<PAGE>
PIMCO Funds Shareholder Update
and Semi-Annual Report
This Update is published twice a year to provide PIMCO Funds shareholders with
general market commentary and fund information. It also includes the financial
report for the PIMCO Funds Multi-Manager Series.
[ARTWORK APPEARS HERE]
If investment jargon has you confused, take a quick course in "Street Talk."
Class is in session on page 2.
December 31, 1998
Multi-Manager Series
Share Class
(D)
Equity Income
Value
Renaissance
Tax-Efficient Equity
Capital Appreciation
Mid-Cap Growth
Innovation
Page 2 Today's Investor
Wall Street 101--A quick course in Street Talk
- --------------------------------------------------------------------------------
Page 4 Market Review
- --------------------------------------------------------------------------------
Page 5 Manager Spotlight
PIMCO Innovation Fund's Dennis McKechnie
- --------------------------------------------------------------------------------
Page 6 In The News
Recent News on PIMCO Funds
- --------------------------------------------------------------------------------
Page 7 Overview: Comprehensive Fund Family
- --------------------------------------------------------------------------------
Page 9 Multi-Manager Series
PIMCO Funds Semi-Annual Report
<PAGE>
Today's
Investor
Wall Street 101--A quick course in Street Talk
[ARTWORK APPEARS HERE]
Are you puzzling over P/Es? Having trouble telling a small cap from a pillbox
hat? Take heart. You're in good company. Today, millions of Americans are
learning the language of Wall Street. That's because more and more of us are
investing in the market. In the past ten years, we've doubled the percentage of
our assets we invest in stocks. In fact, stocks now represent a greater share of
our personal wealth than our homes do. And mutual funds have overtaken banks as
our investment medium of choice.
So, to give you a leg up on some of the basic jargon, we've put together this
short overview. It's intended to give you a better understanding of what's
happening on Wall Street and in your investment portfolio.
The Bulls Versus the Bears
Despite some bumps in the road, for the past eight years the stock market has
posted one of the all-time great "bull runs" . A bull run is just another way of
saying bull market, which typically refers to a prolonged period of rising
stock, bond or commodity prices. A bear market is just the opposite. Many bears
view 1998's sharp and frequent fluctuations (i.e., volatility) as the early
stages of a down market. Bulls, on the other hand, see these dizzying bursts of
volatility as mere blips in the course of a continuing upward trend.
A New Economy?
1998 was the fourth consecutive year the overall stock market gained over 20%.
This unprecedented performance has led some observers to speculate about a new
paradigm, or a new set of rules governing the market. You'll also hear Wall
Street bulls and Silicon Valley pundits talking about a new economy. That's a
term they use to describe the way globalization and information technologies are
changing the way the economy works. Governments around the world are stepping
back and allowing the free market to drive their economies. The spirit of
enterprise is widespread, and new technological innovations have made it
possible for businesses to do more at lower cost and in less time.
The Pros and Cons of Globalization
Many large American companies have expanded their overseas operations in recent
years, partly in response to a new, friendlier international business climate.
In fact, many of these multinationals now earn more of their profits abroad than
at home. In many ways, this globalization has been a boon to the American market
and to the individual investor.
Percent of Foreign Sales
Many companies derive a large portion of their sales from foreign countries.
[BAR CHART APPEARS HERE]
Percent of Foreign Sales
Many companies derive a large portion of
their sales from foreign countries.
Coca-Cola 64%
McDonalds 49%
General Electric 42%
Nike 40%
Based on non-U.S. sales, 1997.
Source: Company annual reports.
But it's a double-edged sword. These new rewards have brought new risks. When
companies are so heavily invested in overseas markets, and so reliant on foreign
earnings, they are more vulnerable to international crises such as those that
occurred in recent years. So even though you may not be investing directly in
international stocks or mutual funds, your investments may not be immune to
international turmoil. In fact, the Asian crisis that began in 1997 and the
collapse of the Russian economy in 1998 are two threats to the ongoing health of
the bull market.
Short-Term Market Gyrations Were the Norm Last Year
The bulls and the bears could each make a case for their views given the
market's volatility in 1998
[LINE GRAPH APPEARS HERE]
STANDARD & POOR'S 500 INDEX
1/2 975.04 5/1 1121.00 9/4 973.89
1/9 927.69 5/8 1108.14 9/11 1009.06
1/16 961.51 5/15 1108.73 9/18 1020.09
1/23 957.59 5/22 1110.47 9/25 1044.75
1/30 980.28 5/29 1090.82
10/2 1002.60
2/6 1012.46 6/5 1113.86 10/9 984.39
2/13 1020.09 6/12 1098.84 10/16 1056.42
2/20 1034.21 6/19 1100.65 10/23 1070.67
2/27 1049.34 6/26 1133.20 10/30 1098.67
3/6 1055.69 7/3 1146.42 11/6 1141.01
3/13 1068.61 7/10 1164.33 11/13 1125.72
3/20 1099.16 7/17 1186.75 11/20 1163.55
3/27 1095.44 7/24 1140.80 11/27 1192.29
7/31 1120.67
4/3 1122.70 12/4 1176.74
4/10 1110.67 8/7 1089.45 12/11 1166.46
4/17 1122.72 8/14 1062.75 12/18 1188.03
4/24 1107.90 8/21 1081.18 12/25 1226.27
8/28 1027.14
2
<PAGE>
The Ongoing Appeal of Blue Chips
A common strategy to manage risk during times of instability is to focus on
higher quality investments. In the case of equities, quality means "blue chips",
a term, which derives from the most expensive (blue) chips, used in poker. Most
blue-chip stocks are household names, like IBM, Coca-Cola, Gillette and Walt
Disney. They have long records of profit, growth and solid reputations for the
high standard of their management, products and services. Their relatively high
stock prices are often justified by their unique combination of growth and
stability. The largest capitalized stocks are known collectively as "The Nifty
Fifty."
Disappearing Dividends
Blue-chip stocks have had a long-standing reputation for paying dividends, the
portion of a company's net profits it pays to its shareholders. But
increasingly, blue chip and many other companies are reinvesting their earnings
in their own businesses to pay for expansion, research and marketing. A dividend
certainly can no longer be taken as a measure of a company's success, as it once
was. For example, thriving companies like Microsoft, Cisco, and Oracle do not
pay them.
The Valuation Game
As an investor, you can determine the value of a stock in a number of ways. One
of the most commonly used is a stock's "price/earnings (P/E) ratio", also known
as its multiple. Because a stock is essentially a claim on a company's future
profits, it's important to know how much you're paying for each dollar of that
profit. The P/E will give you the answer. And it's obtained by dividing the
price of a stock by its earnings per share. Here's an example:
How to Calculate P/E
(Stock price / Earnings per share)
Stock price $40
.Earnings per share /$2
------------------------------
= P/E ratio 20
While P/Es are fairly straight forward, it's important to know what's being used
as the "earnings per share" figure. P/Es may be based on earnings for the most
recent four quarters (i.e. trailing P/Es) or on a forecast of next year's
earnings (i.e. forward P/Es). The Wall Street Journal's stock quotations, for
example, list trailing P/Es.
In the past, stocks with high P/Es (over 20) tended to belong to young, dynamic
companies. Low P/E stocks were associated with older, more mature companies. But
in these days of soaring stock prices, many blue-chip stocks have sported
record-high P/Es. As of December 31, 1998, well-established companies like
Gillette and Coca-Cola had P/Es over 40.
Net Stocks--How High is Up?
The truth is, no one really knows how to value "Net" (Internet) stocks, like
Yahoo! and Amazon.com. As their prices have soared up, up, and away, they've
left the old rules of valuation behind in the dust. Despite sky-high stock
prices, many Internet companies have yet to make a dime of profit, making P/E
ratios virtually meaningless. As a result, many analysts have turned to
price/sales (P/S) ratios and price/cash-flow (P/CF) ratios in an attempt to
measure what these companies actually earn each year.
Diversification--the Real Name of the Game
One last thing to keep in mind--your best protection against all the market's
ups and downs is to maintain a well-balanced portfolio. That means working with
your financial advisor to ensure that you have the right mix of stock, bond and
money market funds. That's called asset allocation, and some experts believe it
is the single most important factor in determining the long-term success of your
portfolio, even more important than the specific investments you choose.
A truly diversified portfolio includes funds with different investment styles
(growth, value, etc.). That way, it can be more resilient as economic conditions
change. You may also want to consider funds that specialize in different
geographic regions or different business sectors. Your choices all depend on
your individual investment goals and risk tolerance. And, always remember, your
financial advisor can help you determine what's right for you.
America Online's Stock Increased over 400% in 1998
High growth prospects led to sky-high return for many Internet companies.
[LINE GRAPH APPEARS HERE]
AMERICAN ONLINE'S STOCK PRICE RANGE FROM 12/31/97 - 12/31/98
1/2 22 13/32 5/1 41 3/4 9/4 43
1/9 21 11/32 5/8 45 1/16 9/11 47 1/2
1/16 23 1/4 5/15 42 15/32 9/18 48 15/16
1/23 23 13/16 5/22 42 5/16 9/25 57/38
1/30 23 29/32 5/29 41 21/32
10/2 53 19/32
2/6 24 5/8 6/5 41 5/8 10/9 46 5/32
2/13 28 9/16 6/12 43 9/16 10/16 51
2/20 29 55/64 6/19 48 3/16 10/23 57 15/32
2/27 30 11/32 6/26 53 7/8 10/30 63 11/16
3/6 30 3/8 7/3 55 5/32 11/6 70
3/13 31 29/32 7/10 56 1/4 11/13 70
3/20 31 1/4 7/17 64 11/20 84 7/8
3/27 34 1/2 7/24 59 19/32 11/27 94 7/8
7/31 58 9/16
4/3 37 1/4 12/4 88
4/10 36 3/4 8/7 55 15/16 12/11 91 9/16
4/17 36 25/32 8/14 53 1/8 12/18 104 1/4
4/24 37 1/4 8/21 55 1/16 12/25 136 5/8
8/28 48 1/8
Returns from America Online from 12/31/97- 12/31/98. Past performance is no
guarantee of future results.
3
<PAGE>
Market
Review
Stock Market
Another Strong Year for Stocks
The stock market realized a strong performance in 1998 despite a mid-year
downturn.
[LINE GRAPH APPEARS HERE]
S&P 500 INDEX
1/2 975.04 5/1 1121.00 9/4 973.89
1/9 927.69 5/8 1108.14 9/11 1009.06
1/16 961.51 5/15 1108.73 9/18 1020.09
1/23 957.59 5/22 1110.47 9/25 1044.75
1/30 980.28 5/29 1090.82
10/2 1002.60
2/6 1012.46 6/5 1113.86 10/9 984.39
2/13 1020.09 6/12 1098.84 10/16 1056.42
2/20 1034.21 6/19 1100.65 10/23 1070.67
2/27 1049.34 6/26 1133.20 10/30 1098.67
3/6 1055.69 7/3 1146.42 11/6 1141.01
3/13 1068.61 7/10 1164.33 11/13 1125.72
3/20 1099.16 7/17 1186.75 11/20 1163.55
3/27 1095.44 7/24 1140.80 11/27 1192.29
7/31 1120.67
4/3 1122.70 12/4 1176.74
4/10 1110.67 8/7 1089.45 12/11 1166.46
4/17 1122.72 8/14 1062.75 12/18 1188.03
4/24 1107.90 8/21 1081.18 12/25 1226.27
8/28 1027.14
The stock market had more than its share of ups and downs in 1998. However, by
the end of the year the overall stock market posted its fourth consecutive 20%+
gain. The year began with a jolt as the market dropped in January but then
rebounded quickly. In the second quarter of 1998, a recurring case of the Asian
flu dealt a powerful blow to the market, and that mood prevailed through most of
the third quarter. Then Alan Greenspan came to the rescue, enacting the first of
three interest rate cuts in late September. The market resumed the climb it had
begun in the first quarter, albeit more quickly.
Throughout much of the year the market was propelled by technology issues and,
more specifically, Internet stocks. Despite concerns about overvaluation,
Internet stocks continued their meteoric ascent, dumbfounding Wall Street
pundits. And the rally spread to computers, as Year 2000-motivated PC purchases
and better inventory management boosted this industry in the fourth quarter,
lifting semiconductor and semiconductor-related stocks as well.
A few areas in the equity markets saw disappointing returns this year. Energy
stocks suffered from the low price of oil. Small-caps under-performed as
investors continued their flight to quality, seeking blue-chip names instead of
smaller, relatively unknown companies. Also, though Europe was boosted by the
inception of the European Monetary Union, most other international regions did
poorly. Devaluations, high interest rates, and failing economies dragged many
Asian and Latin American countries' markets down.
Looking ahead, we remain cautiously optimistic about the stock market. We
believe there is a strong possibility of an earnings slowdown in the coming
year, which could temper the market but not push it into negative territory.
Stock selection will be of utmost importance, and we believe that many good
opportunities still exist.
- --------------------------------------------------------------------------------
Bond Market
Good Times for Bonds
Bond prices have risen in the past year, as interest rates have fallen.
[LINE GRAPH APPEARS HERE]
30-YEAR U.S. TREASURY RATES
1/2 5.839 5/1 5.934 9/4 5.289
1/9 5.729 5/8 5.978 9/11 5.230
1/16 5.810 5/15 5.973 9/18 5.148
1/23 5.971 5/22 5.901 9/25 5.110
1/30 5.801 5/29 5.803
10/2 4.841
2/6 5.921 6/5 5.788 10/9 5.116
2/13 5.850 6/12 5.663 10/16 4.979
2/20 5.872 6/19 5.670 10/23 5.179
2/27 5.924 6/26 5.633 10/30 5.158
3/6 6.020 7/3 5.600 11/6 5.388
3/13 5.894 7/10 5.626 11/13 5.251
3/20 5.886 7/17 5.747 11/20 5.219
3/27 5.959 7/24 5.687 11/27 5.160
7/31 5.714
4/3 5.795 12/4 5.041
4/10 5.882 8/7 5.632 12/11 5.025
4/17 5.877 8/14 5.541 12/18 4.999
4/24 5.946 8/21 5.434 12/25 5.217
8/28 5.339
Six months ago in our annual report to shareholders we predicted the yield on
long-term U.S. Treasury bonds could range from 4 to 6%, with the 5% "handle"
containing most of the movement. This was evident in the past two quarters, as
late in the third quarter yields fell to below 5% for the first time since 1967.
Yields remained around 5% through the end of the year.
The Treasury market benefited from continued global turmoil. The economic
problems that began in Asia and spread to Russia this past summer, have more
recently affected Latin America, particularly Brazil. Unsuccessful action by the
International Monetary Fund further unsettled investor confidence. This global
uncertainty contributed to a massive flight to quality, as investors around the
world sought relative safety in U.S. Treasuries.
Although the municipal bond market did not benefit from the global flight to
quality, the sector is currently experiencing a resurgence, with some
non-taxable yields actually higher than Treasuries. While Treasuries prospered,
some other sectors of the fixed income market missed out on the rally. For
example, investment grade corporate bonds along with high yield bonds were hurt
by fears that global problems would affect U.S. corporate earnings and growth.
Going forward, we expect to see more countries acting to defend their
currencies, either by raising interest rates or tightening control of capital.
In either case, we believe financial uncertainties around the world may
increase, ultimately causing the U.S. economy to slow from its accelerated pace.
We expect the Federal Reserve may again cut interest rates in the second half of
1999, reducing the Fed Funds rate to the 4-4.5% range. And if inflation remains
in its current low range, the real rate of returns on bonds should be
historically high, making this a relatively attractive opportunity for bond
investors.
4
<PAGE>
Manager
Spotlight
PIMCO Innovation Fund
Dennis McKechnie
[PICTURE OF DENNIS MCKECHNIE APPEARS HERE]
By all measures, the high-tech PIMCO Innovation Fund has been an excellent
performer. In 1998 it posted a 79% return. And since its inception in 1994 it
has posted a 36.6% annual return, versus 26.1% from the Lipper Science &
Technology Fund Average. To learn more about Innovation we spoke with Fund
manager Dennis McKechnie.
Q: Technology as a whole had a great year in 1998, led by the Internet industry.
Why do you think these stocks were such high-flyers?
A: I believe Wall Street is coming to appreciate the tremendous growth potential
of this medium. The release of the Starr report over the Internet and the
exponential increase in holiday shopping via the Web were two important drivers.
And we are seeing a lot of companies increasing their Internet advertising
budgets, which is an indicator of the growing power of the Internet.
Q: Can you give us an example of a winning Internet holding?
A: America Online was one of our best performers. The company has consistently
beaten Wall Street expectations in key factors such as subscriber growth,
advertising traffic and electronic commerce revenues. And AOL has added new
growth aspects to its story through acquisitions of companies such as Mirabilis
and Netscape, which bring it additional exposure to informal chat services and
corporate Internet users.
Q: What is your outlook for Internet stocks going forward?
A: We have been very successful in buying the Internet group, with initial
purchases of key holdings 15-30 months ago. We're working hard to ensure that we
are equally successful in paring the group and/or individual names if the time
comes. We're looking at all Internet stocks with a discriminating eye, since
there certainly is concern about overvaluation.
Q: How about an example of a non-Internet success?
A: Nokia contributed meaningfully to the Fund's performance, driven by greater
demand for cellular phones and Nokia's astute product positioning relative to
its competition. Cellular phones are experiencing accelerated growth as the new
digital technology makes both the phones and the service less expensive. Nokia's
products have garnered higher customer satisfaction than phones from Ericsson
and Motorola, leading to an increase in demand.
Q: What other technology-related areas have you focused on?
A: We are very optimistic about the personal computer, semiconductor and disk
drive areas as a result of recent data as well as anecdotal information. PC
manufacturers have been able to overcome the excess inventory and oversupply
that had plagued them for much of 1998.
Also, PC demand at the retail level has been very strong. And it's becoming
increasingly likely that the Year 2000 problem will drive incremental PC demand
for all of 1999, as corporations race to replace their non-compliant systems,
rather than attempt to fix them. This bodes well for the semiconductor and other
PC-related industries as well.
Q: Despite the Innovation Fund's success, it has been less volatile than other
tech funds. How do you achieve this balance?
A: We have a relatively more diversified portfolio than many of our
counterparts. In addition to traditional tech firms we also can invest in
companies in other industries that use technology in innovative ways to advance
their business.
Q: Can you give us an example of a non-traditional tech holding?
A: Sofamor Danek is one of our successes that benefited from the use of
technology. The company is a developer of devices used by surgeons to correct
spinal disorders. The market for these products is growing more than 30% per
year and Sofamor Danek is the industry leader. The company is an attractive
investment that garnered attention from a much larger medical technology
company, Medtronic, which has made an offer to buy it at a premium.
Q: What's your outlook for technology stocks going forward?
A: Despite the sector's success, we believe there continues to be many long-term
investment opportunities. There will undoubtedly be some bumps in the road, so
we feel a dollar cost averaging plan is a smart way to approach an investment in
the Fund.
The views of Mr. McKechnie are not indicative of the future performance of any
PIMCO Fund. Please refer to page 16 for more complete performance information on
the Innovation Fund.
With a dollar cost averaging plan there is no assurance of making a profit or a
guarantee against loss during declining markets. Investors should consider their
ability to continue investing during periods of declining markets.
5
<PAGE>
In The
News
Recent News on PIMCO Funds
The PIMCO Funds and their institutional portfolio managers are regularly
featured in the press. Here is a sample of some recent articles:
. Innovation Fund's High-Tech Success The high-tech PIMCO Innovation Fund was
named the Fund of the Year by Mutual Funds magazine. In recent months the Fund
has been featured in The Wall Street Journal, Barron's, USA Today and
SmartMoney. For additional Fund details turn to page 16.
. Bill Gross Named Manager of the Year Bill Gross, manager of the PIMCO Total
Return, Low Duration, Short-Term and StocksPLUS Funds was named Morningstar's
1998 Fixed Income Manager of the Year. In its presentation of the award,
Morningstar said, "Gross has set PIMCO apart by building a fixed income
management process that blends discipline and flexibility. The firm's investment
committee has moved aggressively to take advantage of declining interest rates,
but has also protected shareholders from losses by taking a more defensive
position in time to avoid shakier markets."
. Tempering Risk and Reward Morningstar praised the managers of the PIMCO
Capital Appreciation and Mid-Cap Growth Funds for their prudent investment
technique. Morningstar said Mid-Cap Growth "tempers the risks of growth
investing without sacrificing the rewards" (8/98). Of the Capital Appreciation
Fund it pointed out that its "since inception return still outstrips the average
large-blend vehicle's by a healthy margin...but the co-managers don't take many
chances"(12/98).
. A High Yield Standout The Wall Street Journal, Barron's Online and Investor's
Business Daily all took note of PIMCO High Yield Fund's outstanding record in
1998.
Morningstar Inc., an independent organization, provides investors with
information regarding a wide range of investment products. One service offered
by Morningstar is assigning star ratings to the mutual funds it tracks. Funds
begin to be rated once they have a three-year record. The highest Morningstar
rating is five-stars, and the lowest rating is one-star. Following are the PIMCO
Fund family's five- and four-star rated Funds as of December 31, 1998.
- --------------------------------------------------------------------------------
PIMCO STOCK FUNDS Overall 3 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
Equity Income **** 4 4 -
StocksPLUS ***** 5 5 -
Capital Appreciation **** 4 4 -
Mid-Cap Growth **** 4 3 -
Innovation **** 4 - -
- --------------------------------------------------------------------------------
PIMCO BOND FUNDS Overall 3 Year 5 Year 10 Year
- --------------------------------------------------------------------------------
Short-Term ***** 5 5 5
Low Duration ***** 5 5 5
Total Return ***** 5 4 5
High Yield ***** 5 5 -
Foreign Bond ***** 5 5 -
The chart above is based on December 31, 1998 Morningstar ratings. During the
3-, 5- and 10-year periods there were 2,802, 1,702 and 732 domestic equity funds
and 1,488, 987 and 368 taxable bond funds rated, respectively.
Morningstar proprietary ratings reflect historical risk-adjusted performance and
are subject to monthly changes. Therefore, past ratings are not a guarantee of
future results. Overall ratings are calculated from a fund's 3-, 5- and 10-year
(if applicable) average annual total returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-bill returns. Ratings are based on institutional
class shares. Class D shares, which were initially offered in April 1998, have
not yet been rated by Morningstar. Had Class D shares been in existence for the
same time period as the institutional class shares, they may have received
different ratings due to Class D shares' higher expenses. 5-star ratings are
limited to the top 10% of funds in an investment category, the next 22.5% earn 4
stars and the next 35% earn 3 stars. Institutional class shares generally have a
$5 million minimum investment. Under special circumstances, institutional shares
may be available. Call for details.
With dollar cost averaging plan there is no assurance of making a profit or a
guarantee against loss during declining markets. Investors should consider their
ability to continue investing during periods of low price levels.
6
<PAGE>
The PIMCO Funds Family
PIMCO Funds offers unique access to the investment expertise of PIMCO Advisors
L.P. PIMCO manages approximately $244 billion, including assets for 46 of the
100 largest U.S. corporations. The firm's institutional heritage is reflected in
the PIMCO Funds, each seeking the highest caliber performance in a specific
investment style. To learn more about any of the PIMCO Funds, please call us at
1-800-227-7337.
<TABLE>
<CAPTION>
Fund Name Objective Primary Portfolio Composition
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock Funds Equity Income Current income and long-term growth Stocks of companies with below-average P/Es
and above-average dividends
--------------------------------------------------------------------------------------------------------------------
Value Long-term growth of capital and income Stocks of companies with below-average P/Es
--------------------------------------------------------------------------------------------------------------------
Renaissance Long-term growth of capital and income Stocks of companies with below-average
valuations
--------------------------------------------------------------------------------------------------------------------
Tax-Efficient Equity Maximum after-tax growth of capital A broadly diversified portfolio of at least 250
common stocks of companies with larger market
capitalizations
--------------------------------------------------------------------------------------------------------------------
StocksPLUS Total return exceeding the S&P 500 Index S&P 500 Index stock index futures backed by a
portfolio of short-term, fixed-income
securities
--------------------------------------------------------------------------------------------------------------------
Capital Appreciation Growth of capital Stocks of larger-capitalized companies
the manager believes are reasonably priced
--------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Growth of capital Stocks of medium-capitalized companies
the manager believes are reasonably priced
--------------------------------------------------------------------------------------------------------------------
Innovation Capital appreciation Stocks of technology-related companies
--------------------------------------------------------------------------------------------------------------------
Stock and Bond Strategic Total return S&P 500 Index stock futures backed by a
Funds Balanced portfolio of short-term, fixed income
securities, and intermediate-term investment
grade bonds
--------------------------------------------------------------------------------------------------------------------
Bond Funds Short-Term Maximum current income consistent with Money market securities and short-term bonds
preservation of capital and daily (up to 1 year duration)
liquidity
--------------------------------------------------------------------------------------------------------------------
Low Duration Maximum total return Shorter-term, investment grade bonds
(1-3 year duration)
--------------------------------------------------------------------------------------------------------------------
Real Return Bond Maximum real return Inflation-indexed government bonds
--------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return Intermediate-term, investment grade bonds
(3-6 year duration)
--------------------------------------------------------------------------------------------------------------------
Total Return Maximum total return Mortgage-related securities
Mortgage (2-6 year duration)
--------------------------------------------------------------------------------------------------------------------
High Yield Maximum total return High-yield bonds (2-6 year duration)
--------------------------------------------------------------------------------------------------------------------
Municipal Bond High current income exempt from Investment grade municipal bonds
federal income tax (3-10 year duration)
--------------------------------------------------------------------------------------------------------------------
Foreign Bond Maximum total return Intermediate-term, investment grade
foreign bonds (3-6 year duration)
</TABLE>
7
<PAGE>
Multi-Manager
Series
PIMCO Funds Semi-Annual Report
Dear Fellow Shareholder:
Despite a volatile third quarter, stocks rebounded in the fourth quarter,
finishing the year with strong positive returns. For the year ended December 31,
1998, the S&P 500 Index returned an impressive 28.6%. However, to a great extent
these returns were basically limited to the large-cap growth and technology
sectors, as both value and small-cap stocks continued to underperform the rest
of the market.
Market Reaches New Highs While the stock market reached new highs in the fourth
quarter, we remain concerned about international problems and their effects on
the markets. Investors' anxiety over global economic turmoil in the third
quarter was quickly soothed by several interest rate cuts in the fourth quarter.
Though these cuts ended the decline that was taking place in the domestic
markets, they were unable to have much effect on the troubled economies
overseas. And, while central banks have cut interest rates globally, weakness
remains in Asia and Russia--and recently spread to Brazil, as well. We do not
believe the international conditions are going to be corrected quickly. In
addition, we believe we will see a slowing domestic economy in 1999. This could
lead to a reduction in corporate profits as well as smaller returns for the
year. We are positioning our portfolios with this in mind, hoping to benefit
from the upside potential of the market while limiting downside risk.
Meeting our Shareholders' Needs 1998 was an eventful year, not just for the
financial markets but for the PIMCO Funds family. In 1998, we introduced D
shares and a new fund, PIMCO Tax-Efficient Equity Fund, as part of PIMCO Funds'
efforts to increase the investment options available to shareholders. Finally,
the year ended on a high note as PIMCO Innovation Fund was named the 1998 Fund
of the Year by Mutual Funds magazine and Bill Gross was named 1998 Fixed-Income
Manager of the Year by Morningstar.
As always, we appreciate the trust you have placed in us through your
investments. We will continue to work hard to help you meet your financial
objectives. If you have any questions regarding your investment, please contact
your financial advisor, or call us at 1-800-426-0107. Or, visit our Web site at
www.pimcofunds.com.
Sincerely,
/s/ Stephen J. Treadway
Stephen J. Treadway
President
January 12, 1999
<PAGE>
PIMCO Funds Financial Information
We are pleased to present an in-depth review of the PIMCO Multi-Manager Series
Funds as of December 31, 1998. In order to help analyze, compare and contrast
the Funds, the report is broken down into a number of sections. Listed below is
a table of contents and descriptions of the various sections.
Pages 10-16 Fund Summaries
A summary of a Fund's performance record and portfolio composition, and a review
from the Fund's investment manager.
Pages 18-26 Schedule of Investments
The schedule of investments includes a listing of securities in the Fund's
portfolio as of December 31, 1998, including the number of shares or principal
amount and value as of that date.
Schedule of
Fund Name Fund Summary Investments
Equity Income Fund Page 10 Page 18
Value Fund Page 11 Page 19
Renaissance Fund Page 12 Page 20
Tax-Efficient Equity Fund Page 13 Page 21
Capital Appreciation Fund Page 14 Page 24
Mid-Cap Growth Fund Page 15 Page 25
Innovation Fund Page 16 Page 26
Page 27 Financial Highlights
This chart shows a per share breakdown of the factors that affect a Fund's NAV
for the current and past reporting periods. In addition to showing total return,
the chart reports distributions, asset size, expense ratios and portfolio
turnover rate.
Page 28 Statements of Assets and Liabilities
A "balance sheet" of a Fund as of the last day of the fiscal period. It includes
the Fund's Class level NAVs per share by dividing the Fund's Class level net
assets (assets minus liabilities) by the number of Class level shares
outstanding.
Page 29 Statements of Operations
This statement lists a Fund's income, expenses, and gains and losses on
securities and currency transactions, and appreciation or depreciation from
portfolio holdings.
Pages 30-31 Statements of Changes in Net Assets
This reports the increase or decrease in a Fund's net assets during the
reporting period. Changes in net assets are due to a variety of factors,
including investment operations, dividends, distributions and capital share
transactions.
Pages 32-35 Notes to Financial Statements
A description of the significant accounting policies of the Funds, and more
detailed information about the schedules and tables that appear in the report.
9
<PAGE>
PIMCO Equity Income Fund
Objective
Current income
as a primary
objective and
long-term growth
of capital
Portfolio
Primarily common
stocks with
below-average
price-to-earnings
ratios and higher
dividend yields
relative to their
industry groups
Fund Inception
Date
3/8/91
Total Net
Assets
$200 million
Number of
Securities
in the
Portfolio
47 (not including short-term instruments)
PIMCO ADVISORS
INSTITUTIONAL
MANAGER
NFJ Investment
Group
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Equity Inc.
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months 1.4% 9.2% 1.8%
1 year 8.1% 28.6% 10.9%
3 years 19.6% 28.2% 18.8%
5 years 17.4% 24.1% 16.6%
Inception 16.1% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
CLASS D
PIMCO S&P 500
EQUITY INCOME INDEX
FUND D
================== =================== ======================
03/31/91 10,000.00 10,000.00
04/30/91 10,065.87 10,024.00
05/31/91 10,632.34 10,457.04
06/30/91 10,259.06 9,978.10
07/31/91 10,829.67 10,443.08
08/31/91 10,987.30 10,690.59
09/30/91 11,044.15 10,512.05
10/31/91 11,118.11 10,652.91
11/30/91 10,670.62 10,223.60
12/31/91 11,607.02 11,393.18
01/31/92 11,891.07 11,181.27
02/29/92 12,199.15 11,326.62
03/31/92 11,987.45 11,105.76
04/30/92 12,199.15 11,432.26
05/31/92 12,216.04 11,488.28
06/30/92 12,222.54 11,317.34
07/31/92 12,765.92 11,779.65
08/31/92 12,391.09 11,538.52
09/30/92 12,492.83 11,674.10
10/31/92 12,504.85 11,716.37
11/30/92 12,878.56 12,113.25
12/31/92 13,265.87 12,261.88
01/31/93 13,329.83 12,364.39
02/31/93 13,602.75 12,532.91
03/31/93 13,909.56 12,797.36
04/30/93 13,632.91 12,488.05
05/31/93 13,732.87 12,822.10
06/30/93 13,972.22 12,859.67
07/31/93 13,945.09 12,807.97
08/31/93 14,432.10 13,293.91
09/30/93 14,415.72 13,191.94
10/31/93 14,527.81 13,464.89
11/30/93 14,377.14 13,336.57
12/31/93 14,331.76 13,497.81
01/31/94 14,803.18 13,956.73
02/28/94 14,478.84 13,577.95
03/31/94 13,896.36 12,985.95
04/30/94 14,000.87 13,152.42
05/31/94 14,082.83 13,368.26
06/30/94 13,880.22 13,040.60
07/31/94 14,332.95 13,468.85
08/31/94 14,915.44 14,021.08
09/30/94 14,635.63 13,678.26
10/31/94 14,804.26 13,985.61
11/30/94 14,005.72 13,476.26
12/31/94 14,045.38 13,676.11
01/31/95 14,498.98 14,030.73
02/28/95 14,966.53 14,577.51
03/31/95 15,393.82 15,007.69
04/30/95 15,788.20 15,449.67
05/31/95 16,364.50 16,067.19
06/30/95 16,412.10 16,440.43
07/31/95 16,981.31 16,985,60
08/31/95 17,215.46 17,028.23
09/30/95 17,662.84 17,746.82
10/31/95 17,588.57 17,683.46
11/30/95 18,187.32 18,459.77
12/31/95 18,672.23 18,815.30
01/31/96 18,945.98 19,455.78
02/29/96 19,192.03 19,636.13
03/31/96 19,569.68 19,825.23
04/30/96 20,056.71 20,117.45
05/31/96 20,374.00 20,636.28
06/30/96 20,411.25 20,714.90
07/31/96 19,466.19 19,799.72
08/31/96 20,127.32 20,117.45
09/30/96 20,814.89 21,355.13
10/31/96 21,280.70 21,944.10
11/30/96 22,877.67 23,602.85
12/31/96 22,592.87 23,135.28
01/31/97 23,084.94 24,580.77
02/28/97 23,743.94 24,773.49
03/31/97 22,942.16 23,755.54
04/30/97 23,771.98 25,173.75
05/31/97 25,253.80 26,706.33
06/30/97 25,958.06 27,902.77
07/31/97 27,600.21 30,123.00
08/31/97 26,967.67 28,435.51
09/30/97 28,641.34 29,992.92
10/31/97 27,750.71 28,991.15
11/30/97 28,892.79 30,333.15
12/31/97 29,566.94 30,853.98
01/31/98 29,673.33 31,195.22
02/28/98 31,410.82 33,445.02
03/31/98 32,883.64 35,157.74
04/30/98 32,393.05 35,511.43
05/31/98 32,197.65 34,900.98
06/30/98 31,509.14 36,318.66
07/31/98 30,251.92 35,931.87
08/31/98 26,125.56 30,736.84
09/30/98 28,045.79 32,705.84
10/31/98 29,804.26 35,366.13
11/30/98 31,839.89 37,509.68
12/31/98 31,951.33 39,670.98
*Excluding the 6-month return, these returns represent the blended performance
of the Fund's Class D shares (for the period from 4/8/98) and the prior
performance of the Fund's institutional class shares (for the period from
3/8/91), adjusted for Class D expenses. Past performance is not an indication of
future results. See page 17 for Footnotes, which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 4.2%
Tobacco/food products
- --------------------------------------------------------------------------------
PNC BANK Corp. 4.1%
Commercial banking
- --------------------------------------------------------------------------------
Union Planters Corp. 3.6%
Commercial banking
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 2.2%
Consumer products
- --------------------------------------------------------------------------------
BF Goodrich Co. 2.2%
Aerospace/climate control systems
- --------------------------------------------------------------------------------
Ford Motor Co. 2.2%
Auto maker
- --------------------------------------------------------------------------------
American Home Products Corp. 2.1%
Drug/consumer goods
- --------------------------------------------------------------------------------
Georgia-Pacific Corp. (Timber Group) 2.1%
Timber company
- --------------------------------------------------------------------------------
Dana Corp. 2.1%
Auto industry parts
- --------------------------------------------------------------------------------
Intimate Brands, Inc. 2.1%
Intimate apparel
- --------------------------------------------------------------------------------
Top Ten Total 26.9%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Financial & Business Services 19.6%
- --------------------------------------------------------------------------------
Consumer Discretionary 14.0%
- --------------------------------------------------------------------------------
Materials & Processing 13.4%
- --------------------------------------------------------------------------------
Utilities 11.5%
- --------------------------------------------------------------------------------
Consumer Staples 10.4%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 99%
- --------------------------------------------------------------------------------
Cash Equivalents 1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the six-month period ended December 31, 1998, the PIMCO Equity Income Fund
posted a return of 1.4%. One of the best performing sectors for the Fund this
period was consumer staples, which performed especially well in the difficult
third quarter. In particular, overweighting in RJR Nabisco greatly enhanced the
Fund's performance. The company's stock price rose after the settlement between
the tobacco industry and the state attorneys general was finalized this year.
The Fund also benefited from holdings in American Home Products and Budweiser.
These consumer staples stocks are value stocks with some growth characteristics
that have shown the ability to generate attractive earnings in any type of
economy, especially during down markets.
The Equity Income Fund also benefited from its exposure to the financial
sector. Despite a difficult third quarter, the sector performed well in the
fourth quarter as a result of low interest rates and a strong domestic economy.
For instance, Fund holding Chase Manhattan was a very strong performer this
period even though it suffered a bad third quarter. And, although its stock is
at all time highs, its valuation is low and therefore appears to be positioned
for further growth.
One standout stock held by the Fund this period was Intimate Brands. The
company, a leading retailer of intimate apparel and personal care products, was
added to the portfolio during the last six months. Through its Victoria's Secret
and Bath & Body Works brands, the company continued to post solid sales and
earnings growth. New product introductions, national television advertising, and
a Web site launch all strengthened brand recognition for Victoria's Secret -
especially the popular Web site, which is expected to boost its catalog sales.
The company continues to expand and find new sources of revenue and has a low
valuation, making it an attractive investment.
The energy sector detracted from the Fund's performance this period.
Unfortunately, a warm winter and over-supply from OPEC caused the price of oil
to reach a 12-year low - and was responsible for much of the underperformance of
the sector. For instance, Kerr McGee, a crude oil and natural gas
exploration/production company (also engaged in chemical manufacturing) saw its
stock decrease throughout the last six months because of the price of oil,
despite an increase in its sales volume.
Looking ahead, the manager believes the Fund is well-positioned to continue
its strong performance. And the manager is optimistic that the Fund's
higher-yielding stock holdings will soon outperform growth offerings.
See page 18 for financial details.
10
<PAGE>
December 31, 1998
Objective
Long-term growth of capital and current income
Portfolio
Primarily stocks the manager believes are undervalued and/or offer above-average
dividend yields
Fund Inception date
12/30/91
Total Net Assets
$244 million
Number of Securities
in the
Portfolio
46 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
NFJ Investment Group
PIMCO Value Fund
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Gr. & Income
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months 1.6% 9.2% 3.1%
1 year 9.9% 28.6% 15.6%
3 years 18.3% 28.2% 21.3%
5 years 17.0% 24.1% 18.4%
Inception 16.3% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
CLASS-D
PIMCO S&P 500
Value Index
Fund D
============= =============== =============
12/31/91 10,000.00 10,000.00
01/31/92 10,285.69 9,814.00
02/29/92 10,630.23 9,941.58
03/31/92 10,388.18 9,747.72
04/30/92 10,431.92 10,034.30
05/31/92 10,338.20 10,083.47
06/30/92 10,114.70 9,933.43
07/31/92 10,470.21 10,339.21
08/31/92 10,164.37 10,127.57
09/30/92 10,302.04 10,246.57
10/31/92 10,364.30 10,281.92
11/30/92 10,917.69 10,632.02
12/31/92 11,269.45 10,762.47
01/31/93 11,503.44 10,852.44
02/28/93 11,624.35 11,000.36
03/31/93 11,982.90 11,232.47
04/30/93 11,770.06 10,960.98
05/31/93 11,932.64 11,254.19
06/30/93 12,012.04 11,287.16
07/31/93 11,950.96 11,241.79
08/31/93 12,596.36 11,668.30
09/30/93 12,623.58 11,578.81
10/31/93 13,057.25 11,818.37
11/30/93 12,921.49 11,705.74
12/31/93 13,066.23 11,847.27
01/31/94 13,667.54 12,250.07
02/28/94 13,441.53 11,917.61
03/31/94 12,716.12 11,398.00
04/30/94 12,557.61 11,544.12
05/31/94 12,553.39 11,733.56
06/30/94 12,260.60 11,445.97
07/31/94 12,769.34 11,821.86
08/31/94 13,303.57 12,306.55
09/30/94 12,895.25 12,005.66
10/31/94 13,028.59 12,275.42
11/30/94 12,369.96 11,828.35
12/31/94 12,484.07 12,003.77
01/31/95 12,819.79 12,315.02
02/28/95 13,389.31 12,794.94
03/31/95 13,754.25 13,172.52
04/30/95 14,121.98 13,560.45
05/31/95 14,655.37 14,102.46
06/30/95 14,906.80 14,430.06
07/31/95 15,558.93 14,908.56
08/31/95 15,746.68 14,945.98
09/30/95 16,179.36 15,576.70
10/31/95 16,221.14 15,521.09
11/30/95 16,914.72 16,202.47
12/31/95 17,273.41 16,514.53
01/31/96 17,762.39 17,076.68
02/29/96 18,146.57 17,234.98
03/31/96 18,289.44 17,400.96
04/30/96 18,524.22 17,657.45
05/31/96 18,894.34 18,112.83
06/30/96 18,806.12 18,181.84
07/31/96 17,788.61 17,378.57
08/31/96 18,476.64 17,745.08
09/30/96 18,976.93 18,743.78
10/31/96 19,243.26 19,260.73
11/30/96 20,888.73 20,716.65
12/31/96 20,705.64 20,306.25
01/31/97 21,397.37 21,574.99
02/28/97 21,755.86 21,744.13
03/31/97 20,989.36 20,850.67
04/30/97 21,810.65 22,095.45
05/31/97 23,092.86 23,440.62
06/30/97 23,674.34 24,490.76
07/31/97 25,232.94 26,439.49
08/31/97 24,697.22 24,958.35
09/30/97 26,176.56 26,325.32
10/31/97 24,853.28 25,446.06
11/30/97 25,454.13 26,623.95
12/31/97 26,030.03 27,081.09
01/31/98 26,128.55 27,380.60
02/28/98 27,676.46 29,355.29
03/31/98 28,791.66 30,858.58
04/30/98 28,233.62 31,169.02
05/31/98 28,107.87 30,633.22
06/30/98 28,150.67 31,877.54
07/31/98 26,962.71 31,538.05
08/31/98 23,093.57 26,978.28
09/30/98 24,416.83 28,706.50
10/31/98 26,567.95 31,041.49
11/30/98 28,084.98 32,922.92
12/31/98 28,596.13 34,819.93
*Excluding the 6-month return, these returns represent the blended performance
of the Fund's retail Class D shares (for the period from 4/8/98) and the prior
performance of the Fund's institutional class shares (for the period from
12/30/91), adjusted for Class D expenses. Past performance is not an indication
of future results. See page 17 for Footnotes, which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
GTE Corp. 3.0%
Telecommunications services
- --------------------------------------------------------------------------------
Public Service Enterprise Group, Inc. 3.0%
Electric & gas utility
- --------------------------------------------------------------------------------
Repsol SA SP - ADR 3.0%
Oil
- --------------------------------------------------------------------------------
Amgen, Inc. 3.0%
Biotechnology
- --------------------------------------------------------------------------------
Bell Atlantic Corp. 3.0%
Telecommunications services
- --------------------------------------------------------------------------------
DTE Energy Co. 3.0%
Electric/steam utility
- --------------------------------------------------------------------------------
SUPERVALU, Inc. 3.0%
Large food wholesaler/retailer
- --------------------------------------------------------------------------------
Whirlpool Corp. 3.0%
Home appliances
- --------------------------------------------------------------------------------
NICOR, Inc. 2.9%
Natural gas utility
- --------------------------------------------------------------------------------
Chase Manhattan Corp. 2.9%
Commercial banking
- --------------------------------------------------------------------------------
Top Ten Total 29.8%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Consumer Staples 13.1%
- --------------------------------------------------------------------------------
Consumer Discretionary 12.9%
- --------------------------------------------------------------------------------
Financial & Business Services 11.8%
- --------------------------------------------------------------------------------
Energy 9.8%
- --------------------------------------------------------------------------------
Health Care 9.2%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 97%
- --------------------------------------------------------------------------------
Cash Equivalents 3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998, PIMCO Value Fund posted a return of
1.6%.
Value stocks have had a difficult year, as the stocks that outperformed
the market this year had relatively high valuations and were within high revenue
growth sectors. While value stocks did outperform during the market uncertainty
of the third quarter, this strength was short lived as growth stocks once again
resumed their outperformance in the fourth quarter.
The consumer staples sector contributed to the Fund's performance this
year, performing well in both up and down markets. For example, SUPERVALU, a
supermarket chain, saw its stock price rise due to a number of factors: a strong
management team, earnings growth, successful expansion, and, more generally,
investor attraction to consumer staples stocks in down markets. Other strong
performers for the Fund included Iowa Beef Products, a meat packing company. The
low price of pigs and cattle enabled the company to increase its profit margins,
and its stock rose as a result.
Another strong sector for the Fund this year was financials. In particular,
Chase Manhattan saw its stock price increase significantly during the year. The
company performed well, avoiding the market declines and trading losses that
plagued other banking companies. Chase benefited from a surge in lending,
profits in currency trading, and falling interest rates. Strong consumer and
investment banking businesses, along with reduced emerging markets trading, also
helped the second-largest United States bank. And Chase displayed confidence in
its own future by announcing a stock buyback of approximately $3 billion.
One disappointing sector for the Fund this year was transportation. Despite
the low/price of fuel, cutthroat competition caused a reduction in profit
margins for the major airlines. In addition, investors shunned this type of
cyclical company, adding to their stock price decline. Fund holding United
Airlines, despite solid fundamentals, saw its stock price drop during the year
as a result.
Despite value stocks' short-term underperformance relative to growth
stocks, the manager remains optimistic that investors will finally diversify
away from growth stocks because of their excessive valuations. The manager
believes that value stocks' lower P/E ratios and lower volatility will make them
attractive investments, especially in uncertain markets.
See page 19 for financial details.
11
<PAGE>
December 31, 1998
Objective
Long-term growth
of capital and
current income
Portfolio
Primarily stocks
common stocks
with below-
average
valuations that
have improving
business
fundamentals
Fund Inception
Date
4/18/88
Total Net
Asset
$636 million
Number of
Securities
in the
Portfolio
51 (not including
short-term
instruments)
PIMCO ADVISORS
INSTITUTIONAL
MANAGER
Columbus
Circle Investors
PIMCO Renaissance fund
- --------------------------------------------------------------------------------
Performance*
- --------------------------------------------------------------------------------
Average Annual total Return For periods ended 12/31/98
Lipper
D Shares S&P 500 Equity Inc.
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months -1.0% 9.2% 1.8%
1 year 11.7% 28.6% 10.9%
5 years 18.5% 24.1% 16.6%
10 years 14.8% 19.2% 14.5%
Inception 14.4% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
CLASS-D
PIMCO S&P 500
Renaissance Index
Fund
============= ============= ============
04/30/88 10,000.00 10,000.00
05/31/88 9,999.99 10,087.00
06/30/88 10,231.81 10,549.99
07/31/88 10,200.23 10,509.90
08/31/88 10,061.54 10,152.57
09/30/88 10,211.25 10,585.07
10/31/88 10,328.86 10,879.33
11/30/88 10,275.10 10,723.76
12/31/88 10,613.99 10,911.42
01/31/89 10,932.00 11,710.14
02/28/89 10,877.19 11,418.56
03/31/89 10,976.03 11,684.61
04/30/89 11,264.28 12,291.04
05/31/89 11,585.77 12,788.83
06/30/89 11,673.84 12,715.93
07/31/89 11,898.50 13,864.18
08/31/89 12,269.32 14,135.92
09/30/89 12,122.10 14,077.96
10/31/89 11,894.71 13,751.35
11/30/89 11,883.30 14,031.88
12/31/89 11,885.79 14,368.64
01/31/90 11,304.45 13,404.51
02/28/90 11,304.43 13,577.42
03/31/90 11,597.44 13,937.23
04/30/90 11,247.15 13,588.80
05/31/90 11,947.78 14,913.70
06/30/90 11,896.36 14,812.29
07/31/90 11,566.63 14,764.89
08/31/90 10,780.28 13,430.14
09/30/90 10,010.71 12,776.10
10/31/90 9,600.00 12,721.16
11/30/90 9,933.71 13,542.95
12/31/90 10,118.32 13,920.79
01/31/91 10,444.31 14,527.74
02/28/91 11,070.19 15,566.47
03/31/91 11,338.41 15,943.18
04/30/91 11,456.75 15,981.45
05/31/91 12,061.86 16,671.85
06/30/91 11,638.94 15,908.27
07/31/91 12,063.61 16,649.60
08/31/91 12,554.64 17,044.20
09/30/91 12,756.99 16,759.56
10/31/91 13,024.73 16,984.14
11/30/91 12,623.15 16,299.68
12/31/91 13,582.86 18,164.36
01/31/92 13,826.81 17,826.50
02/29/92 14,097.90 18,058.25
03/31/92 13,833.44 17,706.11
04/30/92 13,847.05 18,226.67
05/31/92 13,996.94 18,315.98
06/30/92 13,839.33 18,043.44
07/31/92 14,154.49 18,780.51
08/31/92 13,976.30 18.396.08
09/30/92 14,119.65 18,612.23
10/31/92 14,091.96 18,676.44
11/30/92 14,451.14 19,312.37
12/31/92 14,748.53 19,549.34
01/31/93 14,985.33 19,712.77
02/28/93 14,860.02 19,981.45
03/31/93 15,424.81 20,403.06
04/30/93 15,298.82 19,909.92
05/31/93 15,662.69 20,442.51
06/30/93 15,979.01 20,502.41
07/31/93 16,344.69 20,419.99
08/31/93 17,399.74 21,194.72
09/30/93 17,689.86 21,032.16
10/31/93 17,944.14 21,467.32
11/30/93 17,491.96 21,262.73
12/31/93 18,023.93 21,519.80
01/31/94 18,545.04 22,251.47
02/28/94 18,342.36 21,647.57
03/31/94 17,331.66 20,703.73
04/30/94 17,215.41 20,969.15
05/31/94 17,142.63 21,313.26
06/30/94 16,741.66 20,790.87
07/31/94 17,165.31 21,473.64
08/31/94 17,968.71 22,354.06
09/30/94 17,947.80 21,807.50
10/31/94 17,903.74 22,297.52
11/30/94 17,169.93 21,485.44
12/31/94 17,236.50 21,804.07
01/31/95 17,280.85 22,369.45
02/28/95 17,664.85 23,241.19
03/31/95 18,144.86 23,927.04
04/30/95 18,486.05 24,631.69
05/31/95 18,530.60 25,616.22
06/30/95 18,998.09 26,211.28
07/31/95 19,936.73 27,080.45
08/31/95 20,160.12 27,148.42
09/30/95 20,812.83 28,294.08
10/31/95 20,872.60 28,193.07
11/30/95 21,874.30 29,430.75
12/31/95 22,143.55 29,997.58
01/31/96 22,904.87 31,018.70
02/29/96 23,206.23 31,306.24
03/31/96 23,394.87 31,607.72
04/30/96 23,792.28 32,073.62
05/31/96 24,348.45 32,900.80
06/30/96 24,399.50 33,026.15
07/31/96 23,364.23 31,567.06
08/31/96 24,271.93 32,232.81
09/30/96 25,473.73 34,046.87
10/31/96 26,351.74 34,985.88
11/30/96 27,692.30 37,630.46
12/31/96 27,753.25 36,885.00
01/31/97 28,763.31 39,189.58
02/28/97 28,616.38 39,496.83
03/31/97 27,894.36 37,873.90
04/30/97 29,070.33 40,134.97
05/31/97 30,871.10 42,578.39
06/30/97 32,485.16 44,485.90
07/31/97 35,353.05 48,025.64
08/31/97 34,507.33 45,335.25
09/30/97 37,023.23 47,818.26
10/31/97 35,312.68 46,221.13
11/30/97 36,691.85 48,360.70
12/31/97 37,726.31 49,191.06
01/31/98 37,748.75 49,735.11
02/28/98 40,601.16 53,322.01
03/31/98 42,183.51 56,052.63
04,30/98 43,141.54 56,616.52
05/31/98 42,250.28 55,643.28
06/30/98 42,562.55 57,903.51
07/31/98 41,694.27 57,286.84
08/31/98 34,293.54 49,004.31
09/30/98 35,497.24 52,143.52
10/31/98 37,034.27 56,384.88
11/30/98 39,374.84 59,802.36
12/31/98 42,115.33 63,248.18
*Class D shares commenced operations after the inception date shown. Total
return for the periods shown before the inception of Class D shares reflects the
performance for this Fund's oldest class of shares (Class C), restated to
reflect the operating expenses for Class D shares. Had Class D share returns
been restated without regard to the lower operating expenses of Class D shares,
the total return figures for the 1-, 5-, 10-year and since inception periods
would have been lower, namely 11.5%, 17.8%, 14.0% and 13.6%, respectively. Past
performance is not an indication of future results. See page 17 for Footnotes,
which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
Martin Marietta Materials, Inc. 4.0%
Aggregates/building materials
- --------------------------------------------------------------------------------
International Business Machines Corp. 3.8%
Business machines manufacturer
- --------------------------------------------------------------------------------
Allegiance Corp. 3.8%
Broadband communications
- --------------------------------------------------------------------------------
Enron Corp. 3.7%
Gas pipeline systems
- --------------------------------------------------------------------------------
Corning, Inc. 3.0%
Consumer products
- --------------------------------------------------------------------------------
Philip Morris Cos., Inc. 2.8%
Cigarettes/food products/brewing
- --------------------------------------------------------------------------------
Cendant Corp. 2.8%
Consumer services
- --------------------------------------------------------------------------------
Anheuser Busch Cos., Inc. 2.8%
Largest U.S. brewer
- --------------------------------------------------------------------------------
General Motors Corp. 2.7%
Auto maker
- --------------------------------------------------------------------------------
Tele-Communications, Inc. 2.7%
Cable TV systems
- --------------------------------------------------------------------------------
Top Ten Total 32.1%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Financial & Business Services 20.4%
- --------------------------------------------------------------------------------
Consumer Discretionary 15.7%
- --------------------------------------------------------------------------------
Communications 12.7%
- --------------------------------------------------------------------------------
Technology 11.1%
- --------------------------------------------------------------------------------
Health Care 10.5%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 97%
- --------------------------------------------------------------------------------
Cash Equivalents 3%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998, PIMCO Renaissance Fund returned
- -1.0%.
The consumer staples sector made one of the most positive contributions to
the Fund's performance this period. As investors questioned the cyclical
strength of the U.S. economy, this sector's stocks benefited from their lack of
reliance on domestic growth. One of the Fund's largest consumer staples
holdings, Philip Morris, had a strong year, as the two biggest risks to its
stock price, legislation and litigation risk, were put behind it. Congress'
inability to pass a tobacco bill and a multi-state court settlement for the
tobacco industry both eased concerns regarding potentially unknown burdens on
cash flow. While a risk of individual and class action suits remains, these two
types of suits pose less risk, as they have been largely unsuccessful thus far.
As a result, Philip Morris is able to re-focus on shareholder-friendly
activities. It already has made progress in that regard, raising its dividend
this summer.
The Fund's exposure to the technology sector also contributed to its
performance this period. Despite the fact that the Asian economic crisis hurt
many technology issues in the third quarter, the sector bounced back in the
fourth quarter. For instance, the Fund saw a strong contribution from IBM, one
of its largest holdings. A recovery in the PC industry, . which was finally able
to control inventory, aided most PC stocks in general, including IBM.
Specifically, IBM performed very well due to strong demand for its new mainframe
as well as the continued rapid growth of its MIS outsourcing business. The
company has increasingly been recognized as generating more than half of its
results from software and services, areas resistant to economic downturns, which
bodes well for its future.
One sector that saw poor performance this period was utilities. Despite a
strong third quarter, most electric and power utilities did not show strong
performance for the year, and oil stocks had a particularly poor year. Last
year's relatively warm winter as well as OPEC's inability to control output
resulted in historically low prices for oil - in fact, this year oil reached its
lowest price per barrel in 12 years! Even conflict with Iraq in the fourth
quarter could not raise its price. As a result, almost all oil stocks were
hurt - including one of Renaissance Fund's holdings, Exxon, which is considered
one of the stronger names in the sector.
The manager believes that, more than ever, a stock's underlying value and
price will be important to investors and will continue to adhere to the Fund's
investment strategy of purchasing out-of-favor companies that are showing signs
of a turnaround.
See page 20 for financial details.
12
<PAGE>
December 31, 1998
OBJECTIVE
Maximum after-
tax growth of
capital
PORTFOLIO
Broadly diversified
portfolio of at least
250 common
stocks of
companies with
larger market
capitalizations
FUND INCEPTION
DATE
7/10/98
TOTAL NET
ASSETS
$13 million
NUMBER OF
SECURITIES
IN THE
PORTFOLIO
262 (not including
short-term
instruments)
PIMCO ADVISORS
INSTITUTIONAL
MANAGER
Parametric
Portfolio
Associates
PIMCO Tax-Efficient Equity Fund
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Gr. & Income
Index Fund Avg.
- --------------------------------------------------------------
Inception 5.3% -- --
*The adjusted returns above include the effect of paying the applicable sales
charges. Past performance is not an indication of future results. See page 17
for Footnotes, which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
Microsoft Corp. 3.4%
Computer software
- --------------------------------------------------------------------------------
General Electric Co. 2.8%
Conglomerate
- --------------------------------------------------------------------------------
Intel Corp. 2.2%
Semiconductor memory chips
- --------------------------------------------------------------------------------
Exxon Corp. 1.9%
Oil
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 1.7%
Discount stores
- --------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 1.6%
Pharmaceutical/medical products
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 1.6%
Computer networks manufacturer
- --------------------------------------------------------------------------------
International Business Machines Corp. 1.5%
Business machines manufacturer
- --------------------------------------------------------------------------------
Bell Atlantic Corp. 1.4%
Telecommunications services
- --------------------------------------------------------------------------------
Philip Morris Cos., Inc. 1.4%
Cigarettes/food/brewing
- --------------------------------------------------------------------------------
Top Ten Total 19.5%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Technology 16.3%
- --------------------------------------------------------------------------------
Financial & Business Services 14.8%
- --------------------------------------------------------------------------------
Consumer Discretionary 12.1%
- --------------------------------------------------------------------------------
Health Care 11.6%
- --------------------------------------------------------------------------------
Capital Goods 7.9%
- --------------------------------------------------------------------------------
Communications 7.9%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 95%
- --------------------------------------------------------------------------------
Cash Equivalents 5%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the period since inception through December 31, 1998, the Tax-Efficient
Equity Fund posted a return of 5.3%. These returns outperformed the S&P 500
Index return of 4.8% and the Lipper Growth Income Fund Average return of -0.1%.
PIMCO Tax-Efficient Equity Fund was started on July 10, 1998. The Fund is
an actively managed stock fund seeking low tax exposure without compromising
return potential. Its manager uses an innovative investment process featuring
quantitative stock selection and active tax management.
Technology was a strong performer for the Fund in the fourth quarter. The
Fund's quantitative stock selection was highly successful in this sector. Lucent
Technologies in particular was a strong performer for the Fund this period. The
company continues to thrive outside of AT&T's shadow, continuing to build
innovative new products and winning new contracts. In fact, its performance was
so strong this year that it surpassed its old parent AT&T in market
capitalization.
The Fund's retail stocks performed well, aided by the strength of consumer
spending that was driven by a strong economy. One of the strongest performers in
this sector was Gap, Inc., which saw strong sales in all three of its retail
chains: The Gap, Banana Republic and Old Navy.
The Fund's financial services holdings were a mixed bag for the portfolio
this year. While the financial stocks' performance strongly contributed to the
Fund's performance in the fourth quarter, it was a poor performer in the third
quarter. In fact, this sector did not fully recover from its third quarter
collapse, triggered by perceptions of a global financial meltdown. Even with
returns greater than 65% for the fourth quarter, top-performing holdings Chase
Manhattan and Morgan Stanley Dean Witter still finished the year below their
July 17 highs.
The Fund's energy holdings continued to disappoint due to the plunge in oil
prices - during 1998, they reached a 12-year low. However, quantitative stock
selection was successful in domestic petroleum stocks, which contributed to the
Fund's performance.
Looking ahead, the manager believes corporate profits will decrease but
remain in positive territory in 1999. The manager is confident that the Fund is
well-positioned to maximize its earnings in a slowing growth environment.
See page 21 for financial details.
13
<PAGE>
December 31, 1998
Objective
Long-term growth
of capital and
current income.
Portfolio
Primarily common
stocks of com-
panies with market
capitalizations of
at least $100
million that have
improving
fundamentals and
whose stock is
reasonably
valued by the market
Fund Inception date
3/8/91
Total Net
Assets
$1,144 million
Number of
Securities
in the
Portfolio
91 (not including
short-term
instruments)
PIMCO ADVISORS
INSTITUTIONAL
MANAGER
Cadence Capital
Management
PIMCO Capital Appreciation Fund
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Cap App.
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months 2.6% 9.2% 5.3%
1 year 17.1% 28.6% 20.0%
3 years 25.5% 28.2% 16.1%
5 years 20.8% 24.1% 15.0%
Inception 19.3% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
CLASS-D
PIMCO S&P 500
Capital Index
Appreciation
Fund D
================= ============== =============
03/31/91 10,000.00 10,000.00
04/30/91 9,705.43 10,024.00
05/31/91 10,182.00 10,457.04
06/30/91 9,630.41 9,978.10
07/31/91 10,316.01 10,443.08
08/31/91 10,636.43 10,690.59
09/30/91 10,485.75 10,512.05
10/31/91 10.841.63 10,652.91
11/30/91 10,523.18 10,223.60
12/31/91 11,981.69 11,393.18
01/31/92 11,863.40 11,181.27
02/29/92 11,987.69 11,326.62
03/31/92 11,589,66 11,105.76
04/30/92 11,560.95 11,432.26
05/31/92 11,606.48 11,488.28
06/30/92 11,237.26 11,317.34
07/31/92 11,560.95 11,779.65
08/31/92 11,270.04 11,538.52
09/30/92 11,563.08 11,674.10
10/31/92 11,962.48 11,714.37
11/30/92 12,659.18 12,113.25
12/31/92 12,830.71 12,261.88
01/31/93 13,262.61 12,364.39
02/28/93 13,099.23 12,532.91
03/31/98 13,700.36 12,797.36
04/30/93 13,360.33 12,488.05
05/31/93 13,962.18 12,822.10
06/31/93 14,180.85 12,859.67
07/31/93 13,975.35 12,807.97
08/31/93 14,481.91 13,293.91
09/30/93 14,903.02 13,191.94
10/31/93 14,934.88 13,464.89
11/30/93 14,631.63 13,336.57
12/31/93 15,042.76 13,497.81
01/31/94 15,567.88 13,956.73
02/28/94 15,352.00 13,577.95
03/31/94 14,580.82 12,985.95
04/30/94 14,631.14 13,152.43
05/31/94 14,615.13 13,368.26
06/30/94 14,199.05 13,040.60
07/31/94 14,541.25 13,468.85
08/31/94 14,970.96 14,021.08
09/30/94 14,564.95 13,678.26
10/31/94 14,894.83 13,985.61
11/30/94 14,208.91 13,476.26
12/31/94 14,344.66 13,676.11
01/31/95 14,330.90 14,030.73
02/28/95 15,042.49 14,577.51
03/31/95 15,697.14 15,007.69
04/30/95 16,232.32 15,449.67
05/31/95 16,820.97 16,067.19
06/30/95 17,543.90 16,440.43
07/31/95 18,512.48 16,985.60
08/31/95 18,685.94 17,028.23
09/30/95 19,421.04 17,746.82
10/31/95 19,051.66 17,683.46
11/30/95 19,630.62 18,459.77
12/31/95 19,596.15 18,815.30
01/31/96 20,249.11 19,455.78
02/29/96 21,010.13 19,636.13
03/31/96 21,043.16 19,825.23
04/30/96 21,300.56 20,117.45
05/31/96 21,833.46 20,636.28
06/30/96 21,785.95 20,714.90
07/31/96 20,683.23 19,799.72
08/31/96 21,566.67 20,217.30
09/30/96 22,882.76 21,355.13
10/31/96 23,452.22 21,944.10
11/30/96 25,151.19 23,602.85
12/31/96 24,649.58 23,135.28
01/31/97 26,185.08 24,580.77
02/28/97 25,907.41 24,773.49
03/31/97 24,954.35 23,755.54
04/30/97 25,741.81 25,173.75
05/31/97 27,377.40 26,706.33
06/30/97 28,540.50 27,902.77
07/31/97 31,615.11 30,123.00
08/31/97 30,419.84 28,435.51
09/30/97 32,253.91 29,992.92
10/31/97 31,664.05 28,991.15
11/30/97 32,460.81 30,333.15
12/31/97 33,090.97 30,853.98
01/31/98 32,557.98 31,195.22
02/28/98 34,939.14 33,445.02
03/31/98 36,867.85 35,157.74
04/30/98 36,864.93 35,511.43
05/31/98 36,240.26 34,900.98
06/30/98 37,779.78 36,318.66
07/31/98 36,691.72 35,931.87
08/31/98 30,692.63 30,736.84
09/30/98 32,405.27 32,705.84
10/31/98 33,886.20 35,366.13
11/30/98 36,065.08 37,509.68
12/31/98 38,762.75 39,670.98
*Excluding the 6-month return, these returns represent the blended performance
of the Fund's Class D shares (for the period from 4/8/98) and the prior
performance of the Fund's institutional class shares (for the period from
3/8/91), adjusted for Class D expenses. Past performance is not an indication of
future results. See page 17 for Footnotes, which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
Tyco International Limited 1.8%
Fire protection services
- --------------------------------------------------------------------------------
United Technologies Corp. 1.5%
Aerospace/climate control systems
- --------------------------------------------------------------------------------
Albertson's, Inc. 1.5%
Food supermarket chain
- --------------------------------------------------------------------------------
Wellpoint Health Networks, Inc. 1.5%
Healthcare services
- --------------------------------------------------------------------------------
Capital One Financial Corp. 1.4%
Bank card issuer/services
- --------------------------------------------------------------------------------
Kroger Co. 1.4%
Supermarket/convenience stores
- --------------------------------------------------------------------------------
Safeway, Inc. 1.4%
Food supermarket chain
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 1.4%
Building controls/auto products
- --------------------------------------------------------------------------------
Harley-Davidson, Inc. 1.3%
Motorcycle manufacturer
- --------------------------------------------------------------------------------
Compuware Corp. 1.3%
Systems software
- --------------------------------------------------------------------------------
Top Ten Total 14.5%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Financial & Business Services 20.4%
- --------------------------------------------------------------------------------
Technology 18.3%
- --------------------------------------------------------------------------------
Consumer Discretionary 12.7%
- --------------------------------------------------------------------------------
Health Care 10.5%
- --------------------------------------------------------------------------------
Consumer Staples 9.0%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
*Excluding the 6-month return, these returns represent the blended performance
of the Fund's Class D shares (for the period from 4/8/98) and the prior
performance of the Fund's institutional class shares (for the period from
3/8/91), adjusted for Class D expenses. Past performance is not an indication of
future results. See page 17 for Footnotes, which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
Tyco International Limited 1.8%
Fire protection services
- --------------------------------------------------------------------------------
United Technologies Corp. 1.5%
Aerospace/climate control systems
- --------------------------------------------------------------------------------
Albertson's, Inc. 1.5%
Food supermarket chain
- --------------------------------------------------------------------------------
Wellpoint Health Networks, Inc. 1.5%
Healthcare services
- --------------------------------------------------------------------------------
Capital One Financial Corp. 1.4%
Bank card issuer/services
- --------------------------------------------------------------------------------
Kroger Co. 1.4%
Supermarket/convenience stores
- --------------------------------------------------------------------------------
Safeway, Inc. 1.4%
Food supermarket chain
- --------------------------------------------------------------------------------
Johnson Controls, Inc. 1.4%
Building controls/auto products
- --------------------------------------------------------------------------------
Harley-Davidson, Inc. 1.3%
Motorcycle manufacturer
- --------------------------------------------------------------------------------
Compuware Corp. 1.3%
Systems software
- --------------------------------------------------------------------------------
Top Ten Total 14.5%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Financial & Business Services 20.4%
- --------------------------------------------------------------------------------
Technology 18.3%
- --------------------------------------------------------------------------------
Consumer Discretionary 12.7%
- --------------------------------------------------------------------------------
Health Care 10.5%
- --------------------------------------------------------------------------------
Consumer Staples 9.0%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 95%
- --------------------------------------------------------------------------------
Cash Equivalents 5%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998, PIMCO Capital Appreciation Fund
posted a return of 2.6%.
One of the sectors that made the greatest contribution to the Capital
Appreciation Fund this period was consumer cyclicals. The strong domestic
economy drove this sector throughout the year, as consumers continued to spend
despite global economic uncertainty in the third quarter. Strong holiday
shopping sales helped these stocks end the year on a high note. Portfolio
holdings Home Depot, Lowe's, Wal-Mart, The Gap and TJX all experienced
extraordinary price appreciation.
Another sector that performed well for the Fund was financial services.
During the third quarter these stocks were hit hard by fears of economic and
currency weakness spreading from Southeast Asia to Russia and into Latin
America. However, the stocks rebounded in the fourth quarter, posting average
price gains of 13%, as a result of a strong economy and interest rate cuts. The
Fund's top performers for the fourth quarter included American Express, Bank One
and Capital One Financial.
A particularly strong performer for the Fund this period was Tyco
International, a diversified manufacturer of home security and fire protection
services. Tyco recently purchased ADT, one of the best known home security
companies, which increases its presence in this industry. And the company is
currently involved in the purchase of AMP, an electronic connector manufacturer,
which helped its stock rise. Tyco is continuing to provide shareholders with
earnings surprises and top-line growth.
One disappointing stock for the Fund this period was Jones Apparel, the
women's apparel maker. It suffered from same store sales that were
disappointing, due in part to increased competition from rivals in this market
niche. The stock also suffered because investors shunned it in the third
quarter, as they attempted to avoid cyclical stocks because of the volatile
market. The manager sold this stock in October.
Looking ahead, the manager believes the domestic economy will slow, but
will still remain relatively strong, which should continue to bode well for the
Fund's consumer cyclical stocks. The manager believes the Fund is
well-positioned to benefit from this environment in 1999.
See page 24 for financial details.
14
<PAGE>
OBJECTIVE
Growth of capital
PORTFOLIO
Primarily common stocks of companies with medium capitalizations that have
improving fundamentals and whose stock is reasonably valued
FUND INCEPTION DATE
8/26/91
TOTAL NET ASSETS
$969 million
NUMBER OF SECURITIES IN THE PORTFOLIO
87 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Cadence Capital Management
PIMCO Mid-Cap Growth Fund
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Mid-Cap
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months 0.9% 8.9% 0.8%
1 year 9.8% 18.3% 12.3%
3 years 21.0% 23.1% 16.4%
5 years 18.7% 18.7% 14.9%
Inception 17.8% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
Pimco S&P
Mid-Cap Mid-Cap
Growth Index
Fund D
============= =========== ==========
08/31/91 10,000.00 10,000.00
09/30/91 9,946.54 9,967.45
10/31/91 10,307.48 10,357.92
11/30/91 10,013.26 10,008.88
12/31/91 11,315.88 11,191.96
01/31/92 11,324.89 11,389.96
02/29/92 11,431.83 11,571.19
03/31/92 11,086.41 11,135.40
04/30/92 11,009.36 11,002.40
05/31/92 11,015.68 11,106.57
06/30/92 10,720.90 10,789.48
07/31/92 11,011.98 11,325.11
08/31/92 10,686.40 11,054.23
09/30/92 11,034.74 11,208.93
10/31/92 11,391.85 11,477.21
11/30/92 12,074.30 12,118.62
12/31/92 12,305.85 12,525.27
01/31/93 12,757.68 12,681.89
02/28/93 12,360.10 12,504.48
03/31/93 12,860.41 12,936.20
04/30/93 12,503.90 12,597.71
05/31/93 13,034.86 13,171.58
06/30/93 13,434.48 13,237.63
07/31/93 13,264.54 13,212.21
08/31/93 13,916.66 13,757.69
09/30/93 14,285.83 13,903.11
10/31/93 14,136.39 13,948.52
11/30/93 13,737.19 13,639.97
12/31/93 14,190.86 14,273.20
01/31/94 14,480.04 14,605.21
02/28/94 14,455.28 14,397.96
03/31/94 13,923.56 13,731.08
04/30/94 13,969.53 13,833.24
05/31/94 13,711.50 13,702.29
06/30/94 13,251.15 13,230.40
07/31/94 13,546.23 13,678.39
08/31/94 14,250.94 14,394.76
09/30/94 13,881.54 14,126.14
10/31/94 14,156.77 14,280.59
11/30/94 13,483.36 13,636.47
12/31/94 13,799.78 13,761.63
01/31/95 13,663.31 13,904.89
02/28/95 14,490.28 14,634.47
03/31/95 14,951.42 14,888.42
04/30/95 15,284.02 15,187.34
05/31/95 15,805.95 15,553.70
06/30/95 16,732.99 16,186.88
07/31/95 18,306.34 17,031.31
08/31/95 18,441.95 17,346.29
09/30/95 18,699.42 17,766.75
10/31/95 18,406.55 17,309.61
11/30/95 18,755.15 18,065.61
12/31/95 18,872.82 18,020.66
01/31/96 19,240.22 18,282.10
02/29/96 19,700.93 18,903.47
03/31/96 19,941.14 19,130.01
04/30/96 20,351.39 19,714.26
05/31/96 20,688.31 19,980.88
06/30/96 20,261.34 19,681.07
07/31/96 19,285.19 18,349.56
08/31/96 20,330.81 19,407.84
09/30/96 21,750.84 20,254.02
10/31/96 21,889.11 20,312.96
11/30/96 23,214.06 21,457.19
12/31/96 23,189.17 21,481.00
01/31/97 24,131.70 22,287.40
02/28/97 23,720.61 22,104.20
03/31/97 23,035.80 21,161.90
04/30/97 23,522.36 21,710.20
05/31/97 25,139.66 23,608.54
06/30/97 26,353.03 24,271.94
07/31/97 28,786.86 26,675.11
08/31/97 28,738.44 26,643.10
09/30/97 30,754.85 28,175.07
10/31/97 30,095.49 26,949.46
11/30/97 30,293.52 27,348.31
12/31/97 30,991.52 28,409.42
01/31/98 30,430.01 27,869.65
02/28/98 32,210.96 30,177.25
03/31/98 33,190.85 31,538.25
04/30/98 33,660.86 32,115.40
05/31/98 32,501.25 30,670.20
06/30/98 33,108.60 30,863.43
07/31/98 32,155.07 29,665.92
08/31/98 26,415.39 24,145.10
09/30/98 28,319.94 26,397.83
10/31/98 29,093.07 28,757.80
11/30/98 30,693.19 30,192.81
12/31/98 33,409.54 33,595.54
* Excluding the 6-month return, these returns represent the blended performance
of the Fund's Class D shares (for the period from 4/8/98) and the prior
performance of the Fund's institutional class shares (for the period from
3/8/91), adjusted for Class D expenses. Past performance is not an indication
of future results. See page 17 for Footnotes, which include additional
details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
Waters Corp. 1.7%
Liquid chromatography instruments
- --------------------------------------------------------------------------------
Network Associates, Inc. 1.6%
Network security software
- --------------------------------------------------------------------------------
Abercrombie & Fitch Co. "A" 1.5%
Retail apparel stores
- --------------------------------------------------------------------------------
Unisys Corp. 1.5%
Business info. systems
- --------------------------------------------------------------------------------
Comverse Technology, Inc. 1.5%
Multimedia communications
- --------------------------------------------------------------------------------
Bergen Brunswig Corp. "A" 1.4%
Drug and healthcare distributor
- --------------------------------------------------------------------------------
Symbol Technologies, Inc. 1.4%
Bar code laser scanners
- --------------------------------------------------------------------------------
Century Telephone Enterprises, Inc. 1.4%
Telephone services
- --------------------------------------------------------------------------------
Best Buy Co., Inc. 1.4%
Electric/appliances stores
- --------------------------------------------------------------------------------
Shaw Industries, Inc. 1.4%
Carpet manufacturer
- --------------------------------------------------------------------------------
Top Ten Total 14.8%
- --------------------------------------------------------------------------------
Top 5 Industries % of Total Investments
- --------------------------------------------------------------------------------
Financial & Business Services 24.8%
- --------------------------------------------------------------------------------
Technology 18.8%
- --------------------------------------------------------------------------------
Consumer Discretionary 14.4%
- --------------------------------------------------------------------------------
Health Care 11.9%
- --------------------------------------------------------------------------------
Utilities 6.3%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 96%
- --------------------------------------------------------------------------------
Cash Equivalents 4%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
For the six months ended December 31, 1998, PIMCO Mid-Cap Growth Fund posted a
return of 0.9%.
The strongest performing sector for the Fund this period was health care.
New product introductions and expanding markets in the aging population made for
attractive growth prospects in this area. Although these stocks were strong
across the board, one stock in particular, Guidant, performed very well, rising
nearly 50%. It continues to achieve success in its release of new cardiovascular
products while growing its bottom line. A number of mergers in this sector also
drove up stock prices. For instance, cardiac device maker Arterial Vascular
Engineering was purchased by Medtronic, helping its stock rise nearly 20%. Other
mergers in the industry included hospital supplier Allegiance Corp, which is in
the process of being taken over by Cardinal Health and saw a huge uptick in its
stock price.
Another strong sector for the Fund this period was technology, as these
stocks benefited from increased spending for the Year 2000 (Y2K) problem as well
as a decrease in the severity of the global economic crisis. One standout
technology stock this year was Network Associates, a data storage supplier. This
company benefited from three secular stories: increased Y2K spending, an
increase in Internet applications and continuous upgrades in the PC area.
Another strong sector for the Fund was consumer cyclicals, an area that was
driven by the strong domestic economy. Consumers continued to spend, driven by
the additional wealth related to a strong stock market. Portfolio holdings such
as Harley Davidson benefited from the "deep pockets" of American consumers, as
its sales saw a large increase, especially among its higher-end product
offerings.
A disappointing sector for the Fund proved to be utilities. Although the
sector ended the year in positive territory, its returns were low. Many of the
Fund's holdings are diversified providers and distributors of power that are
learning to adjust to a new era of deregulation. Their management teams are
strong and they have adjusted well, but their profits continue to suffer.
Looking ahead, the manager believes the Fund's holdings continue to reflect
its growth at a reasonable price philosophy. The reasons for holding these
stocks include reasonable revenue growth, stable margins and the strategic use
of cash flow to buy back stock. The positive fundamentals of these holdings,
accompanied with very reasonable valuation measures, lead the manager to remain
optimistic about the prospects for the Fund.
See page 25 for financial details. 15
<PAGE>
December 31, 1998
Objective
Capital appreciation; no consideration given to income
Portfolio
Primarily technology-related stocks of companies of all sizes
Fund Inception date
12/22/94
Total Net Assets
$625 million
Number of Securities in the Portfolio
37 (not including short-term instruments)
PIMCO ADVISORS INSTITUTIONAL MANAGER
Columbus Circle Investors
PIMCO Innovation Fund
- --------------------------------------------------------------------------------
PERFORMANCE*
- --------------------------------------------------------------------------------
Average Annual Total Return For periods ended 12/31/98
D Shares Lipper
S&P 500 Mid-Cap
Index Fund Avg.
- --------------------------------------------------------------------------------
6 months 31.0% 9.2% 25.9%
1 year 79.7% 28.6% 51.1%
3 years 34.3% 28.2% 22.9%
Inception 36.6% -- --
Change in Value
$10,000 invested at the Fund's inception
[LINE GRAPH APPEARS HERE]
CLASS-D
PIMCO S&P
Innovation Index
Fund D
============ ============ ============
12/31/94 10,000.00 10,000.00
01/31/95 9,919.80 10,259.30
02/28/95 10,551.05 10,659.10
03/31/95 10,871.71 10,973.66
04/30/95 11,342.67 11,296.83
05/31/95 11,613.18 11,748.36
06/30/95 12,895.69 12,021.28
07/31/95 14,098.07 12,419.90
08/31/95 14,428.68 12,451.08
09/30/95 14,769.27 12,976.51
10/31/95 14,589.00 12,930.19
11/30/95 14,989.73 13,497.82
12/31/95 14,532.71 13,757.79
01/31/96 14,337.93 14,226.10
02/29/96 15,035.38 14,357.98
03/31/96 14,912.35 14,496.25
04/30/96 16,502.09 14,709.92
05/31/96 17,845.53 15,089.29
06/30/96 17,117.27 15,146.78
07/31/96 14,686.57 14,477.60
08/31/96 15,578.75 14,782.93
09/30/96 17,701.79 15,614.91
10/31/96 17,578.58 16,045.57
11/30/96 18,634.91 17,258.46
12/31/96 17,962.34 16,916.57
01/31/97 18,950.47 17,973.51
02/28/97 16,807.97 18,114.43
03/31/97 15,705.41 17,370.10
04/30/97 15,954.99 18,407.10
05/31/97 17,962.35 19,527.72
06/30/97 18,128.81 20,402.57
07/31/97 20,812.12 22,026.00
08/31/97 20,312.88 20,792.10
09/30/97 21,820.89 21,930.89
10/31/97 20,416.59 21,198.39
11/30/97 20,322.81 22,179.67
12/31/97 19,583.81 22,560.49
01/31/98 20,357.79 22,810.01
02/28/98 22,856.77 24,455.07
03/31/98 23,719.15 25,707.41
04/30/98 25,433.10 25,966.03
05/31/98 23,818.50 25,519.67
06/30/98 26,848.19 26,556.28
07/31/98 27,003.91 26,273.46
08/31/98 21,619.33 22,474.84
09/30/98 25,612.42 23,914.58
10/31/98 26,585.69 25,859.79
11/30/98 29,560.63 27,427.15
12/31/98 35,183.07 29,007.51
*Class D shares commenced operations after the inception date shown. Total
return for the periods shown before the inception of Class D shares reflects
the performance for one of the Fund's oldest classes of shares (Class C),
restated to reflect the operating expenses for Class D shares. Past
performance is not an indication of future results. See page 17 for Footnotes,
which include additional details.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Top 10 Holdings % of Total Investments
- --------------------------------------------------------------------------------
America Online, Inc. 8.6%
Online service provider
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 5.0%
Computer network products
- --------------------------------------------------------------------------------
Microsoft Corp. 4.1%
Computer software
- --------------------------------------------------------------------------------
Intel Corp. 3.9%
Microcomputer parts
- --------------------------------------------------------------------------------
Compaq Computer Corp. 3.8%
Computer manufacturer
- --------------------------------------------------------------------------------
International Business Machines Corp. 3.7%
Business machines manufacturer
- --------------------------------------------------------------------------------
Micron Technology, Inc. 3.5%
Semiconductor memory circuits
- --------------------------------------------------------------------------------
Amgen, Inc. 3.3%
Biotechnology
- --------------------------------------------------------------------------------
3Com Corp. 3.1%
Computer communication systems
- --------------------------------------------------------------------------------
Nokia Corp. - ADR 3.0%
Telecommunications services
- --------------------------------------------------------------------------------
Top Ten Total 42.0%
- --------------------------------------------------------------------------------
Top 3 Industries % of Total Investments
- --------------------------------------------------------------------------------
Technology 75.7%
- --------------------------------------------------------------------------------
Health Care 9.7%
- --------------------------------------------------------------------------------
Communications 6.6%
- --------------------------------------------------------------------------------
Portfolio Composition
- --------------------------------------------------------------------------------
Common Stock 92%
- --------------------------------------------------------------------------------
Cash Equivalents 8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PORTFOLIO INSIGHTS
- --------------------------------------------------------------------------------
PIMCO Innovation Fund had a stellar six months, returning 31.0% versus the S&P
500's return of 9.2% for the same period. And Innovation Fund has turned in a
strong performance for the longer term, handily beating the S&P 500 for both the
one-year and three-year periods ended December 31, 1998.
America Online was one of the Fund's best performing holdings in this
period. A variety of factors contributed to its success. Membership reached 15
million subscribers in the fourth quarter. In addition, the release of the Starr
Report via the Web increased Internet traffic and confirmed the importance of
this medium in general and AOL in particular. The company's announced merger
with Netscape and the increase in holiday shopping on the Internet also helped
the stock's performance this year.
Another strong performer for the Fund was Nokia, a cellular phone
manufacturer. Nokia, whose product line is considered to be of a higher quality
than that of its competitors, benefited from a number of positive factors.
"OneRate" plans initiated by AT&T are being emulated by other cell phone service
providers, which is driving an increase in business subscribers, while pre-paid
plans are accelerating entry-level subscribers. And Nokia continues to benefit
from the major worldwide conversion in cellular telephones from analog to
digital, which has increased sales of its phones.
Among our non-technology holdings that have benefited from the use of
technology, Amgen was a strong performer. The biotechnology company's anemia
drug, Epogen, benefited from last year's increase in recommended dosages by
Medicare for dialysis, which increased sales. Another contributor to the
company's success this period was a favorable arbitration ruling in a dispute
with pharmaceuticals giant Johnson & Johnson. The outcome allows Amgen to market
their NESP drug worldwide.
Another strong area for the Fund was semiconductor stocks. Because of their
poor performance for the last several years, the Fund was underweight in this
area when, in October, the Federal Reserve cut interest rates and re-ignited a
bull market. The Fund quickly increased its semiconductor holdings, and saw a
large uptick in the fourth quarter as a result.
The manager believes the Fund is well-positioned to benefit from the
reality that technology spending has become a critical driver of success for
most companies. In addition, the Fund is positioned to benefit from the
increased spending for the Year 2000 problem and the rapid rise of Internet
commerce. The manager is confident that the Fund will continue to identify
exciting opportunities within the technology sector.
16 See page 26 for financial details.
<PAGE>
December 31, 1998
- --------------------------------------------------------------------------------
Footnotes
- --------------------------------------------------------------------------------
A few notes and definitions are needed for a complete understanding of the
performance figures.
Past performance is no indication of future results. Investment return will
fluctuate and the value of an investor's shares will fluctuate and may be worth
more or less than original cost when redeemed. Total return measures
performance, assuming that all dividends and capital gains distributions were
reinvested.
The PIMCO stock funds can invest a portion of their assets in foreign
securities, which can involve special risks due to foreign economic and
political developments. The Innovation Fund concentrates its portfolio in one
sector, making it more volatile than a more diversified stock portfolio, and it,
therefore, should be considered as only part of a diversified portfolio.
Line graphs have been included so an investor can compare a Fund's historical
performance to that of an appropriate broad-based index. Each index reflects a
group of unmanaged securities, and it is not possible to invest directly in an
unmanaged index. The Standard & Poor's 500 and Standard & Poor's Mid-Cap are
indices of stocks of companies with larger- and medium-sized capitalizations,
respectively.
Lipper averages are calculated by Lipper Analytical Services, Inc., a nationally
recognized mutual fund performance evaluation firm. They are total return
performance averages of those funds that are tracked by Lipper, with the
investment objective noted. Lipper rankings are based on total returns, not
adjusted for sales charges.
For additional details on the PIMCO bond funds, contact your financial advisor
to receive a prospectus that contains more complete information, including
charges and expenses. Or contact PIMCO Funds Distributors LLC at 2187 Atlantic
Street, Stamford, CT 06902, 1-800-277-7337, www.pimcofunds.com. Please read the
prospectus carefully before you invest or send money.
17
<PAGE>
Schedule of Investments
Equity Income Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
- --------------------------------------------------------------------------------
COMMON STOCKS 97.5%
Aerospace 2.2%
BFGoodrich Co. 121,500 $ 4,359
Capital Goods 6.2%
Dana Corp. 102,900 4,206
GATX Corp. 109,000 4,128
Hubbell, Inc. `B' 107,700 4,093
-------
12,427
Communications 6.0%
U.S. West, Inc. 64,000 4,136
GTE Corp. 60,800 4,100
Bell Atlantic Corp. 66,932 3,803
-------
12,039
Consumer Discretionary 13.8%
Ford Motor Co. 73,300 4,302
Intimate Brands, Inc. 140,500 4,197
Springs Industries, Inc. `A' 97,300 4,032
American Greetings Corp. `A' 98,000 4,024
VF Corp. 83,600 3,919
Armstrong World Industries 59,600 3,595
Penney J.C., Inc. 73,900 3,464
-------
27,533
Consumer Staples 10.3%
RJR Nabisco Holdings Corp. 279,000 8,283
Kimberly-Clark Corp. 80,300 4,376
SUPERVALU, Inc. 142,600 3,993
Anheuser Busch Cos., Inc. 58,900 3,865
-------
20,517
Energy 9.3%
Kerr McGee Corp. 104,600 4,001
Mobil Corp. 45,000 3,921
Repsol SA SP - ADR 69,500 3,796
Atlantic Richfield Co. 55,400 3,615
Ultramar Diamond Shamrock Corp. 139,500 3,383
-------
18,716
Financial & Business Services 19.3%
PNC Bank Corp. 150,000 8,119
Union Planters Corp. 155,900 7,064
Ohio Casualty Corp. 99,900 4,108
Deluxe Corp. 111,000 4,058
Bankers Trust New York Corp. 46,800 3,998
CIGNA Corp. 51,000 3,943
Chase Manhattan Corp. 56,000 3,812
HRPT Properties Trust 252,600 3,552
-------
38,654
Health Care 4.0%
American Home Products Corp. 75,000 4,223
Mallinckrodt Group, Inc. 123,500 3,805
-------
8,028
Materials & Processing 13.2%
Georgia-Pacific Corp. (Timber Group) 176,700 4,208
Tenneco, Inc. 119,600 4,074
Westvaco Corp. 150,000 4,022
Dow Chemical Co. 41,300 3,756
Phelps Dodge Corp. 70,000 3,561
USX-U.S. Steel Group, Inc. 151,200 3,478
Union Carbide Corp. 80,000 3,400
-------
26,499
Technology 1.9%
Harris Corp. 102,000 3,736
Utilities 11.3%
Allegheny Energy, Inc. 120,000 4,139
Baltimore Gas & Electric 129,000 3,983
Peoples Energy Corp. 99,000 3,948
Public Service Enterprise Group, Inc. 94,500 3,780
NICOR, Inc. 85,000 3,591
DTE Energy Co. 76,000 3,259
-------
22,700
-------
Total Common Stocks 195,208
-------
(Cost $178,144)
SHORT-TERM INSTRUMENTS 0.9%
Repurchase Agreement 0.9%
State Street Bank
3.500% due 01/04/99 $ 1,845 $ 1,845
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 5.750% 10/31/02
valued at $1,883,250. Repurchase
proceeds are $1,845,718.)
--------
Total Short-Term Instruments 1,845
--------
(Cost $1,845)
Total Investments (a) 98.4% $197,053
(Cost $179,989)
Other Assets and Liabilities (Net) 1.6% 3,260
--------
Net Assets 100.0% $200,313
--------
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost. $ 27,721
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value. (10,657)
--------
Unrealized appreciation-net $ 17,064
--------
18 See accompanying notes
<PAGE>
Schedule of Investments
Value Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
- --------------------------------------------------------------------------------
COMMON STOCKS 97.0%
Aerospace 1.2%
Northrop Grumman Corp. 40,000 $ 2,925
Capital Goods 3.8%
Dana Corp. 120,200 4,913
Deere & Co. 134,100 4,442
-------
9,355
Communications 6.0%
GTE Corp. 110,000 7,418
Bell Atlantic Corp. 128,300 7,289
-------
14,707
Consumer Discretionary 12.9%
Whirlpool Corp. 130,000 7,199
VF Corp. 150,000 7,031
American Greetings Corp. `A' 115,000 4,722
Dillards, Inc. `A' 165,000 4,682
Tupperware Corp. 169,900 2,793
King World Productions, Inc. 90,000 2,649
Cracker Barrel Old Country Store, Inc. 105,000 2,448
--------
31,524
Consumer Services 2.1%
Central Newspapers, Inc. `A' 70,800 5,058
Consumer Staples 13.1%
SUPERVALU, Inc. 260,000 7,280
Whitman Corp. 210,000 5,329
Kimberly-Clark Corp. 90,000 4,905
RJR Nabisco Holdings Corp. 165,000 4,898
Anheuser Busch Cos., Inc. 74,100 4,863
IBP, Inc. 160,000 4,660
--------
31,935
Energy 9.7%
Repsol SA SP - ADR 135,000 7,374
Mobil Corp. 77,000 6,709
Kerr McGee Corp. 127,000 4,858
Ultramar Diamond Shamrock Corp. 200,000 4,850
--------
23,791
Environmental Services 2.7%
Browning Ferris Industries, Inc. 230,000 6,541
Financial & Business Services 11.7%
Chase Manhattan Corp. 105,000 7,147
Countrywide Credit Industries, Inc. 100,000 5,019
PNC Bank Corp. 92,000 4,980
Union Planters Corp. 100,000 4,531
Bear Stearns Cos 120,000 4,485
Loews Corp. 26,000 2,555
--------
28,717
Health Care 9.2%
Amgen, Inc. (b) 70,000 7,319
American Home Products Corp. 98,000 5,519
CIGNA Corp. 66,000 5,103
Mallinckrodt Group, Inc. 147,500 4,545
--------
22,486
Materials & Processing 7.8%
Union Carbide Corp. 140,100 5,954
USG Corp. (b) 100,000 5,094
USX-U.S. Steel Group, Inc. 180,000 4,140
Westvaco Corp. 144,600 3,877
------
19,065
Technology 6.8%
Apple Computer, Inc. 120,000 4,913
Harris Corp. 130,000 4,761
Storage Technology Corp. (b) 131,200 4,666
Adobe Systems, Inc. 47,500 2,221
---------
16,561
Transportation 1.0%
UAL Corp. (b) 40,000 2,388
Utilities 9.0%
Public Service Enterprise Group, Inc. 185,000 7,396
DTE Energy Co. 170,000 7,289
NICOR, Inc. 170,000 7,183
---------
21,868
---------
Total Common Stocks 236,921
=========
(Cost $222,027)
SHORT-TERM INSTRUMENTS 2.9%
Principal
Amount
(000s)
Repurchase Agreement 2.9%
State Street Bank
3.500% due 01/04/99 $ 7,002 7,002
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 7.500% 02/15/05
valued at $105,525. Repurchase
proceeds are $100,039.)
---------
Total Short-Term Instruments 7,002
(Cost $7,002) =========
Total Investments (a) 99.9% $243,923
(Cost $229,029)
Other Assets and Liabilities (Net) 0.1% 280
---------
Net Assets 100.0% $244,203
=========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost. $ 29,842
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value. (14,948)
--------
Unrealized appreciation-net $ 14,894
========
(b) Non-income producing security.
See accompanying notes 19
<PAGE>
Schedule of Investments
Renaissance Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
COMMON STOCKS 98.1%
Building 0.9%
Owens Corning 168,100 $ 5,957
Communications 12.7%
Tele-Communications, Inc. `A' (b) 312,400 17,280
Sprint Corp. 185,200 15,580
ALLTEL Corp. 258,500 15,462
Newbridge Networks Corp. (b) 496,500 15,081
MediaOne Group, Inc. (b) 232,600 10,932
AT&T Corp. 92,000 6,923
--------
81,258
Consumer Discretionary 15.8%
Corning, Inc. 423,900 19,075
Cendant Corp. (b) 933,300 17,790
General Motors Corp. 242,500 17,354
Hasbro, Inc. 421,300 15,219
Tommy Hilfiger Corp. (b) 143,700 8,622
Time Warner, Inc. 123,200 7,646
B.J.'s Wholesale Club, Inc. (b) 158,400 7,336
Maytag Corp. 117,100 7,289
-------
100,331
Consumer Services 2.6%
Carnival Corp. `A' 194,700 9,346
Reader's Digest Assn., Inc. 288,100 7,257
-------
16,603
Consumer Staples 8.7%
Philip Morris Cos., Inc. 332,600 17,794
Anheuser Busch Cos., Inc. 270,000 17,719
American Stores Co. 367,300 13,567
Champion International `C' 149,200 6,043
-------
55,123
Energy 6.1%
Enron Corp. 411,800 23,498
Exxon Corp. 207,500 15,173
------
38,671
Financial & Business Services 20.6%
Chase Manhattan Corp. 208,200 14,171
Fleet Financial Group, Inc. 315,600 14,103
Federal National Mortgage Assn. 188,600 13,956
Equitable Cos., Inc. 240,100 13,896
Hartford Life, Inc. `A' (b) 228,300 13,298
Allmerica Financial Corp. 208,000 12,038
Capital One Financial Corp. 101,200 11,638
Valassis Communications, Inc. (b) 194,400 10,036
Citigroup, Inc. 190,000 9,405
Fremont General Corp. 259,600 6,425
First Union Corp. 98,300 5,978
Bank One Corp. 115,600 5,903
-------
130,847
Health Care 10.6%
Allegiance Corp. 523,500 24,408
Amgen, Inc. (b) 149,600 15,643
CIGNA Corp. 157,700 12,192
Bausch & Lomb, Inc. 136,700 8,202
Baxter International, Inc. 103,600 6,663
-------
67,108
Materials & Processing 5.5%
Martin Marietta Materials, Inc. 407,600 25,348
Vulcan Materials Co. 70,400 9,262
--------
34,610
Technology 11.2%
International Business Machines Corp. 132,300 24,442
Motorola, Inc. 216,500 13,220
Learning Company, Inc. (b) 366,900 9,516
Diebold, Inc. 256,300 9,147
Teradyne, Inc. (b) 177,700 7,530
Micron Technology, Inc. (b) 141,700 7,165
NCR Corp. (b) 1,000 42
---------
71,062
Transportation 2.5%
Atlas Air, Inc. 326,900 $ 15,998
Utilities 0.9%
Duke Energy Corp. 92,200 5,907
--------
Total Common Stocks 623,475
========
(Cost $506,971)
SHORT-TERM INSTRUMENTS 2.6%
Principal
Amount
(000s)
Repurchase Agreement 2.6%
State Street Bank
3.500% due 01/04/99 $ 16,437 16,437
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 7.500% 02/15/05
valued at $16,766,750. Repurchase
proceeds are $16,443,392.)
--------
Total Short-Term Instruments 16,437
========
(Cost $16,437)
Total Investments (a) 100.7% $639,912
(Cost $523,408)
Written Options (c) (0.0%) (72)
(Premiums $133)
Other Assets and Liabilities (Net) (0.7%) (4,282)
Net Assets 100.0% $635,558
========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost. $119,072
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value. (2,568)
========
Unrealized appreciation-net $116,504
========
(b) Non-income producing security.
(c) Premiums received on written options:
Type Contracts Premium Value
- ---------------------------------------------------------------------
Call - OTC Micron Technology, Inc.
Strike @ 55.00 Exp. 01/22/99 676 $ 133 $ 72
20 See accompanying notes
<PAGE>
Schedule of Investments
Tax Efficient Equity Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
- --------------------------------------------------------------------------------
COMMON STOCKS 98.1%
Aerospace 0.8%
Northrop Grumman Corp. 900 $ 66
Lockheed Martin Corp. 200 17
BFGoodrich Co. 400 14
Raytheon Co. `B' 200 11
------
108
Building 0.8%
Centex Corp. 800 36
Fleetwood Enterprises, Inc. 800 28
Kaufman & Broad Home Corp. 900 26
Crane Co. 500 15
------
105
Capital Goods 8.1%
General Electric Co. 3,700 378
United Technologies Corp. 800 87
AlliedSignal, Inc. 1,900 84
Dana Corp. 1,900 78
Honeywell, Inc. 1,000 75
McDermott International, Inc. 2,500 62
Tyco International Limited 800 60
Ingersoll-Rand Co. 800 38
Engelhard Corp. 1,200 23
PPG Industries, Inc. 400 23
Caterpillar, Inc. 500 23
Briggs & Stratton 400 20
Johnson Controls, Inc. 300 18
Newell Co. 400 17
Paccar, Inc. 400 16
W.R. Grace & Co. 1,000 16
Hercules, Inc. 500 14
Avery Dennison Corp. 300 14
Nacco Industries, Inc. `A' 100 9
Textron, Inc. 100 8
Sunoco, Inc. 200 7
Minnesota Mining & Manufacturing Co. 100 7
Dover Corp. 100 4
--------
1,081
Communications 8.2%
Bell Atlantic Corp. 3,400 193
AT&T Corp. 2,500 188
BellSouth Corp. 2,600 130
SBC Communications, Inc. 2,400 129
Viacom, Inc. `B' (b) 1,300 96
GTE Corp. 1,400 94
U.S. West, Inc. 1,300 84
AirTouch Communications, Inc. (b) 700 50
MCI WorldCom, Inc. 700 50
Knight-Ridder, Inc. 700 36
ALLTEL Corp. 500 30
--------
1,080
Consumer Discretionary 12.6%
Wal-Mart Stores, Inc. 2,800 227
Ford Motor Co. 2,400 140
Home Depot, Inc. 1,900 116
Procter & Gamble Co. 1,200 110
Time Warner, Inc. 1,200 74
TJX Cos., Inc. 2,300 67
Gap, Inc. 1,150 65
UST, Inc. 1,600 56
Cendant Corp. (b) 2,900 55
Eastman Kodak Co. 700 50
Avon Products, Inc. 1,100 49
VF Corp. 1,000 47
Pitney Bowes, Inc. 700 46
Lowe's Cos., Inc. 900 46
Dayton Hudson Corp. 800 43
Costco Cos., Inc. (b) 600 43
King World Productions, Inc. 1,400 41
TRW, Inc. 700 39
Maytag Corp. 600 37
Walgreen Co. 600 35
Federated Department Stores, Inc. (b) 700 30
Emerson Electric Co. 400 25
Alberto-Culver Co. 900 24
Harrah's Entertainment, Inc. 1,500 24
Colgate-Palmolive Co. 200 19
Liz Claiborne, Inc. 500 16
Brunswick Corp. 600 15
General Motors Corp. 200 14
Consolidated Stores Corp. (b) 700 14
Dollar General Corp. 525 12
Armstrong World Industries 200 12
Mattel, Inc. 500 11
Rite Aid Corp. 200 10
Gillette Co. 200 10
Wm. Wrigley Jr. Co. 100 9
The Stanley Works 300 8
Parker Hannifin Corp. 200 7
K Mart Corp. (b) 400 6
Whirlpool Corp. 100 6
Goodyear Tire & Rubber Co. 100 5
Hasbro, Inc. 100 4
-------
1,667
Consumer Services 2.1%
McDonald's Corp. 800 61
Gannett, Inc. 900 60
Interpublic Group of Companies, Inc. 600 48
McGraw-Hill Companies, Inc. 400 41
Omnicom Group 400 23
New York Times Co. 600 21
Marriott International, Inc. `A' 300 9
Tribune Co. 100 7
Hilton Hotels Corp. 200 4
Darden Restaurants, Inc. 200 4
-------
278
Consumer Staples 7.9%
Philip Morris Cos., Inc. 3,600 193
Coca-Cola Co. 2,500 167
Anheuser Busch Cos., Inc. 1,400 92
H.J. Heinz Co. 1,100 62
Kimberly-Clark Corp. 1,100 60
Clorox Co. 500 58
Albertson's, Inc. 800 51
SUPERVALU, Inc. 1,600 45
Quaker Oats Co. 700 42
Sara Lee Corp. 1,400 39
General Mills, Inc. 500 39
Pepsico, Inc. 900 37
Safeway, Inc. (b) 500 30
Kroger Co. (b) 500 30
Adolph Coors Co. `B' 500 28
Campbell Soup Co. 400 22
Sysco Corp. 700 19
Bestfoods 300 16
Kellogg Co. 200 7
Fortune Brands, Inc. 200 6
Cooper Tire & Rubber Co. 300 6
Louisiana-Pacific Corp. 300 5
-------
1,054
Energy 6.2%
Exxon Corp. 3,600 263
Chevron Corp. 1,500 124
USX Marathon Group 3,000 90
Mobil Corp. 700 61
Phillips Petroleum Co. 1,200 51
Rowan Cos., Inc. (b) 3,900 39
Halliburton Co. 1,300 39
AES Corp. (b) 700 33
Southern Co. 1,000 29
Texaco, Inc. 500 26
Sun Co., Inc. 500 18
Enron Corp. 300 17
Ashland, Inc. 300 15
Unicom Corp. 300 12
Atlantic Richfield Co. 100 7
-----
824
See accompanying notes 21
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule of Investments (Cont.)
Tax Efficient Equity Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
- --------------------------------------------------------------------------------
Environmental Services 0.1%
Service Systems International 200 $ 8
Financial & Business Services 15.3%
Bank One Corp. 2,424 124
Morgan Stanley, Dean Witter, Discover and Co. 1,300 92
Comerica, Inc. 1,300 89
American International Group, Inc. 900 87
First Union Corp. 1,400 85
Mellon Bank Corp. 1,200 83
Federal National Mortgage Assn 1,100 81
Sun Trust Banks, Inc. 900 69
Chase Manhattan Corp. 1,000 68
Allstate Corp. 1,500 58
MBNA Corp. 2,200 55
Fleet Financial Group, Inc. 1,200 54
Northern Trust Corp. 600 52
Progressive Corp. 300 51
Citigroup, Inc. 1,000 50
SunAmerica, Inc. 600 49
Countrywide Credit Industries, Inc. 900 45
Bank of New York 1,100 44
National City Corp. 600 44
American Express Co. 400 41
PNC Bank Corp. 700 38
Wells Fargo & Co. 900 36
Lehman Brothers Holdings, Inc. 800 35
SLM Holding Corp. 700 34
MBIA, Inc. 500 33
Automatic Data Processing, Inc. 400 32
MGIC Investment Corp. 800 32
BankBoston Corp. 800 31
Marsh & Mclennan Cos 500 29
State Street Corp. 400 28
Golden West Financial Corp. 300 28
Conseco, Inc. 900 28
Federal Home Loan Mortgage Corp. 400 26
Charles Schwab Corp. 450 25
Capital One Financial Corp. 200 23
Aon Corp. 400 22
Paychex, Inc. 400 21
KeyCorp 600 19
Washington Mutual, Inc. 500 19
Bear Stearns Cos 500 19
Deluxe Corp. 500 18
Lincoln National Corp. 200 16
BB&T Corp. 400 16
Regions Financial Corp. 400 16
U.S. Bancorp 400 14
Provident Cos., Inc. `B' 300 12
Franklin Resources, Inc. 300 10
Republic New York Corp. 200 9
H&R Block, Inc. 200 9
Associates First Capital Corp. `A' 200 8
Torchmark Corp. 200 7
Equifax, Inc. 200 7
Summit Bancorp 100 4
BankAmerica Corp. 39 2
Waddell & Reed Financial, Inc. `B' 48 1
---------
2,028
Health Care 12.0%
Bristol-Myers Squibb Co. 1,700 226
Merck & Co., Inc. 1,300 191
Pfizer, Inc. 1,400 175
Eli Lilly & Co. 1,300 116
Johnson & Johnson 1,300 109
Amgen, Inc. (b) 1,000 105
Abbott Laboratories 2,000 98
Warner-Lambert Co. 1,300 98
Schering-Plough Corp. 1,700 94
Cardinal Health, Inc. 600 46
Guidant Corp. 400 44
HBO & Co. 1,500 43
American Home Products Corp. 700 39
Becton Dickinson & Co. 900 38
Medtronic, Inc. 500 37
Allergan, Inc. 500 32
Tenet Healthcare Corp. (b) 1,200 32
Biomet, Inc. 500 20
CIGNA Corp. 200 15
HEALTHSOUTH Corp. (b) 700 11
United Healthcare Corp. 200 9
Baxter International 100 6
Mallinckrodt Group, Inc. 200 6
-------
1,590
Materials & Processing 2.3%
Rohm & Haas Co. 3,100 93
Aluminum Co. of America 500 37
E.I. Du Pont de Nemours, Inc. 700 37
Fort James Corp. 900 36
Air Products & Chemicals 900 36
Praxair, Inc. 700 25
Owens Illinois, Inc. (b) 800 25
Nucor Corp. 200 9
Allegheny Teledyne, Inc. 200 4
Pioneer Hi-Bred International, Inc. 100 3
----------
305
Technology 16.9%
Microsoft Corp. (b) 3,400 472
Intel Corp. 2,600 308
Cisco Systems, Inc. (b) 2,350 218
International Business Machines Corp. 1,100 203
Lucent Technologies, Inc. 1,600 176
Dell Computer Corp. (b) 1,600 117
Oracle Corp. (b) 1,800 78
EMC Corp. (b) 900 77
Tellabs, Inc. (b) 1,100 75
Hewlett Packard Co. 1,100 75
Sun Microsystems, Inc. (b) 800 69
Compaq Computer Corp. (b) 1,300 55
Northern Telecom Limited 1,000 50
Xerox Corp. 400 47
Unisys Corp. (b) 1,100 38
Gateway 2000, Inc. (b) 600 31
Computer Associates International, Inc. 700 30
Computer Sciences Corp. 400 26
Apple Computer, Inc. 600 25
First Data Corp. 700 22
Ceridian Corp. (b) 300 21
EG&G, Inc. 600 17
IMS Health, Inc. (b) 100 8
Applied Materials, Inc. (b) 100 4
-------
2,242
Transportation 1.1%
Burlington Northern Santa Fe Corp. 1,100 37
Delta Air Lines, Inc. 600 31
AMR Corp. (b) 500 30
Navistar International Corp. (b) 900 26
Southwest Airlines Co. 700 16
-------
140
Utilities 3.7%
Ameritech Corp. 1,600 101
Central & South West Corp. 3,200 88
FPL Group, Inc. 1,100 68
Duke Energy Corp. 600 38
Coastal Corp. 1,000 35
Houston Industry, Inc. 800 26
Edison International 900 25
Public Service Enterprise Group, Inc. 600 24
Columbia Gas Systems, Inc. 400 23
Consolidated Edison, Inc. 400 21
Baltimore Gas & Electric 400 12
GPU, Inc. 200 9
DTE Energy Co. 200 9
Peoples Energy Corp. 200 8
---------
487
---------
Total Common Stocks 12,997
(Cost $11,850) =========
</TABLE>
22 See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000s) (000s)
- -----------------------------
<S> <C> <C>
SHORT-TERM INSTRUMENTS 5.5%
Repurchase Agreement 5.5%
State Street Bank
3.500% due 01/04/99 $ 734 $ 734
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 6.250% 08/31/02
valued at $750,838. Repurchase
proceeds are $734,285)
---------
Total Short-Term Instruments 734
(Cost $734) =========
Total Investments (a) 103.6% $ 13,731
(Cost $12,584)
Other Assets and Liabilities (Net) (3.6%) (477)
--------
Net Assets 100.0% $ 13,254
========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost $ 1,318
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value (171)
--------
Unrealized appreciation-net $ 1,147
========
(b) Non-income producing security.
</TABLE>
See accompanying notes 23
<PAGE>
Schedule of Investments
Capital Appreciation Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
- --------------------------------------------------------------------------------
COMMON STOCKS 95.4%
Building 1.4%
Lafarge Corp. 235,850 $ 9,552
Centex Corp. 139,900 6,304
--------
15,856
Capital Goods 8.3%
Tyco International Limited 271,900 20,511
United Technologies Corp. 158,400 17,226
Johnson Controls, Inc. 268,100 15,818
Honeywell, Inc. 147,700 11,124
Textron, Inc. 138,900 10,548
Dana Corp. 250,600 10,243
Perkin Elmer Corp. 98,800 9,639
---------
95,109
Communications 4.7%
SBC Communications, Inc. 258,600 13,867
U.S. West, Inc. 212,700 13,746
AT&T Corp. 181,600 13,665
ALLTEL Corp. 211,300 12,638
----------
53,916
Consumer Discretionary 12.7%
Harley-Davidson, Inc. 324,200 15,359
Wal-Mart Stores, Inc. 174,400 14,203
Lowe's Cos., Inc. 276,600 14,158
TJX Cos., Inc. 487,600 14,140
Mohawk Industries, Inc. 335,800 14,125
Gap, Inc. 247,700 13,933
CVS Corp. 251,500 13,833
Home Depot, Inc. 225,800 13,816
Ford Motor Co. 225,000 13,205
Eastman Kodak Co. 154,800 11,146
Costco Cos., Inc. (b) 104,700 7,558
Cintas Corp. 5,900 416
---------
145,892
Consumer Services 3.3%
Gannett, Inc. 202,900 13,429
New York Times Co. 385,800 13,382
Omnicom Group 198,000 11,484
---------
38,295
Consumer Staples 9.0%
Albertson's, Inc. 265,400 16,903
Kroger Co. (b) 272,700 16,498
Safeway, Inc. (b) 267,400 16,295
Clorox Co. 117,900 13,772
Anheuser Busch Cos., Inc. 203,800 13,374
Quaker Oats Co. 198,600 11,817
Sara Lee Corp. 405,600 11,433
H.J. Heinz Co. 54,400 3,080
---------
103,172
Energy 2.1%
Peco Energy Co. 285,700 11,892
Energy East Corp. 205,700 11,622
---------
23,514
Financial & Business Services 20.4%
Capital One Financial Corp. 143,500 16,503
Associates First Capital Corp. `A' 345,474 14,639
Fleet Financial Group, Inc. 320,800 14,336
Provident Cos., Inc. `B' 329,300 13,666
BankAmerica Corp. 224,415 13,493
American Express Co. 125,000 12,781
Southtrust Corp. 345,950 12,779
Wells Fargo & Co. 319,100 12,744
First Union Corp. 202,300 12,302
Countrywide Credit Industries, Inc. 240,600 12,075
Bank One Corp. 232,600 11,877
Hartford Financial Services Group, Inc. 213,000 11,688
American International Group, Inc. 117,600 11,363
PNC Bank Corp. 207,515 11,232
Alliance Capital Management LP 419,200 10,794
Ambac, Inc. 175,400 10,557
Equity Residential Properties Trust 239,400 9,681
Allstate Corp. 233,200 9,007
Household International, Inc. 140,200 5,555
Simon Property Group, Inc. 165,800 4,725
MBNA Corp. 67,020 1,671
---------
233,468
Health Care 10.5%
Wellpoint Health Networks, Inc. (b) 194,200 16,896
Guidant Corp. 129,100 14,233
HBO & Co. 436,800 12,531
Biogen, Inc. 140,200 11,637
American Home Products Corp. 205,800 11,589
CIGNA Corp. 136,700 10,569
Health Management Associates, Inc. `A' (b) 488,150 10,556
Cardinal Health, Inc. 125,200 9,500
Schering-Plough Corp. 162,400 8,973
Eli Lilly & Co. 98,200 8,728
Warner-Lambert Co. 64,100 4,820
---------
120,032
Materials & Processing 1.0%
Leggett & Platt, Inc. 515,530 11,342
Technology 18.3%
Compuware Corp. (b) 193,400 15,109
Oracle Corp. (b) 343,300 14,805
Lucent Technologies, Inc. 129,100 14,201
International Business Machines Corp. 76,100 14,059
Tellabs, Inc. (b) 202,700 13,898
Unisys Corp. (b) 402,400 13,858
EMC Corp. (b) 162,200 13,787
Dell Computer Corp. (b) 186,400 13,642
Microsoft Corp. (b) 96,600 13,397
Cisco Systems, Inc. (b) 141,650 13,147
Intel Corp. 110,600 13,113
Ascend Communications, Inc. (b) 196,200 12,900
Sun Microsystems, Inc. (b) 144,800 12,399
IMS Health, Inc. (b) 163,500 12,334
BMC Software, Inc. (b) 243,900 10,869
Gateway 2000, Inc. (b) 154,300 7,898
---------
209,416
Transportation 1.0%
Burlington Northern Santa Fe Corp. 330,700 11,161
Utilities 2.7%
Ameritech Corp. 226,500 14,354
Consolidated Edison, Inc. 237,700 12,568
New Century Energies, Inc. 72,400 3,530
----------
30,452
----------
Total Common Stocks 1,091,625
==========
(Cost $854,567)
SHORT-TERM INSTRUMENTS 4.7%
Principal
Amount
(000s)
Repurchase Agreement 4.7%
State Street Bank
3.500% due 01/04/99 $ 53,310 53,310
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 7.750% 12/31/99
valued at $3,377,377 and U.S. Treasury
Note 6.000% 02/15/26 valued at
$51,005,453. Repurchase proceeds are
$53,330,731.)
----------
Total Short-Term Instruments 53,310
==========
(Cost $53,310)
Total Investments (a) 100.1% $1,144,935
(Cost $907,877)
Other Assets and Liabilities (Net) (0.1%) (519)
----------
Net Assets 100.0% $1,144,416
==========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value tax cost. $ 251,151
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value. (14,093)
----------
Unrealized appreciation-net $ 237,058
==========
(b) Non-income producing security.
24 See accompanying notes
<PAGE>
Schedule of Investments
Mid-Cap Growth Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
COMMON STOCKS 96.8%
Building 2.4%
Lennar Corp. 494,700 $ 12,491
Pulte Corp. 382,000 10,624
----------
23,115
Capital Goods 4.9%
Waters Corp. (b) 190,100 16,586
General Dynamics Corp. 200,400 11,748
Tower Automotive, Inc. (b) 418,500 10,436
Lear Corp. (b) 218,600 8,416
----------
47,186
Communications 1.9%
Century Telephone Enterprises, Inc. 205,700 13,885
Superior Telecom, Inc. 91,700 4,333
----------
18,218
Consumer Discretionary 14.5%
Abercrombie & Fitch Co. `A' (b) 209,400 14,815
Shaw Industries, Inc. 566,300 13,733
Borders Group, Inc. (b) 530,200 13,222
Premark International, Inc. 368,000 12,742
Bed, Bath & Beyond, Inc. (b) 351,100 11,981
Fred Meyer, Inc. (b) 191,200 11,520
Family Dollar Stores, Inc. 510,900 11,240
Dial Corp. 371,300 10,721
Westpoint Stevens, Inc. (b) 321,400 10,144
Furniture Brands International, Inc. 299,300 8,156
Maytag Corp. 129,600 8,068
Herman Miller, Inc. 197,800 5,316
Tommy Hilfiger Corp. (b) 86,100 5,166
HON Industries 177,800 4,256
----------
141,080
Consumer Services 3.6%
Best Buy Co., Inc. (b) 223,800 13,736
CKE Restaurants, Inc. 365,046 10,746
Darden Restaurants, Inc. 588,400 10,591
----------
35,073
Consumer Staples 5.8%
Food Lion, Inc. `A' 1,179,100 12,528
SUPERVALU, Inc. 443,000 12,404
IBP, Inc. 392,500 11,432
Flowers Industries, Inc. 430,000 10,293
McCormick & Co. 270,200 9,136
----------
55,793
Financial & Business Services 25.0%
Valassis Communications, Inc. (b) 265,200 13,691
Providian Financial Corp. 174,900 13,118
Protective Life Corp. 325,000 12,939
Dime Bancorp, Inc. 464,400 12,278
Liberty Property Trust 498,500 12,276
Duke Realty Investments 522,700 12,153
Allmerica Financial Corp. 207,900 12,032
First American Corp. 271,100 12,030
AmSouth Bancorp 261,700 11,940
Crestar Financial Corp. 156,200 11,246
Travelers Property Casualty `A' 354,600 10,993
Ambac Financial Group, Inc. 181,800 10,942
Mutual Risk Management Limited 268,730 10,514
Mercantile Bankshares Co. 257,800 9,916
BB&T Corp. 243,000 9,796
Cullen/Frost Bankers, Inc. 169,800 9,318
Bank United Corp. 235,900 9,259
Exel Limited `A' 120,800 9,060
Finova Group, Inc. 166,200 8,964
Peoples Heritage Financial Group 448,000 8,960
Equity Residential Properties Trust 188,700 7,631
Summit Bancorp 167,490 7,317
Equifax, Inc. 90,600 3,097
Centura Banks, Inc. 40,300 2,997
----------
242,467
Health Care 12.0%
Bergen Brunswig Corp. `A' 409,800 14,292
Guidant Corp. 120,300 13,263
Total Renal Care Holdings (b) 444,900 13,152
Health Management Associates, Inc. `A' (b) 596,387 12,897
Allegiance Corp. 275,600 12,850
Watson Pharmaceuticals, Inc. (b) 184,700 11,613
Trigon Healthcare, Inc. (b) 308,600 11,515
Safeskin Corp. (b) 444,600 10,726
Mylan Laboratories, Inc. 274,900 8,659
Arterial Vascular Engineering, Inc. (b) 144,300 7,576
----------
116,543
Materials & Processing 1.4%
Southdown, Inc. 229,100 13,560
Technology 19.0%
Network Associates, Inc. (b) 233,825 15,490
Unisys Corp. (b) 424,200 14,608
Comverse Technology, Inc. (b) 205,100 14,562
Symbol Technologies, Inc. 217,800 13,926
Citrix Systems, Inc. (b) 141,000 13,686
Lexmark International Group, Inc. `A' (b) 132,200 13,286
Computer Horizons Corp. (b) 487,900 12,990
Compuware Corp. (b) 159,500 12,461
Apple Computer, Inc. 290,900 11,909
American Power Conversion Corp. (b) 242,100 11,727
Platinum Technology, Inc. (b) 584,200 11,173
Tech Data Corp. (b) 239,400 9,636
Legato Systems, Inc. (b) 141,600 9,337
Veritas Software Corp. (b) 144,700 8,673
Comdisco, Inc. 499,350 8,427
The Reynolds & Reynolds Co. 80,900 1,856
----------
183,747
Utilities 6.3%
IPALCO Enterprises, Inc. 239,300 13,235
Florida Progress Corp. 258,600 11,589
Minnesota Power, Inc. 219,100 9,640
DQE, Inc. 213,100 9,363
BEC Energy 219,100 9,024
Nipsco Industries, Inc. 276,600 8,419
----------
61,270
----------
Total Common Stocks 938,052
(Cost $759,339) ==========
SHORT-TERM INSTRUMENTS 4.1%
Principal
Amount
(000s)
Repurchase Agreement 4.1%
State Street Bank
3.500% due 01/04/99 $ 39,504 39,504
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 5.750% 10/31/02
valued at $40,296,319. Repurchase
proceeds are $39,519,363.)
----------
Total Short-Term Instruments 39,504
(Cost $39,504) ==========
Total Investments (a) 100.9% $977,556
(Cost $798,843)
Other Assets and Liabilities (Net) (0.9%) (8,800)
----------
Net Assets 100.0% $968,756
==========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net unrealized appreciation (depreciation) of
investments based on cost for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost. $193,969
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value. (15,256)
Unrealized appreciation-net $178,713
(b) Non-income producing security.
See accompanying notes 25
<PAGE>
Schedule of Investments
Innovation Fund
December 31, 1998 (Unaudited)
Value
Shares (000s)
COMMON STOCKS 94.5%
Communications 6.8%
Qwest Communications International, Inc. (b) 305,000 $ 15,250
MCI WorldCom, Inc. 200,000 14,350
General Instrument Corp. (b) 370,000 12,557
----------
42,157
Health Care 10.0%
Amgen, Inc. (b) 201,100 21,028
Sofamor Danek Group, Inc. (b) 120,000 14,610
Safeskin Corp. (b) 330,000 7,961
Quintiles Transnational Corp. (b) 145,000 7,739
Alpharma, Inc. `A' 190,000 6,709
Theragenics Corp. (b) 250,000 4,203
----------
62,250
Technology 77.7%
America Online, Inc. (b) 379,800 54,976
Cisco Systems, Inc. (b) 345,000 32,020
Microsoft Corp. (b) 190,000 26,351
Intel Corp. 210,000 24,898
Compaq Computer Corp. (b) 582,500 24,429
International Business Machines Corp. 130,000 24,016
Micron Technology, Inc. (b) 450,000 22,753
3Com Corp. (b) 440,000 19,718
Nokia Corp. - ADR 160,000 19,270
Dell Computer Corp. (b) 255,000 18,663
Teradyne, Inc. (b) 430,000 18,221
Xilinx, Inc. (b) 275,000 17,909
Compuware Corp. (b) 222,000 17,344
Ascend Communications, Inc. (b) 250,000 16,438
Oracle Corp. (b) 340,000 14,663
Citrix Systems, Inc. (b) 150,000 14,559
EMC Corp. (b) 170,000 14,450
Veritas Software Corp. (b) 240,000 14,385
Yahoo, Inc. (b) 60,000 14,104
Altera Corp. (b) 200,000 12,175
Inktomi Corp. (b) 79,000 10,221
Business Objects SA SP - ADR (b) 300,000 9,750
Applied Materials, Inc. (b) 220,000 9,391
Tellabs, Inc. (b) 122,500 8,399
Maxim Integrated Products, Inc. (b) 160,000 6,990
Sun Microsystems, Inc. (b) 80,000 6,850
Novellus Systems, Inc. 135,000 6,683
Micron Electronics, Inc. 340,000 5,886
----------
485,512
----------
Total Common Stocks 589,919
(Cost $349,342) ----------
Principal
Amount
(000s)
SHORT-TERM INSTRUMENTS 8.2%
Repurchase Agreement 8.2%
State Street Bank
3.500% due 01/04/99 $ 51,387 51,387
(Dated 12/31/98. Collateralized by
U.S. Treasury Note 6.125% 12/31/01
valued at $51,002,140 and
U.S. Treasury Note 5.750% 04/30/03
valued at $1,418,346. Repurchase
proceeds are $51,406,983.)
----------
Total Short-Term Instruments 51,387
(Cost $51,387) ==========
Total Investments (a) 102.7% $ 641,306
(Cost $400,729)
Written Options (c) (0.5%) (3,250)
(Premiums $323)
Other Assets and Liabilities (Net) (2.2%) (13,503)
----------
Net Assets 100.0% $ 624,553
==========
Notes to Schedule of Investments (amounts in thousands):
(a) At December 31, 1998, the net
unrealized appreciation (depreciation)
of investments based on cost for
federal income tax purposes was as
follows:
Aggregate gross unrealized appreciation
for all investments in which there was an
excess of value over tax cost $ 240,951
Aggregate gross unrealized depreciation
for all investments in which there was an
excess of tax cost over value (374)
----------
Unrealized appreciation-net $ 240,577
==========
(b) Non-income producing security.
(c) Premiums received on written options:
Type Contracts Premium Value
Call - OTC American Online, Inc.
- --------------------------------------------------------------------------------
Strike @ 95.00 Exp. 01/22/99 650 $ 323 $ 3,250
See accompanying note
26
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected Per Share Data Tax-Efficient
for the Year or Period Ended: Equity Income Fund Value Fund Renaissance Fund Equity Fund
----------------------- ---------------------- ------------------------ --------------
12/31/1998 04/08/98- 12/31/1998 04/08/98- 12/31/1998 04/08/98- 09/30/98-
(b) 06/30/98 (b) 06/30/98 (b) 06/30/98 12/31/98 (b)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value Beginning
of Period $ 16.04 $ 16.71 $ 15.64 $ 15.99 $ 19.10 $ 18.99 $ 10.00
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Net Investment Income
(Loss) (a) 0.18 0.09 0.11 0.04 0.01 0.01 0.02
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Net Realized / Unrealized Gain
(Loss) on Investments (a) (0.01) (0.66) 0.06 (0.34) (0.39) 0.10 0.51
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Total Income from Investment
Operations 0.17 (0.57) 0.17 (0.30) (0.38) 0.11 0.53
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Dividends from Net Investment
Income (0.18) (0.10) (0.10) (0.05) 0.00 0.00 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Distributions from Net
Realized Capital Gains (1.76) 0.00 (1.72) 0.00 (2.33) 0.00 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Total Distributions (1.94) (0.10) (1.82) (0.05) (2.33) 0.00 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Net Asset Value End of Period 14.27 16.04 13.99 15.64 16.39 19.10 10.53
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Total Return 1.41% (3.43)% 1.59% (1.85)% (1.04)% 0.58% 5.30%
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Net Assets End of Period (000s) $ 106 $ 104 $ 108 $ 98 $ 108 $ 126 $ 790
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Ratio of Expenses to Average
Net Assets* 1.11% 1.10% 1.11% 1.10% 1.26% 1.25% 1.10%
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Ratio of Net Investment Income
(Loss) to Average Net Assets* 2.45% 2.23% 1.45% 1.23% 0.08% 0.21% 0.43%
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
Portfolio Turnover Rate 38% 45% 47% 77% 104% 192% 8%
- --------------------------------- ----------------------- ---------------------- ------------------------ --------------
<CAPTION>
Selected Per Share Data
for the Year or Period Ended: Capital Appreciation Fund Mid-Cap Growth Fund Innovation Fund
------------------------- --------------------- -------------------------
12/31/1998 04/08/98- 12/31/1998 04/08/98- 12/31/1998 04/08/98-
(b) 06/30/98 (b) 06/30/98 (b) 06/30/98
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Beginning
of Period $ 26.01 $ 25.41 $ 23.99 $ 23.97 $ 24.28 $ 21.50
- --------------------------------- ----------------------- ---------------------- ------------------------
Net Investment Income (Loss) (a) 0.04 0.02 0.01 0.00 (0.12) (0.05)
- --------------------------------- ----------------------- ---------------------- ------------------------
Net Realized / Unrealized Gain
(Loss) on Investments (a) 0.53 0.58 0.13 0.02 7.52 2.83
- --------------------------------- ----------------------- ---------------------- ------------------------
Total Income from Investment
Operations 0.57 0.60 0.14 0.02 7.40 2.78
- --------------------------------- ----------------------- ---------------------- ------------------------
Dividends from Net Investment
Income (0.13) 0.00 (0.01) 0.00 0.00 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------
Distributions from Net
Realized Capital Gains (1.65) 0.00 (1.07) 0.00 (1.26) 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------
Total Distributions (1.78) 0.00 (1.08) 0.00 (1.26) 0.00
- --------------------------------- ----------------------- ---------------------- ------------------------
Net Asset Value End of Period 24.80 26.01 23.05 23.99 30.42 24.28
- --------------------------------- ----------------------- ---------------------- ------------------------
Total Return 2.60% 2.36% 0.91% 0.08% 31.03% 12.93%
- --------------------------------- ----------------------- ---------------------- ------------------------
Net Assets End of Period (000s) $ 208 $ 118 $ 252 $ 142 $ 5,239 $ 139
- --------------------------------- ----------------------- ---------------------- ------------------------
Ratio of Expenses to Average
Net Assets* 1.10% 1.10% 1.11% 1.10% 1.30% 1.30%
- --------------------------------- ----------------------- ---------------------- ------------------------
Ratio of Net Investment Income
(Loss) to Average Net Assets* 0.35% 0.27% 0.09% 0.03% (0.96)% (0.99)%
- --------------------------------- ----------------------- ---------------------- ------------------------
Portfolio Turnover Rate 62% 75% 45% 66% 60% 100%
- --------------------------------- ----------------------- ---------------------- ------------------------
</TABLE>
* Annualized
(a) Per share amounts based on average number of shares outstanding during the
period.
(b) Unaudited
See accompanying notes 27
<PAGE>
Statements of Assets and Liabilities
December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Capital
Amounts in thousands, Equity Renaissance Tax-Efficient Appreciation Mid-Cap Innovation
except per share amounts Income Fund Value Fund Fund Equity Fund Fund Growth Fund Fund
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at value $ 197,053 $ 243,923 $ 639,912 $ 13,731 $ 1,144,935 $ 977,556 $ 641,306
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and foreign currency 0 0 271 0 0 22 0
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for investments
and foreign currency sold 3,863 0 937 29 10,602 3,920 0
- ------------------------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 313 266 1,566 215 1,662 2,833 11,668
- ------------------------------------------------------------------------------------------------------------------------------------
Interest and dividends
receivable 645 588 772 11 1,345 619 32
- ------------------------------------------------------------------------------------------------------------------------------------
Other assets 63 0 2 0 0 0 7
- -----------------------------------------------------------------------------------------------------------------------------------
201,937 244,777 643,460 13,986 1,158,544 984,950 653,013
===================================================================================================================================
Liabilities:
Payable for investments and
foreign currency purchased $ 607 $ 8 $ 4,715 $ 716 $ 11,701 $ 9,322 $ 21,767
- ------------------------------------------------------------------------------------------------------------------------------------
Written options outstanding 0 0 72 0 0 0 3,250
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 832 279 2,042 0 1,483 5,996 2,475
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued investment advisory fee 85 99 339 5 471 375 335
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued administration fee 55 74 226 4 292 253 206
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued distribution fee 29 80 367 4 88 152 298
- ------------------------------------------------------------------------------------------------------------------------------------
Accrued servicing fee 16 34 141 3 93 96 129
- ------------------------------------------------------------------------------------------------------------------------------------
1,624 574 7,902 732 14,128 16,194 28,460
====================================================================================================================================
Net Assets $ 200,313 $ 244,203 $ 635,558 $ 13,254 $ 1,144,416 $ 968,756 $ 624,553
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:
Paid in capital $ 174,937 $ 222,831 $ 584,306 $ 12,204 $ 875,555 $ 813,060 $ 357,052
- ------------------------------------------------------------------------------------------------------------------------------------
Undistributed (overdistributed)
net investment income 4,816 5,638 44,815 (1) 459 66 (3,276)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed net
realized gain (loss) 3,496 840 (110,128) (96) 31,344 (23,083) 33,127
- ------------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation 17,064 14,894 116,565 1,147 237,058 178,713 237,650
- ------------------------------------------------------------------------------------------------------------------------------------
$ 200,313 $ 244,203 $ 635,558 $ 13,254 $ 1,144,416 $ 968,756 $ 624,553
====================================================================================================================================
Net Assets:
Class D 106 108 108 790 208 252 5,239
- ------------------------------------------------------------------------------------------------------------------------------------
Other Classes 200,207 244,095 635,450 12,464 1,144,208 968,504 619,314
- ------------------------------------------------------------------------------------------------------------------------------------
Shares Issued and Outstanding:
Class D 7 8 7 75 8 11 172
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value and
Redemption Price Per Share
(Net Assets Per Share
Outstanding):
Class D $ 14.27 $ 13.99 $ 16.39 $ 10.53 $ 24.80 $ 23.05 $ 30.42
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of Investments Owned $ 179,989 $ 229,029 $ 523,408 $ 12,584 $ 907,877 $ 798,843 $ 400,729
====================================================================================================================================
</TABLE>
28 See accompanying notes
<PAGE>
Statements of Operations
For the six months ended December 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Capital
Equity Renaissance Tax-Efficient Appreciation Mid-Cap Innovation
Amounts in thousands Income Fund Value Fund Fund Equity Fund Fund Growth Fund Fund
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends, net of foreign
taxes $ 3,371 $ 2,805 $ 3,641 $ 38 $ 7,094 $ 3,419 $ 73
- ------------------------------------------------------------------------------------------------------------------------------------
Interest 151 137 581 6 1,122 1,443 773
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income 3,522 2,942 4,222 44 8,216 4,862 846
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment advisory fees 448 523 1,870 13 2,564 1,843 1,419
- ------------------------------------------------------------------------------------------------------------------------------------
Administration fees 290 393 1,246 12 1,577 1,255 873
- ------------------------------------------------------------------------------------------------------------------------------------
Servicing fees - Class D 0 0 0 1 0 0 2
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution and/or
servicing fees -
Other Classes 229 619 2,796 19 933 1,298 1,815
- ------------------------------------------------------------------------------------------------------------------------------------
Trustees' fees 7 9 23 0 40 28 13
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 0 0 6 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 974 1,544 5,941 45 5,114 4,424 4,122
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 2,548 1,398 (1,719) (1) 3,102 438 (3,276)
====================================================================================================================================
Net Realized and Unrealized
Gain (Loss):
Net realized gain (loss) on
investments 11,693 12,336 (60,991) (96) 33,019 (22,826) 58,761
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures contracts and
written options 0 0 (642) 0 0 0 (2,080)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on investments (11,187) (10,947) 51,051 1,147 (12,629) 38,989 83,889
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation (depreciation)
on futures contracts and
written options 0 0 (16) 0 0 0 (2,602)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Gain (Loss) 506 1,389 (10,598) 1,051 20,390 16,163 137,968
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in
Assets Resulting from
Operations $ 3,054 $ 2,787 $ (12,317) $ 1,050 $ 23,492 $ 16,601 $ 134,692
====================================================================================================================================
</TABLE>
See accompanying notes 29
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Amounts in thousands Equity Income Fund Value Fund
-----------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
Increase (Decrease) in December 31, 1998 June 30, 1998 December 31, 1998 June 30, 1998
Net Assets from: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 2,548 $ 4,503 $ 1,398 $ 2,032
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 11,693 23,527 12,336 29,304
- ---------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) (11,187) 4,261 (10,947) 3,088
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from
operations 3,054 32,291 2,787 34,424
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Class D (1) (1) (1) 0
- ---------------------------------------------------------------------------------------------------------------------------------
Other Classes (2,485) (4,434) (1,380) (2,015)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D (12) 0 (11) 0
- ---------------------------------------------------------------------------------------------------------------------------------
Other Classes (22,655) (20,707) (26,321) (20,689)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (25,153) (25,142) (27,713) (22,704)
=================================================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 0 108 8 100
- ---------------------------------------------------------------------------------------------------------------------------------
Other Classes 32,159 64,648 45,185 90,008
- ---------------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of distributions
Class D 13 1 12 0
- ---------------------------------------------------------------------------------------------------------------------------------
Other Classes 24,490 24,499 26,478 21,627
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
Other Classes (35,957) (34,922) (41,913) (63,900)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from Fund
share transactions 20,705 54,334 29,770 47,835
- ---------------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (1,394) 61,483 4,844 59,555
=================================================================================================================================
Net Assets:
Beginning of period 201,707 140,224 239,359 179,804
- ---------------------------------------------------------------------------------------------------------------------------------
End of period * $ 200,313 $ 201,707 $ 244,203 $ 239,359
- ---------------------------------------------------------------------------------------------------------------------------------
*Including net undistributed (over-
distributed) investment income of: $ 4,816 $ 4,754 $ 5,638 $ 5,621
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Amounts in thousands Renaissance Fund
----------------------------------------------
Six Months Ended Year Ended
Increase (Decrease) in December 31, 1998 June 30, 1998
Net Assets from: (Unaudited)
<S> <C> <C>
Operations:
Net investment income (loss) $ (1,719) $ (1,489)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (61,633) 123,570
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 51,035 4,045
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from operations (12,317) 126,126
- ---------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Class D 0 0
- ---------------------------------------------------------------------------------------------------------------
Other Classes 0 (425)
- ---------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D (13) 0
- ---------------------------------------------------------------------------------------------------------------
Other Classes (80,848) (80,722)
- ---------------------------------------------------------------------------------------------------------------
Total Distributions (80,861) (81,147)
===============================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 13 126
- ---------------------------------------------------------------------------------------------------------------
Other Classes 216,611 465,308
- ---------------------------------------------------------------------------------------------------------------
Issued as reinvestment of distributions
Class D 13 0
- ---------------------------------------------------------------------------------------------------------------
Other Classes 74,634 74,240
- ---------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D (27) 0
- ---------------------------------------------------------------------------------------------------------------
Other Classes (219,532) (311,714)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from Fund
share transactions 71,712 227,960
- ---------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets (21,466) 272,939
===============================================================================================================
Net Assets:
Beginning of period 657,024 384,085
- ---------------------------------------------------------------------------------------------------------------
End of period * $ 635,558 $ 657,024
- ---------------------------------------------------------------------------------------------------------------
*Including net undistributed (overdistributed)
investment income of: $ 44,815 $ 46,534
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
30 See accompanying notes
<PAGE>
<TABLE>
<CAPTION>
Tax-Efficient
Amounts in thousands Equity Fund Capital Appreciation Fund
---------------------------------------------------------------------
Period from
July 10, 1988 to Six Months Ended Year Ended
Increase (Decrease) in December 31, 1998 December 31, 1998 June 30, 1998
Net Assets from: (Unaudited) (Unaudited)
<S> <C> <C> <C>
Operations:
Net investment income (loss) $ (1) $ 3,102 $ 4,296
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (96) 33,019 89,980
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 1,147 (12,629) 125,025
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from operations 1,050 23,492 219,301
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Class D 0 (1) 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 0 (5,606) (3,830)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D 0 (14) 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 0 (70,692) (50,344)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions 0 (76,313) (54,174)
=============================================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 750 112 115
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 14,661 316,577 560,304
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment
of distributions
Class D 0 15 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 0 62,906 43,103
- -----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D 0 (29) 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes (3,207) (305,887) (207,057)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from Fund
share transactions 12,204 73,694 396,465
- -----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 13,254 20,873 561,592
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 0 1,123,543 561,951
- -----------------------------------------------------------------------------------------------------------------------------
End of period * $ 13,254 $ 1,144,416 $ 1,123,543
- -----------------------------------------------------------------------------------------------------------------------------
*Including net undistributed (overdistributed)
investment income of: $ (1) $ 459 $ 2,964
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Amounts in thousands Mid-Cap Growth Fund Innovation Fund
--------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
Increase (Decrease) in December 31, 1998 June 30, 1998 December 31, 1998 June 30, 1998
Net Assets from: (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 438 $ 841 $ (3,276) $ (4,786)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (22,826) 58,714 56,681 18,138
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) 38,989 57,682 81,287 109,570
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from
operations 16,601 117,237 134,692 122,922
- -----------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Class D 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes (424) (1,495) 0 0
- -----------------------------------------------------------------------------------------------------------------------------
From net realized capital gains
Class D (9) 0 (143) 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes (41,274) (30,237) (23,411) (17,902)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (41,707) (31,732) (23,554) (17,902)
=============================================================================================================================
Fund Share Transactions:
Receipts for shares sold
Class D 203 142 4,967 124
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 413,355 600,636 376,354 462,082
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of distributions
Class D 10 0 142 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes 38,459 30,438 21,988 16,937
- -----------------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed
Class D (100) 0 (707) 0
- -----------------------------------------------------------------------------------------------------------------------------
Other Classes (251,943) (310,412) (275,656) (468,412)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) resulting from Fund
share transactions 199,984 320,804 127,088 10,731
- -----------------------------------------------------------------------------------------------------------------------------
Total Increase (Decrease) in Net Assets 174,878 406,309 238,226 115,751
=============================================================================================================================
Net Assets:
Beginning of period 793,878 387,569 386,327 270,576
- -----------------------------------------------------------------------------------------------------------------------------
End of period * $ 968,756 $ 793,878 $ 624,553 $ 386,327
- -----------------------------------------------------------------------------------------------------------------------------
*Including net undistributed (overdistributed)
investment income of: $ 66 $ 52 $ (3,276) $ 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes 31
<PAGE>
Notes to Financial Statements
December 31, 1998 (Unaudited)
1. Organization
PIMCO Funds: Multi-Manager Series (the "Trust" is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company organized as a Massachusetts business trust. The Trust currently
consists of twenty-five separate investment funds (the "Funds") and three
additional series invest in a diversified portfolio of PIMCO Funds (the
"Portfolios"). The Trust may offer up to six classes of shares: Institutional,
Administrative, A, B, C and D. Each share class has identical voting rights
(except shareholders of a class that have exclusive voting rights regarding any
matter relating solely to that class of shares). Information presented in these
financial statements pertains to the Class D shares of the Trust. Certain
detailed financial information for the Institutional, Administrative, A, B and C
Classes (the "Other Classes") is provided separately and is available upon
request.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements in
conformity with generally accepted accounting principles. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates.
Security Valuation. Portfolio securities and other financial instruments for
which market quotations are readily available are stated at market value. Market
value is determined on the basis of last reported sales prices, or if no sales
are reported, as is the case for most securities traded over-the-counter, the
mean between representative bid and asked quotations obtained from a quotation
reporting system or from established market makers. Short-term investments
having a maturity of 60 days or less are valued at amortized cost, which
approximates market value. Certain fixed income securities for which daily
market quotations are not readily available may be valued, pursuant to
guidelines established by the Board of Trustees, with reference to fixed income
securities whose prices are more readily obtainable.
Securities Transactions and Investment Income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed delivery basis may be settled a month or more after the trade date.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have passed,
are recorded as soon as the Fund is informed of the ex-dividend date. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on the accrual basis.
Foreign Currency. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period. Fluctuations in the value of these assets and liabilities
resulting from changes in exchange rates are recorded as unrealized foreign
currency gains (losses). Realized gains (losses) and unrealized appreciation
(depreciation) on investment securities and income and expenses are translated
on the respective dates of such transactions. The effect of changes in foreign
currency exchange rates on investments in securities are not segregated in the
Statement of Operations from the effects of changes in market prices of those
securities, but are included with the net realized and unrealized gain or loss
on investment securities.
Dividends and Distributions to Shareholders. Dividends from net investment
income, if any, are declared and paid quarterly to shareholders of record by the
Equity Income, Value and Renaissance Funds. Dividends from net investment
income, if any, are declared and paid at least annually to shareholders of
record by the other Funds. Net long-term capital gains earned by a Fund, if any,
will be distributed no less frequently than once each year.
Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for such items as wash sales, foreign currency transactions, net
operating losses and capital loss carryforwards. Certain amounts have been
reclassified between undistributed net investment income, accumulated
undistributed net realized gains or losses and paid in capital to more
appropriately conform financial accounting and tax characterizations of dividend
distributions.
Multiclass Operations. Each class offered by the Trust has equal rights as to
assets. Income, non-class specific expenses, and realized and unrealized capital
gains and losses are allocated to each class of shares based on the relative net
assets of each class.
Federal Income Taxes. Each Fund intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if
applicable, to shareholders. Accordingly, no provision for Federal income taxes
has been made.
Foreign Taxes on Dividends. Dividend income in the statement of operations is
shown net of foreign taxes withheld on dividends from foreign securities.
Foreign taxes withheld were as follows: Equity Income Fund - $7,736; Value
Fund - $13,783; Renaissance Fund - $8,699; Tax-Efficient Equity Fund - $10; Mid-
Cap Growth Fund - $5,933.
32
<PAGE>
Futures and Options. Certain Funds are authorized to enter into futures
contracts and options. A Fund may use futures contracts to manage its exposure
to the markets or to movements in interest rates and currency values. The
primary risks associated with the use of futures contracts and options are
imperfect correlation between the change in market value of the securities held
by a Fund and the prices of futures contracts and options, the possibility of an
illiquid market, and the inability of the counterparty to meet the terms of the
contract. Futures contracts and purchased options are valued based upon their
quoted daily settlement prices. The premium received for a written option is
recorded as an asset with an equal liability which is marked to market based on
the option's quoted daily settlement price. Fluctuations in the value of such
instruments are recorded as unrealized appreciation (depreciation) until
terminated, at which time realized gains and losses are recognized.
Forward Currency Transactions. Certain Funds are authorized to enter into
forward foreign exchange contracts for the purpose of hedging against foreign
exchange risk arising from the Fund's investment or anticipated investment in
securities denominated in foreign currencies. A Fund may also enter into these
contracts for purposes of increasing exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one country to another. All
commitments are marked to market daily at the applicable translation rates and
any resulting unrealized gains or losses are recorded. Realized gains or losses
are recorded at the time the forward contract matures or by delivery of the
currency. Risks may arise upon entering these contracts from the potential
inability of counterparties to meet the terms of their contracts and from
unanticipated movements in the value of a foreign currency relative to the U.S.
dollar.
Repurchase Agreements. Each Fund may engage in repurchase transactions. Under
the terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time. The
market value of the collateral must be equal at all times to the total amount of
the repurchase obligations, including interest. Generally, in the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred.
3. Fees, Expenses, and Related Party Transactions Investment Advisory Fee. PIMCO
Advisors L.P. ("PIMCO Advisors") serves as investment advisor to the Trust,
pursuant to an Investment Advisory Agreement. PIMCO Advisors receives from the
Trust a fee based on an annual percentage of the average daily net assets of
each Fund as follows: 0.60% for the Renaissance Fund; 0.65% for the Innovation
Fund; and 0.45% for all other Funds. Each of the Funds also has a sub-advisor
which, under the supervision of PIMCO Advisors, directs the investments of the
Fund's assets. All of the sub-advisors are affiliates of PIMCO Advisors. The
advisory fees received by PIMCO Advisors are paid in all or in part to each of
the sub-advisors in accordance with the portfolio management agreements.
Administration Fee. PIMCO provides administrative services to the Trust for
which it receives from each Fund a monthly administrative fee based on each
share class's average daily net assets. The Administration Fee for Class D is
charged at the annual rate of 0.40%. The Administration Fee for the
Institutional and Administrative Classes is charged at the annual rate of 0.25%.
The Administration Fee for the A, B and C Classes is charged at the annual rate
of 0.40%.
Distribution and Servicing Fees. PIMCO Funds Distributors LLC ("PFD"), formerly
PIMCO Funds Distribution Company, a wholly-owned subsidiary of PIMCO Advisors
L.P., serves as the distributor of the Trust's shares.
The Trust is permitted to reimburse out of the Administrative Class assets
of each Fund, in an amount up to 0.25% on an annual basis of the average daily
net assets of that class, financial intermediaries that provide services in
connection with the distribution of shares or administration of plans or
programs that use Fund shares as their funding medium. The effective rate paid
to PFD was 0.25% during the current fiscal year.
33
<PAGE>
Notes to Financial Statements (Cont.)
December 31, 1998 (Unaudited)
Pursuant to the Distribution and Servicing Plans adopted by the A, B, C and
D Classes of the Trust, the Trust compensates PFD or an affiliate with respect
to Class D for services provided and expenses incurred in connection with
assistance rendered in the sale of shares and services rendered to shareholders
and for maintenance of shareholder accounts of the A, B, C and D Classes. The
Trust paid PFD distribution and servicing fees at an effective rate as set forth
below (calculated as a percentage of each Fund's average daily net assets
attributable to each class):
Distribution Fee (%) Servicing Fee (%)
- --------------------------------------------------------------------------------
Class A
All Funds -- 0.25
Class B
All Funds 0.75 0.25
Class C
All Funds 0.75 0.25
Class D
All Funds -- 0.25
PFD also receives the proceeds of the initial sales charges paid by the
shareholders upon the purchase of Class A shares and the contingent deferred
sales charges paid by the shareholders upon certain redemptions of Class A, B
and C shares. For the period ended December 31, 1998, PFD received $1,244,544
representing commissions (sales charges) and contingent deferred sales charges.
Expenses. The Trust is also responsible for the following expenses: (i) salaries
and other compensation of any of the Trust's executive officers and employees
who are not officers, directors, stockholders or employees of PIMCO Advisors,
PIMCO, or its subsidiaries or affiliates; (ii) taxes and governmental fees;
(iii) brokerage fees and commissions and other portfolio transaction expenses;
(iv) the cost of borrowing money, including interest expenses; (v) fees and
expenses of the Trustees who are not "interested persons" of the Advisor, PIMCO,
Portfolio Managers, or the Trust, and any counsel retained exclusively for their
benefit; (vi) extraordinary expenses, including costs of litigation and
indemnification expenses; (vii) expenses such as organizational expenses, which
are capitalized in accordance with generally accepted accounting principles; and
(viii) any expenses allocated or allocable to a specific class of shares, which
include service 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 and
subject to review and approval by the Trustees. The ratio of expenses to average
net assets, as disclosed in the Financial Highlights, may differ from the annual
fund operating expenses per share class as disclosed in the Prospectus for the
reasons set forth above.
Each unaffiliated Trustee receives an annual retainer of $45,000, plus
$2,000 for each Board of Trustees meeting attended, and $500 for each Audit and
Performance Committee meeting attended, plus reimbursement of related expenses.
Each Audit and Performance Committee receives an additional annual retainer of
$1,000, the Chairman of the Audit and Performance Committees receives an
additional annual retainer of $2,000, the Chairman of the Independent Trustees
receives an additional annual retainer of $6,000, and each Vice Chairman of the
entire Board receives an additional annual retainer of $3,000. These expenses
are allocated to the Funds of the Trust according to their respective net
assets.
4. Purchases and Sales of Securities
Purchases and sales of securities (excluding short-term investments) for the
period ended December 31, 1998 were as follows (amounts in thousands):
U.S. Government/Agency All Other
----------------------------------------------------------
Purchases Sales Purchases Sales
- --------------------------------------------------------------------------------
Equity Income Fund $ 70,941 $ 70,240
Value Fund 106,255 103,491
Renaissance Fund 616,624 605,913
Tax-Efficient Equity Fund 12,460 514
Capital Appreciation Fund 740,050 656,609
Mid-Cap Growth Fund 493,490 334,742
Innovation Fund 321,406 235,262
5. Transactions in Written Call and Put Options
Transactions in written call and put options were as follows (amounts in
thousands):
Renaissance Fund Innovation Fund
----------------------------------------------------------
Premium Contracts Premium Contracts
----------------------------------------------------------
Balance at 06/30/98 $ 132 630 $ 650 1,500
Sales 704 4,351 3,790 7,100
Closing Buys (571) (3,675) (2,975) (5,948)
Expirations (132) (630) (1,141) (2,000)
Exercised 0 0 (1) (2)
- --------------------------------------------------------------------------------
Balance at 12/31/98 $ 133 676 $ 323 650
- --------------------------------------------------------------------------------
34
<PAGE>
6. Shares of Beneficial Interest
The Trust may issue an unlimited number of shares of beneficial interest with a
$.0001 par value. Changes in shares of beneficial interest were as follows
(shares and amounts in thousands):
<TABLE>
<CAPTION>
Equity Income Fund Value Fund
---------------------------------------------- ------------------------------------------------
Six Months Ended 12/31/98 Year Ended 6/30/98 Six Months Ended 12/31/98 Year Ended 6/30/98
Shares Amount Shares Amount Shares Amount Shares Amount
---------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receipts for shares
sold
Class D 0 $ 0 7 $ 108 1 $ 8 6 $ 100
- ----------------------- ---------------------------------------------- -------------------------------------------------
Other Classes 2,158 32,159 4,002 64,648 3,114 45,185 5,791 90,008
- ----------------------- ---------------------------------------------- -------------------------------------------------
Issued as reinvestment
of distributions
Class D 1 13 0 1 1 12 0 0
- ----------------------- ---------------------------------------------- -------------------------------------------------
Other Classes 1,741 24,490 1,593 24,499 1,965 26,478 1,478 21,627
- ----------------------- ---------------------------------------------- -------------------------------------------------
Cost of shares redeemed
Class D 0 0 0 0 0 0 0 0
- ----------------------- ---------------------------------------------- -------------------------------------------------
Other Classes (2,432) (35,957) (2,151) (34,922) (2,918) (41,913) (4,119) (63,900)
- ----------------------- ---------------------------------------------- -------------------------------------------------
Net increase resulting
from Fund share
transactions 1,468 $ 20,705 3,451 $ 54,334 2,163 $ 29,770 3,156 $ 47,835
======================= ============================================== =================================================
<CAPTION>
Renaissance Fund
----------------------------------------------
Six Months Ended 12/31/98 Year Ended 6/30/98
Shares Amount Shares Amount
----------------------------------------------
<S> <C> <C> <C> <C>
Receipts for shares
sold
Class D 1 $ 13 7 $ 126
- ----------------------- ----------------------------------------------
Other Classes 12,725 216,611 25,062 465,308
- ----------------------- ----------------------------------------------
Issued as reinvestment
of distributions
Class D 1 13 0 0
- ----------------------- ----------------------------------------------
Other Classes 4,946 74,634 4,447 74,240
- ----------------------- ----------------------------------------------
Cost of shares redeemed
Class D (2) (27) 0 0
- ----------------------- ----------------------------------------------
Other Classes (13,020) (219,532) (16,657) (311,714)
- ----------------------- ----------------------------------------------
Net increase resulting
from Fund share
transactions 4,651 $ 71,712 12,859 $ 227,960
======================= ==============================================
</TABLE>
<TABLE>
<CAPTION>
Tax-Efficient
Equity Fund Capital Appreciation Fund
------------------- ------------------------------------------------
Period From Six Months Ended
7/10/98 to 12/31/98 12/31/98 Year Ended 6/30/98
Shares Amount Shares Amount Shares Amount
------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Receipts for shares
sold
Class D 75 $ 750 4 $ 112 5 $ 115
- --------------------------- ------------------- ------------------------------------------------
Other Classes 1,510 14,661 12,851 316,577 23,379 560,304
- --------------------------- ------------------- ------------------------------------------------
Issued as reinvest-
ment of distributions
Class D 0 0 1 15 0 0
- --------------------------- ------------------- ------------------------------------------------
Other Classes 0 0 2,672 62,906 1,860 43,103
- --------------------------- ------------------- ------------------------------------------------
Cost of shares redeemed
Class D 0 0 (1) (29) 0 0
- --------------------------- ------------------- ------------------------------------------------
Other Classes (323) (3,207) (12,604) (305,887) (8,659) (207,057)
- --------------------------- ------------------- ------------------------------------------------
Net increase resulting
from Fund share
transactions 1,262 $ 12,204 2,923 $ 73,694 16,585 $ 396,465
=========================== =================== ================================================
</TABLE>
<TABLE>
<CAPTION>
Mid-Cap Growth Fund Innovation Fund
-------------------------------------------- -----------------------------------------
Six Months Six Months
Ended 12/31/98 Year Ended 6/30/98 Ended 12/31/98 Year Ended 6/30/98
Shares Amount Shares Amount Shares Amount Shares Amount
-------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Receipts for shares
sold
Class D 9 $ 203 6 $ 142 190 $ 4,967 6 $ 124
- -------------------------- -------------------------------------------- -----------------------------------------
Other Classes 18,733 413,355 25,999 600,636 15,330 376,354 22,660 462,082
- -------------------------- -------------------------------------------- -----------------------------------------
Issued as reinvest-
ment of distributions
Class D 0 10 0 0 5 142 0 0
- -------------------------- -------------------------------------------- -----------------------------------------
Other Classes 1,800 38,459 1,338 30,438 824 21,988 930 16,937
- -------------------------- -------------------------------------------- -----------------------------------------
Cost of shares redeemed
Class D (4) (100) 0 0 (29) (707) 0 0
- -------------------------- -------------------------------------------- -----------------------------------------
Other Classes (11,485) (251,943) (13,377) (310,412) (11,491) (275,656) (23,091) (468,412)
- -------------------------- -------------------------------------------- -----------------------------------------
Net increase resulting
from Fund share
transactions 9,053 $ 199,984 13,966 $ 320,804 4,829 $ 127,088 505 $ 10,731
========================== ============================================ =========================================
</TABLE>
35
<PAGE>
PIMCO Funds: Access to the highest standard
PIMCO Funds offers unique access to the investment expertise of PIMCO Advisors
L.P. PIMCO manages approximately $244 billion, including assets for 46 of the
100 largest U.S. corporations. The firm's institutional heritage is reflected in
the PIMCO Funds, each seeking the highest caliber performance in a specific
investment style.
- --------------------------------------------------------------------------------
Manager PIMCO Advisors L.P., 800 Newport Center Drive,
Newport Beach, CA 92660
- --------------------------------------------------------------------------------
Distributor PIMCO Funds Distributors LLC, 2187 Atlantic Street,
Stamford, CT 06902
- --------------------------------------------------------------------------------
Custodian Investors Fiduciary Trust Company, 801 Pennsylvania,
Kansas City, MO 64105
- --------------------------------------------------------------------------------
Shareholder First Data Investor Services Group, Inc., P.O. Box 9688,
Servicing Agent and Providence, RI 02940-9688
Transfer Agent
- --------------------------------------------------------------------------------
Independent PricewaterhouseCoopers LLP, 1055 Broadway,
Accountant Kansas City, MO, 64105
- --------------------------------------------------------------------------------
Legal Counsel Ropes & Gray, One International Place,
Boston, MA 02110
- --------------------------------------------------------------------------------
This is a copy of a report by PIMCO Funds to its shareholders. Distribution of
this report to persons other than shareholders of the Trust is authorized only
when accompanied by the Trust's Prospectus. This report does not offer for sale
or solicit orders to buy any securities.
This material is authorized for use only when preceded or accompanied by a
current PIMCO Funds prospectus, which describes in greater detail the investment
policies, management fees and other matters of interest to prospective
investors. Please read the prospectus carefully before you invest or send money.
PZ017.2/99
[LOGO OF PIMCO FUNDS APPEARS HERE]
PIMCO Funds
Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
