NICHOLAS APPLEGATE MUTUAL FUNDS, 497, 1997-12-03

NICHOLAS APPLEGATE MUTUAL FUNDS
497, 1997-12-03

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Nicholas | Applegate-Registered Trademark-
MUTUAL FUNDS

- --------------------------------------------------------------------------------

PROSPECTUS

This prospectus contains vital information about these Funds. For your own
benefit and protection, please read it before you invest, and keep it on hand
for future reference.

Please note that these Funds:

- - are not bank deposits
- - are not federally insured
- - are not endorsed by any bank or government agency
- - are not guaranteed to achieve their investment objectives

LIKE ALL MUTUAL FUND SHARES, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

GLOBAL INSTITUTIONAL FUNDS

PACIFIC RIM FUND
GREATER CHINA FUND
LATIN AMERICA FUND

November 16, 1997

<PAGE>

TABLE OF CONTENTS

OVERVIEW

GLOBAL FUNDS
Pacific Rim Fund
Greater China Fund
Latin America Fund

YOUR ACCOUNT
Transaction Policies
Dividends and Account Policies
Opening an Account
Adding to an Account
Exchanging Shares
Selling or Redeeming Shares
Signature Guarantees

ORGANIZATION AND MANAGEMENT
Investment Adviser Compensation
Administrator Compensation
Distributor
Portfolio Trades
Investment Objectives
Diversification
Portfolio Teams

RISK FACTORS AND SPECIAL CONSIDERATIONS

2
<PAGE>

OVERVIEW

- --------------------------------------------------------------------------------

FUND INFORMATION
Concise Fund descriptions begin on the next page. Each description
provides the following information:

--> GOAL AND STRATEGY. The Fund's particular investment goal and the
strategy it intends to use in pursuing that goal.

--> PORTFOLIO SECURITIES. The primary types of securities in which the Fund
invests. Secondary investments are described in "Risk Factors and Special
Considerations" at the end of the prospectus.

--> RISK FACTORS. The major risk factors associated with the Fund. Other
risk factors are also described in "Risk Factors and Special
Considerations."

--> EXPENSES. The overall costs borne by an investor in the Fund.

The shares of the Nicholas-Applegate Pacific Rim Fund, the
Nicholas-Applegate Greater China Fund, and the Nicholas-Applegate
Latin America Fund (the "Fund" or "Funds") represent interests in
a diversified pool of securities which are portfolios of the
Nicholas-Applegate Mutual Funds (the "Trust"), an open-end management
investment company, otherwise known as a mutual fund.

WHO MAY WANT TO INVEST IN THESE FUNDS
- those who are investing for retirement or other long-term goals
- those seeking to target investment in a particular region
- those who are willing to accept higher short-term risks associated
with investing in foreign companies along with higher potential
long-term results
- those who want professional portfolio management
- those who are seeking funds for the international portion of an asset
allocation portfolio

WHO MAY NOT WANT TO INVEST IN THESE FUNDS
- those who are investing with a shorter time frame
- those who are uncomfortable with an investment that will go up and
down in value
- those who are unable to accept the special risks associated with
foreign investing
*******************************************************

THE INVESTMENT ADVISER
Nicholas-Applegate Capital Management (the "Investment Adviser") serves as
investment adviser to Funds. The Investment Adviser's affiliates, Nicholas-
Applegate - Hong Kong and Nicholas-Applegate - Asia, serve as sub-advisers
to the Greater China and Pacific Rim Funds. Arthur E. Nicholas and 14
other partners with a staff of approximately 350 employees currently manage
approximately $30 billion of discretionary assets for numerous clients,
including employee benefit plans of corporations, public retirement systems
and unions, university endowments, foundations, and other institutional
investors and individuals.

<PAGE>

PACIFIC RIM FUND

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: Long-term growth of capital.

INVESTMENT STRATEGY: The Fund's Investment Adviser focuses on a "bottom-up"
analysis that evaluates the financial condition and competitiveness of
individual companies worldwide. It uses a blend of both traditional
fundamental research, calling on the expertise of many external analysts in
different countries throughout Asia and the Pacific Rim, and systematic
disciplines to uncover signs of "change at the margin" - positive business
developments which are not yet fully reflected in a company's stock price.
The Investment Adviser does not emphasize any particular company size but
instead considers investments which in its opinion offer the potential for
capital appreciation.

PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least 65%
of its total assets in securities of issuers that satisfy at least one of the
following criteria: (i) they derive 50% or more of their total revenue from
goods produced, sales made or services produced in one or more Pacific Rim
countries; (ii) they are organized under the laws of, or have a principal
office in, a Pacific Rim country; (iii) they maintain 50% or more of their
assets in one or more Pacific Rim countries; or (iv) the principal trading
market for a class of their securities is in a Pacific Rim country. The Fund
intends to invest in securities of issuers located in at least three Asian or
Pacific Rim countries. These countries may include Australia, China, Hong
Kong, Japan, India, Indonesia, South Korea, Malaysia, New Zealand, Pakistan,
the Philippines, Singapore, Sri Lanka, Taiwan, and Thailand. The Fund invests
the remainder primarily in a combination of equity and debt securities of
issuers located throughout the world. The Fund may invest up to 35% of its
net assets in debt securities rated below investment grade. The Fund may
also use options, futures contracts, forward currency transactions, and
interest rate and currency swaps as hedging techniques.

PORTFOLIO MANAGEMENT: The Investment Adviser together with its Hong Kong and
Singapore affiliates emphasizes a team approach to portfolio management to
maximize overall effectiveness. For a complete listing of the portfolio team,
see "Portfolio Teams".

RISK FACTORS. The value of the Fund's investments varies day to day in
response to the activities of individual companies and general market and
economic conditions. As with any international fund, performance also depends
upon changing values in foreign currencies, different political and
regulatory environments, and other overall economic factors in the countries
where the Fund invests. These risks are magnified in countries with emerging
markets. Certain Asian and Pacific Rim countries may have relatively unstable
governments, economies based on only a few industries or heavily dependent
upon foreign trade, and securities markets that trade infrequently or in low
volumes. Lower rated debt securities and securities of smaller issuers are
considered speculative and subject to greater volatility and risk of loss
than higher rated securities and securities of larger, more established
companies. For a further explanation, see "Risk Factors and Special
Considerations".

- --------------------------------------------------------------------------------

INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show the expected expenses for the Fund for its
first year of operations. Actual expenses may be more or less than those shown.

- ------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
- ------------------------------------------------------------------------------------------
Maximum sales charge on purchases (as a percentage of offering price) None
- ------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original
purchase price or redemption proceeds, whichever is lower) None
- ------------------------------------------------------------------------------------------
Redemption fee None
- ------------------------------------------------------------------------------------------
Exchange fee None
- ------------------------------------------------------------------------------------------
</TABLE>

4
<PAGE>

- ------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
<S> <C>
- ------------------------------------------------------------------------------------------
Management fees 1.00%
- ------------------------------------------------------------------------------------------
12b-1 expenses None
- ------------------------------------------------------------------------------------------
Other expenses (after expense deferral)(1) 0.40%
- ------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.40%
- ------------------------------------------------------------------------------------------
</TABLE>

(1) The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Fund. Total operating
expenses and Other expenses are expected to be 3.00% and 2.00%,
respectively, absent the deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- -----------------------
1 YEAR 3 YEARS
- -----------------------
$14 $44
- -----------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
FUND'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

5
<PAGE>

GREATER CHINA FUND

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: Long term growth of capital.

INVESTMENT STRATEGY: The Fund's Investment Adviser focuses on a "bottom-up"
analysis that evaluates the financial condition and competitiveness of
individual companies worldwide. It uses a blend of both traditional
research, calling on the expertise of many external analysts throughout Asia,
and systematic disciplines to uncover signs of "change at the margin" -
positive business developments which are not yet fully reflected in a
company's stock price. The Investment Adviser does not emphasize any
particular company size but instead considers investments which in its
opinion offer the potential for capital appreciation.

PRINCIPAL INVESTMENT: Under normal conditions, the Fund invests at least 65%
of its total assets in securities of issuers that satisfy at least one of the
following criteria: (i) their securities are traded principally on stock
exchanges in China, Hong Kong or Taiwan, (ii) they derive 50% or more of
their total revenue from goods produced, sales made or services performed in
China, Hong Kong or Taiwan, (iii) they maintain 50% or more of their assets
in any of China, Hong Kong or Taiwan, or (iv) they are organized under the
laws of China, Hong Kong or Taiwan.The Fund invests the remainder primarily
in a combination of equity and debt securities of issuers located throughout
the world. The Fund may invest up to 35% of its net assets in debt securities
rated below investment grade. The Fund may also use options, futures
contracts, currency swaps and forward currency transactions as hedging
techniuqes.

PORTFOLIO MANAGEMENT: The Investment Adviser together with its Hong Kong and
Singapore affiliates emphasizes a team approach to portfolio management to
maximize its overall effectiveness. For a complete listing of the portfolio
teams, see "Portfolio Teams".

RISK FACTORS: The value of the Fund's investments varies from day to day in
response to the activities of individual companies and general market and
economic conditions. As with any international fund, performance also depends
upon changing values in foreign currencies, different political and regulatory
environments, and other overall economic factors in the countries where the
Fund invests. Because the Fund invests its assets primarily in securities of
issuers operating in the greater China area, its performance is closely tied
to economic and political conditions in the area and the Fund's performance
will be more volatile than more geographically diversified funds. Lower rated
debt securities and securities of smaller issuers are considered speculative
and subject to greater volatility and risk of loss than higher rated
securities and securities of larger, more established companies. For a
further explanation see "Risk Factors and Special Considerations".

- --------------------------------------------------------------------------------

INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below show expenses expected for the Fund in its first
year of operation. Actual expenses may be more or less than those shown.

- ------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C>
- ------------------------------------------------------------------------------------------
Maximum sales charge on purchases (as a percentage of offering price) None
- ------------------------------------------------------------------------------------------
Sales charge on reinvested dividends None
- ------------------------------------------------------------------------------------------
Deferred sales charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower) None
- ------------------------------------------------------------------------------------------
Redemption fee None
- ------------------------------------------------------------------------------------------
Exchange fee None
- ------------------------------------------------------------------------------------------
</TABLE>

(1) The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Fund. Total operating
expenses and Other expenses are expected to be 3,00% and 2.00%,
respectively, absent the deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.

- -----------------------
1 YEAR 3 YEARS
- -----------------------
$14 $44
- -----------------------

- --------------------------------------------------------------------------------
THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
FUND'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

6
<PAGE>

LATIN AMERICA FUND

- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE: Long-term growth of capital.

INVESTMENT STRATEGY: The Fund's Investment Adviser focuses on a "bottom-up"
analysis that evaluates the financial condition and competitiveness of
individual companies worldwide. It uses a blend of both traditional and
fundamental research, calling on expertise of many external analysts in
different countries throughout Latin America, and systematic disciplines to
uncover signs of "change at the margin" - positive business developments which
are not yet fully reflected in a company's stock price. The Investment Adviser
does not emphasize any particular company size but instead considers investments
which in its opinion offer potential for capital appreciation.

PRINCIPAL INVESTMENTS: Under normal conditions, the Fund invests at least
65% of its total assets in securities of issuers that satisfy at least one of
the following criteria: (i) they derive 50% or more of their total revenue
from goods produced, sales made or services performed in one or more Latin
American countries, (ii) they are organized under the laws of, or have a
principal office in, a Latin American country; (iii) they maintain 50% or
more of their assets in one or more Latin American countries, or (iv) the
principal trading market for a class of their securities is in a Latin
American country. The Fund intends to invest in securities of issuers located
in at least three Latin American countries. These countries may include:
Argentina, the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Columbia,
Costa Rica, Dominican Republic, Ecuador, El Salvador, French Guiana,
Guatamala, Guyana, Haiti, Honduras, Jamaica, Mexico, the Netherlands
Antilles, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad and Tobago,
Uruguay and Venezuela. The Fund invests the remainder primarily in a
combination of equity and debt securities of issuers located throughout the
world. The Fund may invest up to 35% of its net assets in debt securities
rated below investment grade. The Fund may also use options, futures
contracts, currency swaps and forward currency transactions as hedging
techniques.

PORTFOLIO MANAGEMENT: The Investment Adviser emphasizes a team approach to
portfolio management to maximize its overall effectiveness. For a complete
list of the portfolio team, see "Portfolio Teams".

RISK FACTORS: The value of the Fund's investments varies from day to day in
response to the activities of individual companies and general market and
economic conditions. As with any international fund, performance also depends
upon changing currency values, different political and regulatory
environments, and other overall economic factors in the countries where the
Fund invests. These risks are magnified in many Latin American countries,
since these countries may have unstable governments, less established
markets, and volatile currencies. Lower rated debt securities and securities
of smaller issuers are considered speculative and subject to greater
volatility and risk of loss than higher rated securities and securities of
larger, more established companies. For a further explanation, see "Risk
Factors and Special Considerations".

- --------------------------------------------------------------------------------
INVESTOR EXPENSES: Investors pay various expenses, either directly or
indirectly. The figures below are the expected expenses for the Fund for its
first year of operation. Actual expenses may be more or less than those shown.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS:
(AFTER EXPENSE DEFERRAL)
<S> <C>
- ------------------------------------------------------------------------------------------
Management fees 1.25%
- ------------------------------------------------------------------------------------------
12b-1 expenses None
- ------------------------------------------------------------------------------------------
Other expenses (after expense deferral)(1) 0.40%
- ------------------------------------------------------------------------------------------
Total operating expenses (after expense deferral)(1) 1.65%
- ------------------------------------------------------------------------------------------
</TABLE>

(1.)The Investment Adviser has agreed to waive or defer its management fees
and to absorb other operating expenses payable by the Fund. Total operating
expenses and Other expenses are expected to be 3,25% and 2.00%,
respectively, absent the deferral. See "Investment Adviser Compensation".

EXAMPLE: The table shows what you would pay if you invested $1,000 over the
various time frames indicated. The example assumes you reinvested all dividends
and that the average annual return was 5%.
- -----------------------
1 YEAR 3 YEARS
- -----------------------
$17 $52
- -----------------------

THIS EXAMPLE IS FOR COMPARISON PURPOSES ONLY AND IS NOT A REPRESENTATION OF THE
FUND'S ACTUAL EXPENSES AND RETURNS, EITHER PAST OR FUTURE.

7
<PAGE>

YOUR ACCOUNT
- -------------
TRANSACTION POLICIES

PURCHASE OF SHARES. Shares are offered at net asset value without a sales
charge to qualified retirement plans, financial and other institutions and "wrap
accounts." The minimum initial investment is $250,000, and the minimum
subsequent investment is $10,000. The Distributor may waive these minimums from
time to time.

VALUATION OF SHARES The net asset value per share (NAV) for a Fund is
determined each business day at the close of regular trading on the New York
Stock Exchange (usually 4 p.m. Eastern Time) by dividing a Fund's net assets by
the number of its shares outstanding.

BUY AND SELL PRICES When you buy shares, you pay the NAV, as described earlier.
When you sell shares, you receive the NAV. Your financial institution may
charge you a fee to execute orders on your behalf.

EXECUTION OF REQUESTS Each Fund is open on those days when the New York Stock
Exchange is open, usually Monday - Friday. Buy and sell requests are executed
at the NAV next calculated after your request is received in good order by the
transfer agent.

At times of peak activity, it may be difficult to place requests by phone.
During these times, consider sending your request in writing. Each Fund
reserves the right to reject any purchase or to suspend or modify the continuous
offering of its shares. Your financial representative is responsible for
forwarding payment promptly to the transfer agent. The Trust reserves the right
to cancel any buy request if payment is not received within three days.

In unusual circumstances, any Fund may temporarily suspend the processing of
sell requests, or may postpone payment of proceeds for up to three business days
or longer, as allowed by federal securities laws.

TELEPHONE TRANSACTIONS For your protection, telephone requests may be recorded
in order to verify their accuracy. In addition the Trust will take measures
to verify the identity of the caller, such as asking for name, account number,
Social Security or taxpayer ID number and other relevant information. If these
measures are not taken, your Fund may be responsible for any losses that may
occur in your account due to an unauthorized telephone call.

CERTIFICATED SHARES Most shares are electronically recorded. If you wish to
have certificates for your shares, please write to the transfer agent.
Certificated shares can only be sold by returning the certificates to the
transfer agent, along with a letter of instruction or a stock power and a
signature guarantee.

SALES IN ADVANCE OF PURCHASE PAYMENTS When you place a request to sell shares
for which the purchase money has not yet been collected, the request will be
executed in a timely fashion, but the Fund will not release the proceeds to you
until your purchase payment clears. This may take up to fifteen calendar days
after the purchase.

SHAREHOLDER INQUIRIES Shareholder inquiries should be addressed to the Trust,
c/o the Trust's transfer agent,

State Street Bank and Trust Company,
Attention: Nicholas-Applegate Mutual Funds,
P.O. Box 8326,
Boston, MA 02266-8326.

Telephone inquiries can be made by calling 1-800-551-8043 or, from outside the
U.S. 1-617-774-5000 (collect).

FEATURES AND ACCOUNT POLICIES

The services referred to below may be terminated or modified at any time upon 60
days' written notice to shareholders. Shareholders seeking to add to, change or
cancel their selection of available services should contact the Transfer Agent
at the address and telephone number provided above.

RETIREMENT PLANS You may invest in each Fund through various retirement plans,
including IRAs, Simplified Employee Plan (SEP) IRAs, 403(b) plans, 457 plans,
and all qualified retirement plans. For further information about any of the
plans, agreements, applications and annual fees, contact the Distributor, your
financial representative or plan sponsor. To determine which retirement plan is
appropriate for you, consult your tax adviser.

ACCOUNT STATEMENTS In general, you will receive account statements as follows:
- - After every transaction that affects your account balance.
- - After any changes of name or address of the registered owner(s).
- - In all other circumstances, every quarter.

Every year you will also receive an applicable tax information statement, mailed
by January 31.

DIVIDENDS The Funds generally distribute most or all of their net earnings in
the form of dividends. Each Fund pays dividends and capital gains annually.

DIVIDEND REINVESTMENTS If you choose this option, or if you do not indicate any
choice, your dividends will be reinvested on the ex-dividend date.
Alternatively, you can choose to have a check for your dividends mailed to you.

8
<PAGE>

TAXABILITY OF DIVIDENDS As long as a Fund meets the requirements for being a
tax-qualified regulated investment company, which each Fund has in the past and
intends to in the future, it pays no federal income tax on the earnings it
distributes to shareholders.

Consequently, dividends you receive from a Fund whether reinvested or taken as
cash, are generally considered taxable. Dividends from a Fund's long-term
capital gains are taxable as capital gains; dividends from other sources are
generally taxable as ordinary income.

Some dividends paid in January may be taxable as if they had been paid the
previous December. Corporations may be entitled to take a dividends-received
deduction for a portion of certain dividends they receive.

The tax information statement that is mailed to you details your dividends and
their federal tax category, although you should verify your tax liability with
your tax professional.

TAXABILITY OF TRANSACTIONS Any time you sell or exchange shares, it is
considered a taxable event for you. Depending on the purchase price and the
sale price of the shares you sell or exchange, you may have a gain or a loss on
the transaction. You are responsible for any tax liabilities generated by your
transactions.

SMALL ACCOUNTS (NON-RETIREMENT ONLY) If you draw down a non-retirement account
so that its total value is less than the Fund minimum, you may be asked to
purchase more shares within 60 days. If you do not take action, the Fund may
close out your account and mail you the proceeds. Your account will not be
closed if its drop in value is due to Fund performance.

AUTOMATIC WITHDRAWALS You may make automatic withdrawals from a Fund of $250 or
more on a monthly or quarterly basis if you have an account of $15,000 or more
in the Fund. Withdrawal proceeds will normally be received prior to the end of
the month or quarter. See the account application for further information.

AUTOMATIC INVESTMENT PLAN You may make regular monthly or quarterly investments
in a Fund through automatic withdrawals of specified amounts from your bank
account once an automatic investment plan is established. See the account
application for further details about this service or call the transfer agent at
1-800-551-8043.

CROSS-REINVESTMENT You may cross-reinvest dividends or dividends and capital
gains distributions paid by one Fund into shares of another Fund, subject to
conditions outlined in the Statement of Additional Information and the
applicable provisions of the qualified retirement plan.

9
<PAGE>

SIMPLIFIED ACCOUNT INFORMATION
- ------------------------------

- -----------------------------------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
This is the minimum $250,000
initial investment
- -----------------------------------------------------------------------------------------------------------------------------------
Use this type of New Account Form
application (Non-Retirement)
- -----------------------------------------------------------------------------------------------------------------------------------
Before completing the Each Fund offers a variety of features, which are described in the "Your Account"
application section of this prospectus. Please read this section before completing the application.
- -----------------------------------------------------------------------------------------------------------------------------------
Completing the If you need assistance, contact your financial representative,
application or call the Trust.
- -----------------------------------------------------------------------------------------------------------------------------------
If you are sending money Mail application and check, payable to: NICHOLAS-APPLEGATE MUTUAL FUNDS,
by CHECK PO BOX 8326, BOSTON, MA 02266-8326. The Trust WILL NOT accept third-party checks.
- -----------------------------------------------------------------------------------------------------------------------------------
If you are sending money Please read the bank wire or ACH section under the "Buying Shares" section below.
by BANK WIRE or ACH You will need an account number with the Trust by sending a completed application to:
NICHOLAS-APPLEGATE MUTUAL FUNDS, PO BOX 8326, BOSTON, MA 02266 8326.
To receive your account number, call either your financial representative or the Trust at (800)551-8043.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------------------------------------------------------------------------------------------------------------------------------
BUYING SHARES
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
This is the minimum $10,000
additional investment
- -----------------------------------------------------------------------------------------------------------------------------------
The price you will receive The Trust is open on days that the New York Stock Exchange is open.
All transactions received in good order before the market closes receive that day's price.
- -----------------------------------------------------------------------------------------------------------------------------------
If you are sending money Instruct your bank to wire the amount you wish to invest to:
by BANK WIRE STATE STREET BANK & TRUST CO. - ABA #011000028
DDA #9904-645-0
STATE STREET BOS, ATTN: MUTUAL FUNDS
CREDIT: NICHOLAS-APPLEGATE [FUND NAME], [YOUR NAME],[ACCOUNT NAME/NUMBER OR NUMBER]
- -----------------------------------------------------------------------------------------------------------------------------------
If you are sending money Call your bank to ensure (1) that your bank supports ACH, and (2) this feature is active on your bank
by ACH account. To establish this option, either complete the appropriate sections when opening an account, or
contact your financial representative or the Trust at (800) 551-8043 for further information.
To initiate an ACH purchase, call the Trust at (800)551-8043.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

- -----------------------------------------------------------------------------------------------------------------------------------
EXCHANGING SHARES
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
This is the minimum $250,000
exchange amount to open
a new account
- -----------------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receive that day's price.
- -----------------------------------------------------------------------------------------------------------------------------------
Things you should The exchange must be to another Institutional Portfolio in an account with the same account registration.
know If opening an account as part of an exchange, you must obtain and read the prospectus.
If you intend to keep money in the portfolio you are exchanging from, make sure that you leave an amount
equal or greater that the portfolio's minimum account size (see the "Opening an Account" section).
To protect other investors, the Trust may limit the number of exchanges you can make.
- -----------------------------------------------------------------------------------------------------------------------------------
How to request an Either contact your financial representative, or call the Trust at (800) 551-8043.
exchange by PHONE The Trust will accept a request by phone if this feature was previously established on your account.
See the Your Account section for further information.
- -----------------------------------------------------------------------------------------------------------------------------------
How to request an Please put your exchange request in writing, including: the name on the account, the name of the Fund or
exchange by MAIL portfolio and the account number you are exchanging from, the shares or dollar amount you wish to exchange,
and the fund or portfolio you wish to exchange to. Mail this request to: PO BOX 8326, BOSTON, MA 02266-
8326.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

-----------------------------------------------------------------------------------------------------------
SELLING OR REDEEMING SHARES
-----------------------------------------------------------------------------------------------------------

IN WRITING BY PHONE
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Certain requests may require a SIGNATURE GUARANTEE. Selling shares by phone is a service option which
See that section below for further information. You must be established on your account prior to
may sell up to the full account value. making a request. See the "Your Account" section,
Things you The Trust may have additional requirements for or contact your financial representative,
should know redeeming shares. Please call the Trust for more or the Trust at (800) 551-8043 for
information. further information.
The maximum amount which may be requested
by phone, regardless of account size, is $50,000.
Amounts greater than that must be requested in
writing. If you wish to receive your
monies by bank wire, the minimum request
is $5,000.
-----------------------------------------------------------------------------------------------------------
If you purchased shares through a financial representative, or a plan administrator/sponsor,
you should call them regarding the most efficient way to sell shares.
If you bought shares recently by check, they may not be available to be sold for up to
15 calendar days from the date of purchase.
Sales by a corporation, trust or fiduciary may have special requirements.
Please call your financial representative or the Trust for further information.
- -----------------------------------------------------------------------------------------------------------------------------------
The price you The Trust is open on days that the New York Stock Exchange is open.
will receive All transactions received in good order before the market closes receive that day's price.
- -----------------------------------------------------------------------------------------------------------------------------------
If you want to receive Please put your request in writing, including: the Either contact your financial representative
your monies by BANK WIRE name of the account owners, account number and or call the Trust at (800) 551-8043.
Fund you are redeeming from, the share or dollar The proceeds will be sent to the existing bank
amount you wish to sell, signed by all account wire address listed on the account.
owners. Mail this request to:
NICHOLAS-APPLEGATE MUTUAL FUNDS,
PO BOX 8326, BOSTON, MA 02266 8326.
The check will be sent to the existing bank wire
address listed on the account.
- -----------------------------------------------------------------------------------------------------------------------------------
If you want to receive Please call the Trust at (800) 551-8043. Either contact your financial representative or
your monies by ACH call the Trust at (800) 551-8043.
The proceeds will be sent to the existing ACH
instructions on the account and will
generally be received at your bank two
business days after your request is received.
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>

-----------------------------------------------------------------------------------------------------------
SIGNATURE GUARANTEES
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
A definition A signature guarantee is required of a financial institution to verify the authenticity of an individual's
signature. It can usually be obtained from a broker, commercial or savings bank, or credit union.
- -----------------------------------------------------------------------------------------------------------------------------------
When you need one A signature guarantee is needed when making a written request for the following reasons:
1. When selling more than $50,000 worth of shares;
2. When you want a check or bank wire sent to a name or address that is not currently listed on the account
3. To sell shares from an account controlled by a corporation, partnership, trust or fiduciary; or
4. If your address was changed within the last 60 days.
- -----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

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ORGANIZATION AND MANAGEMENT
- ---------------------------

INVESTMENT ADVISER COMPENSATION. Pursuant to an investment advisory
agreement, the Pacific Rim Growth Fund and the Greater China Fund each pays
advisory fees at the annual rate of 1.00% of its net assets; the Latin
America Fund pays at the annual rate of 1.25% of its net assets.

The Investment Adviser has agreed to waive or defer its management fees payable
by each Fund, and to absorb other operating expenses of each Fund, so that the
expenses will not exceed the following expense ratios on an annual basis through
March 31, 1998: Pacific Rim Fund and Greater China Fund - 1.40%; and Latin
America Fund - 1.65%. Each Fund will reimburse the Investment Adviser for fees
deferred or other expenses paid pursuant to this Agreement in later years in
which operating expenses for the Fund are less than the percentage limitation
set forth above.

SUB-ADVISERS. To assist it in the management of the Pacific Rim Fund, the
Investment Adviser has entered into sub-advisory agreements with its
investment advisory affiliates, Nicholas Applegate Capital Management -Hong
Kong, 6th Floor, Three Exchange Square, 8 Connaught Place, Hong Kong, and
Nicholas Applegate Capital Management - Asia, 65 Chulia Street #3201/04 OCBC
Centre, Singapore (the "Sub-Advisers"). Its Hong Kong affiliate also acts as
sub-adviser to the Greater China Fund. Pursuant to each sub-advisory
agreement, the Investment Adviser pays each of its affilates a fee ranging
from 20% to 40% of the fee it receives. To the extent the Investment Adviser
waives its management fee under circumstances outlined above, the
Sub-Advisers will also waive or defer their fees.

ADMINISTRATOR COMPENSATION. The Funds pay administrative fees for
administrative personnel and services (including certain legal and financial
reporting services). Each Fund pays Nicholas-Applegate Capital Management an
annual fee of .10% of net assets. Each Fund pays Investment Company
Administration Corporation (ICAC) an annual fee of $5,000 - $35,000. In
addition, each Fund pays ICAC a fee at an annual rate equal to 0.15% of average
net assets.

DISTRIBUTOR OF THE FUND'S SHARES:
Nicholas-Applegate Securities
600 West Broadway, 30th Floor
San Diego, California 92101
(800) 551-8045

PORTFOLIO TRADES. The Investment Adviser is responsible for each Fund's
portfolio transactions. The Sub-Advisers also have responsibility for the
Greater China and Pacific Rim Funds' portfolio transactions. In placing
portfolio trades, the Investment Adviser and its Sub-Advisers may use brokerage
firms that sell shares of the Funds or that provide research services to the
Investment Adviser or its Sub-Advisers, but only when the Investment Adviser
believes no other firm offers a better combination of quality execution (i.e.
timeliness and completeness) and favorable price. The Investment Adviser
expects annual portfolio turnover up to 200%. This is generally higher than
other funds and will result in the Funds incurring higher brokerage costs.

INVESTMENT OBJECTIVE. Each Fund's investment objective is fundamental and may
only be changed with shareholder approval. Other fundamental limitations are
described in the Statement of Additional Information.

DIVERSIFICATION. Each of the Funds is diversified.

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<PAGE>

- -------------------------------------------------------------------------------
PORTFOLIO TEAMS
- -------------------------------------------------------------------------------

NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Catherine Somhegyi, Partner
Chief Investment Officer - Global Equity
Management
Joined the firm in 1987; prior investment
experience with Professional Asset Securities, Inc.
and Pacific Century Advisers
M.B.A. and B.S. - University of Southern
California
GREATER CHINA, PACIFIC RIM, AND LATIN AMERICA FUNDS

Larry Speidell, CFA, Partner
Director of Global Systematic Portfolio
Management and Research
Joined the firm in 1994; 23 years prior investment
experience with Batterymarch Financial
Management and Putnam Management
Company
M.B.A. - Harvard University; B.E. - Yale
University
GREATER CHINA, PACIFIC RIM, AND LATIN AMERICA FUNDS

Jon Borchardt
Joined firm in 1994; 5 years prior investment
experience with Union Bank
B.S. University of San Fransisco
LATIN AMERICA FUND

Aaron Harris
Joined the firm in 1995; 1 year prior investment
experience at Chemical Bank
B.A. Princeton University
LATIN AMERICA FUND

Pedro Marcal
Joined the firm in 1994; 5 years prior investment
experience with A.B. Laffer, V.A. Canto &
Associates, and A-Mark Precious Metals
B.A. - University of California, San Diego
GREATER CHINA AND PACIFIC RIM FUNDS

Eswar Menon
Joined the firm in 1995; 5 years prior investment
experience with Koeneman Capital Management
and Integrated Device Technology
M.B.A. - University of Chicago;
B.S. - Indian Institute of Technology, Madras
GREATER CHINA AND PACIFIC RIM FUNDS

Ernesto Ramos, Ph.D
Joined the firm in 1994; 14 years prior investment
and quantitative research experience with
Batterymarch Financial Management; Bolt
Beraneck & Newman Inc.; and Harvard University
Ph.D - Harvard University; B.S. Massachusetts
Institute of Technology
LATIN AMERICA FUND

Julia Sze
Joined the firm in 1997; 8 years prior experience
with Credit Lyonnais International Asset
Management and Indosuez Asset Management
M.A. and B.A. Stanford University
PACIFIC RIM FUND

NACM - HONG KONG

Robert Brewis
Joined the firm in 1997; 9 years prior investment
experience with Credit Lyonnais International
and Thornton Asset Management
M.A. and B.A. - Cambridge University
GREATER CHINA AND PACIFIC RIM FUNDS

Timothy Greaton
Joined the firm in 1997; 7 years prior investment
experience with Credit Lyonnais International
Asset Management
B.A. - Middlebury College; also attended graduate
programs at Taiwan University and Nanjing
University
GREATER CHINA AND PACIFIC RIM FUNDS

NACM - ASIA

Yeo Boon Hong
Joined the firm in 1997; 8 years prior investment
experience with Credit Lyonnais International
Asset Management and Indosuez Asset
Management.
M.S. - Unversity of British Columbia; B.A.
University of Windsor
PACIFIC RIM FUND

Reginald Tang
Joined firm in 1997; 6 years prior investment
experience with Credit Lyonnais International
Asset Management and Mercury Asset Management.
B.S. - Wharton School, University of Pennsylvania
PACIFIC RIM FUND

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<PAGE>

- -------------------------------------------------------------------------------
RISK FACTORS AND SPECIAL
CONSIDERATIONS
- -------------------------------------------------------------------------------

MUTUAL FUND CONSIDERATIONS IN GENERAL
Prospective investors should know that any mutual fund investment is subject to
normal market fluctuations and other risks inherent in investing in securities.
There can be no assurance that your investment will increase in value. The
value of your investment will go up and down depending upon market forces and
you may not recoup your original investment. You should consider an investment
in any of the Funds a long-term investment.

DERIVATIVE CONTRACTS AND SECURITIES CONSIDERATIONS
The term "derivative" traditionally applies to certain contracts that "derive"
their value from changes in the value of the underlying securities, currencies,
commodities or index. Investors refer to certain types of securities that
incorporate the performance characteristics of these contracts as derivatives.
Derivatives are sophisticated instruments that typically involve a small
investment of cash relative to the magnitude of risks assumed. These include
swap agreements, options, futures, and convertible securities. The Funds seek
to use derivative contracts and securities to reduce a Fund's volatility and
increase its total performance. While the price reaction of certain derivatives
to market changes may differ from traditional investments such as stocks and
bonds, derivatives do not necessarily present greater market risks than
traditional investments. Derivatives are also subject to credit risks related
to the counterparty's ability to perform, and any deterioration in the
counterparty's creditworthiness could adversely affect the instrument. The Funds
will only use derivatives in a manner consistent with the investment objectives,
policies and limitations of the Funds.

GLOBAL INVESTING CONSIDERATIONS

CURRENCY FLUCTUATIONS
Because the assets of each Fund will be invested in instruments issued by
foreign companies, the principal, income and sales proceeds may be paid to the
Funds in local foreign currencies. A reduction in the value of local currencies
relative to the U.S. dollar could mean a corresponding reduction in the value
of the Funds. The value of a foreign security generally tends to decrease when
the value of the U.S. dollar rises against the foreign currency in which the
security is denominated and tends to increase when the value of the dollar falls
against such currency. The Funds may incur costs in connection with
conversions between currencies.

Some countries may also have managed currencies, which are not free floating
against the U.S. dollar. In addition, there is risk that certain foreign
countries may restrict the free conversion of their currencies into other
currencies. Further, certain currencies may not be internationally traded.
Any devaluation in currencies in which a Fund's portfolio securities are
denominated may have a detrimental effect on the Fund.

SOCIAL, POLITICAL AND ECONOMIC FACTORS
The economies of many of the countries where the Funds may invest may be
subject to a substantially greater degree of social, political and economic
instability than the United States. Such instability may result from, among
other things, the following: authoritarian governments; popular unrest
associated with demands for improved political, economic and social
conditions; internal insurgencies and terrorist activities; hostile
relations with neighboring countries; and drug trafficking. This
instability might impair the financial condition of issuers or disrupt the
financial markets in which the Funds invest.

Hong Kong transferred its sovereignty from Great Britain to the Peoples Republic
of China in 1997. China has espoused policies antagonistic to free enterprise
capitalism and democracy. There can be no assurance that China will continue to
protect property rights in Hong Kong after 1997, although China has moved toward
free enterprise, and has established stock exchanges of its own.

The economies of foreign countries may differ favorably or unfavorably and
significantly from the economy of the United States in such respects as the rate
of growth of gross domestic product, rate of inflation, currency depreciation,
savings rates, fiscal balances, and balance of payments positions. Governments
of many foreign countries continue to exercise substantial control over private
enterprise and own or control many companies. Government actions could have a
significant

14
<PAGE>

impact on economic conditions in certain countries which could affect the value
of the securities of the Funds. For example, a foreign country could
nationalize an entire industry. In such a case, the Funds may not be fairly
compensated for their losses and might lose their entire investment in the
country involved.

The economies of certain foreign countries are heavily dependent upon
international trade and accordingly are affected by protective trade barriers
and the economic conditions of their trading partners. The enactment by the
United States or other principal trading partners of protectionist legislation
could have a significant adverse effect on the securities markets of these
countries. Some foreign countries (mostly in Latin America) are large debtors
of commercial banks, foreign governments, and supranational organizations.
These obligations, as well as future restructurings of debt, may affect the
economic performance and political and social stability of these countries.

INFLATION
Certain foreign countries, especially many emerging countries, have experienced
substantial, and in some periods extremely high and volatile, rates of
inflation. Rapid fluctuations in inflation rates and wage and price controls
may continue to have unpredictable effects on the economies, companies and
securities markets of these countries.

MARKET CHARACTERISTICS

DIFFERENCES IN SECURITIES MARKETS. The securities markets in foreign countries
have substantially less trading volume than the markets in the United States and
debt and equity securities of many companies listed on such markets may be less
liquid and more volatile than comparable securities in the United States. Some
of the stock exchanges in foreign countries, to the extent that established
markets exist, are in the earlier stages of their development. The limited
liquidity of certain securities markets may affect the ability of each Fund to
buy and sell securities at the desired price and time. In addition, the
securities markets of some foreign countries are susceptible to being influenced
by large investors trading significant blocks of stocks.

Trading practices in certain foreign countries are also significantly different
from those in the United States. Local commercial, corporation and securities
laws govern the sale and resale of securities, and certain restrictions may
apply. Although brokerage commissions are generally higher than those in the
U.S., the Investment Adviser will seek to achieve the most favorable net
results. In addition, securities settlements and clearance procedures may be
less developed and less reliable than those in the United States. Delays in
settlement could result in temporary periods in which the assets of the Funds
are not fully invested, or it could result in the Fund being unable to sell a
security in a falling market.

GOVERNMENT SUPERVISION OF SECURITIES MARKETS. Disclosure and regulatory
standards in many foreign countries are in many respects less stringent than
those in the United States. There may be less government supervision and
regulation of securities exchanges, listed companies, investors, and brokers in
foreign countries than in the United States, and enforcement of existing
regulations may be extremely limited.

FINANCIAL INFORMATION AND REPORTING STANDARDS. Issuers in foreign countries are
generally subject to accounting, auditing, and financial standards and
requirements that differ, in some cases materially, from those in the United
States. In particular, the assets and profits appearing in financial statements
may not reflect their financial position or results in the way they would be
reflected had the statements been prepared in accordance with U.S. generally
accepted accounting principles. Consequently, financial data may not reflect
the true condition of those issuers and securities markets.

THE FUNDS' INVESTMENTS

EQUITY SECURITIES Each of the Funds will buy equity securities, including
common stocks, convertible securities, and warrants. Equity securities
represent an ownership interest in a company. The Funds may invest in growth
companies, cyclical companies, companies with smaller market capitalizations,
or companies believed to be undergoing a basic change in operations or
markets. Although equity securities have a history of long-term growth in
value, their prices rise and fall as a result of changes in the company's
financial condition as well as movements in the overall securities markets.

SMALL ISSUERS
Each Fund may invest in small to medium-size companies. Smaller and medium-size
issuers may be less seasoned, have more limited product lines, markets,
financial resources and management depth, and be more susceptible to adverse
market conditions than larger issuers. As a result, the securities of much
smaller issuers may be less actively traded than those of larger issuers and may
also

15
<PAGE>

experience greater market volatility.

CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities. A convertible security is a
fixed income equity security that may be converted into a prescribed amount of
common stock at a specified formula. A convertible security entitles the owner
to receive interest until the security matures or is converted. Convertibles
have several unique investment characteristics such as: (a) higher yields than
common stocks but lower yields than straight debt securities; (b) lesser degree
of fluctuation in value than the underlying stock since they have fixed income
characteristics; and (c) potential for capital appreciation if the market price
of the underlying security increases.

CORPORATE DEBT SECURITIES
Each Fund may invest in investment grade and non-investment grade corporate
debt securities. Corporate debt securities are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligation
(credit risk) and may also be subject to price volatility due to such factors
as interest rate sensitivity, market perception of the credit-worthiness of
the issuer and general market liquidity (market risk). When interest rates
decline, the value of the Funds' debt securities can be expected to rise, and
when interest rates rise, the value of those securities can be expected to
decline.

Bonds rated BBB or Baa are investment grade securities but may have
speculative characteristics and changes in economic circumstances are more
likely to lead to a weakened capacity to make interest and principal
payments than higher rated bonds.

Bonds rated BB or Ba are below investment grade and usually offer higher
yields than higher-rated securities because of reduced creditworthiness and
increased risk of default. They are more likely to react to market
developments and credit risks than are more highly rated obligations, which
react primarily to movements in the level of interest rates. In the past,
economic downturns or increases in interest rates caused a higher incidence
of default by issuers of lower rated securities.

In some cases, such obligations may be highly speculative, and may have poor
prospects for reaching investment grade. To the extent the issuer defaults, a
Fund may incur additional expenses in order to enforce its rights or to
participate in a restructuring of the obligation. In addition, the prices of
lower rated securities generally tend to be more volatile and the markets less
liquid than those of higher rated securities. Consequently, the Funds may at
times experience difficulty in liquidating their investments at the desired time
and price. For a further explanation of these ratings, see the Corporate Bond
Ratings at the end of the Statement of Additional Information.

The Funds will not invest in bonds rated below C or determined by the
Investment Adviser to be equivalent at the time of purchase. Such bonds are
considered to have poor prospects of attaining real investment standing, and
the issuer may be in bankruptcy.

SOVEREIGN DEBT SECURITIES Each Fund may invest without limitation in
sovereign debt securities issued by governments of foreign countries. The
sovereign debt in which a Fund may invest may be rated below investment
grade, subject to the Fund's overall limit on such investments. These
securities usually offer higher yields than higher rated securities but are
also subject to greater risk than higher rated securities.

BRADY BONDS
The Funds may invest in a type of sovereign debt known as Brady Bonds. These
obligations were created under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady, in which foreign entities
issued these obligations in exchange for their existing commercial bank loans.
Brady Bonds have been issued by Argentina, Brazil, Costa Rica, Dominican
Republic, Mexico, Philippines, Uruguay and Venezuela, and may be issued by other
emerging countries.

Brady Bonds may be collateralized or uncollateralized, are issued in various
currencies, and are actively traded in the over-the counter securities markets.
In light of the history of loan defaults of countries issuing Brady Bonds,
investment in Brady Bonds may be viewed as speculative.

INVESTMENT COMPANY SECURITIES.
Each Fund may invest up to 10% of its total assets in the shares of other
investment companies. The Funds may invest in money market mutual funds in
connection with the management of their daily cash positions. The Funds may
also make indirect foreign investments through other investment companies that
have comparable investment objectives and policies as the Funds. In addition to
the advisory and operational fees each Fund bears directly in connection with
its own operation, the Funds would also bear their pro rata portions of each
other investment company's advisory and operational expenses.

ILLIQUID SECURITIES
Each Fund may invest up to 15% of its net assets in securities that are
considered illiquid. An illiquid investment is generally an investment that
cannot be disposed of within seven days in the normal course of business at
approximately the amount at which the Fund values it. Limitations on resale may
adversely affect the marketability of illiquid securities and the Fund may not
be able to dispose of these securities at the desired time and

16
<PAGE>

price. A Fund may bear additional expenses if it has to register these
securities before being resold.

TEMPORARY INVESTMENTS
Each Fund may from time to time on a temporary basis to maintain liquidity or
when the Investment Adviser determines that the market conditions call for a
temporary defensive posture, invest all of its assets in short-term
instruments. These temporary investments include: notes issued or guaranteed
by the U.S. government, its agencies or instrumentalities; commercial paper
rated in the highest two rating categories; certificates of deposit; repurchase
agreements and other high grade corporate debt securities.

THE FUNDS' INVESTMENT TECHNIQUES

REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements. A repurchase agreement is the
purchase by the Fund of a security that seller has agreed to buy back, usually
within one to seven days. The seller's promise to repurchase the security is
fully collateralized by securities equal in value to 102% of the purchase price,
including accrued interest. If the seller defaults and the collateral value
declines, the Fund might incur a loss. If the seller declares bankruptcy, the
Fund may not be able to sell the collateral at the desired time. The Funds
enter into these agreements only with brokers, dealers, or banks that meet
credit quality standards established by the Board of Trustees of the Trust.

REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreements. Similar to borrowing
cash, these transactions involve the selling by the Fund of a portfolio
security to a financial institution with a promise to repurchase the same
security in the future at a predetermined price plus interest. The Fund uses
the proceeds of the sale to purchase other securities which are segregated at
trade date and marked to the market daily and maintained until the Fund
settles the transaction. Modern portfolio managers regularly use this type
of technique which is also a form of investment leverage. Leveraging
involves a small investment of money relative to the magnitude of the risk
assumed. It also creates an opportunity for magnified capital appreciation
in a rising market but at the same time, creates greater potential for
magnified losses in a declining market than if the Fund were not leveraged.

SECURITIES SWAPS
Each Fund may enter into securities swaps, a technique primarily used to
indirectly participate in the securities market of a country from which a Fund
otherwise would be precluded for lack of an established securities custody and
safekeeping system. The Fund deposits an amount of cash with its custodian (or
the broker, if legally permitted) in an amount equal to the selling price of the
underlying security. Thereafter, the Fund pays or receives cash from the broker
equal to the change in the value of the underlying security.

SHORT SALES
Each Fund may maintain short positions in securities. A "short sale" is the
sale by the Fund of a security which has been borrowed from a third party on the
expectation that the market price will drop. If the price of the security
drops, the Fund will make a profit by purchasing the security in the open market
at lower price than at which it sold the security. If the price of the security
rises, the Fund may have to cover its short position at a higher price than the
short sale price, resulting in a loss. A short sale can be covered or
uncovered. In a covered short sale, the Fund either (1) borrows and sells
securities it already owns (also known as a short sale "against the box"), or
(2) deposits in a segregated account cash, U.S. government securities, or other
liquid securities in an amount equal to the difference between the market value
of the securities and the short sale price. Use of uncovered short sales is a
speculative investment technique and has potentially unlimited risk.
Accordingly, a Fund will not make uncovered short sales in an amount exceeding
the lesser of 2% of the Fund's net assets or 2% of the securities of such class
of the issuer. The Board of Trustees has determined that no Fund will make
short sales if to do so would create liabilities or require collateral deposits
of more than 25% of the Fund's total assets.

WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each Fund may purchase or sell securities for delivery at a future date,
generally 15 to 45 days after the commitment is made. The other party's failure
to complete the transaction may cause the Fund to miss a price or yield
considered to be advantageous. A Fund may not purchase when-issued securities
or enter into delayed delivery transactions if, as a result, more than 15% of
the Fund's net assets would be segregated to cover such securities.

BORROWING
As a part of its investment program, each Fund may borrow money from financial
institutions and through reverse repurchase agreements, uncovered short sales,
and other techniques. A Fund will incur obligations to pay interest while the
borrowings are outstanding, resulting in an increase in expenses. If a Fund
makes

17
<PAGE>

additional investments while borrowings are outstanding, this may be
considered a form of leverage. Amounts borrowed to leverage the investments
of a Fund may be secured by the securities held by the Fund. Leverage
generally will exaggerate the effect of any gain or loss in the market value
of a Fund's portfolio securities. All borrowings by a Fund cannot exceed
one-third of its total assets.

SECURITIES LENDING.
Each Fund may lend securities to financial institutions such as banks,
broker/dealers and other recognized institutional investors in amounts up to 30%
of the Fund's total assets. These loans earn income for the Fund and are
collateralized by cash, securities, letters of credit or any combination
thereof. The Fund might experience loss if the financial institution defaults
on the loan.

FOREIGN CURRENCY TRANSACTIONS
Each Fund may enter into foreign currency transactions either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange contracts
in order to have the necessary currencies to settle transactions.

Each Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates. Such efforts
could limit potential gains that might result from a relative increase in the
value of such currencies, and might, in certain cases, result in losses to a
Fund.

OPTIONS
The Funds may deal in options on securities, securities indices and foreign
currencies. The Funds may use options to manage stock prices, interest rate and
currency risks. A Fund may not purchase or sell options if more than 25% of its
net assets would be hedged. The Funds may also write covered call options and
secured put options to seek to generate income or lock in gains on up to 25% of
their net assets.

FUTURES AND OPTIONS ON FUTURES The Funds may enter into futures contracts, or
options thereon, involving foreign currency, interest rates, securities, and
securities indices, for hedging purposes only. Unlike certain stock and
foreign currency options in which one party to the option contract may be
required to deliver the underlying asset, an index futures contract does not
require physical delivery of the underlying asset. Instead, an index futures
contract is a bilateral agreement pursuant to which two parties agree to take
or make delivery of an amount of cash equal to a specified dollar amount
times the difference between the index value at the close of the last trading
day of the contract and the price at which the futures contract is originally
struck.

As a general rule, no Fund will purchase or sell futures if, immediately
thereafter, more than 25% of its net assets would be hedged.

RISKS OF FUTURES AND OPTIONS TRANSACTIONS When a Fund uses options, futures
and options on futures as hedging devices, there is a risk that the prices of
the hedging vehicles may not correlate perfectly with the prices of the
securities in the portfolio. This may cause the futures contract and any
related options to react differently than the Fund's portfolio securities to
market or currency rate changes. In addition, the Investment Adviser could
be incorrect in its expectations about the direction or the extent of market,
interest rate or currency movements. In these events, a Fund could lose
money on the futures contracts or options.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the Investment Adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market will exist for these instruments.

18
<PAGE>

FOR MORE INFORMATION

One document is available that offers further information on the
Nicholas/Applegate Mutual Funds:

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI contains more detailed information on all aspects of the Funds.

A current SAI has been filed with the Securities and Exchange Commission
and is incorporated by reference into this prospectus.

To request a free copy of the current SAI, please call or write:

Nicholas Applegate Mutual Funds
P.O. Box 82169
San Diego, CA 92138-2169
Telephone: (800) 551-8643