<PAGE>
PIMCO Funds Prospectus
Multi-Manager
Series
May 7, 1999
Share Classes
(Ins) Institutional
(Adm) Administrative
- ----------------------------------------------------------------------------
BLAIRLOGIE CAPITAL MANAGEMENT
International Fund
- ----------------------------------------------------------------------------
CADENCE CAPITAL MANAGEMENT
Capital Appreciation Fund Small-Cap Growth Fund
Mid-Cap Growth Fund Micro-Cap Growth Fund
- ----------------------------------------------------------------------------
COLUMBUS CIRCLE INVESTORS
Core Equity Fund International Growth Fund
Mid-Cap Equity Fund
- ----------------------------------------------------------------------------
NFJ INVESTMENT GROUP
Equity Income Fund Value 25 Fund
Value Fund Small-Cap Value Fund
- ----------------------------------------------------------------------------
PIMCO EQUITY ADVISORS
Renaissance Fund Opportunity Fund
Growth Fund Innovation Fund
Target Fund
- ----------------------------------------------------------------------------
PARAMETRIC PORTFOLIO ASSOCIATES
Enhanced Equity Fund Tax-Efficient Structured Emerging
Tax-Efficient Equity Fund Markets Fund
Structured Emerging Markets Fund
- ----------------------------------------------------------------------------
MULTIPLE MANAGERS
Balanced Fund
P I M C O
---------
FUNDS
<PAGE>
PIMCO Funds: Multi-Manager Series
Prospectus
May 7, 1999
PIMCO Funds: Multi-Manager Series (the "Trust"), formerly PIMCO Funds: Equity
Advisors Series, is an open-end series management investment company ("mutual
fund"). This Prospectus describes twenty-two separate diversified investment
portfolios (the "Funds") of the Trust. Each Fund has its own investment
objective and policies. The Trust is designed to provide access to the
professional investment management services offered by PIMCO Advisors L.P.
("PIMCO Advisors") and the Funds' Sub-Advisers.
This Prospectus describes two classes of shares which may be offered by each
Fund: the "Institutional Class" and the "Administrative Class." Through
separate prospectuses, certain Funds may offer up to four additional classes of
shares, Class A, Class B, Class C, and Class D shares. See "Other Information--
Multiple Classes of Shares."
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Funds. It should be read and retained for
ready reference to information about the Funds. Information about the
investment objective of each Fund, along with a detailed description of the
types of securities in which each Fund may invest, and of investment policies
and restrictions applicable to each Fund, are set forth in this Prospectus.
There can be no assurance that the investment objective of any Fund will be
achieved. Because the market value of the Funds' investments will change, the
investment returns and net asset value per share of each Fund will vary.
A Statement of Additional Information, dated April 1, 1999, as revised May 7,
1999 and as further amended or supplemented from time to time, containing
additional and more detailed information about the Funds, has been filed with
the Securities and Exchange Commission and is hereby incorporated by reference
into this Prospectus. The Securities and Exchange Commission maintains an
Internet World Wide Web site (at www.sec.gov) which contains the Statement of
Additional Information, materials that are incorporated by reference into this
Prospectus and the Statement of Additional Information, and other information
about the Funds. The Statement of Additional Information is available without
charge and may be obtained by writing or calling:
PIMCO Funds
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
Telephone: 1-800-927-4648
1-800-987-4626 (PIMCO Infolink Audio Response
Network).
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this Prospectus. Any representation to the contrary is
a criminal offense.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, and the shares are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other agency, and involve risk, including the possible loss of
principal.
2 PIMCO Funds: Multi-Manager Series
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................................................... 4
Expense Information..................................................... 9
Financial Highlights.................................................... 12
Investment Objectives and Policies...................................... 20
Investment Restrictions................................................. 33
Characteristics and Risks of Securities and Investment Techniques....... 35
Management of the Trust................................................. 49
Purchase of Shares...................................................... 56
Redemption of Shares.................................................... 60
Portfolio Transactions.................................................. 63
Net Asset Value......................................................... 64
Dividends, Distributions and Taxes...................................... 65
Other Information....................................................... 67
</TABLE>
Prospectus 3
<PAGE>
PROSPECTUS SUMMARY
PIMCO Funds: Multi-Manager Series (the "Trust") is an open-end management
investment company ("mutual fund") organized as a Massachusetts business trust
on August 24, 1990. This Prospectus describes twenty-two separate diversified
investment portfolios (the "Funds") offered by the Trust.
Funds at a Glance
The following chart provides general information about each of the Funds. It
is qualified in its entirety by the more complete descriptions of the Funds
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Sub-Adviser and Fund Investment Objective Primary Investments
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Blairlogie Capital
Management
International Seeks capital appreciation; Invests primarily in common
income is incidental. stocks of non-U.S. issuers.
- ----------------------------------------------------------------------------------------
Cadence Capital
Management
Capital Appreciation Seeks growth of capital. Invests primarily in 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 Seeks growth of capital. Invests primarily in common
stocks of companies with market
capitalizations in excess of
$500 million that have
improving fundamentals and
whose stock is reasonably
valued by the market.
- ----------------------------------------------------------------------------------------
Small-Cap Growth Seeks growth of capital. Invests primarily in common
stocks of companies with market
capitalizations between $50
million and $1 billion that
have improving fundamentals and
whose stock is reasonably
valued by the market.
- ----------------------------------------------------------------------------------------
Micro-Cap Growth Seeks long-term growth of Invests primarily in common
capital. stocks of companies with market
capitalizations of less than
$100 million that have
improving fundamentals and
whose stock is reasonably
valued by the market.
- ----------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
4 PIMCO Funds: Multi-Manager Series
<PAGE>
PROSPECTUS SUMMARY (continued)
Funds at a Glance (continued)
<TABLE>
<CAPTION>
Sub-Adviser and Fund Investment Objective Primary Investments
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Columbus Circle
Investors
Core Equity Seeks long-term growth of Invests primarily in common
capital, with income as a stocks of companies with market
secondary objective. capitalizations in excess of $3
billion.
- ----------------------------------------------------------------------------------------
Mid-Cap Equity Seeks long-term growth of Invests primarily in common
capital. stocks of companies with market
capitalizations between $800
million and $3 billion.
- ----------------------------------------------------------------------------------------
International Growth Seeks long-term capital Invests primarily in an
appreciation. international portfolio of
equity and equity-related
securities.
- ----------------------------------------------------------------------------------------
NFJ Investment Group
Equity Income Seeks current income as a Invests primarily in common
primary investment objective, stocks with below-average price
and long-term growth of capital to earnings ratios and higher
as a secondary objective. dividend yields relative to
their industry groups.
- ----------------------------------------------------------------------------------------
Value Seeks long-term growth of Invests primarily in common
capital and income. stocks with below-average price
to earnings ratios relative to
their industry groups.
- ----------------------------------------------------------------------------------------
Value 25 Seeks long-term growth of Invests primarily in
capital and income. approximately 25 common stocks
with medium market
capitalizations and that have
below-average price to earnings
ratios relative to their
industry groups.
- ----------------------------------------------------------------------------------------
Small-Cap Value Seeks long-term growth of Invests primarily in common
capital and income. stocks of companies with market
capitalizations between $50
million and $1 billion and
below-average price to earnings
ratios relative to their
industry groups.
- ----------------------------------------------------------------------------------------
PIMCO Equity Advisors
Renaissance Seeks long-term growth of Invests primarily in common
capital and income. stocks with below-average
valuations that have improving
business fundamentals.
- ----------------------------------------------------------------------------------------
Growth Seeks long-term growth of Invests primarily in common
capital; income is incidental. stocks of companies with market
capitalizations of at least $5
billion.
- ----------------------------------------------------------------------------------------
Target Seeks capital appreciation; no Invests primarily in common
consideration given to income. stocks of companies with market
capitalizations of between $1
billion and $10 billion.
- ----------------------------------------------------------------------------------------
Opportunity Seeks capital appreciation; no Invests primarily in common
consideration given to income. stocks of companies with market
capitalizations of less than $2
billion.
- ----------------------------------------------------------------------------------------
Innovation Seeks capital appreciation; no Invests primarily in common
consideration given to income. stocks of technology-related
companies.
- ----------------------------------------------------------------------------------------
</TABLE>
(continued on next page)
Prospectus 5
<PAGE>
PROSPECTUS SUMMARY (continued)
Funds at a Glance (continued)
<TABLE>
<CAPTION>
Sub-Adviser and Fund Investment Objective Primary Investments
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Parametric Portfolio
Associates
Enhanced Equity Seeks to provide a total return Invests primarily in common
which equals or exceeds the stocks represented in the S&P
total return performance of an 500.
index representing the
performance of a reasonably
broad spectrum of common stocks
(currently the Standard &
Poor's 500 Composite Stock
Price Index (the "S&P 500")).
- ----------------------------------------------------------------------------------------
Tax-Efficient Equity Seeks maximum after-tax growth Invests primarily in a broadly
of capital. diversified portfolio of at
least 200 common stocks of
companies with larger market
capitalizations.
- ----------------------------------------------------------------------------------------
Structured Emerging Seeks long-term growth of Invests primarily in common
Markets capital. stocks of companies located in
emerging market countries.
- ----------------------------------------------------------------------------------------
Tax-Efficient Structured Has the same investment Invests primarily in common
Emerging Markets objective and policies as the stocks of companies located in
Structured Emerging Markets emerging market countries.
Fund, except that the Fund
seeks to achieve superior
after-tax returns for
shareholders by employing a
variety of tax-efficient
management strategies.
- ----------------------------------------------------------------------------------------
Multiple Managers
Balanced Seeks total return consistent Invests in common stocks, fixed
with prudent investment income securities and money
management. market instruments.
- ----------------------------------------------------------------------------------------
</TABLE>
Investment Risks and Considerations
The following are some of the primary risks relevant to an investment in the
Funds and to the securities in which the Funds invest. Investors should read
this Prospectus carefully for a more complete discussion of the risks relating
to an investment in the Funds. The value of all securities and other
instruments held by the Funds vary from time to time in response to a wide
variety of market factors. Consequently, the net asset value per share of each
Fund will vary. The net asset value per share of any Fund may be less at the
time of redemption than it was at the time of investment. Except for the
Balanced Fund, all of the Funds invest primarily in common stock or other types
of equity securities (the "Stock Funds"). Each of the International,
International Growth, Renaissance, Growth, Target, Opportunity, and Innovation
Funds may invest a portion of its assets in debt securities and may invest up
to 100% of its assets in money market instruments for temporary defensive
purposes. It is the policy of the other Stock Funds to be as fully invested as
practicable in common stock, except that the Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds may invest up to 5% of their
assets in debt securities of emerging market issuers. These other Stock Funds
may not invest in debt securities as a defensive investment posture (although
they may invest in such securities to provide for payment of expenses and to
meet redemption requests), and, therefore, may be more vulnerable to general
declines in stock prices. For further information, see "Investment Objectives
and Policies--Stock Funds."
Certain of the Funds may invest in debt securities rated lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings
Services ("S&P"). Such securities carry a high degree of credit risk and are
considered speculative by the major rating agencies. Certain Funds may invest
in securities of foreign issuers, which may be subject to additional risk
factors, including foreign currency and political risks, not applicable to
6 PIMCO Funds: Multi-Manager Series
<PAGE>
PROSPECTUS SUMMARY (continued)
securities of U.S. issuers. Investments by certain Funds in securities of
issuers based in countries with developing economies may pose political,
currency, and market risks greater than, or in addition to, risks of investing
in foreign developed countries. Certain of the Funds' investment techniques may
involve a form of borrowing, which may tend to exaggerate the effect on net
asset value of any increase or decrease in the market value of a Fund's
portfolio and may require liquidation of portfolio positions when it is not
advantageous to do so.
Certain Funds may (but are not required to) use derivative instruments,
including futures, options, options on futures, and swap agreements, for
hedging purposes or as part of their investment strategies. Use of these
instruments may involve certain costs and risks, including the risk that a Fund
could not close out a position when it would be most advantageous to do so, the
risk of an imperfect correlation between the value of the securities being
hedged and the value of the particular derivative instrument, and the risk that
unexpected changes in interest rates may adversely affect the value of a Fund's
investments in particular derivative instruments.
The Funds offer their shares to both institutional and retail investors.
Institutional shareholders, some of whom also may be investment advisory
clients of PIMCO Advisors L.P. or its affiliates, may hold large positions in
certain of the Funds. Such shareholders may on occasion make large redemptions
of their holdings in the Funds to meet their liquidity needs, in connection
with strategic adjustments to their overall portfolio of investments, or for
other purposes. Large redemptions from some Funds could require liquidation of
portfolio positions when it is not most desirable to do so. Liquidation of
portfolio holdings also may cause a Fund to realize taxable capital gains.
Investment Adviser and Sub-Advisers
PIMCO Advisors L.P. ("PIMCO Advisors" or the "Adviser") serves as investment
adviser to the Trust. PIMCO Advisors is one of the largest investment
management firms in the U.S. As of March 31, 1999, PIMCO Advisors and its
subsidiary partnerships had approximately $248.7 billion in assets under
management. Subject to the supervision of the Board of Trustees of the Trust,
the Adviser is responsible for the investment program for the Funds in
accordance with each Fund's investment objective, policies, and restrictions.
The PIMCO Equity Advisors division ("PIMCO Equity Advisors") of PIMCO Advisors
serves as the Sub-Adviser for the Renaissance, Growth, Target, Opportunity, and
Innovation Funds. For all of the other Funds, the Adviser has engaged separate
firms to serve as Sub-Advisers. These Sub-Advisers are Blairlogie Capital
Management ("Blairlogie"), Cadence Capital Management ("Cadence"), Columbus
Circle Investors ("Columbus Circle"), NFJ Investment Group ("NFJ"), Pacific
Investment Management Company ("Pacific Investment Management"), and Parametric
Portfolio Associates ("Parametric"). Other than Blairlogie, each Sub-Adviser is
an affiliate of PIMCO Advisors (each, an "affiliated Sub-Adviser"). Under the
supervision of PIMCO Advisors, the Sub-Advisers make determinations with
respect to the purchase and sale of portfolio securities, and they place, in
the names of the Funds, orders for execution of the Funds' transactions. For
the Balanced Fund, PIMCO Advisors determines the allocation of the Fund's
assets among common stock and fixed income securities and reserves the right to
allocate a portion of the Fund's assets for investment in money market
instruments and to manage the investment of such assets. For its services, the
Adviser receives fees based on the average daily net assets of each Fund. The
Adviser (and not the Funds or the Trust) compensates the Sub-Advisers it
retains for the Funds out of its advisory fees. See "Management of the Trust."
Prospectus 7
<PAGE>
PROSPECTUS SUMMARY (continued)
Purchase of Shares
This Prospectus describes two classes of shares of each Fund: the
"Institutional Class" and the "Administrative Class." Shares of the
Institutional Class are offered primarily for direct investment by
institutional investors (Institutional Class shares may also be offered through
certain financial intermediaries that charge their customers transaction or
other fees with respect to the customers' investments in the Funds). Shares of
the Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers and other intermediaries. Each Fund pays service
and/or distribution fees to such entities for services they provide to such
Fund's shareholders of that class. Administrative Class shares of certain Funds
are not currently available for investment.
Except with respect to shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds, shares of the Institutional Class
and Administrative Class of the Funds are offered at the relevant next
determined net asset value with no sales charge or other fee. A "Fund
Reimbursement Fee" is normally charged on purchases of Institutional Class and
Administrative Class shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds equal to 1.00% of the net asset
value of the shares purchased. See "Purchase of Shares--Fund Reimbursement
Fees." The minimum initial investment for shares of either class is $5 million,
subject to certain exceptions described under "Purchase of Shares." Shares of
either class may also be offered to clients of the Adviser and its affiliates.
Shares of the Micro-Cap Growth and Small-Cap Growth Funds are normally not
available for purchase by new investors, although purchase orders may be
accepted in certain circumstances. Existing shareholders may continue to invest
in these Funds. These restrictions may be changed or eliminated at any time at
the discretion of the Trust's Board of Trustees. See "Purchase of Shares."
Redemptions and Exchanges
Institutional Class and Administrative Class shares of each Fund may be
redeemed without cost (except as noted below) at the relevant net asset value
per share of the class of that Fund next determined after receipt of the
redemption request. The redemption price may be more or less than the purchase
price.
Institutional Class and Administrative Class shares of any Fund may be
exchanged without cost (except as noted below) on the basis of relative net
asset values for shares of the same class of any other Fund or other series of
the Trust offered generally to the public, or for shares of the same class of a
series of PIMCO Funds: Pacific Investment Management Series, an affiliated
mutual fund family composed primarily of fixed income portfolios managed by
Pacific Investment Management. See "Redemption of Shares."
A Fund Reimbursement Fee is normally charged on redemptions and exchanges
involving Institutional Class and Administrative Class shares of the Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds equal to
1.00% of the net asset value of the shares redeemed or exchanged. See
"Redemption of Shares."
8 PIMCO Funds: Multi-Manager Series
<PAGE>
EXPENSE INFORMATION
Shareholder Transaction Expenses (Institutional Class and Administrative
Class):
<TABLE>
<S> <C>
Sales Load Imposed on Purchases....................................... None
Sales Load Imposed on Reinvested Dividends............................ None
Redemption Fee........................................................ None
Exchange Fee.......................................................... None
Fund Reimbursement Fee Imposed on Purchases, Redemptions and
Exchanges:
Structured Emerging Markets and Tax-Efficient Structured Emerging
Markets Funds....................................................... 1.00%*
All Other Funds...................................................... None
</TABLE>
* Unless a waiver applies, investors are charged a "Fund Reimbursement Fee"
in connection with purchases and redemptions involving Institutional Class
and Administrative Class shares of the Structured Emerging Markets and Tax-
Efficient Structured Emerging Markets Funds equal to 1.00% of the net asset
value of the shares purchased or redeemed. The fee also applies to
exchanges involving these Funds. See "Purchase of Shares--Fund
Reimbursement Fees" and "Redemption of Shares."
Annual Fund Operating Expenses (as a percentage of average daily net assets):
<TABLE>
<CAPTION>
Advisory Administrative Total
Institutional Class Shares Fee Fee Expenses
-------------------------- -------- -------------- --------
<S> <C> <C> <C>
International Fund......................... 0.55% 0.50% 1.05%
Capital Appreciation Fund.................. 0.45 0.25 0.70
Mid-Cap Growth Fund........................ 0.45 0.25 0.70
Small-Cap Growth Fund...................... 1.00 0.25 1.25
Micro-Cap Growth Fund...................... 1.25 0.25 1.50
Core Equity Fund........................... 0.57 0.25 0.82
Mid-Cap Equity Fund........................ 0.63 0.25 0.88
International Growth Fund.................. 0.85 0.50 1.35
Equity Income Fund......................... 0.45 0.25 0.70
Value Fund................................. 0.45 0.25 0.70
Value 25 Fund.............................. 0.50 0.25 0.75
Small-Cap Value Fund....................... 0.60 0.25 0.85
Renaissance Fund........................... 0.60 0.25 0.85
Growth Fund................................ 0.50 0.25 0.75
Target Fund................................ 0.55 0.25 0.80
Opportunity Fund........................... 0.65 0.25 0.90
Innovation Fund............................ 0.65 0.25 0.90
Enhanced Equity Fund....................... 0.45 0.25 0.70
Tax-Efficient Equity Fund.................. 0.45 0.25 0.70
Structured Emerging Markets Fund........... 0.45 0.50 0.95
Tax-Efficient Structured Emerging Markets
Fund...................................... 0.45 0.50 0.95
Balanced Fund.............................. 0.45 0.25 0.70
</TABLE>
<TABLE>
<CAPTION>
Service/
Advisory Administrative 12b-1 Total
Administrative Class Shares Fee Fee Fee Expenses
--------------------------- -------- -------------- -------- --------
<S> <C> <C> <C> <C>
International Fund................. 0.55% 0.50% 0.25% 1.30%
Capital Appreciation Fund.......... 0.45 0.25 0.25 0.95
Mid-Cap Growth Fund................ 0.45 0.25 0.25 0.95
Small-Cap Growth Fund.............. 1.00 0.25 0.25 1.50
Micro-Cap Growth Fund.............. 1.25 0.25 0.25 1.75
Core Equity Fund................... 0.57 0.25 0.25 1.07
Mid-Cap Equity Fund................ 0.63 0.25 0.25 1.13
International Growth Fund.......... 0.85 0.50 0.25 1.60
Equity Income Fund ................ 0.45 0.25 0.25 0.95
Value Fund......................... 0.45 0.25 0.25 0.95
Value 25 Fund...................... 0.50 0.25 0.25 1.00
Small-Cap Value Fund............... 0.60 0.25 0.25 1.10
</TABLE>
Prospectus 9
<PAGE>
EXPENSE INFORMATION (continued)
Annual Fund Operating Expenses (continued):
<TABLE>
<CAPTION>
Service/
Advisory Administrative 12b-1 Total
Administrative Class Shares Fee Fee Fee Expenses
--------------------------- -------- -------------- -------- --------
<S> <C> <C> <C> <C>
Renaissance Fund.................. 0.60% 0.25% 0.25% 1.10%
Growth Fund....................... 0.50 0.25 0.25 1.00
Target Fund....................... 0.55 0.25 0.25 1.05
Opportunity Fund.................. 0.65 0.25 0.25 1.15
Innovation Fund................... 0.65 0.25 0.25 1.15
Enhanced Equity Fund.............. 0.45 0.25 0.25 0.95
Tax-Efficient Equity Fund......... 0.45 0.25 0.25 0.95
Structured Emerging Markets Fund.. 0.45 0.50 0.25 1.20
Tax-Efficient Structured Emerging
Markets Fund..................... 0.45 0.50 0.25 1.20
Balanced Fund..................... 0.45 0.25 0.25 0.95
</TABLE>
For a more detailed discussion of the Funds' fees and expenses, see "Fund
Administrator," "Advisory and Administrative Fees," and "Service and
Distribution Fees" under the caption "Management of the Trust."
Example of Fund Expenses:
An investor would pay the following expenses on a $1,000 investment assuming
(1) a hypothetical 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
Institutional Class Shares 1 year 3 years 5 years 10 years
-------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund.......................... $11 $33 $58 $128
Capital Appreciation Fund................... 7 22 39 87
Mid-Cap Growth Fund......................... 7 22 39 87
Small-Cap Growth Fund....................... 13 40 69 151
Micro-Cap Growth Fund....................... 15 47 82 179
Core Equity Fund............................ 8 26 46 101
Mid-Cap Equity Fund......................... 9 28 49 108
International Growth Fund................... 14 43 74 162
Equity Income Fund.......................... 7 22 39 87
Value Fund.................................. 7 22 39 87
Value 25 Fund............................... 8 24 42 93
Small-Cap Value Fund........................ 9 27 47 105
Renaissance Fund............................ 9 27 47 105
Growth Fund................................. 8 24 42 93
Target Fund................................. 8 26 44 99
Opportunity Fund............................ 9 29 50 111
Innovation Fund............................. 9 29 50 111
Enhanced Equity Fund........................ 7 22 39 87
Tax-Efficient Equity Fund................... 7 22 39 87
Structured Emerging Markets Fund*........... 29 50 72 135
Tax-Efficient Structured Emerging Markets
Fund*...................................... 29 50 72 135
Balanced Fund............................... 7 22 39 87
<CAPTION>
Administrative Class Shares 1 year 3 years 5 years 10 years
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
International Fund.......................... $13 $41 $71 $157
Capital Appreciation Fund................... 10 30 53 117
Mid-Cap Growth Fund......................... 10 30 53 117
Small-Cap Growth Fund....................... 15 47 82 179
Micro-Cap Growth Fund....................... 18 55 95 206
</TABLE>
10 PIMCO Funds: Multi-Manager Series
<PAGE>
EXPENSE INFORMATION (continued)
Example of Fund Expenses (continued):
<TABLE>
<CAPTION>
Administrative Class Shares 1 year 3 years 5 years 10 years
--------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Core Equity Fund............................ $11 $34 $59 $131
Mid-Cap Equity Fund ........................ 12 36 62 137
International Growth Fund................... 16 50 87 190
Equity Income Fund.......................... 10 30 53 117
Value Fund.................................. 10 30 53 117
Value 25 Fund............................... 10 32 55 122
Small-Cap Value Fund........................ 11 35 61 134
Renaissance Fund............................ 11 35 61 134
Growth Fund................................. 10 32 55 122
Target Fund................................. 11 33 58 128
Opportunity Fund............................ 12 37 63 140
Innovation Fund............................. 12 37 63 140
Enhanced Equity Fund........................ 10 30 53 117
Tax-Efficient Equity Fund................... 10 30 53 117
Structured Emerging Markets Fund*........... 32 58 85 164
Tax-Efficient Structured Emerging Markets
Fund*...................................... 32 58 85 164
Balanced Fund............................... 10 30 53 117
</TABLE>
* The Examples for the Structured Emerging Markets and Tax-Efficient
Structured Emerging Markets Funds assume the payment of a Fund
Reimbursement Fee both at the time of purchase and at the time of
redemption even though such fees may be waived for certain investors. See
"Purchase of Shares--Fund Reimbursement Fees" and "Redemption of Shares."
Assuming there is no redemption at the end of the time periods listed, the
Examples for 1, 3, 5, and 10 years, respectively, for the Structured
Emerging Markets and Tax-Efficient Structured Emerging Markets Funds would
be as follows: Institutional Class Shares--$20, $40, $62, and $125; and
Administrative Class Shares--$22, $48, $75, and $154.
The above tables are provided to assist investors in understanding the
various expenses which may be borne directly or indirectly in connection with
an investment in the Funds. The information is based upon each Fund's current
fees and expenses. This example should not be considered a representation of
past or future expenses or performance. Actual expenses may be higher or lower
than those shown.
Prospectus 11
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights set forth on the following pages present certain
information and ratios as well as performance information for the Funds that
were operational during the periods listed. Certain information provided below
for periods through June 30, 1998 is included in the June 30, 1998 PIMCO Funds
Annual Report (relating to Institutional Class and Administrative Class shares)
and has been audited by PricewaterhouseCoopers LLP, independent accountants,
whose report thereon is also included in such Annual Report. Information for
the periods ended December 31, 1998 is included in the December 31, 1998 PIMCO
Funds Semi-Annual Report (relating to Institutional Class and Administrative
Class shares) and is unaudited. The Annual Report and Semi-Annual Report are
incorporated by reference in the Statement of Additional Information and may be
obtained from the Trust without charge. Financial statements and related notes
are also incorporated by reference in the Statement of Additional Information.
The Growth, Target, Opportunity, and Innovation Funds did not offer
Institutional or Administrative Class Shares during the reporting periods.
Prior to November 1, 1995, the fiscal year end for each Fund listed below was
October 31.
Selected data for a share outstanding throughout each period:
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Value Net Unrealized Income from from Net Excess of Net from Net
Beginning Investment Gain (Loss) on Investment Investment Investment Realized
of Period Income (Loss) Investments Operations Income Income Capital Gains
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
International Fund
Institutional Class
09/30/98-12/31/98 + $10.47 $(0.01)(a) $1.73 (a) $1.72 $ 0.00 $0.00 $(1.15)
Administrative Class
09/30/98-12/31/98 + 10.47 (0.01)(a) 1.69 (a) $1.68 0.00 0.00 (1.15)
Capital Appreciation
Fund
Institutional Class
12/31/98 + $26.13 $ 0.09 (a) $0.52 (a) $0.61 $ (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)
10/31/93 11.27 0.11 2.73 2.84 (0.11) 0.00 (0.50)
10/31/92 11.02 0.14 1.05 1.19 (0.14) 0.00 (0.72)
03/08/91-10/31/91 10.00 0.09 1.02 1.11 (0.09) 0.00 0.00
Administrative Class
12/31/98 + 25.99 0.06 (a) 0.52 (a) 0.58 (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
12/31/98 + $24.09 $ 0.05 (a) $0.07 (a) $0.12 $ (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)
10/31/93 11.29 0.07 2.70 2.77 (0.07) 0.00 (0.02)
10/31/92 10.28 0.10 1.03 1.13 (0.10) 0.00 0.00
08/26/91-10/31/91 10.00 0.02 0.27 0.29 (0.01) 0.00 0.00
Administrative Class
12/31/98 + 23.96 0.03 (a) 0.11 (a) 0.14 (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
</TABLE>
- --------
+Unaudited
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
(i)Formerly the Blairlogie International Active Fund.
12 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Distributions Ratio of Investment
in Excess of Distributions Tax Basis Net Asset Net Assets Expenses to Income (Loss)
Net Realized from Return of Total Value End End of Average Net to Average Portfolio
Capital Gains Equalization Capital Distributions of Period Total Return Period (000s) Assets Net Assets Turnover Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $0.00 $(1.15) $11.04 16.93% $ 1,168 1.27%* (0.46)%* 17%
0.00 0.00 0.00 (1.15) 11.00 16.54 9,978 1.39* (0.48)* 17
$0.00 $ 0.00 $0.00 $(1.80) $24.94 2.74% $712,374 0.71%* 0.74%* 62%
0.00 0.00 0.00 (1.80) 26.13 32.97 805,856 0.71 0.64 75
0.00 0.00 0.00 (2.23) 21.19 31.52 536,187 0.71 1.02 87
0.00 0.00 0.00 (1.18) 18.10 14.65 348,728 0.70* 1.33* 73
0.00 0.00 0.00 (0.18) 16.94 28.47 236,220 0.70 1.22 83
0.00 0.00 0.00 (0.18) 13.34 0.15 165,441 0.70 1.17 77
0.00 0.00 0.00 (0.61) 13.50 25.30 84,990 0.70 0.94 81
0.00 (0.08) 0.00 (0.94) 11.27 10.75 36,334 0.70 1.13 134
0.00 0.00 0.00 (0.09) 11.02 11.19 18,813 0.75* 1.55* 41
0.00 0.00 0.00 (1.78) 24.79 2.64 203,574 0.95* 0.49* 62
0.00 0.00 0.00 (1.82) 25.99 32.55 132,384 0.96 0.39 75
0.00 0.00 0.00 (2.22) 21.16 38.26 3,115 0.96* 0.66* 87
$0.00 $ 0.00 $0.00 $(1.09) $23.12 0.81% $518,586 0.71%* 0.49%* 45%
0.00 0.00 0.00 (1.41) 24.09 26.16 437,985 0.71 0.46 66
0.00 0.00 0.00 (4.34) 20.28 30.58 291,374 0.71 0.53 82
0.00 0.00 0.00 (0.57) 19.44 10.37 231,011 0.70* 1.11* 79
0.00 0.00 0.00 (0.07) 18.16 30.54 189,320 0.70 0.43 78
0.00 0.00 0.00 (0.07) 13.97 0.58 121,791 0.70 0.45 61
0.00 0.00 0.00 (0.09) 13.97 24.57 67,625 0.70 0.56 98
0.00 (0.02) 0.00 (0.12) 11.29 10.91 21,213 0.70 0.87 66
0.00 0.00 0.00 (0.01) 10.28 2.98 2,748 0.82* 0.92* 13
0.00 0.00 0.00 (1.08) 23.02 0.93 107,131 0.96* 0.24* 45
0.00 0.00 0.00 (1.41) 23.96 25.75 73,614 0.95 0.22 66
0.00 0.00 0.00 (4.32) 20.24 30.23 2,066 0.96 0.28 82
0.00 0.00 0.00 (0.54) 19.44 10.17 1,071 0.95* 0.89* 79
0.00 0.00 0.00 (0.02) 18.17 36.64 892 0.94* 0.23* 72
</TABLE>
Prospectus 13
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Value Net Unrealized Income from from Net Excess of Net from Net
Beginning Investment Gain (Loss) on Investment Investment Investment Realized
of Period Income (Loss) Investments Operations Income Income Capital Gains
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Small-Cap Growth Fund
Institutional Class
12/31/98 + $14.01 $(0.01)(a) $(1.88)(a) $(1.89) $0.00 $ 0.00 $ (0.47)
06/30/98 13.40 (0.03)(a) 2.52 (a) 2.49 0.00 0.00 (1.88)
06/30/97 20.83 (0.01)(a) 3.17 (a) 3.16 0.00 0.00 (10.59)
11/01/95-06/30/96 21.02 2.02 (0.61) 1.41 0.00 0.00 (1.60)
10/31/95 19.38 (0.05) 3.12 3.07 0.00 0.00 (1.43)
10/31/94 19.15 (0.02) 0.89 0.87 0.00 0.00 (0.64)
10/31/93 15.80 (0.06) 6.19 6.13 0.00 0.00 (2.78)
10/31/92 14.87 0.01 1.50 1.51 (0.01) 0.00 (0.57)
01/07/91-10/31/91 10.00 0.02 5.03 5.05 (0.02) 0.00 (0.16)
Administrative Class
12/31/98 + 13.97 (0.02)(a) (1.89)(a) (1.91) 0.00 0.00 (0.47)
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
12/31/98 + $23.66 $(0.06)(a) $(3.09)(a) $(3.15) $0.00 $ 0.00 $ (0.63)
06/30/98 19.85 (0.11)(a) 6.54 (a) 6.43 0.00 0.00 (2.62)
06/30/97 18.47 0.00 3.41 3.41 0.00 0.00 (2.03)
11/01/95-06/30/96 15.38 0.00 3.43 3.43 0.00 0.00 (0.34)
10/31/95 11.87 (0.04) 3.55 3.51 0.00 0.00 0.00
10/31/94 11.06 (0.03) 0.84 0.81 0.00 0.00 0.00
06/25/93-10/31/93 10.00 0.00 1.07 1.07 0.00 0.00 0.00
Administrative Class
12/31/98 + 23.52 (0.09)(a) (3.07)(a) (3.16) 0.00 0.00 (0.63)
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
Core Equity Fund
Institutional Class
12/31/98 + $20.39 $ 0.01 (a) $ 2.11 (a) $ 2.12 $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
12/31/98 + 20.32 (0.02)(a) 2.06 (a) 2.04 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
Mid-Cap Equity Fund
Institutional Class
12/31/98 + $13.53 $(0.01)(a) $ 1.03 (a) $ 1.02 $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
12/31/98 + 13.50 (0.02)(a) 1.02 (a) 1.00 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)
</TABLE>
- --------
+Unaudited
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
14 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Distributions Ratio of Investment
in Excess of Distributions Tax Basis Net Asset Net Assets Expenses to Income (Loss)
Net Realized from Return of Total Value End End of Average Net to Average Portfolio
Capital Gains Equalization Capital Distributions of Period Total Return Period (000s) Assets Net Assets Turnover Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $0.00 $ 0.00 $ (0.47) $11.65 (13.21)% $ 59,907 1.26%* (0.09)% 48%
0.00 0.00 0.00 (1.88) 14.01 19.33 47,641 1.26 (0.20) 77
0.00 0.00 0.00 (10.59) 13.40 22.82 33,390 1.32 (0.05) 129
0.00 0.00 0.00 (1.60) 20.83 7.22 32,954 1.25* (0.20)* 59
0.00 0.00 0.00 (1.43) 21.02 17.39 73,977 1.25 (0.27) 86
0.00 0.00 0.00 (0.64) 19.38 4.62 50,425 1.25 (0.33) 66
0.00 0.00 0.00 (2.78) 19.15 38.80 43,308 1.25 (0.35) 62
0.00 0.00 0.00 (0.58) 15.80 10.20 33,734 1.25 0.09 66
0.00 0.00 0.00 (0.18) 14.87 50.68 33,168 1.29* 0.11* 48
0.00 0.00 0.00 (0.47) 11.59 (13.39) 1,383 1.51* (0.34)* 48
0.00 0.00 0.00 (1.88) 13.97 18.90 981 1.49 (0.51) 77
0.00 0.00 0.00 (10.59) 13.41 23.12 1 1.54 (0.36) 129
0.00 0.00 0.00 (1.60) 20.82 7.18 112 1.50* (0.41)* 59
0.00 0.00 0.00 0.00 21.01 (5.34) 544 1.60* (0.82)* 9
$0.00 $0.00 $ 0.00 $ (0.63) $19.88 (13.18)% $258,983 1.51%* (0.64)%* 37%
0.00 0.00 0.00 (2.62) 23.66 33.95 257,842 1.51 (0.50) 72
0.00 0.00 0.00 (2.03) 19.85 20.05 164,139 1.52 (0.49) 84
0.00 0.00 0.00 (0.34) 18.47 22.64 83,973 1.50* (0.45)* 54
0.00 0.00 0.00 0.00 15.38 29.54 69,775 1.50 (0.37) 87
0.00 0.00 0.00 0.00 11.87 7.31 32,605 1.50 (0.25) 59
0.00 0.00 (0.01) (0.01) 11.06 10.81 10,827 1.50* (0.02)* 16
0.00 0.00 0.00 (0.63) 19.73 (13.30) 2,709 1.76* (0.90)* 37
0.00 0.00 0.00 (2.62) 23.52 33.70 4,779 1.76 (0.74) 72
0.00 0.00 0.00 (2.03) 19.78 19.72 2,116 1.77 (0.74) 84
0.00 0.00 0.00 0.00 18.46 10.34 566 1.73* (0.74)* 54
$0.00 $0.00 $ 0.00 $ (0.73) $21.78 10.69% $ 1,775 0.83%* 0.06%* 50%
0.00 0.00 0.00 (1.30) 20.39 41.83 1,915 0.83 0.20 120
0.00 0.00 0.00 (0.81) 15.55 21.59 6,444 0.87 0.23 139
0.00 0.00 0.00 (0.33) 13.55 9.41 10,452 0.82* 0.53* 73
0.00 0.00 0.00 (0.06) 12.72 27.86 7,791 0.82* 0.79* 123
0.00 0.00 0.00 (0.73) 21.63 10.33 168,569 1.08* (0.19)* 50
0.00 0.00 0.00 (1.30) 20.32 41.54 128,666 1.08 (0.07) 120
0.00 0.00 0.00 (0.80) 15.53 21.20 29,332 1.13 (0.03) 139
0.00 0.00 0.00 (0.31) 13.56 9.23 33,575 1.07* 0.28 * 73
0.00 0.00 0.00 (0.02) 12.73 11.34 24,645 1.06* 0.34 * 58
$0.00 $0.00 $ 0.00 $ (0.65) $13.90 8.10% $ 9,254 0.89%* (0.09)%* 136%
0.00 0.00 0.00 (4.09) 13.53 30.40 8,488 0.89 (0.25) 268
0.00 0.00 0.00 (1.87) 14.04 9.61 7,591 1.15 (0.43) 202
0.00 0.00 0.00 (0.37) 14.66 16.72 8,378 0.88* (0.32)* 97
0.00 0.00 0.00 (0.02) 12.92 29.34 8,357 0.88* 0.24* 132
0.00 0.00 0.00 (0.65) 13.85 7.97 3,924 1.14* (0.34)* 136
0.00 0.00 0.00 (4.09) 13.50 19.65 2,371 1.13* (0.49)* 268
</TABLE>
Prospectus 15
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Value Net Unrealized Income from from Net Excess of Net from Net
Beginning Investment Gain (Loss) on Investment Investment Investment Realized
of Period Income (Loss) Investments Operations Income Income Capital Gains
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
International Growth
Fund
Institutional Class
12/31/98 + $13.55 $(0.03)(a) $ 0.36 (a) $ 0.33 $(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
Equity Income Fund
Institutional Class
12/31/98 + $16.09 $ 0.22 (a) $(0.04)(a) $ 0.18 $(0.20) $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)
10/31/93 10.92 0.40 1.40 1.80 (0.40) 0.00 (0.37)
10/31/92 10.77 0.45 0.93 1.38 (0.43) 0.00 (0.57)
03/08/91-10/31/91 10.00 0.24 0.92 1.16 (0.24) 0.00 (0.15)
Administrative Class
12/31/98 + 16.08 0.20 (a) (0.03)(a) 0.17 (0.19) 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)
Value Fund (ii)
Institutional Class
12/31/98 + $15.66 $ 0.14 (a) $ 0.05 (a) $ 0.19 $(0.13) 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)
10/31/93 10.05 0.28 2.36 2.64 (0.28) 0.00 (0.49)
12/30/91-10/31/92 10.00 0.24 0.23 0.47 (0.24) 0.00 (0.18)
Administrative Class
12/31/98 + 15.65 0.12 (a) 0.03 (a) 0.15 (0.11) 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
07/10/98-12/31/98 + $10.00 $(0.16)(a) $(1.35)(a) $(1.51) $ 0.00 $0.00 $ 0.00
Small-Cap Value Fund
Institutional Class
12/31/98 + $17.68 $00.15 (a) $(1.83)(a) $(1.68) $(0.21) $0.00 $(0.45)
06/30/98 15.78 0.29 (a) 2.50 (a) 2.79 (0.13) 0.00 (0.76)
06/30/97 14.20 0.46 3.63 4.09 (0.13) 0.00 (2.38)
11/01/95-06/30/96 13.10 0.56 1.49 2.05 (0.21) 0.00 (0.74)
10/31/95 12.07 0.28 1.92 2.20 (0.28) 0.00 (0.89)
10/31/94 12.81 0.29 (0.65) (0.36) (0.29) 0.00 (0.09)
10/31/93 10.98 0.24 2.33 2.57 (0.24) 0.00 (0.50)
10/31/92 10.09 0.22 1.17 1.39 (0.22) 0.00 (0.24)
10/01/91-10/31/91 10.00 0.02 0.10 0.12 (0.03) 0.00 0.00
Administrative Class
12/31/98 + 17.63 0.14 (a) (1.83)(a) (1.69) (0.20) 0.00 (0.45)
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)
</TABLE>
- --------
+Unaudited
*Annualized
(a)Per share amounts based on average number of shares outstanding during the
period.
(ii)Formerly the NFJ Diversified Low P/E Fund.
16 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Distributions Ratio of Investment
in Excess of Distributions Tax Basis Net Asset Net Assets Expenses to Income (Loss)
Net Realized from Return of Total Value End End of Average Net to Average Portfolio
Capital Gains Equalization Capital Distributions of Period Total Return Period (000s) Assets Net Assets Turnover Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $0.00 $(1.05) $12.83 2.88% $ 6,464 1.42%* (0.53)%* 115%
0.00 0.00 0.00 0.00 13.55 35.50 6,822 1.36* 0.08* 60
$0.00 $ 0.00 $0.00 $(1.96) $14.31 1.51 % $131,474 0.71%* 2.86%* 38%
0.00 0.00 0.00 (2.51) 16.09 21.84 138,650 0.71 2.71 45
0.00 0.00 0.00 (2.52) 15.41 27.67 121,138 0.72 3.03 45
0.00 0.00 0.00 (0.82) 14.36 16.35 116,714 0.70* 3.41 * 52
0.00 0.00 0.00 (0.79) 13.09 19.36 118,015 0.70 3.83 46
0.00 0.00 0.00 (0.46) 11.75 2.25 92,365 0.70 3.77 36
0.00 0.00 0.00 (0.77) 11.95 16.65 67,854 0.70 3.55 39
0.00 (0.23) 0.00 (1.23) 10.92 12.89 30,506 0.70 3.83 47
0.00 0.00 0.00 (0.39) 10.77 11.81 15,628 0.74* 4.18* 62
0.00 0.00 0.00 (1.95) 14.30 1.39 10,733 0.96* 2.59* 38
0.00 0.00 0.00 (2.47) 16.08 21.58 11,699 0.96 2.45 45
0.00 0.00 0.00 (2.48) 15.40 27.40 8,145 0.97 2.79 45
0.00 0.00 0.00 (0.84) 14.35 16.08 6,097 0.95* 3.19 * 52
0.00 0.00 0.00 (0.73) 13.13 25.69 140 0.95* 3.43 * 43
$0.00 $ 0.00 $0.00 $(1.85) $14.00 1.69% $ 90,942 0.71%* 1.85%* 47%
0.00 0.00 0.00 (1.87) 15.66 19.35 83,219 0.71 1.59 77
0.00 0.00 0.00 (0.81) 14.81 26.38 74,613 0.73 2.02 71
0.00 0.00 0.00 (1.94) 12.46 16.24 52,727 0.70* 2.40* 29
0.00 0.00 0.00 (1.50) 12.53 24.98 14,443 0.70 2.50 71
0.00 0.00 0.00 (0.39) 11.55 0.15 15,442 0.70 2.34 44
0.00 0.00 0.00 (0.77) 11.92 26.35 22,930 0.70 2.43 28
0.00 0.00 0.00 (0.42) 10.05 4.68 18,083 0.70* 2.57* 73
0.00 0.00 0.00 (1.83) 13.97 1.46 15,735 0.96* 1.62* 47
0.00 0.00 0.00 (1.85) 15.65 12.71 10,349 0.96* 1.40* 77
$0.00 $ 0.00 $0.00 $ 0.00 $ 8.49 (14.51)% $ 160 0.75%* (3.97)%* 35%
$0.00 $ 0.00 $0.00 $(0.66) $15.34 (9.31)% $ 59,431 0.86%* 1.99%* 24%
0.00 0.00 0.00 (0.89) 17.68 17.77 47,432 0.85 1.65 41
0.00 0.00 0.00 (2.51) 15.78 31.99 34,639 0.90 1.92 48
0.00 0.00 0.00 (0.95) 14.20 16.35 29,017 0.85* 2.12* 35
0.00 0.00 0.00 (1.17) 13.10 19.88 35,093 0.85 2.25 50
0.00 0.00 0.00 (0.38) 12.07 (2.89) 31,236 0.85 2.23 48
0.00 0.00 0.00 (0.74) 12.81 23.60 46,523 0.85 2.05 42
0.00 (0.04) 0.00 (0.50) 10.98 13.75 18,261 0.85 2.16 27
0.00 0.00 0.00 (0.03) 10.09 1.19 5,060 1.09* 3.06* 0
0.00 0.00 0.00 (0.65) 15.29 (9.43) 19,175 1.10* 1.78* 24
0.00 0.00 0.00 (0.87) 17.63 17.41 10,751 1.10 1.39 41
0.00 0.00 0.00 (2.50) 15.76 31.70 5,916 1.16 1.68 48
0.00 0.00 0.00 (0.93) 14.20 15.64 4,433 1.10* 1.86* 35
</TABLE>
Prospectus 17
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Net Asset Net Realized/ Total Dividends Dividends in Distributions
Value Net Unrealized Income from from Net Excess of Net from Net
Beginning Investment Gain (Loss) on Investment Investment Investment Realized
of Period Income (Loss) Investments Operations Income Income Capital Gains
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renaissance Fund
Institutional Class
12/31/98 + $19.07 $0.03 (a) $(0.41)(a) $(0.38) $ 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
08/31/98-12/31/98 + 15.37 0.03 (a) 3.28 (a) 3.31 0.00 0.00 (2.33)
Enhanced Equity Fund
Institutional Class
12/31/98 + $12.64 $0.04 (a) $ 0.68 (a) $ 0.72 $(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)
10/31/93 11.76 0.23 0.74 0.97 (0.23) 0.00 (0.42)
10/31/92 10.80 0.16 1.06 1.22 (0.16) 0.00 (0.04)
02/11/91-10/31/91 10.00 0.16 0.80 0.96 (0.16) 0.00 0.00
Administrative Class
12/31/98 + 12.59 0.03 (a) 0.68 (a) 0.71 (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
09/30/98-12/31/98 + $ 8.65 $0.03 (a) $ 1.85 (a) $ 1.88 $ 0.00 $0.00 $ 0.00
Structured Emerging
Markets Fund
Institutional Class
12/31/98 + $10.00 $0.07 (a) $(0.77)(a) $(0.70) $(0.07) $0.00 $(0.28)
Tax-Efficient Structured
Emerging Markets Fund
Institutional Class
12/31/98 + $10.00 $0.07 (a) $(0.61)(a) $(0.54) $(0.06) $0.00 $ 0.00
Balanced Fund (iii)
Institutional Class
12/31/98 + $12.15 $0.21 (a) $ 0.11 (a) $ 0.32 $(0.14) $0.00 $(1.64)
06/30/98 11.42 0.35 (a) 1.81 (a) 2.16 (0.34) 0.00 (1.09)
06/30/97 11.64 0.89 1.21 2.10 (0.36) 0.00 (1.96)
11/01/95-06/30/96 11.89 0.27 0.76 1.03 (0.27) 0.00 (1.01)
10/31/95 10.35 0.44 1.54 1.98 (0.44) 0.00 0.00
10/31/94 10.84 0.34 (0.34) 0.00 (0.34) 0.00 (0.15)
10/31/93 10.42 0.35 0.68 1.03 (0.35) 0.00 (0.26)
06/25/92-10/31/92 10.00 0.12 0.52 0.64 (0.12) 0.00 (0.10)
</TABLE>
- --------
+ Unaudited
* Annualized
(a) Per share amounts based on average number of shares outstanding during
the period.
(iii) NFJ and Cadence began serving as Sub-Advisers of the portion of the
Balanced Fund allocated for investment in common stocks on August 1,
1996. Prior to August 1, 1996, a different firm served as sub-adviser.
18 PIMCO Funds: Multi-Manager Series
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
Ratio of Net
Distributions Ratio of Investment
in Excess of Distributions Tax Basis Net Asset Net Assets Expenses to Income (Loss)
Net Realized from Return of Total Value End End of Average Net to Average Portfolio
Capital Gains Equalization Capital Distributions of Period Total Return Period (000s) Assets Net Assets Turnover Rate
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0.00 $ 0.00 $0.00 $(2.33) $16.36 (1.07)% $ 77 0.86%* 0.40%* 104%
0.00 0.00 0.00 0.00 19.07 13.99 851 0.86* 0.55* 192
0.00 0.00 0.00 (2.33) 16.35 22.91 261 1.02* 0.58* 104
$0.00 $ 0.00 $0.00 $(1.67) $11.69 6.39% $ 37,868 0.71%* 0.70%* 24%
0.00 0.00 0.00 (7.84) 12.64 32.33 36,584 0.71 0.63 65
0.00 0.00 0.00 (3.73) 16.46 31.45 44,838 0.74 1.31 91
0.00 0.00 0.00 (0.54) 15.91 14.21 83,425 0.70* 1.58* 53
0.00 0.00 0.00 (0.42) 14.44 24.46 73,999 0.70 1.91 21
0.00 0.00 0.00 (0.30) 11.99 1.83 65,915 0.70 2.20 44
0.00 0.00 0.00 (0.65) 12.08 8.20 46,724 0.70 1.89 15
0.00 (0.06) 0.00 (0.26) 11.76 11.46 36,515 0.70 1.81 17
0.00 0.00 0.00 (0.16) 10.80 9.59 4,451 0.73* 2.14* 0
0.00 0.00 0.00 (1.67) 11.63 6.30 16,672 0.96* 0.45* 24
0.00 0.00 0.00 (7.84) 12.59 23.85 10,409 0.95* 0.47* 65
$0.00 $ 0.00 $0.00 $ 0.00 $10.53 21.79% $ 392 0.87%* 1.23%* 8%
$0.00 $ 0.00 $0.00 $(0.35) $ 8.95 (7.04)% $ 33,058 0.95%* 1.64%* 15%
$0.00 $ 0.00 $0.00 $(0.06) $ 9.40 (5.37)% $ 45,649 0.96%* 1.52%* 19%
$0.00 $ 0.00 $0.00 $(1.78) $10.69 3.17% $ 38,014 0.71% 3.69%* 100%
0.00 0.00 0.00 (1.43) 12.15 19.91 41,222 0.72 2.91 186
0.00 0.00 0.00 (2.32) 11.42 20.37 61,518 0.74 3.33 199
0.00 0.00 0.00 (1.28) 11.64 9.07 82,562 0.70* 3.46* 140
0.00 0.00 0.00 (0.44) 11.89 19.47 72,638 0.70 3.73 43
0.00 0.00 0.00 (0.49) 10.35 0.08 130,694 0.70 3.25 47
0.00 0.00 0.00 (0.61) 10.84 10.06 126,410 0.70 3.10 19
0.00 0.00 0.00 (0.22) 10.42 6.40 99,198 0.70* 3.36* 39
</TABLE>
Prospectus 19
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and general investment policies of each Fund are
described below. There can be no assurance that the investment objective of any
Fund will be achieved. Because the market value of each Fund's investments will
change, the net asset value per share of each Fund also will vary. Specific
portfolio securities eligible for purchase by the Funds, investment techniques
that may be used by the Funds, and the risks associated with these securities
and techniques are described more fully under "Characteristics and Risks of
Securities and Investment Techniques" in this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information. For
information on other investment policies of the Stock Funds, see "Investment
Objectives and Policies--Stock Funds." This information is also relevant to an
investment in the Balanced Fund because the Common Stock Segment (as described
below) of that Fund is managed in accordance with the investment policies of
the Capital Appreciation and Value Funds.
International Fund seeks capital appreciation through investments in an
international portfolio. Income is an incidental consideration. Under normal
market conditions, at least 65% of the International Fund's total assets will
be invested in common stocks, which may or may not pay dividends, as well as
convertible bonds, convertible preferred stocks, warrants, rights or other
equity securities, for a combination of capital appreciation and income.
Convertible securities may include securities convertible only by certain
classes of investors (which may not include the Fund). The Fund may not invest
in convertible securities which are of less than investment grade quality at
the time of purchase.
The Fund will normally invest in securities traded in developed foreign
securities markets. Particular consideration is given to investments
principally traded in developed North American (other than United States),
Japanese, European, Pacific and Australian securities markets, and in
securities of foreign issuers traded on United States securities markets. The
Fund will also invest in emerging markets, where markets may not yet fully
reflect the potential of the developing economy. There are no prescribed limits
on geographic asset distribution and the Fund has the authority to invest in
securities traded in securities markets of any country in the world. In
allocating the Fund's assets among the various securities markets of any
country in the world, the Sub-Adviser will consider such factors as the
condition and growth potential of the various economies and securities markets,
currency and taxation considerations and other pertinent financial, social,
national and political factors. Under certain adverse investment conditions,
the Fund may restrict the number of securities markets in which its assets will
be invested, although under normal market circumstances the Fund's investments
will include securities principally traded in at least three different
countries. The Fund will not limit its investments to any particular type or
size of company.
The Fund may invest up to 10% of its assets in securities of other investment
companies, such as closed-end management investment companies which invest in
foreign markets. The Fund may also purchase and write call and put options on
securities, securities indexes, and on foreign currencies; enter into futures
contracts and use options on futures contracts, including futures contracts on
foreign currencies; buy or sell foreign currencies; and enter into forward
foreign currency contracts. The Fund may utilize stock index futures contracts
and options thereon for hedging purposes and also for investment purposes. For
instance, the Fund may invest in stock index futures contacts and related
options as an alternative to purchasing individual stocks to adjust its
exposure to a particular foreign market. See "Characteristics and Risks of
Securities and Investment Techniques--Derivative Instruments--Index Futures."
The Fund will not normally invest in securities of U.S. issuers traded on
U.S. securities markets. However, when the Sub-Adviser believes that conditions
in international securities markets warrant a defensive investment strategy,
the Fund may invest up to 100% of its assets in domestic debt, foreign debt and
equity securities principally traded in
20 PIMCO Funds: Multi-Manager Series
<PAGE>
the U.S., including money market instruments, obligations issued or guaranteed
by the U.S. or a foreign government or their respective agencies, authorities
or instrumentalities, or corporate bonds and sponsored American Depository
Receipts.
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks and considerations not typically
associated with investing in U.S. companies. For a discussion of such risks,
see "Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Portfolio Manager for the International Fund is James Smith of
Blairlogie.
Capital Appreciation Fund seeks growth of capital. The Fund invests primarily
in common stocks of companies that have improving fundamentals (such as growth
of earnings and dividends) and whose stock is reasonably valued by the market.
Stocks for the Fund are selected from a universe of the approximately 1,000
largest market capitalization stocks, all of which are those of companies with
market capitalizations of at least $1 billion at the time of investment. The
Fund usually invests in approximately 60 to 100 common stocks. Each issue is
screened and ranked using five distinct computerized models, including: (i) a
dividend growth screen, (ii) an equity growth screen, (iii) an earnings growth
screen, (iv) an earnings momentum screen, and (v) an earnings surprise screen.
The Sub-Adviser believes that the models identify the stocks in the universe
exhibiting growth characteristics with reasonable valuations. Stocks are
replaced when they score worse-than-median screen ranks, have negative earnings
surprises, or show poor relative price performance. The universe is rescreened
frequently to obtain a favorable composition of growth and value
characteristics for the entire Fund. The Portfolio Managers for the Capital
Appreciation Fund are David B. Breed, William B. Bannick, Katherine A. Burdon,
and Peter B. McManus of PIMCO Advisors' subsidiary Cadence.
Mid-Cap Growth Fund seeks growth of capital. The Fund invests primarily in
common stocks of middle capitalization companies that have improving
fundamentals (such as growth of earnings and dividends) and whose stock is
reasonably valued by the market. Stocks for the Fund are selected from a
universe of companies with market capitalizations in excess of $500 million at
the time of investment, excluding the 200 companies with the highest market
capitalization. The Fund usually invests in approximately 60 to 100 common
stocks. Each issue is screened and ranked using five distinct computerized
models, including: (i) a dividend growth screen, (ii) an equity growth screen,
(iii) an earnings growth screen, (iv) an earnings momentum screen, and (v) an
earnings surprise screen. The Sub-Adviser believes that the models identify the
stocks in the universe exhibiting growth characteristics with reasonable
valuations. Stocks are replaced when they score worse-than-median screen ranks,
have negative earnings surprises, or show poor relative price performance. The
universe is rescreened frequently to obtain a favorable composition of growth
and value characteristics for the entire Fund. The Portfolio Managers for the
Mid-Cap Growth Fund are David B. Breed, William B. Bannick, Katherine A.
Burdon, and Peter B. McManus of PIMCO Advisors' subsidiary Cadence.
Small-Cap Growth Fund seeks growth of capital. The Fund invests primarily in
common stocks of companies that have improving fundamentals (such as growth of
earnings and dividends) and whose stock is reasonably valued by the market. The
Fund usually invests in approximately 60 to 100 common stocks selected from a
universe of stocks with market capitalizations of $50 million to $1 billion at
the time of investment. Each issue is screened and ranked using five distinct
computerized models, including: (i) a dividend growth screen, (ii) an equity
growth screen, (iii) an earnings growth screen, (iv) an earnings momentum
screen, and (v) an earnings surprise screen. The Sub-Adviser believes that the
models identify the stocks in the universe exhibiting growth characteristics
with reasonable valuations. Stocks are replaced when they score worse-than-
median screen ranks, have negative earnings surprises, or show poor relative
price performance. The universe is rescreened frequently to obtain a favorable
composition of growth and value characteristics for the entire Fund. The Fund
is intended for aggressive investors seeking above-
Prospectus 21
<PAGE>
average gains and willing to accept the greater risks associated therewith. The
Portfolio Managers for the Small-Cap Growth Fund are David B. Breed, William B.
Bannick, Katherine A. Burdon, and Peter B. McManus of PIMCO Advisors'
subsidiary Cadence.
Micro-Cap Growth Fund seeks long-term growth of capital. The Fund invests
primarily in common stocks of companies that have improving fundamentals (such
as growth of earnings and dividends) and whose stock is reasonably valued by
the market. The Fund usually invests in approximately 60 to 100 common stocks
selected from a universe of stocks with publicly available market
capitalizations of less than $100 million at the time of investment. Each issue
is screened and ranked using five distinct computerized models, including: (i)
a dividend growth screen, (ii) an equity growth screen, (iii) an earnings
growth screen, (iv) an earnings momentum screen, and (v) an earnings surprise
screen. The Sub-Adviser believes that the models identify the stocks in the
universe exhibiting growth characteristics with reasonable valuations. Stocks
are replaced when they score worse-than-median screen ranks, have negative
earnings surprises, or show poor relative price performance. The universe is
rescreened frequently to obtain a favorable composition of growth and value
characteristics for the entire Fund. The Fund is intended for aggressive
investors seeking above-average gains and willing to accept the greater risks
associated therewith. The Portfolio Managers for the Micro-Cap Growth Fund are
David B. Breed, William B. Bannick, Katherine A. Burdon, and Peter B. McManus
of PIMCO Advisors' subsidiary Cadence.
Core Equity Fund seeks long-term growth of capital, with income as a
secondary objective. The Fund attempts to exceed the total return performance
of the S&P 500 over a reasonable measurement period. The Fund usually invests
in approximately 40 to 50 common stocks from companies with market
capitalizations in excess of $3 billion at the time of investment. In selecting
securities, the Sub-Adviser uses an investment discipline called "Positive
Momentum & Positive Surprise." It is based on the premise that companies
performing better than expected will have rising securities prices, while
companies producing less than expected results will not. Through thorough
analysis of company fundamentals in the context of the prevailing economic
environment, the companies selected for purchase remain in the Fund only if
they continue to achieve or exceed expectations, and are sold when business or
earnings results are disappointing. Stock selection may include a significant
portion of middle capitalization companies combined with the large
capitalization stocks.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated with
investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Fund may also purchase and write call and put options on
securities, securities indexes and on foreign currencies; enter into futures
contracts and use options on futures contracts; and enter into forward foreign
currency contracts. The Portfolio Manager for the Core Equity Fund is Anthony
Rizza of PIMCO Advisors' subsidiary Columbus Circle.
Mid-Cap Equity Fund seeks long-term growth of capital. The Fund usually
invests in approximately 40 to 60 common stocks from companies with market
capitalizations of $800 million to $3 billion at the time of investment. In
selecting securities, the Sub-Adviser uses an investment discipline called
"Positive Momentum & Positive Surprise." It is based on the premise that
companies performing better than expected will have rising securities prices,
while companies producing less than expected results will not. Through thorough
analysis of company fundamentals in the context of the prevailing economic
environment, the companies selected for purchase remain in the Fund only if
they continue to achieve or exceed expectations, and are sold when business or
earnings results are disappointing. Stock selection may include companies that
have grown rapidly from small capitalization status.
22 PIMCO Funds: Multi-Manager Series
<PAGE>
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets, which will not exceed 15% of the Fund's
net assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated with
investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Fund may also purchase and write call and put options on
securities, securities indexes and on foreign currencies; enter into futures
contracts and use options on futures contracts; and enter into forward foreign
currency contracts. The Portfolio Manager for the Mid-Cap Equity Fund is Amy H.
Hogan of PIMCO Advisors' subsidiary Columbus Circle.
International Growth Fund seeks long-term capital appreciation. The Fund
invests in an international portfolio of equity and equity-related securities
of companies the principal activities of which are in countries other than the
United States. The Fund will normally invest in securities traded in foreign
securities markets and in securities of foreign issuers traded on U.S.
securities markets. As noted below, except for temporary defensive investments,
the Fund will not invest in securities of U.S. issuers traded on U.S.
securities markets. Otherwise, there are no prescribed limits on geographic
asset distribution, and the Fund has the authority to invest in securities
traded in securities markets of any country in the world. Under certain adverse
investment conditions, the Fund may restrict the number of securities markets
in which it invests, although under normal market conditions, the Fund's
investments will include securities principally traded in at least three
different countries (not including the U.S.). The Fund will not limit its
investments to any particular type or size of company. In pursuing its
investment objective, under normal market conditions, the Fund will invest at
least 65% of its assets in equity securities of issuers which exhibit growth
characteristics in accordance with the Sub-Adviser's Positive Momentum &
Positive Surprise investment discipline (see "Management of the Trust--Sub-
Advisers--Columbus Circle"). The Fund may also invest in issuers which do not
exhibit growth characteristics, but whose securities are thought to be
undervalued.
The Fund may invest in developed foreign securities markets and in emerging
markets, where markets may not fully reflect the potential of the developing
economy. The Fund may also invest in shares of companies which are not
presently listed but are in the process of being privatized by the government
and shares of companies that are traded in over-the-counter markets or other
types of unlisted securities markets.
The Fund will apply the Sub-Adviser's Positive Momentum & Positive Surprise
investment discipline to international markets. Asset allocation decisions
("top down") and individual stock selections ("bottom up") result from
identification of positively surprising fundamental trends. Fundamental factors
considered and their importance vary by security, but include country factors
(e.g., changes in the political environment or funds flows); macroeconomic
factors (e.g., GDP growth, inflation and interest rates); global secular trends
(e.g., global grain shortages or growth in wireless communications); and
industry and company specific factors. Investments are made when the relevant
factors are improving (Positive Momentum) faster than expected (Positive
Surprise). The relevant factors can be country (top down) or company (bottom
up) specific.
The Sub-Adviser believes that securities markets of many nations can be
expected to move relatively independently of one another, because business
cycles and other economic or political events that influence one country's
securities markets may have little effect on the securities markets of other
countries. By investing in an international portfolio, the Fund seeks to reduce
the risks associated with investing in the economy of only one country.
The Fund may invest up to 10% of its assets in securities of other investment
companies, such as closed-end management investment companies which invest in
foreign markets. The Fund may also purchase and write call and put options on
securities, securities indexes, and on foreign currencies; enter into futures
contracts and use options on
Prospectus 23
<PAGE>
futures contracts, including futures contracts on foreign currencies; buy or
sell foreign currencies; and enter into forward foreign currency contracts. The
Fund may utilize stock index futures contracts and options thereon for hedging
purposes and also for investment purposes. For instance, the Fund may invest in
stock index futures contracts and related options as an alternative to
purchasing individual stocks to adjust its exposure to a particular foreign
market. See "Characteristics and Risks of Securities and Investment
Techniques--Derivative Instruments--Index Futures."
The Fund will not normally invest in securities of U.S. issuers traded on
U.S. securities markets. However, when the Sub-Adviser believes that conditions
in international securities markets warrant a defensive investment strategy,
the Fund may temporarily invest up to 100% of its assets in domestic debt,
foreign debt and equity securities principally traded in the U.S., including
money market instruments, obligations issued or guaranteed by the U.S. or a
foreign government or their respective agencies, authorities or
instrumentalities, or corporate bonds and sponsored American Depository
Receipts. The Fund will not invest in debt securities which are of less than
investment grade quality at the time of purchase (i.e., securities rated Ba or
below by Moody's or BB or below by S&P or, if unrated, considered by the Sub-
Adviser to be of comparable quality).
Investing in the securities of foreign issuers, and particularly emerging
market issuers, involves special risks not typically associated with investing
in U.S. companies. For a discussion of such risks, see "Characteristics and
Risks of Securities and Investment Techniques--Foreign Securities." The
Portfolio Manager for the International Growth Fund is Clifford G. Fox of PIMCO
Advisors' subsidiary Columbus Circle.
Equity Income Fund seeks current income as a primary investment objective,
and long-term growth of capital as a secondary objective. The Fund invests
primarily in common stocks characterized by having below-average price to
earnings ("P/E") ratios and higher dividend yields relative to their industry
groups. In selecting securities, the Sub-Adviser classifies a universe of
approximately 2,000 stocks by industry, each of which has a minimum market
capitalization of $200 million at the time of investment. The universe is then
screened to find the lowest P/E ratios in each industry, subject to application
of quality and price momentum screens. From this group, approximately 25 stocks
with the highest yields are chosen for the Fund. The universe is then
rescreened to find the highest yielding stock in each industry, subject to
application of quality and price momentum screens. From this group,
approximately 25 stocks with the lowest P/E ratios are added to the Fund.
Although quarterly rebalancing is a general rule, replacements are made
whenever an alternative stock within the same industry has a significantly
lower P/E ratio or higher dividend yield than the current Fund holding. The
Portfolio Managers for the Equity Income Fund are Chris Najork and Benjamin
Fischer of PIMCO Advisors' subsidiary NFJ.
Value Fund seeks long-term growth of capital and income. The Fund invests
primarily in common stocks characterized by having below-average P/E ratios
relative to their industry groups. In selecting securities, the Sub-Adviser
classifies a universe of approximately 2,000 stocks by industry, each of which
has a minimum market capitalization of $200 million at the time of investment.
The universe is then screened to find the stocks with the lowest P/E ratios in
each industry, subject to application of quality and price momentum screens.
The stocks in each industry with the lowest P/E ratios that pass the quality
and price momentum screens are then selected for the Fund. The Fund usually
invests in approximately 50 stocks, although the Fund may reduce its holdings
below this number (normally not below 30 stocks) if the Sub-Adviser believes
that this would help the Fund to achieve its investment objective. Although
quarterly rebalancing is a general rule, replacements are made whenever an
alternative stock within the same industry has a significantly lower P/E ratio
than the current Fund holding. The Portfolio Managers for the Value Fund are
Chris Najork, Benjamin Fischer, and Paul A. Magnuson of PIMCO Advisors'
subsidiary NFJ.
24 PIMCO Funds: Multi-Manager Series
<PAGE>
Value 25 Fund seeks long-term growth of capital and income. The Fund invests
primarily in a portfolio of approximately 25 common stocks of companies with
medium market capitalizations and below-average P/E ratios relative to their
industry groups. In selecting securities, the Sub-Adviser classifies a universe
of more than 2,000 stocks by industry, each of which has a minimum market
capitalization of $200 million. The universe is then screened to find stocks
with the lowest P/E ratios in each industry, subject to application of quality,
earnings momentum and price momentum screens. Those stocks which pass the
screenings and satisfy the medium-cap size criteria are further analyzed.
Fundamental research is performed on the companies determined by such process
to be the most undervalued. Approximately 25 stocks, diversified across
industries, are selected on an equal-weighted basis for the Fund's portfolio.
Although quarterly rebalancing is a general rule, replacements are made
whenever an alternative stock has a significantly lower P/E ratio than the
current Fund holdings. Because the Fund concentrates on approximately 25 stocks
at any one time (and is not as diversified as many stock funds), it is intended
for aggressive investors seeking above-average capital gains and willing to
accept the greater risks associated therewith. The Portfolio Managers for the
Value 25 Fund are Chris Najork, Benjamin Fischer, and Cliff Hoover of PIMCO
Advisors' subsidiary NFJ.
Small-Cap Value Fund seeks long-term growth of capital and income. The Fund
invests primarily in common stocks of companies with market capitalizations
between $50 million and $1 billion at the time of investment. In selecting
securities, the Sub-Adviser divides a universe of up to approximately 2,000
stocks into quartiles based upon P/E ratio. The lowest quartile in P/E ratio is
screened for market capitalizations between $50 million and $1 billion, subject
to application of quality and price momentum screens. Approximately 100 stocks
with the lowest P/E ratios are combined in the Fund, subject to limits on the
weighting for any one industry. Although quarterly rebalancing is a general
rule, replacements are made whenever a holding achieves a higher P/E ratio than
the S&P 500's P/E ratio or its industry average P/E ratio, or when an
alternative stock within the same industry has a significantly lower P/E ratio
than the current Fund holding. The Fund is intended for aggressive investors
seeking above-average gains and willing to accept the greater risks associated
therewith. The Portfolio Managers for the Small-Cap Value Fund are Chris
Najork, Benjamin Fischer, and Paul A. Magnuson of PIMCO Advisors' subsidiary
NFJ.
Renaissance Fund seeks long-term growth of capital and income. The Fund
invests primarily in common stocks having below-average valuations whose
business fundamentals are expected to improve. Valuation is determined based on
characteristics such as price to earnings, price to book, and price to cash
flow ratios. Stocks are analyzed to identify the key drivers of financial
results and catalysts for change which indicate that a company may demonstrate
improving fundamentals in the future. Stocks are sold from the Fund's portfolio
when the Sub-Adviser believes that their business fundamentals are weakening or
when their valuations have become excessive.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's assets at the time of
investment. Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
securities. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and enter into forward foreign currency contracts. The
Portfolio Manager for the Renaissance Fund is John K. Schneider of PIMCO Equity
Advisors.
Growth Fund seeks long-term growth of capital. Income is an incidental
consideration. The Fund invests primarily in common stocks of companies with
market capitalizations of at least $5 billion at the time of investment. The
Fund may invest a portion of its assets in securities of foreign issuers traded
in foreign securities markets (not including
Prospectus 25
<PAGE>
Eurodollar certificates of deposit), which will not exceed 15% of the Fund's
assets at the time of investment. Investing in the securities of foreign
issuers involves special risks and considerations not typically associated with
investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Fund may also purchase and write call and put options on
securities and securities indexes; enter into futures contracts and use options
on futures contracts; buy or sell foreign currencies; and enter into forward
foreign currency contracts. The Portfolio Manager for the Growth Fund is
Kenneth W. Corba of PIMCO Equity Advisors.
Target Fund seeks capital appreciation. No consideration is given to income.
The Fund invests primarily in common stocks of companies with market
capitalizations of between $1 billion and $10 billion at the time of
investment. The Fund may invest a portion of its assets in securities of
foreign issuers traded in foreign securities markets (not including Eurodollar
certificates of deposit), which will not exceed 15% of the Fund's assets at the
time of investment. Investing in the securities of foreign issuers involves
special risks and considerations not typically associated with investing in
U.S. companies. For a discussion of such risks, see "Characteristics and Risks
of Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and enter into forward foreign currency contracts. The
Portfolio Manager for the Target Fund is Kenneth W. Corba of PIMCO Equity
Advisors.
Opportunity Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily in common stocks of companies with market
capitalizations of less than $2 billion at the time of investment. The Fund is
intended for aggressive investors seeking above-average gains and willing to
accept the greater risks associated therewith.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's assets at the time of
investment. Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
companies. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and enter into forward foreign currency contracts. The
Portfolio Manager for the Opportunity Fund is Michael F. Gaffney of PIMCO
Equity Advisors.
Innovation Fund seeks capital appreciation. No consideration is given to
income. The Fund invests primarily (i.e., at least 65% of its assets) in common
stocks of companies which utilize innovative technologies to gain a strategic
competitive advantage in their industry as well as companies that provide and
service those technologies. Although the Fund emphasizes the utilization of
technologies, it is not restricted to investment in companies in a particular
business sector or industry.
The Fund may invest a portion of its assets in securities of foreign issuers
traded in foreign securities markets (not including Eurodollar certificates of
deposit), which will not exceed 15% of the Fund's assets at the time of
investment. Investing in the securities of foreign issuers involves special
risks and considerations not typically associated with investing in U.S.
companies. For a discussion of such risks, see "Characteristics and Risks of
Securities and Investment Techniques--Foreign Securities." The Fund may also
purchase and write call and put options on securities and securities indexes;
enter into futures contracts and use options on futures contracts; buy or sell
foreign currencies; and
26 PIMCO Funds: Multi-Manager Series
<PAGE>
enter into forward foreign currency contracts. The Portfolio Manager for the
Innovation Fund is Dennis P. McKechnie of PIMCO Equity Advisors.
Enhanced Equity Fund seeks to provide a total return which equals or exceeds
the total return performance of an index that represents the performance of a
reasonably broad spectrum of common stocks that are publicly traded in the
United States. The Fund currently attempts to equal or exceed the total return
performance of the S&P 500. The Sub-Adviser uses quantitative techniques to
construct a portfolio that consists of some, but not all, of the common stocks
that are represented in the S&P 500. The Fund may invest in common stocks of
foreign issuers if included in the S&P 500. The Fund attempts to provide risk-
controlled exposure to the S&P 500 while adding value through security
selection. The Fund is designed to have no greater volatility than the S&P 500.
Stocks in the S&P 500 are ranked by their exposure to growth and value factors
and combined to create a sector-neutral portfolio which exhibits above average
return potential relative to the S&P 500. Approximately 150 positions are owned
by the Fund. Stocks with rising earnings expectations, reasonable valuation of
those earnings and positive investor sentiment are more heavily weighted. The
fundamental inputs used in the stock selection process include company revenues
and cash flow, stock price, reported and estimated earnings, analyst ratings
and earnings estimates revisions. A computer optimization model is used to
achieve diversification and risk control relative to the S&P 500. Frequent and
modest rebalancing assures these exposures are maintained through time. The
Trustees reserve the right to change, without shareholder approval, the index
whose total return the Fund will attempt to equal or exceed, although it is not
anticipated that such a change would be made in the ordinary course of the
Fund's operations. The Fund may engage in the purchase and writing of options
on securities indexes, and may also invest in stock index futures contracts and
options thereon. The Portfolio Managers for the Enhanced Equity Fund are David
Stein, Tom Seto, and Cliff Quisenberry of PIMCO Advisors' subsidiary
Parametric.
Tax-Efficient Equity Fund seeks maximum after-tax growth of capital. The Fund
attempts to provide a total return which exceeds the return of the S&P 500. In
addition, the Fund seeks to achieve superior after-tax returns for its
shareholders in part by minimizing the taxes they incur in connection with the
Fund's investment income and realized capital gains by using the strategies
described under "Tax-Efficient Structured Emerging Markets Fund--Tax-Efficient
Management Strategies" below. Notwithstanding these strategies, the Fund may
have taxable investment income and may realize taxable gains from time to time.
The Fund invests primarily in a broadly diversified portfolio of at least 200
common stocks. Normally, at least 95% of the Fund's assets will be invested in
stocks represented in the S&P 500 and the Fund's portfolio is designed to have
certain characteristics that are similar to those of the index. These
characteristics include such measures as dividend yield, P/E ratio, relative
volatility, economic sector exposure, return on equity, and market price-to-
book value ratio. However, the Sub-Adviser attempts to construct a portfolio
that produces a higher total return than the S&P 500 by using the quantitative
security selection techniques described below. Of course, there can be no
assurance that the Fund's investment performance will equal or exceed that of
the S&P 500.
In selecting specific securities, the Sub-Adviser uses a proprietary
quantitative model that ranks companies based on long-term (5-10 years) price
appreciation potential through analysis of such factors as growth of
sustainable earnings and dividend behavior. Securities in the top 50% of the
model's ranking are considered for purchase. The Sub-Adviser's sell discipline
incorporates a focus on reducing the realization of capital gains. Each sell
candidate is evaluated based on its cost, current market value, and anticipated
benefit of replacement. Securities in the bottom 20% of the model's ranking are
considered for sale. The Fund may engage in the purchase and writing of options
on securities indexes and may also invest in stock index futures contracts and
options thereon. The Portfolio Managers for the Tax-Efficient Equity Fund are
David Stein, Tom Seto, and Cliff Quisenberry of PIMCO Advisors' subsidiary
Parametric.
Prospectus 27
<PAGE>
Structured Emerging Markets Fund seeks long-term growth of capital. The Fund
invests primarily in equity securities of companies located in, or whose
business relates to, emerging markets. The Sub-Adviser will identify those
markets that it considers to be emerging markets, relying primarily on those
countries listed on the International Finance Corporation Investable Composite
Index (the "IFC Investable Index"). However, the Sub-Adviser has discretion in
identifying other countries that qualify as emerging markets on the basis of
market capitalization and liquidity, as well as their inclusion, or
consideration for inclusion, as emerging market countries in other broad-based
market indexes. The Fund seeks to achieve its objective by following a
disciplined and systematic methodology for selecting and weighting countries,
industries, and stocks. Diversification and consistent exposure to opportunity
are emphasized over tactical timing decisions with regard to countries,
industries, or stocks. A disciplined methodology for maintaining the allocation
to countries, industries, and stocks is utilized in portfolio composition,
rather than discretionary shifting in country and industry concentration
levels. First, countries are selected based upon their level of development and
equity market institutions. GNP per capita, local economic diversification, and
freedom of investment flows are the primary considerations in country selection
decisions. Most countries are assigned an equal weight in the Fund unless the
size of their equity market is prohibitive; countries with smaller markets
(i.e., less than $5 billion of market capitalization) are assigned one-half of
the weight assigned to countries with larger markets. Second, all stocks in
each eligible country are divided into five broad economic sector groups:
financial, industrial, consumer, utilities, and natural resources. The Sub-
Adviser will generally endeavor to maintain exposure across all five sectors in
each country. Finally, stocks are selected and purchased to fill out the
country and industry structure. Stock purchase candidates are examined for
liquidity, industry representation, performance relative to industry, and long-
term profitability. Under normal market conditions and assuming Fund size of at
least $5 million, the Sub-Adviser will endeavor to maintain investment exposure
to roughly 20 countries and hold in excess of 200 securities in the Fund. The
allocation methodology described above may be changed from time to time based
on evaluations of economic trends by the Sub-Adviser, consistent with the
principles of broad country and company diversification of the Fund's
investments.
For purposes of implementing its investment objective, the Fund invests
primarily in some or all of the following emerging market countries (this list
is not exclusive):
Argentina Greece Mexico Slovenia
Botswana Hungary Morocco South Africa
Brazil India Pakistan South Korea
Chile Indonesia Peru Taiwan
China Israel Philippines Thailand
Colombia Kenya Poland Turkey
Czech Republic Latvia Portugal Venezuela
Egypt Lithuania Romania Zimbabwe
Estonia Mauritius Russia
Ghana Malaysia Slovak Republic
For purposes of allocating the Fund's investments, a company is considered to
be located in the country in which the company is domiciled, and a company's
business "relates to" any emerging market country in which the company's
securities are primarily traded, from which the company derives a significant
portion of its revenues, or in which a significant portion of the company's
goods or services are produced.
Most of the foreign securities in which the Fund invests will be denominated
in foreign currencies. The Fund may engage in foreign currency transactions to
protect itself against fluctuations in currency exchange rates in relation to
the U.S. dollar or to the weighting of a particular foreign currency on the IFC
Investable Index. Such foreign currency transactions may include forward
foreign currency contracts, foreign exchange futures contracts, and options
thereon,
28 PIMCO Funds: Multi-Manager Series
<PAGE>
currency exchange transactions on a spot (i.e., cash) basis, and put and call
options on foreign currencies. The Fund may sell (write) call and put options.
The Fund may utilize stock index futures contracts and options thereon for
hedging purposes and also for investment purposes. For instance, the Fund may
invest in stock index futures contracts and related options as an alternative
to purchasing individual stocks to adjust its exposure to a particular foreign
market. See "Characteristics and Risks of Securities and Investment
Techniques--Derivative Instruments--Index Futures." The Fund may also engage in
equity index swap transactions. The Fund may also invest up to 5% of its assets
in debt securities of issuers located in emerging market countries, including
corporate debt securities and obligations issued or guaranteed by a foreign
government or its agencies, authorities, or instrumentalities.
Investing in securities of foreign issuers, and particularly emerging market
issuers, involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risks of Securities and Investment Techniques--Foreign
Securities." The Portfolio Managers for the Structured Emerging Markets Fund
are David Stein, Tom Seto, and Cliff Quisenberry of PIMCO Advisors' subsidiary
Parametric.
Tax-Efficient Structured Emerging Markets Fund has the same investment
objective and policies as the Structured Emerging Markets Fund, except that the
Fund seeks to achieve superior after-tax returns for its shareholders in part
by minimizing the taxes they incur in connection with the Fund's investment
income and realized capital gains by using the strategies described under "Tax-
Efficient Management Strategies" below. While the Fund seeks to minimize
investor taxes associated with the Fund's investment income and realized
capital gains, the Fund may have taxable investment income and may realize
taxable gains from time to time.
Investing in securities of foreign issuers, and particularly emerging market
issuers, involves special risks and considerations not typically associated
with investing in U.S. companies. For a discussion of such risks, see
"Characteristics and Risk of Securities and Investment Techniques--Foreign
Securities." The Portfolio Managers for the Tax-Efficient Structured Emerging
Markets Fund are David Stein, Tom Seto, and Cliff Quisenberry of PIMCO
Advisors' subsidiary Parametric.
Tax-Efficient Management Strategies The Sub-Adviser for the Tax-Efficient
Equity and Tax-Efficient Structured Emerging Markets Funds utilizes a range of
active tax management techniques to minimize taxable distributions for these
Funds, including: low portfolio turnover; emphasis towards low-dividend,
growth-oriented companies; tax lot accounting (identification of specific
shares of securities being sold that have the lowest tax cost); and regular
rebalancing to capture available tax credits. The Tax-Efficient Equity and Tax-
Efficient Structured Emerging Markets Funds will generally seek to avoid
realizing net short-term capital gains and, when realizing gains, will attempt
to realize long-term gains (i.e., gains on securities held for more than 12
months). The Funds intend to notify each shareholder as to that portion of his
or her capital gain dividends which qualifies for a long-term tax rate,
generally taxed at a maximum tax rate of 20% in the hands of a shareholder who
is an individual. Net short-term capital gains, when distributed, will be taxed
as ordinary income, generally subject to graduated tax rates of up to 39.6% for
shareholders who are individuals. When these Funds decide to sell a particular
appreciated security, they will normally select for sale first those share lots
with holding periods exceeding 12 months and among those, the share lots with
the highest cost basis. The Funds may, when prudent, sell securities to realize
capital losses that can be used to offset realized capital gains.
To protect against price declines in securities holdings with large
accumulated capital gains, the Tax-Efficient Equity and Tax-Efficient
Structured Emerging Markets Funds may, to the extent permitted by law, use
hedging techniques such as the purchase of put options, the sale of stock index
futures contracts, and equity swaps. By using these
Prospectus 29
<PAGE>
techniques rather than selling such securities, the Funds can reduce their
exposure to price declines in the securities without realizing substantial
capital gains. In limited circumstances, the Funds may follow the practice of
distributing selected appreciated securities to meet redemptions of certain
investors and may, within certain limits, use the selection of securities
distributed to meet such redemptions as a management tool. By distributing
appreciated securities the Funds can reduce their position in such securities
without realizing capital gains. During periods of net withdrawals by
investors, using distributions of securities could enable the Funds to avoid
the forced sale of securities to raise cash for meeting redemptions.
It is expected that by employing the various tax-efficient management
strategies described above, the Tax-Efficient Equity and Tax-Efficient
Structured Emerging Markets Funds can minimize the extent to which shareholders
incur taxes as a result of realized capital gains. The Funds may nevertheless
realize gains and shareholders will incur tax liability from time to time.
Balanced Fund seeks total return consistent with prudent investment
management. The Fund attempts to achieve this objective through a management
policy of investing in the following asset classes: common stock, fixed income
securities, and money market instruments. The proportion of the Fund's total
assets allocated among common stocks, fixed income securities, and money market
instruments will vary from time to time and will be determined by the Adviser.
In determining the allocation of the Fund's assets among the three asset
classes, the Adviser will employ asset allocation principles which take into
account certain economic factors, market conditions, and the expected relative
total return and risk of the various asset classes. Under normal circumstances,
it is anticipated that the Fund will generally maintain a balance among the
types of securities in which it invests. Thus, the Fund will normally maintain
40% to 65% of its assets in common stock, at least 25% of its assets in fixed
income securities, and less than 10% of its assets in money market instruments.
However, in no event would the Fund invest in any common stock if, at the time
of investment, more than 80% of the Fund's assets would be invested in common
stock; in no event would the Fund invest in a fixed income security (other than
a short-term instrument) if, at the time of investment, more than 80% of the
Fund's assets would be invested in fixed income securities; nor would the Fund
invest in a money market instrument if, at the time of investment, more than
60% of its assets would be invested in money market instruments.
In managing the Fund, the Adviser uses a specialist approach and has engaged
three of the Trust's Sub-Advisers to manage certain portions of the Fund's
assets. The portion of the assets of the Fund allocated by the Adviser for
investment in common stock (the "Common Stock Segment") will be further
allocated by the Adviser for investment by Cadence and NFJ. The portion of the
Common Stock Segment allocated to Cadence will be managed in accordance with
the investment policies of, and by the same Portfolio Managers as, the Capital
Appreciation Fund; the portion allocated to NFJ will be managed in accordance
with the investment policies of, and by the same Portfolio Managers as, the
Value Fund. Allocations of the Common Stock Segment to Cadence and NFJ will
vary from time to time as determined by the Adviser.
The portion of the assets of the Fund allocated by the Adviser for investment
in fixed income securities (the "Fixed Income Securities Segment") will be
managed by William H. Gross of PIMCO Advisors' affiliate Pacific Investment
Management. The Fund may invest the Fixed Income Securities Segment in the
following types of securities: securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; corporate debt securities,
including convertible securities and corporate commercial paper; mortgage-
related and other asset-backed securities; inflation-indexed bonds issued by
both governments and corporations; structured notes, including hybrid or
"indexed" securities, catastrophe bonds and loan participations; delayed
funding loans and revolving credit facilities; bank certificates of deposit,
fixed time deposits and bankers' acceptances; repurchase agreements and reverse
repurchase agreements;
30 PIMCO Funds: Multi-Manager Series
<PAGE>
obligations of foreign governments or their subdivisions, agencies and
instrumentalities; and obligations of international agencies or supranational
entities. Fixed income securities may have fixed, variable, or floating rates
of interest.
The Fund invests the Fixed Income Securities Segment in fixed income
securities of varying maturities. Portfolio holdings will be concentrated in
areas of the bond market (based on quality, sector, coupon, or maturity) that
Pacific Investment Management believes to be relatively undervalued. Fixed
income securities in which the Fund may invest will, at the time of
investment, be rated Baa or better by Moody's, BBB or better by S&P or, if not
rated by Moody's or S&P, will be of comparable quality as determined by
Pacific Investment Management, except that up to 10% of the Fixed Income
Securities Segment may be invested in lower rated securities that are rated B
or higher by Moody's or S&P or, if not rated by Moody's or S&P, determined by
Pacific Investment Management to be of comparable quality. High yield fixed
income securities rated lower than Baa by Moody's or BBB by S&P, or of
equivalent quality, are not considered to be investment grade, and are
commonly referred to as "junk bonds." Securities rated below investment grade
and comparable unrated securities are subject to greater risks than higher
quality fixed income securities. See "Characteristics and Risks of Securities
and Investment Techniques--High Yield Securities ("Junk Bonds")." The Fund
also may invest up to 20% of the Fixed Income Securities Segment in securities
denominated in foreign currencies, and may invest beyond this limit in U.S.
dollar-denominated securities of foreign issuers. Investing in securities
denominated in foreign currencies and securities of foreign issuers involves
special risks and considerations not typically associated with investing in
U.S. securities. For a discussion of such risks, see "Characteristics and
Risks of Securities and Investment Techniques--Foreign Securities."
Each Sub-Adviser generally invests a portion of its allocation in liquid
securities to facilitate redemptions. In addition, PIMCO Advisors reserves the
right to allocate a portion of the Fund's assets (the "Money Market Segment")
for investment in money market instruments and reserves the right to manage
the investment of such assets. Because of the Fund's flexible investment
policy, portfolio turnover may be greater than for a fund that does not
allocate assets among various types of securities. See "Portfolio
Transactions."
The Fund may engage in the purchase and writing of put and call options on
debt securities and securities indexes and may also purchase or sell interest
rate futures contracts, stock index futures contracts, and options thereon.
The Fund also may enter into swap agreements with respect to foreign
currencies, interest rates, and securities indexes. With respect to securities
of the Fixed Income Securities Segment denominated in foreign currencies, the
Fund may engage in foreign currency exchange transactions by means of buying
or selling foreign currencies on a spot basis, entering into forward foreign
currency contracts, and buying and selling foreign currency options, foreign
currency futures, and options on foreign currency futures. Foreign currency
exchange transactions may be entered into for the purpose of hedging against
foreign currency exchange risk arising from the Fund's investment or
anticipated investment in securities denominated in foreign currencies and for
purposes of increasing exposure to a particular foreign currency or to shift
exposure to foreign currency fluctuations from one country to another.
Duration Under normal circumstances, the average portfolio duration of the
Fixed Income Securities Segment of the Balanced Fund will vary within a three-
to six-year time frame, based on Pacific Investment Management's forecast for
interest rates. Duration is a measure of the expected life of a fixed income
security that was developed as a more precise alternative to the concept of
"term to maturity." Traditionally, a fixed income security's "term to
maturity" has been used as proxy for the sensitivity of the security's price
to changes in interest rates (which is the "interest rate risk" or
"volatility" of the security). However, "term to maturity" measures only the
time until a fixed income security provides its final payment, taking no
account of the pattern of the security's payments prior to maturity. In
contrast, duration incorporates a bond's yield, coupon interest payments,
final maturity and call features into one measure of the average
Prospectus 31
<PAGE>
life of a fixed income security on a present value basis. Duration management
is one of the fundamental tools used by Pacific Investment Management for the
Fixed Income Securities Segment of the Balanced Fund. For more information on
investments in fixed income securities, see "Characteristics and Risks of
Securities and Investment Techniques" in this Prospectus and "Investment
Objectives and Policies" in the Statement of Additional Information.
Stock Funds
The Capital Appreciation, Mid-Cap Growth, Micro-Cap Growth, Small-Cap Growth,
Core Equity, Mid-Cap Equity, Equity Income, Value, Value 25, Small-Cap Value,
Enhanced Equity, Tax-Efficient Equity, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds will each invest primarily
(normally at least 65% of its assets) in common stock. Each of these Funds may
maintain a portion of its assets, which will usually not exceed 10%, in U.S.
Government securities, high quality debt securities (whose maturity or
remaining maturity will not exceed five years), money market obligations, and
in cash to provide for payment of the Fund's expenses and to meet redemption
requests. It is the policy of these Funds to be as fully invested in common
stocks as practicable at all times, except that the Structured Emerging Markets
and Tax-Efficient Structured Emerging Markets Funds may invest up to 5% of
their respective net assets in debt securities of emerging market issuers. This
policy precludes these Funds from investing in debt securities as a defensive
investment posture (although these Funds may invest in such securities to
provide for payment of expenses and to meet redemption requests). Accordingly,
investors in these Funds bear the risk of general declines in stock prices and
the risk that a Fund's exposure to such declines cannot be lessened by
investment in debt securities. The Funds may also invest in convertible
securities, preferred stock, and warrants, subject to certain limitations.
The International, Renaissance, Growth, Target, Opportunity, and Innovation
Funds will each invest primarily (normally at least 65% of its assets) in
common stocks, and may also invest in other equity securities, including
preferred stocks and securities (including debt securities and warrants)
convertible into or exercisable for common stocks. The International Growth
Fund will invest primarily in equity and equity-related securities. Each of
these Funds may invest a portion of its assets in debt securities and, for
temporary defensive purposes, up to 100% of its assets in short-term U.S.
Government securities and other money market instruments.
One or more of the Stock Funds may temporarily not be invested primarily in
equity securities immediately following the commencement of operations or after
receipt of significant new monies. While attempting to identify suitable
investments, the Funds may hold assets in cash, short-term U.S. Government
securities, and other money market instruments. Any of the Stock Funds may
temporarily not contain the number of securities in which the Fund normally
invests if the Fund does not have sufficient assets to be fully invested, or
pending the Sub-Adviser's ability to prudently invest new monies.
The Stock Funds may also lend portfolio securities; enter into repurchase
agreements and reverse repurchase agreements (subject to the Funds' investment
limitations described below); purchase and sell securities on a when-issued or
delayed delivery basis; and enter into forward commitments to purchase
securities. All of the Stock Funds may invest in American Depository Receipts
("ADRs"). In addition, the International, Core Equity, Mid-Cap Equity,
International Growth, Renaissance, Growth, Target, Opportunity, Innovation,
Structured Emerging Markets, and Tax-Efficient Structured Emerging Markets
Funds may invest in European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs"). The Stock Funds that invest primarily in securities of
foreign issuers may invest a portion of their assets in debt securities and
money market obligations issued by U.S. and foreign issuers that are either
U.S. dollar-denominated or denominated in foreign currency. For more
information on these and other investment
32 PIMCO Funds: Multi-Manager Series
<PAGE>
practices, see "Characteristics and Risks of Securities and Investment
Techniques" in this Prospectus and "Investment Objectives and Policies" in the
Statement of Additional Information.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of the
International, International Growth, Renaissance, Growth, Target, Opportunity,
and Innovation Funds and may not be changed with respect to any such Fund
without shareholder approval by vote of a majority of the outstanding voting
securities of that Fund. The investment objective of each of these Funds and
the Value 25, Tax-Efficient Equity, 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. Under the following
fundamental restrictions, none of the International, International Growth,
Renaissance, Growth, Target, Opportunity, and Innovation Funds may:
(1) Borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of such Fund's total assets (not including the
amount borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting of redemption
requests (not for leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional
investments are purchased.
(2) Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of such Fund's total assets (taken at cost) and then
only to secure borrowings permitted by Restriction (1) above. (The
deposit of securities or cash or cash equivalents in escrow in
connection with the writing of covered call or put options,
respectively, is not deemed to be pledges or other encumbrances.) (For
the purpose of this restriction, collateral arrangements with respect
to the writing of options, futures contracts, options on futures
contracts, and collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge of assets and neither
such arrangements nor the purchase or sale of futures or related
options are deemed to be the issuance of a senior security).
(3) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under federal securities laws.
(4) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, including securities of real
estate investment trusts, and may purchase securities which are
secured by interests in real estate.
(5) Acquire more than 10% of the voting securities of any issuer, both
with respect to any such Fund and to the Funds to which this policy
relates in the aggregate.
(6) Concentrate more than 25% of the value of its total assets in any one
industry; except that the Innovation Fund will concentrate more than
25% of its assets in companies which use innovative technologies to
gain a strategic, competitive advantage in their industry as well as
companies that provide and service those technologies.
The investment restrictions set forth below are fundamental policies of each
of the 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, Tax-Efficient Equity, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Balanced Funds and may not be
changed with respect to any such Fund without shareholder approval by vote of a
majority of the outstanding shares of that Fund. The investment objective of
each of these Funds (with the exception
Prospectus 33
<PAGE>
of the Value 25, Tax-Efficient Equity, and Tax-Efficient Stuctured Emerging
Markets Funds) is also fundamental and may not be changed without such
shareholder approval. Under the following fundamental restrictions, none of
the above-referenced Funds may:
(1) Invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such
investment) would be invested in the securities of issuers in any
particular industry, except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities (or repurchase agreements with respect thereto).
(2) With respect to 75% of its assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of any one issuer, except that this restriction does not
apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities.
(3) With respect to 75% of its assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the
time of such investment) of the outstanding voting securities of any
one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
(4) Purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies in the real estate industry or which invest in real estate
or interests therein.
(5) Purchase or sell commodities or commodities contracts (which, for the
purpose of this restriction, shall not include foreign currency or
forward foreign currency contracts or swap agreements), except that
any such Fund may engage in interest rate futures contracts, stock
index futures contracts, futures contracts based on other financial
instruments or one or more groups of instruments, and on options on
such futures contracts.
(6) Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases and sales of portfolio
securities, but it may make margin deposits in connection with
transactions in options, futures, and options on futures, and except
that effecting short sales will be deemed not to constitute a margin
purchase for purposes of this restriction.
(7) Borrow money, or pledge, mortgage or hypothecate its assets, except
that a Fund may (i) borrow from banks or enter into reverse repurchase
agreements, or employ similar investment techniques, and pledge its
assets in connection therewith, but only if immediately after each
borrowing and continuing thereafter, there is asset coverage of 300%
and (ii) enter into reverse repurchase agreements and transactions in
options, futures, options on futures, and forward foreign currency
contracts as described in this Prospectus and in the Statement of
Additional Information (the deposit of assets in escrow in connection
with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis and collateral
arrangements with respect to initial or variation margin deposits for
futures contracts, options on futures contracts, and forward foreign
currency contracts will not be deemed to be pledges of such Fund's
assets).
(8) Issue senior securities, except insofar as such Fund may be deemed to
have issued a senior security by reason of borrowing money in
accordance with the Fund's borrowing policies, and except for purposes
of this investment restriction, collateral, escrow, or margin or other
deposits with respect to the making of short sales, the purchase or
sale of futures contracts or related options, purchase or sale of
forward foreign currency contracts, and the writing of options on
securities are not deemed to be an issuance of a senior security.
34 PIMCO Funds: Multi-Manager Series
<PAGE>
(9) Lend any funds or other assets, except that such Fund may, consistent
with its investment objective and policies: (a) invest in debt
obligations, including bonds, debentures, or other debt securities,
bankers' acceptances and commercial paper, even though the purchase of
such obligations may be deemed to be the making of loans, (b) enter
into repurchase agreements and reverse repurchase agreements, and (c)
lend its portfolio securities in an amount not to exceed one-third of
the value of its total assets, provided such loans are made in
accordance with applicable guidelines established by the Securities
and Exchange Commission ("SEC") and the Trustees of the Trust.
(10) Act as an underwriter of securities of other issuers, except to the
extent that in connection with the disposition of portfolio
securities, it may be deemed to be an underwriter under the federal
securities laws.
Unless otherwise noted, the remaining restrictions and policies of each Fund
relating to the investment of its assets and activities are non-fundamental and
may be changed without shareholder approval. As indicated above, certain
fundamental investment restrictions do not apply to certain Funds. However,
certain non-fundamental restrictions, set forth in the Statement of Additional
Information, place comparable limitations on these Funds. See "Investment
Restrictions" in the Statement of Additional Information.
Unless otherwise indicated, all limitations applicable to Fund investments
apply only at the time a transaction is entered into. Any subsequent change in
a rating assigned by any rating service to a security (or, if unrated, deemed
to be of comparable quality), or change in the percentage of Fund assets
invested in certain securities or other instruments resulting from market
fluctuations or other changes in a Fund's total assets will not require a Fund
to dispose of an investment until the Adviser or Sub-Adviser determines that it
is practicable to sell or close out the investment without undue market or tax
consequences to the Fund. In the event that ratings services assign different
ratings to the same security, the Adviser or 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.
CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES
The different types of securities and investment techniques used by the
individual Funds all have attendant risks of varying degrees. For example, with
respect to common stock, there can be no assurance of capital appreciation, and
there is a risk of market decline. With respect to debt securities, including
money market instruments, there is the risk that the issuer of a security may
not be able to meet its obligation to make scheduled interest or principal
payments. Because each Fund seeks a different investment objective and has
different investment policies, each is subject to varying degrees of financial,
market, and credit risks. Therefore, investors should carefully consider the
investment objective, investment policies, and potential risks of any Fund or
Funds before investing.
The following describes potential risks associated with different types of
investment techniques that may be used by the individual Funds. For more
detailed information on these investment techniques, as well as information on
the types of securities in which some or all of the Funds may invest, see the
Statement of Additional Information.
Small and Medium Capitalization Stocks
Certain of the Funds may invest in common stock of companies with market
capitalizations that are small compared to those of other publicly traded
companies. Generally, small market capitalization is considered to be less than
$1.5 billion and large market capitalization is considered to be more than $5
billion. Under normal market conditions, the Opportunity Fund will invest
primarily in companies with market capitalizations of less than $2 billion,
Prospectus 35
<PAGE>
the Small-Cap Growth and Small-Cap Value Funds will invest primarily in
companies with market capitalizations of between $50 million and $1 billion,
and the Micro-Cap Growth Fund will invest primarily in companies with market
capitalizations of less than $100 million. Investments in larger companies
present certain advantages in that such companies generally have greater
financial resources, more extensive research and development, manufacturing,
marketing and service capabilities, and more stability and greater depth of
management and technical personnel. Investments in smaller, less seasoned
companies may present greater opportunities for growth but also may involve
greater risks than customarily are associated with more established companies.
The securities of smaller companies may be subject to more abrupt or erratic
market movements than larger, more established companies. These companies may
have limited product lines, markets or financial resources, or they may be
dependent upon a limited management group. Their securities may be traded in
the over-the-counter market or on a regional exchange, or may otherwise have
limited liquidity. As a result of owning large positions in this type of
security, a Fund is subject to the additional risk of possibly having to sell
portfolio securities at disadvantageous times and prices if redemptions require
the Fund to liquidate its securities positions. In addition, it may be prudent
for a Fund with a relatively large asset size to limit the number of relatively
small positions it holds in securities having limited liquidity in order to
minimize its exposure to such risks, to minimize transaction costs, and to
maximize the benefits of research. As a consequence, as a Fund's asset size
increases, the Fund may reduce its exposure to illiquid small capitalization
securities, which could adversely affect performance.
Many of the Funds may also invest in stocks of companies with medium market
capitalizations. Whether a U.S. issuer's market capitalization is medium is
determined by reference to the capitalization for all issuers whose equity
securities are listed on a United States national securities exchange or which
are reported on NASDAQ. Issuers with market capitalizations within the range of
capitalization of companies included in the S&P Mid Cap 400 Index may be
regarded as being issuers with medium market capitalizations. Such investments
share some of the risk characteristics of investments in stocks of companies
with small market capitalizations described above, although such companies tend
to have longer operating histories, broader product lines and greater financial
resources, and their stocks tend to be more liquid and less volatile than those
of smaller capitalization issuers.
Repurchase Agreements
For the purposes of maintaining liquidity and achieving income, each Fund may
enter into repurchase agreements, which entail the purchase of a portfolio-
eligible security from a bank or broker-dealer that agrees to repurchase the
security at the Fund's cost plus interest within a specified time (normally one
day). If the party agreeing to repurchase should default, as a result of
bankruptcy or otherwise, the Fund will seek to sell the securities which it
holds, which action could involve procedural costs or delays in addition to a
loss on the securities if their value should fall below their repurchase price.
Those Funds whose investment objectives do not include the earning of income
will invest in repurchase agreements only as a cash management technique with
respect to that portion of the portfolio maintained in cash. Each Fund will
limit its investment in repurchase agreements maturing in more than seven days
consistent with the Fund's policy on investment in illiquid securities.
Reverse Repurchase Agreements and Other Borrowings
A reverse repurchase agreement may for some purposes be considered borrowing
that involves the sale of a security by a Fund and its agreement to repurchase
the instrument at a specified time and price. The Fund will segregate assets
determined to be liquid by the Adviser or a Sub-Adviser in accordance with
procedures established by the Board of Trustees to cover its obligations under
reverse repurchase agreements. Reverse repurchase agreements will be subject to
the Funds' limitations on borrowings. A Fund also may borrow money for
investment purposes subject to
36 PIMCO Funds: Multi-Manager Series
<PAGE>
any policies of the Fund currently described in this Prospectus or in the
Statement of Additional Information. Such a practice will result in leveraging
of a Fund's assets. Leverage will tend to exaggerate the effect on net asset
value of any increase or decrease in the value of a Fund's portfolio and may
cause a Fund to liquidate portfolio positions when it would not be advantageous
to do so.
Loans of Portfolio Securities
For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions, provided:
(i) the loan is secured continuously by collateral consisting of U.S.
Government securities, cash or cash equivalents (negotiable
certificates of deposit, bankers' acceptances or letters of credit)
maintained on a daily mark-to-market basis in an amount at least equal
to the current market value of the securities loaned;
(ii) the Fund may at any time call the loan and obtain the return of the
securities loaned;
(iii) the Fund will receive any interest or dividends paid on the loaned
securities; and
(iv) the aggregate market value of securities loaned will not at any time
exceed the Fund's limitation on lending its portfolio securities.
Each Fund's performance will continue to reflect changes in the value of the
securities loaned and will also reflect the receipt of either interest, through
investment of cash collateral by the Fund in permissible investments, or a fee,
if the collateral is U.S. Government securities. Securities lending involves
the risk of loss of rights in the collateral or delay in recovery of the
collateral should the borrower fail to return the security loaned or become
insolvent. The Funds may pay lending fees to the party arranging the loan.
Foreign Securities
The International, International Growth, Structured Emerging Markets, and
Tax-Efficient Structured Emerging Markets Funds may invest directly in foreign
equity securities; U.S. dollar- or foreign currency-denominated foreign
corporate debt securities; foreign preferred securities; certificates of
deposit, fixed time 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, Renaissance, Growth, Target, Opportunity, and
Innovation Funds may invest up to 15% of their respective net assets in
securities which are traded principally in securities markets outside the
United States (Eurodollar certificates of deposit are excluded for purposes of
these limitations). The Renaissance, Growth, Target, Opportunity, and
Innovation Funds may invest without limit in securities of foreign issuers that
are traded in U.S. markets. The Enhanced Equity Fund may invest in common stock
of foreign issuers if included in the index from which stocks are selected. The
Balanced Fund may invest up to 20% of its Fixed Income Securities Segment in
securities denominated in foreign currencies, and may invest beyond this limit
in U.S. dollar-denominated securities of foreign issuers.
All of the Funds may invest in ADRs. In addition, the International, Core
Equity, Mid-Cap Equity, International Growth, Renaissance, Growth, Target,
Opportunity, Innovation, Structured Emerging Markets, and Tax-Efficient
Structured Emerging Markets Funds may invest in EDRs and GDRs. ADRs are dollar-
denominated receipts issued generally by domestic banks and representing the
deposit with the bank of a security of a foreign issuer, and are publicly
traded on exchanges or over-the-counter in the United States. EDRs are receipts
similar to ADRs and are issued and traded in Europe. GDRs may be offered
privately in the United States and also trade in public or private markets in
other countries.
Prospectus 37
<PAGE>
Investing in the securities of issuers in any foreign country involves
special risks and considerations not typically associated with investing in
U.S. companies. Shareholders should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations. These risks include: differences in accounting, auditing and
financial reporting standards; generally higher commission rates on foreign
portfolio transactions; the possibility of nationalization, expropriation or
confiscatory taxation; adverse changes in investment or exchange control
regulations (which may include suspension of the ability to transfer currency
from a country); and political instability which could affect U.S. investments
in foreign countries. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product, rate of inflation, capital reinvestment, resources, self-sufficiency,
and balance of payments position. The securities markets, values of
securities, yields, and risks associated with securities markets may change
independently of each other. Additionally, foreign securities and dividends
and interest payable on those securities may be subject to foreign taxes,
including taxes withheld from payments on those securities. Foreign securities
often trade with less frequency and volume than domestic securities and
therefore may exhibit greater price volatility. Additional costs associated
with an investment in foreign securities may include higher custodial fees
than apply to domestic custodial arrangements and transaction costs of foreign
currency conversions. Changes in foreign exchange rates also will affect the
value of securities denominated or quoted in currencies other than the U.S.
dollar.
A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income
and its taxable income. This difference may cause a portion of the Fund's
income distributions to constitute returns of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for federal tax purposes.
Certain of the Funds and, in particular, the Structured Emerging Markets and
Tax-Efficient Structured Emerging Markets Funds, may invest in the securities
of issuers based in countries with developing economies. Investing in
developing (or "emerging market") countries involves certain risks not
typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. A number of emerging market countries restrict, to varying degrees,
foreign investment in securities. Repatriation of investment income, capital,
and the proceeds of sales by foreign investors may require governmental
registration and/or approval in some emerging market countries. A number of
the currencies of emerging market countries have experienced significant
declines against the U.S. dollar in recent years, and devaluation may occur
subsequent to investments in these currencies by a Fund. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative
effects on the economies and securities markets of certain emerging market
countries. Many of the emerging securities markets are relatively small, have
low trading volumes, suffer periods of relative illiquidity, and are
characterized by significant price volatility. There is a risk in emerging
market countries that a future economic or political crisis could lead to
price controls, forced mergers of companies, expropriation or confiscatory
taxation, seizure, nationalization, or creation of government monopolies, any
of which may have a detrimental effect on a Fund's investment.
Additional risks of investing in emerging market countries may include:
currency exchange rate fluctuations; greater social, economic and political
uncertainty and instability (including the risk of war); more substantial
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets;
unavailability of currency hedging techniques in certain emerging market
countries; the fact that companies in emerging market countries may be newly
organized and may be smaller and less seasoned companies; the difference in,
or lack of, auditing and financial reporting standards, which may result in
unavailability of
38 PIMCO Funds: Multi-Manager Series
<PAGE>
material information about issuers; the risk that it may be more difficult to
obtain and/or enforce a judgment in a court outside the United States; and
significantly smaller market capitalization of securities markets. Also, any
change in the leadership or politics of emerging market countries, or the
countries that exercise a significant influence over those countries, may halt
the expansion of or reverse the liberalization of foreign investment policies
now occurring and adversely affect existing investment opportunities.
In addition, emerging securities markets may have different clearance and
settlement procedures, which may be unable to keep pace with the volume of
securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause a Fund to miss attractive
investment opportunities, hold a portion of its assets in cash pending
investment, or delay in disposing of a portfolio security. Such a delay could
result in possible liability to a purchaser of the security.
Special Risks of Investing in Russian and Other Eastern European Securities
The International, International Growth, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds may invest a portion of their
assets in securities of issuers located in Russia and in other Eastern European
countries. While investments in securities of such issuers are subject
generally to the same risks associated with investments in other emerging
market countries described above, the political, legal and operational risks of
investing in Russian and other Eastern European issuers, and of having assets
custodied within these countries, may be particularly acute. A risk of
particular note with respect to direct investment in Russian securities is the
way in which ownership of shares of companies is normally recorded. When a Fund
invests in a Russian issuer, it will normally receive a "share extract," but
that extract is not legally determinative of ownership. The official record of
ownership of a company's share is maintained by the company's share registrar.
Such share registrars are completely under the control of the issuer, and
investors are provided with few legal rights against such registrars. Please
refer to "Investment Objectives and Policies--Foreign Securities" in the
Statement of Additional Information for a more complete description of these
and other risks associated with investments in securities of Russian and other
Eastern European issuers.
Foreign Currency Transactions
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention (or the failure to
intervene) by U.S. or foreign governments or central banks, or by currency
controls or political developments in the U.S. or abroad. For example,
significant uncertainty surrounds the 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. These and other
currencies in which the Funds' assets are denominated may be devalued against
the U.S. dollar, resulting in a loss to the Funds. For a more complete
discussion of foreign currency risks (including those associated with the
euro), please see "Investment Objectives and Policies--Foreign Currencies" in
the Statement of Additional Information.
The International, Core Equity, Mid-Cap Equity, International Growth,
Renaissance, Growth, Target, Opportunity, Innovation, Structured Emerging
Markets, Tax-Efficient Structured Emerging Markets, and Balanced Funds may
enter into forward foreign currency exchange contracts to reduce the risks of
adverse changes in foreign exchange rates. In addition, the International,
International Growth, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, and Balanced Funds may buy and sell foreign currency futures
contracts and options on foreign currencies and foreign
Prospectus 39
<PAGE>
currency futures. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. By entering into a forward
foreign currency exchange contract, the Fund "locks in" the exchange rate
between the currency it will deliver and the currency it will receive for the
duration of the contract. As a result, a Fund reduces its exposure to changes
in the value of the currency it will deliver and increases its exposure to
changes in the value of the currency it will exchange into. The effect on the
value of a Fund is similar to selling securities denominated in one currency
and purchasing securities denominated in another. Contracts to sell foreign
currency would limit any potential gain which might be realized by a Fund if
the value of the hedged currency increases. A Fund may enter into these
contracts for the purpose of hedging against foreign exchange risk arising from
the Fund's investment or anticipated investment in securities denominated in
foreign currencies. Suitable hedging transactions may not be available in all
circumstances and there can be no assurance that a Fund will engage in such
transactions at any given time or from time to time. Also, such transactions
may not be successful and may eliminate any chance for a Fund to benefit from
favorable fluctuations in relevant foreign currencies. The International,
International Growth, Structured Emerging Markets, and Tax-Efficient Structured
Emerging Markets Funds also may enter into these contracts for purposes of
increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another. To the extent that they do
so, the 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. These Funds may use one
currency (or a basket of currencies) to hedge against adverse changes in the
value of another currency (or a basket of currencies) when exchange rates
between the two currencies are positively correlated. Each Fund will segregate
assets determined to be liquid by the Adviser or a 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.
High Yield Securities ("Junk Bonds")
The Renaissance, Growth, and Balanced Funds may invest a portion of their
assets in fixed income securities rated lower than Baa by Moody's or lower than
BBB by S&P but rated at least B by Moody's or S&P or, if not rated, determined
by the Sub-Adviser to be of comparable quality. In addition, the Renaissance
Fund may invest in convertible securities rated below B by Moody's or S&P (or,
if unrated, considered by the Sub-Adviser to be of comparable quality).
Securities rated lower than Baa by Moody's or lower than BBB by S&P are
sometimes referred to as "high yield" or "junk" bonds. Investors should
consider the risks associated with high yield securities before investing in
these Funds. Although each of the Renaissance and Growth Funds reserves the
right to do so at any time, as of the date of this Prospectus, neither Fund
invests nor has the present intention to invest more than 5% of its assets in
high yield securities or junk bonds.
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
40 PIMCO Funds: Multi-Manager Series
<PAGE>
higher quality securities. High yield securities may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
higher grade securities.
For additional discussion of the characteristics of lower rated fixed income
securities, see the Statement of Additional Information. Ratings assigned to
fixed income securities are described in the Appendix to the Statement of
Additional Information.
Derivative Instruments
To the extent permitted by the investment objective and policies of each
Fund, a Fund may purchase and write call and put options on securities,
securities indexes and foreign currencies, and enter into futures contracts and
use options on futures contracts as further described below. In pursuit of
their investment objectives, the International, Core Equity, Mid-Cap Equity,
International Growth, Renaissance, Growth, Target, Opportunity, Innovation,
Tax-Efficient Equity, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, and Balanced Funds may engage in the purchase and writing of
call and put options on securities and enter into futures contracts and options
thereon; each of these Funds, along with the Enhanced Equity Fund, may engage
in the purchase and writing of options on securities indexes and enter into
securities index futures contracts and options thereon. The Funds that may
invest in foreign currency denominated securities may engage in the purchase
and writing of call and put options on foreign currencies. The Tax-Efficient
Equity, Structured Emerging Markets, Tax-Efficient Structured Emerging Markets,
and Balanced Funds also may enter into swap agreements with respect to
securities indexes. The Balanced Fund may also enter into swap agreements with
respect to foreign currencies and interest rates. The Funds may (but are not
required to) use these techniques to hedge against changes in interest rates,
foreign currency exchange rates or securities prices; and for the
International, International Growth, Structured Emerging Markets, and Tax-
Efficient Structured Emerging Markets Funds, to increase exposure to a foreign
currency, to shift exposure to foreign currency fluctuations from one country
to another, or as part of their overall investment strategies. Each 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 (or, as
permitted by applicable regulation, enter into certain offsetting positions) to
cover its obligations under options, futures, and swaps to limit leveraging of
the Fund.
Derivative instruments are considered for these purposes to consist of
securities or other instruments whose value is derived from or related to the
value of some other instrument or asset, and not to include those securities
whose payment of principal and/or interest depends upon cash flows from
underlying assets, such as mortgage-related or asset-backed securities. See
"Mortgage-Related and Other Asset-Backed Securities." The value of some
derivative instruments in which the Funds may invest may be particularly
sensitive to changes in prevailing interest rates, and, like the other
investments of the Funds, the ability of a Fund to successfully utilize these
instruments may depend in part upon the ability of the 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
the risk of loss.
The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If the Sub-Adviser
incorrectly forecasts interest rates, market values or other economic factors
in utilizing a derivatives strategy for a Fund, the Fund might have been in a
better position if it had not entered into the transaction at all. Also,
suitable derivative transactions may not be available in all circumstances. The
use of these strategies involves certain special risks, including a possible
imperfect correlation, or even no correlation, between price movements of
derivative instruments and price movements of related investments. While some
strategies
Prospectus 41
<PAGE>
involving derivative instruments can reduce the risk of loss, they can also
reduce the opportunity for gain or even result in losses by offsetting
favorable price movements in related investments or otherwise, due to the
possible inability of a Fund to purchase or sell a portfolio security at a
time that otherwise would be favorable or the possible need to sell a
portfolio security at a disadvantageous time because the Fund is required to
maintain asset coverage or offsetting positions in connection with
transactions in derivative instruments, and the possible inability of a Fund
to close out or to liquidate its derivatives positions. In addition, a Fund's
use of such instruments may cause the Fund to realize higher amounts of short-
term capital gains (generally taxed to shareholders at ordinary income tax
rates) than if the Fund had not used such instruments.
Options on Securities, Securities Indexes, and Currencies Certain Funds may
purchase put options on securities. One purpose of purchasing put options is
to protect holdings in an underlying or related security against a substantial
decline in market value. These Funds may also purchase call options on
securities. One purpose of purchasing call options is to protect against
substantial increases in prices of securities the Fund intends to purchase
pending its ability to invest in such securities in an orderly manner. A Fund
may sell put or call options it has previously purchased, which could result
in a net gain or loss depending on whether the amount realized on the sale is
more or less than the premium and other transaction costs paid on the put or
call option which is sold. A Fund may write a call or put option only if the
option is "covered" by the Fund holding a position in the underlying
securities or by other means which would permit immediate satisfaction of the
Fund's obligation as writer of the option. Prior to exercise or expiration, an
option may be closed out by an offsetting purchase or sale of an option of the
same series.
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying security above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver the underlying security at the exercise
price. If a put or call option purchased by the Fund is not sold when it has
remaining value, and if the market price of the underlying security remains
equal to or greater than the exercise price (in the case of a put), or remains
less than or equal to the exercise price (in the case of a call), the Fund
will lose its entire investment in the option. Also, where a put or call
option on a particular security is purchased to hedge against price movements
in a related security, the price of the put or call option may move more or
less than the price of the related security. There can be no assurance that a
liquid market will exist when a Fund seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position.
For each of the International, 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.
The International, Core Equity, Mid-Cap Equity, International Growth,
Structured Emerging Markets, Tax-Efficient Structured Emerging Markets, and
Balanced Funds may buy or sell put and call options on foreign currencies as a
hedge against changes in the value of the U.S. dollar (or another currency) in
relation to a foreign currency in which a Fund's securities may be
denominated. Currency options traded on U.S. or other exchanges may be subject
to position limits which may limit the ability of a Fund to reduce foreign
currency risk using such options.
42 PIMCO Funds: Multi-Manager Series
<PAGE>
Over-the-counter options in which certain Funds may invest differ from traded
options in that they are two-party contracts, with price and other terms
negotiated between buyer and seller, and generally do not have as much market
liquidity as exchange-traded options. The Funds may be required to treat as
illiquid over-the-counter options purchased and securities being used to cover
certain written over-the-counter options.
Swap Agreements The Tax-Efficient Equity, Structured Emerging Markets, and
Tax-Efficient Structured Emerging Markets Funds may enter into equity index
swap agreements for purposes of gaining exposure to the stocks making up an
index of securities without actually purchasing those stocks. The Balanced Fund
may enter into swap agreements to hedge against changes in interest rates,
foreign currency exchange rates or securities prices. Swap agreements are two-
party contracts entered into primarily by institutional investors for periods
ranging from a few weeks to more than one year. In a standard swap transaction,
two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular predetermined investments or instruments,
which may be adjusted for an interest factor. The gross returns to be exchanged
or "swapped" between the parties are generally calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, or in a "basket" of
securities representing a particular index.
Most swap agreements entered into by the Funds calculate the obligations of
the parties to the agreement on a "net basis." Consequently, a Fund's current
obligations (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
values of the positions held by each party to the agreement (the "net amount").
A Fund's current obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund), and any accrued but unpaid net
amounts owed to a swap counterparty will be covered by the segregation of
assets determined to be liquid by the Sub-Adviser in accordance with procedures
established by the Board of Trustees to limit any potential leveraging of the
Fund's portfolio. Obligations under swap agreements so covered will not be
construed to be "senior securities" for purposes of a Fund's investment
restriction concerning senior securities. A Fund will not enter into a swap
agreement with any single party if the net amount owed or to be received under
existing contracts with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the 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 investments. Moreover, a Fund bears the risk of loss
of the amount expected to be received under a swap agreement in the event of
the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain standards
for creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
The swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect a Fund's ability to terminate existing swap
agreements or to realize amounts to be received under such agreements.
Futures Contracts and Options on Futures Contracts Certain Funds may enter
into futures contracts and options thereon. The Balanced Fund may invest in
interest rate futures contracts and options thereon. The International, Core
Equity, Mid-Cap Equity, International Growth, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Balanced Funds may invest in foreign
exchange futures contracts and options thereon ("futures options") that are
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system. These Funds may engage in such futures
transactions as an adjunct to their securities activities.
Prospectus 43
<PAGE>
There are several risks associated with the use of futures and futures
options for hedging purposes. There can be no guarantee that there will be a
correlation between price movements in the hedging vehicle and in the portfolio
securities being hedged. An incorrect correlation could result in a loss on
both the hedged securities in a Fund and the hedging vehicle, so that the
portfolio return might have been greater had hedging not been attempted. There
can be no assurance that a liquid market will exist at a time when a Fund seeks
to close out a futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent a Fund from liquidating an unfavorable
position, and the Fund would remain obligated to meet margin requirements until
the position is closed.
Index Futures The International, Core Equity, Mid-Cap Equity, International
Growth, Renaissance, Growth, Target, Opportunity, Innovation, Enhanced Equity,
Tax-Efficient Equity, Structured Emerging Markets, Tax-Efficient Structured
Emerging Markets, and Balanced Funds may purchase and sell futures contracts on
various securities indexes ("Index Futures") and related options for hedging
purposes and for investment purposes. A Fund's purchase and sale of Index
Futures is limited to contracts and exchanges which have been approved by the
Commodity Futures Trading Commission ("CFTC").
Each of the 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.
A Fund may close open positions on the futures exchanges on which Index
Futures are traded at any time up to and including the expiration day. All
positions which remain open at the close of the last business day of the
contract's life are required to settle on the next business day (based upon the
value of the relevant index on the expiration day), with settlement made with
the appropriate clearing house. Because the specific procedures for trading
foreign stock Index Futures on futures exchanges are still under development,
additional or different margin requirements as well as settlement procedures
may be applicable to foreign stock Index Futures at the time a Fund purchases
such instruments.
Positions in Index Futures may be closed out by a Fund only on the futures
exchanges upon which the Index Futures are then traded. There can be no
assurance that a liquid market will exist for any particular contract at any
particular time. Also, the price of Index Futures may not correlate perfectly
with movement in the relevant index due to certain market distortions. First,
all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Second, the deposit requirements in the futures market are
less onerous than margin requirements in the securities market, and as a
result, the futures market may attract more speculators than does the
securities market. Increased participation by speculators in the futures market
may also cause temporary price distortions. In addition, trading hours
44 PIMCO Funds: Multi-Manager Series
<PAGE>
for foreign stock Index Futures may not correspond perfectly to hours of
trading on the foreign exchange to which a particular foreign stock Index
Future relates. This may result in a disparity between the price of Index
Futures and the value of the relevant index due to the lack of continuous
arbitrage between the Index Futures price and the value of the underlying
index.
The Funds may only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system. Each Fund may use
futures contracts and related options for "bona fide hedging" purposes, as such
term is defined in applicable regulations of the CFTC, or, with respect to
positions in futures and related options that do not qualify as "bona fide
hedging" positions, may enter such positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures option
positions, less the amount by which any such positions are "in-the-money,"
would not exceed 5% of the Fund's net assets.
Short Sales
Each Fund may from time to time make short sales involving securities held in
the Fund's portfolio or which the Fund has the right to acquire without the
payment of further consideration. For these purposes, a Fund may also hold or
have the right to acquire securities which, without the payment of any further
consideration, are convertible into or exchangeable for the securities sold
short. Short sales expose the Fund to the risk that it will be required to
acquire, convert or exchange securities to cover its short position at a time
when the securities sold short have appreciated in value, thus resulting in a
loss to the Fund.
When-Issued, Delayed Delivery and Forward Commitment Transactions
Each Fund may purchase securities which it is eligible to purchase on a when-
issued basis, may purchase and sell such securities for delayed delivery and
may make contracts to purchase securities for a fixed price at a future date
beyond normal settlement time (forward commitments). When-issued transactions,
delayed delivery purchases and forward commitments involve a risk of loss if
the value of the securities declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Fund's other assets.
Typically, no income accrues on securities a Fund has committed to purchase
prior to the time delivery of the securities is made, although a Fund may earn
income on securities it has segregated.
Mortgage-Related and Other Asset-Backed Securities
All Funds that may purchase debt securities for investment purposes (and in
particular the Balanced Fund) may invest in mortgage-related securities, and in
other asset-backed securities (unrelated to mortgage loans) that are offered to
investors currently or in the future. The value of some mortgage-related or
asset-backed securities in which the Funds invest may be particularly sensitive
to changes in prevailing interest rates, and, like other fixed income
investments, the ability of a Fund to successfully utilize these instruments
may depend in part upon the ability of the Sub-Adviser to forecast interest
rates and other economic factors correctly.
Mortgage Pass-Through Securities are securities representing interests in
"pools" of mortgage loans secured by residential or commercial real property in
which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities). Early repayment of
principal on some mortgage-related securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return
Prospectus 45
<PAGE>
upon reinvestment of principal. Also, if a security subject to prepayment has
been purchased at a premium, the value of the premium would be lost in the
event of prepayment. Like other fixed income securities, when interest rates
rise, the value of a mortgage-related security generally will decline;
however, when interest rates are declining, the value of mortgage-related
securities with prepayment features may not increase as much as other fixed
income securities. The rate of prepayments on underlying mortgages will affect
the price and volatility of a mortgage-related security, and may have the
effect of shortening or extending the effective maturity of the security
beyond what was anticipated at the time of purchase. To the extent that
unanticipated rates of prepayment on underlying mortgages increase the
effective maturity of a mortgage-related security, the volatility of such
security can be expected to increase.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the full faith and credit of the U.S. Government (in the case of securities
guaranteed by the Government National Mortgage Association ("GNMA")); or
guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to
purchase the agency's obligations). Mortgage-related securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.
Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, on a monthly basis. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are
structured into multiple classes, with each class bearing a different stated
maturity. Monthly payments of principal, including prepayments, are first
returned to investors holding the shortest maturity class; investors holding
the longer maturity classes receive principal only after the first class has
been retired. CMOs that are issued or guaranteed by the U.S. Government or by
any of its agencies or instrumentalities will be considered U.S. Government
securities by a Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other privately issued
securities for purposes of applying a Fund's diversification tests.
Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property.
The market for commercial mortgage-backed securities developed more recently
and in terms of total outstanding principal amount of issues is relatively
small compared to the market for residential single-family mortgage-backed
securities. Many of the risks of investing in commercial mortgage-backed
securities reflect the risks of investing in the real estate securing the
underlying mortgage loans. These risks reflect the effects of local and other
economic conditions on real estate markets, the ability of tenants to make
loan payments, and the ability of a property to attract and retain tenants.
Commercial mortgage-backed securities may be less liquid and exhibit greater
price volatility than other types of mortgage-related or asset-backed
securities.
Mortgage-Related Securities include securities other than those described
above that directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, such as CMO residuals or
stripped mortgage-backed securities ("SMBS"), and may be structured in classes
with rights to receive varying proportions of principal and interest.
46 PIMCO Funds: Multi-Manager Series
<PAGE>
A common type of SMBS will have one class receiving some of the interest and
most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only, or
"IO" class), while the other class will receive all of the principal (the
principal-only, or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on a Fund's yield to maturity from
these securities. For a discussion of the characteristics of some of these
instruments, see the Statement of Additional Information.
Convertible Securities
Many of the Funds may invest in convertible securities. Convertible
securities are generally preferred stocks or fixed income securities that are
convertible into common stock at either a stated price or a stated rate. The
price of the convertible security will normally vary in some proportion to
changes in the price of the underlying common stock because of this conversion
feature. A convertible security will normally also provide a fixed income
stream. For this reason, the convertible security may not decline in price as
rapidly as the underlying common stock.
A Fund's 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.
Investment in Investment Companies
The International and International Growth Funds may each invest up to 10% of
its assets in securities of other investment companies, such as closed-end
management investment companies, or in pooled accounts or other investment
vehicles which invest in foreign markets. Each of the other Funds may invest up
to 5% of its assets in other investment companies. As a shareholder of an
investment company, these Funds may indirectly bear service and other fees
which are in addition to the fees the Funds pay their service providers.
Credit and Market Risk of Fixed Income Securities
All fixed income securities are subject to market risk and credit risk.
Market risk relates to market-induced changes in a security's value, usually as
a result of changes in interest rates. The value of a Fund's investments in
fixed income securities will change as the general level of interest rates
fluctuate. During periods of falling interest rates, the value of a Fund's
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the value of a
Prospectus 47
<PAGE>
Fund's fixed income securities generally decline. Credit risk relates to the
ability of the issuer to make payments of principal and interest.
Money Market Instruments
Each of the Funds may invest at least a portion of its assets in the
following kinds of money market instruments:
(1) short-term U.S. Government securities;
(2) certificates of deposit, bankers' acceptances and other bank
obligations rated in the two highest rating categories by at least
two NRSROs, or, if rated by only one NRSRO, in such agency's two
highest grades, or, if unrated, determined to be of comparable
quality by the Adviser or a 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.
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).
48 PIMCO Funds: Multi-Manager Series
<PAGE>
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, that could have an adverse impact on the Funds'
operations and services provided to shareholders. The Adviser, Distributor,
Shareholder Servicing and Transfer Agent, Custodian, and certain other service
providers to the Funds have reported that each is working toward mitigating the
risks associated with the so-called "year 2000 problem." However, there can be
no assurance that the problem will be corrected in all respects and that the
Funds' operations and services provided to shareholders will not be adversely
affected, nor can there be any assurance that the year 2000 problem will not
have an adverse effect on the entities whose securities are held by the Funds
or on domestic or global equity markets or economies, generally.
"Fundamental" Policies
The investment objective of each of the International, International Growth,
Value 25, Renaissance, Growth, Target, Opportunity, Innovation, 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 by vote of a majority of the
outstanding shares of that Fund. If there is a change in a Fund's investment
objective, including a change approved by shareholder vote, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs.
MANAGEMENT OF THE TRUST
The business affairs of the Trust are managed under the direction of the
Board of Trustees. Information about the Trustees and the Trust's executive
officers may be found in the Statement of Additional Information under the
heading "Management of the Trust."
Investment Adviser
PIMCO Advisors serves as investment adviser to the Funds pursuant to an
investment advisory agreement with the Trust. PIMCO Advisors is a Delaware
limited partnership organized in 1987. PIMCO Advisors provides investment
management and advisory services to private accounts of institutional and
individual clients and to mutual funds. Total assets under management by PIMCO
Advisors and its subsidiary partnerships as of March 31, 1999 were
approximately $248.7 billion.
The general partners of PIMCO Advisors are PIMCO Partners, G.P. and PIMCO
Advisors Holdings L.P. ("PAH"). PIMCO Partners, G.P. is a general partnership
between PIMCO Holding LLC, a Delaware limited liability company and an indirect
wholly-owned subsidiary of Pacific Life Insurance Company, and PIMCO Partners
LLC, a California limited liability company controlled by the current Managing
Directors and two former Managing Directors of Pacific Investment Management.
PIMCO Partners, G.P. is the sole general partner of PAH. PIMCO Advisors is
governed by a Management Board, which exercises substantially all of the
governance powers of the general partner and serves as the functional
equivalent of a board of directors.
PIMCO Advisors' address is 800 Newport Center Drive, Newport Beach,
California 92660. PIMCO Advisors is registered as an investment adviser with
the SEC. PIMCO Advisors currently has six subsidiary investment adviser
Prospectus 49
<PAGE>
partnerships, the following five of which manage one or more of the Funds:
Cadence, Columbus Circle, NFJ, Pacific Investment Management, and Parametric.
Under the investment advisory agreement, PIMCO Advisors, subject to the
supervision of the Board of Trustees, is responsible for providing advice and
guidance with respect to the Funds and for managing, either directly or through
others selected by PIMCO Advisors, the investment of the Funds. PIMCO Advisors
also furnishes to the Board of Trustees periodic reports on the investment
performance of each Fund.
Sub-Advisers
Pursuant to portfolio management agreements, PIMCO Advisors employs separate
firms to serve as Sub-Advisers for the Funds, except that the PIMCO Equity
Advisors division of PIMCO Advisors (also referred to as a "Sub-Adviser")
manages the Renaissance, Growth, Target, Opportunity, and Innovation Funds.
Each such firm is an affiliate of PIMCO Advisors except for Blairlogie, which
serves as Sub-Adviser for the International Fund. Blairlogie is a former
affiliate of PIMCO Advisors. See "Blairlogie" below. PIMCO Advisors (and not
the Funds or the Trust) compensates the Sub-Advisers it retains from its
advisory fee. Each Sub-Adviser has full investment discretion and makes all
determinations with respect to the investment of a Fund's assets, or, for the
Balanced Fund, with respect to the portion of the Fund's assets allocated to
the Sub-Adviser for investment, and makes all determinations respecting the
purchase and sale of a Fund's securities and other investments. If a separate
firm ceases to serve as Sub-Adviser for 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.
Blairlogie manages the International Fund. Blairlogie is an investment
management firm organized as a limited partnership under the laws of the United
Kingdom. Blairlogie Capital Management Ltd., the predecessor investment adviser
to Blairlogie, commenced operations in 1992. Blairlogie is an indirect
majority-owned subsidiary of the Alleghany Corporation. Accounts managed by
Blairlogie had combined assets as of March 31, 1999 of approximately $900
million. Blairlogie's address is 4th Floor, 125 Princes Street, Edinburgh EH2
4AD, Scotland. Blairlogie is registered as an investment adviser with the SEC
in the United States and with the Investment Management Regulatory Organisation
("IMRO") in the United Kingdom.
James Smith is primarily responsible for the day-to-day management of the
Fund. Mr. Smith is a Managing Director and the Chief Investment Officer of
Blairlogie and is responsible for managing an investment team of six
professionals who, in turn, specialize in selection of stocks within Europe,
Asia, and the Americas, and in currency and derivatives. He previously served
as a Senior Portfolio Manager at Murray Johnstone in Glasgow, Scotland,
responsible for international investment management for North American clients,
and at Schroder Investment Management in London. Mr. Smith received his
bachelor's degree in Economics from London University and his MBA from
Edinburgh University. He is an Associate of the Institute of Investment
Management and Research.
On April 30, 1999, PIMCO Advisors sold all of its ownership interest in
Blairlogie to subsidiaries of the Alleghany Corporation (the "Blairlogie
Transaction"). In connection with the Blairlogie Transaction, the PIMCO
Emerging Markets and International Developed Funds, formerly series of the
Trust, transferred all of their assets and liabilities to newly formed series
of Alleghany Funds to be managed by Blairlogie. PIMCO Advisors retained
Blairlogie as the Sub-Adviser of the International Fund subsequent to the
Blairlogie Transaction pursuant to a new portfolio management agreement between
PIMCO Advisors and Blairlogie.
50 PIMCO Funds: Multi-Manager Series
<PAGE>
Cadence manages the Capital Appreciation, Mid-Cap Growth, Micro-Cap Growth,
and Small-Cap Growth Funds, as well as a portion of the Common Stock Segment of
the Balanced Fund (the "Cadence Funds"). Cadence is an investment management
firm organized as a general partnership. Cadence has two partners: PIMCO
Advisors as the supervisory partner, and Cadence Capital Management Inc. as the
managing partner. Cadence Capital Management Corporation, the predecessor
investment adviser to Cadence, commenced operations in 1988. Accounts managed
by Cadence had combined assets as of March 31, 1999 of approximately $7.0
billion. Cadence's address is Exchange Place, 53 State Street, Boston,
Massachusetts 02109. Cadence is registered as an investment adviser with the
SEC.
David B. Breed, William B. Bannick, Katherine A. Burdon, and Peter B. McManus
are primarily responsible for the day-to-day management of the Cadence Funds.
Mr. Breed is a Managing Director, the Chief Executive Officer, and a founding
partner of Cadence, and has 25 years' investment management experience. He has
been the driving force in developing the firm's growth-oriented stock screening
and selection process and has been with Cadence (or its predecessor) since its
inception. Mr. Breed graduated from the University of Massachusetts and
received his MBA from the Wharton School of Business. He is a Chartered
Financial Analyst. Mr. Bannick is a Managing Director and Executive Vice
President of Cadence and has 13 years' investment management experience. He
previously served as Executive Vice President of George D. Bjurman & Associates
and as Supervising Portfolio Manager of Trinity Investment Management
Corporation. Mr. Bannick joined the predecessor of Cadence in 1992. He
graduated from the University of Massachusetts and received his MBA from Boston
University. Mr. Bannick is a Chartered Financial Analyst. Ms. Burdon is a
Managing Director and Portfolio Manager of Cadence and has 10 years' investment
management experience. She previously served as a Vice President and Portfolio
Manager of The Boston Company. Ms. Burdon joined the predecessor of Cadence in
1993. She graduated from Stanford University and received a Master of Science
degree from Northeastern University. Ms. Burdon is a Chartered Financial
Analyst and Certified Public Accountant. Mr. McManus is Director of Fund
Management of Cadence and has 21 years' investment management experience. He
previously served as a Vice President of Bank of Boston. Mr. McManus joined
Cadence in 1994. He graduated from the University of Massachusetts, and he is
certified as a Financial Planner.
Columbus Circle manages the Core Equity, Mid-Cap Equity, and International
Growth Funds (the "Columbus Circle Funds"). Columbus Circle is an investment
management firm organized as a general partnership. Columbus Circle has two
partners: PIMCO Advisors as the supervisory partner, and Columbus Circle
Investors Management Inc. as the managing partner. The predecessors of Columbus
Circle, including the Columbus Circle Investors Division of Thomson Advisory
Group L.P. ("TAG"), commenced operations in 1975. Accounts managed by Columbus
Circle had combined assets as of March 31, 1999 of approximately $5.1 billion.
Columbus Circle's address is Metro Center, One Station Place, 8th Floor,
Stamford, Connecticut 06902. Columbus Circle is registered as an investment
adviser with the SEC.
At the center of Columbus Circle's equity investment strategy is its theory
of Positive Momentum & Positive Surprise. This theory asserts that a good
company doing better than generally expected will experience a rise in its
stock price. And, conversely, a company falling short of expectations will
experience a drop in its stock price. Based on this theory, Columbus Circle
attempts to manage the Columbus Circle Funds with a view to investing in
growing companies that are surprising the market with business results that are
better than anticipated.
Investment decisions made by Columbus Circle are generally made by one or
more committees, although the following individuals have primary responsibility
for the noted Columbus Circle Funds. Clifford G. Fox is primarily responsible
for the day-to-day management of the International Growth Fund. Mr. Fox, a
Managing Director of Columbus Circle, has 17 years of investment management
experience. He received his bachelor's degree from the
Prospectus 51
<PAGE>
University of Pennsylvania and his MBA from New York University, and he is a
Chartered Financial Analyst. Anthony Rizza is primarily responsible for the
day-to-day management of the Core Equity Fund. Mr. Rizza, a Managing Director
of Columbus Circle, has 12 years of investment management experience. He
received his bachelor's degree from the University of Connecticut, and he is a
Chartered Financial Analyst. Amy H. Hogan is primarily responsible for the day-
to-day management of the Mid-Cap Equity Fund. Ms. Hogan, a Managing Director of
Columbus Circle, has 13 years of investment management experience. She received
her bachelor's degree and MBA from the University of Wisconsin, and she is a
Chartered Financial Analyst.
NFJ manages the Equity Income, Value, Value 25, and Small-Cap Value Funds, as
well as a portion of the Common Stock Segment of the Balanced Fund. NFJ is an
investment management firm organized as a general partnership. NFJ has two
partners: PIMCO Advisors as the supervisory partner, and NFJ Management Inc. as
the managing partner. NFJ Investment Group, Inc., the predecessor investment
adviser to NFJ, commenced operations in 1989. Accounts managed by NFJ had
combined assets as of March 31, 1999 of approximately $2.3 billion. NFJ's
address is 2121 San Jacinto, Suite 1840, Dallas, Texas 75201. NFJ is registered
as an investment adviser with the SEC.
Chris Najork and Benjamin Fischer are responsible for the day-to-day
management of the Equity Income Fund, and the portion of the Common Stock
Segment of the Balanced Fund allocated to NFJ. Mr. Najork is a Managing
Director and a founding partner of NFJ and has 30 years' experience
encompassing equity research and portfolio management. He received his
bachelor's degree and MBA from Southern Methodist University, and he is a
Chartered Financial Analyst. Mr. Fischer is a Managing Director and a founding
partner of NFJ and has 32 years' experience encompassing equity research and
portfolio management. He received his bachelor's degree from Oklahoma
University and his MBA from the New York University Graduate School of
Business. He is a Chartered Financial Analyst. Messrs. Najork, Fischer and Paul
A. Magnuson are primarily responsible for the day-to-day management of the
Value Fund and the Small-Cap Value Fund. Mr. Magnuson, a research analyst at
NFJ, has 13 years' experience in equity research and portfolio management. He
received his bachelor's degree in Finance from the University of Nebraska-
Lincoln. Messrs. Najork, Fischer, and Cliff Hoover are primarily responsible
for the day-to-day management of the Value 25 Fund. Mr. Hoover is a principal
at NFJ and has 24 years' experience in portfolio management and banking. He
received his bachelor's degree and MBA from Texas Tech University. He is a
Chartered Financial Analyst.
Pacific Investment Management manages the Fixed Income Securities Segment of
the Balanced Fund. Pacific Investment Management is an investment management
firm organized as a general partnership. Pacific Investment Management has two
partners: PIMCO Advisors as the supervisory partner, and PIMCO Management, Inc.
as the managing partner. Pacific Investment Management Company, the predecessor
investment adviser to Pacific Investment Management, commenced operations in
1971. Pacific Investment Management had approximately $165.1 billion of assets
under management as of March 31, 1999. Pacific Investment Management's address
is 840 Newport Center Drive, Suite 300, Newport Beach, California 92660.
Pacific Investment Management is registered as an investment adviser with the
SEC and as a commodity trading advisor with the CFTC.
William H. Gross is responsible for the day-to-day management of the Fixed
Income Securities Segment of the Balanced Fund. Mr. Gross is a founder and a
Managing Director of Pacific Investment Management and has been associated with
Pacific Investment Management or its predecessor for more than 28 years. He has
extensive investment experience in both credit research and fixed income
portfolio management. He received his bachelor's degree from Duke University
and his MBA from UCLA Graduate School of Business. Mr. Gross is a Chartered
Financial Analyst and a member of The Los Angeles Society of Financial
Analysts.
52 PIMCO Funds: Multi-Manager Series
<PAGE>
PIMCO Equity Advisors manages the Renaissance, Growth, Target, Opportunity,
and Innovation Funds. PIMCO Equity Advisors is a division of PIMCO Advisors and
provides investment management and advisory services primarily to equity-
oriented mutual funds and other institutional clients. PIMCO Equity Advisors'
address is 33 Maiden Lane, New York, NY 10038. Additional information about
PIMCO Equity Advisors and PIMCO Advisors is provided above under "Investment
Adviser." Prior to March 5, 1999, Columbus Circle served as Sub-Adviser for the
Growth, Target, Opportunity, and Innovation Funds, and it served as Sub-Adviser
for the Renaissance Fund until May 7, 1999.
PIMCO Equity Advisors specializes in fundamental research that identifies
characteristics of wealth creating businesses. The primary investment style is
quality growth within various market capitalization ranges--small-cap, mid-cap,
and large-cap. PIMCO Equity Advisors seeks to identify quality growth companies
using proprietary research and the execution of a disciplined investment
process.
John K. Schneider has primary responsibility for the day-to-day portfolio
management of the Renaissance Fund. Mr. Schneider previously served as a
partner and Portfolio Manager of Schneider Capital Management. He has 13 years'
investment management experience. He graduated from Lehigh University and is a
Chartered Financial Analyst. Kenneth W. Corba, a Managing Director and Chief
Investment Officer of PIMCO Equity Advisors, is primarily responsible for the
day-to-day portfolio management of the Growth and Target Funds. Mr. Corba has
14 years' investment management experience. Mr. Corba was most recently Chief
Investment Officer of Eagle Asset Management, and prior to that he was a
principal and a Senior Vice President at Stein Roe and Farnham Inc. Mr. Corba
received his bachelor's degree and MBA from the University of Michigan. He is a
Chartered Financial Analyst. Michael F. Gaffney, a Managing Director of PIMCO
Equity Advisors, is primarily responsible for the day-to-day portfolio
management of the Opportunity Fund. He has 11 years' investment management
experience. Mr. Gaffney previously served as a Senior Vice President of
Alliance Capital Management L.P. He received his bachelor's degree from St.
John's University and his MBA from New York University. Dennis P. McKechnie, a
Portfolio Manager at PIMCO Equity Advisors, has primary responsibility for the
day-to-day portfolio management of the Innovation Fund. He previously shared
responsibility for the Fund as a Portfolio Manager at Columbus Circle. Mr.
McKechnie has 8 years' investment management experience. He received his
bachelor's degree from Purdue University and his MBA from Columbia University.
He is a Chartered Financial Analyst.
Parametric manages the Enhanced Equity, Structured Emerging Markets, Tax-
Efficient Structured Emerging Markets, and Tax-Efficient Equity Funds (the
"Parametric Funds"). Parametric is an investment management firm organized as a
general partnership. Parametric has two partners: PIMCO Advisors as the
supervisory partner, and Parametric Management Inc. as the managing partner.
Parametric Portfolio Associates, Inc., the predecessor investment adviser to
Parametric, commenced operations in 1987. Accounts managed by Parametric had
combined assets as of March 31, 1999 of approximately $3.5 billion.
Parametric's address is 7310 Columbia Center, 701 Fifth Avenue, Seattle,
Washington 98104-7090. Parametric is registered as an investment adviser with
the SEC and as a commodity trading advisor with the CFTC.
David Stein, Tom Seto, and Cliff Quisenberry are primarily responsible for
the day-to-day management of the Parametric Funds. Mr. Stein is a Managing
Director of Parametric and has been associated with Parametric since June,
1996. He also directs research and product development for Parametric. Mr.
Stein graduated with bachelor's and master's degrees in Applied Mathematics
from the University of Witwatersrand, South Africa, and received a Ph.D. in
Applied Mathematics from Harvard University. Prior to joining Parametric, Mr.
Stein served as the Director of Investment Research at GTE Investment
Management, Director of Active Equity Strategies at the Vanguard Group,
Prospectus 53
<PAGE>
and Director of Quantitative Portfolio Management and Research at IBM. Mr. Seto
is a Vice President of Parametric and has 7 years of experience in managing
structured equity portfolios. Prior to joining Parametric, he served as the
Head of U.S. Equity Index Investments at Barclays Global Investors. Mr. Seto
graduated from the University of Washington with a bachelor's degree in
Electrical Engineering, and from the University of Chicago with an MBA in
Finance. Mr. Quisenberry, a Vice President of Parametric, has 9 years'
experience as a Portfolio Manager and has been with Parametric since 1994. He
previously served as a Vice President and Portfolio Manager at Cutler & Co.,
and as a Security Analyst and Portfolio Manager at Fred Alger Management.
Mr. Quisenberry graduated from Yale University with a bachelor's degree in
Economics. He is a Chartered Financial Analyst.
Registration as an investment adviser with the SEC does not involve
supervision by the SEC over investment advice, and registration with the CFTC
as a commodity trading adviser does not involve supervision by the CFTC over
commodities trading. The portfolio management agreements are not exclusive, and
Blairlogie, Cadence, Columbus Circle, NFJ, Parametric, and Pacific Investment
Management may provide, and currently are providing, investment management
services to other clients, including other investment companies.
Fund Administrator
PIMCO Advisors also serves as administrator (the "Administrator") for the
Funds' Institutional Class and Administrative Class shares pursuant to an
administration agreement with the Trust. The Administrator provides or procures
administrative services for Institutional Class and Administrative Class
shareholders of the Funds, which include clerical help and accounting,
bookkeeping, internal audit services and certain other services required by the
Funds, and preparation of reports to the Funds' shareholders and regulatory
filings. The Administrator has retained Pacific Investment Management to
provide such services as sub-administrator. The Administrator and/or the sub-
administrator may also retain other affiliates to provide certain of these
services. In addition, the Administrator, at its own expense, arranges for the
provision of legal, audit, custody, transfer agency (including sub-transfer
agency and other administrative services) and other services necessary for the
ordinary operation of the Funds, and is responsible for the costs of
registration of the Trust's shares and the printing of prospectuses and
shareholder reports for current shareholders.
The Funds (and not the Administrator) are responsible for the following
expenses: (i) salaries and other compensation of any of the Trust's executive
officers and employees who are not officers, directors, stockholders, or
employees of PIMCO Advisors, Pacific Investment Management, or their
subsidiaries or affiliates; (ii) taxes and governmental fees; (iii) brokerage
fees and commissions and other portfolio transaction expenses; (iv) the costs
of borrowing money, including interest expenses; (v) fees and expenses of the
Trustees who are not "interested persons" of the Adviser, any 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 principles; and (viii) any expenses allocated or allocable
to a specific class of shares, which include service and/or distribution fees
payable with respect to the Administrative Class shares, and may include
certain other expenses as permitted by the Trust's Multiple Class Plan adopted
pursuant to Rule 18f-3 under the Investment Company Act of 1940 (the "1940
Act"), subject to review and approval by the Trustees.
54 PIMCO Funds: Multi-Manager Series
<PAGE>
Advisory and Administrative Fees
The Funds feature fixed advisory and administrative fees. For providing or
arranging for the provision of investment advisory services to the Funds as
described above, PIMCO Advisors receives monthly fees from each Fund at an
annual rate based on the average daily net assets of the Fund as follows:
<TABLE>
<CAPTION>
Advisory
Fund Fee Rate
---- --------
<S> <C>
Capital Appreciation, Mid-Cap Growth, Equity Income, Value,
Enhanced Equity, Tax-Efficient Equity,
Structured Emerging Markets, Tax-Efficient Structured Emerging
Markets, and Balanced Funds....................................... .45%
Growth and Value 25 Funds.......................................... .50%
Target and International 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>
For providing or procuring administrative services for the Funds as
described above, the Administrator receives monthly fees from each Fund at an
annual rate based on the average daily net assets attributable in the
aggregate to the Fund's Institutional Class and Administrative Class shares as
follows:
<TABLE>
<CAPTION>
Administrative
Fund Fee Rate
---- --------------
<S> <C>
International, International Growth, Structured Emerging
Markets, and Tax-Efficient Structured Emerging Markets
Funds....................................................... .50%
All Other Funds.............................................. .25%
</TABLE>
The investment advisory, administration, and sub-administration agreements
for the Funds may be terminated by the Trustees, PIMCO Advisors or Pacific
Investment Management (as the case may be) on 60 days' written notice. In
addition, these agreements may be terminated with regard to the International,
Renaissance, Growth, Target, Opportunity, and Innovation Funds by a majority
of the Trustees that are not interested persons of the Trust, PIMCO Advisors,
or Pacific Investment Management (as the case may be), on 60 days' written
notice. Following their initial terms, the agreements will continue from year
to year if approved by the Trustees.
Pursuant to the portfolio management agreements between the Adviser and the
Sub-Advisers listed below, PIMCO Advisors (and not the Funds or the Trust)
pays each Sub-Adviser a fee based on a percentage of the average daily net
assets of the noted Funds as follows: Blairlogie--.40% for the International
Fund; Cadence--.35% for the Capital Appreciation Fund, .35% for the Mid-Cap
Growth Fund, .35% for the portion of the Common Stock Segment of the Balanced
Fund allocated to Cadence, .90% for the Small-Cap Growth Fund, and 1.15% for
the Micro-Cap Growth Fund; Columbus Circle--.47% for the Core Equity Fund,
.53% for the Mid-Cap Equity Fund, and .75% for the International Growth Fund;
NFJ--.35% for the Equity Income Fund, .35% for the Value Fund, .35% for the
portion of the Common Stock Segment of the Balanced Fund allocated to NFJ,
.40% for the Value 25 Fund, and .50% for the Small-Cap Value Fund; Pacific
Investment Management--.25% for the Fixed Income Securities Segment of the
Balanced Fund; and Parametric--.35% for the Enhanced Equity Fund, .35% for the
Tax-Efficient Equity Fund, .35% for the Structured Emerging Markets Fund, and
.35% for the Tax-Efficient Structured Emerging Markets Fund. PIMCO Advisors
does not retain a separate firm to serve as Sub-Adviser for the Renaissance,
Growth, Target, Opportunity, and Innovation Funds and retains all of the
advisory fees it earns from those Funds.
Prospectus 55
<PAGE>
Service and Distribution Fees
The Trust has adopted an Administrative Services Plan and a Distribution Plan
(the "Plans") with respect to the Administrative Class shares of each Fund
except for the Capital Appreciation and Small-Cap Growth Funds, for which the
Trust has adopted only an Administrative Services Plan. Under the terms of the
Plans, the Trust is permitted to reimburse, out of the Administrative Class
assets of each Fund, in an amount up to .25% on an annual basis of the average
daily net assets of that class, financial intermediaries that provide services
in connection with the distribution and marketing of shares and/or the
provision of certain shareholder services (in the case of the Distribution
Plan) or the administration of plans or programs that use Fund shares as their
funding medium (in the case of the Administrative Services Plan), and to
reimburse certain other related expenses. Total reimbursements under the Plans
may be paid in an amount up to .25% on an annual basis of the average daily net
assets attributable to the Administrative Class shares of each Fund. The same
entity may not receive both distribution and administrative services fees with
respect to the same assets but may with respect to separate assets receive fees
under each Plan. Fees paid pursuant to either Plan may be paid for shareholder
services and the maintenance of accounts, and therefore may constitute "service
fees" for purposes of applicable rules of the National Association of
Securities Dealers, Inc. Each Plan has been adopted in accordance with the
requirements of Rule 12b-1 under the 1940 Act and will be administered in
accordance with the provisions of that rule, except that shareholders will not
have the voting rights set forth in Rule 12b-1 with respect to the
Administrative Services Plan that they will have with respect to the
Distribution Plan. For more complete disclosure regarding the Plans and their
terms, see the Statement of Additional Information.
Institutional and Administrative Class shares of the Trust may also be
offered through certain brokers and financial intermediaries ("service agents")
that have established a shareholder servicing relationship with the Trust on
behalf of their customers. The Trust pays no compensation to such entities
other than service fees paid with respect to Administrative Class shares.
Service agents may impose additional or different conditions on the purchase or
redemption of Fund shares by their customers and may charge their customers
transaction or other account fees on the purchase and redemption of Fund
shares. Each service agent is responsible for transmitting to its customers a
schedule of any such fees and information regarding any additional or different
conditions regarding purchases and redemptions. Shareholders who are customers
of service agents should consult their service agents for information regarding
these fees and conditions.
Distributor
Shares of the Trust are distributed through PIMCO Funds Distributors LLC (the
"Distributor"), a wholly-owned subsidiary of PIMCO Advisors. The Distributor,
located at 2187 Atlantic Street, Stamford, Connecticut 06902, is a broker-
dealer registered with the SEC.
PURCHASE OF SHARES
With certain exceptions, each Fund may offer its shares in up to six classes:
Institutional Class, Administrative Class, Class A, Class B, Class C, and Class
D. This Prospectus relates only to the Institutional Class shares and
Administrative Class shares of the Funds. For information regarding Class A,
Class B, Class C, and Class D shares, see "Other Information--Multiple Classes
of Shares" below.
Shares of the Institutional Class are offered primarily for direct investment
by investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations, and high net worth individuals
56 PIMCO Funds: Multi-Manager Series
<PAGE>
(Institutional Class shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to their customers' investments in the Funds). Shares of the
Administrative Class are offered primarily through employee benefit plan
alliances, broker-dealers, and other intermediaries, and each Fund pays service
and/or distribution fees to such entities for services they provide to
shareholders of that class.
Except as described below under "Fund Reimbursement Fees," shares of either
the Institutional Class or the Administrative Class of the Funds may be
purchased at the relevant net asset value of that class without a sales charge
or other fee. The minimum initial investment for shares of either class is $5
million, except that the minimum initial investment for a registered investment
adviser purchasing Institutional Class shares for its clients through omnibus
accounts is $250,000 per Fund. The minimum initial investment may be waived for
Institutional or Administrative Class shares offered to clients of the
affiliated Sub-Advisers, their affiliates, and to the benefit plans of PIMCO
Advisors and its affiliates. In addition, the minimum initial investment does
not apply to shares of the Institutional Class offered through fee-based
programs sponsored and maintained by a registered broker-dealer and approved by
the Distributor pursuant to which each investor pays an asset based fee at an
annual rate of at least .50% of the assets in the account to a financial
intermediary for investment advisory and/or administrative services.
Pension and profit-sharing plans, employee benefit trusts and employee
benefit plan alliances and "wrap account" programs established with broker-
dealers or financial intermediaries may purchase shares of either class only if
the plan or program for which the shares are being acquired will maintain an
omnibus or pooled account for each Fund and will not require a Fund to pay any
type of administrative payment per participant account to any third party.
The investment minimums discussed in this section and the limitations set
forth in "Investment Limitations" below do not apply to participants in PIMCO
Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.
Initial Investment
An account may be opened by completing and signing a Client Registration
Application and mailing it to PIMCO Funds at the following address: 840 Newport
Center Drive, Suite 300, Newport Beach, California 92660. A Client Registration
Application may be obtained by calling 1-800-800-0952.
Except as provided below, purchases of Institutional Class and Administrative
Class shares can only be made by wiring federal funds to National Financial
Data Services (the "Transfer Agent"), 330 West 9th Street, 4th Floor, Kansas
City, Missouri 64105. Before wiring federal funds, the investor must first
telephone the Trust at 1-800-927-4648 to receive instructions for wire
transfer, and the following information will be requested: name of authorized
person; shareholder name; shareholder account number; name of Fund and share
class; amount being wired; and wiring bank name.
Shares may be purchased without first wiring federal funds if the proceeds of
the investment are derived from an advisory account maintained by the investor
with PIMCO Advisors or one of its affiliates; from surrender or other payment
from an annuity, insurance, or other contract held by Pacific Life Insurance
Company; or from an investment by broker-dealers, institutional clients or
other financial intermediaries which have established a shareholder servicing
relationship with the Trust on behalf of their customers.
A purchase order, together with payment in proper form, received by the
Transfer Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange (the "Exchange"), on a day the
Prospectus 57
<PAGE>
Trust is open for business, will be effected at that day's net asset value. An
order received after the close of regular trading on the Exchange will be
effected at the net asset value determined on the next business day. However,
orders received by certain retirement plans and other financial intermediaries
on a business day prior to the close of regular trading on the Exchange and
communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the
following business day will be effected at the net asset value determined on
the prior business day. The Trust is "open for business" on each day the
Exchange is open for trading, which excludes the following holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchase
orders will be accepted only on days on which the Trust is open for business.
Additional Investments
Additional investments may be made at any time at the relevant net asset
value for the particular class by calling the Trust and wiring federal funds to
the Transfer Agent as outlined above.
Fund Reimbursement Fees
Investors in Institutional Class and Administrative Class shares of the
Structured Emerging Markets and Tax-Efficient Structured Emerging Markets Funds
are subject to a fee ("Fund Reimbursement Fee"), both at the time of purchase
and at the time of redemption, equal to 1.00% of the net asset value of the
shares purchased or redeemed. Fund Reimbursement Fees are deducted
automatically from the amount invested or the amount to be received in
connection with a redemption; the fees are not paid separately. Fund
Reimbursement Fees are paid to and retained by the Funds to defray certain
costs described below and no portion of such fees are paid to or retained by
the Adviser, the Distributor, or the 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 "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
58 PIMCO Funds: Multi-Manager Series
<PAGE>
entities ("Non-Taxable Participants"; together with the Taxable Participants,
the "Participants"). Assets in the EM Trust equal in value to the value of the
Taxable Participants' participation in the EM Trust were transferred to the
Tax-Efficient Structured Emerging Markets Fund in exchange for Institutional
Class shares of that Fund. Assets in the EM Trust equal in value to the value
of the Non-Taxable Participants' participation in the EM Trust were transferred
to the Structured Emerging Markets Fund in exchange for Institutional Class
shares of that Fund. The Participants' interests in the EM Trust were then
terminated and Institutional Class shares of the Tax-Efficient Structured
Emerging Markets Fund were distributed to the Taxable Participants and
Institutional Class shares of the Structured Emerging Markets Fund were
distributed to the Non-Taxable Participants, in each case in proportion to each
Participant's interest in the EM Trust. After the completion of the
Transaction, the portfolio securities which were owned by the EM Trust became
portfolio securities of the Funds (allocated to the Funds on a substantially
pro-rata basis), to be held or sold as Parametric deems appropriate.
Portfolio securities transferred to the Funds pursuant to the Transaction
will have the same tax basis as they had when held by the EM Trust. Such
securities have "built-in" capital gains if their market value at the time of
the Transaction was greater than their tax basis (other securities may have
"built-in" capital losses for tax purposes if their market value at the time of
the Transaction was less than their tax basis). Built-in capital gains realized
upon the disposition of these securities will be distributed to all Fund
shareholders who are shareholders of record on the record date for the
distribution, even if such shareholders were not Participants in the EM Trust
prior to the Transaction. This means that investors purchasing Fund shares
after the date of this Prospectus may be required to pay taxes on distributions
that economically represent a return of a portion of the amount invested. For
further information, see "Dividends, Distributions and Taxes" below and
"Taxation--Distributions" in the Statement of Additional Information.
In connection with the Transaction, the Participants in the EM Trust will not
be subject to Fund Reimbursement Fees with respect to any shares of these Funds
they acquired through June 30, 1998, and will not be subject to Fund
Reimbursement Fees upon the subsequent redemption (including any redemption in
connection with an exchange) of any shares acquired by any such Participant
through June 30, 1998. Such Participants will be subject to such Fund
Reimbursement Fees to the same extent as any other shareholder on any shares of
either Fund acquired (whether by reinvestment of dividends or capital gain
distributions or otherwise) after June 30, 1998.
Other Purchase Information
Purchases of a Fund's Institutional Class and Administrative Class shares
will be made in full and fractional shares. In the interest of economy and
convenience, certificates for shares will not be issued.
The Trust and the Distributor each reserves the right, in its sole
discretion, to suspend the offering of shares of the Funds or to reject any
purchase order, in whole or in part, when, in the judgment of management, such
suspension or rejection is in the best interests of the Trust. The Trust and
the Distributor may also waive the minimum initial investment for certain
investors.
Purchases and sales should be made for long-term investment purposes only.
The Trust and Adviser each reserves the right to restrict purchases of Fund
shares (including exchanges) when a pattern of frequent purchases and sales
made in response to short-term fluctuations in share price appears evident.
Institutional Class and Administrative Class shares of the Trust are not
qualified or registered for sale in all states. Prospective investors should
inquire as to whether shares of a particular Fund are available for offer and
sale in their
Prospectus 59
<PAGE>
state of residence. Shares of the Trust may not be offered or sold in any state
unless registered or qualified in that jurisdiction or unless an exemption from
registration or qualification is available.
Investors may, subject to the approval of the Trust, purchase shares of a
Fund with liquid securities that are eligible for purchase by the Fund
(consistent with such Fund's investment policies and restrictions) and that
have a value that is readily ascertainable in accordance with the Trust's
valuation policies. These transactions will be effected only if the Sub-Adviser
intends to retain the security in the Fund as an investment. Assets so
purchased by a Fund will be valued in generally the same manner as they would
be valued for purposes of pricing the Fund's shares, if such assets were
included in the Fund's assets at the time of purchase. The Trust reserves the
right to amend or terminate this practice at any time.
Investment Limitations
Shares of the Small-Cap Growth and Micro-Cap Growth Funds are normally not
available for purchase by new investors, although purchase orders may be
accepted in certain circumstances. Existing shareholders may continue to invest
in these Funds. These restrictions 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.
REDEMPTION OF SHARES
Redemptions by Mail
Institutional Class and Administrative Class shares may be redeemed by
submitting a written request to PIMCO Funds, 840 Newport Center Drive, Suite
300, Newport Beach, California 92660, stating the Fund from which the shares
are to be redeemed, the class of shares, the number or dollar amount of the
shares to be redeemed and the account number. The request must be signed
exactly as the names of the registered owners appear on the Trust's account
records, and the request must be signed by the minimum number of persons
designated on the Client Registration Application that are required to effect a
redemption.
Redemptions by Telephone or Other Wire Communication
If an election is made on the Client Registration Application (or
subsequently in writing), redemptions of shares may be requested by calling the
Trust at 1-800-927-4648, by sending a facsimile to 1-949-760-4456, or by other
means
60 PIMCO Funds: Multi-Manager Series
<PAGE>
of wire communication. Investors should state the Fund and class from which the
shares are to be redeemed, the number or dollar amount of the shares to be
redeemed and the account number. Redemption requests of an amount of $10
million or more may be initiated by telephone, but must be confirmed in writing
by an authorized party prior to processing.
In electing a telephone redemption, the investor authorizes Pacific
Investment Management and the Transfer Agent to act on telephone instructions
from any person representing himself to be the investor, and reasonably
believed by Pacific Investment Management and the Transfer Agent to be genuine.
Neither the Trust nor its Transfer Agent may be liable for any loss, cost or
expense for acting on instructions (whether in writing or by telephone)
believed by the party receiving such instructions to be genuine and in
accordance with the procedures described in this Prospectus. Shareholders
should realize that by electing the telephone or wire redemption option, they
may be giving up a measure of security that they might have if they were to
redeem their shares in writing. Furthermore, interruptions in telephone service
may mean that a shareholder will be unable to effect a redemption by telephone
when desired. The Transfer Agent also provides written confirmation of
transactions initiated by telephone as a procedure designed to confirm that
telephone instructions are genuine (written confirmation is also provided for
redemption requests received in writing). All telephone transactions are
recorded, and Pacific Investment Management or the Transfer Agent may request
certain information in order to verify that the person giving instructions is
authorized to do so. If the Trust or Transfer Agent fails to employ reasonable
procedures to confirm that instructions communicated by telephone are genuine,
it may be liable for any losses due to unauthorized or fraudulent telephone
transactions. All redemptions, whether initiated by letter or telephone, will
be processed in a timely manner, and proceeds will be forwarded by wire in
accordance with the redemption policies of the Trust detailed below. See
"Redemption of Shares--Other Redemption Information."
Shareholders may decline telephone exchange or redemption privileges after an
account is opened by instructing the Transfer Agent in writing at least seven
business days prior to the date the instruction is to be effective.
Shareholders may experience delays in exercising telephone redemption
privileges during periods of abnormal market activity. During periods of
volatile economic or market conditions, shareholders may wish to consider
transmitting redemption orders by telegram, facsimile or overnight courier.
Defined contribution plan participants may request redemptions by contacting
the employee benefits office, the plan administrator or the organization that
provides recordkeeping services for the plan.
Other Redemption Information
Redemption requests for Fund shares are effected at the net asset value per
share next determined after receipt in good order of the redemption request by
the Trust or its designee. A redemption request received by the Trust or its
designee prior to the close of regular trading on the Exchange (normally 4:00
p.m., Eastern time), on a day the Trust is open for business, is effective on
that day. A redemption request received after that time becomes effective on
the next business day.
Unless eligible for a waiver, shareholders of the Structured Emerging Markets
and Tax-Efficient Structured Emerging Markets Funds who redeem their shares
will pay a Fund Reimbursement Fee equal to 1.00% of the net asset value of the
shares redeemed. See "Purchase of Shares--Fund Reimbursement Fees."
Payment of the redemption price will ordinarily be wired to the investor's
bank within three business days after the redemption request, but may take up
to seven business days. Redemption proceeds will be sent by wire only to the
Prospectus 61
<PAGE>
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
Shares of a Fund may be exchanged for shares of the same class of any other
Fund or other series of the Trust based on the respective net asset values of
the shares involved. An exchange may be made by following the redemption
procedure described above under "Redemptions by Mail" or, if the telephone
redemption option has been elected, by calling the Trust at 1-800-927-4648.
Shares of a Fund may also be exchanged for shares of the same class of a series
of PIMCO Funds: Pacific Investment Management Series, an affiliated mutual fund
family composed primarily of fixed income portfolios managed by Pacific
Investment Management. Shareholders interested in such an exchange may request
a prospectus for these other series by contacting PIMCO Funds: Pacific
Investment Management Series at the same address and telephone number as the
Trust.
Unless eligible for a waiver, shareholders who exchange their Institutional
Class or Administrative Class shares of any PIMCO Fund for the same class of
shares of the Structured Emerging Markets Fund or Tax-Efficient Structured
Emerging Markets Fund will be subject to a Fund Reimbursement Fee of 1.00% of
the net asset value of the shares of these Funds acquired in connection with
the exchange. Also, shareholders who exchange their shares of the Structured
Emerging Markets Fund or Tax-Efficient Structured Emerging Markets Fund for
shares of any other PIMCO Fund will be subject to a Fund Reimbursement Fee of
1.00% of the net asset value of the shares of these Funds redeemed in
connection with the exchange. See "Purchase of Shares--Fund Reimbursement
Fees."
62 PIMCO Funds: Multi-Manager Series
<PAGE>
Exchanges may be made only with respect to Funds or other eligible series
that are registered in the state of residence of the investor or where an
exemption from registration is available. An exchange order is treated the
same for tax purposes as a redemption followed by a purchase and may result in
a capital gain or loss, and special rules may apply in computing tax basis
when determining gain or loss. See "Taxation" in the Statement of Additional
Information.
The Trust reserves the right to refuse exchange purchases if, in the
judgment of the Adviser, the purchase would adversely affect a Fund and its
shareholders. In particular, a pattern of exchanges characteristic of "market-
timing" strategies may be deemed by the Adviser to be detrimental to the Trust
or a particular Fund. Currently, the Trust limits the number of "round trip"
exchanges an investor may make. An investor makes a "round trip" exchange when
the investor purchases shares of a particular Fund, subsequently exchanges
those shares for shares of a different Fund, and then exchanges back into the
originally purchased Fund. The Trust has the right to refuse any exchange for
any investor who completes (by making the exchange back into the shares of the
originally purchased Fund) more than six round trip exchanges in any twelve-
month period. Although the Trust will attempt to give shareholders prior
notice whenever it is reasonably able to do so, it may impose additional
restrictions on exchanges at any time.
PORTFOLIO TRANSACTIONS
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. 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.
Some securities considered for investment by the Funds may also be
appropriate for other clients served by the Adviser or a Sub-Adviser. 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.
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. The use of futures contracts may involve the payment of
commissions to futures commission merchants. High portfolio turnover (e.g.,
over 100%) involves correspondingly
Prospectus 63
<PAGE>
greater expenses to a Fund, including brokerage commissions or dealer mark-ups
and other transaction costs on the sale of securities and reinvestments in
other securities. Such sales may result in realization of taxable capital gains
(including short-term capital gains which are generally taxed to shareholders
at ordinary income tax rates). See "Dividends, Distributions and Taxes."
Portfolio turnover rates for each Fund for which financial highlights for at
least the past two fiscal years are provided in this Prospectus are set forth
under "Financial Highlights." Portfolio turnover rates for the remaining Funds
with at least two fiscal years of operations were as follows for the fiscal
years ended June 30, 1998 and 1997, respectively; International--60% and 59%;
Renaissance--192% and 131%; Growth--123% and 94%; Target-- 226% and 145%;
Opportunity--86% and 69%; and Innovation--100% and 80%. 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%. In connection with the change in Sub-Advisers of
the Renaissance, Growth, Target, Opportunity, and Innovation 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--Sub-Advisers."
NET ASSET VALUE
The net asset values of Institutional and Administrative Class shares of each
Fund will be determined once on each day on which the Exchange is open (a
"Business Day"), as of the close of regular trading (normally 4:00 p.m.,
Eastern time) on the Exchange. Net asset value will not be determined on days
on which the Exchange is closed.
Portfolio securities and other assets for which market quotations are readily
available are stated at market value. Fixed income securities are normally
valued on the basis of quotations obtained from brokers and dealers or pricing
services, which take into account appropriate factors such as institutional-
sized trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
Certain fixed income securities for which daily market quotations are not
readily available may be valued, pursuant to guidelines established by the
Board of Trustees, with reference to fixed income securities whose prices are
more readily obtainable and whose durations are comparable to the securities
being valued. Short-term investments having a maturity of 60 days or less are
valued at amortized cost, when the Board of Trustees determines that amortized
cost is their fair value. Exchange-traded options, futures and options on
futures are valued at the settlement price as determined by the appropriate
clearing corporation. All other securities and assets are valued at their fair
value as determined in good faith by the Trustees or by persons acting at their
direction.
Quotations of foreign securities in foreign currency are converted to U.S.
dollar equivalents using foreign exchange quotations received from independent
dealers. The calculation of the net asset value of the International,
International Growth, Structured Emerging Markets, and Tax-Efficient Structured
Emerging Markets Funds may not take place contemporaneously with the
determination of the prices of certain portfolio securities of foreign issuers
used in such calculation. Further, under the Trust's procedures, the prices of
foreign securities are determined using information derived from pricing
services and other sources. Information that becomes known to the Trust or its
agents after the time that net asset value is calculated on any Business Day
may be assessed in determining net asset value per share after the time of
receipt of the information, but will not be used to retroactively adjust the
price of the security so determined earlier or on a prior day. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the Exchange (normally 4:00
p.m., Eastern time) may not be reflected in the calculation of net asset value.
If events materially affecting the value of such securities occur during
64 PIMCO Funds: Multi-Manager Series
<PAGE>
such period, then these securities may be valued at fair value as determined by
the Adviser or a Sub-Adviser and approved in good faith by the Board of
Trustees.
Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or
servicing fees and any other expenses specially allocated to that class are
then deducted from the class's proportionate interest in the Fund's assets, and
the resulting amount for each class is divided by the number of shares of that
class outstanding to produce the class's "net asset value" per share. Under
certain circumstances, the per share net asset value of the Administrative
Class shares of the Funds may be lower than the per share net asset value of
the Institutional Class shares as a result of the daily expense accruals of the
service and/or distribution fees applicable to the Administrative Class shares.
Generally, for Funds that pay income dividends, those dividends are expected to
differ over time by approximately the amount of the expense accrual
differential between a particular Fund's classes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Shares begin earning dividends on the effective date of purchase, provided
notification deadlines are met. See "Purchase of Shares." Net investment income
from interest and dividends, if any, will be declared and paid quarterly to
shareholders of record by the Equity Income, Value, Renaissance, and Balanced
Funds. Net investment income from interest and dividends, if any, will be
declared and paid at least annually to shareholders of record by the other
Funds. Any net capital gains from the sale of portfolio securities will be
distributed no less frequently than once annually. Net short-term capital gains
may be paid more frequently. Dividend and capital gain distributions of a Fund
will be reinvested in additional shares of that Fund unless the shareholder
elects to have them paid in cash. Dividends from net investment income with
respect to Administrative Class shares will be lower than those paid with
respect to Institutional Class shares, reflecting the payment of service and/or
distribution fees by that class.
Each Fund intends to qualify as a regulated investment company annually and
to elect to be treated as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). As such, a Fund generally will
not pay federal income tax on the income and gains it pays as dividends to its
shareholders. In order to avoid a 4% federal excise tax, each Fund intends to
distribute each year substantially all of its net income and gains.
Shareholders subject to U.S. federal income tax will be subject to tax on
dividends received from a Fund, regardless of whether received in cash or
reinvested in additional shares. Distributions received by tax-exempt
shareholders generally will not be subject to federal income tax to the extent
permitted under applicable tax law. All shareholders must treat dividends,
other than capital gain dividends, exempt-interest dividends, 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 (that is, the excess of its net long-term capital
gains over its net short-term capital losses) are taxable to shareholders as
long-term capital gain (generally subject to a 20% tax rate 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
gain may
Prospectus 65
<PAGE>
be characterized as a return of capital to shareholders or, in some cases, as
capital gain. Certain dividends declared in October, November or December of a
calendar year are taxable to shareholders (who otherwise are subject to tax on
dividends) as though received on December 31 of that year if paid to
shareholders during January of the following calendar year. Each Fund will
advise shareholders annually of the amount and nature of the dividends paid to
them.
Current federal tax law requires the holder of a U.S. Treasury or other fixed
income zero coupon security to accrue as income each year a portion of the
discount at which the security was purchased, even though the holder receives
no interest payment in cash on the security during the year. In addition, pay-
in-kind securities will give rise to income which is required to be distributed
and is taxable even though the Fund holding the security receives no interest
payment in cash on the security during the year. Also, a portion of the yield
on certain high yield securities (including certain pay-in-kind securities)
issued after July 10, 1989 may be treated as dividends. Accordingly, each Fund
that holds the foregoing kinds of securities may be required to pay out as an
income distribution each year an amount which is greater than the total amount
of cash interest the Fund actually received. Such distributions may be made
from the cash assets of the Fund or by liquidation of portfolio securities, if
necessary. The Fund may realize gains or losses from such liquidations. In the
event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution, if any, than they
would in the absence of such transactions.
Taxable shareholders should note that the timing of their investment or
redemptions could have undesirable tax consequences. Dividends and
distributions on a Fund's shares are generally subject to federal income tax as
described herein to the extent they do not exceed the Fund's realized income
and gains, even though such dividends and distributions may economically
represent a return of a particular shareholder's investment. Such distributions
are likely to occur in respect of shares purchased at a time when the Fund's
net asset value reflects gains that are either unrealized or realized but not
distributed. Such realized gains may be required to be distributed even when a
Fund's net asset value also reflects unrealized losses.
As discussed above under "Characteristics and Risks of Securities and
Investment Techniques--Investment in Investment Companies," each Fund may
invest in the securities of other investment companies. Investments in other
investment companies may increase the amount of taxes payable by shareholders
of the Funds. For more information on the tax consequences of such investments,
see "Taxation" in the Statement of Additional Information.
The preceding discussion relates only to federal income tax; the consequences
under other tax laws may differ. Shareholders should consult their tax advisers
as to the possible application of foreign, state and local income tax laws to
Trust dividends and capital gain distributions. For additional information
relating to the tax aspects of investing in a Fund, see the Statement of
Additional Information.
66 PIMCO Funds: Multi-Manager Series
<PAGE>
OTHER INFORMATION
Capitalization
The Trust was organized as a Massachusetts business trust on August 24, 1990,
and currently consists of twenty-six portfolios that are operational, twenty-
two of which are described in this Prospectus. Other portfolios may be offered
by means of a separate prospectus. The Board of Trustees may establish
additional portfolios in the future. The capitalization of the Trust consists
of an unlimited number of shares of beneficial interest. When issued, shares of
the Trust are fully paid, non-assessable and freely transferable.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Trust. However, the Second Amended and
Restated Agreement and Declaration of Trust (the "Declaration of Trust") of the
Trust disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The
Declaration of Trust also provides for indemnification out of a Fund's property
for all loss and expense of any shareholder of that Fund held liable on account
of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which such disclaimer is inoperative or the Fund of which he
or she is or was a shareholder is unable to meet its obligations, and thus
should be considered remote.
Multiple Classes of Shares
In addition to Institutional Class shares and Administrative Class shares,
certain Funds also offer up to four additional classes of shares, Class A,
Class B, Class C, and Class D, through separate prospectuses. This Prospectus
relates only to Institutional Class and Administrative Class shares of the
Funds. The other classes of the Funds have different sales charges and expense
levels, which will affect performance accordingly. To obtain more information
about the other classes of shares, please call the Distributor at 1-800-426-
0107 (for Class A, Class B, and Class C) or 1-888-87-PIMCO (for Class D).
Institutional Class and Administrative Class shares of each Fund represent
interests in the assets of that Fund, and each class has identical dividend,
liquidation and other rights and the same terms and conditions, except that
expenses related to the distribution and/or shareholder servicing of
Administrative Class shares are borne solely by such class, and each class may,
at the Trustees' discretion, also pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the
management of the Trust's assets, if these expenses are actually incurred in a
different amount by that class, or if the class receives services of a
different kind or to a different degree than the other classes. All other
expenses are allocated to each class on the basis of the net asset value of
that class in relation to the net asset value of the particular Fund.
Voting
Each class of shares of each Fund has identical voting rights, except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. The Administrative Class shares
have exclusive voting rights with respect to matters pertaining to any
Distribution Plan applicable to that class. These shares are entitled to vote
at meetings of shareholders. Matters submitted to shareholder vote must be
approved by each Fund separately except (i) when required by the 1940 Act,
shares shall be voted together, and (ii) when the Trustees have determined that
the matter does not affect all Funds, then only shareholders
Prospectus 67
<PAGE>
of the Fund or Funds affected shall be entitled to vote on the matter. All
classes of shares of a Fund will vote together, except with respect to a
Distribution Plan or agreement applicable to a class of shares or when a class
vote is required as specified above or otherwise by the 1940 Act. Shares are
freely transferable, are entitled to dividends as declared by the Trustees and,
in liquidation of the Trust, are entitled to receive the net assets of their
Fund, but not of the other Funds. The Trust does not generally hold annual
meetings of shareholders and will do so only when required by law. Shareholders
may remove Trustees from office by votes cast in person or by proxy at a
meeting of shareholders or by written consent. Such a meeting will be called at
the written request of the holders of 10% of the Trust's outstanding shares.
Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As of March 10, 1999, the following were shareholders
of record of at least 25% of the outstanding voting securities of the indicated
Funds: Pacific Life Foundation (Newport Beach, California) and California Race
Track Association (LaVerne, California) with respect to the Core Equity Fund;
Pacific Mutual Life Insurance Company (Newport Beach, California) with respect
to the Mid-Cap Equity Fund; Pacific Asset Management LLC (Newport Beach,
California) with respect to the International Growth Fund; and Pacific Mutual
Life Insurance Company Employee's Retirement Plan Trust (Newport Beach,
California) with respect to the Enhanced Equity Fund. To the extent such
shareholders are also the beneficial owners of such securities, they may be
deemed to control (as that term is defined in the 1940 Act) the relevant Fund.
As used in this Prospectus, the phrase "vote of a majority of the outstanding
shares" of a Fund (or the Trust) means the vote of the lesser of: (1) 67% of
the shares of the Fund (or the Trust) present at a meeting, if the holders of
more than 50% of the outstanding shares are present in person or by proxy; or
(2) more than 50% of the outstanding shares of the Fund (or the Trust).
Performance Information
From time to time the Trust may make available certain information about the
performance of the Institutional Class and Administrative Class shares of some
or all of the Funds. Information about a Fund's performance is based on that
Fund's (or its predecessor's) record to a recent date and is not intended to
indicate future performance. Performance information is computed separately for
each Fund's Institutional Class and Administrative Class shares in accordance
with the formulas described below. Because Administrative Class shares bear the
expense of service and/or distribution fees, it is expected that, under normal
circumstances, the level of performance of a Fund's Administrative Class shares
will be lower than that of the Fund's Institutional Class shares.
The total return of Institutional Class and Administrative Class shares of
all Funds may be included in advertisements or other written material. When a
Fund's total return is advertised with respect to its Institutional Class and
Administrative Class shares, it will be calculated for the past year, the past
five years, and the past ten years (or if the Fund has been offered for a
period shorter than one, five or ten years, that period will be substituted)
since the establishment of the Fund or its predecessor series of PIMCO Advisors
Funds, as more fully described in the Statement of Additional Information. For
periods prior to the initial offering date of Institutional Class or
Administrative Class shares, total return presentations for a class will be
based on the historical performance of an older class of the Fund (if any)
restated, as necessary, to reflect that there are no sales charges associated
with Institutional Class or Administrative Class shares. The older class to be
used in each case is set forth in the Statement of Additional Information. For
these purposes, the performance of the older class will also be restated to
reflect any different operating expenses (such as different administrative fees
and/or 12b-1/servicing fee charges) associated with the newer class. In certain
cases, such a restatement will result in Institutional Class or Administrative
Class performance which is higher than if the performance of the older class
were not restated to reflect the different operating expenses of the
68 PIMCO Funds: Multi-Manager Series
<PAGE>
newer class. In such cases, the Trust's advertisements will also, to the extent
appropriate, show the lower performance figure reflecting the actual operating
expenses incurred by the older class for periods prior to the initial offering
date of the newer class. Total return for each class is measured by comparing
the value of an investment in the Fund at the beginning of the relevant period
to the redemption value of the investment in the Fund at the end of the period
(assuming immediate reinvestment of any dividends or capital gains
distributions at net asset value). Total return may be advertised using
alternative methods that reflect all elements of return, but that may be
adjusted to reflect the cumulative impact of alternative fee and expense
structures.
Quotations of yield for a Fund or class will be based on the investment
income per share (as defined by the SEC) during a particular 30-day (or one-
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and will be computed by dividing net
investment income by the maximum public offering price per share on the last
day of the period.
The Funds may also provide current distribution information to their
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of a Fund will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by the relevant class net asset value per share on the last
day of the period and annualized. The rate of current distributions does not
reflect deductions for unrealized losses from transactions in derivative
instruments such as options and futures, which may reduce total return. Current
distribution rates differ from standardized yield rates in that they represent
what a class of a Fund has declared and paid to shareholders as of the end of a
specified period rather than the Fund's actual net investment income for that
period.
The Adviser and each Sub-Adviser may also report to shareholders or to the
public in advertisements concerning its performance as adviser to clients other
than the Funds, and on its comparative performance or standing in relation to
other money managers. Such comparative information may be compiled or provided
by independent ratings services or by news organizations. Any performance
information, whether related to the Funds, the Adviser, or the Sub-Advisers,
should be considered in light of the Fund's investment objectives and policies,
characteristics and quality of the Funds, and the market conditions during the
time period indicated, and should not be considered to be representative of
what may be achieved in the future.
Investment results of the Funds will fluctuate over time, and any
representation of the Funds' total return or yield for any prior period should
not be considered as a representation of what an investor's total return or
yield may be in any future period. The Trust's Annual and Semi-Annual Reports
contain additional performance information for the Funds and are available upon
request, without charge, by calling 1-800-927-4648 (Current Shareholders), or
1-800-800-0952 (New Accounts).
Prospectus 69
<PAGE>
--------------------------------------------------------------------
PIMCO Funds:
INVESTMENT ADVISER AND ADMINISTRATOR
Multi-Manager
PIMCO Advisors L.P., 800 Newport Center Drive, Newport Beach, CA
Series 92660
--------------------------------------------------------------------
CUSTODIAN
Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
MO 64105
--------------------------------------------------------------------
TRANSFER AGENT
National Financial Data Services, 330 West 9th Street, 4th Floor,
Kansas City, MO \\64105\\
--------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1055 Broadway, Kansas City, MO 64105
--------------------------------------------------------------------
LEGAL COUNSEL
Ropes & Gray, One International Place, Boston, MA 02110
--------------------------------------------------------------------
<PAGE>
For More Information
The following documents are available that offer further information on the
Funds of PIMCO Funds: Multi-Manager Series.
Annual/Semi-Annual Reports to Shareholders The Trust's annual and semi-annual
reports include a discussion of the market conditions and investment strategies
that significantly affected the Funds' performance during its last fiscal year
or other period.
Statement of Additional Information (SAI) The SAI contains additional
information about the Funds. A current SAI has been filed with the Securities
and Exchange Commission, and is incorporated into this prospectus by reference.
To request a free copy of these documents or to make inquiries about the Funds,
please write or call:
PIMCO Funds:
Multi-Manager Series
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
Telephone:
1-800-927-4648
1-800-987-4626 (PIMCO Infolink Audio Response Network)
Information about the Trust (including the SAI) can be reviewed and copied at
the Securities and Exchange Commission's Public Reference Room in Washington,
D.C. Information on the operation of the public reference room may be obtained
by calling the Commission at 1-800-SEC-0330. Reports and other information about
the Trust are available on the Commission's Internet site at www.sec.gov, and
copies of that information may be obtained, upon payment of a duplicating fee,
by writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
SEC File Number: 811-6161
P I M C O
- ---------
FUNDS
840 Newport Center Drive
Suite 300
Newport Beach, CA 92660
