingly, these securities may be deemed "illiquid"
and subject to a Fund's limitations on investment in illiquid securities.
Other Asset-Backed Securities. Similarly, the Adviser and Sub-Advisers
expect that other asset-backed securities (unrelated to mortgage loans) will be
offered to investors in the future and may be purchased by the Funds that may
invest in mortgage-related securities. Several types of asset-backed securities
have already been offered to investors, including Certificates for Automobile
Receivables/SM/ ("CARS/SM/"). CARS/SM/ represent undivided fractional interests
in a trust whose assets consist of a pool of motor vehicle retail installment
sales contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS/SM/ are passed through monthly to
certificate holders, and are guaranteed up to certain amounts and for a certain
time period by a letter of credit issued by a financial institution unaffiliated
with the trustee or originator of the trust. An investor's return on CARS/SM/
may be affected by early prepayment of principal on the underlying vehicle sales
contracts. If the letter of credit is exhausted, the trust may be prevented from
realizing the full amount due on a sales contract because of state law
requirements and restrictions relating to foreclosure sales of vehicles and the
obtaining of deficiency judgments following such sales or because of
depreciation, damage or loss of a vehicle, the application of federal and state
bankruptcy and insolvency laws, or other factors. As a result, certificate
holders may experience delays in payments or losses if the letter of credit is
exhausted.
Consistent with a Fund's investment objectives and policies, the Adviser
and Sub-Adviser also may invest in other types of asset-backed securities.
Convertible Securities
Many of the Funds may invest in convertible securities. A Fund's Sub-
Adviser will select convertible securities to be purchased by the Fund based
primarily upon its evaluation of the fundamental investment characteristics and
growth prospects of the issuer of the security. As a fixed income security, a
convertible security tends to increase in market value when interest rates
decline and to decrease in value when interest rates rise. While convertible
securities generally offer lower interest or dividend yields than non-
convertible fixed income securities of similar quality, their value tends to
increase as the market value of the underlying stock increases and to decrease
when the value of the underlying stock decreases.
The Renaissance Fund may invest in so-called "synthetic convertible
securities," which are composed of two or more different securities whose
investment characteristics, taken together, resemble those of convertible
securities. For example, the Renaissance Fund may purchase a non-convertible
debt security and a warrant or option. The synthetic convertible differs from
the true convertible security in several respects. Unlike a true convertible
security, which is a single security having a unitary market value, a synthetic
convertible comprises two or more separate securities, each with its own market
value. Therefore, the "market value" of a synthetic convertible is the sum of
the values of its fixed income component and its convertible component. For this
reason, the values of a synthetic convertible and a true convertible security
may respond differently to market fluctuations.
Equity-Linked Securities
Each of the Structured Emerging Markets and Tax-Efficient Structured
Emerging Markets Funds may invest up to 15% of its net assets in equity-linked
securities. Equity-linked securities are privately issued securities whose
investment results are designed to correspond generally to the performance of a
specified stock index or "basket" of stocks, or sometimes a single stock. To the
extent that a Fund invests in an equity-linked security whose return corresponds
to the performance of a foreign securities index or one or more foreign stocks,
investing in equity-linked
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securities will involve risks similar to the risks of investing in foreign
equity securities. See "Foreign Securities" in this Statement of Additional
Information. In addition, the Funds bear the risk that the issuer of an equity-
linked security may default on its obligations under the security. Equity-linked
securities may be considered illiquid and thus subject to the Funds'
restrictions on investments in illiquid securities.
Foreign Securities
The Structured Emerging Markets, Tax-Efficient Structured Emerging Markets,
International Growth and International Funds may invest in U.S. dollar or
foreign currency-denominated corporate debt securities of foreign issuers;
foreign equity securities, including preferred securities of foreign issuers;
certain foreign bank obligations; and U.S. dollar- or foreign currency-
denominated obligations of foreign governments or their subdivisions, agencies
and instrumentalities, international agencies and supranational entities. The
Structured Emerging Markets, Tax-Efficient Structured Emerging Markets,
International Growth, International and Precious Metals Funds may also invest in
common stocks issued by foreign companies. The Precious Metals Fund may invest
primarily in securities of foreign issuers, securities denominated in foreign
currencies, securities principally traded on securities markets outside of the
United States and in securities of foreign issuers that are traded on U.S.
securities markets. The Renaissance, Core Equity, Mid-Cap Equity, Growth,
Target, Opportunity and Innovation Funds each may invest up to 15% of their
respective net assets in securities which are traded principally in securities
markets outside the United States (Eurodollar certificates of deposit are
excluded for purposes of these limitations), and (except for the Core Equity and
Mid-Cap Equity Funds) may invest without limit in securities of foreign issuers
that are traded in U.S. securities markets. The Enhanced Equity Fund may invest
in common stock of foreign issuers if it is included in the index from which
stocks are selected.
Each of the Funds may invest in American Depository Receipts ("ADRs"). The
Renaissance, Growth, Target, Core Equity, Mid-Cap Equity, Opportunity,
Innovation, Structured Emerging Markets, Tax-Efficient Structured Emerging
Markets, International Growth, International and Precious Metals Funds may
invest in European Depository Receipts ("EDRs") or Global Depository Receipts
("GDRs"). ADRs are dollar-denominated receipts issued generally by domestic
banks and represent the deposit with the bank of a security of a foreign issuer.
EDRs are foreign currency-denominated receipts similar to ADRs and are issued
and traded in Europe, and are publicly traded on exchanges or over-the-counter
in the United States. GDRs may be offered privately in the United States and
also trade in public or private markets in other countries. ADRs, EDRs and GDRs
may be issued as sponsored or unsponsored programs. In sponsored programs, an
issuer has made arrangements to have its securities trade in the form of ADRs,
EDRs or GDRs. In unsponsored programs, the issuer may not be directly involved
in the creation of the program. Although regulatory requirements with respect to
sponsored and unsponsored programs are generally similar, in some cases it may
be easier to obtain financial information from an issuer that has participated
in the creation of a sponsored program.
Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies. These
include: differences in accounting, auditing and financial reporting standards,
generally higher commission rates on foreign portfolio transactions, the
possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country), political instability which can
affect U.S. investments in foreign countries and potential restrictions on the
flow of international capital. In addition, foreign securities and dividends and
interest payable on those securities may be subject to foreign taxes, including
taxes withheld from payments on those securities. Foreign securities often trade
with less frequency and volume than domestic securities and therefore may
exhibit greater price volatility. Changes in foreign exchange rates will affect
the value of those securities which are denominated or quoted in currencies
other than the U.S. dollar.
The risks of investing in foreign securities are particularly high when
securities of issuers based in developing (or "emerging market") countries are
involved. Investing in 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. These risks include: greater risks of nationalization or
expropriation of assets or confiscatory taxation; currency devaluations and
other currency exchange rate fluctuations; greater social,
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economic and political uncertainty and instability (including the risk of war);
more substantial government involvement in the economy; less government
supervision and regulation of the securities markets and participants in those
markets; controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for U.S.
dollars; unavailability of currency hedging techniques in certain emerging
market countries; the fact that companies in emerging market countries may be
smaller, less seasoned and newly organized companies; the difference in, or lack
of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the United
States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets. In addition,
a number of emerging market countries restrict, to various degrees, foreign
investment in securities, and high rates of 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. 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.
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.
Special Risks of Investing in Russian and Other Eastern European
Securities. The International, International Growth, Tax-Efficient Structured
Emerging Markets and Structured Emerging Markets Funds may invest a portion of
their assets in securities of issuers located in Russia and in other Eastern
European countries. The political, legal and operational risks of investing in
the securities of Russian and other Eastern European issuers, and of having
assets custodied within these countries, may be particularly acute. Investments
in Eastern European countries may involve acute risks of nationalization,
expropriation and confiscatory taxation. The communist governments of a number
of Eastern European countries expropriated large amounts of private property in
the past, in many cases without adequate compensation, and there can be no
assurance that such expropriation will not occur in the future. Also, certain
Eastern European countries, which do not have market economies, are
characterized by an absence of developed legal structures governing private and
foreign investments and private property.
In addition, governments in certain Eastern European countries may require
that a governmental or quasi-governmental authority act as custodian of a Fund's
assets invested in such country. To the extent such governmental or quasi-
governmental authorities do not satisfy the requirements of the 1940 Act to act
as foreign custodians of the Fund's cash and securities, the Fund's investment
in such countries may be limited or may be required to be effected through
intermediaries. The risk of loss through governmental confiscation may be
increased in such circumstances.
Investments in securities of Russian issuers may involve a particularly
high degree of risk and special considerations not typically associated with
investing in U.S. and other more developed markets, many of which stem from
Russia's continuing political and economic instability and the slow-paced
development of its market economy. Investments in Russian securities should be
considered highly speculative. Such risks and special considerations include:
(a) delays in settling portfolio transactions and the risk of loss arising out
of Russia's system of share registration and custody (see below); (b)
pervasiveness of corruption, insider trading, and crime in the Russian economic
system; (c) difficulties associated in obtaining accurate market valuations of
many Russian securities, based partly on the limited amount of publicly
available information; (d) the general financial condition of Russian companies,
which may involve particularly large amounts of inter-company debt; and (e) the
risk that the Russian tax system will not be reformed to prevent inconsistent,
retroactive and/or exorbitant taxation or, in the alternative, the risk that a
reformed tax system may result in the inconsistent and unpredictable enforcement
of the new tax laws. Also, there is the risk that the government of Russia or
other executive or legislative bodies may decide not to continue to support the
economic reform programs implemented since the dissolution of the Soviet Union
and could follow radically different political and/or economic policies to the
detriment of investors, including non-market-oriented policies such as the
support of certain industries at the expense of other sectors or investors, a
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return to the centrally planned economy that existed prior to the dissolution of
the Soviet Union, or the nationalization of privatized enterprises.
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. Ownership of shares (except where shares are held through depositories
that meet the requirements of the 1940 Act) is defined according to entries in
the company's share register and normally evidenced by "share extracts" from the
register or, in certain limited circumstances, by formal share certificates.
However, there is no central registration system for shareholders and these
services are carried out by the companies themselves or by registrars located
throughout Russia. The share registrars are controlled by the issuer of the
securities, and investors are provided with few legal rights against such
registrars. These registrars are not necessarily subject to effective state
supervision nor are they licensed with any governmental entity. It is possible
for a Fund to lose its registration through fraud, negligence or even mere
oversight. While a Fund will endeavor to ensure that its interest continues to
be appropriately recorded, which may involve a custodian or other agent
inspecting the share register and obtaining extracts of share registers through
regular confirmations, these extracts have no legal enforceability and it is
possible that subsequent illegal amendment or other fraudulent act may deprive
the Fund of its ownership rights or improperly dilute its interests. In
addition, while applicable Russian regulations impose liability on registrars
for losses resulting from their errors, it may be difficult for a Fund to
enforce any rights it may have against the registrar or issuer of the securities
in the event of loss of share registration.
Also, although a Russian public enterprise with more than 500 shareholders
is required by law to contract out the maintenance of its shareholder register
to an independent entity that meets certain criteria, this regulation has not
always been strictly enforced in practice. Because of this lack of independence,
management of a company may be able to exert considerable influence over who can
purchase and sell the company's shares by illegally instructing the registrar to
refuse to record transactions in the share register. In addition, so-called
"financial-industrial groups" have emerged in recent years that seek to deter
outside investors from interfering in the management of companies they control.
These practices may prevent a Fund from investing in the securities of certain
Russian companies deemed suitable by the Fund's Sub-Adviser. Further, this also
could cause a delay in the sale of Russian securities held by a Fund if a
potential purchaser is deemed unsuitable, which may expose the Fund to potential
loss on the investment.
Foreign Currencies
The Renaissance, Core Equity, Mid-Cap Equity, Growth, Target, Opportunity,
Innovation, International, International Growth, Structured Emerging Markets,
Tax-Efficient Structured Emerging Markets and Precious Metals Funds invest
directly in foreign currencies and may enter into forward foreign currency
exchange contracts to reduce the risks of adverse changes in foreign exchange
rates. In addition, the Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, International, International Growth and Precious Metals 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. Contracts to sell foreign
currencies would limit any potential gain which might be realized by a Fund if
the value of the hedged currency increases. A Fund may enter into these
contracts for the purpose of hedging against foreign exchange risks arising from
the Funds' investment or anticipated investment in securities denominated in
foreign currencies. Suitable hedging transactions may not be available in all
circumstances. Also, such hedging transactions may not be successful and may
eliminate any chance for a Fund to benefit from favorable fluctuations in
relevant foreign currencies.
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The International, International Growth, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds may also enter into forward
foreign currency exchange contracts for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
currency to another. To the extent that they do so, the International,
International 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
Sub-Adviser. A Fund may use one currency (or a basket of currencies) to hedge
against adverse changes in the value of another currency (or a basket of
currencies) when exchange rates between the two currencies are positively
correlated. A Fund will segregate assets determined to be liquid by the Adviser
or a Sub-Adviser in accordance with procedures established by the Board of
Trustees to cover forward currency contracts entered into for non-hedging
purposes. The Funds may also use foreign currency futures contracts and related
options on currencies for the same reasons for which forward foreign currency
exchange contracts are used.
Special Risks Associated with the Introduction of the Euro. The
introduction of a single currency, the euro, on January 1, 1999 for
participating European nations in the European Economic and Monetary Union
presents unique uncertainties for European securities in the markets in which
they trade and with respect to the operation of the Funds that invest in
securities denominated in European currencies and other European securities. The
introduction of the euro will result in the redenomination of European debt and
equity securities over a period of time. Uncertainties raised by the
introduction of the euro include whether the payment and operational systems of
banks and other financial institutions will function correctly, whether clearing
and settlement payment systems developed for the new currency will be suitable,
the valuation and legal treatment of outstanding financial contracts after
January 1, 1999 that refer to existing currencies rather than the euro, and
possible adverse accounting or tax consequences that may arise from the
transition to the euro. These or other factors could cause market disruptions
and could adversely affect the value of securities and foreign currencies held
by the Funds.
Bank Obligations
Bank obligations in which the Funds may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. A Fund will not invest in
fixed time deposits which (1) are not subject to prepayment or (2) provide for
withdrawal penalties upon prepayment (other than overnight deposits) if, in the
aggregate, more than 15% of its net assets (taken at market value at the time of
investment) would be invested in such deposits, repurchase agreements maturing
in more than seven days and other illiquid assets. Each Fund may also hold funds
on deposit with its sub-custodian bank in an interest-bearing account for
temporary purposes.
Each Fund limits its investments in United States bank obligations to
obligations of United States banks (including foreign branches) which have more
than $1 billion in total assets at the time of investment and are members of the
Federal Reserve System or are examined by the Comptroller of the Currency or
whose deposits are insured by the Federal Deposit Insurance Corporation. A Fund
also may invest in certificates of deposit of savings and loan associations
(federally or state chartered and federally insured) having total assets in
excess of $1 billion.
The Renaissance, Growth, Target, Core Equity, Mid-Cap Equity, Opportunity,
Innovation, International, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, International Growth and Precious Metals Funds limit their
investments in foreign bank obligations to obligations of foreign banks
(including United States branches of foreign banks) which at the time of
investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) are among the 75 largest foreign banks in the
world in terms of total assets;
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(iii) have branches or agencies (limited purpose offices which do not offer all
banking services) in the United States; and (iv) in the opinion of the relevant
Sub-Adviser, are of an investment quality comparable to obligations of United
States banks in which the Funds may invest. Subject to each Fund's limitation on
concentration of no more than 25% of its assets in the securities of issuers in
a particular industry, there is no limitation on the amount of a Fund's assets
which may be invested in obligations of foreign banks which meet the conditions
set forth above.
Obligations of foreign banks involve certain risks associated with
investing in foreign securities described under "Foreign Securities" above,
including the possibilities that their liquidity could be impaired because of
future political and economic developments, that their obligations may be less
marketable than comparable obligations of United States banks, that a foreign
jurisdiction might impose withholding taxes on interest income payable on those
obligations, that foreign deposits may be seized or nationalized, that foreign
governmental restrictions such as exchange controls may be adopted which might
adversely affect the payment of principal and interest on those obligations and
that the selection of those obligations may be more difficult because there may
be less publicly available information concerning foreign banks or the
accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign banks may differ from those applicable to
United States banks. Foreign banks are not generally subject to examination by
any U.S. Government agency or instrumentality.
Commercial Paper
All Funds may invest in commercial paper. Commercial paper represents
short-term unsecured promissory notes issued in bearer form by banks or bank
holding companies, corporations and finance companies. The commercial paper
purchased by the Funds consists of U.S. dollar-denominated obligations of
domestic issuers, or, additionally for the Renaissance, Growth, Target, Core
Equity, Mid-Cap Equity, Opportunity, Innovation, Structured Emerging Markets,
Tax-Efficient Structured Emerging Markets, International, International Growth
and Precious Metals Funds, foreign currency-denominated obligations of domestic
or foreign issuers which, at the time of investment, are (i) rated "P-1" or "P-
2" by Moody's or "A-1" or "A-2" or better by S&P, (ii) issued or guaranteed as
to principal and interest by issuers or guarantors having an existing debt
security rating of "A" or better by Moody's or "A" or better by S&P, or (iii)
securities which, if not rated, are, in the opinion of the Sub-Adviser, of an
investment quality comparable to rated commercial paper in which the Fund may
invest. The rate of return on commercial paper may be linked or indexed to the
level of exchange rates between the U.S. dollar and a foreign currency or
currencies.
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 Sub-Adviser.
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 Sub-Adviser; (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 Sub-Adviser; and (5) repurchase
agreements with domestic commercial banks or registered broker-dealers.
Derivative Instruments
The following describes certain derivative instruments and products in
which certain Funds may invest and risks associated therewith.
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The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. Also, suitable
derivative and/or hedging transactions may not be available in all circumstances
and there can be no assurance that a Fund will be able to identify or employ a
desirable derivative and/or hedging transaction at any time or from time to
time.
Options on Securities and Indexes. As described under "Characteristics and
Risks of Securities and Investment Techniques--Derivatives" in the Prospectuses,
certain Funds may purchase and sell both put and call options on equity, fixed
income or other securities or indexes in standardized contracts traded on
foreign or domestic securities exchanges, boards of trade, or similar entities,
or quoted on National Association of Securities Dealers Automated Quotations
("NASDAQ") or on a regulated foreign over-the-counter market, and agreements,
sometimes called cash puts, which may accompany the purchase of a new issue of
bonds from a dealer. Among other reasons, a Fund may purchase put options to
protect holdings in an underlying or related security against a decline in
market value, and may purchase call options to protect against increases in the
prices of securities it intends to purchase pending its ability to invest in
such securities in an orderly manner.
An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security. Upon exercise, the writer of an
option on an index is obligated to pay the difference between the cash value of
the index and the exercise price multiplied by the specified multiplier for the
index option. (An index is designed to reflect features of a particular
financial or securities market, a specific group of financial instruments or
securities, or certain economic indicators.)
A Fund will write call options and put options only if they are "covered."
In the case of a call option on a security, the option is "covered" if the Fund
owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional
cash consideration is required, cash or other assets determined to be liquid by
the Sub-Adviser in accordance with procedures established by the Board of
Trustees in such amount are segregated) upon conversion or exchange of other
securities held by the Fund. For a call option on an index, the option is
covered if the Fund segregates assets determined to be liquid by the Adviser or
a Sub-Adviser in accordance with procedures established by the Board of Trustees
in an amount equal to the contract value of the index. A call option is also
covered if the Fund holds a call on the same security or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written, provided the difference is segregated by the Fund in assets
determined to be liquid by the Adviser or a Sub-Adviser in accordance with
procedures established by the Board of Trustees. A put option on a security or
an index is "covered" if the Fund segregates assets determined to be liquid by
the Sub-Adviser in accordance with procedures established by the Board of
Trustees equal to the exercise price. A put option is also covered if the Fund
holds a put on the same security or index as the put written where the exercise
price of the put held is (i) equal to or greater than the exercise price of the
put written, or (ii) less than the exercise price of the put written, provided
the difference is segregated by the Fund in assets determined to be liquid by
the Adviser or a Sub-Adviser in accordance with procedures established by the
Board of Trustees.
If an option written by a Fund expires unexercised, the Fund realizes a
capital gain equal to the premium received at the time the option was written.
If an option purchased by a Fund expires unexercised, the Fund realizes a
capital loss equal to the premium paid. Prior to the earlier of exercise or
expiration, an exchange-traded option may be closed out by an offsetting
purchase or sale of an option of the same series (type, exchange, underlying
security or index, exercise price, and expiration). In addition, 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. There can be no assurance, however, that a closing purchase or
sale transaction can be effected when the Fund desires.
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A Fund will realize a capital gain from a closing purchase transaction if
the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the
market value of a put or a call option include supply and demand, interest
rates, the current market price of the underlying security or index in relation
to the exercise price of the option, the volatility of the underlying security
or index, and the time remaining until the expiration date.
The premium paid for a put or call option purchased by a Fund is an asset
of the Fund. The premium received for an option written by a Fund is recorded as
a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is
traded or, if not traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.
OTC Options. The Renaissance, Growth, Target, Opportunity, Innovation,
International, International Growth and Precious Metals Funds may enter into
over-the-counter ("OTC") options transactions only with primary dealers in U.S.
Government securities and only pursuant to agreements that will assure that the
relevant Fund will at all times have the right to repurchase the option written
by it from the dealer at a specified formula price. 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, and they will treat the amount by which such formula price exceeds the
intrinsic value of the option (i.e., the amount, if any, by which the market
price of the underlying security exceeds the exercise price of the option) as an
illiquid investment.
Risks Associated with Options on Securities and Indexes. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option may expire worthless. If a Fund were
unable to close out a covered call option that it had written on a security, it
would not be able to sell the underlying security unless the option expired
without exercise. As the writer of a covered call option, a Fund forgoes, during
the option's life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the premium and the
exercise price of the call but, as long as its obligation as a writer continues,
has retained the risk of loss should the price of the underlying security
decline. The writer of an option has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver the underlying security at the exercise price. If a put or call option
purchased by the Fund is not sold when it has remaining value, and if the market
price of the underlying security remains equal to or greater than the exercise
price (in the case of a put), or remains less than or equal to the exercise
price (in the case of a call), the Fund will lose its entire investment in the
option. Also, where a put or call option on a particular security is purchased
to hedge against price movements in a related security, the price of the put or
call option may move more or less than the price of the related security.
There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund may be unable to close
out a position. Similarly, if restrictions on exercise were imposed, the Fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on an index written by the Fund is covered by an option on
the same index purchased by the Fund, movements in the index may result in a
loss to the Fund; however,
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such losses may be mitigated by changes in the value of the Fund's securities
during the period the option was outstanding.
For each of the International, International Growth, Renaissance, Growth,
Target, Opportunity 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.
Foreign Currency Options. The International, Core Equity, Mid-Cap Equity,
International Growth, Structured Emerging Markets, and Tax-Efficient Structured
Emerging Markets 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. In addition, each of the Funds that may buy or sell foreign
currencies may buy or sell put and call options on foreign currencies either on
exchanges or in the over-the-counter market. A put option on a foreign currency
gives the purchaser of the option the right to sell a foreign currency at the
exercise price until the option expires. A call option on a foreign currency
gives the purchaser of the option the right to purchase the currency at the
exercise price until the option expires. Currency options traded on U.S. or
other exchanges may be subject to position limits which may limit the ability of
a Fund to reduce foreign currency risk using such options.
Futures Contracts and Options on Futures Contracts. Certain Funds may use
interest rate, foreign currency or index futures contracts. The International,
Core Equity, Mid-Cap Equity, International Growth, Structured Emerging Markets
and Tax-Efficient Structured Emerging Markets 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 as an adjunct to their securities
activities. The International, Core Equity, Mid-Cap Equity, International
Growth, Renaissance, Growth, Target, Opportunity, Innovation, Enhanced Equity,
Tax-Efficient Equity, Structured Emerging Markets and Tax-Efficient Structured
Emerging Markets 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 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
Index Futures and related options when a Sub-Adviser 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.
An interest rate, foreign currency or index futures contract provides for
the future sale by one party and purchase by another party of a specified
quantity of a financial instrument, foreign currency or the cash value of an
index at a specified price and time. An Index Future is an agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal to
the difference between the value of a securities index ("Index") at the close of
the last trading day of the contract and the price at which the index contract
was originally written. Although the value of an Index might be a function of
the value of certain specified securities, no physical delivery of these
securities is made. A unit is the value of the relevant Index from time to time.
Entering into a contract to buy units is commonly referred to as buying or
purchasing a contract or holding a long position in an Index. Index Futures
contracts can be traded through all major commodity brokers. A Fund's purchase
and sale of Index Futures is limited to contracts and exchanges which have been
approved by the CFTC. A Fund will ordinarily be able to close open positions on
the futures exchange on which Index Futures are then traded at any time up to
and including the expiration day. As described below, a Fund will be required to
segregate initial margin in the name of the futures broker upon entering into an
Index Future. Variation margin will be paid to and received from the broker on a
daily basis as the contracts are marked to market. For example, when a Fund has
purchased an Index Future and the
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price of the relevant Index has risen, that position will have increased in
value and the Fund will receive from the broker a variation margin payment equal
to that increase in value. Conversely, when a Fund has purchased an Index Future
and the price of the relevant Index has declined, the position would be less
valuable and the Fund would be required to make a variation margin payment to
the broker.
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.
The following example illustrates generally the manner in which Index
Futures operate. The Standard & Poor's 100 Stock Index is composed of 100
selected common stocks, most of which are listed on the New York Stock Exchange.
The S&P 100 Index assigns relative weightings to the common stocks included in
the Index, and the Index fluctuates with changes in the market values of those
common stocks. In the case of the S&P 100 Index, contracts are to buy or sell
100 units. Thus, if the value of the S&P 100 Index were $180, one contract would
be worth $18,000 (100 units x $180). The Index Future specifies that no delivery
of the actual stocks making up the Index will take place. Instead, settlement in
cash must occur upon the termination of the contract, with the settlement being
the difference between the contract price and the actual level of the Index at
the expiration of the contract. For example, if a Fund enters into a futures
contract to buy 100 units of the S&P 100 Index at a specified future date at a
contract price of $180 and the S&P 100 Index is at $184 on that future date, the
Fund will gain $400 (100 units x gain of $4). If the Fund enters into a futures
contract to sell 100 units of the Index at a specified future date at a contract
price of $180 and the S&P 100 Index is at $182 on that future date, the Fund
will lose $200 (100 units x loss of $2).
A public market exists in futures contracts covering a number of Indexes as
well as financial instruments and foreign currencies, including but not limited
to: the S&P 500; the S&P Midcap 400; the Nikkei 225; the NYSE composite; U.S.
Treasury bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S.
Treasury bills; 90-day commercial paper; bank certificates of deposit;
Eurodollar certificates of deposit; the Australian dollar; the Canadian dollar;
the British pound; the German mark; the Japanese yen; the French franc; the
Swiss franc; the Mexican peso; and certain multinational currencies, such as the
European Currency Unit ("ECU"). It is expected that other futures contracts in
which the Funds may invest will be developed and traded in the future.
Certain Funds may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities and
indexes (discussed above). A futures option gives the holder the right, in
return for the premium paid, to assume a long position (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a
long position in the futures contract and the writer is assigned the opposite
short position. In the case of a put option, the holder acquires a short
position and the writer is assigned the opposite long position.
A Fund will only enter into futures contracts and futures options which are
standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or in the case of futures options, for which an established
over-the-counter market exists.
When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to segregate a specified amount of assets determined to be liquid by
the Adviser or a Sub-Adviser in accordance with procedures established by the
Board of Trustees ("initial margin"). The margin required for a futures contract
is set by the exchange on which the contract is traded and may be modified
during the term of the contract. Margin requirements on foreign exchanges may be
different than U.S. exchanges. The initial margin is in the nature of a
performance bond or good faith deposit on the futures contract which is returned
to the Fund upon termination of the contract,
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assuming all contractual obligations have been satisfied. Each Fund expects to
earn interest income on its initial margin deposits. A futures contract held by
a Fund is valued daily at the official settlement price of the exchange on which
it is traded. Each day the Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does not represent a
borrowing or loan by a Fund but is instead a settlement between the Fund and the
broker of the amount one would owe the other if the futures contract expired. In
computing daily net asset value, each Fund will mark to market its open futures
positions.
A Fund is also required to deposit and maintain margin with respect to put
and call options on futures contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (i.e.,
with the same exchange, underlying security or index, and delivery month). If
an offsetting purchase price is less than the original sale price, the Fund
realizes a capital gain, or if it is more, the Fund realizes a capital loss.
Conversely, if an offsetting sale price is more than the original purchase
price, the Fund realizes a capital gain, or if it is less, the Fund realizes a
capital loss. Any transaction costs must also be included in these
calculations.
Limitations on Use of Futures and Futures Options. 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. The Funds may enter into positions in futures
contracts and related options for "bona fide hedging" purposes (as such term is
defined in applicable regulations of the CFTC), for example, to hedge against
changes in interest rates, foreign currency exchange rates or securities prices.
In addition, certain Funds may utilize futures contracts for investment
purposes. For instance, the 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 their exposure to a
particular market. With respect to positions in futures and related options that
do not constitute bona fide hedging positions, a Fund will not enter into a
futures contract or futures option contract if, immediately thereafter, the
aggregate initial margin deposits relating to such positions plus premiums paid
by it for open futures option positions, less the amount by which any such
options are "in-the-money," would exceed 5% of the Fund's net assets. A call
option is "in-the-money" if the value of the futures contract that is the
subject of the option exceeds the exercise price. A put option is "in-the-money"
if the exercise price exceeds the value of the futures contract that is the
subject of the option.
When purchasing a futures contract, a Fund will segregate (and mark-to-
market on a daily basis) assets determined to be liquid by the Adviser or a Sub-
Adviser in accordance with procedures established by the Board of Trustees that,
when added to the amounts deposited with a futures commission merchant as
margin, are equal to the total market value of the futures contract.
Alternatively, the Fund may "cover" its position by purchasing a put option on
the same futures contract with a strike price as high or higher than the price
of the contract held by the Fund.
When selling a futures contract, a Fund will segregate (and mark-to-market
on a daily basis) assets determined to be liquid by the Adviser or a Sub-Adviser
in accordance with procedures established by the Board of Trustees that are
equal to the market value of the instruments underlying the contract.
Alternatively, the Fund may "cover" its position by owning the instruments
underlying the contract (or, in the case of an Index Future, a portfolio with a
volatility substantially similar to that of the Index on which the futures
contract is based), or by holding a call option permitting the Fund to purchase
the same futures contract at a price no higher than the price of the contract
written by the Fund (or at a higher price if the difference is maintained in
liquid assets with the Trust's custodian).
When selling a call option on a futures contract, a Fund will segregate
(and mark-to-market on a daily basis) assets determined to be liquid by the
Adviser or a Sub-Adviser in accordance with procedures established by the
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Board of Trustees that, when added to the amounts deposited with a futures
commission merchant as margin, equal the total market value of the futures
contract underlying the call option. Alternatively, the Fund may cover its
position by entering into a long position in the same futures contract at a
price no higher than the strike price of the call option, by owning the
instruments underlying the futures contract, or by holding a separate call
option permitting the Fund to purchase the same futures contract at a price not
higher than the strike price of the call option sold by the Fund.
When selling a put option on a futures contract, a Fund will segregate (and
mark-to-market on a daily basis) assets determined to be liquid by the Adviser
or a Sub-Adviser in accordance with procedures established by the Board of
Trustees that equal the purchase price of the futures contract, less any margin
on deposit. Alternatively, the Fund may cover the position either by entering
into a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund.
Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. Some of the risk may be
caused by an imperfect correlation between movements in the price of the futures
contract and the price of the security or other investment being hedged. The
hedge will not be fully effective where there is such imperfect correlation.
Also, 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. For example, if the price of
the futures contract moves more than the price of the hedged security, a Fund
would experience either a loss or gain on the future which is not completely
offset by movements in the price of the hedged securities. In addition, there
are significant differences between the securities and futures markets that
could result in an imperfect correlation between the markets, causing a given
hedge not to achieve its objectives. The degree of imperfection of correlation
depends on circumstances such as variations in speculative market demand for
futures and futures options on securities, including technical influences in
futures trading and futures options, and differences between the financial
instruments being hedged and the instruments underlying the standard contracts
available for trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. To compensate for imperfect correlations, a Fund
may purchase or sell futures contracts in a greater dollar amount than the
hedged securities if the volatility of the hedged securities is historically
greater than the volatility of the futures contracts. Conversely, a Fund may
purchase or sell fewer contracts if the volatility of the price of the hedged
securities is historically less than that of the futures contracts. The risk of
imperfect correlation generally tends to diminish as the maturity date of the
futures contract approaches. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends. Also, suitable hedging transactions may not be available in all
circumstances.
Additionally, 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.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
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beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or a futures option position, and that Fund
would remain obligated to meet margin requirements until the position is closed.
In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.
Additional Risks of Options on Securities, Futures Contracts, Options on
Futures Contracts and Forward Currency Exchange Contracts and Options thereon.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees; and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. Some foreign exchanges may be principal markets so that no common
clearing facility exists and a trader may look only to the broker for
performance of the contract. The value of such positions also could be adversely
affected by (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Trust's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States and (v) lesser
trading volume. In addition, unless a Fund hedges against fluctuations in the
exchange rate between the U.S. dollar and the currencies in which trading is
done on foreign exchanges, any profits that a Fund might realize in trading
could be eliminated by adverse changes in the exchange rate, or the Fund could
incur losses as a result of those changes. 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 Sub-Adviser to forecast interest rates
and other economic factors correctly. If the Sub-Adviser incorrectly forecasts
such factors and has taken positions in derivative instruments contrary to
prevailing market trends, the Funds could be exposed to risk of loss. In
addition, a Fund's use of such instruments may cause the Fund to realize higher
amounts of short-term capital gains (generally taxed to shareholders at ordinary
income tax rates) than if the Fund had not used such instruments.
Swap Agreements. The Tax-Efficient Equity, Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds may enter into equity index swap
agreements for purposes of attempting to gain exposure to the stocks making up
an index of securities in a market without actually purchasing those stocks.
Swap agreements are two-party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular predetermined
investments or instruments, which may be adjusted for an interest factor. The
gross returns to be exchanged or "swapped" between the parties are calculated
with respect to a "notional amount," i.e., the return on or increase in value of
a particular dollar amount invested 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 any amounts owing to the Fund) and any accrued but unpaid net
amounts owed to a swap counter party will be covered by segregating assets
determined to be liquid by the Adviser or a Sub-Adviser in accordance with
procedures established by the Board of Trustees, to avoid any potential
leveraging of the Fund's portfolio. Obligations under swap agreements so covered
will not be construed to be "senior securities" for purposes of a Fund's
investment restriction concerning senior securities. A Fund will not enter into
a swap agreement with
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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 Sub-Adviser's ability to predict
correctly whether certain types of investments are likely to produce greater
returns than other investments. Because they are two party contracts and because
they may have terms of greater than seven days, swap agreements may be
considered to be illiquid. Moreover, a Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of the default or
bankruptcy of a swap agreement counterparty. The Funds will enter into swap
agreements only with counter parties that meet certain standards of
creditworthiness (generally, such counter parties would have to be eligible
counter parties 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.
When-Issued, Delayed Delivery and Forward Commitment Transactions
A Fund may purchase or sell securities on a when-issued or delayed delivery
basis. These transactions involve a commitment by the Fund to purchase or sell
securities for a predetermined price or yield, with payment and delivery taking
place more than seven days in the future, or after a period longer than the
customary settlement period for that type of security. When delayed delivery
purchases are outstanding, the Fund will segregate until the settlement date
assets determined to be liquid by the Adviser or a Sub-Adviser in accordance
with procedures established by the Board of Trustees in an amount sufficient to
meet the purchase price. Typically, no income accrues on securities purchased on
a delayed delivery basis prior to the time delivery of the securities is made,
although a Fund may earn income on segregated securities. When purchasing a
security on a delayed delivery basis, the Fund assumes the rights and risks of
ownership of the security, including the risk of price and yield fluctuations,
and takes such fluctuations into account when determining its net asset value.
Because a Fund is not required to pay for the security until the delivery date,
these risks are in addition to the risks associated with the Fund's other
investments. If the Fund remains substantially fully invested at a time when
delayed delivery purchases are outstanding, the delayed delivery purchases may
result in a form of leverage. When the Fund has sold a security on a delayed
delivery basis, the Fund does not participate in future gains or losses with
respect to the security. If the other party to a delayed delivery transaction
fails to deliver or pay for the securities, the Fund could miss a favorable
price or yield opportunity or could suffer a loss. A Fund may dispose of or
renegotiate a delayed delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may result in a
capital gain or loss. There is no percentage limitation on the extent to which
the Funds may purchase or sell securities on a delayed delivery basis.
Each Fund may make contracts to purchase securities for a fixed price at a
future date beyond customary settlement time ("forward commitments") if the Fund
either (i) segregates until the settlement date assets determined to be liquid
by the Adviser or a Sub-Adviser in accordance with procedures established by the
Board of Trustees in an amount sufficient to meet the purchase price or (ii)
enters into an offsetting contract for the forward sale of securities of equal
value that it owns. Certain Funds may enter into forward commitments for the
purchase or sale of foreign currencies. Forward commitments may be considered
securities in themselves. They involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in value of the Fund's other assets. A Fund may
dispose of a commitment prior to settlement and may realize short-term profits
or losses upon such disposition.
Warrants to Purchase Securities
Certain Funds may invest in warrants to purchase equity or fixed income
securities. Bonds with warrants attached to purchase equity securities have
many characteristics of convertible bonds and their prices may, to some degree,
reflect the performance of the underlying stock. Bonds also may be issued with
warrants attached to purchase additional fixed income securities at the same
coupon rate. A decline in interest rates would permit a Fund
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to buy additional bonds at the favorable rate or to sell the warrants at a
profit. If interest rates rise, the warrants would generally expire with no
value.
Repurchase Agreements
For the purposes of maintaining liquidity and achieving income, each Fund
may enter into repurchase agreements with domestic commercial banks or
registered broker/dealers. A repurchase agreement is a contract under which a
Fund would acquire a security for a relatively short period (usually not more
than one week) subject to the obligation of the seller to repurchase and the
Fund to resell such security at a fixed time and price (representing the Fund's
cost plus interest). In the case of repurchase agreements with broker-dealers,
the value of the underlying securities (or collateral) will be at least equal at
all times to the total amount of the repurchase obligation, including the
interest factor. The Fund bears a risk of loss in the event that the other party
to a repurchase agreement defaults on its obligations and the Fund is delayed or
prevented from exercising its rights to dispose of the collateral securities.
This risk includes the risk of procedural costs or delays in addition to a loss
on the securities if their value should fall below their repurchase price. The
Adviser and the Sub-Advisers, as appropriate, will monitor the creditworthiness
of the counter parties.
Securities Loans
Subject to certain conditions described in the Prospectuses and below, each
of the Equity Income, Value, Tax-Efficient Equity, Enhanced Equity, Value 25,
Mega-Cap, Capital Appreciation, Mid-Cap Growth, Small-Cap Value, Small-Cap
Growth, Core Equity, Mid-Cap Equity, Target, Micro-Cap Growth, Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds may make
secured loans of its portfolio securities to brokers, dealers and other
financial institutions amounting to no more than 33% of its total assets, and
each of the Renaissance, Growth, Opportunity, Innovation, International,
International Growth and Precious Metals Funds may make such loans amounting to
no more than 25% of its total assets. The risks in lending portfolio securities,
as with other extensions of credit, consist of possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. However, such loans will be made only to broker-dealers that are
believed by the Adviser or the Sub-Advisers to be of relatively high credit
standing. Securities loans are made to broker-dealers pursuant to agreements
requiring that loans be continuously secured by collateral 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 at all times to the market value of
the securities lent. The borrower pays to the lending Fund an amount equal to
any dividends or interest received on the securities lent. The Fund may invest
only the cash collateral received in interest-bearing, short-term securities or
receive a fee from the borrower. In the case of cash collateral, the Fund
typically pays a rebate to the lender. Although voting rights or rights to
consent with respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans and obtain the return of the securities
loaned at any time on reasonable notice, and it will do so in order that the
securities may be voted by the Fund if the holders of such securities are asked
to vote upon or consent to matters materially affecting the investment. The Fund
may also call such loans in order to sell the securities involved. 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.
Stocks of Small and Medium Capitalization Companies
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. 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
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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.
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 Sub-Adviser 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 Sub-Adviser'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 Sub-
Adviser has determined to be liquid under procedures approved by the Board of
Trustees).
Inflation-Indexed Bonds
Certain Funds may invest in inflation-indexed bonds, which are fixed income
securities whose value is periodically adjusted according to the rate of
inflation. Two structures are common. The U.S. Treasury and some other issuers
utilize a structure that accrues inflation into the principal value of the bond.
Most other issuers pay out the Consumer Price Index ("CPI") accruals as part of
a semiannual coupon.
Inflation-indexed securities issued by the U.S. Treasury have maturities of
approximately five, ten or thirty years, although it is possible that securities
with other maturities will be issued in the future. The U.S. Treasury securities
pay interest on a semi-annual basis equal to a fixed percentage of the
inflation-adjusted principal amount. For example, if a Fund purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semi-annually), and the rate of inflation over the first
six months was 1%, the mid-year par value of the bond would be $1,010 and the
first semi-annual interest payment would be $15.15 ($1,010 times 1.5%).
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If inflation during the second half of the year resulted in the whole year's
inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and
the second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal upon
maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not guaranteed and will fluctuate. A Fund may also
invest in other inflation-related bonds which may or may not provide a similar
guarantee. If a guarantee of principal is not provided, the adjusted principal
value of the bond repaid at maturity may be less than the original principal
amount.
The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if the rate of inflation rises at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increase at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.
While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated
monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of
changes in the cost of living, made up of components such as housing, food,
transportation and energy. Inflation-indexed bonds issued by a foreign
government are generally adjusted to reflect a comparable inflation index
calculated by that government. There can be no assurance that the CPI-U or any
foreign inflation index will accurately measure the real rate of inflation in
the prices of goods and services. Moreover, there can be no assurance that the
rate of inflation in a foreign country will be correlated to the rate of
inflation in the United States.
Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.
Delayed Funding Loans and Revolving Credit Facilities
The Funds may also enter into, or acquire participations in, delayed
funding loans and revolving credit facilities. Delayed funding loans and
revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower during a
specified term. A revolving credit facility differs from a delayed funding loan
in that as the borrower repays the loan, an amount equal to the repayment may be
borrowed again during the term of the revolving credit facility. These
commitments may have the effect of requiring a Fund to increase its investment
in a company at a time when it might not otherwise decide to do so (including a
time when the company's financial condition makes it unlikely that such amounts
will be repaid).
The Funds may acquire a participation interest in delayed funding loans or
revolving credit facilities from a bank or other financial institution. See
"Loan Participations and Assignments." The terms of the participation require a
Fund to make a pro rata share of all loans extended to the borrower and entitles
a Fund to a pro rata share of all payments made by the borrower. Delayed funding
loans and revolving credit facilities usually provide for floating or variable
rates of interest. To the extent that a Fund is committed to advance additional
funds, it will at all times segregate assets, determined to be liquid by the
Adviser or a Sub-Adviser in accordance with procedures established by the Board
of Trustees, in an amount sufficient to meet such commitments.
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Catastrophe Bonds
The Funds may invest in "catastrophe bonds." Catastrophe bonds are fixed
income securities, for which the return of principal and payment of interest is
contingent on the non-occurrence of a specific "trigger" catastrophic event,
such as a hurricane or an earthquake. They may be issued by government agencies,
insurance companies, reinsurers, special purpose corporations or other on-shore
or off-shore entities. If a trigger event causes losses exceeding a specific
amount in the geographic region and time period specified in a bond, a Fund
investing in the bond may lose a portion or all of its principal invested in the
bond. If no trigger event occurs, the Fund will recover its principal plus
interest. For some catastrophe bonds, the trigger event or losses may be based
on company wide losses, index-portfolio losses, industry indices or readings of
scientific instruments rather than specified actual losses. Often the
catastrophe bonds provide for extensions of maturity that are mandatory, or
optional at the discretion of the issuer, in order to process and audit loss
claims in those cases where a trigger event has, or possibly has, occurred. In
addition to the specified trigger events, catastrophe bonds may also expose a
Fund to certain unanticipated risks including but not limited to issuer (credit)
default, adverse regulatory or jurisdictional interpretations and adverse tax
consequences.
Catastrophe bonds are a relatively new type of financial instrument. As
such, there is no significant trading history of these securities, and there can
be no assurance that a liquid market in these instruments will develop. See
"Characteristics and Risks of Securities and Investment Techniques--Illiquid
Securities" in the Class A, B and C, Class D and Institutional Prospectuses.
Lack of a liquid market may impose the risk of higher transaction costs and the
possibility that a Fund may be forced to liquidate positions when it would not
be advantageous to do so. Catastrophe bonds are typically rated, and the Fund
will only invest in catastrophe bonds that meet the credit quality requirements
for the Fund.
Hybrid Instruments
The Funds may invest in "hybrid" or indexed securities. A hybrid instrument
can combine the characteristics of securities, futures, and options. For
example, the principal amount or interest rate of a hybrid could be tied
(positively or negatively) to the price of some commodity, currency or
securities index or another interest rate (each a "benchmark"). The interest
rate or (unlike most fixed income securities) the principal amount payable at
maturity of a hybrid security may be increased or decreased, depending on
changes in the value of the benchmark.
Hybrids can be used as an efficient means of pursuing a variety of
investment goals, including currency hedging, duration management, and increased
total return. Hybrids may not bear interest or pay dividends. The value of a
hybrid or its interest rate may be a multiple of a benchmark and, as a result,
may be leveraged and move (up or down) more steeply and rapidly than the
benchmark. These benchmarks may be sensitive to economic and political events,
such as commodity shortages and currency devaluations, which cannot be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the redemption
value of a hybrid could be zero. Thus, an investment in a hybrid may entail
significant market risks that are not associated with a similar investment in a
traditional, U.S. dollar-denominated bond that has a fixed principal amount and
pays a fixed rate or floating rate of interest. The purchase of hybrids also
exposes a Fund to the credit risk of the issuer of the hybrids. These risks may
cause significant fluctuations in the net asset value of a Fund. Accordingly, no
Fund will invest more than 5% of its assets (taken at market value at the time
of investment) in hybrid instruments.
Certain issuers of structured products such as hybrid instruments may be
deemed to be investment companies as defined in the 1940 Act. As a result, a
Fund's investments in these products will be subject to limits applicable to
investments in investment companies and may be subject to restrictions contained
in the 1940 Act.
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Precious Metals and Metal-Indexed Notes
The Precious Metals Fund may invest in notes, the principal amount or
redemption price of which is indexed to, and thus varies directly with, changes
in the market price of gold bullion or other precious metals ("Metal-Indexed
Notes"). It is expected that the value of Metal-Indexed Notes will be as
volatile as the price of the underlying metal.
The Precious Metals Fund will only purchase Metal-Indexed Notes which are
rated investment grade or are issued by issuers that have outstanding debt
obligations rated investment grade or commercial paper rated in the top rating
category by any NRSRO, or Metal-Indexed Notes issued by issuers that the Sub-
Adviser has determined to be of similar creditworthiness. Debt obligations rated
in the fourth highest rating category by an NRSRO are considered to have some
speculative characteristics. The Metal-Indexed Notes might be backed by a bank
letter of credit, performance bond or might be otherwise secured, and any such
security, which would be held by the Fund's custodian, would be taken into
account in determining the creditworthiness of the securities. The Precious
Metals Fund might purchase unsecured Metal-Indexed Notes if the issuer thereof
met the Fund's credit standards without any such security. While the principal
amount or redemption price of Metal-Indexed Notes would vary with the price of
the resource, such securities would not be secured by a pledge of the resource
or any other security interest in or claim on the resource. In the case of
Metal-Indexed Notes not backed by a performance bond, letter of credit or
similar security, it is expected that such securities generally would not be
secured by any other specific assets.
The Precious Metals Fund anticipates that if Metal-Indexed senior
securities were to be purchased, such securities would be issued by precious
metals or commodity brokers or dealers, by mining companies, by commercial banks
or by other financial institutions. Such issuers would issue notes to hedge
their inventories and reserves of the resource, or to borrow money at a
relatively low cost (which would include the nominal rate of interest paid on
Metal-Indexed Notes, described below, and the cost of hedging the issuer's
metals exposure). The Precious Metals Fund would not purchase a Metal-Indexed
Note issued by a broker or dealer if as a result of such purchase more than 5%
of the value of the Fund's total assets would be invested in securities of such
issuer. The Precious Metals Fund might purchase Metal-Indexed Notes from brokers
or dealers which are not also securities brokers or dealers. Precious metals or
commodity brokers or dealers are not subject to supervision or regulation by any
governmental authority or self-regulatory organization in connection with the
issuance of Metal-Indexed Notes.
Until fairly recently, there were no Metal-Indexed Notes outstanding and
consequently there is no secondary trading market for such securities. Although
a limited secondary market might develop among institutional traders, there is
no assurance that such a market will develop. No public market is expected to
develop, since the Precious Metals Fund expects that Metal-Indexed Notes will
not be registered under the 1933 Act, and therefore disposition of such
securities, other than to the issuer thereof (as described below), would be
dependent upon the availability of an exemption from such registration.
Any Metal-Indexed Notes which the Precious Metals Fund might purchase
generally will have maturities of one year or less. Such notes, however, will be
subject to being called for redemption by the issuer on relatively short notice.
In addition, it is expected that the Metal-Indexed Notes will be subject to
being put by the Precious Metals Fund to the issuer or to a stand-by broker
meeting the credit standards set forth above, with payments being received by
the Precious Metals Fund on no more than seven days' notice. A stand-by broker
might be a securities broker-dealer, in which case the Precious Metals Fund's
investment will be limited by applicable regulations of the Securities and
Exchange Commission (the "SEC"). The put feature of the Metal-Indexed Notes will
ensure liquidity even in the absence of a secondary trading market. The
securities will be repurchased upon exercise of the holder's put at the
specified exercise price, less repurchase fees, if any, which are not expected
to exceed 1% of the redemption or repurchase proceeds. Depending upon the terms
of particular Metal-Indexed Notes, there might be a period as long as five days
between the date upon which the Precious Metals Fund notifies the issuer of the
exercise of the put and determination of the sale price.
It is expected that any Metal-Indexed Notes which the Precious Metals Fund
might purchase will bear interest or pay preferred dividends at relatively
nominal rates under 2% per annum. The Precious Metals Fund's
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holdings of such senior securities therefore would not generate appreciable
current income, and the return from such senior securities would be primarily
from any profit on the sale or maturity thereof at a time when the price of the
relevant precious metal is higher than it was when the senior securities were
purchased.
Investment Strategies of the Portfolios - Incorporation by Reference
The 90/10 Portfolio, 60/40 Portfolio and 30/70 Portfolio invest all of
their assets in Underlying PIMCO Funds, which include certain Funds of the Trust
and series of PIMS as specified in the Retail Portfolio Prospectus and
Institutional Portfolio Prospectus. By investing in Underlying PIMCO Funds, the
Portfolios may be subject to some or all of the risks associated with the
securities, instruments and techniques utilized by the Funds described above.
They may also be subject to additional risks associated with other securities,
instruments and techniques utilized by Underlying Funds which are series of
PIMS. The PIMS series and their attendant risks as described in the current PIMS
prospectus for Institutional Class and Administrative Class shares and PIMS
statement of additional information, which are included in the PIMS registration
statement (File Nos. 033-12113 and 811-5028) on file with the Securities and
Exchange Commission. The current PIMS prospectus and statement of additional are
each on file with the Securities and Exchange Commission and are incorporated in
this document by reference. The PIMS documents may also be obtained free of
charge by calling PIMCO Funds Distributors LLC at 1-800-426-0107.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The investment restrictions set forth below are fundamental policies of the
Renaissance, Growth, Target, Opportunity, Innovation, International,
International Growth and Precious Metals Funds and may not be changed with
respect to any such Fund without shareholder approval by vote of a majority of
the outstanding voting securities of that Fund. Under these restrictions, none
----
of the above-mentioned Funds may:
(1) borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of such Fund's total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings will be
repaid before any additional investments are purchased;
(2) pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of such Fund's total assets (taken at cost) and then only to
secure borrowings permitted by Restriction (1) above. (The deposit of securities
or cash or cash equivalents in escrow in connection with the writing of covered
call or put options, respectively, is not deemed to be pledges or other
encumbrances.) (For the purpose of this restriction, collateral arrangements
with respect to the writing of options, futures contracts, options on futures
contracts, and collateral arrangements with respect to initial and variation
margin are not deemed to be a pledge of assets and neither such arrangements nor
the purchase or sale of futures or related options are deemed to be the issuance
of a senior security.);
(3) underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under federal securities laws;
(4) purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by interests in
real estate, except that the Precious Metals Fund may purchase or sell
agricultural land;
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(5) acquire more than 10% of the voting securities of any issuer, both
with respect to any such Fund and to the Funds to which this policy relates, in
the aggregate; or
(6) concentrate more than 25% of the value of its total assets in any one
industry; except that the Precious Metals Fund will concentrate more than 25% of
its total assets in securities of companies principally engaged in the
extraction, processing, distribution or marketing of precious metals, and the
Innovation Fund will concentrate more than 25% of its assets in companies which
use innovative technologies to gain a strategic, competitive advantage in their
industry as well as companies that provide and service those technologies.
The investment objective of each of the above-referenced Funds and the Tax-
Efficient Equity, Value 25 and Tax-Efficient Structured Emerging Markets Funds
is non-fundamental and may be changed with respect to each such Fund by the
Trustees without shareholder approval.
The investment restrictions set forth below are fundamental policies of
each of the Equity Income, Value, Tax-Efficient Equity, Enhanced Equity, Value
25, Mega-Cap, Capital Appreciation, Mid-Cap Growth, Small-Cap Value, Small-Cap
Growth, Core Equity, Mid-Cap Equity, Micro-Cap Growth, Structured Emerging
Markets and Tax-Efficient Structured Emerging Markets 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 Mega-Cap, Tax-Efficient Equity,
Value 25 and Tax-Efficient Structured Emerging Markets Funds) is also
fundamental and may not be changed without such shareholder approval. Under the
following restrictions, none of the above-mentioned Funds may:
----
(1) invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such investment) would
be invested in the securities of issuers in any particular industry, except that
this restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (or repurchase agreements with
respect thereto);
(2) with respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in the securities of any
one issuer, except that this restriction does not apply to securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities;
(3) with respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the time of
such investment) of the outstanding voting securities of any one issuer, except
that this restriction does not apply to securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities;
(4) purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
in the real estate industry or which invest in real estate or interests therein;
(5) purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or forward
foreign currency contracts or swap agreements), except that any such Fund may
engage in interest rate futures contracts, stock index futures contracts,
futures contracts based on other financial instruments or one or more groups of
instruments, and on options on such futures contracts;
(6) purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio securities, but it
may make margin deposits in connection with transactions in options, futures,
and options on futures, and except that effecting short sales will be deemed not
to constitute a margin purchase for purposes of this restriction;
(7) borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its assets in
connection therewith, but only if immediately after each borrowing and
continuing thereafter, there is asset coverage
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of 300% and (ii) enter into reverse repurchase agreements and transactions in
options, futures, options on futures, and forward foreign currency contracts as
described in the Prospectuses and in this Statement of Additional Information
(the deposit of assets in escrow in connection with the writing of covered put
and call options and the purchase of securities on a when-issued or delayed
delivery basis and collateral arrangements with respect to initial or variation
margin deposits for futures contracts, options on futures contracts, and forward
foreign currency contracts will not be deemed to be pledges of such Fund's
assets);
(8) issue senior securities, except insofar as such Fund may be deemed to
have issued a senior security by reason of borrowing money in accordance with
the Fund's borrowing policies, and except for purposes of this investment
restriction, collateral, escrow, or margin or other deposits with respect to the
making of short sales, the purchase or sale of futures contracts or related
options, purchase or sale of forward foreign currency contracts, and the writing
of options on securities are not deemed to be an issuance of a senior security;
(9) lend any funds or other assets, except that such Fund may, consistent
with its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures, or other debt securities, bankers' acceptances and
commercial paper, even though the purchase of such obligations may be deemed to
be the making of loans, (b) enter into repurchase agreements and reverse
repurchase agreements, and (c) lend its portfolio securities in an amount not to
exceed one-third of the value of its total assets, provided such loans are made
in accordance with applicable guidelines established by the SEC and the Trustees
of the Trust; or
(10) act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under the federal securities laws.
Notwithstanding the provisions of fundamental investment restrictions (7)
and (8) above, a Fund may borrow money for temporary administrative purposes. To
the extent that borrowings for temporary administrative purposes exceed 5% of
the total assets of a Fund, such excess shall be subject to the 300% asset
coverage requirement of fundamental investment restriction (7).
The investment restrictions set forth below are fundamental policies of the
90/10 Portfolio, the 60/40 Portfolio and the 30/70 Portfolio and may not be
changed with respect to any such Portfolio without shareholder approval by vote
of a majority of the outstanding voting securities of that Portfolio. Under
these restrictions, a Portfolio may not:
(1) invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such investment) would
be invested in the securities of issuers in any particular industry, except that
this restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (or repurchase agreements with
respect thereto) or securities issued by any investment company;
(2) purchase securities of any issuer unless such purchase is consistent
with the maintenance of the Portfolio's status as a diversified company under
the Investment Company Act of 1940, as amended;
(3) 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;
(4) 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 Portfolio
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;
(5) borrow money, or pledge, mortgage or hypothecate its assets, except
that a Portfolio 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
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futures, and forward foreign currency contracts to the extent described in the
then current Prospectus(es) for the Portfolio and in this Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis and collateral arrangements with respect
to initial or variation margin deposits for futures contracts, options on
futures contracts, and forward foreign currency contracts will not be deemed to
be pledges of such Portfolio's assets);
(6) issue senior securities, except insofar as such Portfolio may be
deemed to have issued a senior security by reason of borrowing money in
accordance with the Portfolio'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;
(7) lend any funds or other assets, except that such Portfolio 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 and the Trustees of the Trust; or
(8) 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.
Notwithstanding the provisions of fundamental investment restrictions (5)
and (6) above, a Portfolio may borrow money for temporary administrative
purposes. To the extent that borrowings for temporary administrative purposes
exceed 5% of the total assets of a Portfolio, such excess shall be subject to
the 300% asset coverage requirement of fundamental investment restriction (5).
Notwithstanding any other fundamental investment restriction or policy,
each Portfolio may invest some or all of its assets in a single registered open-
end investment company or a series thereof. Unless specified above, any
fundamental investment restriction or policy of any such registered open-end
investment company or series thereof shall not be considered a fundamental
investment restriction or policy of a Portfolio investing therein.
The investment objective of each of the Portfolios is non-fundamental and
may be changed with respect to each such Portfolio by the Trustees without
shareholder approval.
Non-Fundamental Investment Restrictions
Each Fund (but not any Portfolio) is also subject to the following non-
fundamental restrictions and policies (which may be changed without shareholder
approval) and, unless otherwise indicated, may not:
(1) invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities the disposition of which is restricted under
federal securities laws, (c) repurchase agreements maturing in more than seven
days, (d) OTC options (to the extent described above under "Derivative
Instruments -- OTC Options"), and (e) IO/PO SMBS (as described above under
"Mortgage-Related and Asset-Backed Securities -- Stripped Mortgage - Backed
Securities") if, as a result, more than 15% of a Fund's net assets, taken at
current value, would then be invested in securities described in (a), (b), (c),
(d) and (e) above. For the purpose of this restriction, securities subject to a
7-day put option or convertible into readily saleable securities or commodities
are not included with subsections (a) or (b);
(2) purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities. (For this
purpose, the deposit or payment by a Fund of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.);
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<PAGE>
(3) make short sales of securities or maintain a short position for the
account of a Fund unless at all times when a short position is open such Fund
owns an equal amount of such securities or owns or has the right to acquire
securities which, without payment of any further consideration, are convertible
into or exchangeable for securities of the same issue as, and equal in amount
to, the securities sold short;
(4) purchase or sell commodities or commodity contracts except that a
Fund may purchase and sell financial futures contracts and related options and
the Precious Metals Fund may purchase and sell precious metals and other
commodities and futures thereon;
(5) with respect to the Renaissance, Growth, Target, Opportunity,
Innovation, International, International Growth and Precious Metals Funds, make
loans, except by purchase of debt obligations or by entering into repurchase
agreements or through the lending of the Fund's portfolio securities with
respect to not more than 25% of its total assets (33 1/3% in the case of the
Target Fund);
(6) with respect to the Renaissance, Growth, Target, Opportunity,
Innovation, International, International Growth and Precious Metals Funds, and
in each case with respect to 75% of such Fund's total assets, invest in
securities of any issuer if, immediately after such investment, more than 5% of
the total assets of such Fund (taken at current value) would be invested in the
securities of such issuer; provided that this limitation does not apply to bank
certificates of deposit or to obligations issued or guaranteed as to interest
and principal by the U.S. government or its agencies or instrumentalities;
(7) purchase securities the disposition of which is restricted under the
federal securities laws (excluding for purposes of this restriction securities
offered and sold pursuant to Rule 144A of the 1933 Act and Section 4(2)
commercial paper) if, as a result, such investments would exceed 15% of the
value of the net assets of the relevant Fund;
(8) write (sell) or purchase options except that each Fund may (a) write
covered call options or covered put options on securities that it is eligible to
purchase and enter into closing purchase transactions with respect to such
options, and (b) in combination therewith, or separately, purchase put and call
options on securities it is eligible to purchase, and (c) each Fund may engage
in options on securities indexes, options on foreign currencies, options on
futures contracts, and options on other financial instruments or one or more
groups of instruments; provided that the premiums paid by each Fund on all
outstanding options it has purchased do not exceed 5% of its total assets. Each
Fund may enter into closing sale transactions with respect to options it has
purchased;
(9) invest more than 15% of the net assets of a Fund (taken at market
value at the time of the investment) in "illiquid securities," illiquid
securities being defined to include repurchase agreements maturing in more than
seven days, certain loan participation interests, fixed time deposits which are
not subject to prepayment or provide withdrawal penalties upon prepayment (other
than overnight deposits), or other securities which legally or in the Adviser's
or Sub-Adviser's opinion may be deemed illiquid (other than securities issued
pursuant to Rule 144A under the 1933 Act and certain commercial paper that the
Adviser or Sub-Adviser has determined to be liquid under procedures approved by
the Board of Trustees); or
(10) borrow money (excluding reverse repurchase agreements which are
subject to such Fund's fundamental borrowing restriction), except for temporary
administrative purposes.
The Trust has not adopted any non-fundamental investment restrictions or
policies for the 90/10 Portfolio, 60/40 Portfolio or 30/70 Portfolio.
Unless otherwise indicated, all limitations applicable to a Fund's or
Portfolio's 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 a Fund's or Portfolio's assets invested in certain securities or
other instruments resulting from market fluctuations or other changes in a
Fund's or Portfolio's total assets will not require the Fund or Portfolio to
dispose of an investment until the Adviser or Sub-
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<PAGE>
Adviser determines that it is practicable to sell or close out the investment
without undue market or tax consequences to the Fund or Portfolio. In the event
that ratings services assign different ratings to the same security, the Adviser
or Sub-Adviser 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.
The phrase "shareholder approval," as used in the Prospectuses, and the
phrase a "vote of a majority of the outstanding voting securities," as used
herein, means the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the Fund, the Portfolio or the Trust, as the case may be,
or (2) 67% or more of the shares of the Fund, the Portfolio or the Trust, as the
case may be, present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
MANAGEMENT OF THE TRUST
Trustees and Officers
The business of the Trust is managed under the direction of the Trust's
Board of Trustees. Subject to the provisions of the Trust's Declaration of
Trust, its By-Laws and Massachusetts law, the Trustees have all powers necessary
and convenient to carry out this responsibility, including the election and
removal of the Trust's officers.
The Trustees and officers of the Trust, their ages, and a description of
their principal occupations during the past five years are listed below. Except
as shown, each Trustee's and officer's principal occupation and business
experience for the last five years have been with the employer(s) indicated,
although in some cases the Trustee may have held different positions with such
employer(s). Unless otherwise indicated, the business address of the persons
listed below is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660.
<TABLE>
<CAPTION>
Position(s) With Principal Occupation(s) During
---------------- ------------------------------
Name, Address and Age the Trust the Past Five Years
- --------------------- --------- -------------------
<S> <C> <C>
E. Philip Cannon Trustee Proprietor, Cannon & Company, an
3838 Olympia affiliate of Inverness
Houston, TX 77019 Management LLC, a private equity
Age 58 investment firm. Formerly,
Headmaster, St. John's School,
Houston, Texas; Trustee of PIMCO
Advisors Funds ("PAF") and Cash
Accumulation Trust ("CAT");
General Partner, J.B. Poindexter
& Co., Houston, Texas, a private
partnership; and Partner, Iberia
Petroleum Company, an oil and
gas production company. Mr.
Cannon was a director of WNS
Inc., a retailing company which
filed a petition in bankruptcy
within the last five years.
Donald P. Carter Trustee Formerly, Trustee of PAF and
434 Stable Lane CAT; Chairman, Executive Vice
Lake Forest, IL 60045 President and Director,
Age 72 Cunningham & Walsh, Inc.,
Chicago, an advertising agency.
</TABLE>
-34-
<PAGE>
<TABLE>
<S> <C> <C>
Gary A. Childress Trustee Private investor. Formerly, Chairman and Director,
11 Longview Terrace Bellefonte Lime Company, Inc. Mr. Childress is a
Madison, CT 06443 partner in GenLime, L.P., a private limited
Age 65 partnership, which has filed a petition in bankruptcy
within the last five years. Formerly, Trustee of PAF
and CAT.
William D. Cvengros* Trustee Chairman of the Board of the Trust; Chief Executive
800 Newport Center Drive Officer, President, and member of the Management
Newport Beach, CA 92660 Board, PIMCO Advisors; President and Chief
Age 50 Executive Officer, Value Advisors LLC; Co-
Chairman, The Emerging Markets Income Fund,
Inc., The Emerging Markets Income Fund II, Inc.,
The Emerging Markets Floating Rate Fund, Inc.,
Global Partners Income Fund, Inc., Municipal
Partners Fund, Inc., and Municipal Partners Fund II,
Inc.; Chairman and Director, PIMCO Funds: Global
Investors Series plc and PIMCO Global Advisors
(Ireland) Limited. Formerly, Trustee of PAF and
CAT; President of the Trust; Director, Vice
Chairman, and Chief Investment Officer, Pacific
Life Insurance Company ("Pacific Life"); and
Director, PIMCO Funds Distribution Company
(currently, PIMCO Funds Distributors LLC).
Richard L. Nelson Trustee President, Nelson Financial Consultants; Director,
8 Cherry Hills Lane Wynn's International, Inc., a building supplies
Newport Beach, CA 92660 company; and Trustee, Pacific Select Fund.
Age 69 Formerly, Partner, Ernst & Young.
Lyman W. Porter Trustee Professor of Management at the University of
2639 Bamboo Street California, Irvine; and Trustee, Pacific Select Fund.
Newport Beach, CA 92660
Age 69
Alan Richards Trustee Retired Chairman of E.F. Hutton Insurance Group;
7381 Elegans Place Former Director of E.F. Hutton and Company, Inc.;
Carlsbad, CA 92009 Chairman of IBIS Capital, LLC, a reverse mortgage
Age 69 company; Director, Inspired Arts, Inc.; Former
Director of Western National Corporation.
Joel Segall Trustee Formerly, Trustee of PAF and CAT, President and
11 Linden Shores University Professor, Bernard M. Baruch College,
Branford, CT 06405 The City University of New York; Deputy Under
Age 76 Secretary for International Affairs, United States
Department of Labor; Professor of Finance,
University of Chicago; and Board of Managers,
Coffee, Sugar and Cocoa Exchange.
</TABLE>
-35-
<PAGE>
<TABLE>
<S> <C> <C>
W. Bryant Stooks Trustee President, Bryant Investments, Ltd.; Director,
1530 E. Montebello American Agritec LLC, a manufacturer of
Phoenix, AZ 85014 hydrophonics products; and Director, Valley Isle
Age 59 Excursions, Inc., a tour operator. Formerly, Trustee
of PAF and CAT, President, Senior Vice President,
Director and Chief Executive Officer, Archirodon
Group Inc.; Partner, Arthur Andersen & Co.
Gerald M. Thorne Trustee Director, UPI Inc., a plastics company, and
5 Leatherwood Lane American Orthodontics Corp. Formerly, Trustee of
Savannah, GA 31414 PAF and CAT; Director, Kaytee, Inc., a birdseed
Age 61 company; President and Director, Firstar National
Bank of Milwaukee; Chairman, President and
Director, Firstar National Bank of Sheboygan;
Director, Bando-McGlocklin, a small business
investment company.
Stephen J. Treadway* Trustee, President and Executive Vice President, PIMCO Advisors;
2187 Atlantic Street Chief Executive Officer Chairman and President, PIMCO Funds Distributors
Stamford, CT 06902 LLC ("PFD"); Executive Vice President, Value
Age 52 Advisors LLC; Chairman, Municipal Advantage
Fund, Inc. and The Central European Value Fund,
Inc.; President, The Emerging Markets Income
Fund, Inc., The Emerging Markets Income Fund II,
Inc., The Emerging Markets Floating Rate Fund,
Inc., Global Partners Income Fund, Inc., Municipal
Partners Fund, Inc. and Municipal Partners Fund II,
Inc. Formerly, Trustee, President and Chief
Executive Officer of CAT; Executive Vice
President, Smith Barney Inc.
R. Wesley Burns Executive Vice President Trustee and President, PIMS; Managing Director,
Age 40 Pacific Investment Management; Trustee and
President, PIMCO Variable Insurance Trust
("PVIT"); Director and President, PIMCO
Commercial Mortgage Securities Trust, Inc.
("PCM"); Director, PIMCO Funds: Global
Investors Series plc, and PIMCO Global Advisors
(Ireland) Limited. Formerly, Executive Vice
President, Pacific Investment Management, PAF and
CAT.
</TABLE>
-36-
<PAGE>
<TABLE>
<S> <C> <C>
Newton B. Schott, Jr. Vice President and Executive Vice President, Chief Administrative
2187 Atlantic Street Secretary Officer, General Counsel and Secretary, PFD;
Stamford, CT 06902 Senior Vice President, Value Advisors LLC;
Age 57 Executive Vice President, The Emerging Markets
Income Fund, Inc., The Emerging Markets Income
Fund II, Inc., The Emerging Markets Floating Rate
Fund, Inc., The Central European Value Fund, Inc.,
Global Partners Income Fund, Inc., Municipal
Advantage Fund, Inc., Municipal Partners Fund, Inc.
and Municipal Partners Fund II, Inc. Formerly, Vice
President and Clerk of PAF and CAT.
Jeffrey M. Sargent Vice President Vice President and Manager Shareholder Services
Age 36 and Fund Administration, Pacific Investment
Management; Senior Vice President of PIMS, PVIT
and PCM.
Richard M. Weil Vice President General Counsel, PIMCO Advisors. Formerly, Vice
Age 36 President, Bankers Trust Company; Associate,
Simpson, Thatcher & Bartlett.
John P. Hardaway Treasurer Senior Vice President and Manager of Fund
Age 42 Operations Accounting, Pacific Investment
Management; Treasurer, PIMS, PVIT and PCM.
Formerly, Vice President, Pacific Investment
Management.
Joseph D. Hattesohl Assistant Treasurer Vice President and Manager of Fund Taxation,
Age 35 Pacific Investment Management; Assistant
Treasurer, PIMS, PVIT and PCM. Formerly,
Director of Financial Reporting, Carl J. Brown &
Co.; Tax Manager, Price Waterhouse LLP.
Garlin G. Flynn Assistant Secretary Specialist, Pacific Investment Management;
Age 53 Secretary, PIMS, PVIT and PCM. Formerly, Senior
Fund Administrator, Pacific Investment
Management; Senior Mutual Fund Analyst, PIMCO
Advisors Institutional Services.
</TABLE>
/*/ Trustee, is an "interested person" of the Trust (as defined in Section
2(a)(19) of the 1940 Act).
Trustees' Compensation
Trustees, other than those affiliated with PIMCO Advisors, a Sub-Adviser,
or Pacific Investment Management, receive an annual retainer of $47,000, plus
$2,000 for each Board of Trustees meeting attended ($1,000 if the meeting is
attended by telephone), and $1,000 for each Audit and Performance Committee
meeting attended, plus reimbursement of related expenses. Each Audit and
Performance Committee member receives an additional annual retainer of $2,000,
the Chairman of the Audit and Performance Committees receives an additional
annual retainer of $2,000, the Chairman of the Independent Trustees receives an
additional annual retainer of $6,000, and each Vice Chairman of the Independent
Trustees receives an additional annual retainer of $3,000. If in the judgment
of the Independent Trustees, it is necessary or appropriate for any Independent
Trustee, including the Chairman, to perform services in connection with
extraordinary Fund activities or circumstances, the Trustee shall be compensated
for such services at the rate of $2,000 per day, plus reimbursement of
reasonable expenses. Trustees do not currently receive any pension or
retirement benefits from the Trust or the Fund Complex (see below). The Trust
has adopted a deferred compensation plan for the Trustees, which went into place
during 1997,
-37-
<PAGE>
which permits the Trustees to defer their receipt of compensation from the
Trust, at their election, in accordance with the terms of the plan.
-38-
<PAGE>
The following table sets forth information regarding compensation received
by those Trustees who are not "interested persons" (as defined in the 1940 Act)
of the Trust for the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
(1) (2) (3)
Total
Aggregate Compensation
Compensation from from Trust and
Name of Trustee Trust Fund Complex/1/
--------------- ----- ---------------
<S> <C> <C>
E. Philip Cannon/2/ $ 57,000.00 $ 57,000.00
Donald P. Carter $ 66,500.00 $ 66,500.00
Gary A. Childress $ 58,000.00 $ 58,000.00
Richard L. Nelson $ 58,500.00 $ 96,500.00
Lyman W. Porter/2/ $ 57,000.00 $ 96,000.00
Alan Richards $ 62,000.00 $ 100,000.00
Joel Segall $ 58,000.00 $ 58,000.00
W. Bryant Stooks $ 56,500.00 $ 56,500.00
Gerald M. Thorne/2/ $ 57,500.00 $ 57,500.00
</TABLE>
Investment Adviser
PIMCO Advisors serves as investment adviser to each of the Funds and
Portfolios pursuant to an investment advisory agreement ("Advisory Agreement")
between PIMCO Advisors and the Trust. PIMCO Advisors was organized as a limited
partnership under Delaware law in 1987. PIMCO Partners, G.P. ("PGP") and PIMCO
Advisors Holdings L.P. ("PAH") are the general partners of PIMCO Advisors. PGP
is a general partnership between PIMCO Holding LLC ("PH 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 (collectively, the "Managing
Directors"). PGP is the sole general partner of PAH. PGP and PAH have equal
right, power and authority to manage and control the business and affairs of
PIMCO Advisors and to take any action deemed necessary or desirable by them in
connection with the business of PIMCO Advisors.
PGP and PAH have substantially delegated their management and control of
PIMCO Advisors to a Management Board. Pursuant to the terms of the delegation
of authority by PGP and PAH, the Management Board of PIMCO Advisors is composed
of (i) the Chief Executive Officer of PIMCO Advisors; (ii) six other persons
designated by PGP; (iii) three disinterested persons designated by
representatives of the Public General Partner or, if there is no Public General
Partner, PGP or its successor as general partner of PIMCO Advisors; (iv) the
Chief
____________________________
/1/ The amounts listed in column (3) include total compensation paid to
the Trustees for their services as Trustees of the Trust (for all Trustees) and
Pacific Select Fund (for Messrs. Nelson, Porter, and Richards) for the
twelve-month period ended June 30, 1999. By virtue of having PIMCO Advisors or
an affiliate of PIMCO Advisors as investment adviser, the Trust and Pacific
Select Fund were considered to be part of the same "Fund Complex" for these
purposes.
/2/ The Trust has adopted a deferred compensation plan (the "Plan")
which went into place during fiscal 1997. Of the amounts listed in column (2),
the following Trustees elected to have the following amounts deferred from the
Trust and all investment companies in the Fund Complex, respectively: Cannon -
$57,000, $57,000; Porter - $57,000, $57,000; and Thorne - $57,500, $57,500.
-39-
<PAGE>
Executive Officer and one Managing Director of each of the two Investment
Managing Companies having the greatest total income, determined as of the date
of appointment; and (v) one Managing Director of each of two other Investment
Managing Companies designated from time to time by the Management Board upon the
recommendation of the Nominating Committee. PAH is a Public General Partner for
the purposes set forth above.
The Management Board has in turn delegated the authority to manage day-to-
day operations and policies to an Executive Committee. The Executive Committee
is composed of four members. The members of the Executive Committee are William
D. Cvengros, Brent R. Harris, Glenn S. Schafer and William S. Thompson, Jr.
PIMCO Advisors, PGP and PAH are located at 800 Newport Center Drive,
Newport Beach, California 92660. PIMCO Advisors and its subsidiary partnerships
had approximately $256 billion of assets under management as of September 30,
1999.
PIMCO Advisors, subject to the supervision of the Board of Trustees, is
responsible for providing advice and guidance with respect to the Funds and
Portfolios and for managing, either directly or through others selected by the
Adviser, the investment of the Funds and Portfolios. PIMCO Advisors also
furnishes to the Board of Trustees periodic reports on the investment
performance of each Fund and Portfolio. For all of the Funds except the Growth,
Target, Opportunity, Innovation, Renaissance, International, Core Equity, Mid-
Cap Equity, International Growth and Precious Metals Funds, PIMCO Advisors has
engaged affiliates to serve as Sub-Advisers. The PIMCO Equity Advisors division
("PIMCO Equity Advisors") of PIMCO Advisors manages the investment portfolios of
the Growth, Target, Opportunity, Innovation, Renaissance, Core Equity, Mid-Cap
Equity and International Growth Funds. Acting in this capacity, PIMCO Equity
Advisors is also referred to herein as a "Sub-Adviser." If a Sub-Adviser 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 Sub-Adviser
subject to the approval of the Trustees and, if required, the Fund's
shareholders.
PIMCO Advisors' Asset Allocation Committee is responsible for determining
how the assets of the 90/10 Portfolio, the 60/40 Portfolio and the 30/70
Portfolio are allocated and reallocated from time to time among the Underlying
PIMCO Funds. The Portfolios do not pay any fees to PIMCO Advisors in return for
these services under the Advisory Agreement. The Portfolios do, however,
indirectly pay a proportionate share of the advisory fees paid to PIMCO Advisors
and Pacific Investment Management by the Underlying PIMCO Funds in which the
Portfolios invest.
Under the terms of the Advisory Agreement, PIMCO Advisors is obligated to
manage the Funds and the Portfolios in accordance with applicable laws and
regulations. The investment advisory services of PIMCO Advisors to the Trust are
not exclusive under the terms of the Advisory Agreement. PIMCO Advisors is free
to, and does, render investment advisory services to others.
The Advisory Agreement will continue in effect with respect to a Fund and
Portfolio for two years from its effective date, and thereafter on a yearly
basis, provided such continuance is approved annually (i) by the holders of a
majority of the outstanding voting securities of the Fund or Portfolio, or by
the Board of Trustees, and (ii) by a majority of the Trustees who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the Advisory Agreement. The Advisory
Agreement may be terminated without penalty by vote of the Trustees or the
shareholders of the Trust, or by the Adviser, on 60 days' written notice to the
other party and will terminate automatically in the event of its assignment. In
addition, the Advisory Agreement may be terminated with regard to the
Renaissance, Growth, Target, Opportunity, Innovation, International and Precious
Metals Funds by vote of a majority of the Trustees who are not interested
persons of PIMCO Advisors, on 60 days' written notice to PIMCO Advisors.
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<PAGE>
The Adviser currently receives a monthly investment advisory fee from each
Fund at the following annual rates (based on the average daily net assets of the
particular Funds):
<TABLE>
<CAPTION>
Fund Advisory
- ----
Fee Rate
--------
<S> <C>
Equity Income, Value, Tax-Efficient Equity, Mega-Cap, Capital Appreciation,
Mid-Cap Growth, Structured Emerging Markets, Tax-Efficient
Structured Emerging Markets and Enhanced Equity Funds........................................... .45%
Growth and Value 25 Funds......................................................................... .50%
International and Target Funds.................................................................... .55%
Core Equity Fund.................................................................................. .57%
Small-Cap Value, Renaissance and Precious Metals
Funds............................................................................................ .60%
Mid-Cap Equity Fund............................................................................... .63%
Opportunity and Innovation Funds.................................................................. .65%
International Growth Fund......................................................................... .85%
Small-Cap Growth Fund............................................................................. 1.00%
Micro-Cap Growth Fund............................................................................. 1.25%
</TABLE>
-41-
<PAGE>
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997
the Funds paid the Adviser (or its predecessor) the following amounts under the
Advisory Contract:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
Fund 6/30/99 6/30/98 6/30/97
- ---- ------- ------- -------
<S> <C> <C> <C>
Equity Income Fund $ 892,889 $ 795,252 $ 555,146
Value Fund 1,043,826 951,140 463,869
Small-Cap Value Fund 2,215,048 1,395,130 249,347
Core Equity Fund 413,258 504,760 234,333
Mid-Cap Equity Fund 74,646 53,956 48,656
Capital Appreciation Fund 5,057,813 3,627,790 1,953,374
Mid-Cap Growth Fund 3,926,642 2,622,029 1,219,531
Micro-Cap Growth Fund 3,035,025 2,759,876 1,390,317
Small-Cap Growth Fund 574,447 411,785 327,245
Enhanced Equity Fund 238,001 199,467 292,187
Emerging Markets Fund/(1)/ N/A 349,026 568,277
International Developed Fund/(1)/ N/A 653,050 525,817
Balanced Fund/(1)/ 311,190 300,049 306,756
Renaissance Fund* 3,771,388 3,010,051 913,256
Growth Fund* 10,728,640 9,329,701 3,758,433
Target Fund* 5,837,985 6,607,151 2,887,743
Opportunity Fund* 3,171,024 5,172,363 2,324,663
Innovation Fund* 4,453,888 2,028,712 750,414
International Fund* 753,828 922,680 559,353
International Growth Fund** 58,010 24,756 N/A
Precious Metals Fund* 125,947 165,918 119,710
Tax Exempt Fund*/(1)/ N/A 144,515 66,977
Value 25 Fund 7,550 N/A N/A
Tax-Efficient Equity Fund 56,985 N/A N/A
Structured Emerging Markets Fund 156,322 N/A N/A
Tax-Efficient Structured Emerging Markets Fund 212,327 N/A N/A
60/40 Portfolio N/A N/A N/A
70/30 Portfolio N/A N/A N/A
90/10 Portfolio N/A N/A N/A
----------- ----------- -----------
TOTAL $47,116,679 $42,029,157 $19,515,404
</TABLE>
- --------------
* Amounts for the year ended June 30, 1997 are for the period 1/18/97 through
6/30/97.
** Amounts for the year ended June 30, 1998 are for the period 12/31/97 through
6/30/98.
/(1)/ The Tax Exempt Fund reorganized with and into the Municipal Bond Fund of
PIMS in a transaction which took place on June 26, 1998. The Tax Exempt Fund
was liquidated in connection with the transaction and is no longer a series of
the Trust. The International Developed and Emerging Markets Funds reorganized
with and into newly formed series of Alleghany Funds in a transaction which took
place on April 30, 1999. The International Developed and Emerging Markets Funds
were liquidated in connection with the transaction and are no longer series of
the Trust. The Balanced Fund reorganized with and into the Strategic Balanced
Fund of PIMS in a transaction which took place on September 17, 1999. The
Balanced Fund was liquidated in connection with the transaction and is no longer
a series of the Trust.
-42-
<PAGE>
In addition, the predecessors of the Renaissance, Growth, Target,
Opportunity, Innovation, International, Precious Metals and Tax Exempt Funds
(each of which is a former series of PAF which reorganized as a Fund of the
Trust on January 17, 1997) paid the Adviser the following amounts for the fiscal
period ended January 17, 1997 and the fiscal year ended September 30, 1996 under
separate management contracts between the Adviser and PAF:
<TABLE>
<CAPTION>
10/1/96 Year
to Ended
Fund 1/17/97 9/30/96
- ---- ------- -------
<S> <C> <C>
Renaissance Fund $ 653,744 $ 1,627,632
Growth Fund 3,370,567 9,987,541
Target Fund 2,584,257 7,295,767
Opportunity Fund 1,898,337 6,183,575
Innovation Fund 545,586 1,063,584
International Fund 537,647 1,872,608
Precious Metals Fund 107,290 397,969
Tax Exempt Fund 99,023 333,349
---------- -----------
TOTAL $9,796,451 $28,762,025
</TABLE>
Portfolio Management Agreements
PIMCO Equity Advisors manages the investment portfolios of the Growth,
Target, Opportunity, Innovation, Renaissance, Core Equity, Mid-Cap Equity and
International Growth Funds. The Adviser employs Sub-Advisers to provide
investment advisory services to each other Fund pursuant to portfolio management
agreements (each a "Portfolio Management Agreement") between the Adviser and the
Fund's Sub-Adviser. Each Sub-Adviser retained by the Adviser is an affiliate of
the Adviser except for Van Eck Associates Corporation ("Van Eck"), which advises
the Precious Metals Fund, and Blairlogie Capital Management ("Blairlogie"),
which advises the International Fund. The Adviser currently has eight subsidiary
partnerships, the following three of which manage one or more of the Funds:
Parametric Portfolio Associates ("Parametric"), Cadence Capital Management
("Cadence") and NFJ Investment Group ("NFJ"). On April 30, 1999, the Adviser
sold all of its ownership interest in Blairlogie. See "Blairlogie" below.
PIMCO Equity Advisors
- ---------------------
PIMCO Equity Advisors, a division of PIMCO Advisors, acts as the Sub-
Adviser and provides investment advisory services to the Growth, Target,
Opportunity, Innovation, Renaissance, Core Equity, Mid-Cap Equity and
International Growth Funds. PIMCO Equity Advisors' address is 1345 Avenue of the
Americas, 50th Floor, New York, NY 10105. Additional information about PIMCO
Advisors, including information regarding investment advisory fees paid to PIMCO
Advisors by the Growth, Target, Opportunity, Innovation, Renaissance, Core
Equity, Mid-Cap Equity and International Growth Funds, is provided above under
"Investment Adviser." Prior to March 5, 1999, Columbus Circle Investors
("Columbus Circle"), a former subsidiary partnership of the Adviser, served as
Sub-Adviser to the Growth, Target, Opportunity and Innovation Funds. Columbus
Circle served as Sub-Adviser to the Renaissance Fund until May 7, 1999, and it
served as Sub-Adviser to the Core Equity, Mid-Cap Equity and International
Growth Funds until July 1, 1999. On July 1, 1999, the Adviser sold all of its
ownership interest in Columbus Circle to certain of Columbus Circle's
employees.
Parametric
- ----------
Pursuant to a Portfolio Management Agreement between the Adviser and
Parametric, Parametric is the Sub-Adviser and provides investment advisory
services to the Tax-Efficient Equity, Enhanced Equity, Structured Emerging
-43-
<PAGE>
Markets and Tax-Efficient Structured Emerging Markets Funds. For the services
provided to each Fund, the Adviser (not the Trust) pays Parametric a monthly fee
for each Fund at the following annual rates (based on the average daily net
assets of the particular Fund): .35% for the Tax-Efficient Equity Fund, .35% for
the Enhanced Equity Fund, .35% for the Structured Emerging Markets Fund, and
.35% for the Tax-Efficient Structured Emerging Markets Fund.
Parametric is an investment management firm organized as a general
partnership. Parametric is the successor investment adviser to Parametric
Portfolio Associates, Inc., a wholly-owned corporate subsidiary of PFAMCo.
Parametric has two partners: PIMCO Advisors as the supervisory partner, and
Parametric Management Inc. as the managing partner. The predecessor investment
adviser to Parametric commenced operations in 1987. Parametric is located at
7310 Columbia Center, 701 Fifth Avenue, Seattle, Washington 98104-7090.
Parametric provides investment management services to a number of institutional
accounts, including employee benefit plans, college endowment funds and
foundations. Accounts managed by Parametric had combined assets, as of September
30, 1999, of approximately $3.9 billion.
Cadence
- -------
Pursuant to a Portfolio Management Agreement between the Adviser and
Cadence, Cadence provides investment advisory services to the Mega-Cap, Capital
Appreciation, Mid-Cap Growth, Micro-Cap Growth and Small-Cap Growth Funds. For
the services provided, the Adviser (not the Trust) pays Cadence a monthly fee
for each Fund at the following annual rates (based on the average daily net
assets of the particular Fund): .35% for the Mega-Cap Fund, .35% for the Capital
Appreciation Fund, .35% for the Mid-Cap Growth Fund, .90% for the Small-Cap
Growth Fund, and 1.15% for the Micro-Cap Growth Fund.
Cadence is an investment management firm organized as a general
partnership. Cadence is the successor investment adviser to Cadence Capital
Management Corporation, a wholly-owned subsidiary of PFAMCo. Cadence has two
partners: PIMCO Advisors as the supervisory partner, and Cadence Capital
Management Inc. as the managing partner. The predecessor investment adviser to
Cadence commenced operations in 1988. Cadence is located at Exchange Place, 53
State Street, Boston, Massachusetts 02109. Cadence provides investment
management services to a number of institutional accounts, including employee
benefit plans, college endowment funds and foundations. Accounts managed by
Cadence had combined assets, as of September 30, 1999, of approximately $6.5
billion.
NFJ
- ---
Pursuant to a Portfolio Management Agreement between the Adviser and NFJ,
NFJ provides investment advisory services to the Equity Income, Value, Value 25
and Small-Cap Value Funds. For the services provided, the Adviser (not the
Trust) pays NFJ a monthly fee for each Fund at the following annual rates (based
on the average daily net assets of the particular Fund): .35% for the Equity
Income Fund, .35% for the Value Fund, .40% for the Value 25 Fund and .50% for
the Small-Cap Value Fund.
NFJ is an investment management firm organized as a general partnership.
NFJ is the successor investment adviser to NFJ Investment Group, Inc., a wholly-
owned subsidiary of PFAMCo. NFJ has two partners: PIMCO Advisors as the
supervisory partner, and NFJ Management Inc. as the managing partner. The
predecessor investment adviser to NFJ commenced operations in 1989. NFJ is
located at 2121 San Jacinto, Suite 1840, Dallas, Texas 75201. NFJ provides
investment management services to a number of institutional accounts, including
employee benefit plans, college endowment funds and foundations. Accounts
managed by NFJ had combined assets, as of September 30, 1999, of approximately
$2.2 billion.
Blairlogie
- ----------
Pursuant to a Portfolio Management Agreement between the Adviser and
Blairlogie, Blairlogie provides investment advisory services to the
International Fund. For the services provided, the Adviser (not the Trust) pays
Blairlogie a monthly fee for the Fund at the annual rate of .40% based on the
average daily net assets of the International Fund.
-44-
<PAGE>
Blairlogie is an investment management firm organized as a limited
partnership under the laws of the United Kingdom. Blairlogie is the successor
investment adviser to Blairlogie Capital Management Ltd., an indirect subsidiary
of PFAMCo, which commenced operations in 1992. Blairlogie is an indirect
majority-owned subsidiary of the Alleghany Corporation. The Alleghany
Corporation is engaged through its subsidiaries in the businesses of title
insurance, reinsurance, other financial services and industrial minerals.
Blairlogie is located at 125 Princes Street, 4th Floor, Edinburgh EH2 4AD,
Scotland. Blairlogie provides investment management services to a number of
institutional accounts, including employee benefit plans, college endowment
funds and foundations. Accounts managed by Blairlogie had combined assets, as of
September 30, 1999, of approximately $903 million.
Until April 30, 1999, Blairlogie was an affiliate of the Adviser. On April
30, 1999, the Adviser sold all of its ownership interests in Blairlogie to
subsidiaries of the Alleghany Corporation (the "Blairlogie Transaction") and
Blairlogie is no longer affiliated with the Adviser.
In connection with the Blairlogie Transaction, the Emerging Markets and
International Developed Funds (the "Transferred Funds") transferred all of their
assets and liabilities to newly formed series of Alleghany Funds managed by
Blairlogie. The Transferred Funds were liquidated in connection with the
Blairlogie Transaction and are no longer series of the Trust.
Van Eck
- -------
Pursuant to a Portfolio Management Agreement between the Adviser and Van
Eck, Van Eck provides investment advisory services to the Precious Metals Fund.
For the Services provided, the Adviser (not the Trust) pays Van Eck a monthly
fee at the annual rate of .35% based on the average daily net assets of the
Precious Metals Fund.
Van Eck is a Delaware corporation registered as an investment adviser with
the SEC. Van Eck and its affiliates advise other mutual funds and private
accounts. Van Eck is controlled by John C. van Eck who, along with members of
his immediate family, owns 100% of the stock of Van Eck. Van Eck is located at
99 Park Avenue, New York, New York 10001. Accounts managed by Van Eck had
combined assets, as of September 30, 1999, of approximately $1.2 billion.
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the amount of portfolio management fees paid by the Adviser (or its predecessor)
to the applicable Sub-Adviser (or its predecessor) for each of the Funds was as
follows:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
06/30/99 06/30/98 06/30/97
-------- -------- --------
<S> <C> <C> <C>
Equity Income Fund $ 694,469 $ 618,529 $ 492,429
Value Fund 811,864 739,776 388,966
Small-Cap Value Fund 1,845,873 1,162,608 224,788
Core Equity Fund 340,758 416,205 215,998
Mid-Cap Equity Fund 62,797 45,391 45,074
Capital Appreciation Fund 3,933,855 2,821,614 1,714,191
Mid-Cap Growth Fund 3,054,054 2,039,356 1,059,242
Micro-Cap Growth Fund 2,794,415 2,539,086 1,325,695
Small-Cap Growth Fund 517,002 370,606 311,280
Enhanced Equity Fund 185,113 155,141 268,021
Emerging Markets Fund 133,867 307,963 501,411
International Developed Fund 509,210 544,208 478,789
Balanced Fund 212,316 212,532 228,898
Renaissance Fund* 2,033,332 1,906,366 575,288
Growth Fund* 4,727,674 6,344,197 2,544,364
</TABLE>
-45-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Target Fund* 2,563,818 4,324,681 1,869,073
Opportunity Fund* 1,682,634 3,819,591 1,709,827
Innovation Fund* 1,325,219 1,186,016 435,246
International Fund* 540,637 671,040 348,938
International Growth Fund** 27,298 11,650 N/A
Precious Metal Fund* 73,469 96,785 66,070
Value 25 Fund 6,021 N/A N/A
Tax-Efficient Equity Fund 44,322 N/A N/A
Structured Emerging Markets Fund 121,584 N/A N/A
Tax-Efficient Structured Emerging Markets Fund 165,144 N/A N/A
Tax Exempt Fund* N/A 144,515 66,756
----------- ----------- -----------
TOTAL $28,406,745 $30,477,856 $14,870,344
</TABLE>
_________________
*Amounts for the year ended June 30, 1997 are for the period 1/18/97 through
6/30/97.
**Amounts for the year ended June 30, 1998 are for the period 12/31/97 through
6/30/98.
The Adviser paid the Sub-Advisers for the predecessors of the Renaissance,
Growth, Target, Opportunity, Innovation, International, Precious Metals and Tax
Exempt Funds (each of which is a former series of PAF which reorganized as a
Fund of the Trust on January 17, 1997) the following amounts for the fiscal
period ended January 17, 1997 and the fiscal year ended September 30, 1996 under
separate sub-advisory agreements between the Adviser and the relevant Sub-
Adviser:
<TABLE>
<CAPTION>
10/1/96 Year
to Ended
Fund 1/17/97 09/30/96
- ---- ------- --------
<S> <C> <C>
Renaissance Fund $ 326,864 $ 813,816
Growth Fund 1,685,284 4,993,770
Target Fund 1,292,168 3,647,884
Opportunity Fund 949,192 3,091,788
Innovation Fund 272,772 531,792
International Fund 268,824 936,304
Precious Metals Fund 53,837 198,985
Tax Exempt Fund 49,512 166,675
---------- -----------
TOTAL $4,898,453 $14,381,014
</TABLE>
Fund Administrator
In addition to its services as Adviser, PIMCO Advisors serves as
administrator (and is referred to in this capacity as the "Administrator") to
the Funds and Portfolios pursuant to an administration agreement (the
"Administration Agreement") with the Trust. The Administrator provides or
procures administrative services to the Funds and Portfolios, which include
clerical help and accounting, bookkeeping, internal audit services and certain
other services they require, and preparation of reports to the Trust's
shareholders and regulatory filings. PIMCO Advisors has retained Pacific
Investment Management as sub-administrator to provide such services pursuant to
a sub-administration agreement (the "Sub-Administration Agreement"). PIMCO
Advisors may also retain other affiliates to provide such services. In addition,
the Administrator arranges at its own expense for the provision of legal, audit,
custody, transfer agency and other services necessary for the ordinary operation
of the Funds and 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. Under the Administration Agreement, the Administrator has
agreed to provide or procure
-46-
<PAGE>
these services, and to bear these expenses, at the following annual rates for
each Fund and Portfolio (each expressed as a percentage of the Fund's or
Portfolio's average daily net assets attributable to the indicated class or
classes of shares on an annual basis):
Administrative Fee Rate
-----------------------
<TABLE>
<CAPTION>
Institutional and Class A, Class B,
Administrative and Class C Class D
Fund or Portfolio Classes* Shares* Shares**
- ----------------- ------- ------ ------
<S> <C> <C> <C>
Equity Income Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Tax-Efficient Equity Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Value Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Small-Cap Value Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
</TABLE>
-47-
<PAGE>
<TABLE>
<CAPTION>
Institutional and Class A, Class B,
Administrative and Class C Class D
Fund or Portfolio Classes* Shares* Shares**
- ----------------- ------- ------ ------
<S> <C> <C> <C>
Core Equity Fund .25% N/A N/A
Mid-Cap Equity Fund .25% N/A N/A
Value 25 Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
Mega-Cap Fund .25%*** N/A N/A
Capital Appreciation Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Mid-Cap Growth Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Micro-Cap Growth Fund .25% N/A N/A
Small-Cap Growth Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
Enhanced Equity Fund .25% N/A N/A
Renaissance Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
Growth Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
Target Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
Opportunity Fund .25% .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
Innovation Fund .25% .40% of first $2.5 billion .65%
.35% of amounts in excess of $2.5 billion
International Fund .50% .65% of first $2.5 billion N/A
.60% of amounts in excess of $2.5 billion
International Growth Fund .50% N/A N/A
Precious Metals Fund N/A .45% of first $2.5 billion N/A
.40% of amounts in excess of $2.5 billion
Tax-Efficient Structured .50% N/A N/A
Emerging Markets Fund
Structured Emerging .50% N/A N/A
Markets Fund
</TABLE>
-48-
<PAGE>
<TABLE>
<CAPTION>
Institutional and Class A, Class B,
Administrative and Class C Class D
Fund or Portfolio Classes* Shares* Shares**
- ----------------- ------- ------ ------
<S> <C> <C> <C>
90/10 Portfolio .10%**** .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
60/40 Portfolio .10%**** .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
30/70 Portfolio .10%**** .40% of first $2.5 billion N/A
.35% of amounts in excess of $2.5 billion
</TABLE>
* The Administrator receives administrative fees based on a Fund's or
Portfolio's average daily net assets attributable in the aggregate to its
Institutional and Administrative Class shares on the one hand, and to its Class
A, Class B and Class C shares on the other.
** As described below, 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% Class D Administrative Fee rate as 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 Administrative Fee for Institutional Class and Administrative Class
shares reflects an Expense Limitation Agreement between the Trust and the
Administrator. In the absence of this waiver, the Administrative Fee rate for
Institutional and Administrative Class shares of this Fund would be estimated to
be 0.55% for the Fund's initial fiscal year.
**** The Administrative Fee for Institutional and Administrative Class shares of
each Portfolio reflects a fee waiver currently in effect. In the absence of this
waiver, the Administrative Fee rate for Institutional and Administrative Class
shares of each Portfolio would be 0.15% per annum.
Except for the expenses paid by the Administrator, the Trust bears all
costs of its operations. The Trust is responsible for the following expenses:
(i) salaries and other compensation of any of the Trust's executive officers and
employees who are not officers, directors, stockholders, or employees of PIMCO
Advisors, Pacific Investment Management, or their subsidiaries or affiliates;
(ii) taxes and governmental fees; (iii) brokerage fees and commissions and other
portfolio transaction expenses; (iv) costs of borrowing money, including
interest expenses; (v) fees and expenses of the Trustees who are not "interested
persons" of PIMCO Advisors, any Sub-Adviser, or the Trust, and any counsel
retained exclusively for their benefit; (vi) extraordinary expenses, including
costs of litigation and indemnification expenses; (vii) expenses which are
capitalized in accordance with generally accepted accounting principals; and
(viii) any expenses allocated or allocable to a specific class of shares
("Class-specific expenses").
Class-specific expenses include distribution and/or service fees payable
with respect to the Class A, Class B, Class C, Class D or Administrative Class
shares and administrative fees as described above, and may include certain other
expenses as permitted by the Trust's Amended and Restated Multi-Class Plan (the
"Multi-Class Plan") adopted pursuant to Rule 18f-3 under the 1940 Act, which is
subject to review and approval by the Trustees. It is not presently anticipated
that any expenses other than distribution and/or service fees and administrative
fees will be allocated on a class-specific basis.
The Administration Agreement may be terminated by the Trust at any time by
vote of (1) a majority of the Trustees, (2) a majority of the outstanding voting
securities of the Trust, or (3) with respect to the Renaissance, Growth, Target,
Opportunity, Innovation, International and Precious Metals Funds, by a majority
of the Trustees who are not interested persons of the Trust or PIMCO Advisors,
on 60 days' written notice to PIMCO Advisors.
Under the Administration Agreement, the Administrator 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 Administration Agreement includes a plan specific to
Class D shares which has been adopted in conformity with the
-49-
<PAGE>
requirements set forth under Rule 12b-1 of the 1940 Act to allow for payment of
up to .25% per annum of the Class D administrative fees as 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 distribution
of Class D shares and/or the provision of shareholder services. See
"Distribution of Trust Shares--Plan for Class D Shares."
After an initial two-year term, the Sub-Administration Agreement will
continue from year to year upon the approval of the parties thereto. The Sub-
Administration Agreement may be terminated at any time by PIMCO Advisors or
Pacific Investment Management upon 60 days' written notice to the other party
and, with respect to the services rendered to the Trust, at any time by vote of
a majority of the disinterested Trustees of the Trust. The Sub-Administration
Agreement will also terminate upon termination of the Administration Agreement.
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the aggregate amount of the administration fees paid by the Funds and Portfolios
was as follows (Class A, Class B and Class C shares were not offered prior to
January 17, 1997 and Class D shares were not offered prior to April 8,
1998):
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- -------- -------- --------
<S> <C> <C> <C>
Equity Income Fund $ 579,501 $ 487,106 $ 311,798
Value Fund 778,004 720,965 318,624
Small-Cap Value Fund 1,373,378 850,182 114,067
Core Equity Fund 181,254 221,386 102,634
Mid-Cap Equity Fund 29,621 21,411 19,291
Capital Appreciation Fund 3,129,528 2,144,151 1,093,013
Mid-Cap Growth Fund 2,641,971 1,722,412 729,997
Micro-Cap Growth Fund 607,005 551,975 278,025
Small-Cap Growth Fund 143,612 102,410 81,774
Enhanced Equity Fund 132,223 110,815 161,982
Emerging Markets Fund N/A 208,654 312,540
International Developed Fund N/A 555,314 437,490
Balanced Fund 220,148 186,627 170,134
Renaissance Fund* 2,513,413 2,006,144 605,566
Growth Fund* 8,581,473 7,463,761 2,993,370
Target Fund* 4,244,469 4,805,201 2,076,748
Opportunity Fund* 1,950,916 3,182,992 1,424,856
Innovation Fund* 2,740,592 1,248,438 458,154
International Fund* 877,968 1,090,440 567,025
International Growth Fund** 34,123 14,562 N/A
Precious Metals Fund* 94,460 124,438 84,947
Tax Exempt Fund* N/A 193,724 89,008
Value 25 Fund 5,790 N/A N/A
Tax-Efficient Equity Fund 49,326 N/A N/A
Structured Emerging Markets Fund 173,691 N/A N/A
Tax-Efficient Structured Emerging Markets Fund 235,919 N/A N/A
60/40 Portfolio 20,123 N/A N/A
70/30 Portfolio 10,422 N/A N/A
90/10 Portfolio 14,344 N/A N/A
----------- ----------- -----------
TOTAL $31,363,276 $28,013,108 $12,431,043
</TABLE>
- ------------------------
-50-
<PAGE>
*Amounts for the year ended June 30, 1997 are for the period from 1/17/97
through 6/30/97.
**Amounts for the year ended June 30, 1998 are for the period from 12/31/97
through 6/30/98.
The predecessor series of the Renaissance, Growth, Target, Opportunity,
Innovation, International, Precious Metals and Tax Exempt Funds (each a series
of PAF which reorganized as a Fund of the Trust on January 17, 1997) received
administrative services during fiscal years 1997 and 1996 under separate
management contracts between the Adviser and PAF on behalf of each such series.
See "Investment Adviser" above for the amounts paid to the Adviser by these
series under such management contracts during fiscal years 1997 and 1996.
Shares of the Portfolios were not offered during the periods listed above.
DISTRIBUTION OF TRUST SHARES
Distributor and Multi-Class Plan
PIMCO Funds Distributors LLC (the "Distributor") serves as the principal
underwriter of each class of the Trust's shares pursuant to a distribution
contract (the "Distribution Contract") with the Trust. The Distributor is a
wholly-owned subsidiary of PIMCO Advisors. The Distributor, located at 2187
Atlantic Street, Stamford, Connecticut 06902, is a broker-dealer registered with
the Securities and Exchange Commission. The Distribution Contract is terminable
with respect to a Fund, Portfolio or class of shares without penalty, at any
time, by the Fund, Portfolio or class by not more than 60 days' nor less than 30
days' written notice to the Distributor, or by the Distributor upon not more
than 60 days' nor less than 30 days' written notice to the Trust. The
Distributor is not obligated to sell any specific amount of Trust shares.
The Distribution Contract will continue in effect with respect to each Fund
and Portfolio, and each class of shares thereof, for successive one-year
periods, provided that each such continuance is specifically approved (i) by the
vote of a majority of the entire Board of Trustees or by the majority of the
outstanding shares of the Fund, Portfolio or class, and (ii) by a majority of
the Trustees who are not interested persons (as defined in the 1940 Act) of the
Trust and who have no direct or indirect interest financial interest in the
Distribution Contract or the Distribution and/or Servicing Plans described
below, by vote cast in person at a meeting called for the purpose. If the
Distribution Contract is terminated (or not renewed) with respect to one or more
Funds, Portfolios or classes, it may continue in effect with respect to any
Fund, Portfolio or class as to which it has not been terminated (or has been
renewed).
The Trust currently offers up to six classes of shares of each of the
Funds: Class A, Class B, Class C, Class D, Institutional Class and
Administrative Class shares. The Trust currently offers Class A, Class B, Class
C, Institutional Class and Administrative Class shares of each Portfolio.
Class A, Class B and Class C shares of the Trust are offered through firms
("participating brokers") which are members of the National Association of
Securities Dealers, Inc. ("NASD"), and which have dealer agreements with the
Distributor, or which have agreed to act as introducing brokers for the
Distributor ("introducing brokers").
Class D shares are generally offered to clients of financial service firms,
such as broker-dealers or registered investment advisers, with which the
Distributor has an agreement for the use of PIMCO Funds: Multi-Manager Series in
particular investment products, programs or accounts for which a fee may be
charged.
Institutional Class shares are offered primarily for direct investment by
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations, and high net worth individuals
(Institutional Class shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to the customers' investments in the Funds). Administrative Class shares
are offered primarily through employee benefit plan alliances, broker-dealers,
and other intermediaries, and each Fund pays service or distribution fees to
such entities for services they provide to Administrative Class shareholders.
-51-
<PAGE>
Under the Trust's Multi-Class Plan, shares of each class of each Fund and
Portfolio represent an equal pro rata interest in the Fund or Portfolio and,
generally, have identical voting, dividend, liquidation, and other rights
preferences, powers, restrictions, limitations, qualifications and terms and
conditions, except that: (a) each class has a different designation; (b) each
class has exclusive voting rights on any matter submitted to shareholders that
relates solely to its distribution or service arrangements; and (c) each class
has separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class.
Each class of shares bears any class specific expenses allocated to such
class, such as expenses related to the distribution and/or shareholder servicing
of such class. In addition, 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. Each class may have a differing sales charge structure, and
differing exchange and conversion features.
Contingent Deferred Sales Charge and Initial Sales Charge
As described in the Class A, B and C Prospectus and the Retail Portfolio
Prospectus under the caption "Investment Options (Class A, B and C Shares)," a
contingent deferred sales charge is imposed upon certain redemptions of Class A,
Class B and Class C shares. No contingent deferred sales charge is currently
imposed upon redemptions of Class D, Institutional Class or Administrative Class
shares. Because contingent deferred sales charges are calculated on a series-by-
series basis, shareholders should consider whether to exchange shares of one
Fund or Portfolio for shares of another Fund or Portfolio prior to redeeming an
investment if such an exchange would reduce the contingent deferred sales charge
applicable to such redemption.
During the fiscal years ended June 30, 1999, June 30, 1998 and June 30,
1997, the Distributor received the following aggregate amounts in contingent
deferred sales charges on Class A shares, Class B shares and Class C shares of
the Funds and the Portfolios:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
Class 6/30/99 6/30/98 6/30/97
- ----- ------- ------- -------
<S> <C> <C> <C>
Class A $ 5,341 $ 2,273 $ 40,456
Class B $2,063,747 $945,353 $789,851
Class C $ 618,030 $480,061 $533,975
</TABLE>
The Funds did not offer Class A, B and C shares in fiscal years prior to
the fiscal year ended June 30, 1997. However, during the fiscal year ended
September 30, 1996, the Distributor received the following amounts in contingent
deferred sales charges on shares of series of PAF which reorganized as the
following Funds of the Trust: Class A shares: Growth - $9,168, Target - $14 and
--------------
Opportunity - $4,190. Class B shares: Renaissance - $8,722, Growth - $37,445,
--------------
Target - $31,670, Innovation - $36,477, International - $6,359, Precious Metals
- - $1,179 and Tax Exempt -$4,055. Class C shares: Renaissance- $12,809, Growth -
--------------
$124,264, Target - $89,334, Opportunity - $37,154, Innovation - $29,110,
International - $22,016, Precious Metals - $15,384 and Tax Exempt - $1,596.
As described in the Class A, B and C Prospectus and the Retail Portfolio
Prospectus under the caption "Investment Options (Class A, B and C Shares),"
Class A shares of the Trust are sold pursuant to an initial sales charge, which
declines as the amount of the purchase reaches certain defined levels. For the
fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997, the
Distributor received an aggregate of $7,013,745, $4,878,434 and $2,927,636,
respectively, and retained an aggregate of $904,586, $506,878 and $369,546,
respectively, in initial sales charges paid by Class A shareholders of the
Trust.
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<PAGE>
The Trust did not offer Class A shares in fiscal years prior to the fiscal
year ended June 30, 1997. However, during the fiscal year ended September 30,
1996, the Distributor received the following amounts in initial sales charges
paid by shareholders of PAF series which reorganized as the following Funds of
the Trust: Renaissance - $205,419, Growth - 549,330, Target - $852,363,
Opportunity - $176,391, Innovation - $685,093, International - $91,177, Precious
Metals - $72,503 and Tax Exempt - $37,180, and retained the following amounts:
Renaissance - $27,477, Growth -$83,657, Target - $126,693, Opportunity -
$29,605, Innovation - $114,091, International - $13,871, Precious Metals -$7,738
and Tax Exempt - $3,140.
Distribution and Servicing Plans for Class A, Class B and Class C Shares
As stated in the Class A, B and C Prospectus and the Retail Portfolio
Prospectus under the caption "Management of the Trust--Distribution and
Servicing (12b-1) Plans," Class A, Class B and Class C shares of the Trust are
continuously offered through participating brokers which are members of the NASD
and which have dealer agreements with the Distributor, or which have agreed to
act as introducing brokers.
Pursuant to separate Distribution and Servicing Plans for Class A, Class B
and Class C shares (the "Retail Plans"), the Distributor receives (i) in
connection with the distribution of Class B and Class C shares of the Trust,
certain distribution fees from the Trust, and (ii) in connection with personal
services rendered to Class A, Class B and Class C shareholders of the Trust and
the maintenance of shareholder accounts, certain servicing fees from the Trust.
Subject to the percentage limitations on these distribution and servicing fees
set forth below, the distribution and servicing fees may be paid with respect to
services rendered and expenses borne in the past with respect to Class A, Class
B and Class C shares as to which no distribution and servicing fees were paid on
account of such limitations.
The Distributor makes distribution and servicing payments to participating
brokers and servicing payments to certain banks and other financial
intermediaries in connection with the sale of Class B and Class C shares and
servicing payments to participating brokers, certain banks and other financial
intermediaries in connection with the sale of Class A shares. In the case of
Class A shares, these parties are also compensated based on the amount of the
front-end sales charge reallowed by the Distributor, except in cases where Class
A shares are sold without a front-end sales charge (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, participating brokers
and other financial intermediaries are compensated by an advance of a sales
commission by the Distributor. In the case of Class C shares, part or all of the
first year's distribution and servicing fee is generally paid at the time of
sale. Pursuant to the Distribution Agreement, with respect to each Fund's or
Portfolio's Class A, Class B and Class C shares, the Distributor bears various
other promotional and sales related expenses, including the cost of printing and
mailing prospectuses to persons other than current shareholders.
Class A Servicing Fees
- ----------------------
As compensation for services rendered and expenses borne by the Distributor
in connection with personal services rendered to Class A shareholders of the
Trust and the maintenance of Class A shareholder accounts, the Trust pays the
Distributor servicing fees up to the annual rate of .25% (calculated as a
percentage of each Fund's or Portfolio's average daily net assets attributable
to Class A shares).
Class B and Class C Distribution and Servicing Fees
- ---------------------------------------------------
As compensation for services rendered and expenses borne by the Distributor
in connection with the distribution of Class B and 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 or
Portfolio's average daily net assets attributable to Class B and Class C shares,
respectively):
-53-
<PAGE>
Servicing Distribution
Fee Fee
--------- ------------
All Funds and Portfolios .25% .75%
The Retail Plans were adopted pursuant to Rule 12b-1 under 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 Retail Plans,
the fees are payable to compensate the Distributor for services rendered even if
the amount paid exceeds the Distributor's expenses.
The distribution fee applicable to Class B and Class C shares may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale of Class B or Class C shares, respectively, including compensation to,
and expenses (including overhead and telephone expenses) of, financial
consultants or other employees of the Distributor or of participating or
introducing brokers who engage in distribution of Class B or Class C shares,
printing of prospectuses and reports for other than existing Class B or Class C
shareholders, advertising, and preparation, printing and distributions of sales
literature. The servicing fee, which is applicable to Class A, Class B and Class
C shares of the Trust, may be spent by the Distributor on personal services
rendered to shareholders of the Trust and the maintenance of shareholder
accounts, including compensation to, and expenses (including telephone and
overhead expenses) of, financial consultants or other employees of participating
or introducing brokers, certain banks and other financial intermediaries who aid
in the processing of purchase or redemption requests or the processing of
dividend payments, who provide information periodically to shareholders showing
their positions in a Fund's or Portfolio's shares, who forward communications
from the Trust to shareholders, who render ongoing advice concerning the
suitability of particular investment opportunities offered by the Trust in light
of the shareholders' needs, who respond to inquiries from shareholders relating
to such services, or who train personnel in the provision of such services.
Distribution and servicing fees may also be spent on interest relating to
unreimbursed distribution or servicing expenses from prior years.
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 or
Portfolio may indirectly support sales and servicing efforts relating to the
other Funds' or Portfolios' shares of the same class. In reporting its expenses
to the Trustees, the Distributor itemizes expenses that relate to the
distribution and/or servicing of a single Fund's or Portfolio's shares, and
allocates other expenses among the Funds or Portfolios based on their relative
net assets. Expenses allocated to each Fund or 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 percentages annually of the average daily net assets
attributable to shares in the accounts of their customers or clients:
ALL FUNDS AND PORTFOLIOS/(1)/
SERVICING DISTRIBUTION
FEE FEE
- -----------------------------------------------------------------------------
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%
-54-
<PAGE>
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 Advisors 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 bonuses 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 or Portfolios. 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 or Portfolio and/or all
of the Funds or Portfolios 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 administrator for the Funds and Portfolios, PIMCO Advisors may pay
participating brokers and other intermediaries for sub-transfer agency and other
services.
If in any year the Distributor's expenses incurred in connection with the
distribution of Class B and Class C shares and, for Class A, Class B and Class C
shares, in connection with the servicing of shareholders and the maintenance of
shareholder accounts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Retail Plan with
respect to such class of shares continues to be in effect in some later year
when such 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 Retail Plan terminates.
Each Retail Plan may be terminated with respect to any Fund or Portfolio to
which the Plan relates by vote of a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distribution Contract ("disinterested Retail Plan Trustees"), or by vote of a
majority of the outstanding voting securities of the relevant class of that Fund
or Portfolio. Any change in any Retail Plan that would materially increase the
cost to the class of shares of any Fund or Portfolio to which the Plan relates
requires approval by the affected class of shareholders of that Fund or
Portfolio. The Trustees review quarterly written reports of such costs and the
purposes for which such costs have been incurred. Each Retail Plan may be
amended by vote of the Trustees, including a majority of the disinterested
Retail Plan Trustees, cast in person at a meeting called for the purpose. As
long as the Retail Plans are in effect, selection and nomination of those
Trustees who are not interested persons of the Trust shall be committed to the
discretion of such disinterested Trustees.
The Retail Plans will continue in effect with respect to each Fund and
Portfolio, and each class of shares thereof, for successive one-year periods,
provided that each such continuance is specifically approved (i) by the vote of
a majority of the disinterested Retail Plan Trustees and (ii) by the vote of a
majority of the entire Board of Trustees cast in person at a meeting called for
the purpose of voting on such approval.
If a Retail Plan is terminated (or not renewed) with respect to one or more
Funds or Portfolios, or classes thereof, it may continue in effect with respect
to any class of any Fund or Portfolio as to which it has not been terminated (or
has been renewed).
The Trustees believe that the Retail Plans will provide benefits to the
Trust. In this regard, the Trustees believe that the Retail Plans will result in
greater sales and/or fewer redemptions of Trust shares, although it is
impossible to know for certain the level of sales and redemptions of Trust
shares that would occur in the absence of the Retail Plans or under alternative
distribution schemes. Although the expenses of the Funds and Portfolios are
essentially fixed, the Trustees believe that the effect of the Retail Plans on
sales and/or redemptions may benefit the Trust by reducing expense ratios and/or
by affording greater flexibility to the Sub-Advisers. From time to time,
expenses of the Distributor incurred in connection with the sale of Class B and
Class C shares of the Trust, and in connection with the servicing of Class B and
Class C shareholders and the maintenance of shareholder accounts, may exceed the
distribution and servicing fees collected by the Distributor. The Trustees
consider such unreimbursed
-55-
<PAGE>
amounts, among other factors, in determining whether to cause the Funds and
Portfolios to continue payments of distribution and servicing fees in the future
with respect to Class B and Class C shares.
Payments Pursuant to Class A Plans
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the Trust paid the Distributor an aggregate of $2,635,864, $2,017,316 and
$1,147,572, respectively, pursuant to the Class A Retail Plan. Such payments
were allocated among the operational Funds and Portfolios as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- --------- --------- ---------
<S> <C> <C> <C>
Equity Income Fund $ 37,477 $ 20,227 $ 938
Value Fund 51,171 46,720 14,876
Small-Cap Value Fund 226,167 91,688 2,770
Core Equity Fund N/A N/A N/A
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 224,084 75,035 5,510
Mid-Cap Growth Fund 251,954 72,631 12,246
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A 697 108
International Developed Fund N/A 2,903 169
Balanced Fund 23,696 12,278 173
Renaissance Fund 214,100 130,230 53,527
Growth Fund 464,918 403,013 290,828
Target Fund 347,814 394,300 288,012
Opportunity Fund 338,303 531,993 320,127
Innovation Fund 406,854 164,089 99,910
International Fund 29,153 42,700 34,195
International Growth Fund N/A N/A N/A
Precious Metals Fund 8,880 13,370 14,218
Tax Exempt Fund N/A 15,442 9,965
Value 25 Fund 1,189 N/A N/A
Tax-Efficient Equity Fund 7,937 N/A N/A
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 1,312 N/A N/A
70/30 Portfolio 348 N/A N/A
90/10 Portfolio 504 N/A N/A
</TABLE>
During the fiscal year ended June 30, 1999, the amounts collected pursuant
to the Class A Retail Plan were used as follows by the Distributor: sales
commissions and other compensation to sales personnel, $2,135,047; preparing,
printing and distributing sales material and advertising (including preparing,
printing and distributing prospectuses to non-shareholders) and other expenses
(including data processing, legal and operations), $500,814. These totals,
allocated among (i) compensation and (ii) sales material and other expenses for
each Fund and Portfolio, were as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ -------------- --------
<S> <C> <C> <C>
Equity Income Fund $ 30,356 $ 7,121 $ 37,477
Value Fund 41,449 9,722 51,171
</TABLE>
-56-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Small-Cap Value Fund 183,195 42,972 226,167
Core Equity Fund N/A N/A N/A
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 181,508 42,576 224,084
Mid-Cap Growth Fund 204,083 47,871 251,954
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A N/A N/A
International Developed Fund N/A N/A N/A
Balanced Fund 19,194 4,502 23,696
Renaissance Fund 173,421 40,679 214,100
Growth Fund 376,584 88,334 464,918
Target Fund 281,729 66,085 347,814
Opportunity Fund 274,025 64,278 338,303
Innovation Fund 329,552 77,302 406,854
International Fund 23,614 5,539 29,153
International Growth Fund N/A N/A N/A
Precious Metals Fund 7,193 1,687 8,880
Tax Exempt Fund N/A N/A N/A
Value 25 Fund 963 226 1,189
Tax-Efficient Equity Fund 6,429 1,508 7,937
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 1,063 249 1,312
70/30 Portfolio 282 66 348
90/10 Portfolio 408 96 504
</TABLE>
The Trust did not offer Class A shares in fiscal years prior to the fiscal
year ended June 30, 1997. For the fiscal year ended September 30, 1996, PAF paid
the Distributor an aggregate of $1,556,119 pursuant to a Distribution and
Servicing Plan applicable to the Class A shares of PAF (the "PAF Class A Plan"),
which is similar to the Class A Plan of the Trust. Such payments were allocated
among the predecessors of the following Funds (each of which was formerly a
series of PAF which reorganized as a series of the Trust on January 17, 1997) as
follows:
<TABLE>
<CAPTION>
Year Ended
Sept. 30, 1996
--------------
<S> <C>
Renaissance Fund $ 38,973
Growth Fund 351,506
Target Fund 338,598
Opportunity Fund 308,794
Innovation Fund 88,089
International Fund 42,411
Precious Metals Fund 21,416
Tax Exempt Fund 10,288
</TABLE>
The remainder of the total payments made under the PAF Class A Plan for
such fiscal years was allocated among other series of PAF which either merged
with Funds of the Trust or merged with/reorganized as series of PIMS, an
affiliated mutual fund family, in transactions which took place on January 17,
1997.
-57-
<PAGE>
Payments Pursuant to Class B Plans
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the Trust paid the Distributor an aggregate of $7,649,186, $4,549,168 and
$1,670,623, respectively, pursuant to the Class B Retail Plan. Such payments
were allocated among the operational Funds and Portfolios as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Equity Income Fund $ 174,783 $ 80,992 $ 5,019
Value Fund 332,761 311,768 101,067
Small-Cap Value Fund 984,479 611,536 17,419
Core Equity Fund N/A N/A N/A
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 483,520 165,015 5,077
Mid-Cap Growth Fund 834,091 528,760 104,374
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A 4,696 633
International Developed Fund N/A 21,969 2,256
Balanced Fund 109,348 42,373 2,223
Renaissance Fund 1,133,814 603,997 204,965
Growth Fund 996,276 660,761 351,684
Target Fund 703,506 727,857 450,009
Opportunity Fund 428 N/A N/A
Innovation Fund 1,707,917 629,537 332,295
International Fund 84,644 85,359 53,098
International Growth Fund N/A N/A N/A
Precious Metals Fund 40,742 41,484 21,713
Tax Exempt Fund N/A 33,064 18,818
Value 25 Fund 3,700 N/A N/A
Tax-Efficient Equity Fund 28,316 N/A N/A
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 15,370 N/A N/A
70/30 Portfolio 8,250 N/A N/A
90/10 Portfolio 7,240 N/A N/A
</TABLE>
During the fiscal year ended June 30, 1999, the amounts collected pursuant
to the Class B Retail Plan were used as follows by the Distributor: sales
commissions and other compensation to sales personnel, $6,195,840; preparing,
printing and distributing sales material and advertising (including preparing,
printing and distribution prospectuses to non-shareholders), and other expenses
(including data processing, legal and operations), $1,453,345. These totals,
allocated among (i) compensation and (ii) sales material and other expenses for
each Fund and Portfolio, were as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ -------------- -----
<S> <C> <C> <C>
Equity Income Fund $ 141,574 $ 33,209 $ 174,783
Value Fund 269,536 63,225 332,761
Small-Cap Value Fund 797,428 187,051 984,479
Core Equity Fund N/A N/A N/A
</TABLE>
-58-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 391,651 91,869 483,520
Mid-Cap Growth Fund 675,614 158,477 834,091
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A N/A N/A
International Developed Fund N/A N/A N/A
Balanced Fund 88,572 20,776 109,348
Renaissance Fund 918,389 215,425 1,133,814
Growth Fund 806,984 189,292 996,276
Target Fund 569,840 133,666 703,506
Opportunity Fund 347 81 428
Innovation Fund 1,383,413 324,504 1,707,917
International Fund 68,562 16,082 84,644
International Growth Fund N/A N/A N/A
Precious Metals Fund 33,001 7,741 40,742
Tax Exempt Fund N/A N/A N/A
Value 25 Fund 2,997 703 3,700
Tax-Efficient Equity Fund 22,936 5,380 28,316
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 12,450 2,920 15,370
70/30 Portfolio 6,683 1,568 8,250
90/10 Portfolio 5,864 1,376 7,240
</TABLE>
The Trust did not offer Class B shares in fiscal years prior to the fiscal
year ended June 30, 1997. For the fiscal year ended September 30, 1996, PAF
paid the Distributor an aggregate of $1,839,931 pursuant to a Distribution and
Servicing Plan applicable to the Class B shares of PAF (the "PAF Class B Plan"),
which is similar to the Class B Plan of the Trust. Such payments were allocated
among the predecessors of the following Funds (each of which was formerly a
series of PAF which reorganized as a series of the Trust on January 17, 1997) as
follows:
<TABLE>
<CAPTION>
Year Ended
Sept. 30, 1996
--------------
<S> <C>
Renaissance Fund $ 62,195
Growth Fund 211,778
Target Fund 241,125
Opportunity Fund N/A
Innovation Fund 166,747
International Fund 289,719
Precious Metals Fund 14,083
Tax Exempt Fund 14,673
</TABLE>
The remainder of the total payments made under the PAF Class B Plan for
such fiscal years was allocated among other series of PAF which either merged
with Funds of the Trust or merged with/reorganized as series of PIMS, an
affiliated mutual fund family, in transactions which took place on January 17,
1997.
-59-
<PAGE>
Payments Pursuant to Class C Plans
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the Trust paid the Distributor an aggregate of $43,907,220, $42,819,673 and
$28,944,078, respectively, pursuant to the Class C Retail Plan. Such payments
were allocated among the operational Funds and Portfolios as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- -------- -------- --------
<S> <C> <C> <C>
Equity Income Fund $ 230,353 $ 139,875 $ 13,919
Value Fund 779,730 784,829 245,893
Small-Cap Value Fund 1,113,794 814,232 39,558
Core Equity Fund N/A N/A N/A
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 748,698 392,705 28,078
Mid-Cap Growth Fund 1,225,691 951,993 197,365
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A 14,813 5,070
International Developed Fund N/A 40,459 4,936
Balanced Fund 110,967 41,412 1,876
Renaissance Fund 4,288,538 3,887,867 2,024,245
Growth Fund 18,591,740 16,386,591 11,107,219
Target Fund 8,510,832 9,707,945 7,238,372
Opportunity Fund 3,521,632 5,829,510 4,950,118
Innovation Fund 3,440,411 1,834,958 1,149,018
International Fund 1,083,209 1,421,443 1,354,452
International Growth Fund N/A N/A N/A
Precious Metals Fund 133,650 181,565 255,508
Tax Exempt Fund N/A 389,476 328,451
Value 25 Fund 4,980 N/A N/A
Tax-Efficient Equity Fund 50,345 N/A N/A
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 29,671 N/A N/A
70/30 Portfolio 16,395 N/A N/A
90/10 Portfolio 26,585 N/A N/A
</TABLE>
During the fiscal year ended June 30, 1999, the amounts collected pursuant
to the Class C Retail Plan were used as follows by the Distributor: sales
commissions and other compensation to sales personnel, $35,564,849; preparing,
printing and distributing sales material and advertising (including preparing,
printing and distributing prospectuses to non-shareholders) and other expenses
(including data processing, legal and operations), $8,342,372. These totals,
allocated among (i) compensation and (ii) sales material and other expenses for
each Fund and Portfolio, were as follows:
<TABLE>
<CAPTION>
Sales Material
and Other
Compensation Expenses Total
------------ -------------- -----------
<S> <C> <C> <C>
Equity Income Fund $ 186,586 $ 43,767 $ 230,353
Value Fund 631,581 148,149 779,730
Small-Cap Value Fund 902,173 211,621 1,113,794
Core Equity Fund N/A N/A N/A
</TABLE>
-60-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Mid-Cap Equity Fund N/A N/A N/A
Capital Appreciation Fund 606,445 142,253 748,698
Mid-Cap Growth Fund 992,810 232,881 1,225,691
Micro-Cap Growth Fund N/A N/A N/A
Small-Cap Growth Fund N/A N/A N/A
Enhanced Equity Fund N/A N/A N/A
Emerging Markets Fund N/A N/A N/A
International Developed Fund N/A N/A N/A
Balanced Fund 89,883 21,084 110,967
Renaissance Fund 3,473,716 814,822 4,288,538
Growth Fund 15,059,309 3,532,431 18,591,740
Target Fund 6,893,774 1,617,058 8,510,832
Opportunity Fund 2,852,522 669,110 3,521,632
Innovation Fund 2,786,733 653,678 3,440,411
International Fund 877,399 205,810 1,083,209
International Growth Fund N/A N/A N/A
Precious Metals Fund 108,257 25,394 133,650
Tax Exempt Fund N/A N/A N/A
Value 25 Fund 4,034 946 4,980
Tax-Efficient Equity Fund 40,779 9,566 50,345
Structured Emerging Markets Fund N/A N/A N/A
Tax-Efficient Structured Emerging Markets Fund N/A N/A N/A
60/40 Portfolio 24,034 5,637 29,671
70/30 Portfolio 13,280 3,115 16,395
90/10 Portfolio 21,534 5,051 26,585
</TABLE>
The Trust did not offer Class C shares in fiscal years prior to the fiscal
year ended June 30, 1997. For the fiscal year ended September 30, 1996, PAF
paid the Distributor an aggregate of $41,704,155 pursuant to a Distribution and
Servicing Plan applicable to the Class C shares of PAF (the "PAF Class C Plan"),
which is similar to the Class C Plan of the Trust. Such payments were allocated
among the predecessors of the following Funds (each of which was formerly a
series of PAF Fund which reorganized as a series of the Trust on January 17,
1997) as follows:
<TABLE>
<CAPTION>
Year Ended
Sept. 30, 1996
--------------
<S> <C>
Renaissance Fund $ 1,965,449
Growth Fund 13,593,775
Target Fund 8,684,223
Opportunity Fund 7,455,633
Innovation Fund 899,377
International Fund 1,858,512
Precious Metals Fund 430,849
Tax Exempt Fund 499,738
</TABLE>
The remainder of the total payments made under the PAF Class C Plan for
such fiscal years was allocated among other series of PAF which either merged
with Funds of the Trust or merged with/reorganized as series of PIMS, an
affiliated mutual fund family, in transactions which took place on January 17,
1997.
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
Portfolios, and in connection with the servicing of Class A, Class B and Class C
shareholders of the Funds and Portfolios and the maintenance of Class A, Class B
and Class C shareholder
-61-
<PAGE>
accounts, may exceed the distribution and/or servicing fees collected by the
Distributor. As noted above, Class A, Class B and Class C Distribution and
Servicing Plans, which are similar to the Trust's current Retail Plans, were in
effect prior to January 17, 1997 in respect of series of PAF that were
predecessors of certain of the Funds listed below. The remaining Funds and the
Portfolios did not offer Class A, Class B or Class C shares prior to January 17,
1997. As of June 30, 1999, such expenses were approximately $18,240,00 in excess
of payments under the Class A Plan, $29,500,00 in excess of payments under the
Class B Plan and $2,068,00 in excess of payments under the Class C Plan.
The allocation of such excess (on a pro rata basis) among the Funds and
Portfolios listed below as of June 30, 1999 was as follows:
<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Balanced Fund $ 45,000 $ 398,000 $ 59,000
Capital Appreciation Fund 617,000 1,471,000 125,000
Emerging Markets Fund (3,000) 25,000 9,000
Equity Income Fund 116,000 579,000 118,000
Growth Fund 6,987,000 4,479,000 (4,815,000)
Innovation Fund 728,000 7,949,000 1,820,000
International Developed Fund 33,000 76,000 (2,000)
International Fund 641,000 368,000 1,541,000
Mid-Cap Growth Fund 1,242,000 2,468,000 340,000
Small-Cap Growth Fund N/A N/A N/A
Opportunity Fund 2,772,000 3,000 (5,601,000)
Precious Metals Fund 98,000 333,000 186,000
Renaissance Fund 1,095,000 3,832,000 1,279,000
Small-Cap Value Fund 652,000 3,845,000 389,000
Target Fund 3,041,000 2,590,000 6,109,000
Value Fund 170,000 733,000 352,000
Value 25 Fund (1,000) 16,000 3,000
Tax-Efficient Equity Fund 14,000 154,000 34,000
60/40 Portfolio (1,000) 91,000 57,000
70/30 Portfolio (2,000) 41,000 35,000
90/10 Portfolio (4,000) 49,000 30,000
</TABLE>
The allocation of such excess (on a pro rata basis) among the Funds and
Portfolios, calculated as a percentage of net assets of each Fund listed below
as of June 30, 1999, was as follows:
<TABLE>
<CAPTION>
Fund Class A Class B Class C
- ---- ------- ------- -------
<S> <C> <C> <C>
Balanced Fund 0.46% 3.23% 0.45%
Capital Appreciation Fund 0.68 2.67 0.15
Emerging Markets Fund N/A N/A N/A
Equity Income Fund 0.67 2.66 0.45
Growth Fund 3.07 3.35 -0.23
Innovation Fund 0.23 2.26 0.31
International Developed Fund N/A N/A N/A
International Fund 3.40 3.88 1.52
Mid-Cap Growth Fund 1.00 2.91 0.30
Small-Cap Growth Fund N/A N/A N/A
Opportunity Fund 2.28 1.20 -1.81
Precious Metals Fund 1.25 8.49 1.62
Renaissance Fund 1.21 3.03 0.29
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
Small-Cap Value Fund 0.61 3.96 0.34
Target Fund 1.79 3.29 0.67
Value Fund 0.76 2.02 0.44
Value 25 Fund -0.35 1.90 0.36
Tax-Efficient Equity Fund 0.21 2.42 0.32
60/40 Portfolio -0.05 2.49 0.58
70/30 Portfolio -0.49 2.36 0.70
90/10 Portfolio -0.62 2.55 0.38
</TABLE>
Distribution and Administrative Services Plans for Administrative Class Shares
The Trust has adopted an Administrative Services Plan with respect to the
Administrative Class shares of each Fund and Portfolio. The Trust also has
adopted an Administrative Distribution Plan (together with the Administrative
Services Plan, the "Administrative Plans") with respect to the Administrative
Class shares of each Fund and Portfolio except the Capital Appreciation and
Small-Cap Growth Funds, which are not subject to such Administrative
Distribution Plan.
Under the terms of the Administrative Distribution Plan, the Trust is
permitted to reimburse, out of the assets attributable to the Administrative
Class shares of each applicable Fund or Portfolio, in an amount up to 0.25% on
an annual basis of the average daily net assets of that class, financial
intermediaries for costs and expenses incurred in connection with the
distribution and marketing of Administrative Class shares and/or the provision
of certain shareholder services to its customers that invest in Administrative
Class shares of the Funds or Portfolios. Such services may include, but are not
limited to, the following: providing facilities to answer questions from
prospective investors about a Fund or Portfolio; receiving and answering
correspondence, including requests for prospectuses and statements of additional
information; preparing, printing and delivering prospectuses and shareholder
reports to prospective shareholders; complying with federal and state securities
laws pertaining to the sale of Administrative Class shares; and assisting
investors in completing application forms and selecting dividend and other
account options.
Under the terms of the Administrative Services Plan, the Trust is permitted
to reimburse, out of the assets attributable to the Administrative Class shares
of each Fund or Portfolio, in an amount up to 0.25% on an annual basis of the
average daily net assets of that class, financial intermediaries that provide
certain administrative services for Administrative Class shareholders. Such
services may include, but are not limited to, the following: receiving,
aggregating and processing shareholder orders; furnishing shareholder sub-
accounting; providing and maintaining elective shareholder services such as
check writing and wire transfer services; providing and maintaining pre-
authorized investment plans; communicating periodically with shareholders;
acting as the sole shareholder of record and nominee for shareholders;
maintaining accounting records for shareholders; answering questions and
handling correspondence from shareholders about their accounts; and performing
similar account administrative services.
The same entity may be the recipient of fees under both the Administrative
Distribution Plan and the Administrative Services Plan, but may not receive fees
under both plans with respect to the same assets. Fees paid pursuant to either
Plan may be paid for shareholder services and the maintenance of shareholder
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 Administrative Distribution Plan.
Each Administrative Plan provides that it may not be amended to increase
materially the costs which Administrative Class shareholders may bear under the
Plan without the approval of a majority of the outstanding voting securities of
the Administrative Class, and by vote of a majority of both (i) the Trustees of
the Trust and (ii) those Trustees ("disinterested Administrative Plan Trustees")
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
who have no direct or indirect financial interest in the operation of the Plan
or any agreements related to it, cast in person at a meeting called for the
purpose of voting on the Plan and any related amendments.
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<PAGE>
Each Administrative Plan provides that it may not take effect until
approved by vote of a majority of both (i) the Trustees of the Trust and (ii)
the disinterested Administrative Plan Trustees. The Administrative Distribution
Plan further provides that it may not take effect unless approved by the vote of
a majority of the outstanding voting securities of the Administrative Class.
Each Administrative Plan provides that it shall continue in effect so long
as such continuance is specifically approved at least annually by the Trustees
and the disinterested Administrative Plan Trustees. Each Administrative Plan
provides that any person authorized to direct the disposition of monies paid or
payable by a class pursuant to the Plan or any related agreement shall provide
to the Trustees, and the Board shall review at least quarterly, a written report
of the amounts so expended and the purposes for which such expenditures were
made.
Each Administrative Plan is a "reimbursement plan," which means that fees
are payable to the relevant financial intermediary only to the extent necessary
to reimburse expenses incurred pursuant to such plan. Each Administrative Plan
provides that expenses payable under the Plan may be carried forward for
reimbursement for up to twelve months beyond the date in which the expense is
incurred, subject to the limit that not more than 0.25% of the average daily net
assets of Administrative Class shares may be used in any month to pay expenses
under the Plan. Each Administrative Plan requires that Administrative Class
shares incur no interest or carrying charges.
Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that some, if not
all, of the fees paid pursuant to both Administrative Plans will qualify as
"service fees" and therefore will not be limited by NASD rules.
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 and/or distribution fees paid with respect to Administrative
Class shares. Service agents may impose additional or different conditions than
the Trust on the purchase, redemption or exchanges of Trust shares by their
customers. Service agents may also independently establish and charge their
customers transaction fees, account fees and other amounts in connection which
purchases, sales and redemption of Trust shares in addition to any fees charged
by the Trust. 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.
Payments Pursuant to the Administrative Plans
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the Trust paid qualified service providers an aggregate of $1,120,693, $502,216
and $132,422, respectively, pursuant to the Administrative Services Plan and the
Administrative Distribution Plan.
Of these aggregate totals, $602,519, $362,416 and $128,406, respectively,
were paid pursuant to the Administrative Services Plan and/or the Administrative
Distribution Plan for the Funds and Portfolios listed below and were allocated
among the operational Funds and Portfolios as Follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- -------- -------- --------
<S> <C> <C> <C>
Equity Income Fund $ 29,362 $ 25,885 $ 16,938
Value Fund 39,528 11,304 0
Small-Cap Value Fund 40,618 22,930 12,276
Core Equity Fund 176,827 211,557 79,366
Mid-Cap Equity Fund 7,757 1,846 0
Mid-Cap Growth Fund 234,913 64,116 4,723
Micro-Cap Growth Fund 7,665 8,918 1,898
Enhanced Equity Fund 41,681 9,207 0
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
International Developed Fund N/A 6,653 13,205
Renaissance Fund 507 N/A N/A
Growth Fund 1,939 N/A N/A
Target Fund 1,725 N/A N/A
Opportunity Fund 633 N/A N/A
International Fund 17,126 N/A N/A
Tax-Efficient Equity Fund 2,213 N/A N/A
60/40 Portfolio 9 N/A N/A
70/30 Portfolio 9 N/A N/A
90/10 Portfolio 9 N/A N/A
</TABLE>
The additional portions of the aggregate totals, $518,174, $139,800 and
$4,016, respectively, were paid pursuant to the Administrative Services Plan
only for the Capital Appreciation, Emerging Markets and Small-Cap Growth Funds,
and were allocated among these Funds as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 06/30/99 06/30/98 06/30/97
- ---- -------- -------- --------
<S> <C> <C> <C>
Capital Appreciation Fund $ 514,736 $ 137,462 $ 3,297
Emerging Markets Fund N/A 1,802 582
Small-Cap Growth Fund 3,438 536 137
</TABLE>
The remaining Funds did not make payments under either Administrative Plan.
The Administrative Plans were not in effect in prior fiscal years.
Plan for Class D Shares
As described above under "Management of the Trust - Fund Administrator,"
the Trust's Administration Agreement includes a plan (the "Class D Plan")
adopted in conformity with Rule 12b-1 under the 1940 Act which provides for the
payment of up to .25% of the Class D administrative fees as reimbursement for
expenses in respect of activities that may be deemed to be primarily intended to
result in the sale of Class D shares.
Specifically, the Administration Agreement provides that the Administrator
shall provide in respect of Class D shares (either directly or by procuring
through other entities, including various financial services firms such as
broker-dealers and registered investment advisers ("Service Organizations"))
some or all of the following services and facilities in connection with direct
purchases by shareholders or in connection with products, programs or accounts
offered by such Service Organizations ("Special Class D Services"): (i)
facilities for placing orders directly for the purchase of a Fund's Class D
shares and tendering a Fund's Class D shares for redemption; (ii) advertising
with respect to a Fund's Class D shares; (iii) providing information about the
Funds; (iv) providing facilities to answer questions from prospective investors
about the Funds; (v) receiving and answering correspondence, including requests
for prospectuses and statements of additional information; (vi) preparing,
printing and delivering prospectuses and shareholder reports to prospective
shareholders; (vii) assisting investors in applying to purchase Class D shares
and selecting dividend and other account options; and (viii) shareholder
services provided by a Service Organization that may include, but are not
limited to, the following functions: receiving, aggregating and processing
shareholder orders; furnishing shareholder sub-accounting; providing and
maintaining elective shareholder services such as check writing and wire
transfer services; providing and maintaining pre-authorized investment plans;
communicating periodically with shareholders; acting as the sole shareholder of
record and nominee for shareholders; maintaining accounting records for
shareholders; answering questions and handling correspondence from shareholders
about their accounts; issuing confirmations for transactions by shareholders;
performing similar account administrative services; providing such shareholder
communications and recordkeeping services as may be required for any program for
which the Service Organization is a sponsor that relies on Rule 3a-4 under the
1940 Act; and providing such other similar services as may reasonably be
requested to the extent the Service Organization is permitted to do so under
applicable statutes, rules, or regulations.
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<PAGE>
The Administrator has entered into an agreement with the Distributor under
which the Distributor is compensated for providing or procuring certain of the
Special Class D Services at the rate of 0.25% per annum of all assets
attributable to Class D shares sold through the Distributor.
The Trust and the Administrator understand that some or all of the Special
Class D Services provided pursuant to the Administration Agreement may be deemed
to represent services primarily intended to result in the sale of Class D
shares. The Administration Agreement includes the Class D Plan to account for
this possibility. The Administration Agreement provides that any portion of the
fees paid thereunder in respect of Class D shares representing reimbursement for
the Administrator's and the Distributor's expenditures and internally allocated
expenses in respect of Class D Services of any Fund shall not exceed the rate of
0.25% per annum of the average daily net assets of such Fund attributable to
Class D shares.
In accordance with Rule 12b-1 under the 1940 Act, the Class D Plan may not
be amended to increase materially the costs which Class D shareholders may bear
under the Plan without the approval of a majority of the outstanding Class D
shares, and by vote of a majority of both (i) the Trustees of the Trust and (ii)
those Trustees ("disinterested Class D Plan Trustees") who are not "interested
persons" of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to it, cast in person at a meeting called for the purpose of voting on
the Plan and any related amendments. The Class D Plan may not take effect until
approved by vote of a majority of both (i) the Trustees of the Trust and (ii)
the disinterested Class D Plan Trustees. In addition, the Class D Plan may not
take effect unless it is approved by the vote of a majority of the outstanding
Class D shares and it shall continue in effect only so long as such continuance
is specifically approved at least annually by the Trustees and the disinterested
Class D Plan Trustees.
With respect to the Class D Plan, the Administration Agreement requires the
Administrator to present reports as to out-of-pocket expenditures and internal
expense allocations of the Administrator and the Distributor at least quarterly
and in a manner that permits the disinterested Class D Plan Trustees to
determine that portion of the Class D administrative fees paid thereunder which
represents reimbursements in respect of Special Class D Services.
Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that most, if not
all, of the fees paid pursuant to the Class D Plan will qualify as "service
fees" and therefore will not be limited by NASD rules.
For the fiscal years ended June 30, 1999 and June 30, 1998, the Trust paid
qualified service providers an aggregate of $22,580 and $353, respectively,
pursuant to the Class D Plan. Such payments were allocated among the Funds as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
Fund 6/30/99 6/30/98
- ---- -------- --------
<S> <C> <C>
Capital Appreciation Fund $ 581 $ 56
Mid-Cap Growth Fund 606 63
Equity Income Fund 325 56
Renaissance Fund 309 63
Value Fund 252 53
Tax-Efficient Equity Fund 1,843 N/A
Innovation Fund 18,664 61
</TABLE>
The Portfolios do not offer Class D shares.
Purchases, Exchanges and Redemptions
Purchases, exchanges and redemptions of the Trust's shares are discussed in
the Class A, B and C Prospectus, the Class D Prospectus and the Retail Portfolio
Prospectus under the headings "How to Buy Shares,"
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<PAGE>
"Exchange Privilege," and "How to Redeem," and in the Institutional Prospectus
and the Institutional Portfolio Prospectus under the headings "Purchase of
Shares," "Redemption of Shares," and "Net Asset Value."
Certain clients of the Adviser or a Sub-Adviser whose assets would be
eligible for purchase by one or more of the Funds may purchase shares of the
Trust with such assets. Assets so purchased by a Fund will be valued in
accordance with procedures adopted by the Board of Trustees.
One or more classes of shares of the Funds and Portfolios may not be
qualified or registered for sale in all States. Prospective investors should
inquire as to whether shares of a particular Fund or Portfolio, or class of
shares thereof, are available for offer and sale in their State of domicile or
residence. Shares of a Fund or Portfolio may not be offered or sold in any
State unless registered or qualified in that jurisdiction, unless an exemption
from registration or qualification is available.
As described in the Class A, B and C Prospectus, the Class D Prospectus and
the Retail Portfolio Prospectus under the caption "Exchange Privilege," and in
the Institutional Prospectus and the Institutional Portfolio Prospectus under
the caption "Redemption of Shares," a shareholder may exchange shares of any
Fund or Portfolio for shares of the same class of any other Fund or Portfolio of
the Trust that is available for investment, or any series of PIMS, on the basis
of their respective net asset values. The original purchase date(s) of shares
exchanged for purposes of calculating any contingent deferred sales charge will
carry over to the investment in the new Fund or Portfolio. For example, if a
shareholder invests in Class C shares of one Fund and 6 months later (when the
contingent deferred sales charge upon redemption would normally be 1%) exchanges
his shares for Class C shares of another Fund, no sales charge would be imposed
upon the exchange, but the investment in the other Fund would be subject to the
1% contingent deferred sales charge until one year after the date of the
shareholder's investment in the first Fund as described in the Class A, B and C
Prospectus and the Retail Portfolio Prospectus under "Alternative Purchase
Arrangements." With respect to Class B or Class C shares, or Class A shares
subject to a contingent deferred sales charge, if less than all of an investment
is exchanged, any portion of the investment attributable to capital appreciation
and/or reinvested dividends or capital gains distributions will be exchanged
first, and thereafter any portions exchanged will be from the earliest
investment made in the Fund or Portfolio from which the exchange was made. For
federal income tax purposes, an exchange is treated as a sale of shares and
generally results in a capital gain or loss.
Orders for exchanges accepted prior to the close of regular trading on the
New York Stock Exchange on any day the Trust is open for business will be
executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of regular
trading on the New York Stock Exchange on any business day will be executed at
the respective net asset values determined at the close of the next business
day.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12 month
period or in any calendar year. For example, the Trust currently 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 or
Portfolio, subsequently exchanges those shares for shares of a different Fund or
Portfolio and then exchanges back into the originally purchased Fund or
Portfolio. 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 or Portfolio) more than six round trip exchanges in any twelve-
month period. Although the Trust has no current intention of terminating or
modifying the exchange privilege other than as set forth in the preceding
sentence, it reserves the right to do so as described in the Prospectus.
The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of a Fund or
Portfolio not reasonably practicable.
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<PAGE>
The Trust is committed to paying in cash all requests for redemptions by
any shareholder of record of the Funds and Portfolios, limited in amount with
respect to each shareholder during any 90-day period to the lesser of (i)
$250,000, or (ii) 1% of the net asset value of the Trust at the beginning of
such period. Although the Trust will normally redeem all shares for cash, it may
redeem amounts in excess of the lesser of (i) or (ii) above by payment in kind
of securities held by the particular Fund or Portfolio.
Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to shareholder
redemption, the shares in the account do not have a value of at least a
specified amount, the minimums of which are currently set at $250 for Class A,
Class B and Class C shares, $2,000 for Class D shares, and $100,000 with respect
to Institutional Class and Administrative Class shares. The Prospectuses may
set forth higher minimum account balances for one or more classes from time to
time depending upon the Trust's current policy. An investor will be notified
that the value of the account is less than the minimum and allowed at least 30
days to bring the value of the account up to at least the specified amount
before the redemption is processed. The Trust's Agreement and Declaration of
Trust, as amended and restated (the "Declaration of Trust"), also authorizes the
Trust to redeem shares under certain other circumstances as may be specified by
the Board of Trustees. The Funds and Portfolios may also charge periodic
account fees for accounts that fall below minimum balances as described in the
Prospectuses.
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 (a "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 Sub-Adviser. 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 Sub-Adviser'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 "Parametric 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" and, 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
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<PAGE>
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 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 Parametric 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 Parametric
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 Parametric 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 Parametric 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 Parametric 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 "Tax Consequences"
in the Institutional Prospectus and "Taxation--Distributions" below.
In connection with the Parametric 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.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment Decisions and Portfolio Transactions
Investment decisions for the Trust and for the other investment advisory
clients of the Adviser and Sub-Advisers are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved
(including the Trust). Some securities considered for investment by the Funds
may also be appropriate for other clients served by the Adviser or a Sub-
Adviser. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. If a purchase or sale of securities consistent with the investment
policies of a Fund and one or more of these clients 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 Adviser or Sub-
Adviser. 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 the Adviser or a Sub-
Adviser pursuing a small capitalization investment strategy, which could
adversely affect performance. The Adviser or a Sub-Adviser 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. Likewise, a particular security may be
bought for one or more clients when one or more clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in the Adviser's or the Sub-
Adviser's opinion is equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when purchases or sales
of portfolio securities for one or more clients will have an adverse effect on
other clients.
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Brokerage and Research Services
There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price paid
by the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Trust of negotiated brokerage commissions. Such commissions vary among
different brokers. Also, a particular broker may charge different commissions
according to such factors as the difficulty and size of the transaction.
Transactions in foreign securities generally involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States.
The Adviser and/or each Sub-Adviser places orders for the purchase and sale
of portfolio securities, options and futures contracts and buys and sells such
securities, options and futures for the Trust through a substantial number of
brokers and dealers. In so doing, the Adviser or Sub-Adviser uses its best
efforts to obtain for the Trust the most favorable price and execution
available, except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable price and
execution, the Adviser or Sub-Adviser, having in mind the Trust's best
interests, considers all factors it deems relevant, including, by way of
illustration, price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the transaction taking
into account market prices and trends, the reputation, experience and financial
stability of the broker-dealer involved and the quality of service rendered by
the broker-dealer in other transactions. Because the Portfolios invest
exclusively in Institutional Class shares of Underlying PIMCO Funds, they
generally do not pay brokerage commissions and related costs, but do indirectly
bear a proportionate share of these costs incurred by the Underlying PIMCO Funds
in which they invest.
For the fiscal years ended June 30, 1999, June 30, 1998 and June 30, 1997,
the following amounts of brokerage commissions were paid by the Funds and
Portfolios:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
Fund 6/30/99 6/30/98 6/30/97
- ---- ------- ------- -------
<S> <C> <C> <C>
Equity Income Fund $ 370,906 $ 239,458 $ 161,012
Value Fund 590,816 437,002 203,403
Small-Cap Value Fund 973,236 810,211 146,551
Capital Appreciation Fund 2,099,694 1,384,393 889,931
Mid-Cap Growth Fund 1,648,830 1,115,609 634,436
Micro-Cap Growth Fund 381,825 237,969 315,009
Small-Cap Growth Fund 149,013 71,734 113,103
Enhanced Equity Fund 34,926 61,193 196,460
Emerging Markets Fund 94,539 238,241 591,312
International Developed Fund 266,609 326,193 498,041
Balanced Fund 108,337 91,788 197,598
Core Equity Fund 154,017 219,194 114,173
Mid-Cap Equity Fund 53,303 44,404 31,940
Renaissance Fund* 4,009,076 2,539,296 717,040
Growth Fund* 4,502,200 4,154,740 2,632,126
Target Fund* 3,661,375 5,577,623 2,584,198
Opportunity Fund* 1,778,867 1,345,809 1,187,818
Innovation Fund* 782,662 412,457 224,529
International Fund* 556,950 785,827 748,412
International Growth Fund** 77,095 26,179 N/A
Precious Metals Fund* 105,266 98,635 81,251
Tax Exempt Fund* N/A N/A 0
</TABLE>
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<TABLE>
<S> <C> <C> <C>
Value 25 Fund 15,802 N/A N/A
Tax-Efficient Equity Fund 28,136 N/A N/A
Structured Emerging Markets Fund 85,087 N/A N/A
Tax-Efficient Structured Emerging Markets Fund 153,831 N/A N/A
60/40 Portfolio 1,646 N/A N/A
70/30 Portfolio 348 N/A N/A
90/10 Portfolio 65 N/A N/A
----------- ----------- -----------
TOTAL $22,694,457 $20,217,955 $12,268,343
</TABLE>
__________________
*Amounts for the year ending June 30, 1997 are for the period 1/18/97 through
6/30/97.
**Amounts for the year ended June 30, 1998 are for the period from 12/31/97
through 6/30/98.
For the fiscal period ended January 17, 1997 and the fiscal year ended
September 30, 1996, the following amounts of brokerage commissions were paid by
the predecessors of the Funds listed below (each of which was a series of PAF
during such periods and reorganized as a Fund of the Trust on January 17, 1997):
<TABLE>
10/1/96 YEAR
TO ENDED
FUND 1/17/97 9/30/96
- ---- ------- -------
<S> <C> <C>
Renaissance Fund $ 363,501 $ 993,617
Growth Fund 1,064,573 2,985,777
Target Fund 1,375,601 3,080,238
Opportunity Fund 505,221 1,757,263
Innovation Fund 105,556 228,473
International Fund 393,808 1,530,476
Precious Metals Fund 53,096 79,838
Tax Exempt Fund 0 0
---------- -----------
TOTAL $3,861,356 $10,655,682
</TABLE>
The Adviser or, pursuant to the portfolio management agreements, a Sub-
Adviser, 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 Adviser and the Sub-Advisers 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 Adviser or Sub-Adviser 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, as discussed below. The Adviser and
Sub-Advisers 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.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
the Adviser and Sub-Advisers receive research services from many broker-dealers
with which the Adviser and Sub-Advisers place the Trust's portfolio
transactions. These services, which in some cases may also be purchased for
cash, include such matters as general economic and security market reviews,
industry and company reviews, evaluations of securities and recommendations as
to the purchase and sale of securities. Some of these services are of value to
the Adviser and Sub-Advisers in advising various of their clients (including the
Trust), although not all of these services are necessarily useful and of value
in managing the Trust. The advisory fees paid by the Trust are not reduced
because the Adviser and Sub-Advisers receive such services.
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In reliance on the "safe harbor" provided by Section 28(e) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Adviser and
Sub-Advisers may cause the Trust to pay broker-dealers which provide them with
"brokerage and research services" (as defined in the 1934 Act) an amount of
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
Consistent with the Rules of the NASD and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, the Adviser or Sub-Advisers may also consider sales of shares of
the Trust as a factor in the selection of broker-dealers to execute portfolio
transactions for the Trust.
The Adviser or a Sub-Adviser may place orders for the purchase and sale of
exchange-listed portfolio securities with a broker-dealer that is an affiliate
of the Adviser or Sub-Adviser where, in the judgment of the Adviser or Sub-
Adviser, such firm will be able to obtain a price and execution at least as
favorable as other qualified broker-dealers.
Pursuant to rules of the SEC, a broker-dealer that is an affiliate of the
Adviser or a Sub-Adviser may receive and retain compensation for effecting
portfolio transactions for a Fund on a national securities exchange of which the
broker-dealer is a member if the transaction is "executed" on the floor of the
exchange by another broker which is not an "associated person" of the affiliated
broker-dealer, and if there is in effect a written contract between the Adviser
or Sub-Adviser and the Trust expressly permitting the affiliated broker-dealer
to receive and retain such compensation.
SEC rules further require that commissions paid to such an affiliated
broker-dealer, the Adviser, or Sub-Adviser by a Fund on exchange transactions
not exceed "usual and customary brokerage commissions." The rules define "usual
and customary" commissions to include amounts which are "reasonable and fair
compared to the commission, fee or other remuneration received or to be received
by other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a comparable
period of time."
Portfolio Turnover
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 Sub-Advisers 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. Trading in fixed income
securities does not generally involve the payment of brokerage commissions, but
does involve indirect transaction costs. The use of futures contracts may
involve the payment of commissions to futures commission merchants. High
portfolio turnover (e.g., greater than 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. The higher the rate of portfolio turnover of a Fund, the higher
these transaction costs borne by the Fund generally will be. Such sales may
result in realization of taxable capital gains (including short-term capital
gains which are generally taxed to shareholders at ordinary income tax rates).
To the extent portfolio turnover results in the realization of net short-term
capital gains, such gains are generally taxed to shareholders at ordinary income
tax rates. See "Taxation."
The portfolio turnover rate of a Fund or Portfolio is calculated by
dividing (a) the lesser of purchases or sales of portfolio securities for the
particular fiscal year by (b) the monthly average of the value of the portfolio
securities owned by the Fund or Portfolio during the particular fiscal year. In
calculating the rate of portfolio turnover, there is excluded from both (a) and
(b) all securities, including options, whose maturities or expiration dates at
the time of acquisition were one year or less. Proceeds from short sales and
assets used to cover short positions undertaken are included in the amounts of
securities sold and purchased, respectively, during the year.
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Because the Adviser does not expect to reallocate the Portfolio's assets
among the Underlying Funds on a frequent 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 expenses
associated with the portfolio turnover of the Underlying Funds, a number of
which have high (i.e., greater than 100%) portfolio turnover rates.
Portfolio turnover rates for each Fund for which financial highlights for
at least the past two fiscal years are available and are provided in the
Prospectuses under "Financial Highlights" in the applicable Prospectus. The
annual portfolio turnover rate for each of the Tax-Efficient Equity and Tax-
Efficient Structured Emerging Markets Funds is expected to be less than 40%. The
annual portfolio turnover rate for each of 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%. The annual portfolio turnover rate for
the Mega-Cap Fund is expected to be approximately 70%.
In connection with the change in Sub-Advisers of the Growth, Target,
Opportunity, Innovation, Renaissance Core Equity, Mid-Cap Equity, and
International Growth Funds, these Funds may experience increased turnover due to
the differences, if any, between the portfolio management strategies of Columbus
Circle and PIMCO Equity Advisors. See "Management of the Trust--Portfolio
Management Agreements."
NET ASSET VALUE
As indicated in the Prospectuses under the heading "How Fund Shares are
Priced," the net asset value ("NAV") of a class of a Fund's shares is determined
by dividing the total value of a Fund's portfolio investments and other assets
attributable to that class, less any liabilities, by the total number of shares
outstanding of that class.
For purposes of calculating the NAV, portfolio securities and other assets
for which market quotes are available are stated at market value. Market value
is generally determined on the basis of last reported sales prices, or if no
sales are reported, based on quotes obtained from a quotation reporting system,
established market makers, or pricing services. Certain securities or
investments for which daily market quotes are not readily available may be
valued, pursuant to guidelines established by the Board of Trustees, with
reference to other securities or indices. Short-term investments having a
maturity of 60 days or less are generally valued at amortized cost. Exchange
traded options, futures and options on futures are valued at the settlement
price determined by the exchange. Other securities for which market quotes are
not readily available are valued at fair value as determined in good faith by
the Board of Trustees or persons acting at their direction.
Investments initially valued in foreign currencies are converted to U.S.
dollars using foreign exchange rates obtained from pricing services. As a
result, the NAV of a Fund's shares may be affected by changes in the value of
foreign currencies in relation to the U.S. dollar. The value of securities
traded in foreign markets or denominated in foreign currencies may be affected
significantly on a day that the New York Stock Exchange is closed and an
investor is not able to buy, redeem or exchange shares. In particular,
calculation of the NAV of the International Growth, Structured Emerging Markets,
Tax-Efficient Structured Emerging Markets and International Funds may not take
place contemporaneously with the determination of the prices of foreign
securities used in NAV calculations.
Fund shares are valued at the close of regular trading (normally 4:00 p.m.,
Eastern time) (the "NYSE Close") on each day that the New York Stock Exchange is
open. For purposes of calculating the NAV, the Funds normally use pricing data
for domestic equity securities received shortly after the NYSE Close and do not
normally take into account trading, clearances or settlements that take place
after the NYSE Close. Domestic fixed income and foreign securities are normally
priced using data reflecting the earlier closing of the principal markets for
those securities. Information that becomes known to the Funds or their agents
after the NAV has been calculated on a particular day will not generally be used
to retroactively adjust the price of the security or the NAV determined earlier
that day.
In unusual circumstances, instead of valuing securities in the usual
manner, the Funds may value securities at fair value or estimate their value as
determined in good faith by the Board of Trustees, generally based upon
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<PAGE>
recommendations provided by PIMCO Advisors or the relevant Sub-Adviser. Fair
valuation may also be used by the Board of Trustees if extraordinary events
occur after the close of the relevant market but prior to the NYSE Close.
Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or servicing
fees and any other expenses specially allocated to that class are then deducted
from the class's proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class to
produce the class's "net asset value" per share. Under certain circumstances,
the per share net asset value of classes of shares of the Funds and Portfolios
with higher service and/or distribution fees applicable to such shares may be
lower than the per share net asset value of the classes of shares with lower or
no service and/or distribution fees as a result of the higher daily expense
accruals of the service and/or distribution fees applicable to such classes.
Generally, for Funds and Portfolios 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 or Portfolio's classes.
The Trust expects that the holidays upon which the Exchange will be closed
are as follows: New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
TAXATION
The following discussion is general in nature and should not be regarded as
an exhaustive presentation of all possible tax ramifications. All shareholders
should consult a qualified tax adviser regarding their investment in a Fund or
Portfolio.
Each Fund and Portfolio intends to qualify annually and elect to be treated
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). To qualify as a regulated investment
company, each Fund and Portfolio generally must, among other things, (a) derive
in each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including but not limited to gains from options, futures or forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies ("Qualifying Income Test") and (b) diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the value of
the Fund's or Portfolio's total assets is represented by cash, cash items
(including receivables), U.S. Government securities, securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's or Portfolio's total assets and 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities (other than U.S.
Government securities or the securities of other regulated investment companies)
of any one issuer or of two or more issuers which the Fund or Portfolio controls
and which are engaged in the same, similar or related trades or businesses. In
order to qualify for the special tax treatment accorded regulated investment
companies, each Fund and Portfolio must distribute each taxable year an amount
at least equal to the sum of (i) 90% of its investment company taxable income
(which includes dividends, interest and net short-term capital gains in excess
of any net long-term capital losses) and (ii) 90% of its tax exempt interest,
net of expenses allocable thereto. In addition, the Treasury Department is
authorized to promulgate regulations under which gains from foreign currencies
(and options, futures, and forward contracts on foreign currency) would not
constitute qualifying income for purposes of the Qualifying Income Test if such
gains are not directly related to investing in securities (or options and
futures with respect to stock or securities). To date, such regulations have not
been issued.
In years when a Fund or Portfolio distributes amounts in excess of its
earnings and profits, such distributions may be treated in part as a return of
capital. A return of capital is not taxable to a shareholder and has the effect
of reducing the shareholder's basis in the shares.
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<PAGE>
The proper tax treatment of income or loss realized by the Precious Metals
Fund from the retirement or sale of a Metal-Indexed Note is unclear. The
Precious Metals Fund will report such income or loss as capital or ordinary
income or loss in a manner consistent with any Internal Revenue Service position
on the subject following the publication of such a position. Gain or loss from
the sale or exchange of preferred stock indexed to the price of a natural
resource is expected to be capital gain or loss to the Precious Metals Fund.
Distributions
As a regulated investment company, each Fund and Portfolio generally will
not be subject to U.S. federal income tax on its investment company taxable
income and net capital gains (that is, any net long-term capital gains in excess
of the sum of net short-term capital losses and capital loss carryovers from
prior years) designated by the Fund or Portfolio as capital gain dividends, if
any, that it distributes to shareholders on a timely basis. Each Fund and
Portfolio intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and any net capital
gains. In addition, amounts not distributed by a Fund or Portfolio on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax. To avoid the tax, each Fund and Portfolio must
distribute during each calendar year an amount at least equal to the sum of (1)
98% of its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) 98% of its capital gains in excess of its capital
losses (and adjusted for certain ordinary losses) for the twelve month period
ending on October 31 of the calendar year, and (3) all ordinary income and
capital gains for previous years that were not distributed during such years. A
distribution will be treated as paid on December 31 of the calendar year if it
is declared by a Fund or Portfolio in October, November or December of that year
to shareholders of record on a date in such a month and paid by the Fund or
Portfolio during January of the following year.
Shareholders subject to U.S. federal income tax will be subject to tax on
dividends received from a Fund or Portfolio, regardless of whether received in
cash or reinvested in additional shares. Such distributions will be taxable to
shareholders (other than those not subject to federal income tax) in the
calendar year in which the distributions are declared, rather than the calendar
year in which the distributions are received. To avoid application of the excise
tax, each Fund and Portfolio intends to make its distributions in accordance
with the calendar year distribution requirement.
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, if any, 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, if
any, 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 Equity and Tax-
Efficient Structured Emerging Markets 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 are taxable to shareholders (generally subject to a 20%
tax rate for shareholders who are individuals) except as provided by an
applicable tax exemption. Any distributions that are not from a Fund's net
investment income or net capital gains may be characterized as a return of
capital to shareholders or, in some cases, as capital gain. Each Fund will
advise shareholders annually of the amount and nature of the dividends paid to
them.
The tax status of each Fund and Portfolio and the distributions which it
may make are summarized in the Class A, B and C Prospectus, the Class D
Prospectus and the Retail Portfolio Prospectus under the captions
"Distributions" and "Taxes", and in the Institutional Prospectus and
Institutional Portfolio Prospectus under the caption "Dividends, Distributions
and Taxes." All dividends and distributions of a Fund or Portfolio, whether
received in shares or cash, are taxable and must be reported on each
shareholder's federal income tax return.
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A portion of the dividends paid by Funds that invest in stock of U.S.
corporations may qualify for the deduction for dividends received by
corporations (subject generally to a 46-day holding period requirement).
Dividends paid by the other Funds generally are not expected to qualify for the
deduction for dividends received by corporations.
Distributions of net capital gains, if any, designated as capital gain
dividends, are taxable as long-term capital gains (generally subject to a 20%
tax rate for shareholders who are individuals), regardless of how long the
shareholder has held a Fund's or Portfolio's shares and are not eligible for the
dividends received deduction. Any distributions that are not from a Fund's
investment company taxable income or net capital gains may be characterized as a
return of capital to shareholders or, in some cases, as capital gain. The tax
treatment of dividends and distributions will be the same whether a shareholder
reinvests them in additional shares or elects to receive them in cash. A
Portfolio will not be able to offset gains realized by one Fund in which such
Portfolio invests against losses realized by another Fund in which such
Portfolio invests. A Portfolio's use of the fund-of-funds structure could
therefore affect the amount, timing and character of distributions to
shareholders. In addition, Funds that invest in other investment companies will
not be able to offset gains realized by one underlying investment company
against losses realized by another underlying investment company. A Fund's
investment in other investment companies could therefore affect the amount,
timing and character of distributions to shareholders of such Fund.
Taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. Dividends and distributions
on shares of a Fund or Portfolio are generally subject to federal income tax as
described herein to the extent they do not exceed the Fund's or Portfolio'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 net asset value of a Fund or Portfolio 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 or Portfolio's net asset value also
reflects unrealized losses.
Sales of Shares
Upon the disposition of shares of a Fund or Portfolio (whether by
redemption, sale or exchange), a shareholder will realize a gain or loss. Such
gain or loss will be capital gain or loss if the shares are capital assets in
the shareholder's hands, and will be long-term or short-term generally depending
upon the shareholder's holding period for the shares. Long-term capital gains
will generally be taxed at a federal income tax rate of 20% to shareholders who
are individuals. Any loss realized on a disposition will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a disposition of shares
held by the shareholder for six months or less will be treated as a long-term
capital loss to the extent of any distributions of capital gain dividends
received by the shareholder with respect to such shares. Depending on a
Portfolio's percentage ownership in an Underlying PIMCO Fund both before and
after a redemption, a Portfolio's redemption of shares of such Fund may cause
the Portfolio to be treated as not receiving capital gain income on the amount
by which the distribution exceeds the Portfolio's tax basis in the shares of the
Underlying PIMCO Fund, but instead to be treated as receiving a dividend taxable
as ordinary income on the full amount of the distribution. This could cause
shareholders of a Portfolio to recognize higher amounts of ordinary income than
if the shareholders had held the shares of the Underlying PIMCO Funds directly.
Backup Withholding
A Fund or Portfolio may be required to withhold 31% of all taxable
distributions payable to shareholders who fail to provide the Fund or Portfolio
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Corporate shareholders and certain
other shareholders specified in the Code generally are exempt from such backup
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<PAGE>
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's U.S. federal tax liability.
Options, Futures, Forward Contracts and Swap Agreements
To the extent such investments are permissible for a Fund, the Fund's
transactions in options, futures contracts, hedging transactions, forward
contracts, straddles and foreign currencies will be subject to special tax rules
(including mark-to-market, constructive sale, straddle, wash sale and short sale
rules), the effect of which may be to accelerate income to the Fund, defer
losses to the Fund, cause adjustments in the holding periods of the Fund's
securities, convert long-term capital gains into short-term capital gains and
convert short-term capital losses into long-term capital losses. These rules
could therefore affect the amount, timing and character of distributions to
shareholders, including the Portfolios.
Passive Foreign Investment Companies
Investment by a Fund in certain "passive foreign investment companies"
could subject the Fund to a U.S. federal income tax (including interest charges)
on distributions received from the company or on proceeds received from the
disposition of shares in the company, which tax cannot be eliminated by making
distributions to Fund shareholders. However, the Fund may elect to treat a
passive foreign investment company as a "qualified electing fund," in which case
the Fund will be required to include its share of the company's income and net
capital gains annually, regardless of whether it receives any distribution from
the company. The Fund also may make an election to mark the gains (and to a
limited extent losses) in such holdings "to the market" as though it had sold
and repurchased its holdings in those PFICs on the last day of the Fund's
taxable year. Such gains and losses are treated as ordinary income and loss. The
QEF and mark-to-market elections may have the effect of accelerating the
recognition of income (without the receipt of cash) and increase the amount
required to be distributed for the Fund to avoid taxation. Making either of
these elections therefore may require a Fund to liquidate other investments
(including when it is not advantageous to do so) to meet its distribution
requirement, which also may accelerate the recognition of gain and affect a
Fund's total return.
Foreign Currency Transactions
A Fund's transactions in foreign currencies, foreign currency-denominated
debt securities and certain foreign currency options, futures contracts and
forward contracts (and similar instruments) may give rise to ordinary income or
loss to the extent such income or loss results from fluctuations in the value of
the foreign currency concerned.
Foreign Taxation
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, the Adviser and each Sub-Adviser intends to manage the Funds
with the intention of minimizing foreign taxation in cases where it is deemed
prudent to do so. If more than 50% of the value of a Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, such
Fund will be eligible to elect to "pass-through" to the Fund's shareholders the
amount of eligible foreign income and similar taxes paid by the Fund. If this
election is made, a shareholder generally subject to tax will be required to
include in gross income (in addition to taxable dividends actually received) his
pro rata share of the foreign taxes paid by the Fund, and may be entitled either
to deduct (as an itemized deduction) his or her pro rata share of foreign taxes
in computing his taxable income or to use it as a foreign tax credit against his
or her U.S. federal income tax liability, subject to certain limitations. In
particular, shareholders must hold their shares (without protection from risk of
loss) on the ex-dividend date and for at least 15 more days during the 30-day
period surrounding the ex-dividend date to be eligible to claim a foreign tax
credit with respect to a gain dividend. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Each shareholder will
be notified within 60 days after the close of the Fund's taxable year whether
the foreign taxes paid by the Fund will "pass-through" for that year.
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Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election is
made, the source of the electing Fund's income will flow through to shareholders
of the Trust. With respect to such Funds, gains from the sale of securities will
be treated as derived from U.S. sources and certain currency fluctuation gains,
including fluctuation gains from foreign currency-denominated debt securities,
receivables and payables will be treated as ordinary income derived from U.S.
sources. The limitation on the foreign tax credit is applied separately to
foreign source passive income, and to certain other types of income.
Shareholders may be unable to claim a credit for the full amount of their
proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit can be used to offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income. Although a Portfolio
may itself be entitled to a deduction for such taxes paid by an Underlying PIMCO
Fund in which the Portfolio invests, the Portfolio will not be able to pass any
such credit or deduction through to its own shareholders. In addition, a Fund
which invests in other investment companies may not be able to pass any such
credit or deduction for taxes paid by the underlying investment company through
to its own shareholders.
Original Issue Discount and Pay-In-Kind Securities
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
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.
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund may be treated as
debt securities that are issued originally at a discount. Generally, the amount
of the original issue discount ("OID") is treated as interest income and is
included in income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the debt security
matures. A portion of the OID includable in income with respect to certain high-
yield corporate debt securities (including certain pay-in-kind securities) may
be treated as a dividend for U.S. federal income tax purposes.
Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund in the secondary
market may be treated as having market discount. Generally, any gain recognized
on the disposition of, and any partial payment of principal on, a debt security
having market discount is treated as ordinary income to the extent the gain, or
principal payment, does not exceed the "accrued market discount" on such debt
security. Market discount generally accrues in equal daily installments. A Fund
may make one or more of the elections applicable to debt securities having
market discount, which could affect the character and timing of recognition of
income.
Some debt securities (with a fixed maturity date of one year or less from
the date of issuance) that may be acquired by a Fund may be treated as having
acquisition discount, or OID in the case of certain types of debt securities.
Generally, the Fund will be required to include the acquisition discount, or
OID, in income over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt security
matures. The Fund may make one or more of the elections applicable to debt
securities having acquisition discount, or OID, which could affect the character
and timing of recognition of income.
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.
-78-
<PAGE>
Other Taxation
Pursuant to Treasury Department regulations, certain expenses of
nonpublicly offered regulated investment companies, including advisory fees, are
not deductible by those regulated investment companies for purposes of
calculating the income of certain shareholders, generally including individuals
and entities that compute their taxable income in the same manner as an
individual (thus, for example, a qualified pension plan is not subject to this
rule). The shareholder's pro rata portion of such expenses will be treated as
income to the shareholder and will be deductible by the shareholder, subject to
the 2% "floor" on miscellaneous itemized deductions and other limitations on
itemized deductions set forth in the Code. A regulated investment company
generally will be classified as nonpublicly offered unless it either has 500
shareholders at all times during a taxable year or continuously offers shares
pursuant to a public offering.
Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations"). However,
some states may exempt all or a portion of such distributions from income tax to
the extent the shareholder is able to establish that the distribution is derived
from qualifying federal obligations. Moreover, for state income tax purposes,
interest on some federal obligations generally is not exempt from taxation,
whether received directly by a shareholder or through distributions of
investment company taxable income (for example, interest on FNMA Certificates
and GNMA Certificates). Each Fund and Portfolio will provide information
annually to shareholders indicating the amount and percentage of its dividend
distribution which is attributable to interest on federal obligations, and will
indicate to the extent possible from what types of federal obligations such
dividends are derived. The Trust is organized as a Massachusetts business trust.
Under current law, so long as each Fund and Portfolio qualifies for the federal
income tax treatment described above, it is believed that neither the Trust nor
any Fund or Portfolio will be liable for any income or franchise tax imposed by
Massachusetts. Shareholders, in any event, are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund or Portfolio.
OTHER INFORMATION
Capitalization
The Trust is a Massachusetts business trust established under an Agreement
and Declaration of Trust as amended and restated on January 14, 1997. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest. The Board of Trustees may establish additional series (with
different investment objectives and fundamental policies) at any time in the
future. Establishment and offering of additional series will not alter the
rights of the Trust's shareholders. When issued, shares are fully paid, non-
assessable, redeemable and freely transferable. Shares do not have preemptive
rights or subscription rights. In liquidation of a Fund or Portfolio, each
shareholder is entitled to receive his pro rata share of the net assets of that
Fund or Portfolio.
Shares begin earning dividends on Fund shares the day after the Trust
receives the shareholder's purchase payment. Net investment income from interest
and dividends, if any, will be declared and paid monthly to shareholders of
record by the 30/70 Portfolio. 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 and the 60/40 Portfolio. 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 and 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. Dividend and capital gain distributions of a Fund
or Portfolio will be reinvested in additional shares of that Fund or Portfolio
unless the shareholder elects to have them paid in cash.
-79-
<PAGE>
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 or
Portfolio's property for all loss and expense of any shareholder of that Fund or
Portfolio 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 or Portfolio of which he or she is or was a shareholder is unable to
meet its obligations, and thus should be considered remote.
Performance Information
From time to time the Trust may make available certain information about
the performance of some or all classes of shares of some or all of the Funds or
Portfolios. Information about a Fund's or Portfolio's performance is based on
that Fund's (or its predecessor's) or Portfolio's record to a recent date and is
not intended to indicate future performance.
The total return of the classes of shares of the Funds and Portfolios may
be included in advertisements or other written material. When a Fund's or
Portfolio's total return is advertised, it will be calculated for the past year,
the past five years, and the past ten years (or if the Fund or Portfolio 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) or Portfolio, as more fully described below. For
periods prior to the initial offering date of the advertised class of shares,
total return presentations for such class will be based on the historical
performance of an older class of the Fund (if any) restated, as necessary, to
reflect any different sales charges and/or 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 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 or Portfolio at the beginning of the relevant period to the
redemption value of the investment in the Fund or Portfolio 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.
The Funds and Portfolios 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 or
Portfolio will be based on distributions for a specified period (i.e., total
dividends from net investment income), divided by the relevant class net asset
value per share on the last day of the period and annualized. The rate of
current distributions does not reflect deductions for unrealized losses from
transactions in derivative instruments such as options and futures, which may
reduce total return. Current distribution rates differ from standardized yield
rates in that they represent what a class of a Fund or Portfolio has declared
and paid to shareholders as of the end of a specified period rather than the
Fund's or Portfolio's actual net investment income for that period.
Performance information is computed separately for each class of a Fund or
Portfolio. Each Fund and Portfolio may from time to time include the total
return of each class of its shares in advertisements or in information furnished
to present or prospective shareholders. The Equity Income, Value and
Renaissance Funds and the 60/40 and 30/70 Portfolios may from time to time
include the yield and total return of each class of their shares in
advertisements or information furnished to present or prospective shareholders.
Each Fund and Portfolio may from time to time include in advertisements the
total return of each class (and yield of each class in the case of the Equity
Income, Value and Renaissance Funds and the 60/40 and 30/70 Portfolios) and the
ranking of those performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services as having the
-80-
<PAGE>
same investment objectives. Information provided to any newspaper or similar
listing of the Fund's or Portfolio's net asset values and public offering prices
will separately present each class of shares. The Funds and Portfolios also may
compute current distribution rates and use this information in their
Prospectuses and Statement of Additional Information, in reports to current
shareholders, or in certain types of sales literature provided to prospective
investors.
Investment results of the Funds and Portfolios will fluctuate over time,
and any representation of the Funds' or Portfolio's 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 Portfolios and are available upon request, without charge, by calling the
telephone numbers listed on the cover of this Statement of Additional
Information.
Calculation of Yield
Quotations of yield for certain of the Funds and Portfolios will be based
on all investment income per share (as defined by the SEC) during a particular
30-day (or one month) period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and are computed by
dividing net investment income by the maximum offering price per share on the
last day of the period, according to the following formula:
YIELD = 2[( a-b + 1)/6/ -1]
---
cd
where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the
period.
For the one month period ended September 30, 1999, the yields of the Equity
Income, Value and Renaissance Funds and the 60/40 and 30/70 Portfolios were as
follows (Class D shares were not offered during the period listed):
<TABLE>
<CAPTION>
Institutional Administrative
------------- --------------
Fund Class Class Class A Class B Class C Class D
- ---- ----- ----- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Equity Income Fund 3.37% 3.12% 2.80% 2.19% 2.19% 2.96%
Value Fund 2.37% 2.12% 1.87% 1.20% 1.20% 1.95%
Renaissance Fund 0.38% 0.11% -0.05% -0.84% -0.84% -0.06%
60/40 Portfolio 4.53% 4.28% 3.75% 3.20% 3.20% N/A
30/70 Portfolio 5.39% 5.14% 4.62% 4.08% 4.08% N/A
</TABLE>
The yield of a Fund or Portfolio will vary from time to time depending upon
market conditions, the composition of its portfolio and operating expenses of
the Trust allocated to the Fund or Portfolio or its classes of shares. These
factors, possible differences in the methods used in calculating yield should be
considered when comparing a Fund's or Portfolio's yield to yields published for
other investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of a Fund's or Portfolio's various
classes of shares. These yields do not take into account any applicable
contingent deferred sales charges.
-81-
<PAGE>
The Trust, in its advertisements, may refer to pending legislation from
time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields. At any time in
the future, yields and total return may be higher or lower than past yields and
there can be no assurance that any historical results will continue.
Calculation of Total Return
Quotations of average annual total return for a Fund or Portfolio, or a
class of shares thereof, will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the Fund, Portfolio or
class over periods of one, five, and ten years (up to the life of the Fund or
Portfolio), calculated pursuant to the following formula: P (1 + T)/n/ = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the ending redeemable value of
a hypothetical $1,000 payment made at the beginning of the period). Except as
noted below, all total return figures reflect the deduction of a proportionate
share of Fund, Portfolio or class expenses on an annual basis, and assume that
(i) the maximum sales load (or other charges deducted from payments) is deducted
from the initial $1,000 payment and that the maximum contingent deferred sales
charge, if any, is deducted at the times, in the amounts, and under the terms
disclosed in the Prospectuses and (ii) all dividends and distributions are
reinvested when paid. Quotations of total return may also be shown for other
periods. The Funds and Portfolios may also, with respect to certain periods of
less than one year, provide total return information for that period that is
unannualized. Under applicable regulations, any such information is required to
be accompanied by standardized total return information.
-82-
<PAGE>
The table below sets forth the average annual total return of certain
classes of shares of the following Funds for periods ended June 30, 1999. For
periods prior to the "Inception Date" of a particular class of a Fund's shares,
total return presentations for the class are based on the historical performance
of Institutional Class shares of the Fund (the oldest class) adjusted, as
necessary, to reflect any current sales charges (including any contingent
deferred sales charges) associated with the newer class and any different
operating expenses associated with the newer class, such as 12b-1 distribution
and servicing fees (which are not paid by the Institutional Class) and
administrative fee charges.
Average Annual Total Return for Periods Ended June 30, 1999*
<TABLE>
<CAPTION>
Since
Inception Inception Inception
Fund Class** 1 Year 5 Years of Fund Date of Date of
(Annualized) Fund Class
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Equity Income Institutional 12.56% 21.02% 16.89% 03/08/91 03/08/91
Administrative 12.31% 20.72% 16.61% 11/30/94
Class A 6.08% 19.21% 15.66% 1/20/97
Class B 6.50% 19.48% 15.71% 1/20/97
Class C 10.31% 19.66% 15.58% 1/20/97
Class D 12.21% 20.56% 16.45% 4/8/98
- ------------------------------------------------------------------------------------------------------------------
Value Institutional 12.30% 21.23% 17.09% 12/30/91 12/30/91
Administrative 11.91% 20.93% 16.79% 8/21/97
Class A 5.78% 19.40% 15.75% 1/13/97
Class B 6.17% 19.67% 15.83% 1/13/97
Class C 10.06% 19.87% 15.77% 1/13/97
Class D 12.00% 20.79% 16.65% 4/8/98
- ------------------------------------------------------------------------------------------------------------------
Small-Cap Value Institutional -5.11% 15.78% 14.43% 10/1/91 10/1/91
Administrative -5.40% 15.48% 14.14% 11/1/95
Class A -10.70% 14.03% 13.15% 1/20/97
Class B -10.75% 14.24% 13.22% 1/20/97
Class C -7.12% 14.48% 13.14% 1/20/97
- ------------------------------------------------------------------------------------------------------------------
Capital Institutional 10.57% 24.49% 19.51% 3/8/91 3/8/91
Appreciation Administrative 10.30% 24.18% 19.22% 7/31/96
Class A 4.08% 22.61% 18.23% 1/20/97
Class B 4.39% 22.94% 18.30% 1/20/97
Class C 8.34% 23.10% 18.17% 1/20/97
Class D 10.17% 24.00% 19.04% 4/8/98
- ------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Institutional 0.33% 20.56% 16.91% 8/26/91 8/26/91
Administrative 0.31% 20.29% 16.63% 11/30/94
Class A -5.63% 18.73% 15.60% 1/13/97
Class B -5.58% 18.99% 15.67% 1/13/97
Class C -1.76% 19.20% 15.59% 1/13/97
Class D 0.25% 20.16% 16.49% 4/8/98
- ------------------------------------------------------------------------------------------------------------------
Micro-Cap Institutional -12.66% 19.33% 17.61% 6/25/93 6/25/93
Growth Administrative -12.90% 19.03% 17.32% 4/1/96
- ------------------------------------------------------------------------------------------------------------------
Small-Cap Institutional -14.99% 11.38% 16.99% 1/7/91 1/7/91
Growth Administrative -15.26% 11.21% 16.76% 9/27/95
- ------------------------------------------------------------------------------------------------------------------
Enhanced Equity Institutional 17.95% 25.44% 17.73% 2/11/91 2/11/91
Administrative 17.63% 25.10% 17.42% 8/21/97
- ------------------------------------------------------------------------------------------------------------------
International Institutional 28.62% N/A 44.97% 12/31/97 12/31/97
Growth
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-83-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Core Equity Institutional 26.35% N/A 28.08% 12/28/94 12/28/94
Administrative 25.84% N/A 27.73% 5/31/95
- ------------------------------------------------------------------------------------------------------------------
Mid-Cap Equity Institutional 23.18% N/A 24.24% 12/28/94 12/28/94
Administrative % N/A % 8/21/97
- ------------------------------------------------------------------------------------------------------------------
Value 25 Institutional N/A N/A -9.48% 7/10/98 7/10/98
Class A N/A N/A -14.79% 7/10/98
Class B N/A N/A -14.93% 7/10/98
Class C N/A N/A -11.39% 7/10/98
- ------------------------------------------------------------------------------------------------------------------
Structured Institutional 29.21% N/A 29.21% 6/30/98 6/30/98
Emerging
Markets
- ------------------------------------------------------------------------------------------------------------------
Tax-Efficient Institutional 33.39% N/A 33.39% 6/30/98 6/30/98
Structured
Emerging
Markets
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
* Average annual total return presentations for a particular class of
shares assume payment of the current maximum sales charge (if any) applicable to
that class at the time of purchase and assume that the maximum CDSC (if any) for
Class A, Class B and Class C shares was deducted at the times, in the amounts,
and under the terms discussed in the Class A, B and C Prospectus.
** For all Funds listed above, Class A, Class B, Class C, Class D and
Administrative Class total return presentations for periods prior to the
Inception Date of a particular class reflect the prior performance of
Institutional Class shares of the Fund (the oldest class) adjusted to reflect
the actual sales charges (none in the case of Class D and the Administrative
Class) of the newer class. The adjusted performance also reflects the higher
Fund operating expenses applicable to Class A, Class B, Class C, Class D and
Administrative Class shares. These include (i) 12b-1 distribution and servicing
fees, which are not paid by the Institutional Class and are paid by Class B and
Class C (at a maximum rate of 1.00% per annum) and Class A and the
Administrative Class (at a maximum rate of .25% per annum), and may be paid by
Class D (at a maximum rate of .25% per annum) and (ii) administrative fee
charges associated with Class A, Class B and Class C shares (a maximum
differential of .15% per annum) and Class D shares (a maximum differential of
0.40% per annum).
-84-
<PAGE>
The table below sets forth the average annual total return of certain
classes of shares of the following Funds (each of which, except for the Tax-
Efficient Equity Fund, was a series of PAF prior to its reorganization as a Fund
of the Trust on January 17, 1997) for periods ended June 30, 1999. Accordingly,
"Inception Date of Fund" for these Funds refers to the inception date of the PAF
predecessor series. Since Class C shares were offered since the inception of
each PAF series, total return presentations for periods prior to the Inception
Date of the other classes (with the exception of Class D, Institutional Class
and Administrative Class shares of the Innovation Fund, Institutional Class and
Administrative Class shares of the Target Fund and Administrative Class shares
of the Tax-Efficient Equity Fund) are based on the historical performance of
Class C shares, adjusted to reflect any current sales charges (including any
contingent deferred sales charges) associated with the newer class and any
different operating expenses associated with the newer class, such as 12b-1
distribution and servicing fees and administrative fee charges. As described
below, performance presentations for periods prior to the Inception Date of
Class D, Institutional Class and Administrative Class shares of the Innovation
Fund, Institutional Class and Administrative Class shares of the Target Fund and
Administrative Class Shares of the Tax-Efficient Equity Fund are based on the
historical performance of Class A shares.
Average Annual Total Return for Periods Ended June 30, 1999*
<TABLE>
<CAPTION>
Since
Inception Inception Inception Date
of Fund Date of Fund of Class
Fund Class*** 1 Year 5 Years 10 Years (Annualized)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renaissance** Class A 3.90% 21.45% 14.26%(#) 14.22%(#) 4/18/88 2/1/91
Class B 4.22% 21.71% 14.31% 14.26% 5/22/95
Class C 8.17% 21.91% 14.05% 13.94% 4/18/88
Class D 10.01% 22.84%(#) 14.91%(#) 14.80%(#) 4/8/98
Institutional 10.24%(#) 23.28%(#) 15.34%(#) 15.24%(#) 12/30/97
Administrative 9.91%(#) 22.96%(#) 15.05%(#) 14.94%(#) 8/31/98
- -------------------------------------------------------------------------------------------------------------------------------
Growth Class A 12.13% 22.65% 17.13%(#) 18.35%(#) 2/24/84 10/26/90
Class B 12.72% 22.93% 17.19% 18.39% 5/23/95
Class C 16.76% 23.11% 16.93% 17.91% 2/24/84
Class D 18.64%(#) 24.02%(#) 17.80%(#) 18.79%(#) 4/1/99
Institutional 19.11%(#) 24.51%(#) 18.27%(#) 19.26%(#) 4/1/99
Administrative 18.86% 24.21% 17.98% 18.97%
- -------------------------------------------------------------------------------------------------------------------------------
Target Class A 9.33% 20.41% N/A 18.47% 12/17/92 12/17/92
Class B 9.93% 20.69% N/A 18.62% 5/22/95
Class C 13.86% 20.87% N/A 18.60% 12/17/92
Institutional 16.17%(#) 22.37%(#) N/A 20.06%(#) 4/1/99
Administrative 15.88%(#) 22.07%(#) N/A 19.77%(#) 4/1/99
- -------------------------------------------------------------------------------------------------------------------------------
Opportunity Class A -1.74% 14.50% 17.18%(#) 17.08%(#) 2/24/84 12/17/90
Class B -0.95% 14.72% 17.25% 17.11% 4/1/99
Class C 2.36% 14.94% 16.99% 16.65% 2/24/84
Institutional 4.42%(#) 16.27%(#) 18.33%(#) 17.99%(#) 4/1/99
Administrative 4.21%(#) 15.99%(#) 18.04%(#) 17.70%(#) 4/1/99
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-85-
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Innovation Class A 52.48% N/A N/A 36.53% 12/22/94 12/22/94
Class B 55.17% N/A N/A 37.07% 5/22/95
Class C 59.20% N/A N/A 37.21% 12/22/94
Class D 61.62% N/A N/A 38.30% 4/8/98
Institutional 61.96%(#) N/A N/A 38.79%(#) 3/5/99
Administrative 61.60%(#) N/A N/A 38.45%(#) Not yet offered
- -------------------------------------------------------------------------------------------------------------------------------
International** Class A -9.57% 3.73% 6.00%(#) 6.86%(#) 8/25/86 2/1/91
Class B -9.42% 3.79% 6.06% 6.90% 5/22/95
Class C -6.01% 4.10% 5.80% 6.53% 8/25/86
Institutional -3.89%(#) 5.34%(#) 7.04%(#) 7.77%(#) 9/30/98
Administrative -4.43%(#) 5.01%(#) 6.74%(#) 7.48%(#) 9/30/98
- -------------------------------------------------------------------------------------------------------------------------------
Precious Class A -11.23% -16.83% -6.10%(#) -6.45%(#) 10/10/88 2/1/91
Metals** Class B -11.43% -16.95% -6.06% -6.42% 6/15/95
Class C -7.64% -16.63% -6.34% -6.72% 10/10/88
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Efficient Class A N/A 9.55% 7/10/98 7/10/98
Equity Class B N/A 10.10% 7/10/98
Class C N/A 14.10% 7/10/98
Class D N/A 15.90% 7/10/98
Institutional N/A 16.35%(#) Not yet offered
Administrative N/A 16.10% 9/30/98
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Average annual total return presentations for a particular class of shares
assume payment of the current maximum sales charge (if any) applicable to that
class at the time of purchase and assume that the maximum CDSC (if any) for
Class A, B and C shares was deducted at the times, in the amounts, and under the
terms discussed in the Class A, B and C Prospectus.
** The investment objective and policies of the Renaissance Fund and
International Fund were changed effective February 1, 1992 and September 1,
1992, respectively. The investment objective and policies of the Precious
Metals Fund were changed effective November 15, 1994. Performance information
for prior periods does not necessarily represent results that would have been
obtained had the current investment objective and policies been in effect for
all periods.
*** Class A, Class B, Class D, Institutional Class and Administrative Class
total return presentations for the Funds listed for periods prior to the
Inception Date of the particular class of a Fund (with the exception of Class D,
Institutional Class and Administrative Class shares of the Innovation Fund,
Institutional Class and Administrative Class shares of the Target Fund and
Administrative Class shares of the Tax-Efficient Equity Fund) reflect the prior
performance of Class C shares of the Fund, adjusted to reflect the actual sales
charges (or no sales charges in the case of Class D, Institutional Class and
Administrative Class shares) of the newer class. The adjusted performance also
reflects any different operating expenses associated with the newer class.
These include (i) 12b-1 distribution and servicing fees, which are paid by Class
C and Class B (at a maximum rate of 1.00% per annum) and Class A and the
Administrative Class (at a maximum rate of .25% per annum), may be paid by Class
D (at a maximum rate of .25% per annum), and are not paid by the Institutional
Class and (ii) administrative fee charges, which are lower than Class C charges
for the Institutional and Administrative Classes (a maximum differential of .15%
per annum) and higher for Class D (a maximum differential of .25% per annum).
(Administrative fee charges are the same for Class A, B and C shares.)
Performance presentations for periods prior to the Inception Date of Class D,
Institutional Class and Administrative Class shares of the Innovation Fund,
Institutional Class and Administrative Class shares of the Target Fund and
Administrative Class Shares of the Tax-Efficient Equity Fund are based on the
historical performance of Class A shares (which were also offered since
inception of the Fund), adjusted in the manner described above.
Note also that, prior to January 17, 1997, Class A, Class B and Class C shares
of the former PAF series were subject to a variable level of expenses for such
services as legal, audit, custody and transfer agency services. As described in
the Class A, B and C Prospectus, for periods subsequent to January 17, 1997,
Class A, Class B and Class C shares of the Trust are subject to a fee structure
which essentially fixes these expenses (along with other administrative
expenses) under a single administrative fee based on the average daily net
assets of a Fund attributable to Class A, Class B and Class C shares. Under the
current fee structure, the Growth Fund, Target Fund, Opportunity Fund and
International Fund are expected to have higher total Fund operating expenses
than their predecessors had under the fee structure for PAF (prior to January
17, 1997). All other things being equal, such higher expenses have an adverse
effect on total return performance for these Funds after January 17, 1997.
-86-
<PAGE>
(#) Where noted, the method of adjustment used in the table above for periods
prior to the Inception Date of the noted classes of the noted Funds resulted in
performance for the period shown which is higher than if the historical Class C
or Class A share performance (i.e., the older class used for prior periods) were
not adjusted to reflect the lower operating expenses of the newer class. The
following table shows the lower performance figures that would be obtained if
the performance for newer classes with lower operating expenses were calculated
by essentially tacking to such classes' actual performance the actual
performance (with adjustment for actual sales charges) of the older Class of
shares, with their higher operating expenses, for periods prior to the initial
offering date of the newer class (i.e., the total return presentations below are
based, for periods prior to the Inception Date of the noted classes, on the
historical performance of the older class adjusted to reflect the current sales
charges (if any) associated with the newer class, but not reflecting lower
---
operating expenses associated with the newer class, such as lower administrative
fee charges and/or 12b-1 distribution and servicing fee charges).
-87-
<PAGE>
Total Return for Periods Ended June 30, 1999
(with no adjustment for operating expenses of the noted
classes for periods prior to their inception dates)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
Since Inception
of Fund
Fund Class 1 Year 5 Years 10 Years (Annualized)
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Renaissance Class A -- -- 14.12% 14.01%
Class D -- 22.16% 14.16% 14.04%
Institutional 10.24% 22.30% 14.23% 14.10%
Administrative 9.72% 22.05% 14.11% 14.00%
---------------------------------------------------------------------------------
Growth Class A -- -- 17.01% 17.97%
Institutional 18.10% 23.18% 16.96% 17.93%
Administrative 18.06% 23.17% 16.96% 17.93%
---------------------------------------------------------------------------------
Target Institutional 15.82% 21.91% -- 19.61%
Administrative 15.75% 21.90% -- 19.60%
---------------------------------------------------------------------------------
Opportunity Class A -- -- 17.06% 16.69%
Institutional 3.50% 15.01% 17.02% 16.67%
Administrative 3.50% 15.01% 17.02% 16.67%
---------------------------------------------------------------------------------
Innovation Institutional 61.53% -- -- 38.28%
Administrative % -- -- %
---------------------------------------------------------------------------------
International Class A -- -- 5.87% 6.59%
Institutional - 4.20 4.31% 5.90% 6.61%
Administrative - 4.66 4.21% 5.85% 6.57%
---------------------------------------------------------------------------------
Precious Metals Class A -- -- % %
---------------------------------------------------------------------------------
Tax-Efficient Institutional -- -- -- 15.90%
Equity
---------------------------------------------------------------------------------
</TABLE>
The following table sets forth the average annual total return of each
class of shares of the Portfolios for periods ended June 30, 1999. Total return
presentations for periods prior to the Inception Date of Institutional Class and
Administrative Class shares are based on the historical performance of Class A
shares (which were offered since the inception of the Portfolios), adjusted to
reflect that there are no sales charges associated with Institutional Class and
Administrative Class shares and any different operating expenses associated with
these newer classes, such as lower 12b-1 distribution and servicing fees and/or
administrative fee charges.
-88-
<PAGE>
Average Annual Total Return for Periods Ended June 30, 1999*
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Since Inception Inception Inception
of Portfolio Date of Date of Class
Portfolio Class** 1 Year (Annualized) Portfolio
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
90/10 Portfolio Class A N/A 16.91% 9/30/98 9/30/98
Class B N/A 18.03% 9/30/98
Class C N/A 22.03% 9/30/98
Institutional N/A 24.17%(#) 3/1/99
Administrative N/A 23.94%(#) 3/1/99
---------------------------------------------------------------------------------------
60/40 Portfolio Class A N/A 9.17% 9/30/98 9/30/98
Class B N/A 9.83% 9/30/98
Class C N/A 13.82% 9/30/98
Institutional N/A 15.95%(#) 3/1/99
Administrative N/A 15.74%(#) 3/1/99
---------------------------------------------------------------------------------------
30/70 Portfolio Class A N/A 2.11% 9/30/98 9/30/98
Class B N/A 1.29% 9/30/98
Class C N/A 5.27% 9/30/98
Institutional N/A 7.32%(#) 3/1/99
Administrative N/A 7.12%(#) 3/1/99
---------------------------------------------------------------------------------------
</TABLE>
* Average annual total return presentations for a particular class of shares
assume payment of the current maximum sales charge (if any) applicable to that
class at the time of purchase and assume that the maximum CDSC (if any) for
Class A, B and C shares was deducted at the times, in the amounts, and under the
terms discussed in the Retail Portfolio Prospectus.
** Institutional Class and Administrative Class total return presentations for
the Portfolios for periods prior to the Inception Date of these classes reflect
the prior performance of Class A shares, adjusted to reflect that there are no
sales charges associated with Institutional Class and Administrative Class
shares. The adjusted performance also reflects any different operating expenses
associated with the newer classes. These include (i) 12b-1 distribution and
servicing fees, which are the same for Class A and the Administrative Class but
are not paid by the Institutional Class and (ii) administrative fee charges,
which are lower than Class A charges for the Institutional and Administrative
Classes (a differential of .30% per annum).
(#) Where noted, the method of adjustment used in the table above for periods
prior to the Inception Date of the noted classes of the Portfolios resulted in
performance for the period shown which is higher than if the historical Class A
share performance were not adjusted to reflect the lower operating expenses of
the newer class. The following table shows the lower performance figures that
would be obtained if the performance for the newer classes with lower operating
expenses were calculated by essentially tacking to such classes' actual
performance the actual performance (with adjustment for actual sales charges) of
Class A shares, with their higher operating expenses, for periods prior to the
initial offering date of the newer class (i.e., the total return presentations
below are based, for periods prior to the Inception Date of the noted classes,
on the historical performance of Class A shares adjusted to reflect the current
sales charges (if any) associated with the newer class, but not reflecting lower
---
operating expenses associated with the newer class, such as lower administrative
fee charges and/or 12b-1 distribution and servicing fee charges).
-89-
<PAGE>
Total Return for Periods Ended June 30, 1999
(with no adjustment for operating expenses of the noted
classes for periods prior to their inception dates)
<TABLE>
<CAPTION>
-----------------------------------------------------------
Since Inception
of Portfolio
Portfolio Class** 1 Year (Annualized)
-----------------------------------------------------------
<S> <C> <C> <C>
90/10 Portfolio Institutional N/A 23.89%
Administrative N/A 23.79%
-----------------------------------------------------------
60/40 Portfolio Institutional N/A 15.11%
Administrative N/A 15.08%
-----------------------------------------------------------
30/70 Portfolio Institutional N/A 7.08%
Administrative N/A 6.99%
-----------------------------------------------------------
</TABLE>
Performance information for a Fund or Portfolio may also be compared to:
(i) the Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Morgan Stanley Capital International EAFE (Europe,
Australia, Far East) Index, the Morgan Stanley Capital International Emerging
Markets Free Index, the International Finance Corporation Emerging Markets
Index, the Baring Emerging Markets Index, or other unmanaged indexes that
measure performance of a pertinent group of securities; (ii) other groups of
mutual funds tracked by Lipper Analytical Services ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment in the Funds. Unmanaged indexes
(i.e., other than Lipper) generally do not reflect deductions for administrative
and management costs or expenses. The Adviser and any of the Sub-Advisers may
also report to shareholders or to the public in advertisements concerning the
performance of the Adviser and/or the Sub-Advisers as advisers to clients other
than the Trust, and on the comparative performance or standing of the Adviser
and/or the Sub-Advisers 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 or
Portfolios, the Adviser or the Sub-Advisers, should be considered in light of
the Funds' or Portfolios' investment objectives and policies, characteristics
and quality, 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.
The total return of each class (and yield of each class in the case of the
Renaissance Fund and the 30/70 Portfolio) may be used to compare the performance
of each class of a Fund's or Portfolio's shares against certain widely
acknowledged standards or indexes for stock and bond market performance, against
interest rates on certificates of deposit and bank accounts, against the yield
on money market funds, against the cost of living (inflation) index, and against
hypothetical results based on a fixed rate of return.
The S&P's Composite Index of 500 Stocks (the "S&P 500") is a market value-
weighted and unmanaged index showing the changes in the aggregate market value
of 500 stocks relative to the base period 1941-43. The S&P 500 is composed
almost entirely of common stocks of companies listed on the New York Stock
Exchange, although the common stocks of a few companies listed on the American
Stock Exchange or traded over-the-counter are included. The 500 companies
represented include 380 industrial, 10 transportation, 39 utilities and 71
financial services concerns. The S&P 500 represents about 73% of the market
value of all issues traded on the New York Stock Exchange.
The S&P's 400 Mid-Cap Index (the "S&P 400 Mid-Cap Index") is a market
value-weighted and unmanaged index showing the changes in the aggregate market
value of 400 stocks of companies whose capitalization range from $100 million to
over $5 billion and which represent a wide range of industries. As of February
26, 1999, approximately 25% of the 400 stocks were stocks listed on the National
Association of Securities Dealers Automated Quotations ("NASDAQ") system, 73%
were stocks listed on the New York Stock Exchange and 2% were stocks listed on
the American Stock Exchange. The Standard & Poor's Midcap 400 Index P/TR
consists of 400 domestic stocks
-90-
<PAGE>
chosen for market size (median market capitalization of $1.54 billion),
liquidity and industry group representation. It is a market value-weighted index
(stock price times shares outstanding), with each stock affecting the index in
proportion to its market value. The index is comprised of industrials,
utilities, financials and transportation, in size order.
The NASDAQ-OTC Price Index (the "NASDAQ Index") is a market value-weighted
and unmanaged index showing the changes in the aggregate market value of
approximately 3,500 stocks relative to the base measure of 100.00 on February 5,
1971. The NASDAQ Index is composed entirely of common stocks of companies
traded over-the-counter and often through the NASDAQ system. Only those over-
the-counter stocks having only one market maker or traded on exchanges are
excluded.
The Russell 2000 Small Stock Index is an unmanaged index of the 2000
smallest securities in the Russell 3000 Index, representing approximately 7% of
the Russell 3000 Index. The Russell 3000 Index represents approximately 98% of
the U.S. equity market by capitalization. The Russell 1000 Index is composed of
the 1,000 largest companies in the Russell 3000 Index. The Russell 1000 Index
represents the universe of stocks from which most active money managers
typically select. This large cap index is highly correlated with the S&P 500.
The Russell 1000 Value Index contains stocks from the Russell 1000 Index with a
less-than-average growth orientation. It represents the universe of stocks from
which value managers typically select.
The Lehman Government Bond Index (the "SL Government Index") is a measure
of the market value of all public obligations of the U.S. Treasury; all
publicly-issued debt of all agencies of the U.S. Government and all quasi-
federal corporations; and all corporate debt guaranteed by the U.S. Government.
Mortgage-backed securities, flower bonds and foreign targeted issues are not
included in the SL Government Index.
The Lehman Government/Corporate Bond Index (the "SL Government/Corporate
Index") is a measure of the market value of approximately 5,000 bonds. To be
included in the SL Government/Corporate Index, an issue must have amounts
outstanding in excess of $1 million, have at least one year to maturity and be
rated "Baa" or higher by an NRSRO.
BanXquote Money Market, a service of Masterfund Inc., provides the average
rate of return paid on 3-month certificates of deposit offered by major banks
and the average rate paid by major banks on bank money market funds. The
Donoghue Organization, Inc., a subsidiary of IBC USA Inc., publishes the Money
Fund Report which lists the 7-day average yield paid on money market funds.
From time to time, the Trust may use, in its advertisements or information
furnished to present or prospective shareholders, data concerning the
performance and ranking of certain countries' stock markets, including
performance and ranking data based on annualized returns over one-, three-,
five- and ten-year periods. The Trust may also use data about the portion of
world equity capitalization represented by U.S. securities. As of December 31,
1998, the U.S. equity market capitalization represented approximately 40% of the
equity market capitalization of all the world's markets. This compares with 52%
in 1980 and 70% in 1972.
From time to time, the Trust may use, in its advertisements and other
information relating to certain of the Funds and Portfolios, data concerning the
performance of stocks relative to that of fixed income investments and relative
to the cost of living over various periods of time. The table below sets forth
the annual returns for each calendar year from 1973 through 1998 (as well as a
cumulative return and average annual return for this period) for the S&P 500 and
Treasury bills (using the formula set forth after the table) as well as the
rates of inflation (based on the Consumer Price Index) during such periods.
-91-
<PAGE>
<TABLE>
<CAPTION>
Consumer Price
Period S&P 500 Treasury Bills Index
- ------ ------- -------------- --------------
<S> <C> <C> <C>
1973 -14.7 6.9 8.8
1974 -26.5 8.0 12.2
1975 37.2 5.8 7.0
1976 23.8 5.0 4.8
1977 -7.2 5.1 6.8
1978 6.5 7.2 9.0
1979 18.4 10.4 13.3
1980 32.4 11.2 12.4
1981 -4.9 14.7 8.9
1982 21.4 10.5 3.8
1983 22.5 8.8 3.8
1984 6.3 9.9 3.9
1985 32.2 7.7 3.8
1986 18.5 6.1 1.1
1987 5.2 5.5 4.4
1988 16.8 6.3 4.4
1989 31.5 8.4 4.6
1990 -3.2 7.8 6.1
1991 30.5 5.6 3.1
1992 7.7 3.5 2.9
1993 10.1 2.9 2.7
1994 1.3 3.9 2.7
1995 37.4 5.6 2.7
1996 23.1 5.2 3.3
1997 33.4 5.3 1.7
1998 28.6 4.9 1.6
- -----------------------------------------------------------------------------
Cumulative Return
1973-1998 2,667.2% 478.0% 285.6%
- -----------------------------------------------------------------------------
Average Annual Return
1973-1998 13.6% 7.0% 5.3%
- -----------------------------------------------------------------------------
</TABLE>
The average returns for Treasury bills were computed using the following
method. For each month during a period, the Treasury bill having the shortest
remaining maturity (but not less than one month) was selected. (Only the
remaining maturity was considered; the bill's original maturity was not
considered). The return for the selected Treasury bill was computed based on
the price of the bill as of the last trading day of the previous month and the
price on the last trading day of the current month. The price of the bill (P)
at each time (t) is given by:
P\\t\\ = [ 1- rd ]
---
[ 360 ]
where,
r = decimal yield on the bill at time t (the average of bid
and ask quotes); and
d = the number of days to maturity as of time t.
Advertisements and information relating to the Target Fund may use data
comparing the performance of stocks of medium-sized companies to that of other
companies. The following table sets forth the annual returns for each year from
March 1981 (inception of Mid-Cap Index) through December 31, 1998 (as well as a
cumulative return and average annual return for this period) for stocks of
medium-sized companies (based on the Standard & Poor's Mid-Cap Index), stocks
of small companies (based on the Russell 2000 Index) and stocks of larger
companies (based on the S&P 500).
-92-
<PAGE>
<TABLE>
<CAPTION>
Small Mid-Size Large
Period Companies Companies Companies
- ------ --------- --------- ---------
<S> <C> <C> <C>
1981 (2/28 -12/31) 1.8 10.6 -2.5
1982 25.0 22.7 21.4
1983 29.1 26.1 22.5
1984 -7.3 1.2 6.3
1985 31.1 36.0 32.2
1986 5.7 16.2 18.5
1987 -8.8 -2.0 5.2
1988 24.9 20.9 16.8
1989 16.2 35.6 31.5
1990 -19.5 -5.1 -3.2
1991 46.1 50.1 30.5
1992 18.4 11.9 7.7
1993 18.9 14.0 10.1
1994 -1.8 -3.6 1.3
1995 28.4 30.9 37.6
1996 16.5 19.2 22.9
1997 22.8 32.3 33.4
1998 -2.6 19.1 28.6
- -----------------------------------------------------------
Cumulative Return
2/28/81-12/31/98 710.5% 1,784.5% 1,616.9%
- -----------------------------------------------------------
Average Annual Return
2/28/81-12/31/98 12.4% 17.9% 17.3%
- -----------------------------------------------------------
</TABLE>
From time to time, the Trust may use, in its advertisements and other
information relating to the Precious Metals Fund, data concerning the relevant
performance and volatility of portfolios consisting of all stocks, portfolios
consisting of all bonds and portfolios consisting of stocks and bonds blended
with stocks of companies engaged in the extraction, processing, distribution or
marketing of gold and other precious metals. The following table shows the
annual returns for each calendar year from 1988 through 1998 (as well as
cumulative return and average annual return for this period) for an all-stock
portfolio (using the S&P 500), an all-bond portfolio (using the Ibbotson's Long-
Term Corporate Bond Index), and for a hypothetical portfolio with 45% of its
assets in stocks comprising the S&P 500, 45% in bonds comprising the Ibbotson's
Long-Term Corporate Bond Index and 10% in stocks comprising the Philadelphia
Gold & Silver Index.
-93-
<PAGE>
Return and Cumulative Values of Stocks, Bonds, Savings Rates
vs. Balanced Portfolio (Assuming Rebalancing at Year-Ends)
----------------------------------------------------------
ANNUAL RETURNS
--------------
<TABLE>
<CAPTION>
Small Co. S&P 500 LT. Corp.
Stocks Stocks Bonds T-Bills Gold Index Balanced*
------ ------ ----- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
1988 22.87% 16.81% 10.70% 6.35% -20.70% 9.03%
1989 10.18% 31.49% 16.23% 8.37% 37.83% 26.43%
1990 -21.56% -3.17% 6.78% 7.83% -19.09% -0.97%
1991 44.63% 30.55% 19.89% 5.59% -16.75% 21.71%
1992 23.35% 7.67% 9.39% 3.51% -11.75% 5.07%
1993 20.98% 9.99% 13.17% 2.89% 85.01% 23.46%
1994 3.11% 1.31% -5.76% 3.90% -17.12% -3.12%
1995 34.46% 37.43% 27.20% 5.60% 10.14% 29.01%
1996 17.62% 23.07% 1.40% 5.21% -3.05% 10.46%
1997 22.78% 33.36% 12.95% 5.26% -36.45% 17.19%
1998 -7.31% 28.58% 10.76% 4.86% -12.43% 16.46%
Standard
Deviation 17.80% 13.34% 8.37% 1.60% 32.69% 10.35%
88-98
Cumulative
88-98 325.3% 575.6% 210.2% 78.0% -40.8% 349.5%
Annualized
88-98 19.0% 17.8% 10.8% 5.4% -4.7% 12.4%
</TABLE>
_______________________
*Balanced:
--------
Stocks 45%
Bonds 45%
Gold 10%
Small Co. 0%
T-Bills 0%
From time to time, the Trust may use, in its advertisements and other
information, data concerning the average price-to-earnings ("P/E") ratios of
"Value Stocks" and "Growth Stocks." For these purposes, the P/E ratios of Value
Stocks are measured by the P/E ratios of the stocks comprising the Russell 1000
Value Index, and the P/E ratios of Growth Stocks are measured by the P/E ratios
of the stocks comprising the Russell 1000 Growth Index. Both the Russell 1000
Value Index and Russell 1000 Growth Index are unmanaged indexes, and it is not
possible to invest directly in either index. The table below sets forth the
average P/E ratio of Value Stocks and the Average P/E ratio of Growth Stocks for
the period beginning December 31, 1992 and ending March 31, 1999.
-94-
<PAGE>
<TABLE>
<CAPTION>
Average P/E ratio
-----------------
Period
Ending Growth Stocks Value Stocks
- ------ ------------- ------------
<S> <C> <C>
12/31/92 21.76 21.40
3/31/93 21.59 22.36
6/30/93 20.86 21.41
9/30/93 20.25 21.05
12/31/93 18.33 17.84
3/31/94 18.07 17.69
6/30/94 16.70 16.31
9/30/94 15.98 15.28
12/31/94 15.98 14.97
3/31/95 15.80 14.62
6/30/95 16.50 14.87
9/30/95 17.85 16.17
12/31/95 17.91 15.82
3/31/96 18.24 16.07
6/30/96 18.57 15.93
9/30/96` 18.88 15.80
12/31/96 20.45 17.03
3/31/97 20.28 16.78
6/30/97 22.85 18.44
9/30/97 23.80 19.60
12/31/97 22.93 19.06
3/31/98 26.46 21.32
6/30/98 26.55 20.69
9/30/98 25.77 19.31
12/31/98 31.31 22.92
3/31/99 39.46 24.33
</TABLE>
Advertisements and information relating to the Growth Fund may use data
comparing the performance of a hypothetical investment in Growth Stocks, Value
Stocks, "Bonds" and "Savings Accounts." For these purposes, the performance of
an investment in "Bonds" is measured by the Lehman Aggregate Bond Index, an
unmanaged index representative of the U.S. taxable fixed income universe. It is
not possible to invest in this index. The performance of an investment in
"Savings Accounts" is measured by the return on 3-month U.S. Treasury bills.
Similarly, advertisements and information relating to the Renaissance Fund may
use data comparing the performance of a hypothetical investment in "Stocks,"
Bonds and Savings Accounts. For these purposes, the performance of the
investment in "Stocks" is measured by the S&P 500, while the performance of
Bonds and Savings Accounts is measured as discussed above. The table below sets
forth the value at March 31, 1999 of a hypothetical $10,000 investment in
Stocks, Growth Stocks, Value Stocks, Bonds and Savings Accounts made at March
31, 1979.
<TABLE>
<CAPTION>
Asset Category March 31, 1999 Value of $10,000 Investment made at March 31, 1979
- -------------- -----------------------------------------------------------------
<S> <C>
Growth Stocks $ 247,076
Value Stocks $ 231,697
Stocks $ 126,624
Bonds $ 67,584
Savings Accounts $ 39,985
</TABLE>
Advertisements and information may compare the average annual total
return of the Growth, Renaissance and Innovation Funds with that of the Lipper
Growth Fund Average, Lipper Equity Income Fund Average and Lipper
-95-
<PAGE>
Science & Technology Fund Average, respectively. The Innovation Fund may also be
compared to the S&P 500. The Lipper Growth Fund Average is a total-return
performance average of funds that are tracked by Lipper, Inc. and have an
investment objective of long-term growth. The Lipper Equity Income Fund Average
is a total-return performance average of funds tracked by Lipper that have an
investment objective of income and growth through investment in stocks. The
Lipper Science and Technology Fund Average is a total-return performance average
of funds tracked by Lipper with an investment objective of capital appreciation
through investment in technology-oriented companies. None of the averages take
into account sales charges. It is not possible to invest directly in the
averages. The average annual total return of the Growth Fund, the Renaissance
Fund, the Innovation Fund, the Lipper Growth Fund Average, the Lipper Equity
Income Fund Average and the Lipper Science and Technology Fund Average are set
forth below. The inception date of the Growth and Opportunity Funds is February
24, 1984. The inception date of the Innovation Fund is December 27, 1994. The
inception date of the Mid-Cap Growth Fund is August 26, 1991.
<TABLE>
<CAPTION>
Average Annual Total Return
(for periods ending 3/31/99)
--------------------------------------------------
Fund
1 Year 3 Years 5 Years 10 Years Inception
------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Growth Fund 29.0% 27.4% 23.6% 19.4% 19.1%
Lipper Growth Fund Average 13.6% 21.7% 20.4% 16.3% 15.6%
Renaissance Fund 5.5% 23.9% 20.7% 15.0% --
Lipper Equity Income Fund Average 0.7% 16.9% 17.2% 13.6% --
Innovation Fund 68.7% 39.0% -- -- 38.3%
Lipper Science and Technology 52.3% 27.3% -- -- 27.4%
Fund Average
S&P 500 18.5% 28.1% -- -- 30.0%
Opportunity Fund -- -- -- 17.6% 16.9%
Lipper Capital Appreciation -- -- -- 13.6% 12.8%
Fund Average
Target Fund 12.6% 17.5% 19.0% -- 18.8%
Lipper Mid-Cap Fund 0.2% 14.0% 15.8% -- 14.0%
Average
Capital Appreciation Fund -- 23.2% `22.0% -- 18.9%
Lipper Capital Appreciation -- 15.1% 16.5% -- 14.4%
Fund Average
Mid-Cap Growth Fund -- 14.9% 16.8% -- 15.7%
Lipper Capital Appreciation -- 14.0% 15.8% -- 14.2%
Fund Average
</TABLE>
From time to time, the Trust may use, in its advertisements and other
information, data comparing the average annual total return of "Small-Caps,"
which are stocks represented by the Ibbotson's Small Company Stock Total Return
Index, and "Large-Caps," which are stocks represented by the Ibbotson's Large
Company Stock Total Return Index. Both indexes are unmanaged indexes, and it is
not possible to invest directly in either index. For example, for the period
from December 31, 1925 through December 31, 1998, the average annual total
return of Small-Caps was 12.4%, and for Large-Caps was 11.2%.
Advertisements and other information and other information relating to the
Funds may list the annual total returns of certain asset classes during
specified years. In such advertisements, the return of "Small Company
Stocks"
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<PAGE>
will be measured by a one-bond portfolio with a 5-year maturity as measured by
Ibbotson Associates. The following table sets for the average return of these
asset classes for the specified years.
<TABLE>
<CAPTION>
Domestic Asset Class Annual Total Return
--------------------- -------------------
<S> <C> <C>
1990 Intermediate-Term Government Bonds +9.7%
1991 Small Company Stocks +22.9%
1992 Small Company Stocks +31.5%
1993 Small Company Stocks +21.0%
1994 U.S. Treasury Bills +3.9%
1995 Large Company Stocks +37.4%
1996 Large Company Stocks +23.0%
1997 Large Company Stocks +33.4%
1998 Large Company Stocks +28.6%
</TABLE>
Advertisements and other information relating to the Innovation Fund may
include information pertaining to the number of home internet subscriptions and
cellular phone users and sales of personal computers.
The Trust may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1997/1998 costs of college (using tuition and fees only) and an assumed rate of
increase for such costs. For example, the table below sets forth the projected
cost of four years of college at a public college and a private college assuming
a steady increase in both cases of 3% per year. In presenting this information,
the Trust is making no prediction regarding what will be the actual growth rate
in the cost of a college education, which may be greater or less than 3% per
year and may vary significantly from year to year. The Trust makes no
representation that an investment in any of the Funds will grow at or above the
rate of growth of the cost of a college education.
Potential College Cost Table
<TABLE>
<CAPTION>
Start Public Private Start Public Private
Year College College Year College College
- --------- --------- -------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
1997 $13,015 $57,165 2005 $16,487 $72,415
1998 $13,406 $58,880 2006 $16,982 $74,587
1999 $13,808 $60,646 2007 $17,491 $76,825
2000 $14,222 $62,466 2008 $18,016 $79,130
2001 $14,649 $64,340 2009 $18,557 $81,504
2002 $15,088 $66,270 2010 $19,113 $83,949
2003 $15,541 $68,258 2011 $19,687 $86,467
2004 $16,007 $70,306 2012 $20,278 $89,061
</TABLE>
Costs assume a steady increase in the annual cost of college of 3% per year from
a 1996-97 base year amount. Actual rates of increase may be more or less than
3% and may vary.
In its advertisements and other materials, the Trust may compare the
returns over periods of time of investments in stocks, bonds and treasury bills
to each other and to the general rate of inflation. For example, the average
annual return of each category* during the period from 1974 through 1998
was:
Stocks: 14.9%
Bonds: 9.9%
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<PAGE>
T-Bills: 7.0%
Inflation: 5.2%
* Returns of unmanaged indexes do not reflect past or future performance of
any of the Funds or Portfolios of PIMCO Funds: Multi-Manager Series.
Stocks are represented by Ibbotson's Large Company Stock Total Return
Index. Bonds are represented by Ibbotson's Long-term Corporate Bond Index.
Treasury bills are represented by Ibbotson's Treasury Bill Index and
Inflation is represented by the Cost of Living Index. These are all
unmanaged indexes, which can not be invested in directly. While Treasury
bills are insured and offer a fixed rate of return, both the principal and
yield of investment securities will fluctuate with changes in market
conditions. Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks,
Bonds, Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and
Inflation 1999 Yearbook, Ibbotson Associates, Chicago. All rights
reserved.
The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 20 years
from 1979 through 1998, the average annual return of stocks comprising the
Ibbotson's Large Company Stock Total Return Index ranged from -4.91% to 37.4%
while the annual return of a hypothetical portfolio comprised 40% of such common
stocks, 40% of bonds comprising the Ibbotson's Long-term Corporate bond Index
and 20% of Treasury bills comprising the Ibbottson's Treasury Bill Index (a
"mixed portfolio") would have ranged from - 1.00 to 28.19 over the same period.
The average annual returns of each investment category* for each of the years
from 1979 through 1998 is set forth in the following table.
<TABLE>
<CAPTION>
MIXED
YEAR STOCKS BONDS T-BILLS INFLATION PORTFOLIO
- ------ ------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1979 18.44% -4.18% 10.38% 13.31% 7.78%
1980 32.42% 2.61% 11.24% 12.40% 14.17%
1981 -4.91% -0.96% 14.71% 8.94% 0.59%
1982 21.41% 43.79% 10.54% 3.87% 28.19%
1983 22.51% 4.70% 8.80% 3.80% 12.64%
1984 6.27% 16.39% 9.85% 3.95% 11.03%
1985 32.16% 30.90% 7.72% 3.77% 26.77%
1986 18.47% 19.85% 6.16% 1.13% 16.56%
1987 5.23% -0.27% 5.46% 4.41% 3.08%
1988 16.81% 10.70% 6.35% 4.42% 12.28%
1989 31.49% 16.23% 8.37% 4.65% 20.76%
1990 -3.17% 6.87% 7.52% 6.11% 2.98%
1991 30.55% 19.79% 5.88% 3.06% 21.31%
1992 7.67% 9.39% 3.51% 2.90% 7.53%
1993 10.06% 13.17% 2.89% 2.75% 9.84%
1994 1.31% -5.76% 3.90% 2.67% -1.00%
1995 37.40% 27.20% 5.60% 2.70% 26.90%
1996 23.10% 1.40% 5.20% 3.30% 10.84%
1997 33.40% 12.90% 7.10% 1.70% 19.94%
1998 28.58% 10.76% 4.86% 1.61% 16.70%
</TABLE>
* Returns of unmanaged indexes do not reflect past or future
performance of any of the Funds or Portfolios of PIMCO Funds: Multi-
Manager Series. Stocks are represented by Ibbotson's Large Company
Stock Total Return Index. Bonds are represented by Ibbotson's Long-
term Corporate Bond Index. Treasury bills are represented by
Ibbotson's Treasury Bill Index and Inflation is represented by the Cost
of Living Index. Treasury bills are all unmanaged indexes, which
can
-98-
<PAGE>
not be invested in directly. While Treasury bills are insured and
offer a fixed rate of return, both the principal and yield of
investment securities will fluctuate with changes in market conditions.
Source: Ibbotson, Roger G., and Rex A. Sinquefiled, Stocks, Bonds,
Bill and Inflation (SBBI), 1989, updated in Stocks, Bonds, Bills and
Inflation 1999 Yearbook, Ibbotson Associates, Chicago. All rights
reserved.
The Trust may use in its advertisements and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:
<TABLE>
<CAPTION>
Investment Annual Total Total
Period Contribution Contribution Saved
------ ------------ ------------ -----
<S> <C> <C> <C>
30 Years $ 1,979 $ 59,370 $200,000
25 Years $ 2,955 $ 73,875 $200,000
20 Years $ 4,559 $ 91,180 $200,000
15 Years $ 7,438 $111,570 $200,000
10 Years $13,529 $135,290 $200,000
</TABLE>
This hypothetical example assumes a fixed 7% return
compounded annually and a guaranteed return of principal.
The example is intended to show the benefits of a long-term,
regular investment program, and is in no way representative
of any past or future performance of a Fund or Portfolio of
PIMCO Funds: Multi-Manager Series. There can be no guarantee
that you will be able to find an investment that would
provide such a return at the times you invest and an
investor in any of the Funds or Portfolio of PIMCO Funds:
Multi-Manager Series should be aware that certain of the
Funds and Portfolios of PIMCO Funds: Multi-Manager Series
have experienced and may experience in the future periods of
negative growth.
The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1998:
<TABLE>
<CAPTION>
% of Income for Individuals
Aged 65 Years and Older in 1997*
-------------------------------
Social Security
Year and Pension Plans Other
---- ----------------- -----
<S> <C> <C>
1997 43% 57%
</TABLE>
* For individuals with an annual income of at least $51,000. Other
includes personal savings, earnings and other undisclosed sources of
income. Source: Social Security Administration.
Articles or reports which include information relating to performance,
rankings and other characteristics of the Funds and Portfolios may appear in
various national publications and services including, but not limited to: The
Wall Street Journal, Barron's, Pensions and Investments, Forbes, Smart Money,
Mutual Fund Magazine, The New York Times, Kiplinger's Personal Finance, Fortune,
Money Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies
and The Donoghue Organization. Some or all of these publications or reports may
publish their own rankings or performance reviews of mutual funds, including the
Funds, and may provide information
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<PAGE>
relating to the Adviser and the Sub-Advisers, including descriptions of assets
under management and client base, and opinions of the author(s) regarding the
skills of personnel and employees of the Adviser or the Sub-Advisers who have
portfolio management responsibility. From time to time, the Trust may include
references to or reprints of such publications or reports in its advertisements
and other information relating to the Funds and Portfolios.
From time to time, the Trust may set forth in its advertisements and other
materials information about the growth of a certain dollar-amount invested in
one or more of the Funds or Portfolios over a specified period of time and may
use charts and graphs to display that growth.
From time to time, the Trust may set forth in its advertisements and other
materials the names of and additional information regarding investment analysts
employed by the Sub-Advisers who assist with portfolio management and research
activities on behalf of the Funds.
Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of the
Funds and relevant benchmark market indexes in a variety of market conditions.
Based on its independent research and analysis, Ibbotson may develop, from time
to time, model portfolios of the Funds and series of PIMS which indicate how, in
Ibbotson's opinion, a hypothetical investor with a 5+ year investment horizon
might allocate his or her assets among the Funds and series of PIMS. Ibbotson
bases its model portfolios on five levels of investor risk tolerance which it
developed and defines as ranging from "Very Conservative" (low volatility;
emphasis on capital preservation, with some growth potential) to "Very
Aggressive" (high volatility; emphasis on long-term growth potential). However,
neither Ibbotson nor the Trust offers Ibbotson's model portfolios as
investments. Moreover, neither the Trust, the Adviser, the Sub-Advisers nor
Ibbotson represent or guarantee that investors who allocate their assets
according to Ibbotson's models will achieve their desired investment results.
Year 2000 Readiness Disclosure
Many of the world's computer systems may be unable to correctly recognize,
interpret or use dates beyond the year 1999 (the "Year 2000 Problem"). This
inability might lead to significant business disruptions. PIMCO Advisors and
Pacific Investment Management, which serves as sub-administrator to the Funds
and Portfolios, are taking steps to ensure that their computer systems will
function properly. PIMCO Advisors has designated a team of information and
business professionals (the "Year 2000 Team") to address the Year 2000 Problem
and has developed a written "Year 2000 Plan."
The Year 2000 Plan consists of five general phases: Awareness, Assessment,
Remediation, Testing and Implementation. The Year 2000 Plan and budget were
prepared and approved by PIMCO Advisors' Management Board on July 21, 1998.
During the Awareness phase, the Year 2000 Team informed the employees of the
Adviser and its subsidiaries, including their highest levels of management,
about the Year 2000 Problem. During the Assessment phase, the Year 2000 Team
prepared an inventory of information technology ("IT") and non-IT systems used
by the Adviser, its subsidiaries and Pacific Investment Management. Systems
were classified as software, hardware or embedded chips. Separately, systems
were also classified as mission critical or non-mission critical. As the
inventory was compiled and verified, each system was preliminarily assessed for
Year 2000 compliance. This preliminary assessment was made by obtaining
manufacturers' representations that a given product is Year 2000 compliant or
other evidence of compliance. Systems for which no such evidence can be obtained
were identified as candidates for correction or replacement ("Remediation").
During the Remediation phase, software, hardware and embedded chips identified
during the Assessment phase to be non-Year 2000 compliant are corrected or
replaced. Necessarily, further corrections and replacements may need to be made
after the Remediation phase has been completed as a result of problems
identified during the Testing phase or otherwise. During the Testing phase, the
Adviser performs internal testing, point-to-point testing and industry testing
programs. Testing generally will be performed in order of criticality, with
mission-critical systems receiving the highest priority. PIMCO Advisors does
not plan to test non-mission critical systems that are not used in its business
(e.g., software applications incidently installed on PCs). Several subsidiaries
of the Adviser plan on participating in the Securities Industry Association
-100-
<PAGE>
industry-wide testing forum. During the Implementation phase, systems that have
been tested and identified as being Year 2000 compliant are put into normal
business operation and contingency plans are finalized.
As with all investment advisers, the business operations of the Adviser,
its investment advisory subsidiaries and Pacific Investment Management are
heavily dependent upon a complete worldwide network of financial systems that
utilize date fields. The ability of the Adviser, its investment advisory
subsidiaries and Pacific Investment Management to endure any adverse effects of
the transition to the Year 2000 are highly dependent upon the efforts of third
parties, particularly issuers, brokers, dealers and custodians. The failure of
third party organizations to resolve their own processing issues with respect to
the Year 2000 Problem in a timely manner could have a material adverse effect on
the Adviser's business. As of the date of this Statement of Additional
Information, the management of each of the Adviser, its investment advisory
subsidiaries and Pacific Investment Management believes that the transition to
the Year 2000 will not have a material adverse effect on its business or
operations. However, complications as yet unidentified may arise in internal or
external systems or with data providers, other securities firms or institutions,
issuers, counterparties or other entities or even with general economic
conditions related to the Year 2000 Problem. The Year 2000 problem may be
particularly acute with respect to foreign markets and securities of foreign
issuers in which the Funds invest due to a potential lack of Year 2000
compliance efforts in foreign markets or by foreign companies. Although the
Adviser's efforts and expenditures in connection with the Year 2000 Problem are
substantial, there can be no assurances that shareholders of the Funds and
Portfolios will not suffer from disruptions or adverse results arising as a
consequence of the Year 2000 Problem.
Compliance Efforts Related to the Euro
Another potential computer system problem may arise in conjunction with the
recent introduction of the euro. Whether introducing the euro to financial
companies' systems will be problematic is not fully known; however, the cost
associated with making systems recognize the euro is not currently expected to
be material.
Voting Rights
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. Shareholders may remove a person serving as Trustee
either by declaration in writing or at a meeting called for such purpose. The
Trustees are required to call a meeting for the purpose of considering the
removal of a person serving as Trustee if requested in writing to do so by the
holders of not less than 10% of the outstanding shares of the Trust. In the
event that such a request was made, the Trust has represented that it would
assist with any necessary shareholder communications. Shareholders of a class
of shares have different voting rights with respect to matters that affect only
that class.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). All classes of shares of the Funds and
Portfolios have identical voting rights except that each class of shares has
exclusive voting rights on any matter submitted to shareholders that relates
solely to that class, and has separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class. Each class of shares has exclusive voting rights with respect
to matters pertaining to any distribution or servicing plan or agreement
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 and 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 Funds and Portfolios, then only shareholders of the
Fund(s) or Portfolio(s) affected shall be entitled to vote on the matter. All
classes of shares of a Fund or Portfolio will vote together, except with respect
to the Distribution and Servicing Plan applicable to Class A, Class B or Class C
shares, to the Distribution or Administrative Services Plans applicable to
Administrative Class shares, to the Administration Agreement as applicable to a
particular class or classes, or when a class vote is required as specified above
or otherwise by the 1940 Act.
-101-
<PAGE>
The Trust's shares do not have cumulative voting rights. Therefore, the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
To avoid potential conflicts of interest, the 90/10 Portfolio, 60/40
Portfolio and 30/70 Portfolio will vote shares of each Underlying PIMCO Fund
which they own in proportion to the votes of all other shareholders in the
Underlying PIMCO Fund.
Certain Ownership of Trust Shares
As of October 5, 1999, the Trust believes that the Trustees and officers
of the Trust, as a group, owned less than one percent of each class of each Fund
and Portfolio and of the Trust as a whole. As of October 5, 1999, the
following persons owned of record or beneficially 5% or more of the noted class
of shares of the following Funds:
<TABLE>
<CAPTION>
SHARES OF PERCENT
BENEFICIAL OF
OWNERSHIP CLASS
-------------------- --------------
<S> <C> <C>
PIMCO EQUITY INCOME FUND
INSTITUTIONAL
Bank of New York Western Trust Co. 1,457,566.558 18.71%
as Trustee for
Pacific Life Insurance Company R.I.S.P.
700 S. Flower Street, 2nd Floor
Los Angeles, California 90017
AM Castle & Co Employees Pension Plan 1,135,389.199 14.57%
Equity Segment A/C #22-39912
P.O. Box 92956
Chicago, Illinois 60675-2956
Miter & Co. 831,019.074 10.67%
C/O Marshall & Ilsley Trust Co. (Plymouth Tube)
P.O. Box 2977
Milwaukee, Wisconsin 53201
Northern Trust Company as Trustee for 723,582.289 9.29%
Brush Wellman Inc.
P.O. Box 92956
Chicago, Illinois 60675-0001
Bank of America NT&SA as Trustee for 636,321.301 8.17%
Mazda Motor of America
P.O. Box 3577, Terminal Annex
Los Angeles, California 90051-1577
ADMINISTRATIVE
First Union National Bank ** 630,912.392 68.25%
401 S. Tyon Street, FRB-3
CMG Fiduciary Operations Funds Group
Mail Code CMG-2-1151
Charlotte, North Carolina 28288-1151
Invesco Trust Co. TTEE 150,895.226 16.32%
Pasco Acquisition Inc. & Affiliates 401k Plan
P.O. Box 77405
Atlanta, Georgia 30357
Invesco Trust Co. TTEE FBO 106,755.707 11.55%
Lykes Retirement Savings Plan
P.O. Box 77405
Atlanta, Georgia 30357
CLASS A
Carn & Co. ** 223,467.457 19.74%
USI Insurance Services Corporation
401(k) Plan
P.O. Box 96211
Washington, D.C. 20090-6211
Merrill Lynch Pierce Fenner & Smith Inc. ** 103,035.833 9.10%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Khosrow B. Semnani 82,009.123 7.24%
P.O. Box 3508
Salt Lake City, Utah 84110-3508
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 179,934.176 12.52%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 152,969.095 9.50%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
Charles Schwab & Co., Inc. - Reinvest ** 7,956.746 100.00%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO VALUE FUND
INSTITUTIONAL
Pacific Life Insurance Company 2,265,813.598 47.56%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
CMTA-GMPP & Allied Workers Pension Trust 632,170.416 13.27%
c/o Associated Third Party Administrator
1640 South Loop Road
Alameda, California 94502
BAC Local #19 Pension Trust 399,441.558 8.39%
Attn: Allied Administrators Inc.
777 Davis Street
San Francisco, California 94126-2500
Pacific Life Foundation 295,793.030 6.21%
Attn: Michele Myszka
700 Newport Center Drive
Newport Beach, California 92660-6307
California Race Track Association 287,616.098 6.04%
P.O. Box 60014
Arcadia, California 91006-6014
CLASS A
Teamsters Union Loc. No. 52 Pension Fund 276,817.492 18.80%
Attn: Dennis Vadini
3150 Chester Avenue
Cleveland, Ohio 44114
Merrill Lynch Pierce Fenner & Smith Inc. ** 122,410.254 8.31%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 469,808.558 19.93%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 429,817.969 8.26%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
PIMCO Advisors L.P. 715.391 65.20%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
Charles Schwab & Co., Inc. - Reinvest ** 381.798 34.80%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO VALUE 25 FUND
INSTITUTIONAL
First Presbyterian Church of Dallas 25,510.204 100.00%
408 Park Avenue
Dallas, Texas 75201
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc. ** 119,109.691 80.02%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Donaldson Lufkin Jenrette 10,712.440 7.20%
Securities Corporation Inc.**
P.O. Box 2052
Jersey City, New Jersey 07303-2052
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 15,830.188 12.66%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Bear Stearns Securities Corp. 6,401.256 5.13%
FBO 486-96987-14
1 MetroTech Center North
Brooklyn, New York 11201
Bear Stearns Securities Corp. 6,329.114 5.06%
FBO 486-21237-10
1 MetroTech Center North
Brooklyn, New York 11201
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 37,450.990 31.30%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
First Clearing Corporation 9,000.000 7.52%
A/C 7174-2814
Seymour Shlomchik MD IRA
WFS as Custodian
729 Canterbury Lane
Villanova, Pennsylvania 19085
John A. Rundall Trustee 7,092.199 5.93%
John A. Rundall Living Trust
U/A Dated 04/11/90
FBO John A. Rundall
2654 Hollyridge Drive
Los Angeles, California 90068
BSDT CUST IRA For the Benefit of 6,318.344 5.28%
Howard G. Wold
1002 City Park Blvd.
Alexandria, Louisiana 71301-5113
PIMCO SMALL CAP VALUE FUND
INSTITUTIONAL
Pacific Mutual Life Insurance Company 393,532.642 12.40%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
Little Company Of Mary Hospital 309,478.597 9.75%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, Pennsylvania 15230
Lucile Packard Foundation for Children 230,162.916 7.25%
725 Welch Road
Palo Alto, California 94304
Charles Schwab & Co., Inc. Rein** 202,674.771 6.39%
Attn: Mutual Funds Dept
101 Montgomery Street
San Francisco, California 94104-4122
ADMINISTRATIVE
National Financial Services Corporation for the 619,964.737 45.33%
Exclusive Benefit of Our Customers**
1 World Trade Center
200 Liberty Street
New York, New York 10281
First Union National Bank ** 307,642.600 22.49%
1525 West WT Harris Boulevard NC 1151
Charlotte, North Carolina 28288-1151
Wells Fargo Bank TTEE FBO 73,618.333 5.38%
Choicemaster (First Interstate)
P. O. Box 9800 Mutual Funds
Calabasas, California 91302-9800
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc. ** 2,226,975.286 27.96%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Norwest Bank MN NA 828,431.091 10.40%
Dain Rauscher Retirement Plan
#13281312 DTD 1/97
Attn: EBS MS 0035
510 Marquette, Suite 500
Minneapolis, Minnesota 55479-0035
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 1,410,256.142 24.12%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 1,447,431.158 20.97%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
FTC & Co. #022 440,409.270 6.38%
Attn: DATAlynx
P.O. Box 173736
Denver, Colorado 80217
PIMCO CAPITAL APPRECIATION FUND
INSTITUTIONAL
Donaldson Lufkin & Jenrette** 3,816,884.574 18.22%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303-2052
Charles Schwab & Co., Inc. - Reinvest ** 2,380,327.597 11.36%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
ADMINISTRATIVE
Invesco Trust Company FBO 2,131,382.888 25.84%
Reynolds & Reynolds 401k Plan
P. O. Box 77405
Atlanta, Georgia 30357
Certain Employee (Fidelity) ** 2,017,015.430 24.45%
100 Magetian KWIC
Covington, Kentucky 41015
New York Life Trust Company ** 1,608,830.688 19.50%
51 Madison Avenue, Room 117A
New York, New York 10010
First Union National Bank ** 1,055,508.220 12.79%
1525 West WT Harris Boulevard NC 1151
Charlotte, North Carolina 28288-1151
National Financial Services Corporation for ** 603,438.540 7.31%
the Exclusive Benefit of Our Customers
1 World Financial Center
200 Liberty Street
New York, New York 10281
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc. ** 687,938.566 20.85%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Carn & Co. 02087501 508,542.530 15.41%
American Yazaki Employee Savings
and Retirement Plan
Attn: Mutual Funds - Star
P. O. Box 96211
Washington, D.C. 20090-6211
Wachovia Bank FBO VIT Pension Plan 210,473.762 6.38%
Attn: Mutual Fund Department, 5th Floor
P. O. Box 27602
Richmond, Virginia 23261-7602
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 350,674.791 17.20%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 369,895.046 12.76%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
Charles Schwab & Co., Inc. - Reinvest.** 12,890.273 95.77%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO MID CAP GROWTH FUND
INSTITUTIONAL
Charles Schwab & Co., Inc. - Reinvest ** 6,396,732.633 24.07%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Norwest Bank Minnesota NA Custodian FBO 1,621,589.932 6.10%
Parkview Memorial Hospital
c/o Mutual Fund Processing
733 Marquette Avenue MS 0036
Minneapolis, Minnesota 55479-0036
ADMINISTRATIVE
Certain Employee (Fidelity) ** 2,064,711.424 42.45%
100 Magellan KW1C
Covington, Kentucky 41015
University of South Dakota Foundation 453,060.408 9.32%
P.O. Box 5555
Vermillion, South Dakota 57069-5555
UMB TTEE FBO Andrew Profit Sharing Trust 400,329.702 8.23%
JP Morgan/American Century
P.O. Box 419784
Kansas City, Missouri 64141
First Union National Bank ** 260,053.425 5.35%
1525 West WT Harris Boulevard NC 1151
Charlotte, North Carolina 28288-1151
New York Life Trust Company 257,952.033 5.30%
51 Madison Avenue
Room 117A
New York, New York 10010
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc. ** 2,633,051.976 47.70%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 679,591.939 19.19%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc. ** 657,998.399 15.06%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
Charles Schwab & Co., Inc. - Reinvest.** 19,384.108 99.28%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO MICRO CAP GROWTH FUND
INSTITUTIONAL
Charles Schwab & Co., Inc. - Reinvest.** 2,513,470.436 22.60%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Bost & Co. A/C DOMF 8526562 1,572,192.506 14.13%
Dominion Resources
Attn: Mutual Fund Operations
P. O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
University of Southern California 1,054,372.511 9.78%
Treasurer's Office
University Park, BKS 402
Los Angeles, California 90089-2541
Mac & Co. A/C OBRF 3331012 FBO 984,714.133 8.85%
Oberlin College
Attn: Mutual Fund Operations
P. O. Box 3198
Pittsburgh, Pennsylvania 15230-3198
Donald Lufkin & Jenrette** 917,973.955 8.25%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303
Mac & Co. A/C PNMF0550382 883,353.905 7.94%
Mellon Bank N.A.
Public Service of New Mexico
P. O. Box 3198
Mutual Funds Operations
Pittsburgh, Pennsylvania 15230-3198
First Bank N.A., Custodian 626,017.360 5.63%
Community Investment Group
St. Paul Foundation
Mutual Funds #10146497
P.O. Box 64010
St. Paul, Minnesota 55164
ADMINISTRATIVE
Northern Trust as Trustee for 80,488.203 55.47%
Sunday School Board
dba LifeWay Christian Resources
P.O. Box 92956
Chicago, Illinois 60675
New York Life Trust Company ** 58,331.052 40.20%
51 Madison Avenue, Room 117A
New York, New York 10010
PIMCO SMALL CAP GROWTH FUND
INSTITUTIONAL
The Jewish Federation of 1,279,573.170 20.62%
Metropolitan Chicago
One South Franklin Street, Room 625
Chicago, Illinois 60606-4609
DMNH Foundation 779,461.357 12.56%
2001 Colorado Blvd.
City Park
Denver, Colorado 00008-0205
Berklee College of Music, Inc. 595,741.955 9.60%
1140 Boylston Street
Boston, Massachusetts 02215-3693
Pacific Mutual Life Insurance Company 565,810.463 9.12%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
ESOR & Co. A/C 1-429-144-9 473,581.005 7.63%
Associated Bank Green Bay
Trust Operations Dept.
P. O. Box 19006
Green Bay, Wisconsin 54307-9006
Employees Retirement System of Jersey City 450,434.028 7.26%
325 Palisade Avenue
Jersey City, New Jersey 07307-1714
Northern Trust TTEE FBO 335,793.358 5.41%
Consolidated Cigar Inc.
Master Pension Trust 22-02096
P.O. Box 92956
Chicago, Illinois 60675
PIMCO CORE EQUITY FUND
INSTITUTIONAL
PIMCO Advisors L.P. 40,225.261 74.66% *
800 Newport Center Dr., 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
National Financial Services Corp. for 9,149.532 16.98%
Exclusive Benefit of their Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Donaldson Lufkin & Jenrette 3,255.072 6.04%
Pershing Division
P.O. Box 2052
Jersey City, New Jersey 07303
ADMINISTRATIVE
PIMCO Advisors L.P. 461.894 60.73%
800 Newport Center Dr., 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
National Financial Services Corp. 189.331 24.89%
for Exclusive Benefit of our Customers**
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Norwest Bank MN NA 107.073 14.08%
FBO Hanna & Morton LLP Emp. 401K
2700 Snelling Avenue, Suite 300
Minneapolis, Minnesota 55479
PIMCO MID CAP EQUITY FUND
INSTITUTIONAL
Pacific Mutual Life Insurance Company 171,501.575 50.83% *
700 Newport Center Drive
Newport Beach, California 92660
IFTC as Custodian for 85,615.824 25.38% *
John W. Barnum
5175 Tilden Street, N.W.
Washington, D.C. 20016-1961
PIMCO Advisors L.P. 63,451.777 18.81%
800 Newport Center Dr., 6th Floor
Attn: Jesse Jue
Newport Beach, California 92660
PIMCO ENHANCED EQUITY FUND
INSTITUTIONAL
Pacific Mutual Life Insurance Company 1,590,812.141 48.40% *
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach, California 92660
CMTA-GMPP & Allied Workers Pension 444,286.138 13.52%
c/o Associated Third Party Administrator
1640 South Loop Road
Alameda, California 94502
BAC Local #19 Pension Trust 280,723.478 8.54%
Attn: Allied Administrators Inc.
777 Davis Street
San Francisco, California 94126-2500
Pacific Life Foundation 207,951.688 6.33%
700 Newport Center Drive
Newport Beach, California 92660
California Race Track Association 202,206.751 6.15%
P.O. Box 60014
Arcadia, California 91006-6014
PIMCO TARGET FUND
INSTITUTIONAL CLASS
90/10 Portfolio 39,643.576 47.53%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 35,683.436 42.78%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
30/70 Portfolio 8,062.113 9.67%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 1,354,497.730 15.12%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,603,363.967 33.50%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 13,286,953.110 24.74%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO PRECIOUS METALS FUND
CLASS A
USA Petroleum Assurance Corp. 368,947.990 26.08%
30101 Agoura Ct., Suite 200
Agoura Hills, California 91301
Woodland Investments Limited 324,415.205 22.93%
C/O Lyle Schlyer
30101 Agoura Ct., Suite 212
Agoura Hills, California 91301
Raymond James & Associates Inc. CSDN 89,928.058 6.36%
T. L. Cloar, Jr. IRA
3502 Grand Rock Circle
Birmingham, Alabama 35223
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 282,022.869 12.06%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
Bexhill Limited 147,474.898 6.30%
P.O. Box 2097 GT
Cayman Islands, BWI
PIMCO RENAISSANCE FUND
INSTITUTIONAL CLASS
National Investor Services Corp. 7,373.786 99.05%
for the Exclusive Benefit of our Customers**
55 Water Street, 32nd Floor
New York, New York 10041
ADMINISTRATIVE
Chase Manhattan Bank TTEE FBO 35,635.064 100.00%
MetLife Defined Contribution Group
770 Broadway, 10th Floor
New York, New York 10003
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 671,345.308 14.20%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,389,423.969 19.83%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 3,387,002.663 14.15%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
National Investor Services Corp. 1,777.541 54.75%
for the Exclusive Benefit of our Customers
55 Water Street, 32nd Floor
New York, New York 10041
Charles Schwab & Co., Inc. - Reinvest.** 873.795 26.91%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO Advisors L.P. 595.238 18.33%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
PIMCO GROWTH FUND
INSTITUTIONAL CLASS
90/10 Portfolio 16,584.986 47.34%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 14,735.848 42.06%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
30/70 Portfolio 3,326.395 9.50%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
ADMINISTRATIVE CLASS
Chase Bank of Texas, N.A. Trustee 232,277.948 58.83%
1111 Fannin, 10th Floor
Houston, Texas 77002
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 427,637.524 6.86%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 1,126,295.317 26.02%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 7,927,734.101 12.45%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO OPPORTUNITY FUND
INSTITUTIONAL CLASS 151,577.183 88.55%
LaSalle Bank, N.A., Custodian
AMFAC - 408039428
P.O. Box 1443
Chicago, Illinois 60690
90/10 Portfolio 9,317.505 5.44%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
ADMINISTRATIVE CLASS
Chase Bank of Texas, N.A., Trustee 175,152.501 69.76%
1111 Fannin, 10th Floor
Houston, Texas 77002
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 601,463.726 15.70%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
American Express Trust Company 375,129.190 9.79%
FBO WESCO Distribution Inc.
Retirement Savings Plan
733 Marquette Avenue
Minneapolis, Minnesota 55402-2309
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 2,651,692.429 22.08%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO INNOVATION FUND
INSTITUTIONAL CLASS
Alpine Trust & Asset Management 19,249.701 48.38%
225 North 5th Street
Grand Junction, Colorado 81501
IFTC Custodian 6,461.305 16.24%
Jay R. Jackson (IRA)
1540 Kentwood Lane
York, Pennsylvania 17403
Kuntala Sinha
10 Colonial Drive 3,672.889 9.23%
Upper Brookville, New York 11545
Friedmar & Co. 3,055.301 7.68%
C/O The Mechanics Bank
Trust Operations Department
3170 Hilltop Mall Road
Richmond, California 94806
Robert L. Hamilton TTEE 2,477.246 6.23%
Under Intervivos Trust
DTD 11/14/68
800 15th Street
Bellingham, Washington 98225
IFTC Custodian 2,226.575 5.60%
IRA R/O Robert L. Hamilton
800 15th Street
Bellingham, Washington 98225
Hamilton Limited Partnership 2,149.264 5.40%
800 15th Street
Bellingham, Washington 98225
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 1,582,075.367 16.68%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 2,110,260.132 18.23%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 2,722,148.797 15.35%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
Charles Schwab & Co., Inc. - Reinvest.** 474,836.781 93.45%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO INTERNATIONAL FUND
INSTITUTIONAL
90/10 Portfolio 171,402.367 47.72%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
60/40 Portfolio 153,234.890 42.66%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
30/70 Portfolio 34,563.901 9.62%
PIMCO Funds Asset Allocation Series
800 Newport Center Drive
Newport Beach, California 92660
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 77,519.917 5.68%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 91,880.510 11.71%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 931,493.098 10.94%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PIMCO INTERNATIONAL GROWTH FUND
INSTITUTIONAL
PIMCO Advisors L.P. 284,252.416 50.69% *
Attn: Jesse Jue
800 Newport Center Drive, 6th Floor
Newport Beach, CA 92660
Pacific Asset Management LLC 154,920.333 27.62% *
700 Newport Center Drive
Newport Beach, California 92660-6307
Charles Schwab & Co., Inc. - Reinvest.** 116,206.550 20.72%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
PIMCO STRUCTURED EMERGING MARKETS FUND
INSTITUTIONAL
Rhode Island Foundation 895,124.811 23.83%
Attn: Michael Jenkenson
70 Elm Street
Providence, Rhode Island 02903
Berklee College of Music, Inc. 526,744.087 14.02%
1140 Boylston Street
Boston, Massachusetts 02215-3693
Hartford Foundation 335,941.996 8.94%
159 E. Main Street
Rochester, New York 14638
Munsen-Williams-Proctor Institute 297,905.432 7.93%
Attn: Anthony Spiridigloizzi
310 Genesee Street
Utica, New York 13502
The Reeves Foundation 268,739.950 7.15%
115 Summit Avenue
Summit, New Jersey 07901
Deseret Mutual Retiree Med. & Life Pl. Tr. 247,821.868 6.60%
c/o Doug Burton
60 East South Temple Street
Salt Lake City, Utah 84147
Brockton Health Corp. Endowment 208,235.989 5.54%
Attn: Steven Connolly
680 Centre Street
Brockton, Massachusetts 02402-3395
PIMCO TAX-EFFICIENT EQUITY FUND
ADMINISTRATIVE
Centurion Trust Company 1,204,669.332 76.78% *
FBO Omnibus/Centurion Capital Management
2425 EB Camelback Road, Suite 530
Phoenix, Arizona 85016
CLASS A
Merrill Lynch Pierce Fenner & Smith Inc.** 69,116.411 11.01%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
NFSC FEBO #0C8-332321 49,164.208 7.83%
The Robb Charitable Trust
Richard A. Robb
U/A 09/04/1990
56 Pilgrim Road
Marblehead, Massachusetts 01945-1750
LEWCO Securities Corp. 42,824.236 6.82%
FBO A/C #H10-690959-1-01
34 Exchange Place, 4th Floor
Jersey City, New Jersey 07311
Dain Rauscher Inc. FBO 36,701.381 5.85%
Michael G. King and Elizabeth W. King
Long Term Account JT TEN/WROS
14800 164th Place N.E.
Seattle, WA 98101
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc.** 151,550.195 20.68%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS C
Merrill Lynch Pierce Fenner & Smith Inc.** 295,454.421 25.45%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
CLASS D
PIMCO Advisors L.P. 932.836 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
PIMCO TAX-EFFICIENT STRUCTURED EMERGING MARKETS FUND
INSTITUTIONAL
Alscott Investments, LLC 994,743.878 16.81%
501 Baybrook Court
Boise, Idaho 83706
Rede & Company (Weyerhaeuser) 810,937.720 13.71%
4380 S.W. Macadam, Suite 450
Portland, Oregon 97201
Waycrosse, Inc./International Equity Fund II 624,830.101 10.56%
P. O. Box 9300, MS 28
Minneapolis, Minnesota 55440-9300
Ruby Trust 588,903.067 9.95%
499 Park Avenue
New York, New York 10022
Charles Schwab & Co., Inc. - Reinvest.** 539,775.231 9.12%
The Schwab Building
101 Montgomery Street
San Francisco, California 94104-4122
Alscott Investments, LLC 479,994.043 8.11%
501 Baybrook Court
Boise, Idaho 83706
Topaz Trust 348,346.312 5.89%
499 Park Avenue
New York, New York 10022
30/70 PORTFOLIO
INSTITUTIONAL
PIMCO Advisors L.P. 1,016.305 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
CLASS A
Stuart B. Crawford & Virginia Crawford 7,327.728 14.09%
JT TEN WROS NOT TC
4929 Whitcomb Drive
Madison, Wisconsin 53711
Donaldson Lufkin Jenrette 6,843.885 13.16%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
Donaldson Lufkin Jenrette 5,429.257 10.44%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
Mei W. Quinn 4,432.415 8.52%
TOD Howard Wong and Tom E. McGrath
Subject to FDISG TOD Rules
2425 W. New Street
Blue Island, Illinois 60406
Prudential Securities Inc. FBO 3,199.285 6.15%
Mrs. Eunice F. Iverson TREE
Eunice Iverson REV LIV TR
UA DTD 10/13/92
850 Novelly Drive
Reno, Nevada 89503
Charles Baumstark and Daniel Baumstark TTEES 2,918.589 5.61%
Hermann Lumber Company Pension Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
CLASS B
BSDT CUST IRA 23,212.938 13.29%
FBO Miriam P. Squillace
1941 E. River Road
Livingston, Montana 59047-9146
Merrill Lynch Pierce Fenner & Smith Inc. ** 23,102.853 13.23%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
A. G. Edwards & Sons, Inc. C/F 19,294.837 11.05%
Dr. James R. Drake
IRA Account
3004 Brownwood Drive
Chattanooga, Tennessee 37404-6309
Janney Montgomery Scott, Inc. 13,925.510 7.98%
A/C 1021-6717
Joseph L. Abriola & Gloria C. Abriola JT TEN
1801 Market Street
Philadelphia, Pennsylvania 19103-1675
N. F. Verratti, Inc. 9,897.955 5.67%
Profit Sharing Plan DTD 1-1-1983
Nicholas F. Verratti, Jr. TTEE
450 Knowlton Road
Media, Pennsylvania 19063
Joseph L. Abriola (IRA) 8,951.303 5.13%
JMS Inc. CUST FBO
A/C 1021-6665
2 Steeplechase Lane
Blue Bell, Pennsylvania 19422-2460
CLASS C
John P. Bohlman TTEE 44,655.717 8.63%
U/A DTD Feb. 24, 1973
Bohlman Drug Store Inc. PSP
1028 Wisconsin Ave.
Boscobel, Wisconsin 53805
First Clearing Corporation 31,705.579 6.13%
A/C 3766-7636
Louis D. Gura IRA
WFS As Custodian
85 Dogwood Terrace
Ramsey, New Jersey 07446
90/10 PORTFOLIO
INSTITUTIONAL
PIMCO Advisors L.P. 916.590 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
CLASS A
Charles Baumstark and Daniel Baumstark TTEES 16,469.254 24.72%
Herman Lumber Company Pension Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
CLASS B
Donaldson Lufkin Jenrette 8,883.347 5.68%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
60/40 PORTFOLIO
INSTITUTIONAL
PIMCO Advisors L.P. 963.806 100.00%
Attn: Vinh Nguyen
800 Newport Center Drive
Newport Beach, California 92660
CLASS A
Charles Baumstark and Daniel Baumstark TTEES 66,763.874 30.73%
Herman Lumber Company Pension Plan DTD 1/1/99
603 Market Street, P.O. Box 500
Hermann, Missouri 65041
BSDT CUST Rollover IRA FBO 37,996.882 17.49%
Edmund A. Louie
1165 Corvallis Drive
San Jose, California 95120
Christine A. Dudenhoeffer & 14,031.800 6.46%
David C. Klos TTEE
Owensville Lumber Co., Inc. 401K Plan
FBO Plan Participants
1010 Hwy 28 West, P.O. Box 530
Owensville, Missouri 65066
Donaldson Lufkin Jenrette 11,430.398 5.26%
Securities Corporation Inc.
P.O. Box 2052
Jersey City, New Jersey 07303
CLASS B
Merrill Lynch Pierce Fenner & Smith Inc. ** 20,201.388 5.96%
Attn: Book Entry Department
4800 Deer Lake Drive E., Fl. 3
Jacksonville, Florida 32246-6484
PaineWebber For the Benefit of 18,601.996 5.48%
PaineWebber FBO
Elizabeth B. Stoeffler
P.O. Box 3321
Weehawken, New Jersey 07087-8154
CLASS C
John H. & Susan Hutchison TTEES 90,291.419 9.43%
Jack & Susan Hutchison Living TR
DTD 10/30/1985
2441 Bayshore Drive
Newport Beach, California 92663
Jeffrey L. E. B. Morse 48,758.189 5.09%
P.O. Box 127
Sextonville, Wisconsin 53584
</TABLE>
_____________________________________________
* Entity owned 25% or more of the outstanding shares of beneficial interest of
the Fund, and therefore may be presumed to "control" the Fund, as that term is
defined in the 1940 Act.
** Shares are believed to be held only as nominee.
Custodian
Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for assets of all Funds and Portfolios.
Pursuant to a separate sub-custody agreement between IFTC and State Street Bank
and Trust Company ("State Street"), State Street serves as subcustodian of the
Trust for the custody of the foreign securities acquired by those Funds that
invest in foreign securities. Under the agreement, State Street may hold
foreign securities at its principal offices and its branches, and subject to
approval by the Board of Trustees, at a foreign branch of a qualified U.S. bank,
with an eligible foreign subcustodian, or with an eligible foreign securities
depository.
Pursuant to rules or other exemptions under the 1940 Act, the Trust may
maintain foreign securities and cash in the custody of certain eligible foreign
banks and securities depositories. Selection of these foreign custodial
institutions is currently made by the Board of Trustees following a
consideration of a number of factors, including (but not limited to) the
reliability and financial stability of the institution; the ability of the
institution to perform capably custodial services for the Trust; the reputation
of the institution in its national market; the political and economic stability
of the country in which the institution is located; and further risks of
potential nationalization or expropriation of Trust assets, although the
Trustees reserve the right to delegate their selection responsibilities in light
of recent amendments to Rule 17f-5 under the 1940 Act, in which case the factors
for consideration would differ from those
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referenced above. Currently, the Board of Trustees reviews annually the
continuance of foreign custodial arrangements for the Trust, but reserves the
right to discontinue this practice as permitted by the recent amendments to Rule
17f-5. No assurance can be given that the Trustees' appraisal of the risks in
connection with foreign custodial arrangements will always be correct or that
expropriation, nationalization, freezes, or confiscation of assets that would
impact assets of the Funds will not occur, and shareholders bear the risk of
losses arising from these or other events.
Independent Accountants
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, Missouri 64105, serves
as the independent public accountants for the Funds and Portfolios.
PricewaterhouseCoopers LLP provides audit services, accounting assistance, and
consultation in connection with SEC filings.
Transfer and Shareholder Servicing Agents
First Data Investor Services Group, Inc., P.O. Box 9688, Providence, Rhode
Island 02940, serves as the Transfer and Shareholder Servicing Agent for the
Trust's Class A, Class B, Class C and Class D shares. National Financial Data
Services, 330 West 9th Street, 4th Floor, Kansas City, Missouri 64105, serves
as the Transfer Agent for the Trust's Institutional and Administrative Class
shares.
Legal Counsel
Ropes & Gray, One International Place, Boston, Massachusetts 02110 serves as
legal counsel to the Trust.
Registration Statement
This Statement of Additional Information and the Prospectuses do not contain
all of the information included in the Trust's registration statements filed
with the SEC under the 1933 Act with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statements, including the exhibits
filed therewith, may be examined at the offices of the SEC in Washington, D.C.
Statements contained herein and in the Prospectuses as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other documents
filed as an exhibit to the relevant registration statement, each such statement
being qualified in all respects by such reference.
Financial Statements
Audited financial statements for the Funds to be provided in a subsequent
post-effective amendment to be filed prior to the effective date of this
Amendment.
Audited financial statements for the Funds, as of June 30, 1999, for the
fiscal year then ended, including notes thereto, and the reports of
PricewaterhouseCoopers LLP thereon, each dated August 13, 1999, are incorporated
by reference from the Trust's five June 30, 1999 Annual Reports. One Annual
Report (the "Retail Annual Report") corresponds to the Class A, B and C
Prospectus, another (the "Institutional Annual Report") corresponds to the
Institutional Prospectus, another (the "Class D Annual Report") corresponds to
the Class D Prospectus, another (the "Retail Portfolio Annual Report")
corresponds to the Retail Portfolio Prospectus and the fifth (the "Institutional
Portfolio Annual Report") corresponds to the Institutional Portfolio Prospectus.
The Trust's June 30, 1999 Annual Reports were filed electronically with the SEC
on September 9, 1999 (Accession No. 0001017062-99-001593).
Unaudited financial statements for the Funds and Portfolios, as of December
31, 1998, for the semi-annual period then ended, including notes thereto, are
incorporated by reference from the Trust's four December 31, 1998
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<PAGE>
Semi-Annual Reports. One Semi-Annual Report (the "Retail Semi-Annual Report")
corresponds to the Class A, B And C Prospectus, another (the "Institutional
Semi-Annual Report") corresponds to the Institutional Prospectus, another (the
"Class D Semi-Annual Report") corresponds to the Class D Prospectus and the
fourth (the "Retail Portfolio Semi-Annual Report") corresponds to the Retail
Portfolio Prospectus. The Trust's December 31, 1998 Semi-Annual Reports are on
file electronically with the SEC (Retail Semi-Annual Report - filed on March 9,
1999, Accession No. 0001017062-99-000418; Institutional Semi-Annual Report -
filed on March 9, 1999, Accession No. 0001017062-99-000419; Class D Semi-Annual
Report -filed on March 9, 1999, Accession No. 0001017062-99-000423; Retail
Portfolio Semi-Annual Report - filed on March 9, 1999, Accession No. 0001017062-
99-000421). The Portfolios did not offer Institutional Class or Administrative
Class shares during the reporting period ended December 31, 1998.
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APPENDIX
DESCRIPTION OF SECURITIES RATINGS
Certain of the Funds make use of average portfolio credit quality standards
to assist institutional investors whose own investment guidelines limit their
investments accordingly. In determining a Fund's overall dollar-weighted
average quality, unrated securities are treated as if rated, based on the
Adviser's or Sub-Adviser's view of their comparability to rated securities. A
Fund's use of average quality criteria is intended to be a guide for those
investors whose investment guidelines require that assets be invested according
to comparable criteria. Reference to an overall average quality rating for a
Fund does not mean that all securities held by the Fund will be rated in that
category or higher. A Fund's investments may range in quality from securities
rated in the lowest category in which the Fund is permitted to invest to
securities rated in the highest category (as rated by Moody's or S&P or, if
unrated, determined by the Adviser or a Sub-Adviser to be of comparable
quality). The percentage of a Fund's assets invested in securities in a
particular rating category will vary. Following is a description of Moody's and
S&P's ratings applicable to fixed income securities.
Moody's Investors Service, Inc.
Corporate and Municipal Bond Ratings
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than with Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present that suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
A-1
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C: Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classified from Aa through B in its corporate bond rating system. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
Corporate Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations which have an original maturity not
exceeding one year. Obligations relying upon support mechanisms such as letters
of credit and bonds of indemnity are excluded unless explicitly rated.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Services
Corporate and Municipal Bond Ratings
Investment Grade
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
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<PAGE>
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions, or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
Speculative Grade
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC- debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on the
likelihood
A-3
<PAGE>
of, or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
r: The "r" is attached to highlight derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks. Examples of such obligations are:
securities whose principal or interest return is indexed to equities,
commodities, or currencies; certain swaps and options; and interest only and
principal only mortgage securities.
The absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.
N.R.: Not rated.
Debt obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.
Commercial Paper Rating Definitions
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into several categories, ranging from A for the
highest quality obligations to D for the lowest. These categories are as
follows:
A-1: This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B: Issues rated B are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell or hold
a security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished to
Standard & Poor's by the issuer or obtained from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information.
A-4
<PAGE>
PIMCO Funds Shareholders' Guide
for Class A, B and C Shares
November 1, 1999
This Guide relates to the mutual funds (each, a "Fund") that are series of PIMCO
Funds: Multi-Manager Series (the "MMS Trust") and PIMCO Funds: Pacific
Investment Management Series (the "PIMS Trust" and, together with the MMS Trust,
the "Trusts"). Unless otherwise indicated, references to the Funds include the
PIMCO Funds Asset Allocation Series portfolios (each, a "Portfolio") and PIMCO
Funds: Municipal Bond Series (each, a "Municipal Bond Fund"). The Portfolios are
so called "funds-of-funds" which are also series of the MMS Trust, but are
offered through a separate prospectus. The Municipal Bond Funds are series of
the PIMS Trust, but are also offered through a separate prospectus. The MMS
Trust, the PIMS Trust, the Portfolios and Municipal Funds each offer Class A, B
and C shares of their respective Funds in separate prospectuses (each, a "Retail
Prospectus").
This Guide contains detailed information about Fund purchase, redemption and
exchange options and procedures and other information about the Funds. This
Guide is not a prospectus, and should be used in conjunction with the applicable
Retail Prospectus. This Guide, and the information disclosed herein, is
incorporated by reference in, and considered part of, each Retail Prospectus.
PIMCO Funds Distributors LLC distributes the Funds' shares. You can call PIMCO
Funds Distributors LLC at 1-800-426-0107 to find out more about the Funds and
other funds in the PIMCO Funds family. You can also visit our Web site at
www.pimcofunds.com.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
How to Buy Shares...................................................... SG-3
Alternative Purchase Arrangements...................................... SG-8
Exchange Privilege..................................................... SG-21
How to Redeem.......................................................... SG-23
</TABLE>
SG-2
<PAGE>
How to Buy Shares
Class A, Class B and Class C shares of each Fund are continuously offered
through the Trusts' principal underwriter, PIMCO Funds Distributors LLC (the
"Distributor") and through other firms which have dealer agreements with the
Distributor ("participating brokers") or which have agreed to act as
introducing brokers for the Distributor ("introducing brokers"). The
Distributor is a wholly owned subsidiary of PIMCO Advisors L.P. ("PIMCO
Advisors"), the investment adviser to the Funds that are series of the MMS
Trust, and an affiliate of Pacific Investment Management Company ("Pacific
Investment Management"), the investment adviser to the Funds that are series of
the PIMS Trust. PIMCO Advisors and Pacific Investment Management are each
referred to herein as an "Adviser."
There are two ways to purchase Class A, Class B or Class C shares: either
(i) through your dealer or broker which has a dealer agreement with the
Distributor or (ii) 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). Class A, Class B and Class C
shares of the Short Duration Municipal Income, California Intermediate Municipal
Bond and New York Intermediate Municipal Bond Funds are not offered as of the
date of this Guide; however, investment opportunities in these Funds may be
available in the future.
Shares may be purchased at a price equal to their net asset value per share
next determined after receipt of an order, plus a sales charge which, at the
election of the purchaser, may be imposed either (i) at the time of the purchase
in the case of Class A shares (the "initial sales charge alternative"), (ii)
on a contingent deferred basis in the case of Class B shares (the "deferred
sales charge alternative") or (iii) by the deduction of an ongoing asset based
sales charge in the case of Class C shares (the "asset based sales charge
alternative"). In certain circumstances, Class A and Class C shares are also
subject to a Contingent Deferred Sales Charge ("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 on a regular business day are processed at that day's offering price.
However, orders received by the Distributor from dealers or brokers after the
offering price is determined 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 discretion, may accept or reject any
order for purchase of Fund shares. The sale of shares will be suspended during
any period in which the New York Stock Exchange is closed for other than
weekends or holidays, or, if permitted by the rules of the Securities and
Exchange Commission, when trading on the New York Stock Exchange is restricted
or during an emergency which makes it impracticable for the Funds to
SG-3
<PAGE>
dispose of their securities or to determine fairly the value of their net
assets, 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 "Alternative Purchase Arrangements--Sales at Net Asset
Value," the minimum initial investment in Class A, Class B or Class C shares of
any Fund is $2,500, and the minimum additional investment is $100 per Fund. For
information about dealer commissions, see "Alternative Purchase Arrangements"
below. Persons selling Fund shares may receive different compensation for
selling Class A, Class B or Class C shares. Normally, Fund shares purchased
through participating brokers are held in the investor's account with that
broker. No share certificates will be issued unless specifically requested in
writing by an investor or broker-dealer.
Direct Investment
Investors who wish to invest in Class A, Class B or Class C shares of a
Fund 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
purchase, redemption, dividend reinvestment, exchange or transfer of Fund
shares, including the total number of Fund 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" in the applicable Retail Prospectus. Information regarding
direct investment or any other features or plans offered by the Trusts may be
obtained 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 9688
Providence, RI 02940-0926
Purchases are accepted subject to collection of checks at full value and
conversion into federal funds. Payment by a check drawn on any member of the
Federal Reserve System can normally be converted into federal funds within two
business days after receipt of the check. Checks drawn on a non-member bank may
take up to 15 days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the purchase order
and check are accepted, even though the check may not yet have been converted
into federal funds.
SG-4
<PAGE>
Subsequent Purchases of Shares
Subsequent purchases of Class A, Class B or Class C shares can be made as
indicated above by mailing a check with a letter describing the investment or
with the additional investment portion of a confirmation statement. Except for
subsequent purchases through the PIMCO 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-Qualified Retirement Plans
The Distributor makes available retirement plan services and documents for
Individual Retirement Accounts (IRAs), including Roth IRAs, for which Boston
Safe Deposit & Trust Company serves as trustee and for IRA Accounts established
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 Employee Pension Plan (SAR/SEP) IRA and SIMPLE IRA
accounts and prototype documents. In addition, prototype documents are available
for establishing 403(b)(7) custodial accounts with Boston Safe Deposit & Trust
Company 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 aggregate investments in the Trust, and are subject to the small
account fees described below that will apply to other plans. Investors 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 consult their broker about similar types of accounts that may be
offered 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 subsequent investment is $100. The minimum
initial investment for employer-sponsored plans, SIMPLE IRAs, SEPs and SAR/SEPs
and the minimum subsequent investment per Fund for all such plans is $50.
PIMCO Funds Auto-Invest
The PIMCO Funds Auto-Invest plan provides for periodic investments into the
shareholder's account with the Trust by means of automatic transfers of a
designated amount from the shareholder's bank account. 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 minimum 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 participating brokers. You may enroll by
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<PAGE>
completing the appropriate section on the account application, or you may obtain
an Auto-Invest application by calling the Distributor or your broker.
PIMCO Funds Auto-Exchange
The PIMCO Funds Auto-Exchange plan establishes regular, periodic exchanges
from one Fund account to another Fund account. The plan provides for regular
investments into a shareholder's account in a specific Fund by means of
automatic exchanges of a designated amount from another Fund account of the same
class of shares and with identical account registration.
Exchanges 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 purchased through the plan.
Further information regarding the PIMCO Funds Auto-Exchange plan is
available from the Distributor at 1-800-426-0107 or participating brokers. You
may enroll by completing an application which may be obtained from the
Distributor or by telephone request at 1-800-426-0107. For more information on
exchanges, see "Exchange Privilege."
PIMCO Funds Fund Link
PIMCO Funds Fund Link ("Fund Link") connects your Fund account(s) with a
bank account. Fund Link may be used for subsequent purchases and for redemptions
and other transactions described under "How to Redeem." Purchase transactions
are effected by electronic funds transfers from the shareholder's account at a
U.S. bank or other financial institution that is an Automated Clearing House
("ACH") member. Investors may use Fund Link to make subsequent purchases of
shares in amounts from $50 to $10,000. To initiate such purchases, call 1-800-
426-0107. All such calls will be recorded. Fund Link is normally established
within 45 days of receipt of a Fund Link application by First Data Investor
Services Group, Inc. (the "Transfer Agent"), the Funds' transfer agent for
Class A, B and C shares. The minimum investment by Fund Link is $50 per Fund.
Shares will be purchased on the regular business day the Distributor receives
the funds through the ACH system, provided the funds are received before the
close of regular trading on the New York Stock Exchange. If the funds are
received after the close of regular trading, the shares will be purchased on the
next regular business day.
Fund Link privileges must be requested on the account application. To
establish Fund Link on an existing account, complete a Fund Link application,
which is available from the Distributor or your broker, with signatures
guaranteed from all shareholders of record for the account. See "Signature
Guarantee" below. Such privileges apply to each shareholder of record for the
account unless and until the Distributor receives written instructions from a
shareholder of record canceling such privileges. Changes of bank account
information must be made by completing a new Fund Link application signed by all
owners of record of the account, with all signatures guaranteed. The
Distributor, the Transfer Agent and the Fund may rely on any telephone
instructions believed to be genuine and will not be responsible to shareholders
for any damage, loss or expenses arising out of such instructions. The Fund
SG-6
<PAGE>
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.
Signature Guarantee
When a signature guarantee is called for, the shareholder should have
"Signature Guaranteed" stamped under his signature and guaranteed by any of
the following entities: U.S. banks, foreign banks having a U.S. correspondent
bank, credit unions, savings associations, U.S. registered dealers and brokers,
municipal securities dealers and brokers, government securities dealers and
brokers, national securities exchanges, registered securities associations and
clearing agencies (each an "Eligible Guarantor Institution"). The Distributor
reserves the right to reject any signature guarantee pursuant to its written
signature guarantee standards or procedures, which may be revised in the future
to permit it to reject signature guarantees from Eligible Guarantor Institutions
that do not, based on credit guidelines, satisfy such written standards or
procedures. The Funds may change the signature guarantee requirements from time
to time upon notice to shareholders, which may be given by means of a new or
supplemented Retail Prospectus.
Account Registration Changes
Changes in registration or account privileges may be made in writing to the
Transfer Agent. Signature guarantees may be required. See "Signature
Guarantee" above. All correspondence must include the account number and must
be sent to:
PIMCO Funds Distributors LLC
P.O. Box 9688
Providence, RI 02940-0926
Small Account Fee
Because of the disproportionately high costs of servicing accounts with low
balances, a fee at an annual rate of $16 (paid to the applicable Fund's
administrator) will automatically be deducted from direct Fund accounts with
balances falling below a minimum level. The valuation of Fund 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 Fund
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. The fee also
applies 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 Fund account of a
shareholder if the aggregate value of all of the shareholder's Fund accounts is
at least $50,000. No small account fee will be charged to employee and employee-
related accounts of PIMCO Advisors and/or its affiliates.
Minimum Account Size
SG-7
<PAGE>
Due to the relatively high cost to the Funds of maintaining small accounts,
you are asked to maintain an account balance in each Fund in which you invest of
at least the amount necessary to open the type of account involved. If your
balance for any Fund is below such minimum for three months or longer, the
applicable Fund's administrator shall have the right (except in the case of
employer-sponsored retirement accounts) to close that Fund account after giving
you 60 days in which to increase your balance. Your Fund account 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 aggregate value of all your accounts in PIMCO
Funds exceeds $50,000.
Alternative Purchase Arrangements
The Funds offer investors Class A, Class B and Class C shares in the
applicable Retail Prospectus. Class A, B and C shares bear sales charges in
different forms and amounts and bear different levels of expenses, as described
below. Through separate prospectuses, certain of the Funds currently offer up to
three additional classes of shares in the United States: 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, foundations, corporations and other high net worth individuals.
Class D, Institutional Class and Administrative Class shares are sold without 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 Administrative Class shares are generally expected to
achieve higher investment returns than Class A, Class B or Class C shares.
Certain Funds also offer up to two additional classes of shares that are offered
only to non-U.S. investors outside the United States: Class J and Class K
shares. To obtain more information about the other classes of shares, please
call the applicable Trust at 1-800-927-4648 (for Institutional and
Administrative Class shares) or the Distributor at 1-888-87-PIMCO (for Class D
shares).
The alternative purchase arrangements described in this Guide 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,
including the amount and intended length of the investment, the particular Fund
and whether the investor intends to exchange shares for shares of other Funds.
Generally, when making an investment decision, investors should consider the
anticipated life of an intended investment 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 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 applicable to such shares. Similar
reductions are not available on the contingent deferred sales charge alternative
(Class B) or the asset based sales charge alternative (Class C). Class A shares
are subject to a servicing fee but are not subject to a distribution fee and,
SG-8
<PAGE>
accordingly, such shares are expected to pay correspondingly higher dividends on
a per share basis. However, because initial sales charges are deducted at the
time of purchase, not all of the purchase payment for Class A shares is invested
initially. Class B and Class C shares might be preferable to investors who wish
to have all purchase payments invested initially, although remaining subject to
higher distribution and servicing fees and, for certain periods, being subject
to a 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 Alternative--Class A Shares--Class A Deferred Sales
Charge" below.
Class B Class B shares might be preferred by investors who intend to invest in
the Funds for longer periods and who do not intend to purchase shares of
sufficient aggregate value to qualify for sales charge reductions applicable to
Class A shares. Both Class B and Class C shares can be purchased at net asset
value without an initial sales charge. However, unlike Class C shares, Class B
shares convert into Class A shares after the shares have been held for seven
years. After the conversion takes place, the shares will no longer be subject to
a 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 maintain their investment in the Funds for long periods. See "Asset Based
Sales Charge Alternative--Class C Shares" below.
In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a 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 a Fund is $249,999. The
maximum single purchase of Class C shares of a Fund is $999,999. The Funds may
refuse any order to purchase shares.
For a description of the Distribution and Servicing Plans and distribution
and servicing fees payable thereunder with respect to Class A, Class B and Class
C shares, see "Distributor and Distribution and Servicing Plans" below.
Waiver of Contingent Deferred Sales Charges The CDSC applicable to Class A and
Class C shares is currently waived for (i) any partial or complete redemption in
connection with (a)
SG-9
<PAGE>
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
complete redemption in connection with a distribution from a qualified employer
retirement plan in connection with termination of employment or termination of
the employer's plan and the transfer to another employer's plan or to an IRA
(with the exception of a Roth IRA); (iv) any partial or complete redemption
following death or disability (as defined in the Internal Revenue Code) of a
shareholder (including one who owns the shares as joint tenant with his or her
spouse) from an account in which the deceased or disabled is named, provided the
redemption is requested within one year of the death or initial determination of
disability; (v) any redemption resulting from a return of an excess contribution
to a qualified employer retirement plan or an IRA (with the exception of a Roth
IRA); (vi) up to 10% per year of the value of a Fund 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 either Trust, and by directors, officers and employees of the Distributor,
PIMCO Advisors or Pacific Investment Management; (viii) redemptions effected
pursuant to a Fund's right to involuntarily redeem a shareholder's Fund account
if the aggregate net asset value of shares held in such shareholder's account is
less than a minimum account size specified in such Fund's prospectus; (ix)
involuntary redemptions caused by operation of law; (x) redemption of shares of
any Fund that is combined with another Fund, investment company, or personal
holding company by virtue of a merger, acquisition or other similar
reorganization transaction; (xi) redemptions by a shareholder who is a
participant making periodic purchases of not less than $50 through certain
employer sponsored savings plans that are clients of a broker-dealer with which
the Distributor has an agreement with respect to such purchases; (xii)
redemptions effected by trustees or other fiduciaries who have purchased shares
for employer-sponsored plans, the trustee, administrator, fiduciary, broker,
trust company or registered investment adviser for which has an agreement with
the Distributor with respect to such purchases; (xiii) redemptions in connection
with IRA accounts established with Form 5305-SIMPLE under the Code for which the
Trust is the designated financial institution; (xiv) a redemption by a holder of
Class A shares who purchased $1,000,000 or more of Class A shares (and therefore
did not pay a sales charge) where the participating broker or dealer involved in
the sale of such shares waived the commission it would normally receive from the
Distributor pursuant to an agreement with the Distributor; or (xv) a redemption
by a holder of Class A shares where the participating broker or dealer involved
in the purchase of such shares waived the commission it normally would receive
from the Distributor in connection with such purchase pursuant to an agreement
with the Distributor.
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 account owners or to plan participants or
beneficiaries who are age 70 1/2 or older; (b) involuntary redemptions caused by
operation of law; (c) redemption of shares of any Fund that is combined with
another Fund, investment company, or personal holding company by virtue of a
merger, acquisition or other similar reorganization transaction; (d) 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
SG-10
<PAGE>
or disabled is named, provided the redemption is requested within one year of
the death or initial determination of disability; and (e) up to 10% per year of
the value of a Fund account which (i) has a value of at least $10,000 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, certification by plan administrators,
applicable tax forms, death certificates, physicians' certificates, etc.
Initial Sales Charge Alternative--Class A Shares
Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below
under "Class A Deferred Sales Charge," certain investors that purchase
$1,000,000 or more of any Fund's Class A shares (and thus pay no initial sales
charge) may be subject to a 1% CDSC if they redeem such shares during the first
18 months after their purchase.
SG-11
<PAGE>
Initial Sales Charge -- Class A Shares
PIMCO Growth, Target, Opportunity, Capital Appreciation, Mid-Cap Growth, Small-
Cap Growth, Equity Income, Renaissance, Value, Value 25, Small-Cap Value, Tax-
Efficient Equity, International, Innovation and Precious Metals Funds, and PIMCO
Funds Asset Allocation Series -- 90/10 and 40/60 Portfolios
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
Amount Invested Offering Price dealers as % of 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>
- -------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
Amount Invested Offering Price dealers as % of 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>
SG-12
<PAGE>
PIMCO Total Return, High Yield, Long-Term U.S. Government, Global Bond II,
Foreign Bond, Emerging Markets Bond, Strategic Balanced and Convertible Bond
Funds
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
Amount Invested Offering Price dealers as % of 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%/(3)/
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
PIMCO Low Duration, Real Return Bond, Municipal Bond, and StocksPLUS Funds
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
Amount Invested Offering Price dealers as % of Public Offering
Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 3.09% 3.00% 2.50%
- ----------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 2.56% 2.50% 2.00%
- ----------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 2.04% 2.00% 1.75%
- ----------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 1.52% 1.50% 1.25%
- ----------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 1.27% 1.25% 1.00%
- ----------------------------------------------------------------------------------------------------------------
$1,000,000+ 0.00%/(1)/ 0.00%/(1)/ 0.50%/(3)/
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
SG-13
<PAGE>
PIMCO Short-Term Fund
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
Amount Invested Offering Price dealers as % of Public Offering
Price
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 2.04% 2.00% 1.75%
- ----------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 1.78% 1.75% 1.50%
- ----------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 1.52% 1.50% 1.25%
- ----------------------------------------------------------------------------------------------------------------
$250,000+ 0.00%/(1)/ 0.00%/(1)/ 0.25%/(3)/
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
PIMCO California and New York Intermediate Bond Funds
- -----------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Amount of Purchase Sales Charge as % of Net Sales Charge as % of Public Discount or Commission to
------------------ ------------------------ --------------------------- -------------------------
Amount Invested Offering Price dealers as % of Public
--------------- -------------- ----------------------
Offering Price
--------------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$0 - $49,999 3.09% 3.00% 2.75%
- ------------ ----- ----- -----
- -----------------------------------------------------------------------------------------------------------------------
$50,000 - $99,999 2.04% 2.00% 1.75%
- ----------------- ----- ----- -----
- -----------------------------------------------------------------------------------------------------------------------
$10,000 - 249,999 2.01% 1.00% 0.90%
- ------------------ ----- ----- -----
- -----------------------------------------------------------------------------------------------------------------------
$250,000+ 0.00% 0.00% 0.25%
- --------- ------ ----- ------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
1. As shown, investors that purchase more than $1,000,000 of any Fund's Class
A shares ($250,000 in the case of the PIMCO Short-Term Fund) will not pay
any initial sales charge on such purchase. However, except with regard to
purchases of Class A shares of the PIMCO Money Market, California
Intermediate Bond, and New York Intermediate Bond Funds, purchasers of
$1,000,000 or more ($250,00 in the case of the PIMCO Short-Term Income
Fund) 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 of these Funds and the Portfolios (except
for the 30/70 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.
3. The Distributor will pay a commission to dealers who sell amounts of
$1,000,000 ($250,000 in the case of the PIMCO Short-Term Fund) 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") of each
of these Funds except for the PIMCO Money Market Fund (for which no payment
is made) and the PIMCO Short-Term and Short Duration Municipal Income
Funds, according to the following schedule: 0.50% of the first $2,000,000
and 0.25% of amounts over $2,000,000; and 0.25% of sales of Class A shares
of the PIMCO Short-Term and Short Duration Municipal Income Funds in excess
of $250,000.
4. The Distributor will pay a commission to dealers who sell $25,000 or more
of Class A shares of the PIMCO California Intermediate Bond and New York
Intermediate Bonds Funds at an annual rate of 0.25% to be paid in quarterly
Installment.
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 periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to 0.50% of the purchase price on sales of Class A shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.
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.
SG-14
<PAGE>
Under the circumstances described below, investors may be entitled to pay
reduced sales charges for Class A shares.
Combined Purchase Privilege Investors may qualify for a reduced sales charge by
combining purchases of the Class A shares of one or more Funds 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 purchases, 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) single purchase by a trustee or other fiduciary purchasing shares for
a single trust, estate or fiduciary account although more than one
beneficiary is involved; or
(iii) a single purchase for the employee benefit plans of a single
employer.
For further information, 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 PIMCO Equity Income Fund
worth $25,000 at the current maximum offering price and wished to purchase
Class A shares of the PIMCO Growth Fund worth an additional $30,000, the
sales charge for the $30,000 purchase would be at the 4.50% rate applicable
to a single $55,000 purchase of shares of the PIMCO 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) other than the PIMCO Money Market Fund. Each purchase of shares under a
Letter of Intent will be made at the public offering price or prices applicable
at the time of such purchase to a single transaction of the dollar amount
indicated in the Letter. At the investor's option, a Letter of Intent may
include
SG-15
<PAGE>
purchases of Class A shares of any eligible PIMCO Fund (other than the PIMCO
Money Market Fund) made not more than 90 days prior to the date the Letter of
Intent is signed; however, the 13-month period during which the Letter is in
effect will begin on the date of the earliest purchase to be included and the
sales charge on any purchases prior to the Letter will not be adjusted.
Investors qualifying for the Combined Purchase Privilege described above
may purchase shares of the eligible PIMCO Funds under a single Letter of Intent.
For example, if at the time you sign a Letter of Intent to invest at least
$100,000 in Class A shares of any Fund (other than the PIMCO Money Market Fund),
you and your spouse each purchase Class A shares of the PIMCO 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
(other than the PIMCO Money Market Fund) to qualify 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 other than the PIMCO Money Market, Short-Term,
Low Duration, Real Return Bond, Short Duration Municipal Income, Municipal Bond
and StocksPLUS Funds).
A Letter of Intent is not a binding obligation to purchase the full amount
indicated. The minimum initial investment under a Letter of Intent is 5% of such
amount. Shares purchased with the first 5% of such amount will be held in escrow
(while remaining registered in your name) to secure payment of the higher sales
charge applicable to the shares actually purchased in the event the full
intended amount is not purchased. If the full amount indicated is not purchased,
a sufficient amount of such escrowed shares will be involuntarily redeemed to
pay the additional sales charge applicable to the amount actually purchased, if
necessary. Dividends on escrowed shares, whether paid in cash or reinvested in
additional eligible PIMCO Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released.
If you wish to enter into a Letter of Intent in conjunction with your
initial investment in Class A shares of a Fund, you should complete the
appropriate portion of the account application. 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 broker participating in this
program.
Reinstatement Privilege A Class A shareholder who has caused any or all of his
shares (other than PIMCO Money Market Fund shares that were not acquired by
exchanging Class A shares of another Fund) to be redeemed may reinvest all or
any portion 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" in the applicable Retail
Prospectus. A reinstatement pursuant to this privilege will not cancel the
redemption transaction and, consequently, 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
SG-16
<PAGE>
without limit in connection with transactions whose sole purpose is to transfer
a shareholder's interest in a Fund to his Individual Retirement Account or other
qualified retirement plan account. An investor may exercise the reinstatement
privilege by written request sent to the Distributor or to the investor's
broker.
Sales at Net Asset Value Each Fund may sell its Class A shares at net asset
value without a sales charge to (a) current or retired officers, trustees,
directors or employees of either Trust, PIMCO Advisors, Pacific Investment
Management or the Distributor, affiliates of PIMCO Advisors, Pacific Investment
Management 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 registered
representatives and other full-time employees of participating brokers or such
persons' spouses or for trust or custodial accounts for their minor children,
(c) trustees or other fiduciaries purchasing shares for certain plans sponsored
by employers, 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 (including provisions related to minimum levels
of investment in the Trust), and to participants in such plans and their spouses
purchasing for their account(s) or IRAs (with the exception of Roth IRAs), (d)
participants investing through accounts known as "wrap accounts" established
with brokers or dealers approved by the Distributor where such brokers or
dealers are paid a single, inclusive fee for brokerage and investment management
services, (e) client accounts of broker-dealers or registered investment
advisers affiliated with such broker-dealers with which the Distributor has an
agreement for the use of a Fund in particular investment products or programs,
(f) accounts for which a trust company affiliated with the Trust or the Fund's
Adviser serves as trustee or custodian, and (g) former Class A, Class B and
Class C shareholders of the former PIMCO Emerging Markets Fund and PIMCO
International Developed Fund (the "Former Funds") who had all of their shares in
such Former Fund redeemed in connection with reorganization transactions (the
"April Transactions") involving these Funds on April 30, 1999; provided,
however, that this waiver applies only until the close of business on December
31, 1999 and, for each such former shareholder, only with respect to a single
purchase transaction involving the investment in one or more Funds of some or
all of the redemption proceeds received by the shareholder in connection with
the April Transactions. As described above, the Distributor will not pay any
initial commission to dealers upon the sale of Class A shares to the purchasers
described in this paragraph except for sales to purchasers described under (c)
in this paragraph.
Notification of Distributor An investor or participating broker must notify the
Distributor whenever a quantity discount or reduced sales charge is applicable
to a purchase and must provide the Distributor with sufficient information at
the time of purchase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the lowest
applicable sales charge. The quantity discounts described above may be modified
or terminated at any time.
Class A Deferred Sales Charge For all Funds, except the PIMCO Money Market,
California Intermediate Municipal Bond and New York Intermediate Municipal Bond
Funds, investors who purchase $1,000,000 ($250,000 in the case of the PIMCO
Short-Term Fund) or
SG-17
<PAGE>
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 investors purchasing $1,000,000 ($250,000 in the case of the PIMCO Short-Term
and Short Duration Municipal Income Funds) or more of any Fund's Class A shares
if such investors are otherwise eligible to purchase Class A shares without any
sales charge because they are described under "Sales at Net Asset Value"
above.
For purchases subject to the Class A CDSC, a 1% CDSC will apply for any
redemption of such Class A shares that occurs within 18 months of their
purchase. No CDSC will be imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC. In determining whether a CDSC
is payable, it is assumed that Class A shares acquired through the reinvestment
of dividends and distributions are redeemed first, and thereafter that Class A
shares that have been held by an investor for the longest period of time are
redeemed first.
The Class A CDSC does not apply to Class A shares of the PIMCO Money
Market, California Intermediate Municipal Bond, and New York Intermediate
Municipal Bond Funds, but, if PIMCO Money Market Fund Class A shares are
purchased in a transaction that, for any other Fund, would be subject to the
CDSC (i.e., a purchase of $1,000,000 ($250,000 in the case of the PIMCO Short-
Term and Short Duration Municipal Income Funds) or more) and are subsequently
exchanged for Class A shares of any other Fund, a Class A CDSC will apply to the
shares of the Fund acquired by exchange for a period of 18 months from the date
of the exchange.
The Class A CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements--Waiver of
Contingent Deferred Sales Charges." For more information about the Class A CDSC,
call the Distributor at 1-800-426-0107.
Participating Brokers Investment dealers and other financial intermediaries
provide varying arrangements for their clients to purchase and redeem Fund
shares. Some may establish higher minimum investment requirements than set forth
above. Firms may arrange with their clients for other investment or
administrative services and may independently establish and charge 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 participate in a program allowing them access to their clients'
accounts for servicing including, without limitation, transfers of registration
and dividend payee changes; and may perform functions such as generation of
confirmation statements and disbursement of cash dividends. This Guide and the
Retail Prospectuses should be read in connection with such firms' material
regarding their fees and services.
SG-18
<PAGE>
Deferred Sales Charge Alternative--Class B Shares
Class B shares are sold at their current net asset value without any
initial sales charge. The full amount of an investor's purchase payment will be
invested in shares of the Fund(s) selected. A CDSC will be imposed on Class B
shares if an investor redeems an amount which causes the current value of the
investor's account for a Fund to fall below the total dollar amount of purchase
payments subject to the CDSC, except that no CDSC is imposed if the shares
redeemed have been acquired through the reinvestment of dividends or capital
gains distributions or if the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject to the CDSC.
Class B shares of the PIMCO Short-Term Fund and the PIMCO Money Market Fund
are not offered for initial purchase but may be obtained through exchanges of
Class B shares of other Funds. See "Exchange Privilege" below. Class B shares
are not available for purchase by employer sponsored retirement plans.
Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the CDSC according to the following
schedule:
Years Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
---------------- ---------------------
First 5
Second 4
Third 3
Fourth 3
Fifth 2
Sixth 1
Seventh 0*
* After the seventh year, Class B shares convert into Class A shares as
described below.
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which a redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been fully effected.
The following example will illustrate the operation of the Class B CDSC:
Assume that an individual opens a Fund 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 distributions to $11,000. The investor then may redeem up to
$1,000 from that Fund account ($11,000 minus $10,000) without incurring a CDSC.
If the investor should redeem $3,000 from that Fund account, a CDSC would be
imposed on $2,000 of the redemption (the amount
SG-19
<PAGE>
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 for the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed on a redemption of
Class B shares is paid to the Distributor.
Class B shares are subject to higher distribution fees than Class A shares
for a fixed period after their purchase, after which they automatically convert
to Class A shares and are no longer subject to such higher distribution fees.
Class B shares of each Fund automatically convert into Class A shares after they
have been held for seven years.
For sales of Class B shares made and services rendered to Class B
shareholders, the Distributor intends to make payments to participating brokers,
at the time a shareholder purchases Class B shares, of 4.00% 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
brokers 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 exceeding thresholds established from
time to time by the Distributor.
The Class B CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements --Waiver of
Contingent Deferred Sales Charges." For more information about the Class B CDSC,
call the Distributor at 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 depend on the
number of years since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the CDSC according to the following
schedule:
Years Since Purchase Percentage Contingent
Payment was Made Deferred Sales Charge
---------------- ---------------------
First 1
Thereafter 0
SG-20
<PAGE>
In determining whether a CDSC is payable, it is assumed that the purchase
payment from which the redemption is made is the earliest purchase payment (from
which a redemption or exchange has not already been effected).
The following example will illustrate the operation of the Class C CDSC:
Assume that an individual opens a Fund account and makes a purchase payment
of $10,000 for Class C shares of a Fund and that six months later the value of
the investor's account for that Fund has grown through investment performance
and reinvestment of distributions to $11,000. The investor then may redeem up to
$1,000 from that Fund account ($11,000 minus $10,000) without incurring a CDSC.
If the investor should redeem $3,000 from that Fund account, 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 for the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed on a redemption of
Class C shares is paid to the Distributor. Unlike Class B shares, Class C shares
do not automatically convert to any other class of shares of the Funds.
Except as described below, for sales of Class C shares made and services
rendered to Class C shareholders, the Distributor expects to make payments to
participating brokers, at the time the shareholder purchases Class C shares, of
1.00% (representing .75% distribution fees and .25% servicing fees) of the
purchase amount for all Funds, except the Money Market, Short-Term Duration,
Real Return Bond, Municipal Bond and StocksPLUS Funds. For the PIMCO Low
Duration, Real Return Bond, Municipal Bond and StocksPLUS Funds, the Distributor
expects to make payments of .75% (representing .50% distribution fees and .25%
service fees); for the PIMCO Short-Term Fund, the Distributor expects to make
payments of .55% (representing .30% distribution fees and .25% service fees);
and for the PIMCO Money Market Fund, the Distributor expects to make no payment.
For sales of Class C shares made to participants making periodic purchases of
not less than $50 through certain employer sponsored savings plans which are
clients of a broker-dealer with which the Distributor has an agreement with
respect to such purchases, no payments are made at the time of purchase. During
such periods as may from time to time be designated by the Distributor, the
Distributor will pay an additional amount of up to .50% of the purchase price on
sales of Class C shares of all or selected Funds purchased to each participating
broker which obtains purchase orders in amounts exceeding thresholds established
from time to time by the Distributor.
The Class C CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements--Waiver of
Contingent Deferred Sales Charges." For more information about the Class C
CDSC, contact the Distributor at 1-800-426-0107.
Exchange Privilege
SG-21
<PAGE>
Except with respect to exchanges for shares of Funds for which sales may be
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 identical registration on the basis of their respective net asset
values (except that a sales charge will apply on exchanges of Class A shares of
the PIMCO Money Market Fund on which no sales charge was paid at the time of
purchase.) Class A shares of the PIMCO Money Market Fund may be exchanged for
Class A shares of any other Fund, but the usual sales charges applicable to
investments in such other Fund apply on shares for which no sales charge was
paid at the time of purchase. There are currently no exchange fees or charges.
All exchanges are subject to the $2,500 minimum initial 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 9688, Providence, RI 02940-0926 or, unless the investor has specifically
declined telephone exchange privileges on the account application or elected in
writing not to utilize telephone exchanges, by a telephone request to the
Distributor at 1-800-426-0107. Each Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and may be
liable for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions. Exchange forms are available from the Distributor at 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 registration information or account
privileges may be made in writing to the Transfer Agent, First Data Investor
Services Group, Inc., P.O. Box 9688, Providence, RI 02940-0926, or by use of
forms which are available 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 New York Stock Exchange on any day the
Exchange is open (generally weekdays other than normal holidays). The Trusts
reserve the right to refuse exchange purchases if, in the judgment of the Fund's
Adviser, the purchase would adversely affect the Fund and its shareholders. In
particular, a pattern of exchanges characteristic of "market-timing"
strategies may be deemed by an Adviser to be detrimental to a Trust or a
particular Fund.
Currently, each 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 PIMCO Fund, and then exchanges back into the originally
purchased Fund. The Trusts have 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 Trusts have no current intention of terminating or
modifying the exchange privilege other than as set forth in the preceding
sentence, each reserves the right to do so at any time. Except as otherwise
permitted by the Securities and Exchange Commission, each Trust will give 60
days' advance notice to shareholders of any termination or material
SG-22
<PAGE>
modification of the exchange privilege. For further information about exchange
privileges, contact your participating broker or call the Distributor 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 capital appreciation and/or reinvested
dividends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in the Fund
from which the exchange was made. Shareholders should take into account the
effect of any exchange on the applicability of any CDSC that may be imposed upon
any subsequent redemption.
Investors may also select the PIMCO Funds Auto-Exchange plan which
establishes automatic periodic exchanges. For further information 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 participating
broker, by telephone, by submitting a written redemption request directly to the
Transfer Agent (for non-broker accounts), or through an Automatic Withdrawal
Plan or PIMCO 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 redemption request has been received as
described below, less any applicable CDSC. There is no charge by the Distributor
(other than an applicable CDSC) with respect to a redemption; however, a
participating broker who processes a redemption for an investor may charge
customary commissions for its services. Dealers and other financial services
firms are obligated to transmit orders promptly. Requests for redemption
received by dealers or other firms prior to the close of regular trading
(normally 4:00 p.m., Eastern time) on the New York Stock Exchange on a regular
business day and received by the Distributor prior to the close of the
Distributor's business day will be confirmed at the net asset value effective as
of the closing of the Exchange on that day, less any applicable CDSC.
Direct Redemption
A shareholder's original account application permits the shareholder to
redeem by written request and by telephone (unless the shareholder specifically
elects not to utilize telephone redemptions) and to elect one or more of the
additional redemption procedures described below. A shareholder may change the
instructions indicated on his original account application, or may request
additional redemption options, only by transmitting a written direction to the
Transfer Agent. Requests to institute or change any of the additional redemption
procedures will require a signature guarantee.
Redemption proceeds will normally be mailed to the redeeming shareholder
within seven days or, in the case of wire transfer or Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on
SG-23
<PAGE>
the second or third business day. In cases where shares have recently been
purchased by personal check, redemption proceeds may be withheld until the check
has been collected, which may take up to 15 days. To avoid such withholding,
investors should purchase shares by certified or bank check or by wire transfer.
Written Requests
To redeem shares in writing (whether or not represented by certificates), a
shareholder must send the following items to the Transfer Agent, First Data
Investor Services Group, Inc., P.O. Box 9688, Providence, RI 02940-0926.
(1) a written request for redemption signed by all registered owners exactly as
the account is registered on the Transfer Agent's records, including
fiduciary titles, if any, and specifying the account number and the dollar
amount or number of shares to be redeemed;
(2) for certain redemptions described below, a guarantee of all signatures on
the written request or on the share certificate or accompanying stock
power, if required, as described under "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, trustees, custodians or guardians, or if the redemption is
requested by anyone other than the shareholder(s) of record.
Transfers of shares are subject to the same requirements. A signature
guarantee is not required for a redemption requested by and payable to all
shareholders of record for the account that is 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 the Distributor at 1-800-426-0107 before submitting a
request. Redemption or transfer requests will not be honored until all required
documents have been completed by the shareholder and received by the Transfer
Agent. This redemption option does not apply to shares held in broker "street
name" accounts. Shareholders whose shares are held in broker "street name"
accounts must redeem through their broker.
If the proceeds of the redemption (i) are to be paid to a person other than
the record owner, (ii) are to be sent to an address other than the address of
the account on the Transfer Agent's records or (iii) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed as
described above, except that the Distributor may waive the signature guarantee
requirement for redemptions up to $2,500 by a trustee of a qualified retirement
plan, the administrator for which has an agreement with the Distributor.
SG-24
<PAGE>
Telephone Redemptions
Each Trust accepts telephone requests for redemption of uncertificated
shares, except for investors who have specifically declined telephone redemption
privileges on the account application or elected in writing not to utilize
telephone redemptions. The proceeds of a telephone redemption will be sent to
the record shareholder at his record address. Changes in account information
must be made in a written authorization with a signature guarantee. See "How to
Buy Shares--Signature Guarantee." Telephone redemptions 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. Shareholders whose shares are held in broker "street name" accounts
must redeem through their broker.
By completing an account application, an investor agrees that the
applicable Trust, the Distributor and the Transfer Agent shall not be liable for
any loss incurred by the investor by reason of the Trust accepting unauthorized
telephone redemption requests for his account if the Trust reasonably believes
the instructions to be genuine. Thus, shareholders risk possible losses in the
event of a telephone redemption not authorized by them. Each Trust may accept
telephone redemption instructions from any person identifying himself as the
owner of an account or the owner's broker where the owner has not declined in
writing to utilize this service. Each Trust will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, and may be
liable for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions.
A shareholder making a telephone redemption should call the Distributor 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 withdrawn and (iv) the name of the person requesting the
redemption. Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the redemption request
is received prior to the close of regular trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange that day. If the redemption request is
received after the close of the New York Stock Exchange, the redemption is
effected on the following Trust business day at that day's net asset value and
the proceeds are usually sent to the investor on the second following Trust
business day. Each Trust reserves the right to terminate or modify the
telephone redemption service at any time. During times of severe disruptions in
the securities markets, the volume of calls may make it difficult to redeem by
telephone, in which case a shareholder may wish to send a written request for
redemption as described under "Written Requests" above. Telephone
communications may be recorded by the Distributor or the Transfer Agent.
Fund Link Redemptions
If a shareholder has established Fund Link, the shareholder may redeem
shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of a Fund Link application by the Transfer Agent. To use Fund
Link for redemptions, call the Distributor at 1-
SG-25
<PAGE>
800-426-0107. Subject to the limitations set forth above under "Telephone
Redemptions," the Distributor, a Trust and the Transfer Agent may rely on
instructions by any registered owner believed to be genuine and will not be
responsible to any shareholder for any loss, damage or expense arising out of
such instructions. Requests received by the Transfer Agent prior to the close of
regular trading (normally 4:00 p.m., Eastern time) on the New York Stock
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 New York Stock 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. Either Trust may terminate the Fund Link program at any time
without notice to its shareholders. This redemption option does not apply to
shares held in broker "street name" accounts. Shareholders whose shares are
held in broker "street name" accounts must redeem through their broker.
PIMCO Funds Automated Telephone System
PIMCO Funds Automated Telephone System ("ATS") is an automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone telephone. ATS may be used on already-
established Fund 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 established 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 established by calling 1-800-223-2413. Please
refer to "Exchange Privilege" for details.
Redemptions. You may redeem shares by telephone automatically by calling 1-
800-223-2413 and the Fund will send the proceeds directly to your Fund bank
account. Please refer to "How to Redeem" for details.
Expedited Wire Transfer Redemptions
If a shareholder has given authorization for expedited wire redemption,
shares can be redeemed and the proceeds sent by federal wire transfer to a
single previously designated bank account. Requests received by a Trust prior to
the close of the New York Stock Exchange will
SG-26
<PAGE>
result in shares being redeemed that day at the next determined net asset value
(less any CDSC). Normally the proceeds will be sent to the designated bank
account the following business day. The bank must be a member of the Federal
Reserve wire system. Delivery of the proceeds of a wire redemption request may
be delayed by the applicable Trust for up to 7 days if the Distributor deems it
appropriate under then current market conditions. Once authorization is on file
with a Trust, such Trust will honor requests by any person identifying himself
as the owner of an account or the owner's broker by telephone at 1-800-426-0107
or by written instructions. A Trust cannot be responsible for the efficiency of
the Federal Reserve wire system or the shareholder's bank. Neither Trust
currently charges for wire transfers. The shareholder is responsible for any
charges imposed by the shareholder's bank. The minimum amount that may be wired
is $2,500. Each Trust reserves the right to change this minimum or to terminate
the wire redemption privilege. Shares purchased by check may not be redeemed by
wire transfer until such shares have been owned (i.e., paid for) for at least 15
days. Expedited wire transfer redemptions may be authorized by completing a form
available from the Distributor. Wire redemptions may not be used to redeem
shares in certificated form. To change the name of the single bank account
designated to receive wire redemption proceeds, it is necessary to send a
written request with signatures guaranteed to PIMCO Funds Distributors LLC, P.O.
Box 9688, Providence, RI 02940-0926. See "How to Buy Shares--Signature
Guarantee." This redemption option does not apply to shares held in broker
"street name" accounts. Shareholders whose shares are held in broker "street
name" accounts must redeem through their broker.
Certificated Shares
To redeem shares for which certificates have been issued, the certificates
must be mailed to or deposited with the applicable Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "How to Buy
Shares--Signature Guarantee." Further documentation may be requested from
institutions or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners"). The redemption request and stock
power must be signed exactly as the account is registered, including indication
of any special capacity of the registered owner.
Automatic Withdrawal Plan
An investor who owns or buys shares of a Fund having a net asset value of
$10,000 or more may open an Automatic Withdrawal Plan and have a designated sum
of money (not less than $100 per Fund) paid monthly (or quarterly) to the
investor or another person. Such a plan may be established by completing the
appropriate section of the account application or by obtaining an Automatic
Withdrawal Plan application from the Distributor or your broker. If an Automatic
Withdrawal Plan is set up after the account is established providing for payment
to a person other than the record shareholder or to an address other than the
address of record, a signature guarantee is required. See "How to Buy
Shares--Signature Guarantee." Class A, Class B and Class C shares of any Fund
are deposited in a plan account and all distributions are reinvested in
additional shares of the particular class of the Fund at net asset value. Shares
in a plan account are then redeemed at net asset value (less any applicable
CDSC) to make each
SG-27
<PAGE>
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 payment selected by the shareholder. The
Transfer Agent may accelerate the redemption and check mailing date by one day
to avoid weekend delays. Payment will be made to any person the investor
designates; however, if the shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary, except in the case
of a profit-sharing or pension plan where payment will be made to the designee.
As withdrawal payments may include a return of principal, they cannot be
considered a guaranteed annuity or actual yield of income to the investor. The
redemption of shares in connection with an Automatic Withdrawal Plan may result
in a gain or loss for tax purposes. Continued withdrawals in excess of income
will reduce and possibly exhaust invested principal, especially in the event of
a market decline. The maintenance of an Automatic Withdrawal Plan concurrently
with purchases of additional shares of the Fund would be disadvantageous to the
investor because of the CDSC that may become payable on such withdrawals in the
case of Class A, Class B or Class C shares and because of the initial sales
charge in the case of Class A shares. For this reason, the minimum investment
accepted for a Fund while an Automatic Withdrawal Plan is in effect for that
Fund is $1,000, and an investor may not maintain a plan for the accumulation of
shares of the Fund (other than through reinvestment of distributions) and an
Automatic Withdrawal Plan at the same time. The Trust or the Distributor may
terminate or change the terms of the Automatic Withdrawal Plan at any time.
Because the Automatic Withdrawal Plan may involve invasion of capital,
investors should consider carefully with their own financial advisers whether
the plan and the specified amounts to be withdrawn are appropriate in their
circumstances. The Trust and the Distributor make no recommendations or
representations in this regard.
Redemptions In Kind
Each Trust agrees to redeem shares of its Funds 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, each 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.
SG-28
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits.
The letter of each exhibit relates to the exhibit
designation in Form N-1A:
(a) Form of Second Amendment and Restated Agreement and
Declaration of Trust (2)
(b) Form of First Amended and Restated Bylaws (4)
(c) (1) Article III (Shares) and Article V (Shareholders' Voting
Powers and Meetings) of the Second Amended and Restated
Agreement and Declaration of Trust (2)
(2) Article 9 (Issuance of Shares Certificates) and Article 11
(Shareholders' Voting Powers and Meetings) of the First
Amended and Restated Bylaws (4)
<PAGE>
(d) (1) (i) Form of Amended and Restated Investment Advisory
Agreement (4)
(ii) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO International Growth
Fund and PIMCO Tax-Efficient Structured Emerging
Markets Fund (6)
(iii) Form of Addendum to Amended and Restated
Investment Advisory Agreement to add PIMCO Value 25
Fund, PIMCO Hard Assets Fund, and PIMCO Tax-Efficient
Equity Fund (10)
(iv) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO Funds Asset Allocation
Series - 90/10 Portfolio, PIMCO Funds Asset Allocation
Series - 60/40 Portfolio, and PIMCO Funds Asset
Allocation Series -30/70 Portfolio (9)
(v) Form of Addendum to Amended and Restated Investment
Advisory Agreement to add PIMCO Mega-Cap Fund (13)
(2) (i) Form of Portfolio Management Agreement with Pacific
Investment Management Company (6)
(ii) Form of Portfolio Management Agreement, as amended,
with NFJ Investment Group (4)
(iii) Form of Addendum to Portfolio Management Agreement
with NFJ Investment Group to add PIMCO Value 25 Fund
and PIMCO Hard Assets Fund (10)
(iv) Form of Portfolio Management Agreement, as amended,
with Cadence Capital Management (4)
(v) Form of Addendum to Portfolio Management Agreement
with Cadence Capital Management to add PIMCO Mega-Cap
Fund (13)
(vi) Form of Portfolio Management Agreement, as amended,
with Parametric Portfolio Associates (4)
(vii) Form of Addendum to Portfolio Management Agreement with
Parametric Portfolio Associates to add PIMCO Tax-
Efficient Structured Emerging Markets Fund (6)
-2-
<PAGE>
(viii) Form of Addendum to Portfolio Management
Agreement with Parametric Portfolio Associates
to add PIMCO Tax-Efficient Equity Fund (10)
(ix) Form of Portfolio Management Agreement with
Blairlogie Capital Management (13)
(x) Form of Amended and Restated Portfolio
Management Agreement with Columbus Circle
Investors (4)
(xi) Form of Addendum to Portfolio Management
Agreement with Columbus Circle Investors to add
PIMCO International Growth Fund (6)
(xii) Form of Portfolio Management Agreement with Van
Eck Associates Corporation (4)
(e) (1) Amended Distribution Contract (4)
(2) Form of Amended and Restated Distribution Contract (to
add Class D shares) (7)
(3) Form of Addendum to Distribution Contract to add
PIMCO International Growth Fund and PIMCO Tax-Efficient
Structured Emerging Markets Fund (6)
(4) Form of Addendum to Distribution Contract to add
PIMCO Value 25 Fund, PIMCO Hard Assets Fund, and PIMCO
Tax-Efficient Equity Fund (10)
(5) Form of Addendum to Distribution Contract to add
PIMCO Funds Asset Allocation Series - 90/10 Portfolio,
PIMCO Funds Asset Allocation Series - 60/40 Portfolio
and PIMCO Funds Asset Allocation Series - 30/70
Portfolio (9)
(6) Form of Supplement to Distribution Contract to add PIMCO
Mega-Cap Fund (13)
(f) Not Applicable
(g) (1) Form of Custody and Investment Accounting Agreement with
Investors Fiduciary Trust Company (13)
(h) (1) Form of Amended Administration Agreement between the
Trust and PIMCO Advisors L.P. (4)
-3-
<PAGE>
(2) Form of Amended and Restated Administration Agreement
(to include Class D shares ) between the Trust and PIMCO
Advisors L.P. (7)
(3) Form of Amendment No. 1 to Amended and Restated
Administration Agreement between the Trust and PIMCO
Advisors L.P., filed herewith.
(4) Form of Administration Agreement between PIMCO Advisors
L.P. and Pacific Investment Management Company (4)
(5) Form of Amendment to Administration Agreement (to
include Class D shares) between PIMCO Advisors L.P. and
Pacific Investment Management Company (11)
(6) Form of Agency Agreement and Addenda (1)
(7) Form of Addendum to Agency Agreement (4)
(8) Form of Assignment of Agency Agreement (4)
(9) Form of Addendum to Agency Agreement (6)
(10) Form of Transfer Agency Agreement with Shareholder
Services, Inc. (3)
(11) Form of Service Plan for Institutional Services Shares
(6)
(12) Form of Administrative Services Plan for Administrative
Class Shares (4)
(i) Opinion and Consent of Counsel (6)
(j) (1) Consent of PricewaterhouseCoopers LLP filed herewith.
(i) Letter dated October 26, 1999 from
PricewaterhouseCooopers LLP to the Securities and
Exchange Commission filed herewith.
(2) Consent and Opinion of Coopers & Lybrand LLP (6)
(k) Not Applicable
(l) Initial Capital Agreement (6)
(m) (1) Form of Distribution and Servicing Plan (Class A) (4)
(2) Form of Distribution and Servicing Plan (Class B) (4)
(3) Form of Distribution and Servicing Plan (Class C) (4)
(4) Form of Distribution Plan for Administrative Class
Shares (4)
-4-
<PAGE>
(5) Form of Distribution Plan for Class D Shares included as
part of the Form of Amended and Restated Administration
Agreement included in Exhibit 9(b)
(n) (a) Financial Data Schedules for the period ended
6/30/98 (11)
(b) Financial Data Schedules for the period ended
12/31/98 (12)
(o) Form of Amended and Restated Multi-Class Plan (7)
(p) (1) Powers of Attorney and Certificate of Secretary (1)
(2) Power of Attorney for E. Philip Cannon, Donald P.
Carter, Gary A. Childress, William D. Cvengros, John P.
Hardaway, Joel Segall, W. Bryant Stooks, Gerald M.
Thorne, Richard L. Nelson, Lyman W. Porter and Alan
Richards (5)
- --------------------
1 Included in Post-Effective Amendment No. 22 to the Registration Statement
on Form N-1A (File No. 33-36528), as filed on July 1, 1996.
2 Included in Definitive Proxy Statement (File No. 811-06161), as filed on
November 7, 1996.
3 Included in Post-Effective Amendment No. 33 to the Registration Statement
on Form N-1A of PIMCO Advisors Funds (File No. 2-87203), as filed on
November 30, 1995.
4 Included in Post-Effective Amendment No. 25 to the Registration Statement
on Form N-1A (File 33-36528), as filed on January 13, 1997.
5 Included in Post-Effective Amendment No. 27 to the Registration Statement
on Form N-1A (File 33-36528), as filed on October 10, 1997.
6 Included in Post-Effective Amendment No.28 to the Registration Statement on
Form N-1A (File 33-36528), as filed on October 31, 1997.
7 Included in Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A (File 33-36528), as filed on March 13, 1998.
8 Included in Post-Effective Amendment No. 32 to the Registration Statement
on Form N-1A (File 33-36528), as filed on April 21, 1998.
9 Included in Post-Effective Amendment No. 33 to the Registration Statement
on Form N-1A (File 33-36528), as filed on June 30, 1998.
10. Included in Post-Effective Amendment No. 34 to the Registration Statement
on Form N-1A (File 33-36528), as filed on July 2, 1998.
11. Included in Post-Effective Amendment No. 36 to the Registration Statement
on Form N-1A (File 33-36528), as filed on October 30, 1998.
12. Included in Post-Effective Amendment No. 38 to the Registration Statement
on Form N-1A (File 33-36528), as filed on March 31, 1999.
13. Included in Post-Effective Amendment No. 39 to the Registration Statement
on Form N-1A (File 33-36528), as filed on May 25, 1999.
-5-
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
Not applicable.
Item 25. Indemnification
Reference is made to Article VIII, Section 1, of the Registrant's Second
Amended and Restated Agreement and Declaration of Trust, which is incorporated
by reference herein.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the Trust's
Second Amended and Restated Agreement and Declaration of Trust, its By-Laws or
otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or controlling
persons of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustees, officers or controlling persons in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 27. Business and Other Connections of Investment Advisor and Portfolio
Managers.
Unless otherwise stated, the principal business address of each
organization listed in 800 Newport Center Drive, Newport Beach, CA 92660.
PIMCO Advisors L.P.
Name Position with Advisor Other Affiliations
Walter E. Auch, Sr. Member of Management Board Management Consultant;
Director, Fort Dearborn Fund,
Shearson VIP Fund, Shearson
Advisors Fund, Shearson TRAK
Fund, Banyan Land Trust,
Banyan Land Fund II, Banyan
Mortgage Fund, Allied
Healthcare Products, Inc.,
First Western Inc., DHR Group
and Geotech Industries.
William R. Benz Member of Management Board See Pacific Investment
Management Company.
-6-
<PAGE>
David B. Breed Member of Management Board Director, Managing Director
and Chief Executive Officer,
Cadence Capital Management,
Inc.; Managing Director and
Chief Executive Officer,
Cadence Capital Management.
Donald A. Chiboucas Member of Management Board Director, Columbus Circle
Investors Management, Inc.;
Managing Director, Columbus
Circle Investors.
Kenneth W. Corba Member of Management Board. None.
Managing Director and Chief
Investment Officer of
PIMCO Equity Advisors.
William D. Cvengros Chief Executive Officer Trustee and Chairman of the
and President, Member of Trust; Director, PIMCO Funds
Management Board Distributors LLC, Chief
Executive Officer and
President, Value Advisors
LLC; Director, PIMCO Funds
Advertising Agency; Director,
President and Chief Executive
Officer, Thomson Advisory
Group, Inc.
Walter B. Gerken Chairman and Member of Director, Mullin Consulting
Management Board Inc Director, Executive
Services Corps. of Southern
California.
Colin Glinsman Member of Management Managing Director,
Board Oppenheimer Capital.
William H. Gross Operating Board Director and Managing
and Equity Board Director, PIMCO Management,
Inc.; Managing Director,
Pacific Investment Management
Company; Senior Vice
President, PIMCO Funds:
Pacific Investment Management
Series, PIMCO Variable
Insurance Trust; Director and
Vice President, StocksPLUS
Management, Inc.; Member of
PIMCO Partners LLC.
Brent R. Harris Member of Management Board Director and Managing
Director, PIMCO Management,
Inc.; Managing Director,
Pacific Investment Management
Company; Director and Vice
President,
-7-
<PAGE>
StocksPLUS Management,
Inc.; Chairman of the
Board and Trustee,
PIMCO Funds: Pacific
Investment Management
Series, PIMCO Variable
Insurance Trust and
PIMCO Commercial
Mortgage Securities
Trust, Inc.; Member of
PIMCO Partners LLC.
Donald R. Kurtz Member of Management Board Donald R. Kurtz Member
of Management Board
Formerly, Vice
President of Internal
Asset Management,
General Motors
Investment Management
Corp.; Director,
Thomson Advisory Group
L.P.
George A. Long Member of Management Board Chairman and Chief
Executive Officer of
Oppenheimer Capital.
James McCaughan Member of Management Board Chief Executive
Officer, Oppenheimer
Capital
James F. McIntosh Member of Management Board Executive Director,
Allen Matkins, Leck,
Gamble & Mallory LLP.
Formerly, Director,
Pacific Investment
Management Company.
Kenneth H. Mortenson Member of Management Board Managing Director of
Oppenheimer Capital.
William F. Podlich, III Member of Management Board Director and Managing
Director, PIMCO
Management, Inc.;
Managing Director,
Pacific Investment
Management Company;
Vice President, PIMCO
Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO
Partners LLC.
William C. Powers Member of Management See Pacific Investment
Board Management Company.
Glenn S. Schafer Member of Management Board President and
Board Director, Pacific
Mutual Holding Company,
Pacific LifeCorp,
Pacific Life Insurance
Company, Pacific
Financial Asset
Management Corp.,
PMRealty Advisors,
Inc.; Director, Pacific
Mutual Distributors,
Inc., Mutual Service
Corporation,
UnitedPlanners' Group,
Inc., Thomson Advisory
Group.
-8-
<PAGE>
Thomas C. Sutton Member of Management Board Chairman, Chief Executive
Officer and Director, Pacific
William S. Thomson, Jr.
Mutual Holding Company,
Pacific LifeCorp, Pacific
Life Insurance Company,
Pacific Financial Asset
Management Corp.; Director,
Pacific Mutual Distributors,
Inc., Mutual Service
Corporation, United Planners'
Group, Inc., PMRealty
Advisors, Inc.
William S. Thomson, Member of Management Board; Director, Managing Director
Jr. Chairman, Executive and Chief Executive Committee
Committee Fitzgerald Officer, PIMCO
Management, Inc.; Chief
Executive Officer and
Managing Director, Pacific
Investment Management
Company; Member, President
and Chief Executive Officer,
PIMCO Partners LLC; Director
and President, StocksPLUS
Management, Inc.; Vice
President, PIMCO Variable
Insurance Trust, PIMCO Funds:
Pacific Investment Management
Series, and PIMCO Commercial
Mortgage Securities Trust,
Inc.; Director, Thomson
Advisory Group, Inc.
Robert M. Fitzgerald Senior Vice President Chief Financial Officer and
and Chief Treasurer, PIMCO Funds
Financial Officer Distributors, LLC, Columbus
Circle Investors, Columbus
Circle Investors Management,
Inc., Cadence Capital
Management, Inc., NFJ
Investment Group, NFJ
Management, Inc., Parametric
Portfolio Associates,
Parametric Management, Inc.,
PIMCO Management, Inc.,
Pacific
-9-
<PAGE>
Investment Management
Company, and StocksPLUS
Management, Inc.; Chief
Financial Officer and
Assistant Treasurer, Cadence
Capital Management; Senior
Vice President and Chief
Financial Officer, Value
Advisors LLC; Chief Financial
Officer, Columbus Circle
Trust Company; Chief
Financial Officer and
Treasurer, PIMCO Funds
Advertising Agency; Senior
Vice President, Chief
Financial Officer and
Treasurer, Thomson Advisory
Group, Inc.
Benjamin L. Trosky Member of Management Board Managing Director, Pacific
Investment Management
Company; Director and
Managing Director, PIMCO
Management, Inc.; Senior Vice
President, PIMCO Commercial
Mortgage Securities Trust,
Inc.; Member of PIMCO
Partners LLC.
Bradley W. Paulson Vice President Vice President and Secretary,
PIMCO Global Advisors
(Europe) Limited, PIMCO
Global Advisors (Japan)
Limited; Vice President,
Pacific Investment Management
Company.
Kenneth M. Poovey Chief Operating Officer Executive Vice President and
and General Counsel General Counsel, Value
Advisors LLC and Thomson
Advisory Group, Inc.
Stephen J. Treadway Executive Vice President Chairman, President, and
Chief Executive Officer,
PIMCO Funds Advertising
Agency, Inc., PIMCO Funds
Distributors LLC, and
Trustee, President and Chief
Executive Officer of the
Trust;
-10-
<PAGE>
Executive Vice President,
Value Advisors LLC.
Robert S. Venable Vice President None
James G. Ward Senior Vice President, Senior Vice President, Human
Human Resources Resources, Value Advisors
LLC; Senior Vice President,
Thomson Advisory Group, Inc.
Richard M. Weil Senior Vice President - Senior Vice President,
Legal, Secretary Assistant Secretary, PIMCO
Management, Inc.; Secretary,
Cadence Capital Management,
Inc., NFJ Investment Group,
NFJ Management, Inc.,
Parametric Portfolio
Associates, Parametric
Management, Inc., and
StocksPLUS Management, Inc.;
Assistant Secretary, Columbus
Circle Investors, Columbus
Circle Investors Management,
Inc., Cadence Capital
Management, PIMCO Funds
Advertising Agency, Inc. and
Pacific Management Investment
Company; Senior Vice
President, Legal, Secretary
Value Advisors LLC, Thomson
Advisors LLC, Thomson
Advisory Group, Inc., and
Vice President of the
Trust.
Frank C. Poli Vice President, Director of Compliance Officer,
Compliance PIMCO Funds Distributors LLC
Vinh T. Nguyen Vice President, Controller Vice President, Controller,
Columbus Circle Investors
Management, Inc., Cadence
Capital Management, Inc., NFJ
Management, Inc., Parametric
Management, Inc., StocksPLUS
Management, Inc., PIMCO Funds
Advertising Agency, Inc.,
PIMCO
-11-
<PAGE>
Funds Distributors LLC,
and Value Advisors LLC;
Controller, Pacific
Investment Management Company
and PIMCO Management, Inc.
Timothy R. Clark Vice President, Mutual Senior Vice President, PIMCO
Funds Division Funds Distributors LLC
Newton B. Schott, Senior Vice President, Director, Executive Vice
Jr. Mutual Funds Division President, Chief
Administrative Officer,
General Counsel and
Secretary, PIMCO Funds
Distributors LLC and PIMCO
Funds Advertising Agency,
Inc.; Chief Legal Officer and
Secretary, Columbus Circle
Investors, Columbus Circle
Investors Management, Inc.;
Senior Vice President, Mutual
Fund Division; General
Counsel and Secretary,
Columbus Circle Trust
Company; Vice President and
Secretary, the Trust; Senior
Vice President, Value
Advisors LLC.
Diane P. Dubois Vice President, Finance None.
Ernest L. Schmider Senior Vice President See Pacific Investment
Management Company
Cadence Capital Management
Exchange Place, 53 State Street
Boston, Massachusetts 02109
Name Position with Portfolio Other Affiliations
Manager
William B. Bannick Managing Director and Director and Managing
Executive Vice President Director,
Cadence Capital Management,
Inc.
David B. Breed Managing Director and Member of Management Board,
Chief Executive Officer PIMCO Advisors L.P.;
Director, Managing Director
and Chief Executive Officer,
Cadence Capital Management,
Inc.
-12-
<PAGE>
Katherine A. Burdon Managing Director None.
Mary Ellen Melendez Secretary None.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Assistant Treasurer
Barbara M. Green Treasurer None.
Richard M. Weil Assistant Secretary See PIMCO Advisors L.P.
NFJ Investment Group
2121 San Jacinto, Suite 1440
Dallas, Texas 75201
Name Position with Portfolio Other Affiliations
Manager
Benno J. Fischer Managing Director Director, Managing
Director, and Co-Chairman,
NFJ Management, Inc.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
John L. Johnson Managing Director Director, and Co-Chairman
Managing Director, NFJ
Management, Inc.
Jack C. Najork Managing Director Director, Managing
Director, Co-Chairman, NFJ
Management, Inc.
Richard M. Weil Secretary See PIMCO Advisors L.P.
-13-
<PAGE>
Parametric Portfolio Associates
7310 Columbia Center, 701 Fifth Avenue,
Seattle, Washington 98104-7090
Name Position with Portfolio Other Affiliations
Manager
William E. Cornelius, Managing Director Director, Managing
Jr. Chief Executive Officer
Parametric Management,
Inc.
David M. Stein Managing Director Director and Managing
Director, Parametric
Management, Inc.
Brian Langstraat Managing Director None.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
Richard M. Weil Secretary See PIMCO Advisors L.P.
Pacific Investment Management Company ("PIMCO")
840 Newport Center Drive, Suite 300
Newport Beach, California 92660
Name Position with Portfolio Other Affiliations
Manager
George C. Allan Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Tamara J. Arnold Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Michael R. Asay Vice President Vice President, PIMCO
Management, Inc.
Leslie A. Barbi Senior Vice President Senior Vice President,
PIMCO Management, Inc.
William R. Benz, II Managing Director Director and Managing
Director, PIMCO
Management, Inc.; Member
of PIMCO Partners
LLC. Member of Management
Board, PIMCO Advisors L.P.
-14-
<PAGE>
Gregory A. Bishop Vice President None.
Andrew Brick Senior Vice President Senior Vice President,
PIMCO Management, Inc.
John B. Brynjolfsson Vice President Vice President, PIMCO
Management, Inc.
R. Welsley Burns Managing Director Executive Vice President,
PIMCO Management, Inc. and
the Trust; President, PIMCO
Funds: Pacific Investment
Management Series; President
and Director, PIMCO
Commercial Mortgage
Securities Trust, Inc.;
President and Trustee, PIMCO
Variable Insurance Trust;
Director, PIMCO Global
Advisors (Ireland) Limited
and PIMCO Advisors Funds
plc.
Carl J. Cohen Vice President Vice President, PIMCO
Management, Inc.
Jerry L. Coleman Vice President Vice President, PIMCO
Management, Inc.
Doug Cummings Vice President Vice President, PIMCO
Management, Inc.
Wendy W. Cupps Vice President Vice President, PIMCO
Management, Inc.
Chris Dialynas Director Managing Director, PIMCO
Management, Inc.
David J. Dorff Vice President
Michael Dow Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
-15-
<PAGE>
Anita Dunn Vice President Vice President, PIMCO
Management, Inc.
A. Benjamin Ehlert Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Robert A. Ettl Senior Vice President and Vice President, PIMCO
Chief Operations Officer Management, Inc.
Anthony L. Faillace Vice President Vice President, PIMCO
Management, Inc.
Robert M. Fitzgerald Chief Financial Officer See PIMCO Advisors L.P.
and Treasurer
Ursula T. Frisch Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
William H. Gross Managing Director See PIMCO Advisors L.P.
John L. Hague Managing Director Director, PIMCO Management,
Inc., Member of PIMCO
Partners LLC.
Gordon C. Hally Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Pasi M. Hamalainen Executive Vice President Executive Vice President,
PIMCO Management, Inc.
John P. Hardaway Senior Vice President Vice President, PIMCO
Management, Inc.; Treasurer
of the Trust, PIMCO Funds:
Pacific Investment
Management Series, PIMCO
Commercial Mortgage
Securities Trust, Inc., and
PIMCO Variable Insurance
Trust.
Brent R. Harris Managing Director See PIMCO Advisors L.P.
Joseph Hattesohl Vice President and Manager Vice President, PIMCO
of Fund Taxation Management, Inc.; Assistant
Treasurer, the Trust, PIMCO
Funds: Pacific Investment
Management Series, PIMCO
Variable Insurance Trust,
and PIMCO Commercial
Mortgage Securities Trust,
Inc.
-16-
<PAGE>
Raymond C. Hayes Vice President Vice President, PIMCO Robert
G. Herin Management, Inc.
and PIMCO Funds: Pacific
Investment Management
Series.
Robert G. Herin Vice President Vice President, PIMCO
Management, Inc.
David C. Hinman Vice President Vice President, PIMCO
Management, Inc.
Liza Hocson Vice President Vice President, PIMCO
Management, Inc.
Douglas M. Hodge Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Brent L. Holden Executive Vice President Executive Vice President,
PIMCO Management, Inc.
Dwight F. Holloway, Vice President Vice President, PIMCO
Jr. Management, Inc.
Jane T. Howe Vice President Vice President, PIMCO
Management, Inc.
Mark Hudoff Vice President Vice President, PIMCO
Management, Inc.
Margaret E. Isberg Executive Vice President Executive Vice President,
PIMCO Management, Inc.;
Senior Vice President, PIMCO
Funds: Pacific Investment
Management Series.
James M. Keller Vice President Vice President, PIMCO
Management, Inc.
-17-
<PAGE>
Sharon K. Kilmer Executive Vice President None.
Thomas J. Kelleher Vice President Vice President, PIMCO
Management, Inc.
Raymond G. Kennedy Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Mark R. Kiesel Vice President Vice President, PIMCO
Management, Inc.
Steven P. Kirkbaumer Vice President None.
John S. Loftus Executive Vice President Executive Vice President,
PIMCO Management, Inc.; Vice
President and Assistant
Secretary, StocksPLUS
Management, Inc.
David Lown Vice President Vice President, PIMCO
Management, Inc.
Andre J. Mallegol Vice President Vice President, PIMCO
Management, Inc.
Michael E. Martini Vice President Vice President, PIMCO
Management, Inc.
Dean S. Meiling Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Vice President, PIMCO
Funds: Pacific Investment
Management Series and PIMCO
Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO Partners
LLC.
Joseph V. McDevitt Executive Vice President Vice President, PIMCO
Management, Inc.
-18-
<PAGE>
James F. Muzzy Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Vice President, PIMCO
Funds: Pacific Investment
Management Series; Director
and Vice President,
StocksPLUS Management, Inc.;
Member of PIMCO Partners
LLC.
Doris S. Nakamura Vice President
Vinh T. Nguyen Controller See PIMCO Advisors L.P.
Douglas J. Ongaro Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
Thomas J. Otterbein Vice President Vice President, PIMCO
Management, Inc.
Victoria M. Paradis Vice President Vice President, PIMCO
Management, Inc.
Bradley W. Paulson Vice President Vice President and
Secretary, Vice President
PIMCO Global Advisors
(Europe) Limited, PIMCO
Global Advisors (Japan)
Limited.
Elizabeth M. Philipp Vice President Vice President, PIMCO
Management, Inc.
David J. Pittman Vice President None.
William F. Podlich,
III Managing Director See PIMCO Advisors L.P.
William C. Powers Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Senior Vice President
PIMCO Commercial Mortgage
Securities Trust, Inc.;
Member of PIMCO Partners
LLC. Member of Management
Board, PIMCO Advisors L.P.
Edward P. Rennie Senior Vice President Senior Vice President, PIMCO
Management, Inc.
-19-
<PAGE>
Terry A. Randall Vice President
Scott L. Roney Vice President Vice President, PIMCO
Management, Inc.
Michael J. Rosborough Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Seth R. Ruthen Vice President Vice President, PIMCO
Management, Inc.
Jeffrey M. Sargent Vice President and Manager Vice President of the Trust,
Shareholder Services and PIMCO Management, Inc.;
Senior Vice President,
Fund Administration PIMCO Funds: Pacific
Investment Management
Series, PIMCO Variable
Insurance Trust, and
PIMCO Commercial Mortgage
Securities Trust, Inc.
Ernest L. Schmider Executive Vice President, Executive Vice President,
Secretary, Chief Secretary, Chief
Administrative and Legal Administrative
Officer and Legal Officer, PIMCO
Management, Inc.; Director,
Assistant Secretary,
Assistant Treasurer,
StocksPLUS
Management, Inc.;
Secretary, PIMCO
Partners LLC.
Leland T. Scholey Senior Vice President Senior Vice President, PIMCO
Management, Inc., and PIMCO
Funds: Pacific Investment
Management Series.
Richard W. Selby Senior Vice President None.
and Chief Technology
Officer
Denise C. Seliga Vice President Vice President, PIMCO
Management, Inc.
Rita J. Seymour Vice President Vice President, PIMCO
Management, Inc.
Christopher Sullivan Vice President Vice President, PIMCO
Management, Inc.
-20-
<PAGE>
Cheryl L. Sylwester Vice President Vice President, PIMCO
Management, Inc.
Lee R. Thomas, III Managing Director Director and Managing
Director, PIMCO Management,
Inc.; Member of PIMCO
Partners LLC.
William S. Thomson, Director, Managing See PIMCO Advisors L.P.
Jr. Director, Chief
Executive Officer
Benjamin L. Trosky Managing Director See PIMCO Advisors L.P.
Richard E. Tyson Vice President Vice President, PIMCO
Management, Inc.
Peter A. Van de Zilver Vice President Vice President, PIMCO
Management, Inc.
Marilyn Wegener Vice President Vice President, PIMCO
Management, Inc.
Richard M. Weil Assistant Secretary See PIMCO Advisors L.P.
Paul C. Westhead Vice President Vice President, PIMCO
Management, Inc.
Kristen M. Wilsey Vice President Vice President, PIMCO
Management, Inc. and PIMCO
Funds: Pacific Investment
Management Series.
George H. Wood Senior Vice President Senior Vice President,
PIMCO Management, Inc.
Michael A. Yetter Vice President Vice President, PIMCO
Management, Inc.
David Young Vice President Vice President, PIMCO
Management, Inc.
-21-
<PAGE>
Blairlogie Capital Management, Limited
4th Floor, 125 Princes Street
Edinburgh EH2 4AD, Scotland
Name Position with Portfolio Other Affiliations
Manager
Gavin R. Dobson Chief Executive Officer Director and Chief Executive
and Managing Director Officer, Blairlogie Holdings
Limited (U.K.).
James G. S. Smith Chief Investment Officer Director and Chief
and Managing Director Investment Officer,
Blairlogie Holdings
Limited (U.K.).
Van Eck Associates Corporation
99 Park Avenue
New York, New York 10016
Name Position with Portfolio Other Affiliations
Manager
Philip DeFeo Director, President and Trustee, Van Eck Funds
Chief Executive Officer ("VEF") and Van Eck
Worldwide Insurance Trust
("WWIT"); Director,
President and Chief
Executive Officer,
Van Eck Securities
Corporation ("VESC").
John C. van Eck Chairman of the Board Chairman of the Board and
President, VEF and WWIT;
Chairman of the Board, VESC;
Director, Eclipse Financial
Asset Trust. Formerly,
Director, Abex Inc.;
Director, The Henley Group,
Inc.
Fred M. van Eck Director Trustee, VEF and WWIT;
Private Investor, Director,
VESC.
Sigrid S. van Eck Director, Vice President Vice President, Assistant
and Assistant Treasurer Treasurer and Director,
VESC.
-22-
<PAGE>
Jan van Eck Director Director and Executive Vice
President, VESC.
Derek M. van Eck Director and Executive Vice Director and Executive Vice
President; Director, Global President, VESC; President
Investments Global Hard Assets Series
of the Van Eck Funds and
Worldwide Hard Assets
Series of WWIT; Vice
President, Global Balanced
Series of VEF.
Bruce J. Smith Vice President, Treasurer, Vice President, Treasurer,
Controller and Chief Controller and Chief
Financial Officer Financial Officer, VESC;
Vice President, VEF and
WWIT.
Thaddeus M. Vice President, Secretary Vice President and
Leszcynski and General Counsel Secretary, VEF and WWIT;
Vice President, Secretary
and General Counsel, VESC.
Henry J. Bingham Executive Managing Director Executive Vice President,
VEF and WWIT; Executive Vice
President of VESC.
Lucille Palermo Associate, Mining Research President, International
Investors
Gold and Gold/Resources
Series of VEF.
Kevin Reid Director, Real Estate President, Global Real
Research Estate Series of VEF and
Worldwide Real Estate
Series of WWIT; Vice
President, Global Hard
Assets Series of VEF and
Worldwide Hard Assets
Series of WWIT.
Charles Cameron Director, Trading Vice President, VEF
and WWIT.
-23-
<PAGE>
Item 27. Principal Underwriters.
(a) PIMCO Funds Distributors LLC (the "Distributor") serves as
Distributor of shares for the Registrant and also of PIMCO Funds:
Pacific Investment Management Series. The Distributor is a wholly
owned subsidiary of PIMCO Advisors L.P., the Registrant's Adviser.
(b)
Positions and Positions
Name and Principal Offices with and Offices
Business Address* Underwriter with Registrant
Jeffrey L. Booth Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
James D. Bosch Regional Vice President None
Deborah P. Brennan Vice President None
Timothy R. Clark Senior Vice President None
Jonathan P. Fessel Vice President None
Robert M. Fitzgerald Chief Financial Officer None
and Treasurer
Michael J. Gallagher Vice President None
David S. Goldsmith Vice President None
Ronald H. Gray Vice President None
John B. Hussey Vice President None
Edward W. Janeczek Senior Vice President None
Stephen R. Jobe Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
Jonathan C. Jones Vice President None
Raymond Lazcano Vice President None
-24-
<PAGE>
William E. Lynch Senior Vice President None
Kevin D. Maloney Compliance Officer None
Jacqueline A. McCarthy Vice President None
Andrew J. Meyers Executive Vice President Executive Vice
President,
PIMCO Funds
Advertising Agency, Inc.
Fiora N. Moyer Regional Vice President None
Philip J. Neugebauer Vice President Vice President, PIMCO
Funds Advertising Agency
Vinh T. Nguyen Vice President, Controller None
Joffrey H. Pearlman Regional Vice President None
Glynne P. Pisapia Regional Vice President None
Francis C. Poli Compliance Officer Vice President, Director
of Compliance, PIMCO
Advisors L.P.
Mark J. Porterfield Vice President, Vice President,
Compliance Officer Compliance Officer,
PIMCO Advisors L.P.
Newton B. Schott, Jr. Executive Vice President, Vice President and
Chief Administrative Secretary
Officer, General Counsel
and Secretary
Robert M. Smith Vice President None
Ellen Z. Spear Vice President Vice President, PIMCO
Funds Advertising
Agency, Inc.
Daniel W. Sullivan Vice President None
William H. Thomas, Jr. Regional Vice President None
-25-
<PAGE>
Stephen J. Treadway Chairman, President and Executive Vice
Chief Executive Officer President,
PIMCO Advisors L.P.
and Trustee
Paul H. Troyer Senior Vice President None
Brian F. Trumbore Executive Vice President None
Richard M. Weil Assistant Secretary None
Glen A. Zimmerman Vice President None
- -----------------------
Principal business address for all individuals listed is 2187 Atlantic
Street, Stamford, CT 06902, except for Messrs. Fitzgerald, Maloney, Nguyen, Poli
and Weil, for whom the address is 800 Newport Center Drive, Newport Beach, CA
92660.
(c) The Registrant has no principal underwriter that is not an affiliated
person of the Registrant or an affiliated person of such an
affiliated person.
Item 28. Location of Accounts and Records.
The account books and other documents required to be maintained by the
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of Investors Fiduciary
Trust Company, 21 West 10th Street, Kansas City, Missouri 64105, and Shareholder
Services, Inc., P.O. Box 5866, Denver, CO 80217.
Item 29. Management Services.
Not Applicable.
Item 30. Undertakings.
Not Applicable.
-26-
<PAGE>
NOTICE
------
A copy of the Agreement and Declaration of Trust of PIMCO Funds: Multi-
Manager Series (the "Trust"), together with all amendments thereto, is on file
with the Secretary of State of The Commonwealth of Massachusetts and notice is
hereby given that this instrument is executed on behalf of the Trust by an
officer of the Trust as an officer and not individually and that the obligations
of or arising out of this instrument are not binding upon any of the Trustees of
the Trust or shareholders of any series of the Trust individually but are
binding only upon the assets and property of the Trust or the respective series.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has met all of
the requirements for effectiveness of this Post-Effective Amendment No. 43 (the
"Amendment") to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused the Amendment to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Stamford, and
the State of Connecticut on the 29th of October, 1999.
PIMCO FUNDS: MULTI-MANAGER SERIES
By: /s/ Stephen J. Treadway
------------------------------
Stephen J. Treadway,
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 43 has been signed below by the following persons in the
capacities and on the dates indicated.
Name Capacity Date
- ---- -------- ----
/s/ Stephen J. Treadway Trustee and President October 29, 1999
- ----------------------------
Stephen J. Treadway
John P. Hardaway* Treasurer and Principal
- ---------------------------- Financial and Accounting
John P. Hardaway Officer
William D. Cvengros* Trustee
- ----------------------------
William D. Cvengros
Joel Segall* Trustee
- ----------------------------
Joel Segall
Donald P. Carter* Trustee
- ----------------------------
Donald P. Carter
E. Philip Cannon* Trustee
- ----------------------------
E. Philip Cannon
Gary A. Childress* Trustee
- ----------------------------
Gary A. Childress
Richard L. Nelson* Trustee
- ----------------------------
Richard L. Nelson
Lyman W. Porter* Trustee
- ----------------------------
Lyman W. Porter
<PAGE>
Alan Richards* Trustee
- ----------------------------
Alan Richards
W. Bryant Stooks* Trustee
- ----------------------------
W. Bryant Stooks
Gerald M. Thorne* Trustee
- ----------------------------
Gerald M. Thorne
*By: /s/ Stephen J. Treadway
----------------------------
Stephen J. Treadway,
Attorney-In-Fact
Date: October 29, 1999
-2-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO: EXHIBIT NAME
(h)(3) Form of Amendment No. 1 to Amended and Restated Administration
Agreement.
(j)(1) Consent of PricewaterhouseCoopers LLP.
(j)(1)(i) Letter from PricewaterhouseCoopers to the Securities
and Exchange Commission dated October 26, 1999.
<PAGE>
Exhibit (h)(3)
AMENDMENT NO. 1
to
AMENDED AND RESTATED
ADMINISTRATION AGREEMENT
================================================================================
This Amendment No. 1 is made as of August 1, 1999 to the Amended and
Restated Administration Agreement (the "Administration Agreement"), dated as of
April 8, 1998, between PIMCO Funds; Multi-Manager Series (the "Trust"), a
Massachusetts business trust, and PIMCO Advisors L.P. (the "Administrator" or
"PALP"), a limited partnership organized under the laws of Delaware.
WITNESSETH
WHEREAS, the Trust and PALP have entered into the Administration
Agreement; and
WHEREAS, the Trust and PALP desire to amend Schedule A to the
Administration Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. Amendment. Schedule A to the Administration Agreement is amended to
---------
read in its entirety as the Schedule A attached hereto.
2. Effectiveness. The revised Schedule A of the Administration
-------------
Agreement shall be effective with respect to the various Funds and share classes
as of the later of (i) January 14, 1997, (ii) the date of the creation of the
Fund in question or (iii) the date of the creation of the share class in
question.
3. Continuation. Except as set forth above, the Administration
------------
Agreement shall remain in full force and effect in accordance with its terms.
4. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
PIMCO FUNDS: MULTI-MANAGER SERIES
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
PIMCO ADVISORS L.P.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
<PAGE>
Exhibit A
---------
SCHEDULE TO ADMINISTRATION AGREEMENT
Fee Rate:
--------
Institutional and
Administrative Classes Classes A, B & C
---------------------- ----------------
<TABLE>
<CAPTION>
Custody and Custody and
Portfolio Portfolio
Fund Accounting Other Total Accounting Other Total*
- ------------------------------------- ----------- ----- ----- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
PIMCO Capital Appreciation 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Mid-Cap Growth 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Small-Cap Growth 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Micro-Cap Growth 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Renaissance 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Core Equity 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Growth 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Mid-Cap Equity 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Target 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Opportunity 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Innovation 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Equity Income 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Value 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Small-Cap Value 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Enhanced Equity 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Balanced 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Mega-Cap 0.10 0.15 0.25 n/a n/a n/a
PIMCO Precious Metals 0.10 0.20 0.30 0.10 0.35 0.45
PIMCO International 0.10 0.40 0.50 0.10 0.55 0.65
PIMCO International Growth 0.10 0.40 0.50 0.10 0.55 0.65
PIMCO Structured Emerging
Markets 0.10 0.40 0.50 0.10 0.55 0.65
PIMCO Tax-Efficient Structured
Emerging Markets 0.10 0.40 0.50 0.10 0.55 0.65
PIMCO Value 25 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Tax-Efficient Equity 0.10 0.15 0.25 0.10 0.30 0.40
PIMCO Hard Assets n/a n/a n/a 0.10 0.30 0.40
PIMCO Funds Asset Allocation Series
- -------------------------------------
90/10 Portfolio 0.10 0.05 0.15 0.10 0.30 0.40
60/40 Portfolio 0.10 0.05 0.15 0.10 0.30 0.40
30/70 Portfolio 0.10 0.05 0.15 0.10 0.30 0.40
- ------------------
</TABLE>
* The Total fee rate for Class A, B and C shares shall be reduced by 0.05%
per annum on a Fund's average daily net assets attributable in the aggregate to
Class A, B and C shares in excess of $2.5 billion. For example, Class A, B and
C shares of PIMCO Capital Appreciation Fund shall pay an annual fee rate of
0.40% on the Fund's first $2.5 billion of average daily net assets attributable
in the aggregate to Class A, B and C shares, and 0.35% on such assets in excess
of $2.5 billion.
2
<PAGE>
SCHEDULE TO ADMINISTRATION AGREEMENT (CONT.)
Class D Shares
--------------
<TABLE>
<CAPTION>
Custody and
Portfolio
Fund Accounting Other Total
- ---- ----------- ----- -----
<S> <C> <C> <C>
PIMCO Capital Appreciation 0.10 0.55 0.65
PIMCO Mid-Cap Growth 0.10 0.55 0.65
PIMCO Renaissance 0.10 0.55 0.65
PIMCO Growth 0.10 0.55 0.65
PIMCO Innovation 0.10 0.55 0.65
PIMCO Equity Income 0.10 0.55 0.65
PIMCO Value 0.10 0.55 0.65
PIMCO Tax-Efficient Equity 0.10 0.55 0.65
</TABLE>
3
<PAGE>
Exhibit (j)(i)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 43 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated August 13, 1998, relating to the financial
statements and financial highlights appearing in the June 30, 1999 Annual
Reports to Shareholders of the Renaissance Fund, Growth Fund, Core Equity Fund,
Target Fund, Mid-Cap Equity Fund, Opportunity Fund, Innovation Fund,
International Growth Fund, Capital Appreciation Fund, Mid-Cap Growth Fund,
Small-Cap Growth Fund, Micro-Cap Growth Fund, Equity Income Fund, Value Fund,
Value 25 Fund, Small-Cap Value Fund, Enhanced Equity Fund, Tax-Efficient Equity
Fund, Structured Emerging Markets Fund, Tax-Efficient Structured Emerging
Markets Fund, International Fund, Precious Metals Fund, 90/10 Portfolio, 60/40
Portfolio and 30/70 Portfolio (each a Portfolio of PIMCO Funds: Multi-Manager
Series) which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants" in the Prospectuses and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Kansas City, Missouri
October 29, 1999
<PAGE>
Exhibit (j)(1)(i)
[PricewaterhouseCoopers letterhead appears here]
October 26, 1999
VIA FACSIMILE
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Post-Effective Amendment No. 43 to the Registration on Form N-1A of
PIMCO Funds: Multi-Manager Series (the "Trust"), filed on October 29,
1999, SEC File No. 33-36528
Ladies and Gentlemen:
PricewaterhouseCoopers LLP ("PwC") acknowledges that any action taken by
the Commission in declaring the Trust's filing effective or in accelerating the
effective date thereof does not relieve PwC, its partners, or employees from
their responsibilities to comply with the Securities and Exchange Commission's
independence rules. Should the Commission or the Staff, acting pursuant to
delegated authority, declare the Trust's filing effective or accelerate its
effective date, PwC, its partners, and its employees will not assert this action
as a defense in any proceeding initiated by the Commission or any person under
the federal securities laws of the United States.
Very truly yours,
PricewaterhouseCoopers LLP
By: Kevin W. Quinn
---------------------
Name: Kevin W. Quinn
Title: Partner
cc: Keith Gregory
Robert E. Burns, Esq., Chief Counsel to the Office of Chief Accountant
W. Scott Bayless, Associate Director, Office of Chief Accountant
