Prepared by R.R. Donnelley Financial -- PACIFIC INVESTMENT MANAGEMENT SERIES

497 1 d497.htm PACIFIC INVESTMENT MANAGEMENT SERIES Prepared by R.R. Donnelley Financial -- PACIFIC INVESTMENT MANAGEMENT SERIES

PIMCO Funds Prospectus

Pacific

Investment

Management

Series

April 1, 2002

Share Classes

^Ins^{Institutional}

^Adm^{Administrative}



SHORT DURATION BOND FUNDS
Money Market Fund Short-Term Fund Low Duration Fund		Low Duration Fund II Low Duration Fund III

INTERMEDIATE DURATION BOND FUNDS
GNMA Fund Moderate Duration Fund Total Return Fund Total Return Fund II		Total Return Fund III Total Return Mortgage Fund Investment Grade Corporate Bond Fund High Yield Fund

LONG DURATION BOND FUNDS
Long-Term U.S. Government Fund

REAL RETURN BOND FUNDS
Real Return Fund Real Return Fund II		Real Return Asset Fund

TAX EXEMPT BOND FUNDS
Short Duration Municipal Income Fund Municipal Bond Fund		California Intermediate Municipal Bond Fund California Municipal Bond Fund New York Municipal Bond Fund

INTERNATIONAL BOND FUNDS
Global Bond Fund Global Bond Fund II		Foreign Bond Fund Emerging Markets Bond Fund

STOCK AND BOND FUNDS
Strategic Balanced Fund Convertible Fund		European Convertible Fund

STOCK FUNDS
StocksPLUS Fund
This cover is not part of the Prospectus

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series

April 1, 2002

Share Classes

Institutional

and

Administrative

This prospectus describes 30 mutual funds offered by PIMCO Funds: Pacific Investment Management Series. The Funds provide access to the professional investment advisory services offered by Pacific Investment Management Company LLC (“PIMCO”). As of December 31, 2001, PIMCO managed approximately $241.3 billion in assets. The firm’s institutional heritage is reflected in the PIMCO Funds offered in this prospectus.

This prospectus explains what you should know about the Funds before you invest. Please read it carefully.

The Securities and Exchange Commission has not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


1		PIMCO Funds: Pacific Investment Management Series

Table of Contents

Summary Information		3
Fund Summaries
Money Market Fund		5
Short-Term Fund		7
Low Duration Fund		9
Low Duration Fund II		11
Low Duration Fund III		13
GNMA Fund		15
Moderate Duration Fund		17
Total Return Fund		19
Total Return Fund II		21
Total Return Fund III		23
Total Return Mortgage Fund		25
Investment Grade Corporate Bond Fund		27
High Yield Fund		29
Long-Term U.S. Government Fund		31
Real Return Fund		33
Real Return Fund II		35
Real Return Asset Fund		37
Short Duration Municipal Income Fund		39
Municipal Bond Fund		41
California Intermediate Municipal Bond Fund		43
California Municipal Bond Fund		45
New York Municipal Bond Fund		47
Global Bond Fund		49
Global Bond Fund II		51
Foreign Bond Fund		53
Emerging Markets Bond Fund		55
Strategic Balanced Fund		57
Convertible Fund		59
European Convertible Fund		61
StocksPLUS Fund		63
Summary of Principal Risks		65
Management of the Funds		68
Investment Options		72
Purchases, Redemptions and Exchanges		73
How Fund Shares are Priced		77
Fund Distributions		78
Tax Consequences		79
Characteristics and Risks of Securities and Investment Techniques		80
Financial Highlights		91
Appendix A—Description of Securities Ratings		A-1


Prospectus		2

Summary Information

The table below compares certain investment characteristics of the Funds. Other important characteristics are described in the individual Fund Summaries beginning on page 5. Following the table are certain key concepts which are used throughout the prospectus.

		Main Investments	Duration	Credit Quality(1)	Non-U.S. Dollar Denominated Securities(2)

Short Duration Bond Funds	Money Market	Money market instruments	£ 90 days dollar- weighted average maturity	Min 95% Aaa or Prime 1; £ 5% Aa or Prime 2	0%

	Short-Term	Money market instruments and short maturity fixed income securities	0-1 year	B to Aaa; max 10% below Baa	0-5%(3)

	Low Duration	Short maturity fixed income securities	1-3 years	B to Aaa; max 10% below Baa	0-20%(3)

	Low Duration II	Short maturity fixed income securities with quality and non-U.S. issuer restrictions	1-3 years	A to Aaa	0%

	Low Duration III	Short maturity fixed income securities with prohibitions on firms engaged in socially sensitive practices	1-3 years	B to Aaa; max 10% below Baa	0-20%(3)


Intermediate Duration Bond	GNMA	Short and intermediate maturity mortgage-related fixed income securities issued by the Government National Mortgage Association	1-7 years	Baa to Aaa; max 10% below Aaa	0%

Funds	Moderate Duration	Short and intermediate maturity fixed income securities	2-5 years	B to Aaa; max 10% below Baa	0-20%(3)

	Total Return	Intermediate maturity fixed income securities	3-6 years	B to Aaa; max 10% below Baa	0-20%(3)

	Total Return II	Intermediate maturity fixed income securities with quality and non-U.S. issuer restrictions	3-6 years	Baa to Aaa	0%

	Total Return III	Intermediate maturity fixed income securities with prohibitions on firms engaged in socially sensitive practices	3-6 years	B to Aaa; max 10% below Baa	0-20%(3)

	Total Return Mortgage	Short and intermediate maturity mortgage-related fixed income securities	1-7 years	Baa to Aaa; max 10% below Aaa	0%

	Investment Grade Corporate Bond	Corporate fixed income securities	3-7 years	B to Aaa; max 10% below Baa	0-20%(3)

	High Yield	Higher yielding fixed income securities	2-6 years	B to Aaa; min 65% below Baa	0-15%(4)


Long Duration Bond Funds	Long-Term U.S. Government	Long-term maturity fixed income securities	³ 8 years	A to Aaa	0%


Real Return Bond Funds	Real Return	Inflation-indexed fixed income securities	+/- 2 years of its Index	B to Aaa; max 10% below Baa	0-20%(3)

	Real Return II	Inflation-indexed fixed income securities	+/- 2 years of its Index	Baa to Aaa	0%

	Real Return Asset	Inflation-indexed fixed income securities	+/- 3 years of its Index	B to Aaa; max 20% below Baa	0-30%(3)


Tax Exempt Bond Funds	Short Duration Municipal Income	Short and intermediate maturity municipal securities (exempt from federal income tax)	0-2 years	Baa to Aaa	0%

	Municipal Bond	Intermediate and long-term maturity municipal securities (exempt from federal income tax)	3-10 years	Ba to Aaa; max 10% below Baa	0%

	California Intermediate Municipal Bond	Intermediate maturity municipal securities (exempt from federal and California income tax)	3-7 years	B to Aaa; max 10% below Baa	0%

	California Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)	3-12 years	B to Aaa; max 10% below Baa	0%

	New York Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and New York income tax)	3-12 years	B to Aaa; max 10% below Baa	0%


International Bond Funds	Global Bond	U.S. and non-U.S. intermediate maturity fixed income securities	3-7 years	B to Aaa; max 10% below Baa	25-75%(5)

	Global Bond II	U.S. and hedged non-U.S. intermediate maturity fixed income securities	3-7 years	B to Aaa; max 10% below Baa	25-75%(5)

	Foreign Bond	Intermediate maturity hedged non-U.S. fixed income securities	3-7 years	B to Aaa; max 10% below Baa	³ 85%(5)

	Emerging Markets Bond	Emerging market fixed income securities	0-8 years	Max 15% below B	³ 80%(5)


Stock and Bond Funds	Strategic Balanced	45-75% in the StocksPLUS Fund; 25-55% in the Total Return Fund	0-6 years(6)	B to Aaa; max 10% below Baa(6)	0-20%(3)(6)

	Convertible	Convertible securities	N/A	Caa to Aaa; max 40% below Baa and 10% below B	0-20%(3)

	European Convertible	European convertible securities	N/A	B to Aaa; max 40% below Baa	³ 65%(7)


Stock Funds	StocksPLUS	S&P 500 stock index derivatives backed by a portfolio of short-term fixed-income securities	0-1 year	B to Aaa; max 10% below Baa	0-20%(3)

(1)

As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

(2)

Each Fund (except the Low Duration II, Total Return II, Long-Term U.S. Government, Short-Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds) may invest beyond these limits in U.S. dollar-denominated securities of non-U.S. issuers.

(3)

The percentage limitation relates to non-U.S. dollar-denominated securities.

(4)

The percentage limitation relates to euro-denominated securities.

(5)

The percentage limitation relates to securities of foreign issuers denominated in any currency.

(6)

The Fund does not invest in securities directly, but in other PIMCO Funds with these characteristics.

(7)

The percentage limitation relates to convertible securities issued by or convertible into a European issuer denominated in any currency.


3		PIMCO Funds: Pacific Investment Management Series

Summary Information (continued)

Fixed Income Instruments

The “Fixed Income Funds” are the Money Market, Short-Term, Low Duration, Low Duration II, Low Duration III, GNMA, Moderate Duration, Real Return, Real Return II, Real Return Asset, Total Return, Total Return II, Total Return III, Total Return Mortgage, Investment Grade Corporate Bond, High Yield, Long-Term U.S. Government, Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, New York Municipal Bond, Global Bond, Global Bond II, Foreign Bond, and Emerging Markets Bond Funds. Each Fixed Income Fund differs from the others primarily in the length of the Fund’s duration or the proportion of its investments in certain types of fixed income securities. Each Fixed Income Fund invests at least 65% of its assets in “Fixed Income Instruments,” which as used in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.

Duration

Duration is a measure of the expected life of a fixed income security that is used to determine the sensitivity of a security’s price to changes in interest rates. The longer a security’s duration, the more sensitive it will be to changes in interest rates. Similarly, a Fund with a longer average portfolio duration will be more sensitive to changes in interest rates than a Fund with a shorter average portfolio duration.

Credit Ratings

In this prospectus, references are made to credit ratings of debt securities which measure an issuer’s expected ability to pay principal and interest over time. Credit ratings are determined by rating organizations, such as Standard & Poor’s Ratings Service (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”). The following terms are generally used to describe the credit quality of debt securities depending on the security’s credit rating or, if unrated, credit quality as determined by PIMCO:

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Descriptions, Performance and Fees

The Funds provide a broad range of investment choices. The following summaries identify each Fund’s investment objective, principal investments and strategies, principal risks, performance information and fees and expenses. A more detailed “Summary of Principal Risks” describing principal risks of investing in the Funds begins after the Fund Summaries. Investors should be aware that the investments made by a Fund and the results achieved by a Fund at any given time are not expected to be the same as those made by other mutual funds for which PIMCO acts as investment adviser, including mutual funds with names, investment objectives and policies similar to the Funds.

It is possible to lose money on investments in the Funds.

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		4

PIMCO Money Market Fund

Ticker Symbols:

PMIXX (Inst. Class)

PMAXX(Admin.Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum current income, consistent with preservation of capital and daily liquidity

Fund Focus

Money market instruments

Average Portfolio Maturity

£ 90 days dollar-weighted average maturity

Credit Quality

Minimum 95% rated Aaa or Prime 1;
£ 5% Aa or Prime 2

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing at least 95% of its total assets in a diversified portfolio of money market securities that are in the highest rating category for short-term obligations. The Fund also may invest up to 5% of its total assets in money market securities that are in the second-highest rating category for short-term obligations. The Fund may only invest in U.S. dollar-denominated securities that mature in 397 days or fewer from the date of purchase. The dollar-weighted average portfolio maturity of the Fund may not exceed 90 days. The Fund attempts to maintain a stable net asset value of $1.00 per share, although there is no assurance that it will be successful in doing so.

The Fund may invest in the following: obligations of the U.S. Government (including its agencies and instrumentalities); short-term corporate debt securities of domestic and foreign corporations; obligations of domestic and foreign commercial banks, savings banks, and savings and loan associations; and commercial paper. The Fund may invest more than 25% of its total assets in securities or obligations issued by U.S. banks. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions in order to earn income.

The Fund’s investments will comply with applicable rules governing the quality, maturity and diversification of securities held by money market funds.

Principal Risks

An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Management Risk

• Market Risk

• Issuer Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


5		PIMCO Funds: Pacific Investment Management Series

PIMCO Money Market Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’95)	1.72%

	Lowest (4th Qtr. ’01)	0.56%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	3.95%	5.14%	4.72%

Administrative Class	3.68%	4.89%	4.47%

Salomon 3-Month Treasury Bill Index(1)	4.09%	5.01%	4.69%

Lipper Institutional Money Market Fund Average(2)	3.96%	5.16%	4.78%

(1)

The Salomon 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3 month Treasury Bill issues. It is not possible to invest directly in the index.

(2)

The Lipper Institutional Money Market Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest in high quality financial instruments (rated in the top two grades) with dollar-weighted maturities of less than 90 days. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.15%	None	0.20%	0.35%

Administrative	0.15	0.25%	0.20	0.60

(1) Other Expenses reflect an Administrative Fee of 0.20%. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$36	$113	$197	$443

Administrative	61	192	335	750


Prospectus		6

PIMCO Short-Term Fund

Ticker Symbols:

PTSHX (Inst. Class)

PSFAX (Admin. Class)

Principal Investments and Strategies

Investment Objective

Seeks maximum current income, consistent with preservation of capital and daily liquidity

Fund Focus

Money market instruments and short maturity fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities. The average portfolio duration of this Fund will vary based on PIMCO’s forecast for interest rates and will normally not exceed one year. For point of reference, the dollar-weighted average portfolio maturity of this Fund is normally not expected to exceed three years.

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 5% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


7		PIMCO Funds: Pacific Investment Management Series

PIMCO Short-Term Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’95)	2.60%

	Lowest (1st Qtr. ’94)	0.19%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	5.65%	6.08%	5.76%

Administrative Class	5.40%	5.82%	5.50%

Salomon 3-Month Treasury Bill Index(1)	4.09%	5.01%	4.69%

Lipper Ultra-short Obligation Fund Avg(2)	5.30%	5.57%	5.15%

(1)

(2)

The Lipper Ultra-short Obligation Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues or better, and maintain a portfolio dollar-weighted average maturity between 91 and 365 days. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.76%	1.01%

Administrative	0.25	0.25%	0.75	1.25


(1) Other Expenses reflect an Administrative Fee of 0.20% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.45% for the Institutional Class and 0.70% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$103	$322	$558	$1,236

Administrative	127	397	686	1,511


Prospectus		8

PIMCO Low Duration Fund

Ticker Symbols:

PTLDX (Inst. Class)

PLDAX (Admin. Class)

Principal Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short maturity fixed income securities

Average Portfolio Duration

1-3 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


9		PIMCO Funds: Pacific Investment Management Series

PIMCO Low Duration Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (2nd Qtr. ’95)	3.63%

	Lowest (1st Qtr. ’94)	-0.32%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	8.00%	6.80%	6.78%

Administrative Class	7.73%	6.53%	6.52%

Merrill Lynch 1–3 Year Treasury Index(1)	8.30%	6.59%	6.09%

Lipper Short Investment Grade Debt Fund Avg(2)	7.24%	5.92%	5.63%

(1)

The Merrill Lynch 1–3 Year Treasury Index is an unmanaged index of U.S Treasury obligations having maturities from one to 2.99 years. It is not possible to invest directly in the index.

(2)

The Lipper Short Investment Grade Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of less than three years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.24%	0.49%

Administrative	0.25	0.25%	0.24	0.74

(1) Other Expenses reflect an Administrative Fee of 0.18% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.43% for the Institutional Class and 0.68% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$50	$157	$274	$616

Administrative	76	237	411	918


Prospectus		10

PIMCO Low Duration Fund II

Ticker Symbols:

PLDTX (Inst. Class)

PDFAX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short maturity fixed income

securities

Average Portfolio Duration

1-3 years

Credit Quality

A to Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Liquidity Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


11		PIMCO Funds: Pacific Investment Management Series

PIMCO Low Duration Fund II (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1st Qtr. ’95)	3.83%

	Lowest (1st Qtr. ’94)	-0.61%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	8.12%	6.57%	6.27%

Administrative Class	7.91%	6.31%	6.00%

Merrill Lynch 1–3 Year Treasury Index(1)	8.30%	6.59%	6.09%

Lipper Short Investment Grade Debt Fund Avg(2)	7.24%	5.92%	5.63%

(1)

The Merrill Lynch 1–3 Year Treasury Index is an unmanaged index of U.S Treasury obligations having maturities from one to 2.99 years. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25%. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		12

PIMCO Low Duration Fund III

Ticker Symbols:

PLDIX (Inst. Class)

N/A (Admin. Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short maturity fixed income

securities

Average Portfolio Duration

1-3 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities. The average portfolio duration of this Fund normally varies within a one- to three-year time frame based on PIMCO’s forecast for interest rates. The Fund will not invest in the securities of any issuer determined by PIMCO to be engaged principally in the provision of healthcare services, the manufacture of alcoholic beverages, tobacco products, pharmaceuticals or military equipment, or the operation of gambling casinos. The Fund will also avoid, to the extent possible on the basis of information available to PIMCO, the purchase of securities of issuers engaged in the production or trade of pornographic materials. An issuer will be deemed to be principally engaged in an activity if it derives more than 10% of its gross revenues from such activities.

The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


13		PIMCO Funds: Pacific Investment Management Series

PIMCO Low Duration Fund III (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	3.94%

	Lowest (2nd Qtr. ’99)	0.29%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/31/96)

Institutional Class	8.18%	6.40%	6.40%

Administrative Class	7.90%	6.14%	6.14%

Merrill Lynch 1–3 Year Treasury Index(1)	8.30%	6.59%	6.59%

Lipper Short Investment Grade Debt Fund Avg(2)	7.24%	5.92%	5.92%

(1)

The Merrill Lynch 1–3 Year Treasury Index is an unmanaged index of U.S Treasury obligations having maturities from one to 2.99 years. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25%. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		14

PIMCO GNMA Fund

Ticker Symbols:

PDMIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short to intermediate maturity mortgage-related fixed income securities

Average Portfolio Duration

1-7 years

Credit Quality

Baa to Aaa; maximum 10% below Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of securities of varying maturities issued by the Government National Mortgage Association (“GNMA”). The Fund is neither sponsored by nor affiliated with GNMA. The average portfolio duration of this Fund normally varies within a one- to seven-year time frame based on PIMCO’s forecast for interest rates. The Fund invests primarily in securities that are in the highest rating category, but may invest up to 10% of its assets in investment grade securities rated below Aaa by Moody’s or AAA by S&P, subject to a minimum rating of Baa by Moody’s or BBB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may not invest in securities denominated in foreign currencies, but may invest without limit in U.S. dollar-denominated securities of foreign issuers.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Mortgage Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


15		PIMCO Funds: Pacific Investment Management Series

PIMCO GNMA Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	4.65%

	Lowest (4th Qtr. ’99)	-0.48%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Institutional Class	12.09%	8.34%

Lehman Brothers GNMA Index(1)	8.23%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.35%	6.20%

(1)

The Lehman Brothers GNMA Index is an unmanaged index of mortgage-backed pass-through securities of the Government National Mortgage Association (GNMA).

(2)

The Lipper U.S. Mortgage Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in mortgages/securities issued or guaranteed as to principal and interest by the U.S. government and certain federal agencies. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25% Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		16

PIMCO Moderate Duration Fund

Ticker Symbols:

PMDRX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short and intermediate maturity fixed income securities

Average Portfolio Duration

2-5 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


17		PIMCO Funds: Pacific Investment Management Series

PIMCO Moderate Duration Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	5.62%

	Lowest (2nd Qtr. ’99)	-0.64%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/31/96)

Institutional Class	9.40%	7.25%	7.25%

Lehman Brothers Intermediate Government/Corporate Bond Index(1)	8.98%	7.09%	7.09%

Lipper Short Intermediate Investment Grade Debt Fund Avg(2)	7.21%	6.08%	6.08%

(1)

The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged index of fixed income securities having maturities from 1 to 9.99 years. It is not possible to invest directly in the index.

(2)

The Lipper Short Intermediate Investment Grade Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of one to five years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.20%	0.45%

Administrative	0.25	0.25%	0.20	0.70

(1) Other Expenses reflect an Administrative Fee of 0.20%.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$46	$144	$252	$567

Administrative	72	224	390	871


Prospectus		18

PIMCO Total Return Fund

Ticker Symbols:

PTTRX (Inst. Class)

PTRAX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Intermediate maturity fixed income
securities

Average Portfolio Duration

3-6 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


19		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	6.49%

	Lowest (1st Qtr. ’94)	-2.69%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	9.49%	8.15%	8.25%

Administrative Class	9.22%	7.88%	7.99%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

The Lehman Brothers Aggregate Bond Index is an unmanaged index of investment grade, U.S. dollar-denominated fixed income securities of domestic issuers having a maturity greater than one year. It is not possible to invest directly in the index.

(2)

The Lipper Intermediate Investment Grade Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc., that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.24%	0.49%

Administrative	0.25	0.25%	0.24	0.74

(1) Other Expenses reflect an Administrative Fee of 0.18% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.43% for the Institutional Class and 0.68% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$50	$157	$274	$616

Administrative	76	237	411	918


Prospectus		20

PIMCO Total Return Fund II

Ticker Symbols:

PMBIX (Inst. Class)

PRADX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Intermediate maturity fixed income securities

Average Portfolio Duration

3-6 years

Credit Quality

Baa to Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Liquidity Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


21		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund II (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	6.50%

	Lowest (1st Qtr. ’94)	-2.60%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	9.66%	7.90%	7.93%

Administrative Class	9.40%	7.63%	7.66%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

The Lipper Intermediate Investment Grade Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.26%	0.51%

Administrative	0.25	0.25%	0.26	0.76


(1) Other Expenses reflect an Administrative Fee of 0.25% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.50% for the Institutional Class and 0.75% for the Administrative class. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$52	$164	$285	$640

Administrative	78	243	422	942


Prospectus		22

PIMCO Total Return Fund III

Ticker Symbols:

PTSAX (Inst. Class)

PRFAX (Admin. Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Intermediate maturity fixed income securities

Average Portfolio Duration

3-6 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities. The average portfolio duration of this Fund normally varies within a three- to six-year time frame based on PIMCO’s forecast for interest rates. The Fund will not invest in the securities of any issuer determined by PIMCO to be engaged principally in the provision of healthcare services, the manufacture of alcoholic beverages, tobacco products, pharmaceuticals or military equipment, or the operation of gambling casinos. The Fund will also avoid, to the extent possible on the basis of information available to the Adviser, the purchase of securities of issuers engaged in the production or trade of pornographic materials. An issuer will be deemed to be principally engaged in an activity if it derives more than 10% of its gross revenues from such activities.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


23		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund III (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	6.72%

	Lowest (1st Qtr. ’94)	-2.68%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	9.98%	7.85%	8.00%

Administrative Class	9.60%	7.55%	7.72%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25%. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		24

PIMCO Total Return Mortgage Fund

Ticker Symbols:

PTRIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Short and intermediate maturity mortgage-related fixed income securities

Average Portfolio Duration

1-7 years

Credit Quality

Baa to Aaa; maximum 10% below Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in a diversified portfolio of mortgage-related Fixed Income Instruments of varying maturities (such as mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage-backed securities and mortgage dollar rolls). The average portfolio duration of this Fund normally varies within a one- to seven-year time frame based on PIMCO’s forecast for interest rates. The Fund invests primarily in securities that are in the highest rating category, but may invest up to 10% of its assets in investment grade securities rated below Aaa by Moody’s or AAA by S&P, subject to a minimum rating of Baa by Moody’s or BBB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may not invest in securities denominated in foreign currencies, but may invest without limit in U.S. dollar-denominated securities of foreign issuers.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Mortgage Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


25		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Mortgage Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	4.66%

	Lowest (2nd Qtr. ’99)	-0.13%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Institutional Class	9.99%	8.31%

Lehman Brothers Mortgage Index(1)	8.22%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.63%	6.28%

(1)

The Lehman Brothers Mortgage Index is an unmanaged index of mortgage-related fixed income securities. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25% Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		26

PIMCO Investment Grade Corporate Bond Fund

Ticker Symbols:

N/A (Inst. Class)

N/A (Admin. Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Corporate fixed income

securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of investment grade corporate fixed income securities of varying maturities. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame based on PIMCO’s forecast for interest rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summary for a description of these and other risks of investing in the Fund.

Performance Information


27		PIMCO Funds: Pacific Investment Management Series

PIMCO Investment Grade Corporate Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ‘01)	4.17%

	Lowest (2nd Qtr. ‘01)	-0.10%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (4/28/00)(3)

Institutional Class	9.07%	12.25%

Lehman Brothers Credit Investment Grade Index(1)	10.39%	11.60%

Lipper Intermediate Investment Grade Debt Fund Average(2)	7.59%	9.72%

(1)

The Lehman Brothers Credit Investment Grade Index is an unmanaged index comprised of investment grade corporate bonds. It is not possible to invest directly in the index.

(2)

The Lipper Intermediate Investment Grade Debt Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues (rated in the top four grades) with dollar-weighted average maturities of five to ten years. It does not take into account sales charges.

(3)

The Fund began operations on 4/28/00. Index comparisons began on 4/30/00.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25%.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		28

PIMCO High Yield Fund

Ticker Symbols:

PHIYX (Inst. Class)

PHYAX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Higher yielding fixed income securities

Average Portfolio Duration

2-6 years

Credit Quality

B to Aaa; minimum 65% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of high yield securities (“junk bonds”) rated below investment grade but rated at least B by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The remainder of the Fund’s assets may be invested in investment grade Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a two- to six-year time frame based on PIMCO’s forecast for interest rates. The Fund may invest up to 15% of its assets in euro-denominated securities and may invest without limit in U.S. dollar-denominated securities of foreign issuers. The Fund normally will hedge at least 75% of its exposure to the euro to reduce the risk of loss due to fluctuations in currency exchange rates.

The Fund may invest up to 25% of its assets in derivative instruments, such as options, futures contracts or swap agreements. The Fund may invest all of its assets in mortgage- or asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers, and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Market Risk

• Issuer Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


29		PIMCO Funds: Pacific Investment Management Series

PIMCO High Yield Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1st Qtr. ‘93)	6.27%

	Lowest (1st Qtr. ‘00)	-2.19%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/15/92)(4)

Institutional Class	4.99%	5.33%	8.72%

Administrative Class	4.74%	5.07%	8.45%

Lehman Brothers BB U.S. High Yield Index(1)	10.16%	6.55%	8.41%

Merrill Lynch U.S. High Yield BB-B Rated Index(2)	5.46%	4.01%	7.19%

Lipper High Current Yield Fund Avg(3)	1.79%	1.39%	5.41%

(1)

The Lehman Brothers BB U.S. High Yield Index, the Fund’s former benchmark index, is an unmanaged index comprised of various fixed income securities rated BB. It is not possible to invest directly in the index.

(2)

The Merrill Lynch U.S. High Yield BB-B Rated Index, the Fund’s current benchmark index, is an unmanaged index of bonds rated BB and B by Moody’s or S&P. The Fund changed its benchmark index because the Merrill Lynch U.S. High Yield BB-B Rated Index more closely reflects the universe of securities in which the Fund invests. It is not possible to invest directly in the index.

(3)

The Lipper High Current Yield Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that aim at high (relative) current yield from fixed income securities, have no quality or maturity restrictions, and tend to invest in lower grade debt issues. It does not take into account sales charges.

(4)

The Fund began operations on 12/15/92. Index comparisons began on 12/31/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.25%	0.50%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.25%.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$51	$160	$280	$628

Administrative	77	240	417	930


Prospectus		30

PIMCO Long-Term U.S. Government Fund

Ticker Symbols:

PGOVX (Inst. Class)

PLGBX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Long-term maturity fixed income securities

Average Portfolio Duration

³ 8 years

Credit Quality

A to Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of fixed income securities that are issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”). Assets not invested in U.S. Government Securities may be invested in other types of Fixed Income Instruments. The Fund also may obtain exposure to U.S. Government Securities through the use of futures contracts (including related options) with respect to such securities, and options on such securities, when PIMCO deems it appropriate to do so. While PIMCO may invest in derivatives at any time it deems appropriate, it will generally do so when it believes that U.S. Government Securities are overvalued relative to derivative instruments. This Fund will normally have a minimum average portfolio duration of eight years. For point of reference, the dollar-weighted average portfolio maturity of the Fund is normally expected to be more than ten years.

The Fund’s investments in Fixed Income Instruments are limited to those of investment grade U.S. dollar-denominated securities of U.S. issuers that are rated at least A by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. In addition, the Fund may only invest up to 10% of its assets in securities rated A by Moody’s or S&P, and may only invest up to 25% of its assets in securities rated Aa by Moody’s or AA by S&P.

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


31		PIMCO Funds: Pacific Investment Management Series

PIMCO Long-Term U.S. Government Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (2nd Qtr. ’95)	10.76%

	Lowest (1st Qtr. ’96)	-6.26%
Calendar Year End (through 12/31

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	5.51%	8.80%	9.52%

Administrative Class	5.25%	8.52%	9.26%

Lehman Long-Term Treasury Index(1)	4.22%	8.36%	8.51%

Lipper General U.S. Government Fund Avg(2)	6.17%	6.35%	6.27%

(1)

The Lehman Long-Term Treasury Index is an unmanaged index of U.S. Treasury issues with maturities greater than 10 years. It is not possible to invest directly in the index.

(2)

The Lipper General U.S. Government Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in U.S. government and agency issues. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.31%	0.56%

Administrative	0.25	0.25%	0.30	0.80

(1) Other Expenses reflect an Administrative Fee of 0.25% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.50% for the Institutional Class and 0.75% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$57	$179	$313	$701

Administrative	82	255	444	990


Prospectus		32

PIMCO Real Return Fund

Ticker Symbols:

PRRIX (Inst. Class)

PARRX (Admin. Class)

Principal Investments and Strategies

Investment Objective

Seeks maximum real return, consistent with preservation of real capital and prudent investment management

Fund Focus

Inflation-indexed fixed income
securities

Average Portfolio Duration

See description below

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks its investment objective by investing under normal circumstances at least 65% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations. Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. “Real return” equals total return less the estimated cost of inflation, which is typically measured by the change in an official inflation measure. The average portfolio duration of this Fund normally varies within two years (plus or minus) of the duration of the Lehman Global Real: U.S. TIPS Index, which as of February 15, 2002 was 6.1 years.

The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund also may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Issuer Non-Diversification Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

• Mortgage Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


33		PIMCO Funds: Pacific Investment Management Series

PIMCO Real Return Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1st Qtr. ’01)	5.29%

	Lowest (4th Qtr. ’01)	-1.26%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (1/29/97)(3)

Institutional Class	8.70%	7.50%

Administrative Class	8.41%	7.22%

Lehman Global Real: U.S Tips Index(1)	7.90%	5.98%

Lipper Intermediate U.S. Treasury Fund Average(2)	7.43%	6.59%

(1)

The Lehman Global Real: U.S. TIPS Index is an unmanaged index consisting of the U.S. Treasury Inflation Protected Securities market. It is not possible to invest directly in the index.

(2)

The Lipper Intermediate U.S. Treasury Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in U.S. Treasury bills, notes and bonds with dollar weighted average maturities of five to ten years. It does not take into account sales charges.

(3)

The Fund began operations on 1/29/97. Index comparisons began on 1/31/97.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.24%	0.49%

Administrative	0.25	0.25%	0.25	0.75

(1) Other Expenses reflect an Administrative Fee of 0.20% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.45% for the Institutional Class and 0.70% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities. (2) On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.05%, to 0.20% per annum. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$50	$157	$274	$616

Administrative	77	240	417	930


Prospectus		34

PIMCO Real Return Fund II

Ticker Symbols:

N/A (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum real return, consistent with preservation of

real capital and prudent

investment management

Fund Focus

Inflation-indexed fixed income
securities

Average Portfolio Duration

See description below

Credit Quality

Baa to Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks its investment objective by investing under normal circumstances at least 65% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. government and non-U.S. governments, their agencies or instrumentalities, and corporations. Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. “Real return” equals total return less the estimated cost of inflation, which is typically measured by the change in an official inflation measure. The average portfolio duration of this Fund normally varies within two years (plus or minus) of the duration of the Lehman Global Real: U.S. TIPS Index, which as of February 15, 2002 was 6.1 years. The Fund may not invest more than 2.5% of its assets in the securities of a single issuer, except U.S. Government Securities.

The Fund may invest only in investment grade U.S. dollar-denominated securities that are rated at least Baa by Moody’s or BBB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may not invest more than 1% of its assets in the securities of a single issuer that is rated Baa by Moody’s or BBB by S&P, or if unrated, determined by PIMCO to be of comparable quality. The Fund may not invest in securities denominated in foreign currencies, but may invest without limit in U.S. dollar-denominated securities of non-U.S. issuers.

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The Fund may not enter into contracts to purchase securities on a forward basis with respect to more than 50% of its assets.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Leveraging Risk

• Management Risk

• Mortgage Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The Fund does not have a full calendar year of performance. Thus, no bar chart or annual returns table is included for the Fund.


35		PIMCO Funds: Pacific Investment Management Series

PIMCO Real Return Fund II (continued)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses	Expense Reduction(3)	Net Fund Operating Expenses

Institutional	0.25%	None	1.57%	1.82%	(1.37)%	0.45%

Administrative	0.25	0.25%	1.57	2.07	(1.37)	0.70

(1)

Other Expenses, which are based on estimated amounts for the initial fiscal year of the class, reflect an Administrative Fee of 0.20% and organizational expenses.

(2)

On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.05%, to 0.20% per annum.

(3)

PIMCO has contractually agreed, for the Fund’s current fiscal year, to reduce Total Annual Fund Operating Expenses for the Institutional and Administrative Class shares to the extent they would exceed, due to the payment of organizational expenses, 0.45% and 0.70%, respectively, of average daily net assets. Under the Expense Limitation Agreement, PIMCO may recoup these waivers and reimbursements in future periods, not exceeding three years, provided total expenses, including such recoupment, do not exceed the annual expense limit.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3

Institutional	$46	$144

Administrative	72	224


Prospectus		36

PIMCO Real Return Asset Fund

Ticker Symbols:

N/A (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum real return, consistent with prudent investment management

Fund Focus

Inflation-indexed fixed income
securities

Average Portfolio Duration

See description below

Credit Quality

B to Aaa; maximum 20% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks its investment objective by investing under normal circumstances at least 65% of its assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations. Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. “Real return” equals total return less the estimated cost of inflation, which is typically measured by the change in an official inflation measure. The average portfolio duration of this Fund normally varies within three years (plus or minus) of the duration of the Lehman U.S. Treasury Inflation Notes 10+ Years Index, which as of February 15, 2002 was 10.2 years.

The Fund invests primarily in investment grade securities, but may invest up to 20% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund also may invest up to 30% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Issuer Non-Diversification Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

• Mortgage Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The Fund does not have a full calendar year of performance. Thus, no bar chart or annual returns table is included for the Fund.


37		PIMCO Funds: Pacific Investment Management Series

PIMCO Real Return Asset Fund (continued)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses	Expense Reduction(2)	Net Fund Operating Expenses

Institutional	0.50%	None	1.62%	2.12%	(1.37)%	0.75%

Administrative	0.50	0.25%	1.62	2.37	(1.37)	1.00

(1)

Other Expenses, which are based on estimated amounts for the initial fiscal year of the class, reflect an Administrative Fee of 0.25% and organizational expenses representing the Fund’s organizational expenses as attributed to the class and pro rata Trustee fees.

(2)

PIMCO has contractually agreed, for the Fund’s current fiscal year, to reduce Total Annual Fund Operating Expenses for the Institutional and Administrative Class shares to the extent they would exceed, due to the payment of organizational expenses, 0.75% and 1.00%, respectively, of average daily net assets. Under the Expense Limitation Agreement, PIMCO may recoup these waivers and reimbursements in future periods, not exceeding three years, provided total expenses, including such recoupment, do not exceed the annual expense limit.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3

Institutional	$ 77	$240

Administrative	102	318


Prospectus		38

PIMCO Short Duration Municipal Income Fund

Ticker Symbols:

PSDIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal income tax,

consistent with preservation of capital.

Fund Focus

Short and intermediate maturity municipal securities (exempt from federal income tax)

Average Portfolio Duration

0-2 years

Credit Quality

Baa to Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax (“Municipal Bonds”). Municipal Bonds generally are issued by or on behalf of states and local governments and their agencies, authorities and other instrumentalities.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The Fund may only invest in investment grade debt securities. The Fund may invest more than 25% of its assets in bonds of issuers in California and New York. To the extent that the Fund concentrates its investments in California or New York, it will be subject to California or New York State Specific Risk. The average portfolio duration of this Fund varies based on PIMCO’s forecast for interest rates and under normal market conditions is not expected to exceed two years. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds.

The Fund may invest in derivative instruments, such as options, futures contracts or swap agreements, or in mortgage- or asset-backed securities. The Fund may also invest in securities issued by entities whose underlying assets are Municipal Bonds, including, without limitation, residual interest bonds. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


39		PIMCO Funds: Pacific Investment Management Series

PIMCO Short Duration Municipal Income Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’00)	2.01%

	Lowest (4th Qtr. ’01)	0.75%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Institutional Class	4.98%	5.11%

Lehman Brothers 1-Year Municipal Bond Index(1)	5.77%	5.12%

Lipper Short Municipal Debt Fund Avg(2)	4.71%	4.55%

(1)

The Lehman Brothers 1-Year Municipal Bond Index is an unmanaged index comprised of National Municipal Bond issues having maturities from 1 to 2 years. It is not possible to invest directly in the index.

(2)

The Lipper Short Municipal Debt Fund Average is a total performance average of Funds tracked by Lipper, Inc. that invest in municipal debt issues with dollar-weighted maturities of less than three years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Share Classes	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.20%	None	0.20%	0.40%

Administrative	0.20	0.25%	0.19	0.64

(1) Other Expenses reflect an Administrative Fee of 0.19% paid by each class and interest expense attributable to the Institutional Class. Total Annual Fund Operating Expenses excluding interest expense is 0.39% for the Institutional Class. Interest Expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Classes	Year 1	Year 3	Year 5	Year 10

Institutional	$41	$128	$224	$505

Administrative	65	205	357	798


Prospectus		40

PIMCO Municipal Bond Fund

Ticker Symbols:

PFMIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal income tax,

consistent with preservation of capital. Capital appreciation is a secondary objective

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal income tax)

Average Portfolio Duration

3-10 years

Credit Quality

Ba to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund may invest up to 20% of its net assets in U.S. Government Securities, money market instruments and/or “private activity” bonds. For shareholders subject to the federal alternative minimum tax (“AMT”), distributions derived from “private activity” bonds must be included in their AMT calculations, and as such a portion of the Fund’s distribution may be subject to federal income tax. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its net assets in Municipal Bonds or “private activity” bonds which are high yield securities (“junk bonds”) rated at least Ba by Moody’s or BB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest more than 25% of its assets in bonds of issuers in California and New York. To the extent that the Fund concentrates its investments in California or New York, it will be subject to California or New York State Specific Risk. The average portfolio duration of this Fund normally varies within a three- to ten-year time frame, based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

The Fund may invest in derivative instruments, such as options, futures contracts or swap agreements on U.S. Government Securities and Municipal Bonds, and invest in mortgage- or asset-backed securities. The Fund may also invest in securities issued by entities whose underlying assets are Municipal Bonds, including, without limitation, residual interest bonds. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Liquidity Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


41		PIMCO Funds: Pacific Investment Management Series

PIMCO Municipal Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1st Qtr. ’01)	3.55%

	Lowest (2nd Qtr. ’99)	-2.36%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (12/31/97)

Institutional Class	7.74%	4.96%

Administrative Class	7.48%	4.69%

Lehman Brothers General Municipal Bond Index(1)	5.13%	5.19%

Lipper General Municipal Debt Fund Avg(2)	3.90%	3.74%

(1)

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. It is not possible to invest directly in the index.

(2)

The Lipper General Municipal Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in municipal debt issues in the top four credit ratings. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.24%	0.49%

Administrative	0.25	0.25%	0.24	0.74

(1) Other Expenses reflect an Administrative Fee of 0.24%. (2) On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.01%, to 0.24% per annum. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$50	$157	$274	$616

Administrative	76	237	411	918


Prospectus		42

PIMCO California Intermediate

Municipal Bond Fund

Ticker Symbols:

PCIMX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and California income tax. Capital appreciation is a secondary objective.

Fund Focus

Intermediate maturity municipal securities (exempt from federal and California income tax)

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund invests under normal circumstances at least 65% of its net assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and California income tax (“California Municipal Bonds”). California Municipal Bonds generally are issued by or on behalf of the State of California and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


43		PIMCO Funds: Pacific Investment Management Series

PIMCO California Intermediate Municipal Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	3.17%

	Lowest (4th Qtr. ’01)	-0.69%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Institutional Class	6.04%	7.24%

Administrative Class	5.80%	6.98%

Lehman Brothers Intermediate California Insured Municipal Bond Index(1)	4.89%	6.14%

Lipper California Intermediate Municipal Debt Fund Avg(2)	4.56%	5.85%

(1)

The Lehman Brothers Intermediate California Insured Municipal Bond Index is an unmanaged index comprised of California Municipal Bond issues having maturities from 5 to 10 years. It is not possible to invest directly in the index.

(2)

The Lipper California Municipal Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in California, with dollar weighted maturities of five to ten years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class and Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.23%	0.48%

Administrative	0.25	0.25%	0.22	0.72


(1) Other Expenses reflect an Administrative Fee of 0.22% paid by each class and interest expense attributable to the Institutional Class. Total Annual Fund Operating Expenses excluding interest expense is 0.47% for the Institutional Class. Interest expense is generally incurred as a result of investment management activities.
(2) On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.02%, to 0.22% per annum.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class and Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$49	$154	$269	$604

Administrative	74	230	401	894


Prospectus		44

PIMCO California

Municipal Bond Fund

Ticker Symbols:

PICMX (Inst. Class)

N/A (Admin. Class)

Principal Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and California income tax. Capital appreciation is a secondary objective.

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to twelve-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


45		PIMCO Funds: Pacific Investment Management Series

PIMCO California Municipal Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	4.20%

	Lowest (4th Qtr. ’01)	-0.13%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (5/16/00)(3)

Institutional Class	7.96%	10.66%

Lehman California Insured Municipal Index(1)	5.25%	9.30%

Lipper California Intermediate Municipal Debt Fund Average(2)	3.71%	9.03%

(1)

The Lehman California Insured Municipal Index is an unmanaged index comprised of insured California Municipal Bond issues. It is not possible to invest directly in the index.

(2)

The Lipper California Intermediate Municipal Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of its assets in municipal debt issues that are exempt from taxation in California, with dollar-weighted average maturities of five to ten years. It does not take into account sales charges.

(3)

The Fund began operations on 5/16/00. Index comparisons began on 5/31/00.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class and Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.22%	0.47%

Administrative	0.25	0.25%	0.22	0.72

(1) Other Expenses reflect an Administrative Fee of 0.22%. (2) On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.02%, to 0.22% per annum. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class and Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$48	$151	$263	$591

Administrative	74	230	401	894


Prospectus		46

PIMCO New York

Municipal Bond Fund

Ticker Symbols:

N/A (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and New York income tax. Capital appreciation is a secondary objective.

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal and New York income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund will invest under normal circumstances at least 65% of its net assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and New York income tax (“New York Municipal Bonds”). New York Municipal Bonds generally are issued by or on behalf of the State of New York and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to twelve-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from municipal bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• New York State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


47		PIMCO Funds: Pacific Investment Management Series

PIMCO New York Municipal Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’00)	3.91%

	Lowest (4th Qtr. ’01)	-0.71%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Institutional Class	6.68%	7.58%

Lehman Brothers New York Insured Municipal Bond Index(1)	4.59%	6.44%

Lipper New York Intermediate Municipal Debt Fund Avg(2)	3.64%	5.55%

(1)

The Lehman Brothers New York Insured Municipal Bond Index is an unmanaged index comprised of insured New York Municipal Bond issues. It is not possible to invest directly in the index.

(2)

The Lipper New York Intermediate Municipal Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in New York. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)(2)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.23%	0.48%

Administrative	0.25	0.25%	0.22	0.72

(1) Other Expenses reflect an Administrative Fee of 0.22% paid by each class and interest expense attributable to the Institutional Class. Total Annual Fund Operating Expenses excluding interest expense is 0.47% for the Institutional Class. Interest expense is generally incurred as a result of investment management activities. (2) On October 1, 2001, the Fund’s Administrative Fee was reduced by 0.02%, to 0.22% per annum. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$49	$154	$269	$604

Administrative	74	230	401	894


Prospectus		48

PIMCO Global Bond Fund

Ticker Symbols:

PIGLX (Inst. Class)

PADMX (Admin.Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

U.S. and non-U.S. intermediate
maturity fixed income securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in Fixed Income Instruments of issuers located in at least three countries (one of which may be the United States), which may be represented by futures contracts (including related options) with respect to such securities, and options on such securities. The Fund invests primarily in securities of issuers located in economically developed countries. Securities may be denominated in major foreign currencies, baskets of foreign currencies (such as the euro), or the U.S. dollar.

PIMCO selects the Fund’s foreign country and currency compositions based on an evaluation of various factors, including, but not limited to, relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. Investments in the securities of issuers located outside the United States will normally vary between 25% and 75% of the Fund’s assets. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


49		PIMCO Funds: Pacific Investment Management Series

PIMCO Global Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	8.65%

	Lowest (1st Qtr. ’97)	-4.40%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (11/23/93)(3)

Institutional Class	2.48%	1.89%	5.28%

Administrative Class	2.23%	1.66%	5.05%

J.P. Morgan Global Index (Unhedged)(1)	-0.80%	2.42%	4.57%

Lipper Global Income Fund Avg(2)	2.70%	2.87%	4.67%

(1)

The J.P. Morgan Global Index (Unhedged) is an unmanaged index representative of the total return performance in U.S. dollars on an unhedged basis of major world bond markets. It is not possible to invest directly in the index.

(2)

The Lipper Global Income Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest primarily in U.S. dollar and non-U.S. dollar debt securities of issuers located in at least three countries, one of which may be the United States. It does not take into account sales charges.

(3)

The Fund began operations on 11/23/93. Index comparisons began on 11/30/93.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.32%	0.57%

Administrative	0.25	0.25%	0.31	0.81

(1) Other Expenses reflect an Administrative Fee of 0.30% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.55% for the Institutional Class and 0.80% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$58	$183	$318	$ 714

Administrative	83	259	450	1,002


Prospectus		50

PIMCO Global Bond Fund II

Ticker Symbols:

PGBIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital

Fund Focus

U.S. and hedged foreign

intermediate maturity fixed income securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

PIMCO selects the Fund’s foreign country and currency compositions based on an evaluation of various factors, including, but not limited to, relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. Investments in the securities of issuers located outside the United States will normally vary between 25% and 75% of the Fund’s assets. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame. The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Institutional Class shares. For periods prior to the inception of Institutional Class shares (2/25/98), performance information shown in the bar chart (including the information to its right) and in the Average Annual Total Returns table is based on the performance of the Fund’s Class A shares, which are offered in a different prospectus. The prior Class A performance has been adjusted to reflect the actual fees and expenses paid by Institutional Class shares, including no sales charges (loads) or distribution and/or service (12b-1) fees and lower administrative fees. The Administrative Class of the Fund has not yet commenced operations as of the date of this prospectus. Past performance is no guarantee of future results.


51		PIMCO Funds: Pacific Investment Management Series

PIMCO Global Bond Fund II (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’96)	5.39%

	Lowest (2nd Qtr. ’99)	-1.72%

Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (10/2/95)(3)

Institutional Class	10.83%	7.28%	8.99%

J.P. Morgan Global Index (Hedged)(1)	6.15%	7.94%	8.44%

Lipper Global Income Fund Avg(2)	2.70%	2.87%	4.36%

(1)

The J.P. Morgan Global Index (Hedged) is an unmanaged index representative of the total return performance in U.S. dollars on a hedged basis of major world bond markets. It is not possible to invest directly in the index.

(2)

(3)

The Fund began operations on 10/2/95. Index comparisons began on 9/30/95.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.33%	0.58%

Administrative	0.25	0.25%	0.33	0.83


(1) Other Expenses reflect an Administrative Fee of 0.30% and interest expense. Because the Administrative Class of the Fund was not operational during the last fiscal year, Other Expenses include interest expense incurred by the Institutional Class. Total Annual Fund Operating Expenses excluding interest expense is 0.55% for the Institutional Class and 0.80% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$59	$186	$324	$726

Administrative	82	255	444	990


Prospectus		52

PIMCO Foreign Bond Fund

Ticker Symbols:

PFORX (Inst. Class)

PFRAX (Admin. Class)

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Intermediate maturity hedged non-U.S. fixed income securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 85% of its assets in Fixed Income Instruments of issuers located outside the United States, representing at least three foreign countries, which may be represented by futures contracts (including related options) with respect to such securities, and options on such securities. Such securities normally are denominated in major foreign currencies or baskets of foreign currencies (such as the euro). The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

PIMCO selects the Fund’s foreign country and currency compositions based on an evaluation of various factors, including, but not limited to relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


53		PIMCO Funds: Pacific Investment Management Series

PIMCO Foreign Bond Fund (continued)

Calendar Year Total Returns — Institutional Class




	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’95)	7.23%

	Lowest (1st Qtr. ’94)	-4.22%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/2/92)(3)

Institutional Class	8.96%	7.95%	9.69%

Administrative Class	8.69%	7.68%	9.42%

J.P. Morgan Non-U.S. Index (Hedged)(1)	6.05%	8.27%	8.83%

Lipper International Income Fund Avg(2)	0.66%	2.00%	5.70%

(1)

The J.P. Morgan Non-U.S. Index (Hedged) in an unmanaged index representative of the total return performance in U.S. dollars of major non-U.S. bond markets. It is not possible to invest directly in the index.

(2)

The Lipper International Income Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest primarily in U.S. dollar and non-U.S. dollar debt securities of issuers located in at least three countries, excluding the United States, except in periods of market weakness. It does not take into account sales charges.

(3)

The Fund began operations on 12/2/92. Index comparisons began on 11/30/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.29%	0.54%

Administrative	0.25	0.25%	0.28	0.78

(1) Other Expenses reflect an Administrative Fee of 0.25% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.50% for the Institutional Class and 0.75% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$55	$173	$302	$677

Administrative	80	249	433	966


Prospectus		54

PIMCO Emerging Markets Bond Fund

Ticker Symbols:

PEBIX (Inst. Class)

PEBAX (Admin. Class)

Principal
Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Focus

Emerging market fixed income securities

Average Portfolio Duration

0-8 years

Credit Quality

Maximum 15% below B

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in Fixed Income Instruments of issuers that economically are tied to countries with emerging securities markets. Such securities may be denominated in non-U.S. currencies and the U.S. dollar. A security is economically tied to an emerging market country if it is principally traded on the country’s securities markets, or the issuer is organized or principally operates in the country, derives a majority of its income from its operations within the country, or has a majority of its assets in the country. The average portfolio duration of this Fund varies based on PIMCO’s forecast for interest rates and, under normal market conditions, is not expected to exceed eight years.

PIMCO has broad discretion to identify and invest in countries that it considers to qualify as emerging securities markets. However, PIMCO generally considers an emerging securities market to be one located in any country that is defined as an emerging or developing economy by the World Bank or its related organizations, or the United Nations or its authorities. The Fund emphasizes countries with relatively low gross national product per capita and with the potential for rapid economic growth. PIMCO will select the Fund’s country and currency composition based on its evaluation of relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, and any other specific factors PIMCO believes to be relevant. The Fund likely will concentrate its investments in Asia, Africa, the Middle East, Latin America and the developing countries of Europe. The Fund may invest in securities whose return is based on the return of an emerging securities market, such as a derivative instrument, rather than investing directly in securities of issuers from emerging markets.

The Fund may invest substantially all of its assets in high yield securities (“junk bonds”) subject to a maximum of 15% of its assets in securities rated below B by Moody’s or by S&P or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Market Risk

• Issuer Risk

• Emerging Markets Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


55		PIMCO Funds: Pacific Investment Management Series

PIMCO Emerging Markets Bond Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’01)		13.10%

	Lowest (3rd Qtr. ’98)	-21.05%

Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Institutional Class	28.17%	11.13%

Administrative Class	27.82%	10.85%

J.P. Morgan Emerging Markets Bond Index Plus(1)	-0.77%	4.58%

Lipper Emerging Market Debt Fund Avg(2)	11.53%	3.34%

(1)

The J.P. Morgan Emerging Markets Bond Index Plus is an unmanaged index which tracks the total returns for external-currency denominated debt instruments of emerging markets. It is not possible to invest directly in the index.

(2)

The Lipper Emerging Market Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that seek either current income or total return by investing at least 65% of total assets in emerging market debt securities. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.45%	None	0.48%	0.93%

Administrative	0.45	0.25%	0.47	1.17


(1) Other Expenses reflect an Administrative Fee of 0.40% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.85% for the Institutional Class and 1.10% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$ 95	$296	$515	$1,143

Administrative	119	372	644	1,420


Prospectus		56

PIMCO Strategic Balanced Fund

Ticker Symbols:

PSBIX (Inst. Class)

PSBAX (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return,

consistent with preservation of

capital and prudent investment management

Fund Focus

45-75% StocksPLUS Fund;

25-55% Total Return Fund

Average Portfolio Duration

(of Underlying Funds)

0-6 years

Credit Quality

(of Underlying Funds)

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared and distributed quarterly

The Fund seeks to achieve its investment objective by normally investing between 45% and 75% of its assets in the StocksPLUS Fund and between 25% and 55% of its assets in the Total Return Fund (collectively, the “Underlying Funds”). The Fund invests all of its assets in shares of the Underlying Funds and does not invest directly in stocks or bonds of other issuers.

The StocksPLUS Fund seeks to exceed the total return of the S&P 500 by investing under normal circumstances substantially all of its assets in S&P 500 derivatives, backed by a portfolio of Fixed Income Instruments. The Total Return Fund seeks to achieve its investment objective by investing at least 65% of its assets in a diversified portfolio of Fixed Income Securities of various maturities. Please see the Fund Summaries of the Underlying Funds in this prospectus for information on their investment styles and primary investments.

PIMCO determines how the Fund will allocate and reallocate its assets between the Underlying Funds according to the Fund’s equity/fixed income allocation targets and ranges. PIMCO does not allocate the Fund’s assets according to a predetermined blend of shares of the Underlying Funds. Instead, PIMCO will determine the mix of Underlying Funds appropriate for the Fund based on methodology, developed by PIMCO, that forecasts stages in the business cycle and considers the risk and reward potential of equity and fixed income investments within specific phases of the business cycle.

The Fund is a “fund of funds,” which is a term used to describe mutual funds that pursue their investment objectives by investing in other mutual funds. The cost of investing in the Fund will generally be higher than the cost of investing in a mutual fund that invests directly in individual stocks and bonds. By investing in the Fund, an investor will indirectly bear fees and expenses charged by the Underlying Funds in addition to the Fund’s direct fees and expenses. In addition, the use of a fund of funds structure could affect the timing, amount and character of distributions to shareholders and may therefore increase the amount of taxes payable by shareholders.

In addition to the StocksPLUS and Total Return Funds, the Fund may in the future invest in additional funds in the PIMCO Funds family at the discretion of PIMCO and without shareholder approval.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect the net asset value, yield and total return of the Fund are:

• Allocation Risk

• Underlying Fund Risk

Among the principal risks of investing in the Underlying Funds, and consequently the Fund, which could adversely affect the net asset value, yield and total return of the Fund, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks associated with the Underlying Funds and an investment in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of broad-based securities market indices and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Institutional Class shares. For periods prior to the inception date of Administrative Class shares (6/30/99), performance information shown in the table for that class is based on the performance of the Fund’s Institutional Class shares. The prior Institutional Class performance has been adjusted to reflect the actual 12b-1/service fees and other expenses paid by Administrative Class shares. Past performance is no guarantee of future results, and the Fund achieved the performance track record shown during a period when it pursued its investment objective using different investment strategies.


57		PIMCO Funds: Pacific Investment Management Series

PIMCO Strategic Balanced Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (2nd Qtr. ’97)	12.23%

	Lowest (3rd Qtr. ’01)	-6.57%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (6/28/96)(4)

Institutional Class	-2.80%	9.63%	10.64%

Administrative Class	-3.18%	9.36%	10.37%

S&P 500 Index(1)	-11.88%	10.70%	11.90%

S&P 500 and Lehman Brothers Aggregate Bond Index Blend(2)	-3.71%	9.81%	10.60%

Lipper Balanced Fund Avg(3)	-4.38%	7.65%	8.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

The index used for the Fund is a static self-blended index consisting 60% of the S&P 500 Composite Stock Price Index and 40% of the Lehman Brothers Aggregate Bond Index. The Fund believes this self-blended index reflects the Fund’s investment strategy more accurately than the S&P 500 Index. It is not possible to invest directly in the index.

(3)

The Lipper Balanced Fund Average is a total return performance average of Funds tracked by Lipper, Inc., whose primary objective is to conserve principal by maintaining at all times a balanced portfolio of both stocks and bonds. It does not take into account sales charges.

(4)

The Fund began operations on 6/28/96. Index comparisons began on 6/30/96.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Underlying Fund Expenses(2)	Total Annual Fund Operating Expenses

Institutional	None	None	0.05%	0.59%	0.64%

Administrative	None	0.25%	0.05	0.59	0.89


(1) Other Expenses reflect an Administrative Fee of 0.05%.
(2) Underlying Fund Expenses for the Fund are estimated based upon a 60%/40% allocation of the Fund’s assets between the StocksPLUS and Total Return Funds and upon the total annual operating expenses of the Institutional Class shares of these Underlying Funds. Underlying Fund Expenses will vary with changes in the expenses of the Underlying Funds, as well as allocation of the Fund’s assets, and may be higher or lower than those shown above. For a listing of the expenses associated with each Underlying Fund for the most recent fiscal year, please see the Fund Summaries of the Underlying Funds.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class		Year 1	Year 3	Year 5	Year 10

Institutional		$65	$205	$357	$ 798

Administrative		91	284	493	1,096


Prospectus		58

PIMCO Convertible Fund

Ticker Symbols:

PFCIX (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with prudent

investment management

Fund Focus

Convertible securities

Average Portfolio Duration

N/A

Credit Quality

Caa to Aaa; maximum 40% below Baa

and 10% below B

Dividend Frequency

Declared and distributed quarterly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of convertible securities. Convertible securities, which are issued by companies of all sizes and market capitalizations, include, but are not limited to: corporate bonds, debentures, notes or preferred stocks and their hybrids that can be converted into (exchanged for) common stock or other securities, such as warrants or options, which provide an opportunity for equity participation. The Fund may invest in securities of any market capitalization, and may from time to time invest a significant amount of its assets in securities of smaller companies.

The Fund invests primarily in investment grade debt securities, but may invest up to 40% of its assets in high yield securities (“junk bonds”) rated Caa or higher by Moody’s or CCC or higher by S&P or, if unrated, determined by PIMCO to be of comparable quality. The Fund may only invest up to 10% of its assets in convertible securities rated Caa or CCC or, if unrated, determined by PIMCO to be of comparable quality. The Fund may also invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. In addition, the Fund may invest up to 35% of its assets in common stock or in other Fixed Income Instruments.

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Derivatives Risk

• Liquidity Risk

• Smaller Company Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


59		PIMCO Funds: Pacific Investment Management Series

PIMCO Convertible Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1st Qtr. ’00)	12.98%

	Lowest (1st Qtr. ‘01)	-12.33%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (3/31/99)

Institutional Class	-13.78%	7.38%

Administrative Class	-13.76%	7.26%

First Boston Convertible Bond Index(1)	-6.45%	6.22%

Lipper Convertible Securities Fund Avg(2)	-7.69%	6.30%

(1)

The First Boston Convertible Bond Index is an unmanaged market index comprised of convertible bonds. It is not possible to invest directly in the index.

(2)

The Lipper Convertible Securities Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest primarily in convertible bonds and/or convertible preferred stock. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.40%	None	0.27%	0.67%

Administrative	0.40	0.25%	0.25	0.90

(1) Other Expenses reflect an Administrative Fee of 0.25% paid by each class and interest expense attributable to the Institutional Class. Total Annual Fund Operating Expenses excluding interest expense is 0.65% for the Institutional Class. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$68	$214	$373	$ 835

Administrative	92	287	498	1,108


Prospectus		60

PIMCO European Convertible Fund

Ticker Symbols:

N/A (Inst. Class)

N/A (Admin. Class)

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with prudent

investment management

Fund Focus

European convertible securities

Average Portfolio Duration

N/A

Credit Quality

B to Aaa; maximum 40% below Baa

Dividend Frequency

Declared and distributed quarterly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of European convertible securities. European convertible securities include any convertible security issued by, or convertible into, an issuer located in any European country. European convertible securities, which are issued by companies of all sizes and market capitalizations include, but are not limited to: corporate bonds, debentures, notes or preferred stocks and their hybrids that can be converted into (exchanged for) common stock or other securities, such as warrants or options, which provide an opportunity for equity participation. The Fund may invest in securities of any market capitalization, and may from time to time invest a significant amount of its assets in securities of smaller companies.

The Fund invests primarily in investment grade debt securities, but may invest up to 40% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest its assets in securities denominated in any currency and may invest up to 35% of its assets in non-European issuers.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Derivatives Risk

• Liquidity Risk

• Smaller Company Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

• European Concentration Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


61		PIMCO Funds: Pacific Investment Management Series

PIMCO European Convertible Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4th Qtr. ’01)	2.55%

	Lowest (3rd Qtr. ’01)	-0.36%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (11/30/00)

Institutional Class	3.05%	3.19%

UBS All European Convertible Index(1)	-7.71%	-2.15%

Lipper Convertible Securities Fund Average(2)	-7.69%	-2.55%

(1)

The UBS All European Convertible Index is an index of equity holdings equalized at the beginning of the period to reflect the respective cash values of the convertibles in the index. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.50%	None	0.25%	0.75%

Administrative	0.50	0.25%	0.25	1.00

(1) Other Expenses reflect an Administrative Fee of 0.25%.
Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$ 77	$240	$417	$ 930

Administrative	102	318	552	1,225


Prospectus		62

PIMCO StocksPLUS Fund

Ticker Symbols:

PSTKX (Inst. Class)

PPLAX (Admin. Class)

Principal

Investments and

Strategies

Investment Objective

Seeks total return which exceeds that of the S&P 500

Fund Focus

S&P 500 stock index derivatives backed by a portfolio of short-term fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared and distributed quarterly

The Fund seeks to exceed the total return of the S&P 500 by investing under normal circumstances substantially all of its assets in S&P 500 derivatives, backed by a portfolio of Fixed Income Instruments. The Fund may invest in common stocks, options, futures, options on futures and swaps. The Fund uses S&P 500 derivatives in addition to or in place of S&P 500 stocks to attempt to equal or exceed the performance of the S&P 500. The value of S&P 500 derivatives closely track changes in the value of the index. However, S&P 500 derivatives may be purchased with a fraction of the assets that would be needed to purchase the equity securities directly, so that the remainder of the assets may be invested in Fixed Income Instruments. PIMCO actively manages the Fixed Income Instruments held by the Fund with a view toward enhancing the Fund’s total return, subject to an overall portfolio duration which is normally not expected to exceed one year.

The S&P 500 is composed of 500 selected common stocks that represent approximately two-thirds of the total market value of all U.S. common stocks. The Fund is neither sponsored by nor affiliated with S&P. The Fund seeks to remain invested in S&P 500 derivatives or S&P 500 stocks even when the S&P 500 is declining.

Though the Fund does not normally invest directly in S&P 500 securities, when S&P 500 derivatives appear to be overvalued relative to the S&P 500, the Fund may invest all of its assets in a “basket” of S&P 500 stocks. Individual stocks are selected based on an analysis of the historical correlation between the return of every S&P 500 stock and the return on the S&P 500 itself. PIMCO may employ fundamental analysis of factors such as earnings and earnings growth, price to earnings ratio, dividend growth, and cash flows to choose among stocks that satisfy the correlation tests. Stocks chosen for the Fund are not limited to those with any particular weighting in the S&P 500. The Fund also may invest in exchange traded funds based on the S&P 500, such as Standard & Poor’s Depositary Receipts.

Assets not invested in equity securities or derivatives may be invested in Fixed Income Instruments. The Fund may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. In addition, the Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income.

Principal Risks

Under certain conditions, generally in a market where the value of both S&P 500 derivatives and fixed income securities are declining, the Fund may experience greater losses than would be the case if it invested directly in a portfolio of S&P 500 stocks. Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Derivatives Risk

• Credit Risk

• Interest Rate Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


63		PIMCO Funds: Pacific Investment Management Series

PIMCO StocksPLUS Fund (continued)

Calendar Year Total Returns — Institutional Class






		Highest and Lowest Quarter Returns (for periods shown in the bar chart)

		Highest (4th Qtr. ’98)		21.45%

		Lowest (3rd Qtr. ’01)		-14.62%

Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (5/13/93)(3)

Institutional Class	-11.47%	10.72%	14.52%

Administrative Class	-11.96%	10.28%	14.14%

S&P 500 Index(1)	-11.88%	10.70%	13.85%

Lipper Large-Cap Core Fund Average(2)	-13.83%	8.13%	11.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

The Lipper Large-Cap Core Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 75% of their equity assets in companies with market capitalizations (on a 3 year weighted basis) of greater than 300% of the dollar weighted median market capitalization of the S&P 400 Mid-Cap Index. It does not take into account sales charges.

(3)

The Fund began operations on 5/13/93. Index comparisons began on 4/30/93.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.40%	None	0.25%	0.65%

Administrative	0.40	0.25%	0.25	0.90

(1) Other Expenses reflect an Administrative Fee of 0.25%.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$66	$208	$362	$ 810

Administrative	92	287	498	1,108


Prospectus		64

Summary of Principal Risks

The value of your investment in a Fund changes with the values of that Fund’s investments. Many factors can affect those values. The factors that are most likely to have a material effect on a particular Fund’s portfolio as a whole are called “principal risks.” The principal risks of each Fund are identified in the Fund Summaries and are described in this section. Each Fund may be subject to additional principal risks and risks other than those described below because the types of investments made by a Fund can change over time. Securities and investment techniques mentioned in this summary and described in greater detail under “Characteristics and Risks of Securities and Investment Techniques” appear in bold type. That section and “Investment Objectives and Policies” in the Statement of Additional Information also include more information about the Funds, their investments and the related risks. There is no guarantee that a Fund will be able to achieve its investment objective.

Interest Rate Risk

As interest rates rise, the value of fixed income securities held by a Fund are likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations.

Credit Risk

A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.

High Yield Risk

Funds that invest in high yield securities and unrated securities of similar credit quality (commonly known as “junk bonds”) may be subject to greater levels of interest rate, credit and liquidity risk than Funds that do not invest in such securities. These securities are considered predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments. An economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce a Fund’s ability to sell these securities (liquidity risk). If the issuer of a security is in default with respect to interest or principal payments, a Fund may lose its entire investment.

Market Risk

The market price of securities owned by a Fund may go up or down, sometimes rapidly or unpredictably. Securities may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of a security may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities generally have greater price volatility than fixed income securities.

Issuer Risk

The value of a security may decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk.


65		PIMCO Funds: Pacific Investment Management Series

Derivatives Risk

Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Funds may use are referenced under “Characteristics and Risks of Securities and Investment Techniques—Derivatives” in this prospectus and described in more detail under “Investment Objectives and Policies” in the Statement of Additional Information. The Funds typically use derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The Funds may also use derivatives for leverage, in which case their use would involve leveraging risk. A Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. A Fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Mortgage Risk

A Fund that purchases mortgage-related securities is subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities may exhibit additional volatility. This is known as extension risk. In addition, mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates.

Foreign (Non-U.S.) Investment Risk

A Fund that invests in foreign securities may experience more rapid and extreme changes in value than a Fund that invests exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally, issuers of foreign securities are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. Also, nationalization, expropriation or confiscatory taxation, currency blockage, political changes or diplomatic developments could adversely affect a Fund’s investments in a foreign country. In the event of nationalization, expropriation or other confiscation, a Fund could lose its entire investment in foreign securities. Adverse conditions in a certain region can adversely affect securities of other countries whose economies appear to be unrelated. To the extent that a Fund invests a significant portion of its assets in a concentrated geographic area like Eastern Europe or Asia, the Fund will generally have more exposure to regional economic risks associated with foreign investments.

European Concentration Risk

When a Fund concentrates its investments in Europe, it may be affected significantly by economic, regulatory or political developments affecting European issuers. All countries in Europe may be significantly affected by fiscal and monetary controls implemented by the European Economic and Monetary Union. Eastern European markets are relatively undeveloped and may be particularly sensitive to economic and political events affecting those countries.

Emerging Markets Risk

Foreign investment risk may be particularly high to the extent that a Fund invests in emerging market securities of issuers based in countries with developing economies. These securities may present market, credit, currency, liquidity, legal, political and other risks different from, or greater than, the risks of investing in developed foreign countries.


Prospectus		66

Currency Risk

Funds that invest directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged.

Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the U.S. or abroad. As a result, a Fund’s investments in foreign currency-denominated securities may reduce the returns of the Fund.

Issuer Non-Diversification Risk

Focusing investments in a small number of issuers, industries or foreign currencies increases risk. Funds that are “non-diversified” may invest a greater percentage of their assets in the securities of a single issuer (such as bonds issued by a particular state) than Funds that are “diversified.” Funds that invest in a relatively small number of issuers are more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. Some of those issuers also may present substantial credit or other risks. Similarly, a Fund may be more sensitive to adverse economic, business or political developments if it invests a substantial portion of its assets in the bonds of similar projects or from issuers in the same state.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.

Smaller Company Risk

The general risks associated with fixed income securities are particularly pronounced for securities issued by companies with smaller market capitalizations. These companies may have limited product lines, markets or financial resources or they may depend on a few key employees. As a result, they may be subject to greater levels of credit, market and issuer risk. Securities of smaller companies may trade less frequently and in lesser volumes than more widely held securities and their values may fluctuate more sharply than other securities. Companies with medium-sized market capitalizations may have risks similar to those of smaller companies.

Management Risk

Each Fund is subject to management risk because it is an actively managed investment portfolio. PIMCO and each individual portfolio manager will apply investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that these will produce the desired results.

California State-Specific Risk

A Fund that concentrates its investments in California municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of California issuers to pay interest or repay principal. Provisions of the California Constitution and State statutes which limit the taxing and spending authority of California governmental entities may impair the ability of California issuers to pay principal and/or interest on their obligations. While California’s economy is broad, its does have major concentrations in high technology, aerospace and defense-related manufacturing, trade, entertainment, real estate and financial services, and may be sensitive to economic problems affecting those industries. Future California political and economic developments, constitutional amendments, legislative measures, executive orders, administrative regulations, litigation and voter initiatives could have an adverse effect on the debt obligations of California issuers.


67		PIMCO Funds: Pacific Investment Management Series

New York State-Specific Risk

A Fund that concentrates its investments in New York municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of New York issuers to pay interest or repay principal. Certain issuers of New York municipal bonds have experienced serious financial difficulties in the past and a reoccurrence of these difficulties may impair the ability of certain New York issuers to pay principal or interest on their obligations. The financial health of New York City affects that of the State, and when New York City experiences financial difficulty it may have an adverse affect on New York municipal bonds held by the Fund. The growth rate of New York has at times been somewhat slower than the nation overall. The economic and financial condition of New York also may be affected by various financial, social, economic and political factors.

Allocation Risk

The Strategic Balanced Fund’s investment performance depends upon how its assets are allocated and reallocated between the Underlying Funds according to the Fund’s equity/fixed income allocation targets and ranges. A principal risk of investing in the Fund is that PIMCO will make less than optimal or poor asset allocation decisions. PIMCO attempts to identify allocations for the Underlying Funds that will provide consistent, quality performance for the Fund, but there is no guarantee that PIMCO’s allocation techniques will produce the desired results. It is possible that PIMCO will focus on an Underlying Fund that performs poorly or underperforms other Funds under various market conditions. You could lose money on your investment in the Fund as a result of these allocation decisions.

Underlying Fund Risks

Because the Strategic Balanced Fund invests all of its assets in Underlying Funds, the risks associated with investing in the Fund are closely related to the risks associated with the securities and other investments held by the Underlying Funds. The ability of the Fund to achieve its investment objective will depend upon the ability of the Underlying Funds to achieve their investment objectives. There can be no assurance that the investment objective of any Underlying Fund will be achieved.

The Strategic Balanced Fund’s net asset value will fluctuate in response to changes in the net asset values of the Underlying Funds in which it invests. The extent to which the investment performance and risks associated with the Fund correlate to those of a particular Underlying Fund will depend upon the extent to which the Fund’s assets are allocated from time to time for investment in the Underlying Fund, which will vary. The Fund’s investment in a particular Underlying Fund normally will exceed 25% of its assets. Because the Fund invests a significant portion of its assets in each Underlying Fund, it will be particularly sensitive to the risks associated with each of the Underlying Funds.

Management of the Funds

Investment Adviser and Administrator

PIMCO serves as the investment adviser and the administrator (serving in its capacity as administrator, the “Administrator”) for the Funds. Subject to the supervision of the Board of Trustees, PIMCO is responsible for managing the investment activities of the Funds and the Funds’ business affairs and other administrative matters.

PIMCO is located at 840 Newport Center Drive, Newport Beach, California 92660. Organized in 1971, PIMCO provides investment management and advisory services to private accounts of institutional and individual clients and to mutual funds. As of December 31, 2001, PIMCO had approximately $241.3 billion in assets under management.


Prospectus		68

Advisory Fees

Each Fund, except the Strategic Balanced Fund, pays PIMCO fees in return for providing investment advisory services. For the fiscal year ended March 31, 2001, the Funds paid monthly advisory fees to PIMCO at the following annual rates (stated as a percentage of the average daily net assets of each Fund taken separately):

Fund		Advisory Fees

Money Market Fund		0.15%
Short Duration Municipal Income Fund		0.20%
Short-Term, Low Duration, Low Duration II, Low Duration III, GNMA, Moderate Duration, Real Return, Total Return, Total Return II, Total Return III, Total Return Mortgage, High Yield, Long-Term U.S. Government, Investment Grade Corporate Bond, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, New York Municipal Bond, Global Bond, Global Bond II, and Foreign Bond Funds		0.25%
Strategic Balanced*, Convertible and StocksPLUS Funds		0.40%
Emerging Markets Bond Fund		0.45%
European Convertible Fund		0.50%

Effective September 29, 2000, the advisory fee for the Strategic Balanced Fund was reduced to an annual rate of 0.00%.

The Real Return II and Real Return Asset Funds were not operational during the fiscal year ended March 31, 2001. The investment advisory fees for the Real Return II and Real Return Asset Funds are at an annual rate of 0.25% and 0.50%, respectively, based upon the average daily net assets of the Fund.

Administrative Fees

Each Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Institutional and Administrative Class shareholders of each Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides or procures administrative services for Institutional and Administrative Class shareholders and also bears the costs of various third-party services required by the Funds, including audit, custodial, portfolio accounting, legal, transfer agency and printing costs.

For the fiscal year ended March 31, 2001, the Funds paid PIMCO monthly administrative fees at the following annual rates (stated as a percentage of the average daily net assets attributable in the aggregate to the Fund’s Institutional and Administrative Class shares):

Fund		Administrative Fees

Low Duration and Total Return Funds		0.18%
Short Duration Municipal Income Fund		0.19%
Money Market, Short-Term and Moderate Duration Funds		0.20%
California Municipal Bond, California Intermediate Municipal Bond and New York Municipal Bond Funds*		0.24%
Low Duration II, Low Duration III, GNMA, Real Return, Total Return II, Total Return III, Total Return Mortgage, High Yield, Long-Term U.S. Government, Municipal Bond, Investment Grade Corporate Bond, Foreign Bond, Strategic Balanced**, Convertible, European Convertible and StocksPLUS Funds		0.25%
Global Bond and Global Bond II Funds		0.30%
Emerging Markets Bond Fund		0.40%

Effective October 1, 2001, the administrative fee for the Real Return, California Municipal Bond, California Intermediate Municipal Bond, New York Municipal Bond and Municipal Bond Funds was reduced to an annual rate of 0.20%, 0.22%, 0.22%, 0.22% and 0.24%, respectively.

Effective September 29, 2000, the administrative fee for the Strategic Balanced Fund was reduced to an annual rate of 0.05%.

The Real Return II and Real Return Asset Funds were not operational during the fiscal year ended March 31, 2001. The administrative fees for the Real Return II and Real Return Asset Funds are each at an annual rate of 0.20% and 0.25%, respectively, based upon the average daily net assets of the Fund.

Strategic Balanced Fund Fees

The Strategic Balanced Fund does not pay any fees to PIMCO under the Trust’s investment advisory agreement in return for the advisory and asset allocation services provided by PIMCO. The Fund does, however, indirectly pay its proportionate share of the advisory fees paid to PIMCO by the Underlying Funds in which the Fund invests.


69		PIMCO Funds: Pacific Investment Management Series

The Fund pays administrative fees to PIMCO at an annual rate of 0.05% based on the average daily net assets attributable in the aggregate to the Fund’s Institutional Class and Administrative Class shares. The Fund also indirectly pays its proportionate share of the administrative fees charged by PIMCO to the Underlying Funds in which the Fund invests.

The expenses associated with investing in a “fund of funds,” such as the Fund, are generally higher than those for mutual funds that do not invest primarily in other mutual funds. This is because shareholders in a “fund of funds” indirectly pay a portion of the fees and expense charged at the underlying fund level.

The Strategic Balanced Fund is structured in the following ways to lessen the impact of expenses incurred at the Underlying Fund level:

•

The Fund does not pay any fees for asset allocation or advisory services under the Trust’s investment advisory agreement.

•

The Fund invests in Institutional Class shares of the Underlying Funds, which are not subject to any sales charges or 12b-1 fees.

PIMCO has broad discretion to allocate and reallocate the Fund’s assets among the Underlying Funds consistent with the Fund’s investment objective and policies and asset allocation targets and ranges. Although PIMCO does not charge an investment advisory fee for its asset allocation services, PIMCO indirectly receives fees (including investment advisory and administrative fees) from the Underlying Funds in which the Fund invests. In this regard, PIMCO has a financial incentive to invest the Fund’s assets in Underlying Funds with higher fees than other Funds, even if it believes that alternate investments would better serve the Fund’s investment program. PIMCO is legally obligated to disregard that incentive in making asset allocation decisions for the Fund. The Trustees and officers of the Trust may also have conflicting interests in fulfilling their fiduciary duties to both the Fund and the Underlying Funds of the Trust.


Prospectus		70

Individual Portfolio Managers

The following individuals have primary responsibility for managing each of the noted Funds.

Fund	Portfolio Manager	Since	Recent Professional Experience


Money Market Short-Term	Paul A. McCulley	11/99 8/99	Managing Director, PIMCO. He has managed fixed income assets since joining PIMCO in 1999. Prior to joining PIMCO, Mr. McCulley was associated with Warburg Dillon Read as a Managing Director from 1992-1999 and Head of Economic and Strategy Research for the Americas from 1995-1999, where he managed macro research world-wide.
Money Market Short-Term	Paul A. McCulley	11/99 8/99

Low Duration Low Duration II Low Duration III Moderate Duration Total Return Total Return II Total Return III Strategic Balanced StocksPLUS	William H. Gross	5/87* 11/91* 12/96* 12/96* 5/87* 12/91* 5/91* 1/98 1/98	Managing Director, Chief Investment Officer and a founding partner of PIMCO. He leads a team which manages the Moderate Duration, Strategic Balanced and StocksPLUS Funds.

Total Return Mortgage GNMA	W. Scott Simon	4/00 10/01	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to that, he was a Senior Managing Director and co-head of mortgage-backed security pass-through trading at Bear Stearns & Co.

Real Return Real Return II Real Return Asset	John B. Brynjolfsson	1/97* 8/01 8/01	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 1989, and has managed fixed income accounts for various institutional clients and funds since 1992.

Long-Term U.S. Government	James M. Keller	4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 1996, and has managed fixed income accounts for various institutional clients since that time.

Investment Grade Corporate Bond	Chris P. Dialynas	4/00*	Managing Director, PIMCO. He is a Portfolio Manager and a senior member of PIMCO’s investment strategy group, and has been associated with PIMCO since 1980.

	Shannon M. Bass	2/02	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2001. Prior to joining PIMCO, he was a Managing Director of the fixed income division of Lehman Brothers.

High Yield	Benjamin L. Trosky	12/92*	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1990, and has managed fixed income accounts for various institutional clients and funds since that time.

	Raymond G. Kennedy	4/02	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1996. Prior to that, he was associated with the Prudential Insurance Company of America as a private placement asset manager.

Short Duration Municipal Income Municipal Bond California Intermediate Municipal Bond California Municipal Bond New York Municipal Bond	Mark V. McCray	4/00 4/00 4/00 5/00* 4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to that, he was a bond trader from 1992-1999 at Goldman Sachs & Co. where he was appointed Vice President in 1996 and named co-head of municipal bond trading in 1997 with responsibility for the firm’s proprietary account and supervised municipal bond traders.

Global Bond Global Bond II Foreign Bond	Sudi Mariappa	11/00 11/00 11/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to joining PIMCO, Mr. Mariappa was a Managing Director with Merrill Lynch from 1999-2000. Prior to that, he was associated with Sumitomo Finance International as an Executive Director in 1998, and with Long-term Capital Management as a strategist from 1995-1998.

Emerging Markets Bond	Mohamed A. El-Erian	8/99	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO, he was a Managing Director from 1998-1999 for Salomon Smith Barney/Citibank, where he was head of emerging markets research. Prior to that he was associated with the International Monetary Fund as a Deputy Director and Advisor from 1983-1998.

Convertible European Convertible	Sandra K. Harris	4/99* 11/00*	Senior Vice President, PIMCO. She joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO in 1999, she was associated with Nicholas-Applegate Capital Management where she was a Convertible Securities Portfolio Manager from 1995-1999.

* Since inception of the Fund.

**Fund has not commenced operation as of the date of this prospectus.

Distributor

The Trust’s Distributor is PIMCO Funds Distributors LLC, an indirect subsidiary of Allianz Dresdner Asset Management of America L.P. The Distributor, located at 2187 Atlantic Street, Stamford, CT 06902, is a broker-dealer registered with the Securities and Exchange Commission.


71		PIMCO Funds: Pacific Investment Management Series

Investment Options—

Institutional Class and Administrative Class Shares

The Trust offers investors Institutional Class and Administrative Class shares of the Funds in this prospectus.

The Trust does not charge any sales charges (loads) or other fees in connection with purchases, sales (redemptions) or exchanges of Institutional Class or Administrative Class shares. Administrative Class shares are subject to a higher level of operating expenses than Institutional Class shares due to the additional service and/or distribution fees paid by Administrative Class shares as described below. Therefore, Institutional Class shares will generally pay higher dividends and have a more favorable investment return than Administrative Class shares.

• Service and Distribution (12b-1) Fees—Administrative Class Shares. The Trust has adopted both an Administrative Services Plan and a Distribution Plan for the Administrative Class shares of each Fund. The Distribution Plan has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“1940 Act”), as amended.

Each Plan allows the Funds to use its Administrative Class assets to reimburse financial intermediaries that provide services relating to Administrative Class shares. The Distribution Plan permits reimbursement for expenses in connection with the distribution and marketing of Administrative Class shares and/or the provision of shareholder services to Administrative Class shareholders. The Administrative Services Plan permits reimbursement for services in connection with the administration of plans or programs that use Administrative Class shares of the Funds as their funding medium and for related expenses.

In combination, the Plans permit a Fund to make total reimbursements at an annual rate of up to 0.25% of the Fund’s average daily net assets attributable to its Administrative Class shares. The same entity may not receive both distribution and administrative services fees with respect to the same Administrative Class assets, but may receive fees under each Plan with respect to separate assets. Because these fees are paid out of a Fund’s Administrative Class assets on an ongoing basis, over time they will increase the cost of an investment in Administrative Class shares, and Distribution Plan fees may cost an investor more than other types of sales charges.

• Arrangements with Service Agents. Institutional Class and Administrative Class shares of the Funds may be offered through certain brokers and financial intermediaries (“service agents”) that have established a shareholder servicing relationship with the Trust on behalf of their customers. The Trust pays no compensation to such entities other than service and/or distribution fees paid with respect to Administrative Class shares. Service agents may impose additional or different conditions than the Trust on purchases, redemptions or exchanges of Fund shares by their customers. Service agents may also independently establish and charge their customers transaction fees, account fees and other amounts in connection with purchases, sales and redemptions of Fund shares in addition to any fees charged by the Trust. These additional fees may vary over time and would increase the cost of the customer’s investment and lower investment returns. Each service agent is responsible for transmitting to its customers a schedule of any such fees and information regarding any additional or different conditions regarding purchases, redemptions and exchanges. Shareholders who are customers of service agents should consult their service agents for information regarding these fees and conditions.


Prospectus		72

Purchases, Redemptions and Exchanges

Purchasing Shares

Investors may purchase Institutional Class and Administrative Class shares of the Funds at the relevant net asset value (“NAV”) of that class without a sales charge or other fee.

Institutional Class shares are offered primarily for direct investment by investors such as pension and profit sharing plans, employee benefit trusts, endowments, foundations, corporations and high net worth individuals. Institutional Class shares may also be offered through certain financial intermediaries that charge their customers transaction or other fees with respect to their customers’ investments in the Funds.

Administrative Class shares are offered primarily through employee benefit plan alliances, broker-dealers and other intermediaries, and each Fund pays service and/or distribution fees to these entities for services they provide to Administrative Class shareholders.

Pension and profit-sharing plans, employee benefit trusts and employee benefit plan alliances and “wrap account” programs established with broker-dealers or financial intermediaries may purchase shares of either class only if the plan or program for which the shares are being acquired will maintain an omnibus or pooled account for each Fund and will not require a Fund to pay any type of administrative payment per participant account to any third party. Shares may be offered to clients of PIMCO and its affiliates, and to the benefit plans of PIMCO and its affiliates.

• Investment Minimums. The minimum initial investment for shares of either class is $5 million, except that the minimum initial investment for a registered investment adviser purchasing Institutional Class shares for its clients through omnibus accounts is $250,000 per Fund. In addition, the minimum initial investment does not apply to Institutional Class shares offered through fee-based programs sponsored and maintained by a registered broker-dealer and approved by the Distributor which each investor pays an asset based fee at an annual rate of at least 0.50% of the assets in the account to a financial intermediary for investment advisory and/or administrative services.

The Trust and the Distributor may waive the minimum initial investment for other categories of investors at their discretion.

The investment minimums discussed in this section and the limitations set forth below do not apply to participants in PIMCO Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.

• Timing of Purchase Orders and Share Price Calculations. A purchase order received by the Trust’s transfer agent, National Financial Data Services (“Transfer Agent”), prior to the close of regular trading (normally 4:00 p.m., Eastern time) on the New York Stock Exchange, on a day the Trust is open for business, together with payment made in one of the ways described below, will be effected at that day’s NAV. An order received after the close of regular trading on the New York Stock Exchange will be effected at the NAV determined on the next business day. However, orders received by certain retirement plans and other financial intermediaries on a business day prior to the close of regular trading on the New York Stock Exchange and communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the following business day will be effected at the NAV determined on the prior business day. The Trust is “open for business” on each day the New York Stock Exchange is open for trading, which excludes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchase orders will be accepted only on days on which the Trust is open for business.

• Initial Investment. Investors may open an account by completing and signing a Client Registration Application and mailing it to PIMCO Funds at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660. A Client Registration Application may be obtained by calling 1-800-927-4648.


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Except as described below, an investor may purchase Institutional Class and Administrative Class shares only by wiring federal funds to the Trust’s Transfer Agent, National Financial Data Services, 330 West 9th Street, 4th Floor, Kansas City, Missouri 64105. Before wiring federal funds, the investor must telephone the Trust at 1-800-927-4648 to receive instructions for wire transfer and must provide the following information: name of authorized person, shareholder name, shareholder account number, name of Fund and share class, amount being wired, and wiring bank name.

An investor may purchase shares without first wiring federal funds if the proceeds of the investment are derived from an advisory account the investor maintains with PIMCO or one of its affiliates, from surrender or other payment from an annuity, insurance, or other contract held by Pacific Life Insurance Company, or from an investment by broker-dealers, institutional clients or other financial intermediaries which have established a shareholder servicing relationship with the Trust on behalf of their customers.

• Additional Investments. An investor may purchase additional Institutional Class and Administrative Class shares of the Funds at any time by calling the Trust and wiring federal funds to the Transfer Agent as outlined above.

• Other Purchase Information. Purchases of a Fund’s Institutional Class and Administrative Class shares will be made in full and fractional shares. In the interest of economy and convenience, certificates for shares will not be issued.

The Trust and the Distributor each reserves the right, in its sole discretion, to suspend the offering of shares of the Funds or to reject any purchase order, in whole or in part, when, in the judgment of management, such suspension or rejection is in the best interests of the Trust.

An investor should invest in the Funds for long-term investment purposes only. The Trust and PIMCO each reserves the right to restrict purchases of Fund shares (including exchanges) when a pattern of frequent purchases and sales made in response to short-term fluctuations in share price appears evident. Notice of any such restrictions, if any, will vary according to the particular circumstances.

Institutional Class and Administrative Class shares of the Trust are not qualified or registered for sale in all states. Investors should inquire as to whether shares of a particular Fund are available for offer and sale in the investor’s state of residence. Shares of the Trust may not be offered or sold in any state unless registered or qualified in that jurisdiction or unless an exemption from registration or qualification is available.

Subject to the approval of the Trust, an investor may purchase shares of a Fund with liquid securities that are eligible for purchase by the Fund (consistent with the Fund’s investment policies and restrictions) and that have a value that is readily ascertainable in accordance with the Trust’s valuation policies. These transactions will be effected only if PIMCO intends to retain the security in the Fund as an investment. Assets purchased by a Fund in such a transaction will be valued in generally the same manner as they would be valued for purposes of pricing the Fund’s shares, if such assets were included in the Fund’s assets at the time of purchase. The Trust reserves the right to amend or terminate this practice at any time.

• Retirement Plans. Shares of the Funds are available for purchase by retirement and savings plans, including Keogh plans, 401(k) plans, 403(b) custodial accounts, and Individual Retirement Accounts. The administrator of a plan or employee benefits office can provide participants or employees with detailed information on how to participate in the plan and how to elect a Fund as an investment option. Participants in a retirement or savings plan may be permitted to elect different investment options, alter the amounts contributed to the plan, or change how contributions are allocated among investment options in accordance with the plan’s specific provisions. The plan administrator or employee benefits office should be consulted for details. For questions about participant accounts, participants should contact their employee benefits office, the plan administrator, or


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the organization that provides recordkeeping services for the plan. Investors who purchase shares through retirement plans should be aware that plan administrators may aggregate purchase and redemption orders for participants in the plan. Therefore, there may be a delay between the time the investor places an order with the plan administrator and the time the order is forwarded to the Transfer Agent for execution.

Redeeming Shares

• Redemptions by Mail. An investor may redeem (sell) Institutional Class and Administrative Class shares by submitting a written request to PIMCO Funds at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660. The redemption request should state the Fund from which the shares are to be redeemed, the class of shares, the number or dollar amount of the shares to be redeemed and the account number. The request must be signed exactly as the names of the registered owners appear on the Trust’s account records, and the request must be signed by the minimum number of persons designated on the Client Registration Application that are required to effect a redemption.

• Redemptions by Telephone or Other Wire Communication. An investor that elects this option on the Client Registration Application (or subsequently in writing) may request redemptions of shares by calling the Trust at 1-800-927-4648, by sending a facsimile to 1-949-725-6830, by sending an e-mail to shareholder.services@pimco.com, or by other means of wire communication. Investors should state the Fund and class from which the shares are to be redeemed, the number or dollar amount of the shares to be redeemed, the account number and the signature (which may be an electronic signature) of an authorized signatory. Redemption requests of an amount of $10 million or more may be initiated by telephone or by e-mail, but must be confirmed in writing by an authorized party prior to processing.

In electing a telephone redemption, the investor authorizes PIMCO and the Transfer Agent to act on telephone instructions from any person representing himself to be the investor, and reasonably believed by PIMCO or the Transfer Agent to be genuine. Neither the Trust nor the Transfer Agent may be liable for any loss, cost or expense for acting on instructions (whether in writing or by telephone) believed by the party receiving such instructions to be genuine and in accordance with the procedures described in this Prospectus. Shareholders should realize that by electing the telephone, or wire or e-mail redemption option, they may be giving up a measure of security that they might have if they were to redeem their shares in writing. Furthermore, interruptions in service may mean that a shareholder will be unable to effect a redemption by telephone or e-mail when desired. The Transfer Agent also provides written confirmation of transactions initiated by telephone as a procedure designed to confirm that telephone instructions are genuine (written confirmation is also provided for redemption requests received in writing or via e-mail). All telephone transactions are recorded, and PIMCO or the Transfer Agent may request certain information in order to verify that the person giving instructions is authorized to do so. The Trust or Transfer Agent may be liable for any losses due to unauthorized or fraudulent telephone transactions if it fails to employ reasonable procedures to confirm that instructions communicated by telephone are genuine. All redemptions, whether initiated by letter or telephone, will be processed in a timely manner, and proceeds will be forwarded by wire in accordance with the redemption policies of the Trust detailed below. See “Other Redemption Information.”

Shareholders may decline telephone exchange or redemption privileges after an account is opened by instructing the Transfer Agent in writing at least seven business days prior to the date the instruction is to be effective. Shareholders may experience delays in exercising telephone redemption privileges during periods of abnormal market activity. During periods of volatile economic or market conditions, shareholders may wish to consider transmitting redemption orders by telegram, facsimile, e-mail or overnight courier.

Defined contribution plan participants may request redemptions by contacting the employee benefits office, the plan administrator or the organization that provides recordkeeping services for the plan.


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• Timing of Redemption Requests and Share Price Calculations. A redemption request received by the Trust or its designee prior to the close of regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time), on a day the Trust is open for business, is effective on that day. A redemption request received after that time becomes effective on the next business day. Redemption requests for Fund shares are effected at the NAV per share next determined after receipt of a redemption request by the Trust or its designee. The request must properly identify all relevant information such as account number, redemption amount (in dollars or shares), the Fund name, and must be executed or initiated by the appropriate signatories.

• Other Redemption Information. Redemption proceeds will ordinarily be wired to the investor’s bank within three business days after the redemption request, but may take up to seven business days. Redemption proceeds will be sent by wire only to the bank name designated on the Client Registration Application. Redemptions of Fund shares may be suspended when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors. Under these and other unusual circumstances, the Trust may suspend redemptions or postpone payment for more than seven days, as permitted by law.

For shareholder protection, a request to change information contained in an account registration (for example, a request to change the bank designated to receive wire redemption proceeds) must be received in writing, signed by the minimum number of persons designated on the Client Registration Application that are required to effect a redemption, and accompanied by a signature guarantee from any eligible guarantor institution, as determined in accordance with the Trust’s procedures. Shareholders should inquire as to whether a particular institution is an eligible guarantor institution. A signature guarantee cannot be provided by a notary public. In addition, corporations, trusts, and other institutional organizations are required to furnish evidence of the authority of the persons designated on the Client Registration Application to effect transactions for the organization.

Due to the relatively high cost of maintaining small accounts, the Trust reserves the right to redeem Institutional Class and Administrative Class shares in any account for their then-current value (which will be promptly paid to the investor) if at any time, due to redemption by the investor, the shares in the account do not have a value of at least $100,000. A shareholder will receive advance notice of a mandatory redemption and will be given at least 30 days to bring the value of its account up to at least $100,000. This mandatory redemption policy does not apply to participants in PIMCO Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.

The Trust agrees to redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1% of the Fund’s net assets during any 90-day period for any one shareholder. In consideration of the best interests of the remaining shareholders, the Trust reserves the right to pay any redemption proceeds exceeding this amount in whole or in part by a distribution in kind of securities held by a Fund in lieu of cash. It is highly unlikely that shares would ever be redeemed in kind. When shares are redeemed in kind, the redeeming shareholder should expect to incur transaction costs upon the disposition of the securities received in the distribution.

Exchange Privilege

An investor may exchange Institutional Class or Administrative Class shares of a Fund for shares of the same class of any other Fund or other series of the Trust that offers that class based on the respective NAVs of the shares involved. An exchange may be made by following the redemption procedure described above under “Redemptions by Mail” or, if the investor has elected the telephone redemption option, by calling the Trust at 1-800-927-4648. An investor may also exchange shares of a Fund for shares of the same class of a series of PIMCO Funds: Multi-Manager Series, an affiliated mutual fund family composed primarily of equity portfolios


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managed by PIMCO Advisors and its subsidiaries. Shareholders interested in such an exchange may request a prospectus for these other series by contacting PIMCO Funds at the same address and telephone number as the Trust.

An investor may exchange shares only with respect to Funds or other eligible series that are registered in the investor’s state of residence or where an exemption from registration is available. An exchange order is treated the same for tax purposes as a redemption followed by a purchase and may result in a capital gain or loss, and special rules may apply in computing tax basis when determining gain or loss. See “Tax Consequences” in this Prospectus and “Taxation” in the Statement of Additional Information.

How Fund Shares Are Priced

The net asset value (“NAV”) of a Fund’s Institutional and Administrative Class shares is determined by dividing the total value of a Fund’s portfolio investments and other assets attributable to that class, less any liabilities, by the total number of shares outstanding of that class.

Except for the Money Market Fund, for purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Certain securities or investments for which daily market quotations are not readily available may be valued, pursuant to guidelines established by the Board of Trustees, with reference to other securities or indices. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost. Exchange traded options, futures and options on futures are valued at the settlement price determined by the exchange. Other securities for which market quotes are not readily available are valued at fair value as determined in good faith by the Board of Trustees or persons acting at their direction.

The Money Market Fund’s securities are valued using the amortized cost method of valuation, which involves valuing a security at cost on the date of acquisition and thereafter assuming a constant accretion of a discount or amortization of a premium to maturity, regardless of the impact of fluctuating interest rates on the market value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if it sold the instrument.

Investments initially valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. As a result, the NAV of a Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the New York Stock Exchange is closed and an investor is not able to purchase, redeem or exchange shares.


77		PIMCO Funds: Pacific Investment Management Series

Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern time) (the “NYSE Close”) on each day that the New York Stock Exchange is open. For purposes of calculating the NAV, the Funds normally use pricing data for domestic equity securities received shortly after the NYSE Close and do not normally take into account trading, clearances or settlements that take place after the NYSE Close. Domestic fixed income and foreign securities are normally priced using data reflecting the earlier closing of the principal markets for those securities. Information that becomes known to the Funds or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day.

In unusual circumstances, instead of valuing securities in the usual manner, the Funds may value securities at fair value or estimate their value as determined in good faith by the Board of Trustees, generally based upon recommendations provided by PIMCO. Fair valuation may also be used if extraordinary events occur after the close of the relevant market but prior to the NYSE Close.

Under certain circumstances, the per share NAV of the Administrative Class shares of the Funds may be lower than the per share NAV of the Institutional Class shares as a result of the daily expense accruals of the service and/or distribution fees paid by Administrative Class shares. Generally, for Funds that pay income dividends, those dividends are expected to differ over time by approximately the amount of the expense accrual differential between the two classes.

Fund Distributions

Each Fund distributes substantially all of its net investment income to shareholders in the form of dividends. A shareholder begins earning dividends on Fund shares the day after the Trust receives the shareholder’s purchase payment. Dividends paid by each Fund with respect to each class of shares are calculated in the same manner and at the same time, but dividends on Administrative Class shares are expected to be lower than dividends on Institutional Class shares as a result of the distribution fees applicable to Administrative Class shares. The following shows when each Fund intends to declare and distribute income dividends to shareholders of record.

Fund	Declared Daily and Paid Monthly	Declared and Paid Quarterly

Fixed Income Funds	·

Strategic Balanced, Convertible, European Convertible and StocksPLUS Funds		·

In addition, each Fund distributes any net capital gains it earns from the sale of portfolio securities to shareholders no less frequently than annually. Net short-term capital gains may be paid more frequently.

A Fund’s dividend and capital gain distributions with respect to a particular class of shares will automatically be reinvested in additional shares of the same class of the Fund at NAV unless the shareholder elects to have the distributions paid in cash. A shareholder may elect to have distributions paid in cash on the Client Registration Application or by submitting a written request, signed by the appropriate signatories, indicating the account number, Fund name(s) and wiring instructions. Shareholders do not pay any sales charges on shares received through the reinvestment of Fund distributions.


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Tax Consequences

• Taxes on Fund Distributions. A shareholder subject to U.S. federal income tax will be subject to tax on Fund distributions whether they are paid in cash or reinvested in additional shares of the Funds. For federal income tax purposes, Fund distributions will be taxable to the shareholder as either ordinary income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable to shareholders as ordinary income. Federal taxes on Fund distributions of gains are determined by how long the Fund owned the investments that generated the gains, rather than how long a shareholder has owned the shares. Distributions of gains from investments that a Fund owned for more than one year will generally be taxable to shareholders as long-term capital gains. Distributions of gains from investments that the Fund owned for one year or less will generally be taxable as ordinary income.

Fund distributions are taxable to shareholders even if they are paid from income or gains earned by a Fund prior to the shareholder’s investment and thus were included in the price paid for the shares. For example, a shareholder who purchases shares on or just before the record date of a Fund distribution will pay full price for the shares and may receive a portion of his or her investment back as a taxable distribution.

• Taxes on Redemption or Exchanges of Shares. Any gain resulting from the sale of Fund shares will generally be subject to federal income tax. When a shareholder exchanges shares of a Fund for shares of another series, the transaction will be treated as a sale of the Fund shares for these purposes, and any gain on those shares will generally be subject to federal income tax.

• A Note on the Real Return, Real Return II and Real Return Asset Funds. Periodic adjustments for inflation to the principal amount of an inflation-indexed bond may give rise to original issue discount, which will be includable in the Fund’s gross income. Due to original issue discount, the Fund may be required to make annual distributions to shareholders that exceed the cash received, which may cause the Fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation-indexed bond is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital.

• A Note on the Municipal Funds. Dividends paid to shareholders of the Municipal Funds and derived from Municipal Bond interest are expected to be designated by the Funds as “exempt-interest dividends” and shareholders may generally exclude such dividends from gross income for federal income tax purposes. The federal tax exemption for “exempt-interest dividends” from Municipal Bonds does not necessarily result in the exemption of such dividends from state and local taxes although the California Intermediate Municipal Bond Fund, the California Municipal Bond Fund, and the New York Municipal Bond Fund intend to arrange their affairs so that a portion of such distributions will be exempt from state taxes in the respective state. Each Municipal Fund may invest a portion of its assets in securities that generate income that is not exempt from federal or state income tax. Dividends derived from taxable interest or capital gains will be subject to federal income tax. The interest on “private activity” bonds is a tax-preference item for purposes of the federal alternative minimum tax. As a result, for shareholders that are subject to the alternative minimum tax, income derived from “private activity” bonds will not be exempt from federal income tax. The Municipal Funds seek to produce income that is generally exempt from federal income tax and will not benefit investors in tax-sheltered retirement plans or individuals not subject to federal income tax. Further, the California Intermediate Municipal Bond, the California Municipal Bond, and the New York Municipal Bond Funds seek to produce income that is generally exempt from the relevant state’s income tax and will not benefit individuals that are not subject to that state’s income tax.


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• A Note on the Strategic Balanced Fund. The Strategic Balanced Fund’s use of a fund of funds structure could affect the amount, timing and character of distributions to shareholders, and may therefore increase the amount of taxes payable by shareholders. See “Taxation—Distributions” in the Statement of Additional Information.

This section relates only to federal income tax; the consequences under other tax laws may differ. Shareholders should consult their tax advisors as to the possible application of foreign, state and local income tax laws to Fund dividends and capital distributions. Please see the Statement of Additional Information for additional information regarding the tax aspects of investing in the Funds.

Characteristics and Risks of

Securities and Investment Techniques

This section provides additional information about some of the principal investments and related risks of the Funds described under “Summary Information” above. It also describes characteristics and risks of additional securities and investment techniques that may be used by the Funds from time to time. Most of these securities and investment techniques are discretionary, which means that PIMCO can decide whether to use them or not. This prospectus does not attempt to disclose all of the various types of securities and investment techniques that may be used by the Funds. As with any mutual fund, investors in the Funds rely on the professional investment judgment and skill of PIMCO and the individual portfolio managers. Please see “Investment Objectives and Policies” in the Statement of Additional Information for more detailed information about the securities and investment techniques described in this section and about other strategies and techniques that may be used by the Funds.

The Strategic Balanced Fund invests its assets in shares of the Underlying Funds, and as such does not invest directly in the securities described below. The Underlying Funds, however, may invest in such securities. Because the value of an investment in the Strategic Balanced Fund is directly related to the investment performance of the Underlying Funds in which it invests, the risks of investing in the Strategic Balanced Fund are closely related to the risks associated with the Underlying Funds and their investments in the securities described below.

Securities Selection

Most of the Funds in this prospectus seek maximum total return. The total return sought by a Fund consists of both income earned on a Fund’s investments and capital appreciation, if any, arising from increases in the market value of a Fund’s holdings. Capital appreciation of fixed income securities generally results from decreases in market interest rates or improving credit fundamentals for a particular market sector or security.

In selecting securities for a Fund, PIMCO develops an outlook for interest rates, currency exchange rates and the economy; analyzes credit and call risks, and uses other security selection techniques. The proportion of a Fund’s assets committed to investment in securities with particular characteristics (such as quality, sector, interest rate or maturity) varies based on PIMCO’s outlook for the U.S. economy and the economies of other countries in the world, the financial markets and other factors.

PIMCO attempts to identify areas of the bond market that are undervalued relative to the rest of the market. PIMCO identifies these areas by grouping bonds into sectors such as: money markets, governments, corporates, mortgages, asset-backed and international. Sophisticated proprietary software then assists in evaluating sectors and pricing specific securities. Once investment opportunities are identified, PIMCO will shift assets among sectors depending upon changes in relative valuations and credit spreads. There is no guarantee that PIMCO’s security selection techniques will produce the desired results.


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not purchase shares of the Underlying Funds according to any predetermined formula, but rather decides how to allocate the Fund’s investments based upon PIMCO’s methodology for forecasting stages in the business cycle, and the potential risk and reward of equity and fixed income investments at specific stages of the business cycle. In addition to purchasing shares of the StocksPLUS and Total Return Funds, PIMCO may in the future invest in additional funds in the PIMCO fund family without shareholder approval.

U.S. Government Securities

U.S. Government Securities are obligations of, or guaranteed by, the U.S. Government, its agencies or government-sponsored enterprises. U.S. Government Securities are subject to market and interest rate risk, and may be subject to varying degrees of credit risk. U.S. Government Securities include zero coupon securities, which tend to be subject to greater market risk than interest-paying securities of similar maturities.

Municipal Bonds

Municipal bonds are generally issued by states and local governments and their agencies, authorities and other instrumentalities. Municipal bonds are subject to interest rate, credit and market risk. The ability of an issuer to make payments could be affected by litigation, legislation or other political events or the bankruptcy of the issuer. Lower rated municipal bonds are subject to greater credit and market risk than higher quality municipal bonds. The types of municipal bonds in which the Funds may invest include municipal lease obligations. The Funds may also invest in securities issued by entities whose underlying assets are municipal bonds.

The Funds may invest, without limitation, in residual interest bonds, which are created by depositing municipal securities in a trust and dividing the income stream of an underlying municipal bond in two parts, one, a variable rate security and the other, a residual interest bond. The interest rate for the variable rate security is determined by an index or an auction process held approximately every 7 to 35 days, while the residual interest bond holder receives the balance of the income from the underlying municipal bond less an auction fee. The market prices of residual interest bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase.

Mortgage-Related and Other Asset-Backed Securities

Each Fund may invest in mortgage- or other asset-backed securities. Except for the Money Market, Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, New York Municipal Bond, Convertible and European Convertible Funds, each Fund may invest all of its assets in such securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

The value of some mortgage- or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. When interest rates rise, the value of a mortgage-related security generally will decline; however, when interest rates are declining, the value of mortgage-related securities with prepayment features may not increase as much as other fixed income securities. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If unanticipated rates of prepayment on underlying mortgages increase the effective maturity of a mortgage-related security, the volatility of the security can be expected to increase. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.


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yield to maturity from these securities. A Fund may not invest more than 5% of its assets in any combination of IO, PO, or inverse floater securities. The Funds may invest in other asset-backed securities that have been

offered to investors.

Loan Participations and Assignments

purchases a participation, it may only be able to enforce its rights through the lender, and may assume the credit risk of the lender in addition to the borrower.

Corporate Debt Securities

Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. When interest rates rise, the value of corporate debt securities can be expected to decline. Debt securities with longer maturities tend to be more sensitive to interest rate movements than those with shorter maturities.

High Yield Securities

Securities rated lower than Baa by Moody’s or lower than BBB by S&P are sometimes referred to as “high yield” or “junk” bonds. Investing in high yield securities involves special risks in addition to the risks associated with investments in higher-rated fixed income securities. While offering a greater potential opportunity for capital appreciation and higher yields, high yield securities typically entail greater potential price volatility and may be less liquid than higher-rated securities. High yield securities may be regarded as predominately speculative with respect to the issuer’s continuing ability to meet principal and interest payments. They may also be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-rated securities. The Emerging Markets Bond Fund may invest in securities that are in default with respect to the payment of interest or repayment of principal, or presenting an imminent risk of default with respect to such payments. Issuers of securities in default may fail to resume principal or interest payments, in which case the Fund may lose its entire investment.

• Credit Ratings and Unrated Securities. Rating agencies are private services that provide ratings of the credit quality of fixed income securities, including convertible securities. Appendix A to this prospectus describes the various ratings assigned to fixed income securities by Moody’s and S&P. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. A Fund will not necessarily sell a security when its rating is reduced below its rating at the time of purchase. PIMCO does not rely solely on credit ratings, and develops its own analysis of issuer credit quality.

A Fund may purchase unrated securities (which are not rated by a rating agency) if its portfolio manager determines that the security is of comparable quality to a rated security that the Fund may purchase. Unrated securities may be less liquid than comparable rated securities and involve the risk that the portfolio manager may not accurately evaluate the security’s comparative credit rating. Analysis of the creditworthiness of issuers of high yield securities may be more complex than for issuers of higher-quality fixed income securities. To the extent that a Fund invests in high yield and/or unrated securities, the Fund’s success in achieving its investment objective may depend more heavily on the portfolio manager’s creditworthiness analysis than if the Fund invested exclusively in higher-quality and rated securities.

Variable and Floating Rate Securities


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invest in inverse floating rate debt instruments (“inverse floaters”). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. A Fund may not invest more than 5% of its assets in any combination of inverse floater, interest only, or principal only securities.

Inflation-Indexed Bonds

Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates are tied to the relationship between nominal interest rates and the rate of inflation. If nominal interest rates increase at a faster rate than inflation, real interest rates may rise, leading to a decrease in value of inflation-indexed bonds. Short-term increases in inflation may lead to a decline in value. Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary income, even though investors do not receive their principal until maturity.

Event-Linked Bonds

Each Fund (except the Money Market Fund) may invest in “event-linked bonds,” which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific “trigger” event, such as a hurricane, earthquake, or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as “catastrophe bonds.” If a trigger event occurs, a Fund may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose the Fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds may also be subject to liquidity risk.

Convertible and Equity Securities

Each Fund may invest in convertible securities. Convertible securities are generally preferred stocks and other securities, including fixed income securities and warrants, that are convertible into or exercisable for common stock at a stated price or rate. The price of a convertible security will normally vary in some proportion to changes in the price of the underlying common stock because of this conversion or exercise feature. However, the value of a convertible security may not increase or decrease as rapidly as the underlying common stock. A convertible security will normally also provide income and is subject to interest rate risk. Convertible securities may be lower-rated securities subject to greater levels of credit risk. A Fund may be forced to convert a security before it would otherwise choose, which may have an adverse effect on the Fund’s ability to achieve its investment objective.

While the Fixed Income Funds intend to invest primarily in fixed income securities, each may invest in convertible securities or equity securities. While some countries or companies may be regarded as favorable investments, pure fixed income opportunities may be unattractive or limited due to insufficient supply, or legal or technical restrictions. In such cases, a Fund may consider convertible securities or equity securities to gain exposure to such investments.

Equity securities generally have greater price volatility than fixed income securities. The market price of equity securities owned by a Fund may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting equity securities markets generally or particular industries represented in those markets. The value of an equity security may also decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.


83		PIMCO Funds: Pacific Investment Management Series

Foreign (Non-U.S.) Securities

inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. The securities markets, values of securities, yields and risks associated with foreign securities markets may change independently of each other. Also, foreign securities and dividends and interest payable on those securities may be subject to foreign taxes, including taxes withheld from payments on those securities. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Investments in foreign securities may also involve higher custodial costs than domestic investments and additional transaction costs with respect to foreign currency conversions. Changes in foreign exchange rates also will affect the value of securities denominated or quoted in foreign currencies.

Certain Funds also may invest in sovereign debt issued by governments, their agencies or instrumentalities, or other government-related entities. Holders of sovereign debt may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. In addition, there is no bankruptcy proceeding by which defaulted sovereign debt may be collected.

• Emerging Market Securities. Each Fund (except the Money Market, Low Duration II, Total Return II, Long-Term U.S. Government, Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond and New York Municipal Bond Funds) may invest up to 10% of its assets (5% in the case of the Short-Term, Low Duration and Low Duration III Funds) in securities of issuers based in countries with developing (or “emerging market”) economies. The Emerging Markets Bond Fund may invest without limit in such securities.

Investing in emerging market securities imposes risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by a Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.

Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause a Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security.


Prospectus		84

Each Fund (except the Low Duration II, Total Return II, Long-Term U.S. Government, Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds) may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with a debt restructuring. Investments in Brady Bonds may be viewed as speculative. Brady Bonds acquired by a Fund may be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on any of its holdings.

Foreign (Non-U.S.) Currencies

A Fund that invests directly in foreign currencies or in securities that trade in, or receive revenues in, foreign currencies will be subject to currency risk. Foreign currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or perceived changes in interest rates and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or foreign governments or central banks, or by currency controls or political developments. For example, uncertainty surrounds the introduction of the euro (a common currency unit for the European Union) and the effect it may have on the value of European currencies as well as securities denominated in local European currencies. These and other currencies in which the Funds’ assets are denominated may be devalued against the U.S. dollar, resulting in a loss to the Funds.

• Foreign Currency Transactions. Funds that invest in securities denominated in foreign currencies may engage in foreign currency transactions on a spot (cash) basis, and enter into forward foreign currency exchange contracts and invest in foreign currency futures contracts and options on foreign currencies and futures. A forward foreign currency exchange contract, which involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract, reduces a Fund’s exposure to changes in the value of the currency it will deliver and increases its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of a Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. A contract to sell foreign currency would limit any potential gain which might be realized if the value of the hedged currency increases. A Fund may enter into these contracts to hedge against foreign exchange risk, to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one currency to another. Suitable hedging transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for a Fund to benefit from favorable fluctuations in relevant foreign currencies. A Fund may use one currency (or a basket of currencies) to hedge against adverse changes in the value of another currency (or a basket of currencies) when exchange rates between the two currencies are positively correlated. The Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees to cover its obligations under forward foreign currency exchange contracts entered into for non-hedging purposes.

Repurchase Agreements

Each Fund may enter into repurchase agreements, in which the Fund purchases a security from a bank or broker-dealer and agrees to repurchase the security at the Fund’s cost plus interest within a specified time. If the party agreeing to repurchase should default, the Fund will seek to sell the securities which it holds. This could involve procedural costs or delays in addition to a loss on the securities if their value should fall below their repurchase price. Repurchase agreements maturing in more than seven days are considered illiquid securities.

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings

Each Fund may enter into reverse repurchase agreements and dollar rolls, subject to a Fund’s limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. A Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its obligations under reverse repurchase


85		PIMCO Funds: Pacific Investment Management Series

agreements, dollar rolls, and other borrowings. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for a Fund.

Each Fund may borrow money to the extent permitted under the 1940 Act. This means that, in general, a Fund may borrow money from banks for any purpose on a secured basis in an amount up to ¹/3 of the Fund’s total assets. A Fund may also borrow money for temporary administrative purposes on an unsecured basis in an amount not to exceed 5% of the Fund’s total assets.

Derivatives

whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. Each Fund (except the Money Market Fund) may invest some or all of its assets in derivative instruments. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. A description of these and other derivative instruments that the Funds may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.

A Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments. A description of various risks associated with particular derivative instruments is included in “Investment Objectives and Policies” in the Statement of Additional Information. The following provides a more general discussion of important risk factors relating to all derivative instruments that may be used by the Funds.

Management Risk. Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions.

Credit Risk. The use of a derivative instrument involves the risk that a loss may be sustained as a result of the failure of another party to the contract (usually referred to as a “counterparty”) to make required payments or otherwise comply with the contract’s terms.

Liquidity Risk. Liquidity risk exists when a particular derivative instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.

Leverage Risk. Because many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When a Fund uses derivatives for leverage, investments in that Fund will tend to be more volatile, resulting in larger gains or losses in response to market changes. To limit leverage risk, each Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments.

Lack of Availability. Because the markets for certain derivative instruments (including markets located in foreign countries) are relatively new and still developing, suitable derivatives transactions may not be available in all circumstances for risk management or other purposes. There is no assurance that a Fund will engage in derivatives transactions at any time or from time to time. A Fund’s ability to use derivatives may also be limited by certain regulatory and tax considerations.


Prospectus		86

Market and Other Risks. Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to a Fund’s interest. If a portfolio manager incorrectly forecasts the values of securities, currencies or interest rates or other economic factors in using derivatives for a Fund, the Fund might have been in a better position if it had not entered into the transaction at all. While some strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments. A Fund may also have to buy or sell a security at a disadvantageous time or price because the Fund is legally required to maintain offsetting positions or asset coverage in connection with certain derivatives transactions.

Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indexes. Many derivatives, in particular privately negotiated derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to a Fund. Also, the value of derivatives may not correlate perfectly, or at all, with the value of the assets, reference rates or indexes they are designed to closely track. In addition, a Fund’s use of derivatives may cause the Fund to realize higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if the Fund had not used such instruments.

Delayed Funding Loans and Revolving Credit Facilities

The Funds (except the Money Market and Municipal Bond Funds) may also enter into, or acquire participations in, delayed funding loans and revolving credit facilities, in which a lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees in an amount sufficient to meet such commitments. Delayed funding loans and revolving credit facilities are subject to credit, interest rate and liquidity risk and the risks of being a lender.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each Fund may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments). When-issued transactions, delayed delivery purchases and forward commitments involve a risk of loss if the value of the securities declines prior to the settlement date. This risk is in addition to the risk that the Fund’s other assets will decline in the value. Therefore, these transactions may result in a form of leverage and increase a Fund’s overall investment exposure. Typically, no income accrues on securities a Fund has committed to purchase prior to the time delivery of the securities is made, although a Fund may earn income on securities it has segregated to cover these positions.

Investment in Other Investment Companies

The Strategic Balanced Fund invests substantially all of its assets in other investment companies. Each other Fund may invest up to 10% of its assets in securities of other investment companies, such as closed-end management investment companies, or in pooled accounts or other investment vehicles which invest in foreign markets. As a shareholder of an investment company, a Fund may indirectly bear service and other fees which are in addition to the fees the Fund pays its service providers.

Subject to the restrictions and limitations of the 1940 Act, each Fund may elect to pursue its investment objective either by investing directly in securities, or by investing in one or more underlying investment vehicles or companies that have substantially similar investment objectives, policies and limitations as the Fund.

Short Sales


87		PIMCO Funds: Pacific Investment Management Series

when the securities sold short have appreciated in value, thus resulting in a loss to the Fund. A Fund making a short sale must segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its position in a permissible manner.

Illiquid Securities

Each Fund may invest up to 15% (10% in the case of the Money Market Fund) of its net assets in illiquid securities. Certain illiquid securities may require pricing at fair value as determined in good faith under the supervision of the Board of Trustees. A portfolio manager may be subject to significant delays in disposing of illiquid securities, and transactions in illiquid securities may entail registration expenses and other transaction costs that are higher than those for transactions in liquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued the securities. Restricted securities, i.e., securities subject to legal or contractual restrictions on resale, may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 and certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets.

Loans of Portfolio Securities

For the purpose of achieving income, each Fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. Please see “Investment Objectives and Policies” in the Statement of Additional Information for details. When a Fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the Fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent. A Fund may pay lending fees to a party arranging the loan.

Portfolio Turnover

The length of time a Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by a Fund is known as “portfolio turnover.” Each Fund may engage in frequent and active trading of portfolio securities to achieve its investment objective, particularly during periods of volatile market movements. High portfolio turnover (e.g., over 100%) involves correspondingly greater expenses to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales may also result in realization of taxable capital gains, including short-term capital gains (which are generally taxed at ordinary income tax rates). The trading costs and tax effects associated with portfolio turnover may adversely affect a Fund’s performance.

With respect to the Strategic Balanced Fund, PIMCO does not expect to reallocate the Fund’s assets among the Underlying Funds on a frequent basis so the portfolio turnover rate for the Fund is expected to be modest (i.e., less than 25%) in comparison to most mutual funds. However, the Fund indirectly bears the expenses associated with portfolio turnover of the Underlying Funds, which may have fairly high portfolio turnover rates (i.e., in excess of 100%). Shareholders in the Fund may also bear expenses directly or indirectly through sales of securities held by the Fund and the Underlying Funds which result in realization of taxable capital gains. To the extent such gains relate to securities held for twelve months or less, such gains will be short-term capital gains taxed at ordinary income tax rates when distributed to shareholders who are individuals.

Temporary Defensive Strategies

For temporary or defensive purposes, each Fund may invest without limit in U.S. debt securities, including taxable securities and short-term money market securities, when PIMCO deems it appropriate to do so. When a Fund engages in such strategies, it may not achieve its investment objective.

Changes in Investment Objectives and Policies

The investment objective of the Global Bond Fund II may be changed by the Board of Trustees without shareholder approval. The investment objective of each other Fund is fundamental and may not be changed without shareholder approval. Unless otherwise stated, all other investment policies of the Funds may be changed by the Board of Trustees without shareholder approval.


Prospectus		88

Percentage Investment Limitations

Unless otherwise stated, all percentage limitations on Fund investments listed in this prospectus will apply at the time of investment. A Fund would not violate these limitations unless an excess or deficiency occurs or exists immediately after and as a result of an investment.

Other Investments and Techniques

The Funds may invest in other types of securities and use a variety of investment techniques and strategies which are not described in this prospectus. These securities and techniques may subject the Funds to additional risks. Please see the Statement of Additional Information for additional information about the securities and investment techniques described in this prospectus and about additional securities and techniques that may be used by the Funds.


89		PIMCO Funds: Pacific Investment Management Series

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Prospectus		90

Financial Highlights

The financial highlights table is intended to help a shareholder understand the financial performance of Institutional and Administrative Class shares of each Fund for the past 5 years or, if the class is less than 5 years old, since the class of shares commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a particular class of shares of a Fund, assuming reinvestment of all dividends and distributions. This information, except for the period ended September 30, 2001, has been audited by PricewaterhouseCoopers LLP, whose report, along with each Fund’s financial statements, are included in the Trust’s annual report to shareholders. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations		Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Money Market Fund
Institutional Class
09/30/2001*	$	1.00	$	0.02	(a)	$	0.00	(a)	$	0.02	$	(0.02	)	$	0.00		$	0.00		$	0.00
03/31/2001		1.00		0.06	(a)		0.00	(a)		0.06		(0.06	)		0.00			0.00			0.00
03/31/2000		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1999		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1998		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1997		1.00		0.05			0.00			0.05		(0.05	)		0.00			0.00			0.00
Administrative Class
09/30/2001*		1.00		0.02	(a)		0.00	(a)		0.02		(0.02	)		0.00			0.00			0.00
03/31/2001		1.00		0.06	(a)		0.00	(a)		0.06		(0.06	)		0.00			0.00			0.00
03/31/2000		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1999		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1998		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1997		1.00		0.05			0.00			0.05		(0.05	)		0.00			0.00			0.00
Short-Term Fund
Institutional Class
09/30/2001*	$	10.03	$	0.25	(a)	$	0.04	(a)	$	0.29	$	(0.26	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.95		0.64	(a)		0.10	(a)		0.74		(0.64	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.59	(a)		(0.08	)(a)		0.51		(0.59	)		0.00			0.00			0.00
03/31/1999		10.06		0.57	(a)		(0.02	)(a)		0.55		(0.57	)		0.00			0.00			(0.01	)
03/31/1998		10.00		0.62	(a)		0.06	(a)		0.68		(0.60	)		(0.01	)		(0.01	)		0.00
03/31/1997		9.92		0.61			0.08			0.69		(0.59	)		(0.02	)		0.00			0.00
Administrative Class
09/30/2001*		10.03		0.20	(a)		0.08	(a)		0.28		(0.25	)		0.00			0.00			0.00
03/31/2001		9.95		0.60	(a)		0.12	(a)		0.72		(0.62	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.57	(a)		(0.09	)(a)		0.48		(0.56	)		0.00			0.00			0.00
03/31/1999		10.06		0.54	(a)		(0.02	)(a)		0.52		(0.54	)		0.00			0.00			(0.01	)
03/31/1998		10.00		0.59	(a)		0.07	(a)		0.66		(0.58	)		(0.01	)		(0.01	)		0.00
03/31/1997		9.92		0.58			0.08			0.66		(0.57	)		(0.01	)		0.00			0.00
Low Duration Fund
Institutional Class
09/30/2001*	$	10.03	$	0.30	(a)	$	0.17	(a)	$	0.47	$	(0.30	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.81		0.68	(a)		0.21	(a)		0.89		(0.65	)		(0.02	)		0.00			0.00
03/31/2000		10.10		0.64	(a)		(0.29	)(a)		0.35		(0.63	)		(0.01	)		0.00			0.00
03/31/1999		10.18		0.65	(a)		(0.02	)(a)		0.63		(0.65	)		0.00			(0.01	)		(0.05	)
03/31/1998		9.98		0.65	(a)		0.23	(a)		0.88		(0.63	)		(0.02	)		(0.03	)		0.00
03/31/1997		9.95		0.64			0.03			0.67		(0.63	)		(0.01	)		0.00			0.00
Administrative Class
09/30/2001*		10.03		0.29	(a)		0.17	(a)		0.46		(0.29	)		0.00			0.00			0.00
03/31/2001		9.81		0.62	(a)		0.25	(a)		0.87		(0.63	)		(0.02	)		0.00			0.00
03/31/2000		10.10		0.61	(a)		(0.29	)(a)		0.32		(0.60	)		(0.01	)		0.00			0.00
03/31/1999		10.18		0.62	(a)		(0.02	)(a)		0.60		(0.62	)		0.00			(0.01	)		(0.05	)
03/31/1998		9.98		0.63	(a)		0.22	(a)		0.85		(0.60	)		(0.02	)		(0.03	)		0.00
03/31/1997		9.95		0.62			0.03			0.65		(0.60	)		(0.02	)		0.00			0.00

* Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


91		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.02	)	$	1.00	1.94	%	$	169,906	0.35	%+	3.78	%+	N/A
0.00		(0.06	)		1.00	6.20			135,990	0.35		6.02		N/A
0.00		(0.05	)		1.00	5.21			305,016	0.35		5.04		N/A
0.00		(0.05	)		1.00	5.14			322,290	0.35		4.85		N/A
0.00		(0.05	)		1.00	5.40			55,335	0.35		5.29		N/A
0.00		(0.05	)		1.00	5.19			23,497	0.40	(f)	5.08		N/A

0.00		(0.02	)		1.00	1.82			18,606	0.60	+	3.35	+	N/A
0.00		(0.06	)		1.00	5.94			7,165	0.60		5.75		N/A
0.00		(0.05	)		1.00	4.96			9,791	0.60		4.79		N/A
0.00		(0.05	)		1.00	4.93			9,273	0.60		4.44		N/A
0.00		(0.05	)		1.00	5.12			749	0.60		5.04		N/A
0.00		(0.05	)		1.00	4.94			12	0.66	(g)	4.83		N/A


$0.00	$	(0.26	)	$	10.06	2.91	%	$	782,755	0.71	%+(c)	4.97	%+	77	%
0.00		(0.66	)		10.03	7.65			524,693	1.01	(c)	6.42		121
0.00		(0.59	)		9.95	5.19			589,203	0.64	(c)	5.88		38
0.00		(0.58	)		10.03	5.63			495,752	0.45		5.66		47
0.00		(0.62	)		10.06	7.06			172,846	0.45		6.12		48
0.00		(0.61	)		10.00	7.12			156,515	0.47	(c)	6.12		77

0.00		(0.25	)		10.06	2.78			56,357	0.86	+ (e)	3.92	+	77
0.00		(0.64	)		10.03	7.40			4,610	1.25	(e)	6.01		121
0.00		(0.56	)		9.95	4.91			15,137	0.89	(e)	5.67		38
0.00		(0.55	)		10.03	5.39			3,769	0.70		5.37		47
0.00		(0.60	)		10.06	6.80			5,147	0.70		5.86		48
0.00		(0.58	)		10.00	6.86			4,513	0.72	(e)	5.87		77


$0.00	$	(0.30	)	$	10.20	4.78	%	$	4,073,469	0.43	%+	5.96	%+	269	%
0.00		(0.67	)		10.03	9.44			3,950,592	0.49	(b)	6.86		348
0.00		(0.64	)		9.81	3.56			3,440,455	0.51	(b)	6.40		82
0.00		(0.71	)		10.10	6.35			3,367,438	0.43		6.36		245
0.00		(0.68	)		10.18	9.00			2,759,531	0.43		6.39		309
0.00		(0.64	)		9.98	6.97			2,797,001	0.43		6.46		240

0.00		(0.29	)		10.20	4.65			254,039	0.68	+	5.64	+	269
0.00		(0.65	)		10.03	9.17			151,774	0.74	(d)	6.31		348
0.00		(0.61	)		9.81	3.30			118,874	0.75	(d)	6.13		82
0.00		(0.68	)		10.10	6.09			128,212	0.68		6.09		245
0.00		(0.65	)		10.18	8.73			46,186	0.68		6.16		309
0.00		(0.62	)		9.98	6.71			23,564	0.68		6.21		240

+ Annualized.

(b)

Ratio of expenses to average net assets excluding interest expense is 0.43%.

(c)

Ratio of expenses to average net assets excluding interest expense is 0.45%.

(d)

Ratio of expenses to average net assets excluding interest expense is 0.68%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.70%.

(f)

Ratio of expenses to average net assets excluding interest expense is 0.35%.

(g)

Ratio of expenses to average net assets excluding interest expense is 0.60%.


Prospectus		92

Financial Highlights (continued)

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Low Duration Fund II
Institutional Class
09/30/2001*	$	9.98	$	0.29	(a)	$	0.23	(a)	$	0.52		$	(0.29	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.69		0.62	(a)		0.29	(a)		0.91			(0.61	)		(0.01	)		0.00			0.00
03/31/2000		9.95		0.58	(a)		(0.27	)(a)		0.31			(0.57	)		0.00			0.00			0.00
03/31/1999		10.00		0.58	(a)		0.00	(a)		0.58			(0.58	)		0.00			0.00			(0.05	)
03/31/1998		9.81		0.22	(a)		0.59	(a)		0.81			(0.56	)		(0.04	)		(0.02	)		0.00
03/31/1997		9.82		0.62			(0.03	)		0.59			(0.58	)		(0.02	)		0.00			0.00
Administrative Class
09/30/2001*		9.98		0.28	(a)		0.23	(a)		0.51			(0.28	)		0.00			0.00			0.00
03/31/2001		9.69		0.59	(a)		0.30	(a)		0.89			(0.59	)		(0.01	)		0.00			0.00
03/31/2000		9.95		0.52	(a)		(0.23	)(a)		0.29			(0.55	)		0.00			0.00			0.00
03/31/1999		10.00		0.56	(a)		0.00	(a)		0.56			(0.56	)		0.00			0.00			(0.05	)
02/02/1998 – 03/31/1998		10.03		0.14	(a)		(0.08	)(a)		0.06			(0.08	)		(0.01	)		0.00			0.00
Low Duration Fund III
Institutional Class
09/30/2001*	$	9.87	$	0.27	(a)	$	0.22	(a)	$	0.49		$	(0.27	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.66		0.64	(a)		0.21	(a)		0.85			(0.63	)		(0.01	)		0.00			0.00
03/31/2000		9.98		0.61	(a)		(0.32	)(a)		0.29			(0.61	)		0.00			0.00			0.00
03/31/1999		10.05		0.60	(a)		0.00	(a)		0.60			(0.60	)		0.00			0.00			(0.07	)
03/31/1998		9.91		0.53	(a)		0.24	(a)		0.77			(0.60	)		0.00			(0.03	)		0.00
12/31/1996 – 03/31/1997		10.00		0.15			(0.09	)		0.06			(0.15	)		0.00			0.00			0.00
Administrative Class
09/30/2001*		9.87		0.26	(a)		0.22	(a)		0.48			(0.26	)		0.00			0.00			0.00
03/31/2001		9.66		0.63	(a)		0.20	(a)		0.83			(0.61	)		(0.01	)		0.00			0.00
03/31/2000		9.98		0.57	(a)		(0.31	)(a)		0.26			(0.58	)		0.00			0.00			0.00
03/19/1999 – 03/31/1999		9.97		0.02			0.01			0.03			(0.02	)		0.00			0.00			0.00
GNMA Fund
Institutional Class
09/30/2001*	$	10.44	$	0.33	(a)	$	0.36	(a)	$	0.69		$	(0.34	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.89		0.63	(a)		0.60	(a)		1.23			(0.63	)		0.00			(0.05	)		0.00
03/31/2000		10.01		0.62	(a)		(0.12	)(a)		0.50			(0.62	)		0.00			0.00			0.00
03/31/1999		10.13		0.64	(a)		(0.08	)(a)		0.56			(0.64	)		0.00			0.00			(0.04	)
07/31/1997 – 03/31/1998		10.00		0.43	(a)		0.14	(a)		0.57			(0.42	)		0.00			(0.02	)		0.00
Moderate Duration Fund
Institutional Class
09/30/2001*	$	10.00	$	0.27	(a)	$	0.34	(a)	$	0.61		$	(0.27	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.52		0.64	(a)		0.47	(a)		1.11			(0.63	)		0.00			0.00			0.00
03/31/2000		9.94		0.60	(a)		(0.42	)(a)		0.18			(0.58	)		(0.02	)		0.00			0.00
03/31/1999		10.14		0.60	(a)		0.07	(a)		0.67			(0.60	)		0.00			(0.11	)		(0.16	)
03/31/1998		9.83		0.38	(a)		0.56	(a)		0.94			(0.60	)		0.00			(0.03	)		0.00
12/31/1996 – 03/31/1997		10.00		0.15			(0.17	)		(0.02	)		(0.15	)		0.00			0.00			0.00
Total Return Fund
Institutional Class
09/30/2001*	$	10.52	$	0.29	(a)	$	0.35	(a)	$	0.64		$	(0.29	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.96		0.67	(a)		0.56	(a)		1.23			(0.65	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.63	(a)		(0.40	)(a)		0.23			(0.60	)		(0.03	)		0.00			0.00
03/31/1999		10.62		0.63	(a)		0.16	(a)		0.79			(0.63	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.64	(a)		0.62	(a)		1.26			(0.62	)		(0.02	)		(0.27	)		0.00
03/31/1997		10.29		0.68			(0.02	)		0.66			(0.66	)		(0.02	)		0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


93		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.29	)	$	10.21	5.27	%	$	469,506	0.50	%+	5.71	%+	279	%
0.00		(0.62	)		9.98	9.74			636,542	0.50		6.37		382
0.00		(0.57	)		9.69	3.28			467,997	0.57	(c)	5.88		117
0.00		(0.63	)		9.95	5.89			414,463	0.57	(c)	5.79		322
0.00		(0.62	)		10.00	8.29			401,204	0.50		5.98		335
0.00		(0.60	)		9.81	6.33			339,375	0.51		6.31		237

0.00		(0.28	)		10.21	5.14			60	0.75	+	5.49	+	279
0.00		(0.60	)		9.98	9.50			82	0.75		6.06		382
0.00		(0.55	)		9.69	3.01			71	1.17	(d)	5.30		117
0.00		(0.61	)		9.95	5.63			22,594	0.85	(d)	5.47		322
0.00		(0.09	)		10.00	0.58			56	0.75	+	8.53	+	335


$0.00	$	(0.27	)	$	10.09	5.07	%	$	43,229	0.50	%+	5.46	%+	270	%
0.00		(0.64	)		9.87	9.06			42,924	0.50		6.53		419
0.00		(0.61	)		9.66	2.98			32,349	0.55	(c)	6.20		87
0.00		(0.67	)		9.98	6.10			26,549	0.50		5.94		167
0.00		(0.63	)		10.05	7.93			23,896	0.50		5.98		307
0.00		(0.15	)		9.91	0.58			10,056	0.49	+	6.00	+	155

0.00		(0.26	)		10.09	4.93			12	0.75	+	5.18	+	270
0.00		(0.62	)		9.87	8.82			11	0.75		6.49		419
0.00		(0.58	)		9.66	2.71			10	0.82	(d)	5.79		87
0.00		(0.02	)		9.98	0.15			6	0.75	+	6.42	+	167


$0.00	$	(0.34	)	$	10.79	6.77	%	$	27,431	0.51	%+(c)	6.20	%+	587	%
0.00		(0.68	)		10.44	12.96			9,963	0.50		6.29		808
0.00		(0.62	)		9.89	5.16			4,308	1.60	(e)	6.23		952
0.00		(0.68	)		10.01	5.71			4,119	2.37	(e)	6.35		198
0.00		(0.44	)		10.13	5.86			3,748	1.81	+ (c)	6.30	+	486


$0.00	$	(0.27	)	$	10.34	6.23	%	$	638,149	0.45	%+	5.36	%+	228	%
0.00		(0.63	)		10.00	12.09			576,911	0.45		6.54		377
0.00		(0.60	)		9.52	1.86			387,126	0.47	(f)	6.16		129
0.00		(0.87	)		9.94	6.70			317,400	0.45		5.94		169
0.00		(0.63	)		10.14	9.80			239,152	0.45		3.75		96
0.00		(0.15	)		9.83	(0.25	)		13,458	0.44	+	6.01	+	49


$0.00	$	(0.29	)	$	10.87	6.22	%	$	34,042,435	0.43	%+	5.51	%+	256	%
0.00		(0.67	)		10.52	12.80			31,746,629	0.49	(b)	6.57		450
0.00		(0.63	)		9.96	2.33			24,900,321	0.54	(b)	6.25		223
0.00		(1.05	)		10.36	7.60			21,711,396	0.43		5.91		154
0.00		(0.91	)		10.62	12.63			16,484,119	0.43		6.06		206
0.00		(0.68	)		10.27	6.60			12,528,536	0.43		6.60		173

+ Annualized.

(b)

Ratio of expenses to average net assets excluding interest expense is 0.43%.

(c)

Ratio of expenses to average net assets excluding interest expense is 0.50%.

(d)

Ratio of expenses to average net assets excluding interest expense is 0.75%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.51%.

(f)

Ratio of expenses to average net assets excluding interest expense is 0.45%.


Prospectus		94

Financial Highlights (continued)

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Administrative Class
09/30/2001*		10.52		0.28	(a)		0.35	(a)		0.63			(0.28	)		0.00			0.00			0.00
03/31/2001		9.96		0.64	(a)		0.56	(a)		1.20			(0.62	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.61	(a)		(0.41	)(a)		0.20			(0.58	)		(0.02	)		0.00			0.00
03/31/1999		10.62		0.61	(a)		0.16	(a)		0.77			(0.61	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.61	(a)		0.63	(a)		1.24			(0.60	)		(0.02	)		(0.27	)		0.00
03/31/1997		10.29		0.66	(a)		(0.02	)(a)		0.64			(0.64	)		(0.02	)		0.00			0.00
Total Return Fund II
Institutional Class
09/30/2001*	$	10.27	$	0.27	(a)	$	0.42	(a)	$	0.69		$	(0.27	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.67		0.62	(a)		0.60	(a)		1.22			(0.61	)		(0.01	)		0.00			0.00
03/31/2000		10.11		0.58	(a)		(0.44	)(a)		0.14			(0.58	)		0.00			0.00			0.00
03/31/1999		10.26		0.59	(a)		0.17	(a)		0.76			(0.59	)		0.00			(0.18	)		(0.14	)
03/31/1998		9.85		0.63	(a)		0.52	(a)		1.15			(0.60	)		(0.03	)		(0.11	)		0.00
03/31/1997		9.89		0.61			(0.02	)		0.59			(0.62	)		(0.01	)		0.00			0.00
Administrative Class
09/30/2001*		10.27		0.26	(a)		0.42	(a)		0.68			(0.26	)		0.00			0.00			0.00
03/31/2001		9.67		0.59	(a)		0.60	(a)		1.19			(0.58	)		(0.01	)		0.00			0.00
03/31/2000		10.11		0.55	(a)		(0.44	)(a)		0.11			(0.55	)		0.00			0.00			0.00
03/31/1999		10.26		0.56	(a)		0.17	(a)		0.73			(0.56	)		0.00			(0.18	)		(0.14	)
03/31/1998		9.85		0.60	(a)		0.52	(a)		1.12			(0.57	)		(0.03	)		(0.11	)		0.00
03/31/1997		9.89		0.59			(0.02	)		0.57			(0.60	)		(0.01	)		0.00			0.00
Total Return Fund III
Institutional Class
09/30/2001*	$	9.19	$	0.26	(a)	$	0.33	(a)	$	0.59		$	(0.26	)	$	0.00		$	0.00		$	0.00
03/31/2001		8.74		0.57	(a)		0.45	(a)		1.02			(0.56	)		(0.01	)		0.00			0.00
03/31/2000		9.27		0.55	(a)		(0.53	)(a)		0.02			(0.54	)		(0.01	)		0.00			0.00
03/31/1999		9.55		0.57	(a)		0.20	(a)		0.77			(0.56	)		0.00			(0.24	)		(0.25	)
03/31/1998		9.15		0.57	(a)		0.56	(a)		1.13			(0.54	)		(0.03	)		(0.16	)		0.00
03/31/1997		9.13		0.55			0.05			0.60			(0.55	)		(0.02	)		0.00			(0.01	)
Administrative Class
09/30/2001*		9.19		0.25	(a)		0.33	(a)		0.58			(0.25	)		0.00			0.00			0.00
03/31/2001		8.74		0.55	(a)		0.45	(a)		1.00			(0.54	)		(0.01	)		0.00			0.00
03/31/2000		9.27		0.54	(a)		(0.54	)(a)		0.00			(0.52	)		(0.01	)		0.00			0.00
03/31/1999		9.55		0.55	(a)		0.20	(a)		0.75			(0.54	)		0.00			(0.24	)		(0.25	)
04/11/1997 – 03/31/1998		9.12		0.54	(a)		0.58	(a)		1.12			(0.50	)		(0.03	)		(0.16	)		0.00
Total Return Mortgage Fund
Institutional Class
09/30/2001*	$	10.42	$	0.26	(a)	$	0.36	(a)	$	0.62		$	(0.26	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.97		0.63	(a)		0.63	(a)		1.26			(0.63	)		0.00			(0.18	)		0.00
03/31/2000		10.19		0.59	(a)		(0.21	)(a)		0.38			(0.59	)		0.00			0.00			(0.01	)
03/31/1999		10.24		0.58	(a)		0.05	(a)		0.63			(0.58	)		0.00			(0.03	)		(0.07	)
07/31/1997 – 03/31/1998		10.00		0.41	(a)		0.30	(a)		0.71			(0.46	)		0.00			(0.01	)		0.00
Investment Grade Corporate Bond Fund
Institutional Class
09/30/2001*	$	10.68	$	0.37	(a)	$	0.06	(a)	$	0.43		$	(0.38	)	$	0.00		$	0.00		$	0.00
04/28/2000 – 03/31/2001		10.00		0.72	(a)		0.72	(a)		1.44			(0.72	)		0.00			(0.04	)		0.00
High Yield Fund
Institutional Class
09/30/2001*	$	9.88	$	0.41	(a)	$	(0.68	)(a)	$	(0.27	)	$	(0.41	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.22		0.90	(a)		(0.33	)(a)		0.57			(0.90	)		(0.01	)		0.00			0.00
03/31/2000		11.23		0.94	(a)		(1.01	)(a)		(0.07	)		(0.93	)		(0.01	)		0.00			0.00
03/31/1999		11.66		0.95	(a)		(0.43	)(a)		0.52			(0.94	)		(0.01	)		0.00			0.00
03/31/1998		11.10		0.98	(a)		0.65	(a)		1.63			(0.98	)		0.00			0.00			(0.09	)
03/31/1997		10.94		0.92			0.34			1.26			(0.97	)		0.00			(0.13	)		0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


95		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate


0.00		(0.28	)		10.87	6.09			7,092,788	0.68	+	5.22	+	256
0.00		(0.64	)		10.52	12.52			5,353,222	0.74	(d)	6.31		450
0.00		(0.60	)		9.96	2.07			3,233,785	0.79	(d)	6.01		223
0.00		(1.03	)		10.36	7.33			1,972,984	0.68		5.52		154
0.00		(0.89	)		10.62	12.36			481,730	0.68		5.74		206
0.00		(0.66	)		10.27	6.34			151,194	0.68		6.35		173


$0.00	$	(0.27	)	$	10.69	6.87	%	$	1,697,892	0.50	%+	5.23	%+	258	%
0.00		(0.62	)		10.27	13.02			1,606,998	0.51		6.24		566
0.00		(0.58	)		9.67	1.46			1,263,556	0.50		5.89		142
0.00		(0.91	)		10.11	7.46			986,690	0.50		5.65		213
0.00		(0.74	)		10.26	11.99			574,587	0.50		6.15		361
0.00		(0.63	)		9.85	6.15			478,451	0.50		6.38		293

0.00		(0.26	)		10.69	6.74			94,178	0.75	+	4.95	+	258
0.00		(0.59	)		10.27	12.74			77,183	0.76	(c)	6.00		566
0.00		(0.55	)		9.67	1.20			56,755	0.75		5.56		142
0.00		(0.88	)		10.11	7.19			54,736	0.75		5.33		213
0.00		(0.71	)		10.26	11.71			15,172	0.75		5.86		361
0.00		(0.61	)		9.85	5.88			5,304	0.75		6.13		293


$0.00	$	(0.26	)	$	9.52	6.54	%	$	832,711	0.50	%+	5.58	%+	230	%
0.00		(0.57	)		9.19	12.15			868,757	0.50		6.46		581
0.00		(0.55	)		8.74	0.33			635,592	0.50		6.21		186
0.00		(1.05	)		9.27	8.20			488,243	0.50		5.85		216
0.00		(0.73	)		9.55	12.62			365,249	0.51	(b)	5.99		183
0.00		(0.58	)		9.15	6.76			193,297	0.51	(b)	6.21		90

0.00		(0.25	)		9.52	6.40			10,355	0.75	+	5.34	+	230
0.00		(0.55	)		9.19	11.83			11,223	0.75		6.12		581
0.00		(0.53	)		8.74	0.08			10,144	0.75		6.11		186
0.00		(1.03	)		9.27	7.93			1,867	0.75		5.59		216
0.00		(0.69	)		9.55	12.46			178	0.76	+ (c)	5.85	+	183


$0.00	$	(0.26	)	$	10.78	6.03	%	$	18,807	0.50	%+	4.90	%+	644	%
0.00		(0.81	)		10.42	13.14			20,314	0.50		6.22		848
0.00		(0.60	)		9.97	3.91			3,971	0.50		5.94		1,476
0.00		(0.68	)		10.19	6.27			4,128	0.50		5.66		158
0.00		(0.47	)		10.24	6.69			3,588	0.52	+ (b)	6.07	+	593


$0.00	$	(0.38	)	$	10.73	4.06	%	$	5,982	0.50	%+	7.00	%+	185	%
0.00		(0.76	)		10.68	15.00			5,751	0.50	+	7.54	+	253


$0.00	$	(0.41	)	$	9.20	(2.82	)%	$	1,386,032	0.50	%+	8.45	%+	41	%
0.00		(0.91	)		9.88	5.85			1,182,954	0.50		8.91		53
0.00		(0.94	)		10.22	(0.74	)		1,960,171	0.50		8.64		39
0.00		(0.95	)		11.23	4.73			2,162,868	0.50		8.41		39
0.00		(1.07	)		11.66	15.26			1,628,930	0.50		8.52		37
0.00		(1.10	)		11.10	12.04			744,498	0.50		8.77		67

Annualized.

(b)

Ratio of expenses to average net assets excluding interest expense is 0.50%.

(c)

Ratio of expenses to average net assets excluding interest expense is 0.74%.

(d)

Ratio of expenses to average net assets excluding interest expense is 0.68%.


Prospectus		96

Financial Highlights (continued)

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Administrative Class
09/30/2001*		9.88		0.40	(a)		(0.68	)(a)		(0.28	)		(0.40	)		0.00			0.00			0.00
03/31/2001		10.22		0.88	(a)		(0.33	)(a)		0.55			(0.88	)		(0.01	)		0.00			0.00
03/31/2000		11.23		0.91	(a)		(1.01	)(a)		(0.10	)		(0.90	)		(0.01	)		0.00			0.00
03/31/1999		11.66		0.93	(a)		(0.43	)(a)		0.50			(0.92	)		(0.01	)		0.00			0.00
03/31/1998		11.10		0.95	(a)		0.65	(a)		1.60			(0.95	)		0.00			0.00			(0.09	)
03/31/1997		10.94		0.85	(a)		0.38	(a)		1.23			(0.94	)		0.00			(0.13	)		0.00
Long-Term U.S. Government Fund
Institutional Class
09/30/2001*	$	10.65	$	0.34	(a)	$	0.27	(a)	$	0.61		$	(0.34	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.79		0.62	(a)		0.85	(a)		1.47			(0.61	)		0.00			0.00			0.00
03/31/2000		10.30		0.61	(a)		(0.50	)(a)		0.11			(0.62	)		0.00			0.00			0.00
03/31/1999		10.57		0.63	(a)		0.20	(a)		0.83			(0.64	)		0.00			0.00			(0.46	)
03/31/1998		9.39		0.52	(a)		1.34	(a)		1.86			(0.62	)		0.00			(0.06	)		0.00
03/31/1997		9.96		0.79			(0.35	)		0.44			(0.68	)		0.00			0.00			(0.33	)
Administrative Class
09/30/2001*		10.65		0.32	(a)		0.28	(a)		0.60			(0.33	)		0.00			0.00			0.00
03/31/2001		9.79		0.40	(a)		1.05	(a)		1.45			(0.59	)		0.00			0.00			0.00
03/31/2000		10.30		0.57	(a)		(0.49	)(a)		(0.08	)		(0.59	)		0.00			0.00			0.00
03/31/1999		10.57		0.60	(a)		0.20	(a)		0.80			(0.61	)		0.00			0.00			(0.46	)
09/23/1997 – 03/31/1998		10.17		0.26	(a)		0.51	(a)		0.77			(0.31	)		0.00			(0.06	)		0.00
Real Return Fund
Institutional Class
09/30/2001*	$	10.40	$	0.32	(a)	$	0.15	(a)	$	0.47		$	(0.36	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.92		0.76	(a)		0.60	(a)		1.36			(0.80	)		0.00			(0.08	)		0.00
03/31/2000		9.83		0.68	(a)		0.11	(a)		0.79			(0.68	)		0.00			(0.02	)		0.00
03/31/1999		9.77		0.51	(a)		0.10	(a)		0.61			(0.48	)		(0.07	)		0.00			0.00
03/31/1998		9.93		0.44	(a)		0.05	(a)		0.49			(0.48	)		(0.03	)		(0.14	)		0.00
01/29/1997 – 03/31/1997		9.92		0.11			(0.02	)		0.09			(0.08	)		0.00			0.00			0.00
Administrative Class
09/30/2001*		10.40		0.32	(a)		0.13	(a)		0.45			(0.34	)		0.00			0.00			0.00
04/28/2000 – 03/31/2001		9.95		0.62	(a)		0.58	(a)		1.20			(0.67	)		0.00			(0.08	)		0.00
Short Duration Municipal Income Fund
Institutional Class
09/30/2001*	$	10.16	$	0.18	(a)	$	0.09	(a)	$	0.27		$	(0.18	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.99		0.45	(a)		0.16	(a)		0.61			(0.44	)		0.00			0.00			0.00
08/31/1999 – 03/31/2000		10.00		0.23	(a)		(0.01	)(a)		0.22			(0.23	)		0.00			0.00			0.00
Municipal Bond Fund
Institutional Class
09/30/2001*	$	10.02	$	0.25	(a)	$	0.20	(a)	$	0.45		$	(0.25	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.47		0.48	(a)		0.54	(a)		1.02			(0.47	)		0.00			0.00			0.00
03/31/2000		10.12		0.46	(a)		(0.65	)(a)		(0.19	)		(0.46	)		0.00			0.00			0.00
03/31/1999		9.97		0.45	(a)		0.14	(a)		0.59			(0.44	)		0.00			0.00			0.00
12/31/1997 – 03/31/1998		10.00		0.11	(a)		(0.03	)(a)		0.08			(0.11	)		0.00			0.00			0.00
Administrative Class
09/30/2001*		10.02		0.23	(a)		0.20	(a)		0.43			(0.23	)		0.00			0.00			0.00
03/31/2001		9.47		0.45	(a)		0.55	(a)		1.00			(0.45	)		0.00			0.00			0.00
03/31/2000		10.12		0.44	(a)		(0.65	)(a)		(0.21	)		(0.44	)		0.00			0.00			0.00
09/30/1998 – 03/31/1999		10.25		0.21			(0.13	)		0.08			(0.21	)		0.00			0.00			0.00
California Intermediate Municipal Bond Fund
Institutional Class
09/30/2001*	$	10.60	$	0.22	(a)	$	0.19	(a)	$	0.41		$	(0.22	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.05		0.48	(a)		0.56	(a)		1.04			(0.46	)		0.00			(0.03	)		0.00
08/31/1999 – 03/31/2000		10.00		0.25	(a)		0.06	(a)		0.31			(0.24	)		0.00			(0.02	)		0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


97		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital			Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate


	0.00			(0.40	)		9.20	(2.94	)		486,539	0.75	+	8.18	+	41
	0.00			(0.89	)		9.88	5.59			462,899	0.75		8.79		53
	0.00			(0.91	)		10.22	(0.99	)		354,296	0.75		8.40		39
	0.00			(0.93	)		11.23	4.49			238,792	0.75		8.17		39
	0.00			(1.04	)		11.66	14.98			69,937	0.75		8.21		37
	0.00			(1.07	)		11.10	11.76			10,428	0.76	(e)	8.48		67


$	0.00		$	(0.34	)	$	10.92	5.89	%	$	255,690	0.51	%+(d)	6.39	%+	320	%
	0.00			(0.61	)		10.65	15.52			234,088	0.56	(d)	6.13		1,046
	0.00			(0.62	)		9.79	1.26			217,410	0.57	(d)	6.29		320
	0.00			(1.10	)		10.30	7.76			170,847	0.89	(d)	5.83		364
	0.00			(0.68	)		10.57	20.23			48,547	0.51	(d)	4.88		177
	0.00			(1.01	)		9.39	4.48			19,995	0.63	(d)	7.63		402

	0.00			(0.33	)		10.92	5.76			87,863	0.77	+	6.10	+	320
	0.00			(0.59	)		10.65	15.24			77,435	0.80	(e)	3.91		1,046
	0.00			(0.59	)		9.79	1.01			39,808	0.82	(e)	5.82		320
	0.00			(1.07	)		10.30	7.46			11,383	1.15	(e)	5.58		364
	0.00			(0.37	)		10.57	7.60			4,957	0.76	+ (e)	4.87	+	177


$	0.00		$	(0.36	)	$	10.51	4.55	%	$	813,186	0.50	%+	6.15	%+	29	%
	0.00			(0.88	)		10.40	14.44			557,849	0.54	(d)	7.57		202
	0.00			(0.70	)		9.92	8.37			207,826	0.53	(d)	6.91		253
	0.00			(0.55	)		9.83	6.41			15,588	0.52	(d)	5.18		438
	0.00			(0.65	)		9.77	4.70			5,526	0.52	(d)	4.46		967
	0.00			(0.08	)		9.93	0.09			5,638	0.51	+ (d)	6.54	+	160

	0.00			(0.34	)		10.51	4.40			67,084	0.75	+	6.11	+	29
	0.00			(0.75	)		10.40	12.70			51,359	0.80	+ (e)	6.61	+	202


$	0.00		$	(0.18	)	$	10.25	2.71	%	$	14,555	0.39	%+	3.55	%+	51	%
	0.00			(0.44	)		10.16	6.22			13,645	0.40	(g)	4.48		208
	(0.43	)		(0.23	)		9.99	2.19			10,725	0.39	+ (b)	3.92	+	171


$	0.00		$	(0.25	)	$	10.22	4.50	%	$	33,871	0.50	%+	4.84	%+	48	%
	0.00			(0.47	)		10.02	11.13			23,478	0.50		4.89		306
	0.00			(0.46	)		9.47	(1.81	)		5,684	0.50		4.80		145
	0.00			(0.44	)		10.12	6.04			5,894	0.50		4.41		70
	0.00			(0.11	)		9.97	0.78			3,023	0.50	+	4.46	+	60

	0.00			(0.23	)		10.22	4.37			6,536	0.74	+	4.59	+	48
	0.00			(0.45	)		10.02	10.86			4,811	0.75	(f)	4.66		306
	0.00			(0.44	)		9.47	(2.07	)		3,141	0.75	(f)	4.58		145
	0.00			(0.21	)		10.12	0.83			1,419	0.75	+ (f)	2.11	+	70


$	0.00		$	(0.22	)	$	10.79	3.90	%	$	69,469	0.50	%+(h)	4.09	%+	35	%
	0.00			(0.49	)		10.60	10.60			87,531	0.50	(h)	4.62		257
	0.00			(0.26	)		10.05	3.16			8,415	0.49	+ (c)	4.22	+	357

Annualized.

(b)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 0.62%.

(c)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.02%.

(d)

Ratio of expenses to average net assets excluding interest expense is 0.50%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.75%.

(f)

Ratio of expenses to average net assets excluding interest expense is 0.74%.

(g)

Ratio of expenses to average net assets excluding interest expense is 0.39%.

(h)

Ratio of expenses to average net assets excluding interest expense is 0.49%.


Prospectus		98

Financial Highlights (continued)

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Administrative Class
09/30/2001*		10.60		0.20	(a)		0.20	(a)		0.40			(0.21	)		0.00			0.00			0.00
03/31/2001		10.05		0.45	(a)		0.57	(a)		1.02			(0.44	)		0.00			(0.03	)		0.00
09/07/1999 – 03/31/2000		10.02		0.22	(a)		0.05	(a)		0.27			(0.22	)		0.00			(0.02	)		0.00
California Municipal Bond Fund
Institutional Class
09/30/2001*	$	10.35	$	0.20	(a)	$	0.31	(a)	$	0.51		$	(0.20	)	$	0.00		$	0.00		$	0.00
05/16/2000 – 03/31/2001		10.00		0.43	(a)		0.78	(a)		1.21			(0.43	)		0.00			(0.43	)		0.00
New York Municipal Bond Fund
Institutional Class
09/30/2001*	$	10.64	$	0.23	(a)	$	0.19	(a)	$	0.42		$	(0.24	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.94		0.45	(a)		0.79	(a)		1.24			(0.45	)		0.00			(0.09	)		0.00
08/31/1999 – 03/31/2000		10.00		0.23	(a)		(0.04	)(a)		0.19			(0.23	)		0.00			(0.02	)		0.00
Global Bond Fund
Institutional Class
09/30/2001*	$	8.45	$	0.22	(a)	$	0.32	(a)	$	0.54		$	(0.22	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.01		0.48	(a)		(0.56	)(a)		(0.08	)		(0.06	)		0.00			0.00			0.00
03/31/2000		9.76		0.57	(a)		(0.75	)(a)		(0.18	)		(0.46	)		(0.06	)		0.00			0.00
03/31/1999		9.70		0.52	(a)		0.14	(a)		0.66			(0.36	)		(0.16	)		(0.08	)		0.00
03/31/1998		9.86		0.66	(a)		(0.10	)(a)		0.56			(0.53	)		0.00			0.00			(0.19	)
03/31/1997		10.05		0.70			(0.01	)		0.69			(0.44	)		0.00			(0.44	)		0.00
Administrative Class
09/30/2001*		8.45		0.20	(a)		0.33	(a)		0.53			(0.21	)		0.00			0.00			0.00
03/31/2001		9.01		0.46	(a)		(0.56	)(a)		(0.10	)		(0.06	)		0.00			0.00			0.00
03/31/2000		9.76		0.55	(a)		(0.75	)(a)		(0.20	)		(0.45	)		(0.05	)		0.00			0.00
03/31/1999		9.70		0.51	(a)		0.14	(a)		0.65			(0.35	)		(0.16	)		(0.08	)		0.00
03/31/1998		9.86		0.59	(a)		(0.05	)(a)		0.54			(0.51	)		0.00			0.00			(0.19	)
08/01/1996 – 03/31/1997		10.28		0.51			(0.23	)		0.28			(0.26	)		0.00			(0.44	)		0.00
Global Bond Fund II
Institutional Class
09/30/2001*	$	9.61	$	0.23	(a)	$	0.16	(a)	$	0.39		$	(0.23	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.41		0.55	(a)		0.51	(a)		1.06			(0.56	)		0.00			(0.08	)		(0.22	)
03/31/2000		9.89		0.56	(a)		(0.46	)(a)		0.10			(0.55	)		(0.01	)		(0.02	)		0.00
03/31/1999		9.92		0.52	(a)		0.06	(a)		0.58			(0.52	)		0.00			(0.01	)		(0.08	)
02/25/1998 – 03/31/1998		9.82		0.06	(a)		0.09	(a)		0.15			0.00			(0.05	)		0.00			0.00
Foreign Bond Fund
Institutional Class
09/30/2001*	$	10.32	$	0.25	(a)	$	0.11	(a)	$	0.36		$	(0.25	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.03		0.58	(a)		0.51	(a)		1.09			(0.59	)		0.00			0.00			(0.21	)
03/31/2000		10.63		0.64	(a)		(0.45	)(a)		0.19			(0.64	)		0.00			(0.15	)		0.00
03/31/1999		10.74		0.58	(a)		0.24	(a)		0.82			(0.58	)		0.00			(0.10	)		(0.25	)
03/31/1998		10.41		0.66	(a)		0.61	(a)		1.27			(0.63	)		0.00			(0.31	)		0.00
03/31/1997		10.50		0.80			1.00			1.80			(0.40	)		0.00			(1.49	)		0.00
Administrative Class
09/30/2001*		10.32		0.24	(a)		0.11	(a)		0.35			(0.24	)		0.00			0.00			0.00
03/31/2001		10.03		0.55	(a)		0.51	(a)		1.06			(0.56	)		0.00			0.00			(0.21	)
03/31/2000		10.63		0.61	(a)		(0.45	)(a)		0.16			(0.61	)		0.00			(0.15	)		0.00
03/31/1999		10.74		0.56	(a)		0.24	(a)		0.80			(0.56	)		0.00			(0.10	)		(0.25	)
03/31/1998		10.41		0.63	(a)		0.61	(a)		1.24			(0.60	)		0.00			(0.31	)		0.00
01/28/1997 – 03/31/1997		10.54		0.59			(0.67	)		(0.08	)		(0.05	)		0.00			0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


99		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital			Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



	0.00			(0.21	)		10.79	3.78			1,783	0.75	+ (h)	3.85	+	35
	0.00			(0.47	)		10.60	10.36			1,717	0.74		4.28		257
	0.00			(0.24	)		10.05	2.73			10	0.75	+ (b)	3.95	+	357


$	0.00		$	(0.20	)	$	10.66	4.98	%	$	14,204	0.49	%+	3.75	%+	36	%
	0.00			(0.86	)		10.35	12.49			11,941	0.49	+	4.76	+	338


$	0.00		$	(0.24	)	$	10.82	3.91	%	$	3,445	0.49	%+	4.27	%+	106	%
	0.00			(0.54	)		10.64	12.77			3,753	0.50	(i)	4.41		973
	(0.21	)		(0.25	)		9.94	1.93			3,058	0.49	+ (c)	4.00	+	270


$	0.00		$	(0.22	)	$	8.77	6.49	%	$	327,841	0.55	%+	5.09	%+	210	%
	(0.42	)		(0.48	)		8.45	(0.83	)		307,686	0.57	(d)	5.58		416
	(0.05	)		(0.57	)		9.01	(1.81	)		271,538	0.71	(d)	6.12		301
	0.00			(0.60	)		9.76	6.90			266,984	0.55		5.35		143
	0.00			(0.72	)		9.70	5.85			256,274	0.55		6.64		389
	0.00			(0.88	)		9.86	6.78			215,631	0.56	(d)	7.51		911

	0.00			(0.21	)		8.77	6.36			3,015	0.80	+	4.79	+	210
	(0.40	)		(0.46	)		8.45	(1.07	)		2,142	0.81	(e)	5.33		416
	(0.05	)		(0.55	)		9.01	(2.05	)		2,238	0.92	(e)	5.91		301
	0.00			(0.59	)		9.76	6.78			1,326	0.80		5.21		143
	0.00			(0.70	)		9.70	5.57			1,548	0.80		6.39		389
	0.00			(0.70	)		9.86	2.97			346	0.78	+	5.66	+	911


$	0.00		$	(0.23	)	$	9.77	4.10	%	$	64,881	0.55	%+	4.70	%+	146	%
	0.00			(0.86	)		9.61	11.87			62,895	0.58	(d)	5.86		422
	0.00			(0.58	)		9.41	1.11			84,926	0.61	(d)	5.92		290
	0.00			(0.61	)		9.89	6.06			29,044	0.55		5.29		236
	0.00			(0.05	)		9.92	1.02			24,517	0.55	+	6.24	+	369


$	0.00		$	(0.25	)	$	10.43	3.57	%	$	524,998	0.51	%+(f)	4.82	%+	168	%
	0.00			(0.80	)		10.32	11.34			482,480	0.54	(f)	5.78		417
	0.00			(0.79	)		10.03	1.96			421,831	0.69	(f)	6.20		330
	0.00			(0.93	)		10.63	7.92			530,325	0.50		5.39		376
	0.00			(0.94	)		10.74	12.64			392,198	0.50		6.32		280
	0.00			(1.89	)		10.41	17.69			234,880	0.50		7.88		984

	0.00			(0.24	)		10.43	3.44			17,671	0.75	+	4.58	+	168
	0.00			(0.77	)		10.32	11.06			17,056	0.78	(g)	5.36		417
	0.00			(0.76	)		10.03	1.70			4,824	0.97	(g)	6.01		330
	0.00			(0.91	)		10.63	7.65			2,096	0.75		5.13		376
	0.00			(0.91	)		10.74	12.34			315	0.75		6.07		280
	0.00			(0.05	)		10.41	(0.72	)		30	0.79	+ (g)	7.63	+	984

Annualized.

(b)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.01%.

(c)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.30%.

(d)

Ratio of expenses to average net assets excluding interest expense is 0.55%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.80%.

(f)

Ratio of expenses to average net assets excluding interest expense is 0.50%.

(g)

Ratio of expenses to average not assets excluding interest expense is 0.75%.

(h)

Ratio of expenses to average net assets excluding interest expense is 0.74%.

(i)

Ratio of expenses to average net assets excluding interest expense is 0.49%.


Prospectus		100

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Emerging Markets Bond Fund
Institutional Class
09/30/2001*	$	8.40	$	0.39	(a)	$	0.30	(a)	$	0.69		$	(0.41	)	$	0.00		$	0.00		$	0.00
03/31/2001		8.61		0.82	(a)		0.20	(a)		1.02			(0.83	)		0.00			0.00			(0.40	)
03/31/2000		7.51		0.86	(a)		1.11	(a)		1.97			(0.87	)		0.00			0.00			0.00
03/31/1999		9.67		0.87	(a)		(2.11	)(a)		(1.24	)		(0.87	)		0.00			0.00			(0.05	)
07/31/1997 – 03/31/1998		10.00		0.46	(a)		(0.18	)(a)		0.28			(0.46	)		0.00			(0.15	)		0.00
Administrative Class
09/30/2001*		8.40		0.38	(a)		0.29	(a)		0.67			(0.39	)		0.00			0.00			0.00
03/31/2001		8.61		0.80	(a)		0.20	(a)		1.00			(0.81	)		0.00			0.00			(0.40	)
03/31/2000		7.51		0.83	(a)		1.12	(a)		1.95			(0.85	)		0.00			0.00			0.00
09/30/98 – 03/31/1999		6.82		0.45	(a)		0.74	(a)		1.19			(0.45	)		0.00			0.00			(0.05	)
Strategic Balanced Fund
Institutional Class
09/30/2001*	$	10.46	$	0.18	(a)	$	(0.50	)(a)	$	(0.32	)	$	(0.16	)	$	0.00		$	0.00		$	0.00
03/31/2001		12.80		0.90	(a)		(1.88	)(a)		(0.98	)		(0.67	)		0.00			0.00			(0.69	)
03/31/2000		12.76		0.80	(a)		0.44	(a)		1.24			(0.74	)		0.00			(0.15	)		(0.31	)
03/31/1999		12.60		0.89	(a)		0.60	(a)		1.49			(0.66	)		0.00			(0.67	)		0.00
03/31/1998		10.32		1.30	(a)		2.05	(a)		3.35			(0.84	)		0.00			(0.23	)		0.00
06/28/1996 – 03/31/1997		10.00		0.85			0.31			1.16			(0.63	)		0.00			(0.21	)		0.00
Administrative Class
09/30/2001*		10.47		0.17	(a)		(0.51	)(a)		(0.34	)		(0.15	)		0.00			0.00			0.00
03/31/2001		12.79		0.90	(a)		(1.88	)(a)		(0.98	)		(0.65	)		0.00			0.00			(0.69	)
06/30/99 – 03/31/2000		13.17		0.62	(a)		0.07	(a)		0.69			(0.61	)		0.00			(0.15	)		(0.31	)
Convertible Fund
Institutional Class
09/30/2001*	$	11.33	$	0.09	(a)	$	(1.08	)(a)	$	(0.99	)	$	(0.14	)	$	0.00		$	0.00		$	0.00
03/31/2001		15.77		0.01	(a)		(3.50	)(a)		(3.49	)		(0.25	)		0.00			0.00			(0.70	)
03/31/2000		10.00		0.07	(a)		5.97	(a)		6.04			(0.03	)		(0.15	)		(0.09	)		0.00
Administrative Class
09/30/2001*		11.36		0.08	(a)		(1.09	)(a)		(1.01	)		(0.12	)		0.00			0.00			0.00
08/01/2000 – 03/31/2001		14.49		(0.03	)(a)		(2.19	)(a)		(2.22	)		(0.21	)		0.00			0.00			(0.70	)
European Convertible Fund
Institutional Class
09/30/2001*	$	9.97	$	0.09	(a)	$	(0.01	)(a)	$	0.08		$	(0.08	)	$	0.00		$	0.00		$	0.00
11/30/2000 – 03/31/2001		10.00		0.04	(a)		(0.03	)(a)		0.01			(0.04	)		0.00			0.00			0.00
StocksPLUS Fund
Institutional Class
09/30/2001*	$	10.20	$	(0.02	)(a)	$	(0.90	)(a)	$	(0.92	)	$	(0.11	)	$	0.00		$	0.00		$	0.00
03/31/2001		14.15		0.06	(a)		(2.84	)(a)		(2.78	)		(0.26	)		0.00			0.00			(0.91	)
03/31/2000		14.32		1.08	(a)		1.33	(a)		2.41			(1.10	)		0.00			(0.97	)		(0.51	)
03/31/1999		14.09		0.97	(a)		1.32	(a)		2.29			(0.82	)		0.00			(1.24	)		0.00
03/31/1998		11.46		1.90	(a)		3.23	(a)		5.13			(1.41	)		0.00			(1.09	)		0.00
03/31/1997		11.16		1.27			0.82			2.09			(1.27	)		0.00			(0.52	)		0.00
Administrative Class
09/30/2001*		10.08		(0.06	)(a)		(0.88	)(a)		(0.94	)		(0.11	)		0.00			0.00			0.00
03/31/2001		14.03		(0.07	)(a)		(2.72	)(a)		(2.79	)		(0.25	)		0.00			0.00			(0.91	)
03/31/2000		14.25		1.10	(a)		1.23	(a)		2.33			(1.07	)		0.00			(0.97	)		(0.51	)
03/31/1999		14.06		1.10	(a)		1.13	(a)		2.23			(0.80	)		0.00			(1.24	)		0.00
03/31/1998		11.46		1.89	(a)		3.19	(a)		5.08			(1.39	)		0.00			(1.09	)		0.00
01/07/1997 – 03/31/1997		11.56		0.14			(0.09	)		0.05			(0.15	)		0.00			0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


101		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.41	)	$	8.68	8.27	%	$	50,626	0.85	%+	8.88	%+	531	%
0.00		(1.23	)		8.40	12.94			46,239	0.93	(c)	9.73		902
0.00		(0.87	)		8.61	27.90			12,614	0.89	(c)	10.69		328
0.00		(0.92	)		7.51	(12.55	)		3,641	0.85		11.08		315
0.00		(0.61	)		9.67	3.10			3,676	0.86	+ (c)	7.21	+	695

0.00		(0.39	)		8.68	8.11			8,071	1.10	+	8.62	+	531
0.00		(1.21	)		8.40	12.65			7,793	1.17	(d)	9.46		902
0.00		(0.85	)		8.61	27.60			13,490	1.14	(d)	10.30		328
0.00		(0.50	)		7.51	17.88			118	1.10	+	6.24	+	315


$0.00	$	(0.16	)	$	9.98	(3.11	)%	$	45,303	0.05	%+	3.44	%+	11	%
0.00		(1.36	)		10.46	(8.31	)		47,236	0.43	(e)	7.31		651
0.00		(1.20	)		12.80	10.05			124,934	0.65		6.19		176
0.00		(1.33	)		12.76	12.36			97,945	0.65		7.00		82
0.00		(1.07	)		12.60	33.40			38,806	0.65		10.84		56
0.00		(0.84	)		10.32	11.83			10,360	0.90	+	9.72	+	95

0.00		(0.15	)		9.98	(3.31	)		723	0.30	+	3.21	+	11
0.00		(1.34	)		10.47	(8.34	)		488	0.63	(e)	7.30		651
0.00		(1.07	)		12.79	5.47			709	0.90	+	6.48	+	176


$0.00	$	(0.14	)	$	10.20	(8.82	)%	$	21,817	0.76	%+(g)	1.59	%+	144	%
0.00		(0.95	)		11.33	(23.00	)		65,980	0.67	(g)	0.08		225
0.00		(0.27	)		15.77	60.66			168,224	0.65	(b)	0.50		247

0.00		(0.12	)		10.23	(8.90	)		290	1.01	+ (h)	1.36	+	144
0.00		(0.91	)		11.36	(16.25	)		322	0.90	+	(0.32	)	225


$0.00	$	(0.08	)	$	9.97	0.79	%	$	5,032	0.75	%+	1.82	%+	113	%
0.00		(0.04	)		9.97	0.10			4,997	0.75	+ (f)	1.27	+	175


$0.00	$	(0.11	)	$	9.17	(9.15	)%	$	368,713	0.65	%+	(0.29	)%+	225	%
0.00		(1.17	)		10.20	(20.93	)		420,050	0.65		0.48		270
0.00		(2.58	)		14.15	17.82			620,144	0.65		7.42		92
0.00		(2.06	)		14.32	17.65			512,953	0.65		6.92		81
0.00		(2.50	)		14.09	47.75			416,600	0.65		13.74		30
0.00		(1.79	)		11.46	19.44			235,829	0.65		11.78		47

0.00		(0.11	)		9.03	(9.51	)		37,741	0.90	+	(1.19	)+	225
0.00		(1.16	)		10.08	(21.21	)		35,474	0.90		(0.55	)	270
0.00		(2.55	)		14.03	17.31			28,403	0.90		7.61		92
0.00		(2.04	)		14.25	17.21			11,302	0.90		7.83		81
0.00		(2.48	)		14.06	47.19			2,143	0.90		13.49		30
0.00		(0.15	)		11.46	0.34			682	0.95	+ (h)	4.83	+	47

Annualized.

(b)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 0.69%.

(c)

Ratio of expenses to average net assets excluding interest expense 0.85%.

(d)

Ratio of expenses to average net assets excluding interest expense 1.10%.

(e)

Effective September 29, 2000, the Strategic Balanced Fund did not incur advisory fee expenses.

(f)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.78%.

(g)

Ratio of expenses to average net assets excluding interest expense is 0.65%.

(h)

Ratio of expenses to average net assets excluding interest expense is 0.90%.


Prospectus		102

Appendix A

Description of Securities Ratings

A Fund’s investments may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by Moody’s or S&P or, if unrated, determined by PIMCO to be of comparable quality). The percentage of a Fund’s assets invested in securities in a particular rating category will vary. The following terms are generally used to describe the credit quality of fixed income securities:

High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by PIMCO.

Below Investment Grade, High Yield Securities (“Junk Bonds”) are those rated lower than Baa by Moody’s or BBB by S&P and comparable securities. They are deemed predominately speculative with respect to the issuer’s ability to repay principal and interest.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present that make the long-term risks appear somewhat larger than with Aaa securities.

A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba: Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well-assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

B: Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.


A-1		PIMCO Funds: Pacific Investment Management Series

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Moody’s applies numerical modifiers, 1, 2, and 3 in each generic rating classified from Aa through Caa in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.

Corporate Short-Term Debt Ratings

Moody’s short-term debt ratings are opinions of the ability of issuers to repay punctually senior debt obligations which have an original maturity not exceeding one year. Obligations relying upon support mechanisms such as letters of credit and bonds of indemnity are excluded unless explicitly rated.

Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior ability for repayment of senior short-term debt obligations. Prime-1 repayment ability will often be evidenced by many of the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structure with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; and well-established access to a range of financial markets and assured sources of alternate liquidity.

PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong ability for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable ability for repayment of senior short-term obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Short-Term Municipal Bond Ratings

There are four rating categories for short-term municipal bonds that define an investment grade situation, which are listed below. In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents an evaluation of the degree of risk associated with scheduled principal and interest payments, and the other represents an evaluation of the degree of risk associated with the demand feature. The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1. MIG ratings terminate at the retirement of the obligation while VMIG rating expiration will be a function of each issue’s specific structural or credit features.

MIG 1/VMIG 1: This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.


Prospectus		A-		2

MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.

MIG 3/VMIG 3: This designation denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.

MIG 4/VMIG 4: This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk.

SG: This designation denotes speculative quality. Debt instruments in this category lack margins of protection.

Standard & Poor's Rating Service

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

A: Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions, or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher-rated categories.

Speculative Grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB-rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.


A-3		PIMCO Funds: Pacific Investment Management Series

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.

CI: The rating CI is reserved for income bonds on which no interest is being paid.

D: Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The D rating will also be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

Provisional ratings: The letter “p” indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise his own judgment with respect to such likelihood and risk.

r: The “r” is attached to highlight derivative, hybrid, and certain other obligations that S&P believes may experience high volatility or high variability in expected returns due to non-credit risks. Examples of such obligations are: securities whose principal or interest return is indexed to equities, commodities, or currencies; certain swaps and options; and interest only and principal only mortgage securities.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.

Commercial Paper Rating Definitions

An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from A for the highest quality obligations to D for the lowest. These categories are as follows:

A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.

B: Issues rated B are regarded as having only speculative capacity for timely payment.


Prospectus		A-4

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.

D: Debt rated D is in payment default. The D rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period.

A commercial paper rating is not a recommendation to purchase, sell or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information.


A-5		PIMCO Funds: Pacific Investment Management Series

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISER AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

TRANSFER AGENT

National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas City, MO 64105

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006

The Trust’s Statement of Additional Information (“SAI”) and annual and semi-annual reports to shareholders include additional information about the Funds. The SAI and the financial statements included in the Funds’ most recent annual report to shareholders are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Funds’ annual report discusses the market conditions and invest-ment strategies that significantly affected each Fund’s performance during its last fiscal year.

You may get free copies of any of these materials, request other information about a Fund, or make shareholder inquiries by calling the Trust at 1-800-927-4648 or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by writing to:

PIMCO Funds: Pacific Investment Management Series

840 Newport Center Drive

Suite 300

Newport Beach, CA 92660

You may review and copy information about the Trust, including its SAI, at the Securities and Exchange Commission’s public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the Trust on the Commission’s Web site at www.sec.gov. You may get copies of this information, with payment of a duplication fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-0102, or by e-mailing your request to publicinfo@sec.gov.

Reference the Trust’s Investment Company Act file number in your correspondence.

Investment Company Act file no. 811-5028

PIMCO Funds

840 Newport Center Drive

Suite 300

Newport Beach, CA 92660

15-20310-02

APRIL 1, 2002	PIMCO Funds Prospectus

Share Class ^D	SHORT DURATION BOND FUNDS Short-Term Fund Low Duration Fund INTERMEDIATE DURATION BOND FUNDS Total Return Fund INTERNATIONAL BOND FUNDS Foreign Bond Fund Emerging Markets Bond Fund HIGH YIELD BOND FUNDS High Yield Fund MORTGAGE-BACKED BOND FUNDS GNMA Fund Total Return Mortgage Fund INFLATION-INDEXED BOND FUNDS Real Return Fund	CONVERTIBLE FUNDS Convertible Fund TAX-EXEMPT BOND FUNDS Short Duration Municipal Income Fund Municipal Bond Fund California Intermediate Municipal Bond Fund California Municipal Bond Fund New York Municipal Bond Fund STOCK AND BOND FUNDS Strategic Balanced Fund ENHANCED INDEX STOCK FUNDS StocksPLUS Fund
This cover is not part of the Prospectus.

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series

April 1, 2002

Share Class

This prospectus describes 17 mutual funds offered by PIMCO Funds: Pacific Investment Management Series. The Funds provide access to the professional investment advisory services offered by Pacific Investment Management Company LLC (“PIMCO”). As of December 31, 2001, PIMCO managed approximately $241.3 billion in assets. The firm’s institutional heritage is reflected in the PIMCO Funds offered in this prospectus.

The Funds offer Class D shares in this prospectus. This prospectus explains what you should know about the Funds before you invest. Please read it carefully.


1		PIMCO Funds: Pacific Investment Management Series

Table of Contents

Summary Information		3
Fund Summaries
California Intermediate Municipal Bond Fund		5
California Municipal Bond Fund		7
Convertible Fund		9
Emerging Markets Bond Fund		11
Foreign Bond Fund		13
GNMA Fund		15
High Yield Fund		17
Low Duration Fund		19
Municipal Bond Fund		21
New York Municipal Bond Fund		23
Real Return Fund		25
Short Duration Municipal Income Fund		27
Short-Term Fund		29
StocksPLUS Fund		31
Strategic Balanced Fund		33
Total Return Fund		35
Total Return Mortgage Fund		37
Summary of Principal Risks		39
Management of the Funds		41
How to Buy and Sell Shares		45
How Fund Shares are Priced		47
Fund Distributions		47
Tax Consequences		48
Characteristics and Risks of Securities and Investment Techniques		49
Financial Highlights		57
Appendix A—Description of Securities Ratings		A-1


Prospectus		2

Summary Information

		Main Investments	Duration	Credit Quality(1)	Non-U.S. Dollar Denominated Securities(2)

Short Duration Bond Funds	Short-Term	Money market instruments and short maturity fixed income securities	0–1 year	B to Aaa; max 10% below Baa	0–5%(3)

	Low Duration	Short maturity fixed income securities	1–3 years	B to Aaa; max 10% below Baa	0–20%(3)

Intermediate Duration Bond Funds	Total Return	Intermediate maturity fixed income securities	3–6 years	B to Aaa; max 10% below Baa	0–20%(3)

International Bond Funds	Foreign Bond	Intermediate maturity hedged non-U.S. fixed income securities	3–7 years	B to Aaa; max 10% below Baa	³ 85%(5)

	Emerging Markets Bond	Emerging market fixed income securities	0–8 years	Max 15% below B	³ 80%(5)

High Yield Bond Funds	High Yield	Higher yielding fixed income securities	2–6 years	B to Aaa; min 65% below Baa	0–15%(4)

Mortgage-Backed Bond Funds	GNMA	Short and intermediate maturity mortgage-related fixed income securities issued by the Government National Mortgage Association	1–7 years	Baa to Aaa; max 10% below Aaa	0%

	Total Return Mortgage	Short and intermediate maturity mortgage-related fixed income securities	1–7 years	Baa to Aaa; max 10% below Aaa	0%

Inflation-Indexed Bond Funds	Real Return	Inflation-indexed fixed income securities	+/– 2 years of its Index	B to Aaa; max 10% below Baa	0–20%(3)

Convertible Funds	Convertible	Convertible securities	N/A	Caa to Aaa; max 40% below Baa and 10% below B	0–20%(3)

Tax-Exempt Bond Funds	Short Duration Municipal Income	Short and intermediate maturity municipal securities (exempt from federal income tax)	0–2 years	Baa to Aaa	0%

	Municipal Bond	Intermediate and long-term maturity municipal securities (exempt from federal income tax)	3–10 years	Ba to Aaa; max 10% below Baa	0%

	California Intermediate Municipal Bond	Intermediate maturity municipal securities (exempt from federal and California income tax)	3–7 years	B to Aaa; max 10% below Baa	0%

	California Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)	3–12 years	B to Aaa; max 10% below Baa	0%

	New York Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and New York income tax)	3–12 years	B to Aaa; max 10% below Baa	0%

Stock and Bond Funds	Strategic Balanced	45–75% in the StocksPLUS Fund; 25–55% in the Total Return Fund	0–6 years(6)	B to Aaa; max 10% below Baa(6)	0–20%(3)(6)

Enhanced Index Stock Funds	StocksPLUS	S&P 500 stock index derivatives backed by a portfolio of short-term fixed income securities	0–1 year	B to Aaa; max 10% below Baa	0–20%(3)

(1)

As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

(2)

Each Fund (except the Short-Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond and New York Municipal Bond Funds) may invest beyond these limits in U.S. dollar-denominated securities of non-U.S. issuers.

(3)

The percentage limitation relates to non-U.S. dollar-denominated securities.

(4)

The percentage limitation relates to euro-denominated securities.

(5)

The percentage limitation relates to securities of foreign issuers denominated in any currency.

(6)

The Fund does not invest in securities directly, but in other PIMCO Funds with these characteristics.


3		PIMCO Funds: Pacific Investment Management Series

Summary Information (continued)

Fixed Income Instruments

The “Fixed Income Funds” are the Short-Term, Low Duration, GNMA, Total Return, Total Return Mortgage, Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, New York Municipal Bond, Real Return, Foreign Bond, Emerging Markets Bond and High Yield Funds. Each Fixed Income Fund differs from the others primarily in the length of the Fund’s duration or the proportion of its investments in certain types of fixed income securities. Each Fixed Income Fund invests at least 65% of its assets in “Fixed Income Instruments,” which as used in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.

Duration

Credit Ratings

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Descriptions, Performance and Fees

It is possible to lose money on investments in the Funds.

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		4

PIMCO California Intermediate Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and California income

tax. Capital appreciation is a

secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate maturity municipal securities (exempt from federal

and California income tax)

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund invests under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and California income tax (“California Municipal Bonds”). California Municipal Bonds generally are issued by or on behalf of the State of California and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (1/31/00), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


5		PIMCO Funds: Pacific Investment Management Series

PIMCO California Intermediate Municipal Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	3.08%

	Lowest (10/1/01–12/31/01)	-0.79%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class D	5.66%	6.85%

Lehman Brothers California Intermediate Municipal Bond Index(1)	4.89%	6.14%

Lipper California Intermediate Municipal Debt Fund Avg(2)	4.56%	5.85%

(1)

The Lehman Brothers California Intermediate Municipal Bond Index is an unmanaged index comprised of California Municipal Bond issues having maturities from 5 to 10 years. It is not possible to invest directly in the index.

(2)

The Lipper California Intermediate Municipal Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in municipal debt issues that are exempt from taxation in California, with dollar weighted maturities of five to ten years. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.36%	0.86%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.60% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect an Administrative Fee of 0.35% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.85% for Class D. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$88	$274	$477	$1,061


Prospectus		6

PIMCO California Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and California income tax. Capital appreciation is a secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund invests under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and California income tax (“California Municipal Bonds”). California Municipal Bonds generally are issued by or on behalf of the State of California and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to twelve-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (7/31/00), performance information shown in the table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


7		PIMCO Funds: Pacific Investment Management Series

PIMCO California Municipal Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	4.10%

	Lowest (10/1/01–12/31/01)	-0.23%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (5/16/00)(3)

Class D	7.63%	10.30%

Lehman California Insured Municipal Index(1)	5.25%	9.30%

Lipper California Intermediate Municipal Debt Fund Avg(2)	3.71%	9.03%

(1)

The Lehman California Insured Municipal Index is an unmanaged index comprised of insured California Municipal Bond issues. It is not possible to invest directly in the index.

(2)

(3)

The Fund began operations on 5/16/00. Index comparisons began on 5/31/00.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.35%	0.85%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.60% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect the portion of Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$87	$271	$471	$1,049


Prospectus		8

PIMCO Convertible Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with prudent investment management

Fund Category

Convertible

Fund Focus

Convertible securities

Average Portfolio Duration

N/A

Credit Quality

Caa to Aaa; maximum 40% below Baa

and 10% below B

Dividend Frequency

Declared and distributed quarterly

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements and may invest in asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Derivatives Risk

• Liquidity Risk

• Smaller Company Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (3/31/00), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


9		PIMCO Funds: Pacific Investment Management Series

PIMCO Convertible Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/00–3/31/00)	12.89%

	Lowest (1/1/01–3/31/01)	-11.71%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (3/31/99)

Class D	-13.40%	7.32%

First Boston Convertible Bond Index(1)	-6.45%	6.22%

Lipper Convertible Securities Fund Avg(2)	-7.69%	6.30%

(1)

The First Boston Convertible Bond Index is an unmanaged market index comprised of convertible bonds. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.40%	0.25%	0.40%	1.05%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect the portion of Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$107	$334	$580	$1,284


Prospectus		10

PIMCO Emerging Markets Bond Fund

Principal Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of

capital and prudent investment management

Fund Category

International Bond

Fund Focus

Emerging market fixed income

securities

Average Portfolio Duration

0-8 years

Credit Quality

Maximum 15% below B

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in Fixed Income Instruments of issuers that economically are tied to countries with emerging securities markets. Such securities may be denominated in non-U.S. currencies and the U.S. dollar. A security is economically tied to an emerging market country if it is principally traded on the country’s securities markets, or the issuer is organized or principally operates in the country, derives a majority of its income from its operations within the country, or has a majority of its assets in the country. The average portfolio duration of the Fund varies based on PIMCO’s forecast for interest rates and, under normal market conditions, is not expected to exceed eight years.

PIMCO has broad discretion to identify and invest in countries that it considers to qualify as emerging securities markets. However, PIMCO generally considers an emerging securities market to be one located in any country that is defined as an emerging or developing economy by the World Bank or its related organizations, or the United Nations or its authorities. The Fund emphasizes countries with relatively low gross national product per capita and with the potential for rapid economic growth. PIMCO will select the Fund’s country and currency composition based on its evaluation of relative interest rates, inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances, and any other specific factors PIMCO believes to be relevant. The Fund likely will concentrate its investments in Asia, Africa, the Middle East, Latin America and the developing countries of Europe. The Fund may invest in securities whose return is based on the return of an emerging securities market, such as a derivative instrument rather than investing directly in securities of issuers from emerging markets.

The Fund may invest substantially all of its assets in high yield securities (“junk bonds”) subject to a maximum of 15% of its assets in securities rated below B by Moody’s or by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Market Risk

• Issuer Risk

• Emerging Markets Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (3/31/00), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


11		PIMCO Funds: Pacific Investment Management Series

PIMCO Emerging Markets Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/01–12/31/01)	12.98%

	Lowest (7/1/98–9/30/98)	-21.14%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class D	27.77%	10.72%

J.P. Morgan Emerging Markets Bond Index Plus(1)	-0.77%	4.58%

Lipper Emerging Markets Debt Fund Avg(2)	11.53%	3.34%

(1)

(2)

The Lipper Emerging Markets Debt Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that seek either current income or total return by investing at least 65% of total assets in emerging market debt securities. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.45%	0.25%	0.63%	1.33%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.80% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect an Administrative Fee of 0.55% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 1.25% for Class D. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$135	$421	$729	$1,601


Prospectus		12

PIMCO Foreign Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of

capital and prudent investment management

Fund Category

International Bond

Fund Focus

Intermediate maturity hedged

non-U.S. fixed income securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


13		PIMCO Funds: Pacific Investment Management Series

PIMCO Foreign Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/95–12/31/95)	7.12%

	Lowest (1/1/94–3/31/94)	-4.32%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/2/92)(3)

Class D	8.48%	7.48%	9.21%

J.P. Morgan Non-U.S. Index (Hedged)(1)	6.05%	8.27%	8.83%

Lipper International Income Fund Avg(2)	0.66%	2.00%	5.70%

(1)

(2)

(3)

The Fund began operations on 12/2/92. Index comparisons began on 11/30/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.49%	0.99%


(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.70% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect an Administrative Fee of 0.45% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.95% for Class D. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$101	$315	$547	$1,213


Prospectus		14

PIMCO GNMA Fund


Principal Investments and Strategies		Investment Objective Seeks maximum total return, consistent with preservation of capital and prudent investment management Fund Category Mortgage-Backed Bond		Fund Focus Short to intermediate maturity mortgage-related fixed income securities Average Portfolio Duration 1-7 years		Credit Quality B to Aaa; maximum 10% below Aaa Dividend Frequency Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• Derivatives Risk

• Mortgage Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. This is because the Fund has not offered Class D shares for a full calendar year. Although Class D and Institutional Class shares would have similar annual returns (because all the Fund’s shares represent interests in the same portfolio of securities), Class D performance would be lower than Institutional Class performance because of the higher expenses paid by Class D shares.

The Average Annual Total Returns table also shows estimated historical performance for Class D shares. The performance of the Class D shares is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


15		PIMCO Funds: Pacific Investment Management Series

PIMCO GNMA Fund (continued)

Calendar Year Total Return — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	4.65%

	Lowest (10/1/99–12/31/99)	-0.48%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class D	11.63%	7.91%

Lehman Brothers GNMA Index(1)	8.23%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.35%	6.20%

(1)

The Lehman Brothers GNMA Index, the Fund’s current benchmark index, is an unmanaged index of mortgage-backed pass-through securities of the Government National Mortgage Association (GNMA). The Fund has changed its benchmark index because the Lehman Brothers GNMA Index more closely reflects the universe of securities in which the Fund invests.

(2)

The Lipper U.S. Mortgage Fund Average is a total return performance average of funds tracked by Lipper, Inc. that invest at least 65% of their assets in mortgage/securities issued or guaranteed as to principal and interest by the U.S. government and certain federal agencies. It does not take into account sale charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.50%	1.00%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Fund—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect the portion of Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
Share Class	Year 1	Year 3	Year 5	Year 10

Class D	$102	$318	$552	$1,225


Prospectus		16

PIMCO High Yield Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

High Yield Bond

Fund Focus

Higher yielding fixed income

securities

Average Portfolio Duration

2-6 years

Credit Quality

B to Aaa; minimum 65% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund may invest up to 25% of its assets in derivative instruments, such as options, futures contracts or swap agreements. The Fund may invest all of its assets in mortgage or asset backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Market Risk

• Issuer Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


17		PIMCO Funds: Pacific Investment Management Series

PIMCO High Yield Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/93–3/31/93)	6.17%

	Lowest (1/1/00–3/31/00)	-2.29%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/15/92)(4)

Class D	4.60%	4.93%	8.31%

Lehman Brothers Intermediate BB US High Yield Index(1)	10.16%	6.55%	8.41%

Merrill Lynch U.S. High Yield BB-B Rated Index(2)	5.46%	4.01%	7.19%

Lipper High Current Yield Fund Avg(3)	1.79%	1.39%	5.41%

(1)

The Lehman Brothers Intermediate BB US High Yield Index, the Fund’s former benchmark index, is an unmanaged index comprised of various fixed income securities rated BB. It is not possible to invest directly in the index.

(2)

The Merrill Lynch U.S. High Yield BB-B Rated Index, the Fund's current benchmark index, is an unmanaged index of bonds rated BB and B by Moody’s or S&P. The Fund changed its benchmark index because the Merrill Lynch U.S. High Yield BB-B Rated Index more closely reflects the universe of securities in which the Fund invests. It is not possible to invest directly in the index.

(3)

(4)

The Fund began operations on 12/15/92. Index comparisons began on 12/31/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.40%	0.90%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect the portion of the Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$92	$287	$498	$1,108


Prospectus		18

PIMCO Low Duration Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of

capital and prudent investment management

Fund Category

Short Duration Bond

Fund Focus

Short maturity fixed income

securities

Average Portfolio Duration

1-3 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


19		PIMCO Funds: Pacific Investment Management Series

PIMCO Low Duration Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4/1/95–6/30/95)	3.55%

	Lowest (1/1/94–3/31/94)	-0.40%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class D	7.66%	6.46%	6.44%

Merrill Lynch 1-3 Year Treasury Index(1)	8.30%	6.59%	6.09%

Lipper Short Investment Grade Debt Fund Avg(2)	7.24%	5.92%	5.63%

(1)

The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S Treasury obligations having maturities from one to 2.99 years. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.32%	0.82%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.50% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect an Administrative Fee of 0.25% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.75% for Class D. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$84	$262	$455	$1,014


Prospectus		20

PIMCO Municipal Bond Fund


Principal Investments and Strategies		Investment Objective Seeks high current income exempt from federal income tax, consistent with preservation of capital. Capital appreciation is a secondary objective. Fund Category Tax Exempt Bond		Fund Focus Intermediate to long-term maturity municipal securities (exempt from federal income tax) Average Portfolio Duration 3-10 years		Credit Quality Ba to Aaa; maximum 10% below Baa Dividend Frequency Declared daily and distributed monthly

The Fund may invest up to 20% of its net assets in U.S. Government Securities, money market instruments and/or “private activity” bonds. For shareholders subject to the federal alternative minimum tax (“AMT”), distributions derived from “private activity” bonds must be included in their AMT calculations, and as such a portion of the Fund’s distribution may be subject to federal income tax. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its net assets in Municipal Bonds or “private activity” bonds which are high yield securities (“junk bonds”) but rated at least Ba by Moody’s or BB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest more than 25% of its assets in bonds of issuers in California and New York. To the extent that the Fund concentrates its investments in California or New York, it will be subject to California or New York State Specific Risk. The average portfolio duration of this Fund normally varies within a three- to ten-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

The Fund may invest in derivative instruments, such as options, futures contracts, or swap agreements, on U.S. Government Securities and Municipal Bonds, and invest in mortgage- or asset-backed securities. The Fund may also invest in securities issued by entities whose underlying assets are Municipal Bonds, including, without limitation, residual interest bonds. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Liquidity Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


21		PIMCO Funds: Pacific Investment Management Series

PIMCO Municipal Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/01–3/31/01)	3.46%

	Lowest (4/1/99–6/30/99)	-2.44%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (12/31/97)

Class D	7.37%	4.58%

Lehman Brothers General Municipal Bond Index(1)	5.13%	5.19%

Lipper General Municipal Debt Fund Avg(2)	3.90%	3.74%

(1)

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.35%	0.85%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.60% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect the portion of the Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$87	$271	$471	$1,049


Prospectus		22

PIMCO New York Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and New York income tax. Capital appreciation is a secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal and New York income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund will invest under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and New York income tax (“New York Municipal Bonds”). New York Municipal Bonds generally are issued by or on behalf of the State of New York and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three-to twelve-year time frame, based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• New York State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


23		PIMCO Funds: Pacific Investment Management Series

PIMCO New York Municipal Bond Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/00–12/31/00)	3.81%

	Lowest (10/1/01–12/31/01)	-0.81%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class D	6.36%	7.21%

Lehman Brothers New York Insured Municipal Bond Index(1)	4.59%	6.44%

Lipper New York Intermediate Muncipal Debt Fund Avg(2)	3.64%	5.55%

(1)

The Lehman Brothers Intermediate New York Insured Municipal Bond Index is an unmanaged index comprised of insured New York Municipal Bond issues. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.40%	0.90%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.60% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect an Administrative Fee of 0.35% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.85% for Class D. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Year 1	Year 3	Year 5	Year 10

Class D	$92	$287	$498	$1,108


Prospectus		24

PIMCO Real Return Fund

Principal Investments and Strategies

Investment Objective

Seeks maximum real return, consistent with preservation of real capital and prudent investment management

Fund Category

Inflation-Indexed Bond

Fund Focus

Inflation-indexed fixed income
securities

Average Portfolio Duration

± 2 years of its Index

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund also may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Issuer Non-Diversification Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

• Mortgage Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


25		PIMCO Funds: Pacific Investment Management Series

PIMCO Real Return Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/01–3/31/01)	5.18%

	Lowest (10/1/01–12/31/01)	-1.37%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (1/29/97)(3)

Class D	8.24%	7.07%

Lehman Global Real: U.S. TIPS Index(1)	7.90%	5.98%

Lipper Intermediate U.S. Treasury Fund Avg(2)	7.43%	6.59%

(1)

The Lehman Global Real: U.S. TIPS Index is an unmanaged index consisting of the U.S. Treasury Inflation Protected Securities market. It is not possible to invest directly in the index.

(2)

The Lipper Intermediate U.S. Treasury Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in U.S. Treasury bills, notes and bonds with dollar-weighted average maturities of five to ten years. It does not take into account sales charges.

(3)

The Fund began operations on 1/29/97. Index comparisons began on 1/31/97.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.44%	0.94%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect an Administrative Fee of 0.40% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.90% for Class D. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$96	$300	$520	$1,155


Prospectus		26

PIMCO Short Duration Municipal Income Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal income tax, consistent with preservation of capital.

Fund Category

Tax Exempt Bond

Fund Focus

Short and intermediate maturity municipal securities (exempt from federal income tax)

Average Portfolio Duration

0-2 years

Credit Quality

Baa to Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


27		PIMCO Funds: Pacific Investment Management Series

PIMCO Short Duration Municipal Income Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/00–12/31/00)	1.90%

	Lowest (10/1/01–12/31/01)	0.65%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class D	4.55%	4.68%

Lehman Brothers 1-Year Municipal Bond Index(1)	5.77%	5.12%

Lipper Short Municipal Debt Fund Avg(2)	4.71%	4.55%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets):

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.20%	0.25%	0.36%	0.81%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.60% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect an Administrative Fee of 0.35% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.80% for Class D. Interest expense is generally incurred as a result of investment management activities. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$83	$259	$450	$1,002


Prospectus		28

PIMCO Short-Term Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum current income, consistent with preservation of

capital and daily liquidity

Fund Category

Short Duration Bond

Fund Focus

Money market instruments and short maturity fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities. The average portfolio duration of this Fund normally does not exceed one year. For point of reference, the dollar-weighted average portfolio maturity of this Fund is normally not expected to exceed three years.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


29		PIMCO Funds: Pacific Investment Management Series

PIMCO Short-Term Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/95–12/31/95)	2.52%

	Lowest (1/1/94–3/31/94)	0.12%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class D	5.33%	5.77%	5.45%

Salomon Brothers 3-Month Treasury Bill(1)	4.09%	5.01%	4.69%

Lipper Ultra-short Obligations Fund Avg(2)	5.30%	5.57%	5.15%

(1)

The Salomon Brothers 3-Month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3 month Treasury Bill issues. It is not possible to invest directly in the index.

(2)

The Lipper Ultra-short Obligations Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 65% of their assets in investment-grade debt issues or better, and maintain a portfolio dollar-weighted average maturity between 91 and 365 days. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.81%	1.31%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.50% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect an Administrative Fee of 0.25% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.75%. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$133	$415	$718	$1,579


Prospectus		30

PIMCO StocksPLUS Fund

Principal

Investments and Strategies

Investment Objective

Seeks total return which exceeds that of the S&P 500

Fund Category

Enhanced Index Stock

Fund Focus

S&P 500 stock index derivatives backed by a portfolio of short-term fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared and distributed quarterly

Assets not invested in equity securities or derivatives may be invested in Fixed Income Instruments. The Fund may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. In addition, the Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income.

Principal Risks

• Market Risk

• Issuer Risk

• Derivatives Risk

• Credit Risk

• Interest Rate Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For the period prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


31		PIMCO Funds: Pacific Investment Management Series

PIMCO StocksPLUS Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/98–12/31/98)	21.17%

	Lowest (7/1/01–9/30/01)	-14.93%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (5/13/93)(3)

Class D	-12.70%	10.04%	13.92%

S&P 500 Index(1)	-11.88%	10.70%	13.85%

Lipper Large-Cap Core Fund Average(2)	-13.83%	8.13%	11.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

The Lipper Large-Cap Core Fund Average is a total return performance average of funds tracked by Lipper, Inc. that invest at least 75% of their equity assets in companies with market capitalizations (on a 3 year weighted basis) of greater than 300% of the dollar weighted median market capitalization of the S&P 400 Mid-Cap Index. It does not take into account sales charges.

(3)

The Fund began operations on 5/13/93.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.40%	0.25%	0.40%	1.05%


(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect the portion of the Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees.

Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Year 1	Year 3	Year 5	Year 10

Class D	$107	$334	$579	$1,283


Prospectus		32

PIMCO Strategic Balanced Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

Stock and Bond

Fund Focus

45-75% StocksPLUS Fund;

25-55% Total Return Fund

Average Portfolio Duration

(of Underlying Funds)

0-6 years

Credit Quality

(of Underlying Funds)

B to Aaa; maximum 10%

below Baa

Dividend Frequency

Declared and distributed quarterly

Please see the Fund Summaries of the Underlying Funds in this prospectus for information on their investment styles and primary investments.

In addition to the StocksPLUS and Total Return Funds, the Fund may in the future invest in additional funds in the PIMCO Funds family at the discretion of PIMCO and without shareholder approval.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect the net asset value, yield and total return of the Fund are:

• Allocation Risk

• Underlying Fund Risk

Among the principal risks of investing in the Underlying Funds, and consequently the Fund, which could adversely affect the net asset value, yield and total return of the Fund, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks associated with the Underlying Funds and an investment in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results, and the Fund achieved the performance track record shown during a period when it pursued its investment objective using different investment policies.


33		PIMCO Funds: Pacific Investment Management Series

PIMCO Strategic Balanced Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4/1/97–6/30/97)	12.12%

	Lowest (7/1/01–9/30/01)	-6.72%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (6/28/96)(4)

Class D	-3.48%	9.12%	10.14%

S&P 500 Index(1)	-11.88%	10.70%	11.90%

S&P 500 and Lehman Brothers Aggregate Bond Index Blend(2)	-3.71%	9.81%	10.60%

Lipper Balanced Fund Avg(3)	-4.38%	7.65%	8.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

This index is a static blend consisting 60% of the S&P 500 Composite Stock Price Index and 40% of the Lehman Brothers Aggregate Bond Index. This blended index reflects the Fund’s investment strategy more accurately than the S&P 500 Index. It is not possible to invest directly in the index.

(3)

(4)

The Fund began operations on 6/28/96. Index comparisons began on 6/30/96.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Underlying Fund Expenses(3)	Total Annual Fund Operating Expenses

Class D	None	0.25%	0.40%	0.59%	1.24%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator— Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD. (2) Other Expenses reflect the portion of the Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees. (3) Underlying Fund Expenses for the Fund are based upon a 60%/40% allocation of the Fund’s assets between the StocksPLUS and Total Return Funds and upon the total annual operating expenses of Institutional Class shares of these Underlying Funds. Total Annual Fund Operating Expenses and the Examples set forth below are based on the Underlying Fund Expenses the Fund will incur. Actual Underlying Fund Expenses for the Fund are expected to vary with changes in the allocation of the Fund’s assets, and may be higher or lower than those shown above. Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Year 1	Year 3	Year 5	Year 10

Class D	$126	$393	$681	$1,500


Prospectus		34

PIMCO Total Return Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of

capital and prudent investment management

Fund Category

Intermediate Duration Bond

Fund Focus

Intermediate maturity fixed income

securities

Average Portfolio Duration

3-6 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


35		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	6.41%

	Lowest (1/1/94–3/31/94)	-2.76%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class D	9.15%	7.82%	7.92%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.31%	0.81%

(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.50% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect an Administrative Fee of 0.25% that is not reflected under Distribution and/or Service (12b-1) Fees and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.75%. Interest expense is generally incurred as a result of investment management activities.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$83	$259	$450	$1,002


Prospectus		36

PIMCO Total Return Mortgage Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

Mortgage-Backed Bond

Fund Focus

Short and intermediate maturity

fixed income securities

Average Portfolio Duration

1-7 years

Credit Quality

Baa to Aaa; maximum 10% below Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Mortgage Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The bar chart, the information to its right and the Average Annual Total Returns table show performance of the Fund’s Class D shares. For periods prior to the inception date of Class D shares (4/8/98), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class D shares. Past performance is no guarantee of future results.


37		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Mortgage Fund (continued)

Calendar Year Total Returns — Class D



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	4.56%

	Lowest (4/1/99–6/30/99)	-0.23%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class D	9.56%	7.87%

Lehman Brothers Mortgage Index(1)	8.22%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.63%	6.28%

(1)

The Lehman Brothers Mortgage Index is an unmanaged index of mortgage-related fixed income securities. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class D shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class D	0.25%	0.25%	0.40%	0.90%


(1) The Fund’s administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the Investment Company Act of 1940. Up to 0.25% per year of the total fees paid under the administration agreement may be distribution and/or service (12b-1) fees. The Fund will pay a total of 0.65% per year under the administration agreement regardless of whether a portion or none of the 0.25% authorized under the plan is paid under the plan. Please see “Management of the Funds—Investment Adviser and Administrator—Administrative Fees” for details. The Fund intends to treat any fees paid under the plan as “service fees” for purposes of applicable rules of the National Association of Securities Dealers, Inc. (the “NASD”). To the extent that such fees are deemed not to be “service fees,” Class D shareholders may, depending on the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the NASD.
(2) Other Expenses reflect the portion of the Administrative Fee paid by the class that is not reflected under Distribution and/or Service (12b-1) Fees.
Examples. The Examples are intended to help you compare the cost of investing in Class D shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.
	Year 1	Year 3	Year 5	Year 10

Class D	$92	$287	$498	$1,108


Prospectus		38

Summary of Principal Risks

Interest Rate Risk

Credit Risk

A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic condition, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.

High Yield Risk

Funds that invest in high yield securities and unrated securities of similar credit quality (commonly known as “junk bonds”) may be subject to greater levels of interest rate, credit and liquidity risk than Funds that do not invest in such securities. High yield securities are considered predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments. An economic downturn or period of rising interest rates could adversely affect the market for high yield securities and reduce a Fund’s ability to sell its high yield securities (liquidity risk). If the issuer of a security is in default with respect to interest payments or principal payments, a Fund may lose its entire investment.

Market Risk

Issuer Risk

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Funds with principal investment strategies that involve foreign securities, derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk.

Derivatives Risk


39		PIMCO Funds: Pacific Investment Management Series

with the underlying asset, rate or index. A Fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Mortgage Risk

Foreign (Non-U.S.) Investment Risk

Emerging Markets Risk

Currency Risk

Funds that invest directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the U.S. or abroad. As a result, the Fund’s investments in foreign currency-denominated securities may reduce the returns of the Fund.

Issuer Non-Diversification Risk

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.


Prospectus		40

Management Risk

California State-Specific Risk

A Fund that concentrates its investments in California municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of California issuers to pay interest or repay principal. Provisions of the California Constitution and State statutes which limit the taxing and spending authority of California governmental entities may impair the ability of California issuers to pay principal and/or interest on their obligations. While California’s economy is broad, it does have major concentrations in high technology, aerospace and defense-related manufacturing, trade, entertainment, real estate and financial services, and may be sensitive to economic problems affecting those industries. Future California political and economic developments, constitutional amendments, legislative measures, executive orders, administrative regulations, litigation and voter initiatives could have an adverse effect on the debt obligations of California issuers.

New York State-Specific Risk

Allocation Risk

The Strategic Balanced Fund’s investment performance depends upon how its assets are allocated and reallocated between the Underlying Funds according to the Fund’s equity/fixed income allocation targets and ranges. A principal risk of investing in the Fund is that PIMCO will make less than optimal or poor asset allocation decisions. PIMCO attempts to identify allocations for the Underlying Funds that will provide consistent, quality performance for the Fund but there is no guarantee that PIMCO’s allocation techniques will produce the desired results. It is possible that PIMCO will focus on an Underlying Fund that performs poorly or underperforms other Funds under various market conditions. You could lose money on your investment in the Fund as a result of these allocation decisions.

Underlying Fund Risks

Management of the Funds

Investment Adviser and Administrator


41		PIMCO Funds: Pacific Investment Management Series

Advisory Fees

Fund		Advisory Fees

Short Duration Municipal Income Fund		0.20%
Strategic Balanced,* Convertible and StocksPLUS Funds		0.40%
Emerging Markets Bond Fund		0.45%
All other Funds		0.25%

Effective September 29, 2000, the advisory fee for the Strategic Balanced Fund was reduced to an annual rate of 0.00%.

Administrative Fees

Each Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Class D shareholders of each Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides or procures administrative services for Class D shareholders and also bears the costs of various third-party services required by the Funds, including audit, custodial, portfolio accounting, legal transfer agency and printing costs.

PIMCO may pay financial service firms a portion of the Class D administrative fees in return for the firm’s services (normally not to exceed an annual rate of 0.35% of a Fund’s average daily net assets attributable to Class D shares purchased through such firms).

Fund		Administrative Fees*

Short-Term, Low Duration and Total Return Funds		0.50%
Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal, California Municipal Bond and New York Municipal Bond Funds		0.60%
Total Return Mortgage, High Yield, Real Return, Convertible, Strategic Balanced and StocksPLUS Funds		0.65%
Foreign Bond Fund		0.70%
GNMA Fund		0.75%
Emerging Markets Bond Fund		0.80%

* As described below under “12b-1 Plan for Class D Shares,” the administration agreement includes a plan adopted in conformity with Rule 12b-1 under the Investment Company Act of 1940 which provides for the payment of up to 0.25% of the Administrative Fee as reimbursement for expenses in respect of activities that may be deemed to be primarily intended to result in the sale of Class D shares. In the Fund Summaries above, the “Annual Fund Operating Expenses” table provided under “Fees and Expenses of the Fund” for each Fund shows the Administrative Fees rate under two separate columns entitled “Distribution and/or Service (12b-1) Fees” and “Other Expenses.”

12b-1 Plan for Class D Shares

The Funds’ administration agreement includes a plan for Class D shares that has been adopted in conformity with the requirements set forth in Rule 12b-1 under the 1940 Act. The plan provides that up to 0.25% per annum of the Class D administrative fees paid under the administration agreement may represent reimbursement for expenses in respect of activities that may be deemed to be primarily intended to result in the sale of Class D shares. The principal types of activities for which such payments may be made are services in connection with the distribution of Class D shares and/or the provision of shareholder services. Because 12b-1 fees would be paid out of a Fund’s Class D share assets on an ongoing basis, over time these fees would increase the cost of your investment in Class D shares and may cost you more than other types of sales charges.

Strategic Balanced Fund Fees

The Fund pays administrative fees to PIMCO at an annual rate of 0.65% based on the average daily net assets attributable in the aggregate to the Fund’s Class D shares. The Fund also indirectly pays its proportionate share of the administrative fees charged by PIMCO to the Underlying Funds in which the Fund invests.


Prospectus		42

The Strategic Balanced Fund is structured in the following ways to lessen the impact of expenses incurred at the Underlying Fund level:

•

The Fund does not pay any fees for asset allocation or advisory services under the Trust’s investment advisory agreement.

•

The Fund invests in Institutional Class shares of the Underlying Funds, which are not subject to any sales charges or 12b-1 fees, and which are subject to lower administrative fees than the Class D shares.

PIMCO has broad discretion to allocate and reallocate the Fund’s assets among the Underlying Funds consistent with the Fund’s investment objectives and policies and asset allocation targets and ranges. Although PIMCO does not charge an investment advisory fee for its asset allocation services, PIMCO indirectly receives fees (including investment advisory and administrative fees) from the Underlying Funds in which the Fund invests. In this regard, PIMCO has a financial incentive to invest the Fund’s assets in Underlying Funds with higher fees than other Funds, even if it believes that alternate investments would better serve the Fund’s investment program. PIMCO is legally obligated to disregard that incentive in making asset allocation decisions for the Fund. The Trustees and officers of the Trust may also have conflicting interests in fulfilling their fiduciary duties to both the Fund and the Underlying Funds of the Trust.


43		PIMCO Funds: Pacific Investment Management Series

Individual Portfolio Managers

The following individuals have primary responsibility for managing each of the noted Funds.

Fund	Portfolio Manager	Since	Recent Professional Experience

Short-Term	Paul A. McCulley	8/99	Managing Director, PIMCO. He has managed fixed income assets since joining PIMCO in 1999. Prior to joining PIMCO, Mr. McCulley was associated with Warburg Dillon Read as a Managing Director from 1992-1999 and Head of Economic and Strategy Research for the Americas from 1995-1999, where he managed macro research world-wide.

Low Duration	William H. Gross	5/87*	Managing Director, Chief Investment Officer and a founding partner of PIMCO.
Total Return		5/87*	He leads a team which manages the Strategic Balanced and
Strategic Balanced		1/98	StocksPLUS Funds.
StocksPLUS		1/98

Total Return Mortgage	W. Scott Simon	4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000.
GNMA		10/01	Prior to that, he was a Senior Managing Director and co-head of Mortgage Backed Securities pass-through trading at Bear Stearns & Co.

Foreign Bond	Sudi Mariappa	11/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000.
			Prior to joining PIMCO, Mr. Mariappa was a Managing Director with Merrill Lynch
			from 1999-2000. Prior to that, he was associated with Sumitomo Finance
			International as an Executive Director in 1998, and with Long-term Capital
			Management as a strategist from 1995-1998.

Emerging Markets Bond	Mohamed A. El-Erian	8/99	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO, he was a Managing Director from 1998-1999 for Salomon Smith Barney/Citibank where he was head of emerging markets research. Prior to that he was associated with the International Monetary Fund as a Deputy Director and Advisor from 1983-1998.

High Yield	Benjamin L. Trosky	12/92*	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1990, and has managed fixed income accounts for various institutional clients and funds since that time.


	Raymond G. Kennedy	4/02	Managing Director, PIMCO. He is a Portfolio Manager and a senior member of PIMCO’s investment strategy group. He joined PIMCO as a Portfolio Manager in 1996. Prior to that, he was associated with the Prudential Insurance Company of America as a private placement asset manager.

Short Duration Municipal Income	Mark V. McCray	4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to that, he was a bond trader from 1992-1999 at Goldman, Sachs & Co. where he was appointed Vice President in 1996 and named co-head of municipal bond trading in 1997 with responsibility for the firm’s proprietary account and supervised municipal bond traders.
Municipal Bond		4/00
California Intermediate Municipal Bond		4/00
California Municipal Bond		5/00*
New York Municipal Bond		4/00

Real Return	John B. Brynjolfsson	1/97*	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 1989, and has managed fixed income accounts for various institutional clients and funds since that time.


Convertible	Sandra K. Harris	4/99*	Senior Vice President, PIMCO. She joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO in 1999, she was associated with Nicholas-Applegate Capital Management, where she was a Convertible Securities Portfolio Manager from 1995-1999.

* Since inception of the Fund.

Distributor


Prospectus		44

How to Buy and Sell Shares

The following section provides basic information about how to buy, sell (redeem) and exchange Class D shares of the Funds.

General Information

• Financial Service Firms. Broker-dealers, registered investment advisers and other financial service firms provide varying investment products, programs or accounts, pursuant to arrangements with the Distributor, through which their clients may purchase and redeem Class D shares of the Funds. Firms will generally provide or arrange for the provision of some or all of the shareholder servicing and account maintenance services required by your account, including, without limitation, transfers of registration and dividend payee changes. Firms may also perform other functions, including generating confirmation statements and disbursing cash dividends, and may arrange with their clients for other investment or administrative services. Your firm may independently establish and charge you transaction fees and/or other additional amounts for such services, which may change over time. These fees and additional amounts could reduce your investment returns on Class D shares of the Funds.

Your financial service firm may have omnibus accounts and similar arrangements with the Trust and may be paid for providing sub-transfer agency and other services. A firm may be paid for its services directly or indirectly by the Funds, PIMCO Advisors or an affiliate (normally not to exceed an annual rate of 0.35% of a Fund’s average daily net assets attributable to its Class D shares purchased through such firm for its clients). Your firm may establish various minimum investment requirements for Class D shares of the Funds and may also establish certain privileges with respect to purchases, redemptions and exchanges of Class D shares or the reinvestment of dividends. Please contact your firm for information.

This prospectus should be read in connection with your firm’s materials regarding its fees and services.

• Calculation of Share Price and Redemption Payments. When you buy or sell (redeem) Class D shares of the Funds, you pay or receive a price equal to the NAV of the shares. NAVs are determined at the close of regular trading (normally 4:00 p.m. Eastern time) on each day the New York Stock Exchange is open. See “How Fund Shares Are Priced” below for details. Generally, purchase and redemption orders for Fund shares are processed at the NAV next calculated after your order is received by the Distributor. In addition, orders received by the Distributor from financial service firms after NAV is determined that day will be processed at that day’s NAV if the orders were received by the firm from its customer prior to such determination and were transmitted to and received by the Distributor prior to its close of business that day (normally 7:00 p.m., Eastern time).

The Trust does not calculate NAVs or process orders on days when the New York Stock Exchange is closed. If your purchase or redemption order is received by the Distributor on a day when the New York Stock Exchange is closed, it will be processed on the next succeeding day when the New York Stock Exchange is open (according to the succeeding day’s NAV).

Buying Shares

Class D shares of each Fund are continuously offered through financial service firms, such as broker-dealers or registered investment advisers, with which the Distributor has an agreement for the use of the Funds in particular investment products, programs or accounts for which a fee may be charged. See “Financial Service Firms” above.

You may purchase Class D shares only through your financial service firm. In connection with purchases, your financial service firm is responsible for forwarding all necessary documentation to the Distributor, and may charge you for such services. If you wish to purchase shares of the Funds directly from the Trust or the Distributor, you should inquire about the other classes of shares offered by the Trust. Please call the Distributor at 1-888-87-PIMCO for information about other investment options.

Class D shares of the Funds will be held in your account with your financial service firm and, generally, your firm will hold your Class D shares in nominee or street name as your agent. In most cases, the Trust’s transfer agent will have no information with respect to or control over accounts of specific Class D shareholders and you may obtain information about your accounts only through your financial service firm. In certain circumstances, your firm may arrange to have your shares held in your own name or you may subsequently become a holder of record for some other reason (for instance, if you terminate your relationship with your firm). In such circumstances, please contact the Distributor at 1-888-87-PIMCO for information about your account. In the interest of economy and convenience, certificates for Class D shares will not be issued.


45		PIMCO Funds: Pacific Investment Management Series

The Distributor, in its sole discretion, may accept or reject any order for purchase of Fund shares. The sale of shares will be suspended during any period in which the New York Stock Exchange is closed for other than weekends or holidays, or if permitted by the rules of the Securities and Exchange Commission, when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors.

•

Investment Minimums. The following investment minimums apply for purchases of Class D shares.

Initial Investment		Subsequent Investments
$2,500 per Fund		$100 per Fund

Your financial service firm may impose different investment minimums than the Trust. For example, if your firm maintains an omnibus account with a particular Fund, the firm may impose higher or lower investment minimums than the Trust when you invest in Class D shares of the Fund through your firm. Please contact your firm for information.

Exchanging Shares

You may exchange your Class D shares of any Fund for Class D shares of any other Fund or any series of PIMCO Funds: Multi-Manager Series that offers Class D shares. Shares are exchanged on the basis of their respective NAVs next calculated after your exchange order is received by the Distributor. Currently, the Trust does not charge any exchange fees or charges. Your financial service firm may impose various fees and charges, investment minimums and other requirements with respect to exchanges. Please contact your financial service firm to exchange your shares and for additional information about the exchange privilege.

The Trust reserves the right to refuse exchange purchases if, in the judgment of PIMCO, the purchase would adversely affect a Fund and its shareholders. In particular, a pattern of exchanges characteristic of “market-timing” strategies may be deemed by PIMCO to be detrimental to the Trust or a particular Fund. Currently, the Trust limits the number of “round trip” exchanges an investor may make. An investor makes a “round trip” exchange when the investor purchases shares of a particular Fund, subsequently exchanges those shares for shares of a different Fund and then exchanges back into the originally purchased Fund. The Trust has the right to refuse any exchange for any investor who completes (by making the exchange back into the shares of the originally purchased Fund) more than six round trip exchanges in any twelve-month period. Although the Trust has no current intention of terminating or modifying the exchange privilege other than as set forth in the preceding sentence, it reserves the right to do so at any time. Except as otherwise permitted by Securities and Exchange Commission regulations, the Trust will give 60 days’ advance notice to your financial service firm of any termination or material modification of the exchange privilege.

Selling Shares

You can sell (redeem) Class D shares through your financial service firm on any day the New York Stock Exchange is open. You do not pay any fees or other charges to the Trust or the Distributor when you sell your shares, although your financial service firm may charge you for its services in processing your redemption request. Please contact your firm for details. If you are the holder of record of your Class D shares, you may contact the Distributor at 1-888-87-PIMCO for information regarding how to sell your shares directly to the Trust.

Your financial service firm is obligated to transmit your redemption orders to the Distributor promptly and is responsible for ensuring that your redemption request is in proper form. Your financial service firm will be responsible for furnishing all necessary documentation to the Distributor or the Trust’s transfer agent and may charge you for its services. Redemption proceeds will be forwarded to your financial service firm as promptly as possible and in any event within seven days after the redemption request is received by the Distributor in good order. Redemptions of Fund shares may be suspended when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors. Under these and other unusual circumstances, the Trust may suspend redemptions or postpone payment for more than seven days, as permitted by law.

Redemptions In Kind

The Trust had agreed to redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1% of the Fund’s net assets during any 90-day period for any one shareholder. In consideration of the best interests of the remaining shareholders, the Trust may pay any redemption proceeds exceeding this amount in whole or in part by a distribution in kind of securities held by a Fund in lieu of cash. Except for Funds with a tax-efficient management strategy, it is highly unlikely that your shares would ever be


Prospectus		46

redeemed in kind. If your shares are redeemed in kind, you should expect to incur transaction costs upon the disposition of the securities received in the distribution.

How Fund Shares Are Priced

The net asset value (“NAV”) of a Fund’s Class D shares is determined by dividing the total value of a Fund’s portfolio investments and other assets attributable to that class, less any liabilities, by the total number of shares outstanding of that class.

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Certain securities or investments for which daily market quotations are not readily available may be valued, pursuant to guidelines established by the Board of Trustees, with reference to other securities of indices. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost. Exchange traded options, futures and options on futures are valued at the settlement price determined by the exchange. Other securities for which market quotes are not readily available are valued at fair value as determined in good faith by the Board of Trustees or persons acting at their direction.

In unusual circumstances, instead of valuing securities in the usual manner, the Funds may value securities at fair value or estimate their value as determined in good faith by the Board of Trustees, generally based upon recommendations provided by PIMCO. Fair valuation may also be used if significant events occur after the close of the relevant market but prior to the NYSE Close.

Fund Distributions

Each Fund distributes substantially all of its net investment income to shareholders in the form of dividends. You begin earning dividends on Fund shares the day after the Trust receives your purchase payment. The following shows when each Fund intends to declare and distribute income dividends to shareholders of record.

Fund	Declared Daily and Paid Monthly	Declared and Paid Quarterly

Fixed Income Funds	·

Convertible, Strategic Balanced and StocksPLUS Funds		·


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You can choose from the following distribution options:

• Reinvest all distributions in additional Class D shares of your Fund at NAV. This will be done unless you elect another option.

• Invest all distributions in Class D shares of any other Fund or any series of PIMCO Funds: Multi-Manager Series which offers Class D shares at NAV. You must have an account existing in the Fund or series selected for investment with the identical registered name. This option must be elected when your account is set up.

• Receive all distributions in cash (either paid directly to you or credited to your account with your financial service firm). This option must be elected when your account is set up.

Your financial service firm may offer additional distribution reinvestment programs or options. Please contact your firm for details.

You do not pay any sales charges on shares you receive through the reinvestment of Fund distributions. If you elect to receive Fund distributions in cash and the postal or other delivery service is unable to deliver checks to your address of record, the Trust’s Transfer Agent will hold the returned checks for your benefit in a non-interest bearing account.

Tax Consequences

• Taxes on Fund distributions. If you are subject to U.S. federal income tax, you will be subject to tax on Fund distributions whether you received them in cash or reinvested in additional shares of the Funds. For federal income tax purposes, Fund distributions will be taxable to you as either ordinary income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable to you as ordinary income. Federal taxes on Fund distributions of gains are determined by how long the Fund owned the investments that generated the gains, rather than how long you have owned your shares. Distributions of gains from investments that a Fund owned for more than one year will generally be taxable to you as long-term capital gains. Distributions of gains from investments that the Fund owned for one year or less will generally be taxable to you as ordinary income.

Fund distributions are taxable to you even if they are paid from income or gains earned by a Fund prior to your investment and thus were included in the price you paid for your shares. For example, if you purchase shares on or just before the record date of a Fund distribution, you will pay full price for the shares and may receive a portion of your investment back as a taxable distribution.

• Taxes when you sell (redeem) or exchange your shares. Any gain resulting from the sale of Fund shares will generally be subject to federal income tax. When you exchange shares of a Fund for shares of another series, the transaction will be treated as a sale of the Fund shares for these purposes, and any gain on those shares will generally be subject to federal income tax.

• Consult your tax advisor about other possible tax consequences. This is a summary of certain federal income tax consequences of investing in a Fund. You should consult your tax advisor for more information on your own tax situation, including possible state, local and foreign tax consequences.

• A Note on the Real Return Fund. Periodic adjustments for inflation to the principal amount of an inflation-indexed bond may give rise to original issue discount, which will be includable in the Fund’s gross income. Due to original issue discount, the Fund may be required to make annual distributions to shareholders that exceed the cash received, which may cause the Fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation-indexed bond is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital.


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that generate income that is not exempt from federal or state income tax. Dividends derived from taxable interest or capital gains will be subject to federal income tax. The interest on “private activity” bonds is a tax-preference item for purposes of the federal alternative minimum tax. As a result, if you are subject to the alternative minimum tax, income derived from “private activity” bonds will not be exempt from federal income tax. The Municipal Funds seek to produce income that is generally exempt from federal income tax and will not benefit investors in tax-sheltered retirement plans or individuals not subject to federal income tax. Further, the California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds seek to produce income that is generally exempt from the relevant state’s income tax and will not benefit individuals that are not subject to that state’s income tax.

• A Note on the Strategic Balanced Fund. The Strategic Balanced Fund’s use of a fund of funds structure could affect the amount, timing and character of distributions to shareholders. See “Taxation—Distributions” in the Statement of Additional Information.

Characteristics and Risks of

Securities and Investment Techniques

Securities Selection

PIMCO attempts to identify areas of the bond market that are undervalued relative to the rest of the market. PIMCO identifies these areas by grouping bonds into sectors: such as money markets, governments, corporates, mortgages, asset-backed and international. Sophisticated proprietary software then assists in evaluating sectors and pricing specific securities. Once investment opportunities are identified, PIMCO will shift assets among sectors depending upon changes in relative valuations and credit spreads. There is no guarantee that PIMCO’s security selection techniques will produce the desired results.


49		PIMCO Funds: Pacific Investment Management Series

rather decides how to allocate the Fund’s investments based upon PIMCO’s methodology for forecasting stages in the business cycle, and the potential risk and reward of equity and fixed income investments at specific stages of the business cycle. In addition to purchasing shares of the StocksPLUS and Total Return Funds, PIMCO may in the future invest in additional funds in the PIMCO fund family without shareholder approval.

U.S. Government Securities

Municipal Bonds

Mortgage-Related and Other Asset-Backed Securities

Each Fund may invest in mortgage- or other asset-backed securities. Except for the Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond, New York Municipal Bond and Convertible Funds, each Fund may invest all of its assets in such securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. A Fund may not invest more than 5% of its assets in any combination of IO, PO, or inverse floater securities. The Funds may invest in other asset-backed securities that have been offered to investors.

Loan Participations and Assignments

Certain Funds may invest in fixed- and floating-rate loans, which investments generally will be in the form of loan participations and assignments of portions of such loans. Participations and assignments involve special types of risk, including credit risk, interest rate risk, liquidity risk, and the risks of being a lender. If a Fund purchases a participation, it may only be able to enforce its rights through the lender, and may assume the credit risk of the lender in addition to the borrower.


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Corporate Debt Securities

High Yield Securities

Securities rated lower than Baa by Moody’s or lower than BBB by S&P are sometimes referred to as “high yield” or “junk” bonds.

Investing in high yield securities involves special risks in addition to the risks associated with investments in higher-rated fixed income securities. While offering a greater potential opportunity for capital appreciation and higher yields, high yield securities typically entail greater potential price volatility and may be less liquid than higher-rated securities. High yield securities may be regarded as predominately speculative with respect to the issuer’s continuing ability to meet principal and interest payments. They may also be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-rated securities. The Emerging Markets Bond Fund may invest in securities that are in default with respect to the payment of interest or repayment of principal, or presenting an imminent risk of default with respect to such payments. Issuers of securities in default may fail to resume principal or interest payments, in which case the Fund may lose its entire investment.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. Each Fund may invest in floating rate debt instruments (“floaters”) and engage in credit spread trades. While floaters provide a certain degree of protection against rises in interest rates, a Fund will participate in any declines in interest rates as well. Each Fund may also invest in inverse floating rate debt instruments (“inverse floaters”). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. A Fund may not invest more than 5% of its assets in any combination of inverse floater, interest only, or principal only securities.

Inflation-Indexed Bonds


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Event-Linked Bonds

Each Fund may invest in “event-linked bonds,” which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific “trigger” event, such as a hurricane, earthquake, or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as “catastrophe bonds.” If a trigger event occurs, a Fund may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose the Fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds may also be subject to liquidity risk.

Convertible and Equity Securities

Foreign (Non-U.S.) Securities

Investing in foreign securities involves special risks and considerations not typically associated with investing in U.S. securities. Shareholders should consider carefully the substantial risks involved for Funds that invest in securities issued by foreign companies and governments of foreign countries. These risks include: differences in accounting, auditing and financial reporting standards; generally higher commission rates on foreign portfolio transactions; the possibility of nationalization, expropriation or confiscatory taxation; adverse changes in investment or exchange control regulations; and political instability. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. The securities markets, values of securities, yields and risks associated with foreign securities markets may change independently of each other. Also, foreign securities and dividends and interest payable on those securities may be subject to foreign taxes, including taxes withheld from payments on those securities. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Investments in foreign securities may also involve higher custodial costs than domestic investments and additional transaction costs with respect to foreign currency conversions. Changes in foreign exchange rates also will affect the value of securities denominated or quoted in foreign currencies.

• Emerging Market Securities. Each Fund (except the Short Duration Municipal Income, Municipal Bond, California Intermediate Municipal Bond, California Municipal Bond and New York Municipal Bond Funds) may invest up to 10% of its assets (5% in the case of the Short-Term and Low Duration Funds) in securities of issuers based in countries with developing (or “emerging market”) economies. The Emerging Markets Bond Fund may invest without limit in such securities.


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capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by a Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.

Each Fund (except the Municipal Bond, Short Duration Municipal Income, California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds) may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with a debt restructuring. Investments in Brady Bonds may be viewed as speculative. Brady Bonds acquired by a Fund may be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on any of its holdings.

Foreign (Non-U.S.) Currencies


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Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls And Other Borrowings

Each Fund may borrow money to the extent permitted under the Investment Company Act of 1940 (“1940 Act”), as amended. This means that, in general, a Fund may borrow money from banks for any purpose on a served basis in an amount up to ¹/3 of the Fund’s total assets. A Fund may also borrow money for temporary administrative purposes on an unsecured basis in an amount not to exceed 5% of the Fund’s total assets.

Derivatives

Each Fund may, but is not required to, use derivative instruments for risk management purposes or as part of its investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. Each Fund may invest some or all of its assets in derivative instruments. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. A description of these and other derivative instruments that the Funds may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.


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will engage in derivatives transactions at any time or from time to time. A Fund’s ability to use derivatives may also be limited by certain regulatory and tax considerations.

Delayed Funding Loans and Revolving Credit Facilities

The Funds (except the Municipal Bond Fund) may also enter into, or acquire participations in, delayed funding loans and revolving credit facilities, in which a lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees in an amount sufficient to meet such commitments. Delayed funding loans and revolving credit facilities are subject to credit, interest rate and liquidity risk and the risks of being a lender.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each Fund may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments). When-issued transactions, delayed delivery purchases and forward commitments involve a risk of loss if the value of the securities declines prior to the settlement date. This risk is in addition to the risk that the Fund’s other assets will decline in value. Therefore, these transactions may result in a form of leverage and increase a Fund’s overall investment exposure. Typically, no income accrues on securities a Fund has committed to purchase prior to the time delivery of the securities is made, although a Fund may earn income on securities it has segregated to cover these positions.

Investment in Other Investment Companies

Subject to the restrictions and limitations of the 1940 Act, each Fund may elect to pursue its investment objectives either by investing directly in securities or, by investing in one or more underlying investment vehicles or companies that have substantially similar investment objectives, policies and limitations as the Fund.

Short Sales

Each Fund may make short sales as part of its overall portfolio management strategies or to offset a potential decline in value of a security. A short sale involves the sale of a security that is borrowed from a broker or other institution to complete the sale. Short sales expose a Fund to the risk that it will be required to acquire, convert or exchange securities to replace the borrowed securities (also known as “covering” the short position) at a time when the securities sold short have appreciated in value, thus resulting in a loss to the Fund. A Fund making a short sale must segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its position in a permissible manner.


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Illiquid Securities

Each Fund may invest up to 15% of its net assets in illiquid securities. Certain illiquid securities may require pricing at fair value as determined in good faith under the supervision of the Board of Trustees. A portfolio manager may be subject to significant delays in disposing of illiquid securities, and transactions in illiquid securities may entail registration expenses and other transaction costs that are higher than those for transactions in liquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued the securities. Restricted securities, i.e., securities subject to legal or contractual restrictions on resale, may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 and certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets.

Loans of Portfolio Securities

Portfolio Turnover

Temporary Defensive Strategies

Changes in Investment Objectives and Policies

The investment objective of each Fund is fundamental and may not be changed without shareholder approval. Unless otherwise stated, all other investment policies of the Funds may be changed by the Board of Trustees without shareholder approval.

Percentage Investment Limitations

Other Investments and Techniques


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Financial Highlights

The financial highlights table is intended to help a shareholder understand the financial performance of Class D shares of each Fund since the class of shares was first offered. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Class D shares of a Fund, assuming reinvestment of all dividends and distributions. The information for the fiscal year ended March 31, 2001 has been audited by PricewaterhouseCoopers LLP, whose report, along with each Fund’s financial statements, are included in the Trust’s annual report to shareholders. The information for the period ended September 30, 2001 is unaudited. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)(b)		Net Realized and Unrealized Gain (Loss) on Investments(b)			Total Income from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Short-Term Fund (a)
09/30/2001*	$	10.03	$	0.21	$	0.06		$	0.27		$	(0.24	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.95		0.62		0.09			0.71			(0.61	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.55		(0.08	)		0.47			(0.55	)		0.00			0.00			0.00
04/08/1998–03/31/1999		10.07		0.53		(0.03	)		0.50			(0.53	)		0.00			0.00			(0.01	)
Low Duration Fund (a)
09/30/2001*	$	10.03	$	0.28	$	0.18		$	0.46		$	(0.29	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.81		0.62		0.24			0.86			(0.64	)		0.00			0.00			0.00
03/31/2000		10.10		0.61		(0.29	)		0.32			(0.60	)		(0.01	)		0.00			0.00
04/08/1998–03/31/1999		10.19		0.60		(0.03	)		0.57			(0.60	)		0.00			(0.01	)		(0.05	)
Total Return Fund (a)
09/30/2001*	$	10.52	$	0.27	$	0.35		$	0.62		$	(0.27	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.96		0.64		0.56			1.20			(0.62	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.60		(0.40	)		0.20			(0.58	)		(0.02	)		0.00			0.00
04/08/1998–03/31/1999		10.66		0.59		0.12			0.71			(0.59	)		0.00			(0.24	)		(0.18	)
Total Return Mortgage Fund (a)
09/30/2001*	$	10.42	$	0.22	$	0.34		$	0.56		$	(0.20	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.97		0.59		0.63			1.22			(0.59	)		0.00			(0.18	)		0.00
03/31/2000		10.19		0.54		(0.20	)		0.34			(0.55	)		(0.01	)		0.00			0.00
04/08/1998–03/31/1999		10.27		0.53		0.02			0.55			(0.53	)		0.00			(0.03	)		(0.07	)
Short Duration Municipal Income Fund
09/30/2001*	$	10.16	$	0.16	$	0.09		$	0.25		$	(0.16	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.98		0.41		0.17			0.58			(0.40	)		0.00			0.00			0.00
01/31/2000–03/31/2000		9.99		0.06		(0.01	)		0.05			(0.06	)		0.00			0.00			0.00
Municipal Bond Fund (a)
09/30/2001*	$	10.02	$	0.23	$	0.20		$	0.43		$	(0.23	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.47		0.43		0.56			0.99			(0.44	)		0.00			0.00			0.00
03/31/2000		10.12		0.42		(0.64	)		(0.22	)		(0.43	)		0.00			0.00			0.00
04/08/1998–03/31/1999		9.98		0.40		0.14			0.54			(0.40	)		0.00			0.00			0.00
California Intermediate Municipal Bond Fund
09/30/2001*	$	10.60	$	0.19	$	0.20		$	0.39		$	(0.20	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.05		0.45		0.55			1.00			(0.42	)		0.00			(0.03	)		0.00
01/31/2000–03/31/2000		9.88		0.06		0.18			0.24			(0.07	)		0.00			0.00			0.00
California Municipal Bond Fund
09/30/2001*	$	10.35	$	0.18	$	0.31		$	0.49		$	(0.18	)	$	0.00		$	0.00		$	0.00
07/31/2000–03/31/2001		10.35		0.31		0.43			0.74			(0.31	)		0.00			(0.43	)		0.00
New York Municipal Bond Fund
09/30/2001*	$	10.64	$	0.22	$	0.18		$	0.40		$	(0.22	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.94		0.44		0.77			1.21			(0.42	)		0.00			(0.09	)		0.00
01/31/2000–03/31/2000		9.79		0.07		0.15			0.22			(0.07	)		0.00			0.00			0.00
Real Return Fund (a)
09/30/2001*	$	10.40	$	0.26	$	0.18		$	0.44		$	(0.33	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.92		0.72		0.60			1.32			(0.76	)		0.00			(0.08	)		0.00
03/31/2000		9.83		0.63		0.12			0.75			(0.64	)		0.00			(0.02	)		0.00
04/08/1998–03/31/1999		9.77		0.47		0.09			0.56			(0.44	)		(0.06	)		0.00			0.00
Foreign Bond Fund (a)
09/30/2001*	$	10.32	$	0.22	$	0.12		$	0.34		$	(0.23	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.03		0.53		0.51			1.04			(0.54	)		0.00			0.00			(0.21	)
03/31/2000		10.63		0.59		(0.45	)		0.14			(0.59	)		0.00			(0.15	)		0.00
04/08/1998–03/31/1999		10.83		0.53		0.15			0.68			(0.53	)		0.00			(0.10	)		(0.25	)
Emerging Markets Bond Fund
09/30/2001*	$	8.40	$	0.43	$	0.24		$	0.67		$	(0.39	)	$	0.00		$	0.00		$	0.00
03/31/2001		8.61		0.79		0.20			0.99			(0.80	)		0.00			0.00			(0.40	)

Unaudited

(a)

Commenced operations on April 8, 1998.

(b)

Per share amounts based on average number of shares outstanding during the period.


57		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions	Net Asset Value End of Period	Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate


$0.00	$(0.24)	$10.06	2.75	%	$	44,743	0.94	%+(g)	4.11	%+	77	%
0.00	(0.63)	10.03	7.33			6,613	1.31	(g)	6.15		121
0.00	(0.55)	9.95	4.87			3,361	0.93	(g)	5.54		38
0.00	(0.54)	10.03	5.10			2,278	0.75	+	5.05	+	47

$0.00	$(0.29)	$10.20	4.61	%	$	51,139	0.75	%+	5.53	%+	269	%
0.00	(0.64)	10.03	9.10			19,282	0.82	(g)	6.23		348
0.00	(0.61)	9.81	3.22			12,018	0.83	(g)	6.11		82
0.00	(0.66)	10.10	5.77			6,481	0.75	+	5.81	+	245

$0.00	$(0.27)	$10.87	6.05	%	$	452,646	0.75	%+	5.12	%+	256	%
0.00	(0.64)	10.52	12.44			264,984	0.81	(g)	6.24		450
0.00	(0.60)	9.96	2.00			80,459	0.87	(g)	5.97		223
0.00	(1.01)	10.36	6.73			34,839	0.75	+	5.21	+	154

$0.00	$(0.20)	$10.78	5.83	%	$	9,077	0.90	%+	4.23	%+	644	%
0.00	(0.77)	10.42	12.69			1,261	0.90		5.78		848
0.00	(0.56)	9.97	3.47			166	0.90		5.38		1,476
0.00	(0.63)	10.19	5.41			183	0.90	+	5.15	+	158

$0.00	$(0.16)	$10.25	2.51	%	$	11	0.80	%+	3.17	%+	51	%
0.00	(0.40)	10.16	5.78			11	0.81	(k)	4.05		208
0.00	(0.06)	9.98	0.47			10	0.80	+ (d)	3.51	+	171

$0.00	$(0.23)	$10.22	4.32	%	$	2,753	0.85	%+	4.47	%+	48	%
0.00	(0.44)	10.02	10.74			1,414	0.85		4.41		306
0.00	(0.43)	9.47	(2.16	)		1,104	0.85		4.46		145
0.00	(0.40)	10.12	5.47			242	0.85	+	3.99	+	70

$0.00	$(0.20)	$10.79	3.72	%	$	997	0.85	%+	3.58	%+	35	%
0.00	(0.45)	10.60	10.21			181	0.86	(h)	4.26		257
0.00	(0.07)	10.05	2.39			10	0.85	+ (e)	3.88	+	357

$0.00	$(0.18)	$10.66	4.80	%	$	11	0.85	%+	3.44	%+	36	%
0.00	(0.74)	10.35	7.82			10	0.85	+	4.47	+	338

$0.00	$(0.22)	$10.82	3.73	%	$	117	0.85	%+	3.95	%+	106	%
0.00	(0.51)	10.64	12.44			113	0.90	(h)	4.23		973
0.00	(0.07)	9.94	2.21			10	0.87	+ (h)(f)	4.02	+	270

$0.00	$(0.33)	$10.51	4.34	%	$	270,241	0.90	%+	4.96	%+	29	%
0.00	(0.84)	10.40	13.99			57,696	0.94	(j)	7.14		202
0.00	(0.66)	9.92	7.93			15,560	0.93	(j)	6.44		253
0.00	(0.50)	9.83	5.89			193	0.92	+ (j)	4.75	+	438

$0.00	$(0.23)	$10.43	3.34	%	$	38,328	0.96	%+(c)	4.33	%+	168	%
0.00	(0.75)	10.32	10.84			26,590	0.99	(c)	5.26		417
0.00	(0.74)	10.03	1.51			9,955	1.16	(c)	5.77		330
0.00	(0.88)	10.63	6.46			8,513	0.95	+	4.82	+	376

$0.00	$(0.39)	$ 8.68	8.05	%	$	518	1.33	%+(i)	9.64	%+	531	%
0.00	(1.20)	8.40	12.58			11	1.33	(i)	9.33		902

Annualized

(c)

Ratio of expenses to average net assets excluding interest expense is 0.95%.

(d)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.29%.

(e)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.74%.

(f)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 2.52%.

(g)

Ratio of expenses to average net assets excluding interest expense is 0.75%.

(h)

Ratio of expenses to average net assets excluding interest expense is 0.85%.

(i)

Ratio of expenses to average net assets excluding interest expense is 1.25%.

(j)

Ratio of expenses to average net assets excluding interest expense is 0.90%.

(k)

Ratio of expenses to average net assets excluding interest expense is 0.80%.

Prospectus

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)(b)			Net Realized and Unrealized Gain (Loss) on Investments(b)			Total Income from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

High Yield Fund (a)
09/30/2001*	$	9.88	$	0.39		$	(0.68	)	$	(0.29	)	$	(0.39	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.22		1.52			0.99			0.53			(0.86	)		(0.01	)		0.00			0.00
03/31/2000		11.23		0.89			(1.01	)		(0.12	)		(0.88	)		(0.01	)		0.00			0.00
04/08/1998–03/31/1999		11.68		0.89			(0.45	)		0.44			(0.88	)		(0.01	)		0.00			0.00
Convertible Fund
09/30/2001*	$	11.43	$	0.07		$	(1.09	)	$	(1.02	)	$	(0.12	)	$	0.00		$	0.00		$	0.00
08/01/2000–03/31/2001		15.77		(0.05	)		(3.39	)		(3.44	)		(0.20	)		0.00			0.00			(0.70	)
Strategic Balanced Fund (a)
09/30/2001*	$	10.44	$	0.15		$	(0.51	)	$	(0.36	)	$	(0.13	)	$	0.00		$	0.00		$	0.00
03/31/2001		12.78		1.47			(2.49	)		(1.02	)		(0.63	)		0.00			0.00			(0.69	)
03/31/2000		12.75		0.71			0.47			1.18			(0.69	)		0.00			(0.15	)		(0.31	)
04/08/1998–03/31/1999		12.65		0.79			0.60			1.39			(0.62	)		0.00			(0.67	)		0.00
StocksPLUS Fund (a)
09/30/2001*	$	10.12	$	(0.04	)	$	(0.92	)	$	(0.96	)	$	(0.10	)	$	0.00		$	0.00		$	0.00
03/31/2001		14.08		(0.05	)		(2.76	)		(2.81	)		(0.24	)		0.00			0.00			(0.91	)
03/31/2000		14.27		1.04			1.29			2.33			(1.04	)		(0.97	)		(0.51	)		0.00
04/08/1998–03/31/1999		14.13		0.79			1.38			2.17			(0.79	)		0.00			(1.24	)		0.00
GNMA Fund
05/31/2001–09/30/2001*	$	10.43	$	0.21		$	0.36		$	0.57		$	(0.21	)	$	0.00		$	0.00		$	0.00

Unaudited

(a)

Commenced operations on April 8, 1998.

(b)

Per share amounts based on average number of shares outstanding during the period.


59		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital		Total Distributions		Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate


$	0.00	$	(0.39)	$	9.20	(3.01	)%	$	48,610	0.90	%+	8.05	%+	41	%
	0.00		(0.87)		9.88	5.40			32,820	0.90		15.06		53
	0.00		(0.89)		10.22	(1.14	)		23,601	0.90		8.29		39
	0.00		(0.89)		11.23	4.00			9,065	0.90	+	8.07	+	39

$	0.00	$	(0.12)	$	10.29	(9.00	)%	$	7	1.05	%+	1.20	%+	144	%
	0.00		(0.90)		11.43	(22.62	)		8	1.05	+	(0.35	)	225

$	0.00	$	(0.13)	$	9.95	(3.44	)%	$	1,283	0.65	%+	2.78	%+	11	%
	0.00		(1.32)		10.44	(8.65	)		632	0.76	(c)	12.67		651
	0.00		(1.15)		12.78	9.55			167	1.05		5.49		176
	0.00		(1.29)		12.75	11.45			173	1.05	+	6.41	+	82

$	0.00	$	(0.10)	$	9.06	(9.60	)%	$	2,476	1.05	%+	(0.69	)%+	225	%
	0.00		(1.15)		10.12	(21.27	)		2,769	1.05		(0.43	)	270
	0.00		(2.52)		14.08	17.32			3,288	1.05		7.16		92
	0.00		(2.03)		14.27	16.69			1,721	1.05	+	8.12	+	81

$	0.00	$	(0.21)	$	10.79	6.57	%	$	11	1.01	%+(d)	5.99	%+	587	%

Annualized

(c)

Effective September 29, 2000, the Strategic Balanced Fund did not incur advisory fee expenses.

(d)

Ratio of expenses to average net assets excluding interest expense is 1.00%


Prospectus		60

Appendix A

Description of Securities Ratings

High Quality Debt Securities are those rated, in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by PIMCO.

Below Investment Grade, High Yield Securities (“Junk Bonds”) are those rated lower than Baa by Moody’s or BBB by S&P and comparable securities. They are deemed to be predominately speculative with respect to the issuer’s ability to repay principal and interest.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.


A-1		PIMCO Funds: Pacific Investment Management Series

Corporate Short-Term Debt Ratings

Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Short-Term Municipal Bond Ratings

MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.

SG: This designation denotes speculative quality. Debt instruments in this category lack margins of protection.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

Prospectus A-2

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.


A-3		PIMCO Funds: Pacific Investment Management Series

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.

Prospectus A-4

PIMCO Funds: Pacific Investment Management Series

The Trust’s Statement of Additional Information (“SAI”) and annual and semi-annual reports to shareholders include additional information about the Funds. The SAI and the financial statements included in the Funds’ most recent annual report to shareholders are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Funds’ annual report discusses the market conditions and investment strategies that significantly affected each Fund’s performance during its last fiscal year.

You may get free copies of any of these materials, request other information about a Fund, or make shareholder inquiries by calling the Trust at 1-888-87-PIMCO, or by writing to:

PIMCO Funds Distributors LLC

2187 Atlantic Street

Stamford, CT 06902

You may also contact your financial service firm for details.

You may review and copy information about the Trust, including its SAI, at the Securities and Exchange Commission’s public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the Trust on the Commission’s Web site at www.sec.gov. You may get copies of this information, with payment of a duplication fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-6009, or by e-mailing your request to publicinfo@sec.gov.

You can also visit our Web site at www.pimcofunds.com for additional information about the Funds.

Investment Company File No. 811-5028

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISER AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

DISTRIBUTOR

PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT 06902-6896

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT

PFPC Inc., P.O. Box 9688, Providence, RI 02940-9688

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006-2401

For further information about the PIMCO Funds, call 1-800-426-0107 or visit our Web site at http://www.pimcofunds.com.

Not part of the prospectus

Stay connected with

www.pimcofunds.com

Fund information, manager commentary and more at www.pimcofunds.com.

Timely, user-friendly information about the PIMCO Funds is available on the PIMCO Funds Web site. We are committed to providing you with more than just the latest statistics. Visit www.pimcofunds.com to get a comprehensive look at the entire PIMCO Funds family, as well as extensive commentary and analysis from our investment professionals.

Fund Information Section

Click “Fund Information” on our Home page for current data on all of the PIMCO Funds. You will find:

n Daily share prices and year-to-date performance figures.

n Historical performance, portfolio holdings and risk analysis.

n Morningstar ratings and Lipper category rankings.

Bond Center

PIMCO Funds offers you access to some of the most respected bond managers in the country. Visit our site’s Bond Center to learn what these managers are thinking about the economy and the bond markets. You may also want to take the time to click through “About Bond Investing,” which includes more detailed discussions of investment strategies and techniques.

Manager Commentary

The site houses timely updates and analysis from our stock and bond fund managers, including:

n End-of-day reports and investment insights.

n Manager newsletters on a range of topics from global financial markets to technology to the Federal Reserve.

n Manager media appearances. You can view video clips or read transcripts.

Free E-mail Newsletters

Have any of PIMCO’s manager newsletters delivered by e-mail. If you’re already registered, click “Preferences’’ on the Home page, then “Change My Personal Information,” and check the newsletters you’d like to receive.

RCM Funds

Find out everything you need to know about the latest additions to the PIMCO Funds family: 11 RCM Funds. These domestic, international and global stock funds are managed by Dresdner RCM Global Investors, renowned experts in their field. Click on “Fund Information” on the Home page and then click on the fund name for details.

Manager appearances and other manager commentary contain the current opinions of the manager and do not represent a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice.

PZ009.4/02

Not part of the Prospectus

PIMCO Funds

Distributors LLC

2187 Atlantic Street

Stamford, CT 06902-6896

APRIL 1, 2002

PIMCO Funds Prospectus

Share Classes

A B C

SHORT DURATION BOND FUNDS Money Market Fund Short-Term Fund Low Duration Fund INTERMEDIATE DURATION BOND FUNDS Total Return Fund LONG DURATION BOND FUNDS Long-Term U.S. Government Fund INTERNATIONAL BOND FUNDS Global Bond Fund II Foreign Bond Fund Emerging Markets Bond Fund		HIGH YIELD BOND FUNDS High Yield Fund MORTGAGE-BACKED BOND FUNDS GNMA Fund Total Return Mortgage Fund INFLATION-INDEXED BOND FUNDS Real Return Fund CONVERTIBLE FUNDS Convertible Fund STOCK AND BOND FUNDS Strategic Balanced Fund ENHANCED INDEX STOCK FUNDS StocksPLUS Fund

This cover is not part of the Prospectus

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series

April 1, 2002

Share Classes A, B and C

This prospectus describes 15 mutual funds offered by PIMCO Funds: Pacific Investment Management Series. The Funds provide access to the professional investment advisory services offered by Pacific Investment Management Company LLC (“PIMCO”). As of December 31, 2001, PIMCO managed approximately $241.3 billion in assets.

This prospectus explains what you should know about the Funds before you invest. Please read it carefully.


1		PIMCO Funds: Pacific Investment Management Series

Table of Contents

Summary Information		3
Fund Summaries
Convertible Fund		5
Emerging Markets Bond Fund		7
Foreign Bond Fund		9
Global Bond Fund II		11
GNMA Fund		13
High Yield Fund		15
Long-Term U.S. Government Fund		17
Low Duration Fund		19
Money Market Fund		21
Real Return Fund		23
Short-Term Fund		25
StocksPLUS Fund		27
Strategic Balanced Fund		29
Total Return Fund		31
Total Return Mortgage Fund		33
Summary of Principal Risks		35
Management of the Funds		37
Investment Options		40
How Fund Shares are Priced		44
How to Buy and Sell Shares		45
Fund Distributions		48
Tax Consequences		49
Characteristics and Risks of Securities and Investment Techniques		50
Financial Highlights		59
Appendix A—Description of Securities Ratings		A-1


Prospectus		2

Summary Information

		Main Investments	Duration	Credit Quality(1)	Non-U.S. Dollar Denominated Securities(2)


Short Duration Bond Funds	Money Market	Money market instruments	£ 90 days dollar- weighted average maturity	Min 95% Aaa or Prime 1; £ 5% Aa or Prime 2	0%


	Short-Term	Money market instruments and short maturity fixed income securities	0–1 year	B to Aaa; max 10% below Baa	0–5%(3)


	Low Duration	Short maturity fixed income securities	1–3 years	B to Aaa; max 10% below Baa	0–20%(3)


Intermediate Duration Bond Funds	Total Return	Intermediate maturity fixed income securities	3–6 years	B to Aaa; max 10% below Baa	0–20%(3)


Long Duration Bond Funds	Long-Term U.S. Government	Long-term maturity fixed income securities	³ 8 years	A to Aaa	0%


International Bond Funds	Global Bond II	U.S. and hedged non-U.S. intermediate maturity fixed income securities	3–7 years	B to Aaa; max 10% below Baa	25–75%(5)


	Foreign Bond	Intermediate maturity hedged non-U.S. fixed income securities	3–7 years	B to Aaa; max 10% below Baa	³ 85%(5)


	Emerging Markets Bond	Emerging market fixed income securities	0–8 years	Max 15% below B	³ 80%(5)


High Yield Bond Funds	High Yield	Higher yielding fixed income securities	2–6 years	B to Aaa; min 65% below Baa	0–15%(4)


Mortgage-Backed Bond Funds	GNMA Fund	Short to intermediate maturity mortgage-related fixed income securities issued by the Government National Mortgage Association	1–7 years	Baa to Aaa; max 10% below Aaa	0%


	Total Return Mortgage	Short to intermediate maturity mortgage-related fixed income securities	1–7 years	Baa to Aaa; max 10% below Aaa	0%


Inflation-Indexed Bond Funds	Real Return	Inflation-indexed fixed income securities	+/– 2 years of its Index	B to Aaa; max 10% below Baa	0–20%(3)


Convertible Funds	Convertible	Convertible securities	N/A	Caa to Aaa; max 40% below Baa and 10% below B	0–20%(3)


Stock and Bond Funds	Strategic Balanced	45–75% in the StocksPLUS Fund; 25–55% in the Total Return Fund	0–6 years(6)	B to Aaa; max 10% below Baa(6)	0–20%(3)(6)


Enhanced Index Stock Funds	StocksPLUS	S&P 500 stock index derivatives backed by a portfolio of short-term fixed-income securities	0–1 year	B to Aaa; max 10% below Baa	0–20%(3)

(1)

As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

(2)

Each Fund (except the Long-Term U.S. Government Fund) may invest beyond these limits in U.S. dollar-denominated securities of non-U.S. issuers.

(3)

The percentage limitation relates to non-U.S. dollar-denominated securities.

(4)

The percentage limitation relates to euro-denominated securities.

(5)

The percentage limitation relates to securities of foreign issuers denominated in any currency.

(6)

The Fund does not invest in securities directly, but in other PIMCO Funds with these characteristics.


3		PIMCO Funds: Pacific Investment Management Series

Summary Information (continued)

Fixed Income Instruments

The “Fixed Income Funds” are the Money Market, Short-Term, Low Duration, GNMA, Total Return, Total Return Mortgage, Long-Term U.S. Government, Real Return, Global Bond II, Foreign Bond, Emerging Markets Bond and High Yield Funds. Each Fixed Income Fund differs from the others primarily in the length of the Fund’s duration or the proportion of its investments in certain types of fixed income securities. Each Fixed Income Fund invests at least 65% of its assets in “Fixed Income Instruments,” which as used in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.

Duration

Credit Ratings

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Descriptions, Performance and Fees

It is possible to lose money on investments in the Funds.

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		4

PIMCO Convertible Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with prudent

investment management

Fund Category

Convertible

Fund Focus

Convertible securities

Average Portfolio Duration

N/A

Credit Quality

Caa to Aaa; maximum 40% below Baa

and 10% below B

Dividend Frequency

Declared and distributed quarterly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of convertible securities. Convertible securities, which are issued by companies of all sizes and market capitalizations include, but are not limited to: corporate bonds, debentures, notes or preferred stocks and their hybrids that can be converted into (exchanged for) common stock or other securities, such as warrants or options, which provide an opportunity for equity participation. The Fund may invest in securities of any market capitalization, and may from time to time invest a significant amount of its assets in securities of smaller companies.

The Fund may invest all of its assets in derivative instruments, such as options, futures contracts or swap agreements, and may invest in asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Derivatives Risk

• Smaller Company Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflect the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (5/28/99), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


5		PIMCO Funds: Pacific Investment Management Series

PIMCO Convertible Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/00–3/31/00)	13.24%

	Lowest (1/1/01–3/31/01)	-11.78%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (3/31/99)

Class A	-17.39%	5.57%

Class B	-18.44%	5.51%

Class C	-15.19%	6.52%

First Boston Convertible Bond Index(1)	-6.45%	6.22%

Lipper Convertible Securities Fund Avg(2)	-7.69%	6.30%

(1)

The First Boston Convertible Bond Index is an unmanaged marked index comprised of convertible bonds. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1.0%(1)

Class B	None	5.0%(2)

Class C	None	1.0%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

The maximum CDSC is imposed on shares redeemed in the first year. For shares held longer than one year, the CDSC declines according to the schedule set forth under “Investment Options—Class A, B and C Shares—Contingent Deferred Sales Charges (CDSCs)—Class B Shares.”

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.40%	0.25%	0.41%	1.06%

Class B	0.40	1.00	0.41	1.81

Class C	0.40	1.00	0.40	1.80

(1)

Due to the 12b-1 distribution fee imposed on Class B and Class C shares, a Class B or Class C shareholder may, depending upon the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the National Association of Securities Dealers, Inc.

(2)

Other Expenses reflect an Administrative Fee of 0.40% paid by each class and interest expense attributable to Class A and Class B. Total Annual Fund Operating Expenses excluding interest expense is 1.05% for Class A and 1.80% for Class B. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Class A, B or C shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$553	$772	$1,008	$1,686	$553	$772	$1,008	$1,686

Class B	684	869	1,180	1,928*	184	569	980	1,928*

Class C	283	566	975	2,116	183	566	975	2,116

For Class B shares purchased prior to January 1, 2002, this amount is $1,833.


Prospectus		6

PIMCO Emerging Markets Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

International Bond

Fund Focus

Emerging market fixed income securities

Average Portfolio Duration

0-8 years

Credit Quality

Maximum 15% below B

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in Fixed Income Instruments of issuers that economically are tied to countries with emerging securities markets. Such securities may be denominated in non-U.S. currencies and the U.S. dollar. A security is economically tied to an emerging market country if it is principally traded on the country’s securities markets, or the issuer is organized or principally operates in the country, derives a majority of its income from its operations within the country, or has a majority of its assets in the country. The average portfolio duration of the Fund varies based on PIMCO’s forecast for interest rates and, under normal market conditions, is not expected to exceed eight years.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• High Yield Risk

• Emerging Markets Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


7		PIMCO Funds: Pacific Investment Management Series

PIMCO Emerging Markets Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/01–12/31/01)	12.98%

	Lowest (7/1/98–9/30/98)	-21.14%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class A	21.87%	9.54%

Class B	21.69%	9.54%

Class C	25.70%	9.88%

J.P. Morgan Emerging Markets Bond Index Plus(1)	-0.77%	4.58%

Lipper Emerging Market Debt Fund Avg(2)	11.53%	3.34%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:


Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.45%	0.25%	0.64%	1.34%

Class B	0.45	1.00	0.64	2.09

Class C	0.45	1.00	0.63	2.08

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.55% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 1.25% for Class A and 2.00% for Class B and Class C. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Class A, B or C shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10


Class B	$580	$855	$1,151	$1,990	$580	$855	$1,151	$1,990

Class C	712	955	1,324	2,227*	212	655	1,124	2,227*

Class D	311	652	1,119	2,410	211	652	1,119	2,410

For Class B shares purchased prior to January 1, 2002, this amount is $2,134.


Prospectus		8

PIMCO Foreign Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

International Bond

Fund Focus

Intermediate maturity hedged non-U.S. fixed income securities

Average Portfolio Maturity

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

PIMCO selects the Fund’s foreign country and currency compositions based on an evaluation of various factors, including, but not limited to relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. The average portfolio duration of the Fund normally varies within a three- to seven-year time frame. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/20/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


9		PIMCO Funds: Pacific Investment Management Series

PIMCO Foreign Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/95–12/31/95)	7.12%

	Lowest (1/1/94–3/31/94)	-4.32%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/2/92)(3)

Class A	3.60%	6.47%	8.65%

Class B	2.67%	6.34%	8.59%

Class C	6.67%	6.65%	8.39%

J.P. Morgan Non-U.S. Index (Hedged)(1)	6.05%	8.27%	8.83%

Lipper International Income Fund Avg(2)	0.66%	2.00%	5.70%

(1)

(2)

The Lipper International Income Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest primarily in U.S. dollar and non-U.S dollar debt securities of issuers located in at least three countries, excluding the United States, except in periods of market weakness. It does not take into account sales charges.

(3)

The Fund commenced operations 12/2/92. Index comparisons begin on 11/30/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Continget Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.49%	0.99%

Class B	0.25	1.00	0.49	1.74

Class C	0.25	1.00	0.49	1.74

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.45% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.95% for Class A and 1.70% for Class B and Class C. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Class A, B or C shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$546	$751	$ 972	$1,608	$546	$751	$972	$1,608

Class B	677	848	1,144	1,851*	177	548	944	1,851*

Class C	277	548	944	2,052	177	548	944	2,052

For Class B shares purchased prior to January 1, 2002, this amount is $1,756.


Prospectus		10

PIMCO Global Bond Fund II

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital

Fund Category

International Bond

Fund Focus

U.S. and hedged foreign intermediate maturity fixed income securities

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

PIMCO selects the Fund’s foreign country and currency compositions based on an evaluation of various factors, including, but not limited to relative interest rates, exchange rates, monetary and fiscal policies, trade and current account balances. Investments in the securities of issuers located outside the United States will normally vary between 25% and 75% of the Fund’s assets. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame. The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Foreign Investment Risk

• Currency Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Mortgage Risk

• Derivatives Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


11		PIMCO Funds: Pacific Investment Management Series

PIMCO Global Bond Fund II (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (07/01/96–09/30/96)	5.29%

	Lowest (04/01/99–06/30/99)	-1.82%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Year	Fund Inception (10/2/95)(3)

Class A	5.42%	5.88%	7.77%

Class B	4.56%	5.77%	7.74%

Class C	8.56%	6.06%	7.74%

J.P. Morgan Global Index (Hedged)(1)	6.15%	7.94%	8.44%

Lipper Global Income Fund Avg(2)	2.70%	2.87%	4.36%

(1)

(2)

(3)

The Fund commenced operations on 10/2/95. Index comparisons begin on 9/30/95.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.48%	0.98%

Class B	0.25	1.00	0.48	1.73

Class C	0.25	1.00	0.48	1.73

(1)

(2)

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$545	$748	$ 967	$1,597	$545	$748	$967	$1,597

Class B	676	845	1,139	1,840*	176	545	939	1,840*

Class C	276	545	939	2,041	176	545	939	2,041

For Class B shares purchased prior to January 1, 2002, this amount is $1,745.


Prospectus		12

PIMCO GNMA Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return,

consistent with preservation of capital

and prudent investment management

Fund Category

Mortgage-Backed Bond

Fund Focus

Short to intermediate maturity mortgage-related fixed income securities

Average Portfolio Duration

1-7 years

Credit Quality

Baa to Aaa; maximum 10% below Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• Derivatives Risk

• Mortgage Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A shares (11/30/00), Class B and C shares (5/31/01), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


13		PIMCO Funds: Pacific Investment Management Series

PIMCO GNMA Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (07/1/01–09/30/01)	4.55%

	Lowest (10/1/99–12/31/99)	-0.58%
(Calendar Year End through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class A	6.68%	6.82%

Class B	5.74%	6.73%

Class C	9.79%	7.10%

Lehman Brothers GNMA Index(1)	8.23%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.35%	6.20%

(1)

The Lehman Brothers GNMA Index is an unmanaged index of mortgage-backed pass-through securities of the Government National Mortgage Association (GNMA).

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1.0%(1)

Class B	None	5.0%(2)

Class C	None	1.0%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.50%	1.00%

Class B	0.25	1.00	0.50	1.75

Class C	0.25	1.00	0.50	1.75

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.50%.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$547	$754	$ 978	$1,620	$547	$754	$978	$1,620

Class B	678	851	1,149	1,862*	178	551	949	1,862*

Class C	278	551	949	2,062	178	551	949	2,062

For Class B shares purchased prior to January 1, 2002, this amount is $1,767.


Prospectus		14

PIMCO High Yield Fund

Principal

Investments and Strategies

Investment Objective

Seeks maximum total return, consistent

with preservation of capital and prudent investment management

Fund Category

High Yield Bond

Fund Focus

Higher yielding fixed income securities

Average Portfolio Duration

2-6 years

Credit Quality

B to Aaa; minimum 65% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund may invest up to 25% of its assets in derivative instruments, such as options, futures contracts or swap agreements. The Fund may invest all of its assets in mortgage- or asset-backed securities. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase, and sale contracts or by using other investment techniques (such as buy backs or dollar rolls). The “total return” sought by the Fund consists of income earned on the Fund’s investments, plus capital appreciation, if any, which generally arises from decreases in interest rates or improving credit fundamentals for a particular sector or security.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• High Yield Risk

• Market Risk

• Issuer Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/13/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


15		PIMCO Funds: Pacific Investment Management Series

PIMCO High Yield Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/93–3/31/93)	6.17%

	Lowest (1/1/00–3/31/00)	-2.28%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (12/15/92)(4)

Class A	-0.11%	3.95%	7.75%

Class B	-1.01%	3.84%	7.69%

Class C	2.85%	4.13%	7.52%

Lehman Brothers Intermediate BB US High Yield Index(1)	10.16%	6.55%	8.41%

Merrill Lynch U.S. High Yield BB-B Rated Index(2)	5.46%	4.01%	7.19%

Lipper High Current Yield Fund Avg(3)	1.79%	1.39%	5.41%

(1)

(2)

(3)

(4)

The Fund commenced operations on 12/15/92. Index comparisons begin on 12/31/92.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.40%	0.90%

Class B	0.25	1.00	0.40	1.65

Class C	0.25	1.00	0.40	1.65

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40%.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$538	$724	$ 926	$1,508	$538	$724	$926	$1,508

Class B	668	820	1,097	1,753*	168	520	897	1,753*

Class C	268	520	897	1,955	168	520	897	1,955

For Class B shares purchased prior to January 1, 2002, this amount is $1,657.


Prospectus		16

PIMCO Long-Term U.S. Government Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return,

consistent with preservation of

capital and prudent investment management

Fund Category

Long Duration Bond

Fund Focus

Long-term maturity fixed income securities

Average Portfolio Duration

³ 8 years

Credit Quality

A to Aaa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of fixed income securities that are issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”). Assets not invested in U.S. Government Securities may be invested in other types of Fixed Income Instruments. The Fund also may obtain exposure to U.S. Government Securities through the use of futures contracts (including related options) with respect to such securities, and options on such securities, when PIMCO deems it appropriate to do so. While PIMCO may invest in derivatives any time it deems appropriate, it will generally do so when it believes that U.S. Government Securities are overvalued relative to derivative instruments. This Fund will normally have a minimum average portfolio duration of eight years. For point of reference, the dollar-weighted average portfolio maturity of the Fund is normally expected to be more than ten years.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/20/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


17		PIMCO Funds: Pacific Investment Management Series

PIMCO Long-Term U.S. Government Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4/1/95–6/30/95)	10.66%

	Lowest (1/1/96–3/31/96)	-6.35%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	0.37%	7.38%	8.61%

Class B	-0.49%	7.25%	8.55%

Class C	3.37%	7.57%	8.32%

Lehman Long-Term Treasury Index(1)	4.22%	8.36%	8.51%

Lipper General U.S. Government Fund Avg(2)	6.17%	6.35%	6.27%

(1)

The Lehman Long-Term Treasury Index is an unmanaged index of U.S. Treasury issues with maturities greater than 10 years. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.47%	0.97%

Class B	0.25	1.00	0.45	1.70

Class C	0.25	1.00	0.46	1.71

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.90% for Class A and 1.65% for Class B and Class C. Interest expense is generally incurred as a result of investment management activities.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$545	$745	$ 962	$1,586	$545	$745	$962	$1,586

Class B	673	836	1,123	1,813*	173	536	923	1,813*

Class C	274	539	928	2,019	174	539	928	2,019

For Class B shares purchased prior to January 1, 2002, this amount is $1,720.


Prospectus		18

PIMCO Low Duration Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent

investment management

Fund Category

Short Duration Bond

Fund Focus

Short maturity fixed income securities

Average Portfolio Duration

1-3 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/13/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


19		PIMCO Funds: Pacific Investment Management Series

PIMCO Low Duration Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (04/1/95–06/30/95)	3.51%

	Lowest (1/1/94–3/31/94)	-0.44%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	4.27%	5.65%	5.96%

Class B	1.69%	5.18%	5.73%

Class C	5.96%	5.78%	5.77%

Merrill Lynch 1-3 Year Treasury Index(1)	8.30%	6.59%	6.09%

Lipper Short Investment Grade Debt Fund Avg(2)	7.24%	5.92%	5.63%

(1)

The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index of U.S Treasury obligations having maturities from one to 2.99 years. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	0.75%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.46%	0.96%

Class B	0.25	1.00	0.46	1.71

Class C	0.25	0.75	0.46	1.46

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.90% for Class A, 1.65% for Class B and 1.40% for Class C. Interest expense is generally incurred as a result of investment management activities.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$395	$597	$ 815	$1,443	$395	$597	$815	$1,443

Class B	674	839	1,128	1,819*	174	539	928	1,819*

Class C	249	462	797	1,746	149	462	797	1,746

For Class B shares purchased prior to January 1, 2002, this amount is $1,723.


Prospectus		20

PIMCO Money Market Fund


Principal Investments and Strategies		Investment Objective Seeks maximum current income, consistent with preservation of capital and daily liquidity Fund Category Short Duration Bond		Fund Focus Money market instruments Average Portfolio Maturity £ 90 days dollar-weighted average maturity		Credit Quality Minimum 95% rated Aaa or Prime 1; £ 5% Aa or Prime 2 Dividend Frequency Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing at least 95% of its assets in a diversified portfolio of money market securities that are in the highest rating category for short-term obligations. The Fund also may invest up to 5% of its assets in money market securities that are in the second-highest rating category for short-term obligations. The Fund may only invest in U.S. dollar-denominated securities that mature in 397 days or fewer from the date of purchase. The dollar-weighted average portfolio maturity of the Fund may not exceed 90 days. The Fund attempts to maintain a stable net asset value of $1.00 per share, although there is no assurance that it will be successful in doing so.

The Fund may invest in the following: obligations of the U.S. Government (including its agencies and instrumentalities); short-term corporate debt securities of domestic and foreign corporations; obligations of domestic and foreign commercial banks, savings banks, and savings and loan associations; and commercial paper. The Fund may invest more than 25% of its assets in securities or obligations issued by U.S. banks. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions in order to earn income.

The Fund’s investments will comply with applicable rules governing the quality, maturity and diversification of securities held by money market funds.

Principal Risks

• Interest Rate Risk

• Credit Risk

• Management Risk

• Market Risk

• Issuer Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/13/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. To obtain the Fund’s current yield, call 1-800-927-4648. Past performance is no guarantee of future results.


21		PIMCO Funds: Pacific Investment Management Series

PIMCO Money Market Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/95–12/31/95)	1.65%

	Lowest (10/1/01–12/31/01)	0.50%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	3.69%	4.84%	4.44%

Class B	2.76%	3.96%	3.53%

Class C	3.69%	4.88%	4.46%

Salomon Brothers 3-month Treasury Bill Index(1)	4.09%	5.01%	4.69%

Lipper Money Market Fund Avg(2)	3.44%	4.71%	4.40%

(1)

The Salomon Brothers 3-month Treasury Bill Index is an unmanaged index representing monthly return equivalents of yield averages of the last 3 month Treasury Bill issues. It is not possible to invest directly in the index.

(2)

The Lipper Money Market Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest in high quality financial instruments (rated in the top two grades) with dollar-weighted average maturities of less than 90 days. It does not take into account sales charges.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	None(1)	None

Class B	None	None(2)

Class C	None	None

(1)

Regular sales charges apply when Class A shares of the Money Market Fund (on which no sales charge was paid at the time of purchase) are exchanged for shares of any other Fund.

(2)

Class B shares are available only through exchanges of Class B shares of other Funds.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.15%	0.10%	0.35%	0.60%

Class B	0.15	1.00	0.35	1.50

Class C	0.15	0.10	0.35	0.60

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.35%.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$ 61	$192	$ 335	$ 750	$ 61	$192	$335	$ 750

Class B	653	774	1,018	1,545*	153	474	818	1,545*

Class C	161	192	335	750	61	192	335	750

For Class B shares purchased prior to January 1, 2002, this amount is $1,429.


Prospectus		22

PIMCO Real Return Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum real return, consistent with preservation of real capital and prudent investment management

Fund Category

Inflation-Indexed Bond

Fund Focus

Inflation-indexed fixed income securities

Average Portfolio Duration

± 2 years of its Index

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P or, if unrated, determined by PIMCO to be of comparable quality. The Fund also may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates. The Fund is non-diversified, which means that it may concentrate its assets in a smaller number of issuers than a diversified Fund.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Issuer Non-Diversification Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

• Mortgage Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information


23		PIMCO Funds: Pacific Investment Management Series

PIMCO Real Return Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/01–3/31/01)	5.18%

	Lowest (10/1/01–12/31/01)	-1.37%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (1/29/97)(3)

Class A	4.99%	6.40%

Class B	2.41%	5.96%

Class C	6.70%	6.53%

Lehman Global Real: U.S. TIPS Index(1)	7.90%	5.98%

Lipper Intermediate U.S Treasury Fund Avg(2)	7.43%	6.59%

(1)

The Lehman Global Real: U.S. TIPS Index is an unmanaged index consisting of the U.S. Treasury Inflation Protected Securities market. It is not possible to invest directly in the index.

(2)

(3)

The Fund began operations on 1/29/97. Index comparisons began on 1/31/97.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.44%	0.94%

Class B	0.25	1.00	0.44	1.69

Class C	0.25	0.75	0.44	1.44

(1)

(2)

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$393	$591	$ 804	$1,420	$393	$591	$804	$1,420

Class B	672	833	1,118	1,797*	172	533	918	1,797*

Class C	247	456	787	1,724	147	456	787	1,724

For Class B shares purchased prior to January 1, 2002, this amount is $1,701.


Prospectus		24

PIMCO Short-Term Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum current income, consistent with preservation of capital and daily liquidity

Fund Category

Short Duration Bond

Fund Focus

Money market instruments and short maturity fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its assets in a diversified portfolio of Fixed Income Instruments of varying maturities. The average portfolio duration of this Fund normally does not exceed one year. For point of reference, the dollar-weighted average portfolio maturity of the Fund is normally not expected to exceed three years.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/20/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


25		PIMCO Funds: Pacific Investment Management Series

PIMCO Short-Term Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/95–12/31/95)	2.49%

	Lowest (1/1/94–3/31/94)	0.10%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	3.12%	5.23%	5.13%

Class B	-0.55%	4.58%	4.80%

Class C	3.90%	5.35%	5.03%

Salomon Brothers 3-month Treasury Bill Index(1)	4.09%	5.01%	4.69%

Lipper Ultra-short Obligations Fund Avg(2)	5.30%	5.57%	5.15%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	2%	0.50%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

Class B shares are available only through exchanges of Class B shares of other Funds. The maximum CDSC is imposed on shares redeemed in the first year. For shares held longer than one year, the CDSC declines according to the schedule set forth under “Investment Options—Class A, B and C Shares—Contingent Deferred Sales Charges (CDSCs)—Class B Shares.”

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.91%	1.41%

Class B	0.25	1.00	0.90	2.15

Class C	0.25	0.55	0.90	1.70

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.35% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.85% for Class A, 1.60% for Class B and 1.15% for Class C. Interest expense is generally incurred as a result of investment management activities.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$341	$637	$ 956	$1,857	$341	$637	$ 956	$1,857

Class B	718	973	1,354	2,292*	218	673	1,154	2,292*

Class C	273	536	923	2,009	173	536	923	2,009

For Class B shares purchased prior to January 1, 2002, this amount is $2,201.


Prospectus		26

PIMCO StocksPLUS Fund

Principal

Investments and

Strategies

Investment Objective

Seeks total return which exceeds that of the S&P 500

Fund Category

Enhanced Index Stock

Fund Focus

S&P 500 stock index derivatives backed by a portfolio of short-term fixed income securities

Average Portfolio Duration

0-1 year

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared and distributed quarterly

Principal Risks

• Market Risk

• Issuer Risk

• Derivatives Risk

• Credit Risk

• Interest Rate Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risk of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A Shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/20/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


27		PIMCO Funds: Pacific Investment Management Series

PIMCO StocksPLUS Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/98–12/31/98)	21.23%

	Lowest (7/1/01–9/30/01)	-14.96%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (5/13/93)(3)

Class A	-14.80%	9.49%	13.59%

Class B	-17.12%	9.09%	13.31%

Class C	-13.50%	9.62%	13.42%

S&P 500 Index(1)	-11.88%	10.70%	13.85%

Lipper Large-Cap Core Fund Average(2)	-13.83%	8.13%	11.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

The Lipper Large-Cap Core Fund Average is a total return performance average of Funds tracked by Lipper, Inc. that invest at least 75% of their equity assets in companies with market capitalization (on a 3 year weighted basis) of greater than 300% of the dollar weighted median market capitalization of the S&P 400 Mid-Cap Index. It does not take into account sales charges.

(3)

The Fund began operations on 5/13/93. Index comparisons began on 4/30/93.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.40%	0.25%	0.40%	1.05%

Class B	0.40	1.00	0.40	1.80

Class C	0.40	0.75	0.40	1.55

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40%.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$404	$624	$ 862	$1,544	$404	$624	$862	$1,544

Class B	683	866	1,175	1,917*	183	566	975	1,917*

Class C	258	490	845	1,845	158	490	845	1,845

* For

Class B shares purchased prior to January 1, 2002, this amount is $1,822.


Prospectus		28

PIMCO Strategic Balanced Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

Stock and Bond

Fund Focus

45-75% StocksPLUS Fund;

25-55% Total Return Fund

Average Portfolio Duration

(of Underlying Funds)

0-6 years

Credit Quality

(of Underlying Funds)

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared and distributed quarterly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect the net asset value, yield and total return of the Fund, are:

• Allocation Risk

• Underlying Fund Risk

Among the principal risks of investing in the Underlying Funds, and consequently the Fund, which could adversely affect the net asset value, yield and total return of the Fund, are:

• Market Risk

• Issuer Risk

• Interest Rate Risk

• Credit Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Currency Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks associated with the Underlying Funds and an investment in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of broad-based securities market indices and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (5/28/99), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results, and the Fund achieved the performance track record shown during a period when it pursued its investment objective using different investment strategies.


29		PIMCO Funds: Pacific Investment Management Series

PIMCO Strategic Balanced Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (4/1/97–6/30/97)	12.12%

	Lowest (7/1/01–9/30/01)	-6.67%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	Fund Inception (6/28/96)(4)

Class A	-7.73%	8.11%	9.21%

Class B	-8.85%	8.02%	9.19%

Class C	-5.04%	8.28%	9.29%

S&P 500 Index(1)	-11.88%	10.70%	11.90%

S&P 500 and Lehman Brothers Aggregate Bond Index Blend(2)	-3.71%	9.81%	10.60%

Lipper Balanced Fund Average(3)	-4.38%	7.65%	8.52%

(1)

The Standard & Poor’s 500 Composite Stock Price Index is an unmanaged index of common stocks. It is not possible to invest directly in the index.

(2)

The index used for the Fund is a static blend consisting 60% of the S&P 500 Composite Stock Price Index and 40% of The Lehman Brothers Aggregate Bond Index. This blended index reflects the Fund’s investment strategy more accurately than the S&P 500 Index. It is not possible to invest directly in the index.

(3)

(4)

The Fund commenced operations on 6/28/96. Index comparisons begin on 6/30/96.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1.0%(1)

Class B	None	5.0%(2)

Class C	None	1.0%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Underlying Fund Expenses(3)	Total Annual Fund Operating Expenses

Class A	None	0.25%	0.40%	0.59%	1.24%

Class B	None	1.00	0.40	0.59	1.99

Class C	None	1.00	0.40	0.59	1.99

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40%.

(3)

Underlying Fund Expenses for the Fund are estimated based upon a 60%/40% allocation of the Fund’s assets between the StocksPLUS and Total Return Funds and upon the total annual operating expenses of the Institutional Class Shares of these Underlying Funds. Underlying Fund Expenses will vary with changes in the expenses of the Underlying Funds, as well as allocation of the Fund’s assets, and may be higher or lower than those shown above. For a listing of the expenses associated with each Underlying Fund for the most recent fiscal year, please see the Fund Summaries of the Underlying Funds.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$571	$826	$1,100	$1,882	$571	$826	$1,100	$1,882

Class B	702	924	1,273	2,121*	202	624	1,073	2,121*

Class C	302	624	1,073	2,317	202	624	1,073	2,317

* For

Class B shares purchased prior to January 1, 2002, this amount is $2,027.


Prospectus		30

PIMCO Total Return Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

Intermediate Duration Bond

Fund Focus

Intermediate maturity fixed income securities

Average Portfolio Duration

3-6 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (1/13/97), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


31		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	6.37%

	Lowest (1/1/94–3/31/94)	-2.80%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	4.08%	6.66%	7.26%

Class B	3.17%	6.54%	7.21%

Class C	7.17%	6.85%	6.98%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1.0%(1)

Class B	None	5.0%(2)

Class C	None	1.0%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.46%	0.96%

Class B	0.25	1.00	0.45	1.70

Class C	0.25	1.00	0.46	1.71

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.90% for Class A, and 1.65% for Class B and Class C. Interest expense is generally incurred as a result of investment management activities.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$544	$742	$ 957	$1,575	$544	$742	$957	$1,575

Class B	673	836	1,123	1,810*	173	536	923	1,810*

Class C	274	539	928	2,019	174	539	928	2,019

For Class B shares purchased prior to January 1, 2002, this amount is $1,716.


Prospectus		32

PIMCO Total Return Mortgage Fund

Principal

Investments and

Strategies

Investment Objective

Seeks maximum total return, consistent with preservation of capital and prudent investment management

Fund Category

Mortgage-Backed Bond

Fund Focus

Short to intermediate maturity mortgage-related fixed income

securities

Average Portfolio Duration

1-7 years

Credit Quality

Baa to Aaa; maximum 10% below Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Mortgage Risk

• Derivatives Risk

• Liquidity Risk

• Foreign Investment Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (7/31/00), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


33		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Mortgage Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	4.56%

	Lowest (4/1/99–6/30/99)	-0.23%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (7/31/97)

Class A	4.68%	6.76%

Class B	3.71%	6.71%

Class C	7.72%	7.06%

Lehman Brothers Mortgage Index(1)	8.22%	7.12%

Lipper U.S. Mortgage Fund Avg(2)	7.63%	6.28%

(1)

The Lehman Brothers Mortgage Index is an unmanaged index of mortgage-related fixed income securities. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	4.5%	1.0%(1)

Class B	None	5.0%(2)

Class C	None	1.0%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.40%	0.90%

Class B	0.25	1.00	0.40	1.65

Class C	0.25	1.00	0.40	1.65

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.40%.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$538	$724	$ 926	$1,508	$538	$724	$926	$1,508

Class B	668	820	1,097	1,753*	168	520	897	1,753*

Class C	268	520	897	1,955	168	520	897	1,955

For Class B shares purchased prior to January 1, 2002, this amount is $1,657.


Prospectus		34

Summary of Principal Risks

The value of your investment in a Fund changes with the values of that Fund’s investments. Many factors can affect those values. The factors that are most likely to have a material effect on a particular Fund’s portfolio as a whole are called “principal risks.” The principal risks of each Fund are identified in the Fund Summaries and are described in this section. Each Fund may be subject to additional principal risks and risks other than those described below because the types of investments made by a Fund can change over time. Securities and investment techniques mentioned in this summary and described in greater detail under “Characteristics and Risks of Securities and Investment Techniques” appear in bold type. That section and “Investment Objectives and Policies” in the Statement of Additional Information also include more information about the Funds, their investments and the related risks. There is no guarantee that the Fund will be able to achieve its investment objective.

Interest Rate Risk

Credit Risk

A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.

High Yield Risk

Market Risk

Issuer Risk

Liquidity Risk

Derivatives Risk


35		PIMCO Funds: Pacific Investment Management Series

Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. A Fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Mortgage Risk

Foreign (Non-U.S.) Investment Risk

Emerging Markets Risks

Currency Risk

Funds that invest directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the U.S. or abroad. As a result, the Fund’s investments in foreign currency-denominated securities may reduce the returns of the Fund.

Issuer Non-Diversification Risk

Focusing investments in a small number of issuers, industries or foreign currencies increases risk. Funds that are “non-diversified” may invest a greater percentage of their assets in the securities of a single issuer than Funds that are “diversified.” Funds that invest in a relatively small number of issuers are more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. Some of those issuers also may present substantial credit or other risks. Similarly, a Fund may be more sensitive to adverse economic, business or political developments if it invests a substantial portion of its assets in the bonds of similar projects or from issuers in a single state.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.


Prospectus		36

Smaller Company Risk

Management Risk

Allocation Risk

Underlying Fund Risks

Management of the Funds

Investment Adviser and Administrator

Advisory Fees

Each Fund pays PIMCO fees in return for providing investment advisory services. For the fiscal year ended March 31, 2001, the Funds paid monthly advisory fees to PIMCO at the following annual rates (stated as a percentage of the average daily net assets of each Fund taken separately):

Fund		Advisory Fees

Money Market Fund		0.15%
Foreign Bond, Global Bond II, GNMA, High Yield, Long-Term U.S. Government, Low Duration, Real Return, Short-Term, Total Return and Total Return Mortgage Funds		0.25%
StocksPLUS, Convertible and Strategic Balanced* Funds		0.40%
Emerging Markets Bond Fund		0.45%

Effective September 29, 2000, the advisory fee for the Strategic Balanced Fund was reduced to an annual rate of 0.00%.


37		PIMCO Funds: Pacific Investment Management Series

Administrative Fees

Each Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Class A, Class B and Class C shareholders of each Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides or procures administrative services for Class A, Class B and Class C shareholders and also bears the costs of various third-party services required by the Funds, including audit, custodial, portfolio accounting, legal, transfer agency and printing costs.

Fund	Administrative Fees

Money Market and Short-Term Funds	0.35	%
High Yield, Long-Term U.S. Government, Low Duration, Real Return, StocksPLUS, Convertible, Strategic Balanced, Total Return and Total Return Mortgage Funds	0.40	%
Foreign Bond and Global Bond II Funds	0.45	%
GNMA Fund	0.50	%
Emerging Markets Bond Fund	0.55	%

Strategic Balanced Fund Fees

The Fund pays administrative fees to PIMCO at an annual rate of 0.40% based on the average daily net assets attributable in the aggregate to the Fund’s Class A, Class B and Class C shares. The Fund also indirectly pays its proportionate share of the administrative fees charged by PIMCO to the Underlying Funds in which the Fund invests.

The Strategic Balanced Fund is structured in the following ways to lessen the impact of expenses incurred at the Underlying Fund level:

•

The Fund does not pay any fees for asset allocation or advisory services under the Trust’s investment advisory agreement.

•

PIMCO has broad discretion to allocate and reallocate the Fund’s assets among the Underlying Funds consistent with the Fund’s investment objective and policies and asset allocation targets and ranges. Although PIMCO does not charge an investment advisory fee for its asset allocation services, PIMCO indirectly receives fees (including investment advisory and administrative fees) from the Underlying Funds in which the Fund invests. In this regard, PIMCO has a financial incentive to invest the Fund’s assets in Underlying Funds with higher fees than other Funds, even if it believes that alternative investments would better serve the Fund’s investment program. PIMCO is legally obligated to disregard that incentive in making asset allocation decisions for the Fund. The Trustees and officers of the Trust may also have conflicting interests in fulfilling their fiduciary duties to both the Fund and the Underlying Funds of the Trust.


Prospectus		38

Individual Portfolio Managers

The following individuals have primary responsibility for managing each of the noted Funds.

Fund	Portfolio Manager	Since	Recent Professional Experience

Convertible	Sandra K. Harris	4/99*	Senior Vice President, PIMCO. She joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO in 1999, she was associated with Nicholas-Applegate Capital Management where she was a Convertible Securities Portfolio Manager from 1995-1999.

Emerging Markets Bond	Mohamed A. El-Erian	8/99	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1999. Prior to joining PIMCO, he was a Managing Director from 1998-1999 for Salomon Smith Barney/Citibank where he was head of emerging markets research. Prior to that he was associated with the International Monetary Fund as a Deputy Director and Advisor from 1983-1998.

Foreign Bond Global Bond II	Sudi Mariappa	11/00 11/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to joining PIMCO, Mr. Mariappa was a Managing Director with Merrill Lynch from 1999-2000. Prior to that, he was associated with Sumitomo Finance International as an Executive Director in 1998, and with Long-term Capital Management as a strategist from 1995-1998.

High Yield	Benjamin L. Trosky	12/92*	Managing Director, PIMCO. He joined PIMCO as a Portfolio Manager in 1990, and has managed fixed income accounts for various institutional clients and funds since that time.

	Raymond G. Kennedy	4/02	Managing Director, PIMCO. He is a Portfolio Manager and a senior member of PIMCO’s investment strategy group. He joined PIMCO as a Portfolio Manager in 1996. Prior to that, he was associated with the Prudential Insurance Company of America as a private placement asset manager.

Long-Term U.S. Government	James M. Keller	4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 1996, and has managed fixed income accounts for various institutional clients since that time.

Low Duration	William H. Gross	5/87*	Managing Director, Chief Investment Officer and a founding partner of PIMCO.

Total Return Mortgage GNMA	W. Scott Simon	4/00 10/01	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to that, he was a Senior Managing Director and co-head of Mortgage Backed Securities pass-through trading at Bear Stearns & Co.

Money Market Short-Term	Paul A. McCulley	11/99 8/99	Managing Director, PIMCO. He has managed fixed income assets since joining PIMCO in 1999. Prior to joining PIMCO, Mr. McCulley was associated with Warburg Dillion Read as a Managing Director from 1992-1999 and Head of Economic and Strategy Research for the Americas from 1995-1999, where he managed macro research world-wide.

Real Return	John B. Brynjolfsson	1/97*	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 1989, and has managed fixed income accounts for various institutional clients and funds since that time.

StocksPLUS Strategic Balanced Total Return	William H. Gross	1/98 1/98 5/87*	Managing Director, Chief Investment Officer and a founding partner of PIMCO. He leads a team which manages the Strategic Balanced and StocksPLUS Funds.

Since inception of the Fund.

Distributor


39		PIMCO Funds: Pacific Investment Management Series

Investment Options—Class A, B and C Shares

The Trust offers investors Class A, Class B and Class C shares of each Fund in this prospectus. Each class of shares is subject to different types and levels of sales charges than the other classes and bears a different level of expenses.

The class of shares that is best for you depends upon a number of factors, including the amount and the intended length of your investment. The following summarizes key information about each class to help you make your investment decision, including the various expenses associated with each class. More extensive information about the Trust’s multi-class arrangements is included in the PIMCO Funds Shareholders’ Guide for Class A, B and C Shares (the “Guide”), which is included as part of the Statement of Additional Information and can be obtained free of charge from the Distributor. See “How to Buy and Sell Shares—PIMCO Funds Shareholders’ Guide” below.

Class A Shares

•

You pay an initial sales charge when you buy Class A shares of any Fund except the Money Market Fund. The maximum initial sales charge is 2.00% for the Short-Term Fund, 3.00% for the Low Duration, Real Return and StocksPLUS Funds and 4.50% for all other Funds. The sales charge is deducted from your investment so that not all of your purchase payment is invested.

•

You may be eligible for a reduction or a complete waiver of the initial sales charge under a number of circumstances. For example, you normally pay no sales charge if you purchase $1,000,000 or more of Class A shares. Please see the Guide for details.

•

Class A shares are subject to lower 12b-1 fees than Class B or Class C shares. Therefore, Class A shareholders generally pay lower annual expenses and receive higher dividends than Class B or Class C shareholders.

•

You normally pay no contingent deferred sales charge (“CDSC”) when you redeem Class A shares, although for certain Funds you may pay a 1% CDSC if you purchase $1,000,000 or more of Class A shares (and therefore pay no initial sales charge) and then redeem the shares during the first 18 months after your initial purchase. The Class A CDSC is waived for certain categories of investors and does not apply if you are otherwise eligible to purchase Class A shares without a sales charge. Please see the Guide for details.

Class B Shares

•

You do not pay an initial sales charge when you buy Class B shares. The full amount of your purchase payment is invested initially. Class B shares of the Money Market and Short-Term Funds are not offered for initial purchase but may be obtained through exchanges of Class B shares of other Funds.

•

You normally pay a CDSC of up to 5% if you redeem Class B shares during the first six years after your initial purchase. The amount of the CDSC declines the longer you hold your Class B shares. You pay no CDSC if you redeem during the seventh year and thereafter. The Class B CDSC is waived for certain categories of investors. Please see the Guide for details.

•

Class B shares are subject to higher 12b-1 fees than Class A shares for the first eight years they are held (seven years for Class B shares purchased prior to January 1, 2002). During this time, Class B shareholders normally pay higher annual expenses and receive lower dividends than Class A shareholders.

•

Class B shares automatically convert into Class A shares after they have been held for eight years. After the conversion takes place, the shares are subject to the lower 12b-1 fees paid by Class A shares. (The conversion period for Class B shares purchased prior to January 1, 2002, is seven years.)

Class C Shares

•

You do not pay an initial sales charge when you buy Class C shares. The full amount of your purchase payment is invested initially.

•

You normally pay a CDSC of 1% if you redeem Class C shares during the first year after your initial purchase. The Class C CDSC is waived for certain categories of investors. Please see the Guide for details.

•

Class C shares are subject to higher 12b-1 fees than Class A shares. Therefore, Class C shareholders normally pay higher annual expenses and receive lower dividends than Class A shareholders.

•

Class C shares do not convert into any other class of shares. Because Class B shares convert into Class A shares after eight years, Class C shares will normally be subject to higher expenses and will pay lower dividends than Class B shares if the shares are held for more than eight years.


Prospectus		40

The following provides additional information about the sales charges and other expenses associated with Class A, Class B and Class C shares.


Initial Sales Charges —Class A Shares	Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Funds is the net asset value (“NAV”) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase, as set forth below. No sales charge is imposed where Class A shares are issued to you pursuant to the automatic reinvestment of income dividends or capital gains distributions.

Short-Term Fund	Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

	$0–$49,999	2.04%	2.00%

	$50,000–$99,999	1.78%	1.75%

	$100,000–$249,999	1.52%	1.50%

	$250,000 +	0.00%**	0.00%**


Low Duration Fund	Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

	$0–$49,999	3.09%	3.00%

	$50,000–$99,999	2.04%	2.00%

	$100,000–$249,999	1.01%	1.00%

	$250,000 +	0.00%**	0.00%**


Real Return and StocksPLUS Funds	Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

	$0–$49,999	3.09%	3.00%

	$50,000–$99,999	2.56%	2.50%

	$100,000–$249,999	2.04%	2.00%

	$250,000–$499,999	1.52%	1.50%

	$500,000–$999,999	1.27%	1.25%

	$1,000,000 +	0.00%*	0.00%*


All Other Funds (except Money Market Fund)	Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

	$0–$49,999	4.71%	4.50%

	$50,000–$99,999	4.17%	4.00%

	$100,000–$249,999	3.63%	3.50%

	$250,000–$499,999	2.56%	2.50%

	$500,000–$999,999	2.04%	2.00%

	$1,000,000 +	0.00%*	0.00%*


	* As shown, investors that purchase $1,000,000 or more of any Fund’s Class A shares will not pay any initial sales charge on the purchase. However, purchasers of $1,000,000 or more of Class A shares may be subject to a CDSC of 1% if the shares are redeemed during the first 18 months after their purchase. See “CDSCs on Class A Shares” below.

	** As shown,investors that purchase $250,000 or more of the Fund’s Class A shares will not pay any initial sales charge on the purchase. However, certain purchasers of $250,000 or more of Class A shares may be subject to a contingent deferred sales charge of 0.75% (in the case of the Low Duration Fund) and 0.50% (in the case of the Short-Term Fund) if the shares are redeemed during the first 18 months after their purchase. See “CDSCs on Class A Shares” below.


41		PIMCO Funds: Pacific Investment Management Series

Contingent Deferred Sales Charges (CDSCs)--Class B and Class C Shares

Unless you are eligible for a waiver, if you sell (redeem) your Class B or Class C shares within the time periods specified below, you will pay a CDSC according to the following schedules.

Class B Shares

Years Since Purchase Payment was Made		Percentage Contingent Deferred Sales Charge

First		5

Second		4

Third		3

Fourth		3

Fifth		2

Sixth		1

Seventh and thereafter		0*

After the eighth year, Class B shares convert into Class A shares. As noted above, Class B shares purchased prior to January 1, 2002, convert into Class A shares after seven years.

Class C Shares

Years Since Purchase Payment was Made		Percentage Contingent Deferred Sales Charge

First		1

Thereafter		0

CDSCs on Class A Shares

Unless a waiver applies, investors who purchase $1,000,000 ($250,000 in the case of the Short-Term and Low Duration Funds) or more of Class A shares (and, thus, pay no initial sales charge) of a Fund other than the Money Market Fund will be subject to a 1% CDSC (0.50% and 0.75% in the case of the Short-Term and Low Duration Funds, respectively) if the shares are redeemed within 18 months of their purchase. The Class A CDSC does not apply if you are otherwise eligible to purchase Class A shares without an initial sales charge or are eligible for a waiver of the CDSC. See “Reductions and Waivers of Initial Sales Charges and CDSCs” below. The Class A CDSC does not apply to the Money Market Fund; however, if Money Market Fund Class A shares are purchased in an amount that for any other Fund would be subject to a CDSC and are subsequently exchanged for shares of another Fund, a Class A CDSC will apply for 18 months from the date of the exchange.

How CDSCs are Calculated

A CDSC is imposed on redemptions of Class B and Class C shares (and where applicable, Class A shares) on the amount of the redemption which causes the current value of your account for the particular class of shares of a Fund to fall below the total dollar amount of your purchase payments subject to the CDSC. However, no CDSC is imposed if the shares redeemed have been acquired through the reinvestment of dividends or capital gains distributions or if the amount redeemed is derived from increases in the value of your account above the amount of the purchase payments subject to the CDSC. CDSCs are deducted from the proceeds of your redemption, not from amounts remaining in your account. In determining whether a CDSC is payable, it is assumed that the purchase payment from which the redemption is made is the earliest purchase payment for the particular class of shares in your account (from which a redemption or exchange has not already been effected).

For instance, the following example illustrates the operation of the Class B CDSC:

•

Assume that an individual opens an account and makes a purchase payment of $10,000 for Class B shares of a Fund and that six months later the value of the investor’s account for that Fund has grown through investment performance and reinvestment of distributions to $11,000. The investor then may redeem up to $1,000 from that Fund ($11,000 minus $10,000) without incurring a CDSC. If the investor should redeem $3,000, a CDSC would be imposed on $2,000 of the redemption (the amount by which the investor’s account for the Fund was reduced below the amount of the purchase payment). At the rate of 5%, the Class B CDSC would be $100.


Prospectus		42

The Trust expects that the manner of calculating the CDSC on Class B and Class C shares (and where applicable, Class A shares) purchased after December 31, 2001 will change from that described above. The Trust will provide shareholders with at least 60 days’ notice prior to implementing the change. When the Trust implements the change, the CDSC on all shares purchased after December 31, 2001, will be subject to the change, not just shares purchased after the date of such notice. It is expected that the change will be implemented no later than January 1, 2008.

Under the new calculation method, the following rules will apply:

•

Shares acquired through the reinvestment of dividends or capital gains distributions will be redeemed first and will not be subject to any CDSC.

•

For the redemption of all other shares, the CDSC will be based on either your original purchase price or the then current NAV of the shares being sold, whichever is lower. To illustrate this point, consider shares purchased at an NAV of $10. If the Fund’s NAV per share at the time of redemption is $12, the CDSC will apply to the purchase price of $10. If the NAV per share at the time of redemption is $8, the CDSC will apply to the $8 current NAV per share.

•

CDSCs will be deducted from the proceeds of your redemption, not from amounts remaining in your account.

•

In determining whether a CDSC is payable, the first-in first-out, or “FIFO,” method will be used to determine which shares are being redeemed.

The following example illustrates the operation of the Class B CDSC beginning no later than January 1, 2008:

•

Assume that an individual opens an account and makes a purchase payment of $10,000 for 1,000 Class B shares of a Fund (at $10 per share) and that six months later the value of the investor’s account for that Fund has grown through investment performance to $11,000 ($11 per share). If the investor should redeem $2,200 (200 shares), a CDSC would be applied against $2,000 of the redemption (the purchase price of the shares redeemed, because the purchase price is lower than the current NAV of such shares ($2,200)). At the rate of 5%, the Class B CDSC would be $100.

Reductions and Waivers of Initial Sales Charges and CDSCs

The initial sales charges on Class A shares and the CDSCs on Class A, Class B and Class C shares may be reduced or waived under certain purchase arrangements and for certain categories of investors. Please see the Guide for details. The Guide is available free of charge from the Distributor. See “How to Buy and Sell Shares—PIMCO Funds Shareholders’ Guide” below.

Distribution and Servicing (12b-1) Plans

The Funds pay fees to the Distributor on an ongoing basis as compensation for the services the Distributor renders and the expenses it bears in connection with the sale and distribution of Fund shares (“distribution fees”) and/or in connection with personal services rendered to Fund shareholders and the maintenance of shareholder accounts (“servicing fees”). These payments are made pursuant to Distribution and Servicing Plans (“12b-1 Plans”) adopted by each Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“1940 Act”), as amended.

There is a separate 12b-1 Plan for each class of shares offered in this prospectus. Class A shares pay only servicing fees. Class B and Class C shares pay both distribution and servicing fees. The following lists the maximum annual rates at which the distribution and/or servicing fees may be paid under each 12b-1 Plan (calculated as a percentage of each Fund’s average daily net assets attributable to the particular class of shares):

Class A	Servicing Fee	Distribution Fee

Money Market Fund	0.10%	0.00%

All other Funds	0.25%	0.00%


Class B

All Funds	0.25%	0.75%


43		PIMCO Funds: Pacific Investment Management Series

Class C

Money Market Fund	0.10%	0.00%

Short-Term Fund	0.25%	0.30%

Low Duration, Real Return and StocksPLUS Funds	0.25%	0.50%

All other Funds	0.25%	0.75%

Because distribution fees are paid out of a Fund’s assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than sales charges which are deducted at the time of investment. Therefore, although Class B and Class C shares do not pay initial sales charges, the distribution fees payable on Class B and Class C shares may, over time, cost you more than the initial sales charge imposed on Class A shares. Also, because Class B shares convert into Class A shares after they have been held for eight years (seven years for Class B shares purchased prior to January 1, 2002) and are not subject to distribution fees after the conversion, an investment in Class C shares may cost you more over time than an investment in Class B shares.

How Fund Shares Are Priced

The net asset value (“NAV”) of a Fund’s Class A, Class B and Class C shares is determined by dividing the total value of a Fund’s portfolio investments and other assets attributable to that class, less any liabilities, by the total number of shares outstanding of that class.


Prospectus		44

How to Buy and Sell Shares

The following section provides basic information about how to buy, sell (redeem) and exchange shares of the Funds.

PIMCO Funds Shareholders' Guide

More detailed information about purchase, redemption and exchange arrangements for Fund shares is provided in the PIMCO Funds Shareholders’ Guide, which is included in the Statement of Additional Information and can be obtained free of charge from the Distributor by written request or by calling 1-800-426-0107. The Guide provides technical information about the basic arrangements described below and also describes special purchase, sale and exchange features and programs offered by the Trust, including:

•

Automated telephone and wire transfer procedures

•

Automatic purchase, exchange and withdrawal programs

•

Programs that establish a link from your Fund account to your bank account

•

Special arrangements for tax-qualified retirement plans

•

Investment programs which allow you to reduce or eliminate the initial sales charges

•

Categories of investors that are eligible for waivers or reductions of initial sales charges and CDSCs

Calculation of Share Price and Redemption Payments

When you buy shares of the Funds, you pay a price equal to the NAV of the shares, plus any applicable sales charge. When you sell (redeem) shares, you receive an amount equal to the NAV of the shares, minus any applicable CDSC. NAVs are determined at the close of regular trading (normally 4:00 p.m., Eastern time) on each day the New York Stock Exchange is open. See “How Fund Shares Are Priced” above for details. Generally, purchase and redemption orders for Fund shares are processed at the NAV next calculated after your order is received by the Distributor. There are certain exceptions where an order is received by a broker or dealer prior to the NYSE Close and then transmitted to the Distributor after the NAV has been calculated for that day (in which case the order may be processed according to that day’s NAV). Please see the Guide for details.

Buying Shares

You can buy Class A, Class B or Class C shares of the Funds in the following ways:

•

Through your broker, dealer or other financial intermediary. Your broker, dealer or other intermediary may establish higher minimum investment requirements than the Trust and may also independently charge you transaction fees and additional amounts (which may vary) in return for its services, which will reduce your return. Shares you purchase through your broker, dealer or other intermediary will normally be held in your account with that firm.

•

Directly from the Trust. To make direct investments, you must open an account with the Distributor and send payment for your shares either by mail or through a variety of other purchase options and plans offered by the Trust.

If you wish to invest directly by mail, please send a check payable to PIMCO Funds Distributors LLC, along with a completed application form to:

PIMCO Funds Distributors LLC

P.O. Box 9688

Providence, RI 02940-0926

The Trust accepts all purchases by mail subject to collection of checks at full value and conversion into federal funds. You may make subsequent purchases by mailing a check to the address above with a letter describing the investment or with the additional investment portion of a confirmation statement. Checks for subsequent purchases should be payable to PIMCO Funds Distributors LLC and should clearly indicate your account number. Please call the Distributor at 1-800-426-0107 if you have any questions regarding purchases by mail.

The Guide describes a number of additional ways you can make direct investments, including through the PIMCO Funds Auto-Invest and PIMCO Funds Fund Link programs. You can obtain a


45		PIMCO Funds: Pacific Investment Management Series

Guide free of charge from the Distributor by written request or by calling 1-800-426-0107. See “PIMCO Funds Shareholders’ Guide” above.

The Distributor, in its sole discretion, may accept or reject any order for purchase of Fund shares. No share certificates will be issued unless specifically requested in writing.

Investment Minimums. The following investment minimums apply for purchases of Class A, Class B and Class C shares.

Initial Investment		Subsequent Investments
$2,500 per Fund		$100 per Fund

Lower minimums may apply for certain categories of investors, including certain tax-qualified retirement plans, and for special investment programs and plans offered by the Trust, such as the PIMCO Funds Auto-Invest and PIMCO Funds Fund Link programs. Please see the Guide for details.

Small Account Fee

Because of the disproportionately high costs of servicing accounts with low balances, if you have a direct account with the Distributor, you will be charged a fee at the annual rate of $16 if your account balance for any Fund falls below a minimum level of $2,500. However, you will not be charged this fee if the aggregate value of all of your PIMCO Funds accounts is at least $50,000. Any applicable small account fee will be deducted automatically from your below-minimum Fund account in quarterly installments and paid to the Administrator. Each Fund account will normally be valued, and any deduction taken, during the last five business days of each calendar quarter. Lower minimum balance requirements and waivers of the small account fee apply for certain categories of investors. Please see the Guide for details.

Minimum Account Size

Due to the relatively high cost to the Funds of maintaining small accounts, you are asked to maintain an account balance in each Fund in which you invest of at least the minimum investment necessary to open the particular type of account. If your balance for any Fund remains below the minimum for three months or longer, the Administrator has the right (except in the case of employer-sponsored retirement accounts) to redeem your remaining shares and close that Fund account after giving you 60 days to increase your balance. Your Fund account will not be liquidated if the reduction in size is due solely to a decline in market value of your Fund shares or if the aggregate value of all your PIMCO Funds accounts exceeds $50,000.

Exchanging Shares

You may exchange your Class A, Class B or Class C shares of any Fund for the same Class of shares of any other Fund or of a series of PIMCO Funds: Multi-Manager Series. Shares are exchanged on the basis of their respective NAVs next calculated after your exchange order is received by the Distributor (except if Class A shares of the Money Market Fund are exchanged for Class A shares of any other Fund, the usual sales charges applicable to investments in such other Fund apply on shares for which no sales load was paid at the time of purchase). Currently, the Trust does not charge any exchange fees or charges. Exchanges are subject to the $2,500 minimum initial purchase requirements for each Fund, except with respect to tax-qualified programs and exchanges effected through the PIMCO Funds Auto-Exchange plan. If you maintain your account with the Distributor, you may exchange shares by completing a written exchange request and sending it to PIMCO Funds Distributors LLC, P.O. Box 9688, Providence, RI 02940-0926. You can get an exchange form by calling the Distributor at 1-800-426-0107.

The Trust reserves the right to refuse exchange purchases if, in the judgment of PIMCO, the purchase would adversely affect a Fund and its shareholders. In particular, a pattern of exchanges characteristic of “market-timing” strategies may be deemed by PIMCO to be detrimental to the Trust or a particular Fund. Currently, the Trust limits the number of “round trip” exchanges an investor may make. An investor makes a “round trip” exchange when the investor purchases shares of a particular Fund, subsequently exchanges those shares for shares of a different PIMCO Fund and then exchanges back into the originally purchased Fund. The Trust has the right to refuse any exchange for any investor who completes (by making the exchange back into the shares of the originally purchased Fund) more than six round trip exchanges in any twelve-month period. Although the Trust has no current intention of terminating or modifying the exchange privilege other than as set forth in the preceding sentence, it reserves the right to do so at any time. Except as otherwise permitted by the Securities and Exchange Commission, the Trust will give you 60 days’ advance notice if it exercises its right to terminate or materially modify the exchange privilege. The Guide provides more detailed information about the exchange privilege, including the procedures you must follow and additional exchange options. You can obtain a Guide free of charge from the Distributor by written request or by calling 1-800-426-0107. See “PIMCO Funds Shareholders’ Guide” above.


Prospectus		46

Selling Shares

You can sell (redeem) Class A, Class B or Class C shares of the Funds in the following ways:

• Through your broker, dealer or other financial intermediary. Your broker, dealer or other intermediary may independently charge you transaction fees and additional amounts in return for its services, which will reduce your return.

• Directly from the Trust by Written Request. To redeem shares directly from the Trust by written request (whether or not the shares are represented by certificates), you must send the following items to the Trust’s Transfer Agent, PFPC Inc., P.O. Box 9688, Providence, RI 02940-9688:

(1) a written request for redemption signed by all registered owners exactly as the account is registered on the Transfer Agent’s records, including fiduciary titles, if any, and specifying the account number and the dollar amount or number of shares to be redeemed;

(2) for certain redemptions described below, a guarantee of all signatures on the written request or on the share certificate or accompanying stock power, if required, as described under “Signature Guarantee” below;

(3) any share certificates issued for any of the shares to be redeemed (see “Certificated Shares” below); and

(4) any additional documents which may be required by the Transfer Agent for redemption by corporations, partnerships or other organizations, executors, administrators, trustees, custodians or guardians, or if the redemption is requested by anyone other than the shareholder(s) of record. Transfers of shares are subject to the same requirements.

A signature guarantee is not required for redemptions requested by and payable to all shareholders of record for the account, and to be sent to the address of record for that account. To avoid delay in redemption or transfer, if you have any questions about these requirements you should contact the Transfer Agent in writing or call 1-800-426-0107 before submitting a request. Written redemption or transfer requests will not be honored until all required documents in the proper form have been received by the Transfer Agent. You can not redeem your shares by written request if they are held in broker “street name” accounts—you must redeem through your broker.

If the proceeds of your redemption (i) are to be paid to a person other than the record owner, (ii) are to be sent to an address other than the address of the account on the Transfer Agent’s records, and/or (iii) are to be paid to a corporation, partnership, trust or fiduciary, the signature(s) on the redemption request and on the certificates, if any, or stock power must be guaranteed as described under “Signature Guarantee” below. The Distributor may, however, waive the signature guarantee requirement for redemptions up to $2,500 by a trustee of a qualified retirement plan, the administrator for which has an agreement with the Distributor.

The Guide describes a number of additional ways you can redeem your shares, including:

• Telephone requests to the Transfer Agent

• PIMCO Funds Automated Telephone System (ATS)

• Expedited wire transfers

• Automatic Withdrawal Plan

• PIMCO Funds Fund Link

Unless you specifically elect otherwise, your initial account application permits you to redeem shares by telephone subject to certain requirements. To be eligible for ATS, expedited wire transfer, Automatic Withdrawal Plan, and Fund Link privileges, you must specifically elect the particular option on your account application and satisfy certain other requirements. The Guide describes each of these options and provides additional information about selling shares. You can obtain a Guide free of charge from the Distributor by written request or by calling 1-800-426-0107.

Other than an applicable CDSC, you will not pay any special fees or charges to the Trust or the Distributor when you sell your shares. However, if you sell your shares through your broker, dealer or other financial intermediary, that firm may charge you a commission or other fee for processing your redemption request.

Redemptions of Fund shares may be suspended when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors. Under these and other unusual circumstances, the Trust may suspend redemptions or postpone payment for more than seven days, as permitted by law.


47		PIMCO Funds: Pacific Investment Management Series

Timing of Redemption Payments

Redemption proceeds will normally be mailed to the redeeming shareholder within seven calendar days or, in the case of wire transfer or Fund Link redemptions, sent to the designated bank account within one business day. Fund Link redemptions may be received by the bank on the second or third business day. In cases where shares have recently been purchased by personal check, redemption proceeds may be withheld until the check has been collected, which may take up to 15 days. To avoid such withholding, investors should purchase shares by certified or bank check or by wire transfer.

Redemptions In Kind

The Trust will redeem shares of each Fund solely in cash up to the lesser of $250,000 or 1% of the Fund’s net assets during any 90-day period for any one shareholder. In consideration of the best interests of the remaining shareholders, the Trust may pay any redemption proceeds exceeding this amount in whole or in part by a distribution in kind of securities held by a Fund in lieu of cash. It is highly unlikely that your shares would ever be redeemed in kind. If your shares are redeemed in kind, you should expect to incur transaction costs upon the disposition of the securities received in the distribution.

Certificated Shares

If you are redeeming shares for which certificates have been issued, the certificates must be mailed to or deposited with the Trust, duly endorsed or accompanied by a duly endorsed stock power or by a written request for redemption. Signatures must be guaranteed as described under “Signature Guarantee” below. The Trust may request further documentation from institutions or fiduciary accounts, such as corporations, custodians (e.g., under the Uniform Gifts to Minors Act), executors, administrators, trustees or guardians. Your redemption request and stock power must be signed exactly as the account is registered, including indication of any special capacity of the registered owner.

Signature Guarantee

When a signature guarantee is called for, a “medallion” signature guarantee will be required. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association or other financial institution which is participating in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are the Securities Transfer Agents Medallion Program, Stock Exchanges Medallion Program and New York Stock Exchange, Inc. Medallion Signature Program. Signature guarantees from financial institutions which are not participating in one of these programs will not be accepted. Please note that financial institutions participating in a recognized medallion program may still be ineligible to provide a signature guarantee for transactions of greater than a specified dollar amount. The Trust may change the signature guarantee requirements from time to time upon notice to shareholders, which may be given by means of a new or supplemented prospectus.

Fund Distributions

Each Fund distributes substantially all of its net investment income to shareholders in the form of dividends. You begin earning dividends on Fund shares the day after the Trust receives your purchase payment. Dividends paid by each Fund with respect to each class of shares are calculated in the same manner and at the same time, but dividends on Class B and Class C shares are expected to be lower than dividends on Class A shares as a result of the distribution fees applicable to Class B and Class C shares. The following shows when each Fund intends to declare and distribute income dividends to shareholders of record.

Fund	Declared Daily and Paid Monthly	Declared and Paid Quarterly

Fixed Income Funds	·

Convertible, StocksPLUS and Strategic Balanced Funds		·

You can choose from the following distribution options:

•

Reinvest all distributions in additional shares of the same class of your Fund at NAV. This will be done unless you elect another option.

•

Invest all distributions in shares of the same class of any other Fund or another series of the Trust or PIMCO Funds: Multi-Manager Series which offers that class at NAV. You must have an account existing in the Fund or series selected for investment with the identical registered name.


Prospectus		48

You must elect this option on your account application or by a telephone request to the Transfer Agent at 1-800-426-0107.

•

Receive all distributions in cash (either paid directly to you or credited to your account with your broker or other financial intermediary). You must elect this option on your account application or by a telephone request to the Transfer Agent at 1-800-426-0107.

You do not pay any sales charges on shares you receive through the reinvestment of Fund distributions.

If you elect to receive Fund distributions in cash and the postal or other delivery service is unable to deliver checks to your address of record, the Trust’s Transfer Agent will hold the returned checks for your benefit in a non-interest bearing account.

Tax Consequences

• Taxes on Fund distributions. If you are subject to U.S. federal income tax, you will be subject to tax on Fund distributions whether you received them in cash or reinvested them in additional shares of the Funds. For federal income tax purposes, Fund distributions will be taxable to you as either ordinary income or capital gains.

• Taxes when you sell (redeem) or exchange your shares. Any gain resulting from the sale of Fund shares will generally be subject to federal income tax. When you exchange shares of a Fund for shares of another series, the transaction will be treated as a sale of the Fund shares for these purposes, and any gain on those shares will generally be subject to federal income tax.

• Consult your tax advisor about other possible tax consequences. This is a summary of certain federal income tax consequences of investing in a Fund. You should consult your tax advisor for more information on your own tax situation, including possible state, local and foreign tax consequences.

• A Note on the Real Return Fund. Periodic adjustments for inflation to the principal amount of an inflation-indexed bond may give rise to original issue discount, which will be includable in the Fund’s gross income. Due to original issue discount, the Fund may be required to make annual distributions to shareholders that exceed the cash received, which may cause the Fund to liquidate certain investments when it is not advantageous to do so. Also, if the principal value of an inflation-indexed bond is adjusted downward due to deflation, amounts previously distributed in the taxable year may be characterized in some circumstances as a return of capital.

• A Note on the Strategic Balanced Fund. The Strategic Balanced Fund’s use of a fund of funds structure could affect the amount, timing and character of distributions to shareholders, and may therefore increase the amount of taxes payable by shareholders. See “Taxation—Distributions” in the Statement of Additional Information.


49		PIMCO Funds: Pacific Investment Management Series

Characteristics and Risks of Securities and Investment Techniques

Securities Selection

PIMCO attempts to identify areas of the bond market that are undervalued relative to the rest of the market. PIMCO identifies these areas by grouping bonds into sectors such as money markets, governments, corporates, mortgages, asset-backed and international. Sophisticated proprietary software then assists in evaluating sectors and pricing specific securities. Once investment opportunities are identified, PIMCO will shift assets among sectors depending upon changes in relative valuations and credit spreads. There is no guarantee that PIMCO’s security selection techniques will produce the desired results.

With respect to the Strategic Balanced Fund, PIMCO will purchase shares of the StocksPLUS and Total Return Funds according to the Strategic Balanced Fund’s equity/fixed income allocation ranges. PIMCO does not purchase shares of the Underlying Funds according to any predetermined formula, but rather decides how to allocate the Fund’s investments based upon PIMCO’s methodology for forecasting stages in the business cycle, and the potential risk and reward of equity and fixed income investments at specific stages of the business cycle. In addition to purchasing shares of the StocksPLUS and Total Return Funds, PIMCO may in the future invest in additional funds in the PIMCO fund family without shareholder approval.

U.S. Government Securities

Municipal Bonds


Prospectus		50

Mortgage-Related and Other Asset-Backed Securities

Each Fund may invest in mortgage- or other asset-backed securities. Except for the Money Market and Convertible Funds, each Fund may invest all of its assets in such securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

Loan Participations and Assignments

Corporate Debt Securities

High Yield Securities

Securities rated lower than Baa by Moody’s Investors Service, Inc. (“Moody’s”) or lower than BBB by Standard & Poor’s Ratings Services (“S&P”) are sometimes referred to as “high yield” or “junk” bonds. Investing in high yield securities involves special risks in addition to the risks associated with investments in higher-rated fixed income securities. While offering a greater potential opportunity for capital appreciation and higher yields, high yield securities typically entail greater potential price volatility and may be less liquid than higher-rated securities. High yield securities may be regarded as predominately speculative with respect to the issuer’s continuing ability to meet principal and interest payments. They may also be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-rated securities. The Emerging Markets Bond Fund may invest in securities that are in default with respect to the payment of interest or repayment of principal, or presenting an imminent risk of default with respect to such payments. Issuers of securities in default may fail to resume principal or interest payments, in which case the Fund may lose its entire investment.

• Credit Ratings and Unrated Securities. Rating agencies are private services that provide ratings of the credit quality of fixed income securities, including convertible securities. Appendix A to this prospectus describes the various ratings assigned to fixed income securities by Moody’s and S&P. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. A Fund will not necessarily sell a security when its rating is reduced below its rating at the time of purchase. PIMCO does not rely solely on credit ratings, and develops its own analysis of issuer credit quality.


51		PIMCO Funds: Pacific Investment Management Series

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. Each Fund may invest in floating rate debt instruments (“floaters”) and (except the Money Market Fund) engage in credit spread trades. While floaters provide a certain degree of protection against rises in interest rates, a Fund will participate in any declines in interest rates as well. Each Fund (except the Money Market Fund) may also invest in inverse floating rate debt instruments (“inverse floaters”). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. A Fund may not invest more than 5% of its assets in any combination of inverse floater, interest only, or principal only securities.

Inflation-Indexed Bonds

Event-Linked Bonds

Convertible and Equity Securities

Each Fund (except the Money Market Fund) may invest in convertible securities. Convertible securities are generally preferred stocks and other securities, including fixed income securities and warrants, that are convertible into or exercisable for common stock at a stated price or rate. The price of a convertible security will normally vary in some proportion to changes in the price of the underlying common stock because of this conversion or exercise feature. However, the value of a convertible security may not increase or decrease as rapidly as the underlying common stock. A convertible security will normally also provide income and is subject to interest rate risk. Convertible securities may be lower-rated securities subject to greater levels of credit risk. A Fund may be forced to convert a security before it would otherwise choose, which may have an adverse effect on the Fund’s ability to achieve its investment objective.

Equity securities generally have greater price volatility than fixed income securities. The market price of equity securities owned by a Fund may go up or down, sometimes rapidly or unpredictably.


Prospectus		52

Equity securities may decline in value due to factors affecting equity securities markets generally or particular industries represented in those markets. The value of an equity security may also decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.

Foreign (Non-U.S.) Securities

• Emerging Market Securities. Each Fund (except the Money Market and Long-Term U.S. Government Funds) may invest up to 10% of its assets (5% in the case of the Short-Term and Low Duration Funds) in securities of issuers based in countries with developing (or “emerging market”) economies. The Emerging Markets Bond Fund may invest without limit in such securities.

Each Fund (except the Long-Term U.S. Government Fund) may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with a debt restructuring. Investments in Brady Bonds may be viewed as speculative. Brady Bonds acquired by a Fund may be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on any of its holdings.

Foreign (Non-U.S.) Currencies


53		PIMCO Funds: Pacific Investment Management Series

perceived changes in interest rates and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or foreign governments or central banks, or by currency controls or political developments. For example, uncertainty surrounds the introduction of the euro (a common currency unit for the European Union) and the effect it may have on the value of European currencies as well as securities denominated in local European currencies. These and other currencies in which the Funds’ assets are denominated may be devalued against the U.S. dollar, resulting in a loss to the Funds.

Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings

Each Fund may enter into reverse repurchase agreements and dollar rolls, subject to the Fund’s limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. A Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise to cover its obligations under reverse repurchase agreements, dollar rolls, and other borrowings. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for a Fund.

Derivatives

Each Fund (except the Money Market Fund) may, but is not required to, use derivative instruments for risk management purposes or as part of its investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. Each Fund (except the Money Market Fund) may invest some or all of its assets in derivative instruments. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. A description of these and other derivative instruments that the Funds may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.

A Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments.


Prospectus		54

A description of various risks associated with particular derivative instruments is included in “Investment Objectives and Policies” in the Statement of Additional Information. The following provides a more general discussion of important risk factors relating to all derivative instruments that may be used by the Funds.

Delayed Funding Loans and Revolving Credit Facilities

The Funds (except the Money Market Fund) may also enter into, or acquire participations in, delayed funding loans and revolving credit facilities, in which a lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees in an amount sufficient to meet such commitments. Delayed funding loans and revolving credit facilities are subject to credit, interest rate and liquidity risk and the risks of being a lender.


55		PIMCO Funds: Pacific Investment Management Series

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each Fund may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments). When-issued transactions, delayed delivery purchases and forward commitments involve a risk of loss if the value of the securities declines prior to the settlement date. This risk is in addition to the risk that the Fund’s other assets will decline in value. Therefore, these transactions may result in a form of leverage and increase a Fund’s overall investment exposure. Typically, no income accrues on securities a Fund has committed to purchase prior to the time delivery of the securities is made, although a Fund may earn income on securities it has segregated to cover these positions.

Investment in Other Investment Companies

The Strategic Balanced Fund invests substantially all of its assets in other investment companies. Each Fund may invest up to 10% of its assets in securities of other investment companies, such as closed-end management investment companies, or in pooled accounts or other investment vehicles which invest in foreign markets. As a shareholder of an investment company, a Fund may indirectly bear service and other fees which are in addition to the fees the Fund pays its service providers.

Short Sales

Illiquid Securities

Loans of Portfolio Securities

Portfolio Turnover


Prospectus		56

Temporary Defensive Strategies

For temporary or defensive purposes, each Fund may invest without limit in U.S. debt securities, including short-term money market securities, when PIMCO deems it appropriate to do so. When a Fund engages in such strategies, it may not achieve its investment objective.

Changes in Investment Objectives and Policies

Percentage Investment Limitations

Other Investments and Techniques


57		PIMCO Funds: Pacific Investment Management Series

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Prospectus		58

Financial Highlights

The financial highlights table is intended to help you understand the financial performance of Class A, Class B and Class C shares of each Fund for the past 5 years or, if the class is less than 5 years old, since the class of shares was first offered. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a particular class of shares of a Fund, assuming reinvestment of all dividends and distributions. This information, except for the period ended September 30, 2001, has been audited by PricewaterhouseCoopers LLP, whose report, along with each Fund’s financial statements, are included in the Trust’s annual report to shareholders. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations		Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Money Market Fund
Class A
09/30/2001*	$	1.00	$	0.02	(a)	$	0.00		$	0.02	$	(0.02	)	$	0.00		$	0.00		$	0.00
03/31/2001		1.00		0.06	(a)		0.00	(a)		0.06		(0.06	)		0.00			0.00			0.00
03/31/2000		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1999		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1998		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
01/13/1997 – 03/31/1997		1.00		0.01			0.00			0.01		(0.01	)		0.00			0.00			0.00
Class B
09/30/2001*		1.00		0.01	(a)		0.00	(a)		0.01		(0.01	)		0.00			0.00			0.00
03/31/2001		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/2000		1.00		0.04	(a)		0.00	(a)		0.04		(0.04	)		0.00			0.00			0.00
03/31/1999		1.00		0.04	(a)		0.00	(a)		0.04		(0.04	)		0.00			0.00			0.00
03/31/1998		1.00		0.04	(a)		0.00	(a)		0.04		(0.04	)		0.00			0.00			0.00
01/13/1997 – 03/31/1997		1.00		0.01			0.00			0.01		(0.01	)		0.00			0.00			0.00
Class C
09/30/2001*		1.00		0.02	(a)		0.00	(a)		0.02		(0.02	)		0.00			0.00			0.00
03/31/2001		1.00		0.06	(a)		0.00	(a)		0.06		(0.06	)		0.00			0.00			0.00
03/31/2000		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1999		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
03/31/1998		1.00		0.05	(a)		0.00	(a)		0.05		(0.05	)		0.00			0.00			0.00
01/13/1997 – 03/31/1997		1.00		0.01			0.00			0.01		(0.01	)		0.00			0.00			0.00
Short-Term Fund
Class A
09/30/2001*	$	10.03	$	0.20	(a)	$	0.07	(a)	$	0.27	$	(0.24	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.95		0.60	(a)		0.10	(a)		0.70		(0.60	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.55	(a)		(0.09	)(a)		0.46		(0.54	)		0.00			0.00			0.00
03/31/1999		10.06		0.53	(a)		(0.02	)(a)		0.51		(0.53	)		0.00			0.00			(0.01	)
03/31/1998		10.00		0.55	(a)		0.09	(a)		0.64		(0.56	)		(0.01	)		(0.01	)		0.00
01/20/1997 – 03/31/1997		10.04		0.10			(0.03	)		0.07		(0.10	)		(0.01	)		0.00			0.00
Class B
09/30/2001*		10.03		0.20	(a)		0.03	(a)		0.23		(0.20	)		0.00			0.00			0.00
03/31/2001		9.95		0.53	(a)		0.10	(a)		0.63		(0.53	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.48	(a)		(0.09	)(a)		0.39		(0.47	)		0.00			0.00			0.00
03/31/1999		10.06		0.45	(a)		(0.02	)(a)		0.43		(0.45	)		0.00			0.00			(0.01	)
03/31/1998		10.00		0.50	(a)		0.08	(a)		0.58		(0.50	)		(0.01	)		(0.01	)		0.00
01/20/1997 – 03/31/1997		10.04		0.09			(0.03	)		0.06		(0.10	)		0.00			0.00			0.00
Class C
09/30/2001*		10.03		0.19	(a)		0.06	(a)		0.25		(0.22	)		0.00			0.00			0.00
03/31/2001		9.95		0.57	(a)		0.10	(a)		0.67		(0.57	)		0.00			0.00			(0.02	)
03/31/2000		10.03		0.52	(a)		(0.09	)(a)		0.43		(0.51	)		0.00			0.00			0.00
03/31/1999		10.06		0.50	(a)		(0.02	)(a)		0.48		(0.50	)		0.00			0.00			(0.01	)
03/31/1998		10.00		0.54	(a)		0.07	(a)		0.61		(0.53	)		(0.01	)		(0.01	)		0.00
01/20/1997 – 03/31/1997		10.04		0.09			(0.03	)		0.06		(0.10	)		0.00			0.00			0.00
Low Duration Fund
Class A
09/30/2001*	$	10.03	$	0.27	(a)	$	0.18	(a)	$	0.45	$	(0.28	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.81		0.60	(a)		0.25	(a)		0.85		(0.61	)		(0.02	)		0.00			0.00
03/31/2000		10.10		0.59	(a)		(0.29	)(a)		0.30		(0.58	)		(0.01	)		0.00			0.00
03/31/1999		10.18		0.60	(a)		(0.02	)(a)		0.58		(0.60	)		0.00			(0.01	)		(0.05	)
03/31/1998		9.98		0.60	(a)		0.23	(a)		0.83		(0.58	)		(0.02	)		(0.03	)		0.00
01/13/1997 – 03/31/1997		10.02		0.12			(0.03	)		0.09		(0.12	)		(0.01	)		0.00			0.00

* Unaudited

(a) Per share amounts based on average number of shares outstanding during the period.


59		PIMCO Funds: Pacific Investment Management Series



Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.02	)	$	1.00	1.81	%	$	61,716	0.60	%+	3.55	%+	N/A
0.00		(0.06	)		1.00	5.94			58,940	0.60		5.85		N/A
0.00		(0.05	)		1.00	4.92			101,734	0.60		4.90		N/A
0.00		(0.05	)		1.00	4.76			105,200	0.60		4.78		N/A
0.00		(0.05	)		1.00	5.10			41,375	0.60		5.02		N/A
0.00		(0.01	)		1.00	1.01			43,589	0.57	+	4.44	+	N/A

0.00		(0.01	)		1.00	1.35			48,767	1.50	+	2.64	+	N/A
0.00		(0.05	)		1.00	5.02			38,286	1.50		4.87		N/A
0.00		(0.04	)		1.00	3.99			25,507	1.50		4.05		N/A
0.00		(0.04	)		1.00	4.03			14,968	1.50		3.79		N/A
0.00		(0.04	)		1.00	4.21			2,937	1.50		4.15		N/A
0.00		(0.01	)		1.00	0.83			3,143	1.41	+	3.62	+	N/A

0.00		(0.02	)		1.00	1.81			116,829	0.60	+	3.54	+	N/A
0.00		(0.06	)		1.00	5.94			108,549	0.60		5.77		N/A
0.00		(0.05	)		1.00	4.95			99,475	0.60		4.78		N/A
0.00		(0.05	)		1.00	4.85			86,159	0.60		4.79		N/A
0.00		(0.05	)		1.00	5.14			55,696	0.60		5.05		N/A
0.00		(0.01	)		1.00	1.02			85,398	0.58	+	4.47	+	N/A


$0.00	$	(0.24	)	$	10.06	2.70	%	$	458,984	1.02	%+(b)	3.98	%+	77	%
0.00		(0.62	)		10.03	7.23			84,342	1.41	(b)	6.03		121
0.00		(0.54	)		9.95	4.76			75,671	1.03	(b)	5.45		38
0.00		(0.54	)		10.03	5.21			80,787	0.85		5.15		47
0.00		(0.58	)		10.06	6.64			24,182	0.85		5.48		48
0.00		(0.11	)		10.00	0.66			2,533	0.86	+ (b)	5.07	+	77

0.00		(0.20	)		10.06	2.33			8,505	1.87	+ (c)	3.96	+	77
0.00		(0.55	)		10.03	6.44			6,954	2.15	(c)	5.28		121
0.00		(0.47	)		9.95	4.00			6,694	1.80	(c)	4.77		38
0.00		(0.46	)		10.03	4.43			3,813	1.60		4.45		47
0.00		(0.52	)		10.06	5.96			1,258	1.60		4.97		48
0.00		(0.10	)		10.00	0.58			114	1.62	+ (c)	4.83	+	77

0.00		(0.22	)		10.06	2.54			121,695	1.34	+ (d)	3.71	+	77
0.00		(0.59	)		10.03	6.91			23,961	1.70	(d)	5.72		121
0.00		(0.51	)		9.95	4.45			18,935	1.34	(d)	5.17		38
0.00		(0.51	)		10.03	4.91			15,589	1.15		4.92		47
0.00		(0.55	)		10.06	6.33			6,763	1.15		5.33		48
0.00		(0.10	)		10.00	0.63			1,359	1.14	+	4.78	+	77


$0.00	$	(0.28	)	$	10.20	4.53	%	$	417,930	0.90	%+	5.41	%+	269	%
0.00		(0.63	)		10.03	8.93			273,994	0.96	(e)	6.07		348
0.00		(0.59	)		9.81	3.07			235,413	0.98	(e)	5.91		82
0.00		(0.66	)		10.10	5.86			191,727	0.90		5.85		245
0.00		(0.63	)		10.18	8.49			109,531	0.90		5.93		309
0.00		(0.13	)		9.98	0.85			59,348	0.91	+ (e)	5.84	+	240

Annualized.

(b)

Ratio of expenses to average net assets excluding interest expense is 0.85%.

(c)

Ratio of expenses to average net assets excluding interest expense is 1.60%.

(d)

Ratio of expenses to average net assets excluding interest expense is 1.15%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.90%.


Prospectus		60

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Low Duration Fund (continued)
Class B
09/30/2001*	$	10.03	$	0.24	(a)	$	0.17	(a)	$	0.41		$	(0.24	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.81		0.53	(a)		0.24	(a)		0.77			(0.53	)		(0.02	)		0.00			0.00
03/31/2000		10.10		0.51	(a)		(0.29	)(a)		0.22			(0.50	)		(0.01	)		0.00			0.00
03/31/1999		10.18		0.52	(a)		(0.02	)(a)		0.50			(0.52	)		0.00			(0.01	)		(0.05	)
03/31/1998		9.98		0.53	(a)		0.22	(a)		0.75			(0.50	)		(0.02	)		(0.03	)		0.00
01/13/1997 – 03/31/1997		10.02		0.10			(0.03	)		0.07			(0.11	)		0.00			0.00			0.00
Class C
09/30/2001*		10.03		0.25	(a)		0.17	(a)		0.42			(0.25	)		0.00			0.00			0.00
03/31/2001		9.81		0.55	(a)		0.25	(a)		0.80			(0.56	)		(0.02	)		0.00			0.00
03/31/2000		10.10		0.54	(a)		(0.29	)(a)		0.25			(0.53	)		(0.01	)		0.00			0.00
03/31/1999		10.18		0.55	(a)		(0.02	)(a)		0.53			(0.55	)		0.00			(0.01	)		(0.05	)
03/31/1998		9.98		0.55	(a)		0.23	(a)		0.78			(0.53	)		(0.02	)		(0.03	)		0.00
01/13/1997 – 03/31/1997		10.02		0.11			(0.03	)		0.08			(0.11	)		(0.01	)		0.00			0.00
GNMA Fund
Class A
09/30/2001*	$	10.44	$	0.33	(a)	$	0.35	(a)	$	0.68		$	(0.33	)	$	0.00		$	0.00		$	0.00
11/30/2000 – 03/31/2001		10.13		0.21	(a)		0.31	(a)		0.52			(0.21	)		0.00			0.00			0.00
Class B
05/31/2001 – 09/30/2001*		10.43		0.18	(a)		0.36	(a)		0.54			(0.18	)		0.00			0.00			0.00
Class C
05/31/2001 – 09/30/2001*		10.43		0.18	(a)		0.36	(a)		0.54			(0.18	)		0.00			0.00			0.00
Total Return Fund
Class A
09/30/2001*	$	10.52	$	0.26	(a)	$	0.36	(a)	$	0.62		$	(0.27	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.96		0.62	(a)		0.56	(a)		1.18			(0.60	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.58	(a)		(0.40	)(a)		0.18			(0.56	)		(0.02	)		0.00			0.00
03/31/1999		10.62		0.58	(a)		0.16	(a)		0.74			(0.58	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.58	(a)		0.63	(a)		1.21			(0.57	)		(0.02	)		(0.27	)		0.00
01/13/1997 – 03/31/1997		10.40		0.12			(0.12	)		0.00			(0.13	)		0.00			0.00			0.00
Class B
09/30/2001*		10.52		0.22	(a)		0.36	(a)		0.58			(0.23	)		0.00			0.00			0.00
03/31/2001		9.96		0.54	(a)		0.57	(a)		1.11			(0.54	)		(0.01	)		0.00			0.00
03/31/2000		10.36		0.51	(a)		(0.41	)(a)		0.10			(0.48	)		(0.02	)		0.00			0.00
03/31/1999		10.62		0.50	(a)		0.16	(a)		0.66			(0.50	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.50	(a)		0.63	(a)		1.13			(0.50	)		(0.01	)		(0.27	)		0.00
01/13/1997 – 03/31/1997		10.40		0.11			(0.12	)		(0.01	)		(0.12	)		0.00			0.00			0.00
Class C
09/30/2001*		10.52		0.22	(a)		0.36	(a)		0.58			(0.23	)		0.00			0.00			0.00
03/31/2001		9.96		0.54	(a)		0.57	(a)		1.11			(0.54	)		(0.01	)		0.00			0.00
03/31/2000		10.36		0.51	(a)		(0.41	)(a)		0.10			(0.48	)		(0.02	)		0.00			0.00
03/31/1999		10.62		0.50	(a)		0.16	(a)		0.66			(0.50	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.51	(a)		0.63	(a)		1.14			(0.51	)		(0.01	)		(0.27	)		0.00
01/13/1997 – 03/31/1997		10.40		0.11			(0.12	)		(0.01	)		(0.12	)		0.00			0.00			0.00
Total Return Mortgage Fund
Class A
09/30/2001*	$	10.42	$	0.23	(a)	$	0.37	(a)	$	0.60		$	(0.24	)	$	0.00		$	0.00		$	0.00
07/31/2000 – 03/31/2001		10.02		0.39	(a)		0.57	(a)		0.96			(0.38	)		0.00			(0.18	)		0.00
Class B
09/30/2001*		10.42		0.19	(a)		0.41	(a)		0.60			(0.24	)		0.00			0.00			0.00
07/31/2000 – 03/31/2001		10.02		0.34	(a)		0.59	(a)		0.93			(0.35	)		0.00			(0.18	)		0.00
Class C
09/30/2001*		10.42		0.19	(a)		0.37	(a)		0.56			(0.20	)		0.00			0.00			0.00
07/31/2000 – 03/31/2001		10.02		0.34	(a)		0.61	(a)		0.95			(0.37	)		0.00			(0.18	)		0.00
Long-Term U.S. Government Fund
Class A
09/30/2001*	$	10.65	$	0.32	(a)	$	0.27	(a)	$	0.59		$	(0.32	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.79		0.34	(a)		1.09	(a)		1.43			(0.57	)		0.00			0.00			0.00
03/31/2000		10.30		0.58	(a)		(0.51	)(a)		0.07			(0.58	)		0.00			0.00			0.00
03/31/1999		10.57		0.59	(a)		0.20	(a)		0.79			(0.60	)		0.00			0.00			(0.46	)
03/31/1998		9.39		0.48	(a)		1.34	(a)		1.82			(0.58	)		0.00			(0.06	)		0.00
01/20/1997 – 03/31/1997		9.67		0.32			(0.47	)		(0.15	)		(0.13	)		0.00			0.00			0.00
Class B
09/30/2001*		10.65		0.28	(a)		0.27	(a)		0.55			(0.28	)		0.00			0.00			0.00
03/31/2001		9.79		0.65	(a)		0.71	(a)		1.36			(0.50	)		0.00			0.00			0.00
03/31/2000		10.30		0.50	(a)		(0.50	)(a)		0.00			(0.51	)		0.00			0.00			0.00
03/31/1999		10.57		0.51	(a)		0.20	(a)		0.71			(0.52	)		0.00			0.00			(0.46	)
03/31/1998		9.39		0.39	(a)		1.35	(a)		1.74			(0.50	)		0.00			(0.06	)		0.00
01/20/1997 – 03/31/1997		9.67		0.29			(0.47	)		(0.18	)		(0.10	)		0.00			0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


61		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital		Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$	0.00	$	(0.24	)	$	10.20	4.14	%	$	123,972	1.65	%+	4.69	%+	269	%
	0.00		(0.55	)		10.03	8.12			88,585	1.71	(c)	5.32		348
	0.00		(0.51	)		9.81	2.30			73,121	1.73	(c)	5.16		82
	0.00		(0.58	)		10.10	5.07			65,160	1.65		5.03		245
	0.00		(0.55	)		10.18	7.68			17,624	1.65		5.16		309
	0.00		(0.11	)		9.98	0.68			5,296	1.67	+	5.03	+	240

	0.00		(0.25	)		10.20	4.27			186,865	1.40	+	4.91	+	269
	0.00		(0.58	)		10.03	8.39			119,062	1.46	(e)	5.58		348
	0.00		(0.54	)		9.81	2.55			110,447	1.48	(e)	5.42		82
	0.00		(0.61	)		10.10	5.33			112,229	1.40		5.35		245
	0.00		(0.58	)		10.18	8.01			68,766	1.40		5.46		309
	0.00		(0.12	)		9.98	0.75			63,606	1.42	+ (e)	5.36	+	240


	0.00	$	(0.33	)	$	10.79	6.60	%	$	5,956	1.00	%+	6.17	%+	587	%
	0.00		(0.21	)		10.44	5.68			11	0.65	+ (d)	6.11	+	808

	0.00		(0.18	)		10.79	6.13			3,290	1.75	+	4.99	+	587

	0.00		(0.18	)		10.79	6.17			4,768	1.75	+	4.99	+	587


$	0.00	$	(0.27	)	$	10.87	5.97	%	$	3,908,906	0.90	%+	5.01	%+	256	%
	0.00		(0.62	)		10.52	12.27			3,061,033	0.96	(b)	6.08		450
	0.00		(0.58	)		9.96	1.85			1,947,405	1.01	(b)	5.79		223
	0.00		(1.00	)		10.36	7.09			1,140,606	0.90		5.37		154
	0.00		(0.86	)		10.62	12.11			533,893	0.90		5.46		206
	0.00		(0.13	)		10.27	0.02			115,742	0.91	+ (b)	6.08	+	173

	0.00		(0.23	)		10.87	5.58			1,372,647	1.65	+	4.23	+	256
	0.00		(0.55	)		10.52	11.44			975,823	1.70	(c)	5.33		450
	0.00		(0.50	)		9.96	1.08			654,104	1.76	(c)	5.01		223
	0.00		(0.92	)		10.36	6.28			549,478	1.65		4.55		154
	0.00		(0.78	)		10.62	11.26			186,932	1.65		4.74		206
	0.00		(0.12	)		10.27	(0.10	)		74,130	1.67	+ (c)	5.28	+	173

	0.00		(0.23	)		10.87	5.58			1,532,148	1.65	+	4.23	+	256
	0.00		(0.55	)		10.52	11.44			1,103,702	1.71	(c)	5.34		450
	0.00		(0.50	)		9.96	1.09			720,199	1.75	(c)	5.01		223
	0.00		(0.92	)		10.36	6.29			715,201	1.65		4.63		154
	0.00		(0.79	)		10.62	11.28			405,037	1.65		4.83		206
	0.00		(0.12	)		10.27	(0.11	)		329,104	1.67	+ (c)	5.32	+	173


$	0.00	$	(0.24	)	$	10.78	5.83	%	$	9,550	0.90	%+	4.33	%+	644	%
	0.00		(0.56	)		10.42	10.58			769	0.90	+	5.68	+	848

	0.00		(0.24	)		10.78	5.42			3,306	1.65	+	3.52	+	644
	0.00		(0.53	)		10.42	9.95			816	1.65	+	4.89	+	848

	0.00		(0.20	)		10.78	5.43			5,239	1.65	+	3.57	+	644
	0.00		(0.55	)		10.42	9.94			1,908	1.65	+	4.94	+	848


$	0.00	$	(0.32	)	$	10.92	5.67	%	$	107,838	0.90	%+	5.96	%+	320	%
	0.00		(0.57	)		10.65	15.07			79,477	0.97	(b)	3.36		1,046
	0.00		(0.58	)		9.79	0.86			42,773	0.99	(b)	5.96		320
	0.00		(1.06	)		10.30	7.34			29,809	1.34	(b)	5.33		364
	0.00		(0.64	)		10.57	19.78			6,161	0.91	(b)	4.49		177
	0.00		(0.13	)		9.39	(1.72	)		1,204	1.12	+ (b)	6.91	+	402

	0.00		(0.28	)		10.92	5.28			67,911	1.65	+	5.22	+	320
	0.00		(0.50	)		10.65	14.22			54,374	1.70	(c)	6.40		1,046
	0.00		(0.51	)		9.79	0.11			34,301	1.72	(c)	5.16		320
	0.00		(0.98	)		10.30	6.51			37,946	2.13	(c)	4.53		364
	0.00		(0.56	)		10.57	18.85			7,516	1.66	(c)	4.64		177
	0.00		(0.10	)		9.39	(1.92	)		454	1.87	+ (c)	4.95	+	402

Annualized.

(b)

The ratio of expenses to average net assets excluding interest expense is 0.90%.

(c)

The ratio of expenses to average net assets excluding interest expense is 1.65%.

(d)

The accrual of expenses reflect Advisory fees of 0.25% and Administrative fees of 0.40%.

(e)

Ratio of expenses to average net assets excluding interest expense is 1.40%.


Prospectus		62

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

Long-Term U.S. Government Fund (continued)
Class C
09/30/2001*	$	10.65	$	0.28	(a)	$	0.27	(a)	$	0.55		$	(0.28	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.79		0.92	(a)		0.44	(a)		1.36			(0.50	)		0.00			0.00			0.00
03/31/2000		10.30		0.51	(a)		(0.51	)(a)		0.00			(0.51	)		0.00			0.00			0.00
03/31/1999		10.57		0.50	(a)		0.21	(a)		0.71			(0.52	)		0.00			0.00			(0.46	)
03/31/1998		9.39		0.39	(a)		1.35	(a)		1.74			(0.50	)		0.00			(0.06	)		0.00
01/20/1997 – 03/31/1997		9.67		0.29			(0.47	)		(0.18	)		(0.10	)		0.00			0.00			0.00
Real Return Fund
Class A
09/30/2001*	$	10.40	$	0.27	(a)	$	0.17	(a)	$	0.44		$	(0.33	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.92		0.71	(a)		0.61	(a)		1.32			(0.76	)		0.00			(0.08	)		0.00
03/31/2000		9.83		0.64	(a)		0.11	(a)		0.75			(0.64	)		0.00			(0.02	)		0.00
03/31/1999		9.77		0.43	(a)		0.14	(a)		0.57			(0.45	)		(0.06	)		0.00			0.00
03/31/1998		9.93		0.40	(a)		0.03	(a)		0.43			(0.42	)		(0.03	)		(0.14	)		0.00
01/29/1997 – 03/31/1997		10.00		0.11	(a)		(0.10	)(a)		0.01			(0.08	)		0.00			0.00			0.00
Class B
09/30/2001*		10.40		0.21	(a)		0.19	(a)		0.40			(0.29	)		0.00			0.00			0.00
03/31/2001		9.92		0.64	(a)		0.60	(a)		1.24			(0.68	)		0.00			(0.08	)		0.00
03/31/2000		9.83		0.57	(a)		0.11	(a)		0.68			(0.57	)		0.00			(0.02	)		0.00
03/31/1999		9.77		0.37	(a)		0.12	(a)		0.49			(0.38	)		(0.05	)		0.00			0.00
03/31/1998		9.93		0.33	(a)		0.03	(a)		0.36			(0.36	)		(0.02	)		(0.14	)		0.00
01/29/1997 – 03/31/1997		10.00		0.09			(0.10	)		(0.01	)		(0.06	)		0.00			0.00			0.00
Class C
09/30/2001*		10.40		0.24	(a)		0.18	(a)		0.42			(0.31	)		0.00			0.00			0.00
03/31/2001		9.92		0.68	(a)		0.59	(a)		1.27			(0.71	)		0.00			(0.08	)		0.00
03/31/2000		9.83		0.58	(a)		0.12	(a)		0.70			(0.59	)		0.00			(0.02	)		0.00
03/31/1999		9.77		0.44	(a)		0.08	(a)		0.52			(0.40	)		(0.06	)		0.00			0.00
03/31/1998		9.93		0.35	(a)		0.04	(a)		0.39			(0.38	)		(0.03	)		(0.14	)		0.00
01/29/1997 – 03/31/1997		10.00		0.09			(0.10	)		(0.01	)		(0.06	)		0.00			0.00			0.00
Global Bond Fund II
Class A
09/30/2001*	$	9.61	$	0.21	(a)	$	0.16	(a)	$	0.37		$	(0.21	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.41		0.52	(a)		0.50	(a)		1.02			(0.52	)		0.00		$	(0.08	)	$	(0.22	)
03/31/2000		9.89		0.52	(a)		(0.46	)(a)		0.06			(0.51	)		(0.01	)		(0.02	)		0.00
03/31/1999		9.92		0.48	(a)		0.06	(a)		0.54			(0.48	)		0.00			(0.01	)		(0.08	)
03/31/1998		10.84		0.64	(a)		0.51	(a)		1.15			0.00			(0.54	)		(1.53	)		0.00
10/01/1996 – 03/31/1997		10.96		0.66			(0.16	)		0.50			(0.22	)		0.00			(0.40	)		0.00
Class B
09/30/2001*		9.61		0.17	(a)		0.16	(a)		0.33			(0.17	)		0.00			0.00			0.00
03/31/2001		9.41		0.45	(a)		0.50	(a)		0.95			(0.45	)		0.00			(0.08	)		(0.22	)
03/31/2000		9.89		0.45	(a)		(0.46	)(a)		(0.01	)		(0.44	)		(0.01	)		(0.02	)		0.00
03/31/1999		9.92		0.41	(a)		0.06	(a)		0.47			(0.41	)		0.00			(0.01	)		(0.08	)
03/31/1998		10.84		0.66	(a)		0.41	(a)		1.07			0.00			(0.46	)		(1.53	)		0.00
10/01/1996 – 03/31/1997		10.96		0.62			(0.16	)		0.46			(0.18	)		0.00			(0.40	)		0.00
Class C
09/30/2001*		9.61		0.17	(a)		0.16	(a)		0.33			(0.17	)		0.00			0.00			0.00
03/31/2001		9.41		0.45	(a)		0.50	(a)		0.95			(0.45	)		0.00			(0.08	)		(0.22	)
03/31/2000		9.89		0.45	(a)		(0.46	)(a)		(0.01	)		(0.44	)		(0.01	)		(0.02	)		0.00
03/31/1999		9.92		0.41	(a)		0.06	(a)		0.47			(0.41	)		0.00			(0.01	)		(0.08	)
03/31/1998		10.84		0.55	(a)		0.52	(a)		1.07			0.00			(0.46	)		(1.53	)		0.00
10/01/1996 – 03/31/1997		10.96		0.62			(0.16	)		0.46			(0.18	)		0.00			(0.40	)		0.00
Foreign Bond Fund
Class A
09/30/2001*	$	10.32	$	0.22	(a)	$	0.12	(a)	$	0.34		$	(0.23	)	$	0.00		$	0.00		$	0.00
03/31/2001		10.03		0.54	(a)		0.50	(a)		1.04			(0.54	)		0.00			0.00			(0.21	)
03/31/2000		10.63		0.59	(a)		(0.45	)(a)		0.14			(0.59	)		0.00			(0.15	)		0.00
03/31/1999		10.74		0.53	(a)		0.24	(a)		0.77			(0.53	)		0.00			(0.10	)		(0.25	)
03/31/1998		10.41		0.61	(a)		0.62	(a)		1.23			(0.59	)		0.00			(0.31	)		0.00
01/20/1997 – 03/31/1997		10.59		0.59			(0.72	)		(0.13	)		(0.05	)		0.00			0.00			0.00
Class B
09/30/2001*		10.32		0.19	(a)		0.11	(a)		0.30			(0.19	)		0.00			0.00			0.00
03/31/2001		10.03		0.46	(a)		0.50	(a)		0.96			(0.46	)		0.00			0.00			(0.21	)
03/31/2000		10.63		0.51	(a)		(0.45	)(a)		0.06			(0.51	)		0.00			(0.15	)		0.00
03/31/1999		10.74		0.46	(a)		0.24	(a)		0.70			(0.46	)		0.00			(0.10	)		(0.25	)
03/31/1998		10.41		0.53	(a)		0.61	(a)		1.14			(0.50	)		0.00			(0.31	)		0.00
01/20/1997 – 03/31/1997		10.59		0.58			(0.72	)		(0.14	)		(0.04	)		0.00			0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


63		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.28	)	$	10.92	5.28	%	$	42,948	1.65	%+	5.23	%+	320	%
0.00		(0.50	)		10.65	14.24			35,675	1.71	(c)	9.01		1,046
0.00		(0.51	)		9.79	0.11			20,955	1.71	(c)	5.16		320
0.00		(0.98	)		10.30	6.52			31,653	2.16	(c)	4.50		364
0.00		(0.56	)		10.57	18.86			7,258	1.66	(c)	4.64		177
0.00		(0.10	)		9.39	(1.83	)		275	1.88	+ (c)	5.52	+	402


$0.00	$	(0.33	)	$	10.51	4.34	%	$	299.468	0.90	%+	5.10	%+	29	%
0.00		(0.84	)		10.40	13.97			95,899	0.94	(b)	7.03		202
0.00		(0.66	)		9.92	7.93			17,676	0.93	(b)	6.57		253
0.00		(0.51	)		9.83	5.99			6,250	0.92	(b)	4.40		438
0.00		(0.59	)		9.77	4.12			370	0.92	(b)	4.06		967
0.00		(0.08	)		9.93	0.15			1	0.90	+	6.14	+	160

0.00		(0.29	)		10.51	3.94			223,031	1.65	+	4.07	+	29
0.00		(0.76	)		10.40	13.12			54,875	1.69	(c)	6.33		202
0.00		(0.59	)		9.92	7.16			11,463	1.68	(c)	5.82		253
0.00		(0.43	)		9.83	5.19			3,646	1.68	(c)	3.72		438
0.00		(0.52	)		9.77	3.50			1,496	1.67	(c)	3.32		967
0.00		(0.06	)		9.93	(0.08	)		509	1.59	+	3.43	+	160

0.00		(0.31	)		10.51	4.07			270,874	1.40	+	4.50	+	29
0.00		(0.79	)		10.40	13.42			81,407	1.44	(e)	6.69		202
0.00		(0.61	)		9.92	7.40			17,336	1.43	(e)	5.90		253
0.00		(0.46	)		9.83	5.46			2,534	1.43	(e)	4.49		438
0.00		(0.55	)		9.77	3.73			490	1.42	(e)	3.56		967
0.00		(0.06	)		9.93	(0.07	)		148	1.62	+ (e)	5.13	+	160


$0.00	$	(0.21	)	$	9.77	3.89	%	$	3,907	0.95	%+	4.26	%+	146	%
0.00		(0.82	)		9.61	11.43			2,747	0.98	(d)	5.46		422
0.00		(0.54	)		9.41	0.71			2,279	0.98	(d)	5.45		290
0.00		(0.57	)		9.89	5.65			2,728	0.95		5.07		236
0.00		(2.07	)		9.92	11.21			6,816	0.95		5.88		369
0.00		(0.62	)		10.84	4.55			7,652	2.05	+ (d)	5.60	+	307

0.00		(0.17	)		9.77	3.50			5,709	1.70	+	3.55	+	146
0.00		(0.75	)		9.61	10.60			5,243	1.73	(f)	4.73		422
0.00		(0.47	)		9.41	(0.05	)		4,590	1.73	(f)	4.72		290
0.00		(0.50	)		9.89	4.85			4,909	1.70		4.16		236
0.00		(1.99	)		9.92	10.39			4,473	1.70		5.12		369
0.00		(0.58	)		10.84	4.17			3,925	2.57	+ (f)	4.22	+	307

0.00		(0.17	)		9.77	3.51			6,742	1.70	+	3.54	+	146
0.00		(0.75	)		9.61	10.60			5,208	1.73	(f)	4.75		422
0.00		(0.47	)		9.41	(0.05	)		5,254	1.73	(f)	4.71		290
0.00		(0.50	)		9.89	4.82			5,863	1.70		4.16		236
0.00		(1.99	)		9.92	10.39			6,096	1.70		5.12		369
0.00		(0.58	)		10.84	4.17			5,323	2.43	+ (f)	4.14	+	307


$0.00	$	(0.23	)	$	10.43	3.34	%	$	100,403	0.96	%+(d)	4.35	%+	168	%
0.00		(0.75	)		10.32	10.82			84,631	0.99	(d)	5.28		417
0.00		(0.74	)		10.03	1.50			54,299	1.19	(d)	5.75		330
0.00		(0.88	)		10.63	7.43			29,009	0.95		4.87		376
0.00		(0.90	)		10.74	12.14			9,582	0.95		5.88		280
0.00		(0.05	)		10.41	(1.21	)		704	0.97	+ (d)	4.95	+	984

0.00		(0.19	)		10.43	2.95			32,171	1.70	+	3.62	+	168
0.00		(0.67	)		10.32	9.94			28,747	1.74	(f)	4.57		417
0.00		(0.66	)		10.03	0.72			24,402	1.91	(f)	5.00		330
0.00		(0.81	)		10.63	6.69			21,256	1.70		4.14		376
0.00		(0.81	)		10.74	11.29			10,631	1.70		5.13		280
0.00		(0.04	)		10.41	(1.34	)		1,221	1.75	+ (f)	3.73	+	984

Annualized.

(b)

The ratio of expenses to average net assets excluding interest expense is 0.90%.

(c)

The ratio of expenses to average net assets excluding interest expense is 1.65%.

(d)

The ratio of expenses to average net assets excluding interest expense is 0.95%.

(e)

The ratio of expenses to average net assets excluding interest expense is 1.40%.

(f)

The ratio of expenses to average net assets excluding interest expense is 1.70%.


Prospectus		64

Year or Period Ended	Net Asset Value Beginning of Period	Net Investment Income (Loss)		Net Realized and Unrealized Gain (Loss) on Investments		Total Income (Loss) from Investment Operations		Dividends from Net Investment Income		Dividends in Excess of Net Investment Income		Distributions from Net Realized Capital Gains		Distributions in Excess of Net Realized Capital Gains

Foreign Bond Fund (continued)
Class C
09/30/2001*	$10.32	$0.19	(a)	$0.11	(a)	$0.30		$(0.19	)	$0.00		$0.00		$0.00
03/31/2001	10.03	0.46	(a)	0.50	(a)	0.96		(0.46	)	0.00		0.00		(0.21	)
03/31/2000	10.63	0.51	(a)	(0.45	)(a)	0.06		(0.51	)	0.00		(0.15	)	0.00
03/31/1999	10.74	0.45	(a)	0.24	(a)	0.69		(0.45	)	0.00		(0.10	)	(0.25	)
03/31/1998	10.41	0.52	(a)	0.62	(a)	1.14		(0.50	)	0.00		(0.31	)	0.00
01/20/1997 – 03/31/1997	10.59	0.58		(0.72	)	(0.14	)	(0.04	)	0.00		0.00		0.00
Emerging Markets Bond Fund
Class A
09/30/2001*	$8.40	$0.37	(a)	$0.30	(a)	$0.67		$(0.39	)	$0.00		$0.00		$0.00
03/31/2001	8.61	0.77	(a)	0.21	(a)	0.98		(0.79	)	0.00		0.00		(0.40	)
03/31/2000	7.51	0.84	(a)	1.10	(a)	1.94		(0.84	)	0.00		0.00		0.00
03/31/1999	9.67	0.83	(a)	(2.11	)(a)	(1.28	)	(0.83	)	0.00		0.00		(0.05	)
07/31/1997 – 03/31/1998	10.00	0.44	(a)	(0.18	)(a)	0.26		(0.44	)	0.00		(0.15	)	0.00
Class B
09/30/2001*	8.40	0.34	(a)	0.30	(a)	0.64		(0.36	)	0.00		0.00		0.00
03/31/2001	8.61	0.73	(a)	0.19	(a)	0.92		(0.73	)	0.00		0.00		(0.40	)
03/31/2000	7.51	0.77	(a)	1.11	(a)	1.88		(0.78	)	0.00		0.00		0.00
03/31/1999	9.67	0.77	(a)	(2.11	)(a)	(1.34	)	(0.77	)	0.00		0.00		(0.05	)
07/31/1997 – 03/31/1998	10.00	0.40	(a)	(0.20	)(a)	0.20		(0.38	)	0.00		(0.15	)	0.00
Class C
09/30/2001*	8.40	0.34	(a)	0.29	(a)	0.63		(0.35	)	0.00		0.00		0.00
03/31/2001	8.61	0.72	(a)	0.21	(a)	0.93		(0.74	)	0.00		0.00		(0.40	)
03/31/2000	7.51	0.78	(a)	1.10	(a)	1.88		0.78		0.00		0.00		0.00
03/31/1999	9.67	0.77	(a)	(2.11	)(a)	(1.34	)	(0.77	)	0.00		0.00		(0.05	)
07/31/1997 – 03/31/1998	10.00	0.38	(a)	(0.18	)(a)	0.20		(0.38	)	0.00		(0.15	)	0.00
High Yield Fund
Class A
09/30/2001*	$ 9.88	$0.39	(a)	$(0.68	)(a)	$(0.29	)	$(0.39)		$0.00		$0.00		$0.00
03/31/2001	10.22	0.87	(a)	(0.34	)(a)	0.53		(0.86)		(0.01	)	0.00		0.00
03/31/2000	11.23	0.89	(a)	(1.01	)(a)	(0.12	)	(0.88)		(0.01	)	0.00		0.00
03/31/1999	11.66	0.91	(a)	(0.43	)(a)	0.48		(0.90)		(0.01	)	0.00		0.00
03/31/1998	11.10	0.93	(a)	0.66	(a)	1.59		(0.94)		0.00		0.00		(0.09	)
01/13/1997 – 03/31/1997	11.18	0.17		(0.05	)	0.12		(0.20)		0.00		0.00		0.00
Class B
09/30/2001*	9.88	0.35	(a)	(0.67	)(a)	(0.32	)	(0.36)		0.00		0.00		0.00
03/31/2001	10.22	0.79	(a)	(0.33	)(a)	0.46		(0.79)		(0.01	)	0.00		0.00
03/31/2000	11.23	0.81	(a)	(1.01	)(a)	(0.20	)	(0.80)		(0.01	)	0.00		0.00
03/31/1999	11.66	0.82	(a)	(0.43	)(a)	0.39		(0.81)		(0.01	)	0.00		0.00
03/31/1998	11.10	0.84	(a)	0.66	(a)	1.50		(0.85)		0.00		0.00		(0.09	)
01/13/1997 – 03/31/1997	11.18	0.15		(0.05	)	0.10		(0.18)		0.00		0.00		0.00
Class C
09/30/2001*	9.88	0.35	(a)	(0.67	)(a)	(0.32	)	(0.36)		0.00		0.00		0.00
03/31/2001	10.22	0.79	(a)	(0.33	)(a)	0.46		(0.79)		(0.01	)	0.00		0.00
03/31/2000	11.23	0.81	(a)	(1.01	)(a)	0.20		(0.80)		(0.01	)	0.00		0.00
03/31/1999	11.66	0.82	(a)	(0.43	)(a)	0.39		(0.81)		(0.01	)	0.00		0.00
03/31/1998	11.10	0.85	(a)	0.65	(a)	1.50		(0.85)		0.00		0.00		(0.09	)
01/13/1997 – 03/31/1997	11.18	0.15		(0.05	)	0.10		(0.18)		0.00		0.00		0.00
Convertible Fund
Class A
09/30/2001*	$11.41	$ 0.01	(a)	$(1.03	)(a)	$(1.02	)	$(0.11)		$0.00		$0.00		$0.00
03/31/2001	15.76	0.00	(a)	(3.45	)(a)	(3.45	)	(0.20)		0.00		0.00		(0.70	)
05/28/1999 – 03/31/2000	10.67	0.00	(a)	5.35	(a)	5.35		(0.03)		(0.14	)	(0.09	)	0.00
Class B
09/30/2001*	11.34	0.03	(a)	(1.08	)(a)	(1.05	)	(0.08)		0.00		0.00		0.00
03/31/2001	15.68	(0.16	)(a)	(3.36	)(a)	(3.52	)	(0.12)		0.00		0.00		(0.70	)
05/28/1999 – 03/31/2000	10.67	(0.07	)(a)	5.29	(a)	5.22		(0.02)		(0.10	)	(0.09	)	0.00
Class C
09/30/2001*	11.37	0.03	(a)	(1.09	)(a)	(1.06	)	(0.07)		0.00		0.00		0.00
03/31/2001	15.71	(0.15	)(a)	(3.38	)(a)	(3.53	)	(0.11)		0.00		0.00		(0.70	)
05/28/1999 – 03/31/2000	10.67	(0.07	)(a)	5.31	(a)	5.24		(0.02)		(0.09	)	(0.09	)	0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


65		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.19	)	$	10.43	2.95	%	$	41,438	1.70	%+	3.61	%+	168	%
0.00		(0.67	)		10.32	9.96			35,337	1.74	(d)	4.57		417
0.00		(0.66	)		10.03	0.73			30,214	1.91	(d)	5.01		330
0.00		(0.80	)		10.63	6.63			29,584	1.70		4.16		376
0.00		(0.81	)		10.74	11.29			17,080	1.70		5.13		280
0.00		(0.04	)		10.41	(1.32	)		1,788	1.76	+ (d)	4.09	+	984


$0.00	$	(0.39	)	$	8.68	8.03	%	$	2,659	1.39	%+(b)	8.53	%+	531	%
0.00		(1.19	)		8.40	12.46			1,143	1.34	(b)	9.08		902
0.00		(0.84	)		8.61	27.39			316	1.29	(b)	10.59		328
0.00		(0.88	)		7.51	(12.90	)		172	1.25		10.26		315
0.00		(0.59	)		9.67	2.84			317	1.26	+ (b)	6.93	+	695

0.00		(0.36	)		8.68	7.64			2,828	2.15	+ (c)	7.76	+	531
0.00		(1.13	)		8.40	11.59			1,620	2.09	(c)	8.58		902
0.00		(0.78	)		8.61	26.43			1,168	2.04	(c)	9.57		328
0.00		(0.82	)		7.51	(13.58	)		398	2.00		9.68		315
0.00		(0.53	)		9.67	2.29			304	2.01	+ (c)	6.33	+	695

0.00		(0.35	)		8.68	7.63			1,538	2.13	+ (c)	7.71	+	531
0.00		(1.14	)		8.40	11.74			792	2.08	(c)	8.52		902
0.00		(0.78	)		8.61	26.49			249	2.04	(c)	9.87		328
0.00		(0.82	)		7.51	(13.57	)		229	2.00		9.79		315
0.00		(0.53	)		9.67	2.29			136	2.01	+ (c)	6.11	+	695


$0.00	$	(0.39	)	$	9.20	(3.01	)%	$	295,186	0.90	%+	8.02	%+	41	%
0.00		(0.87	)		9.88	5.44			262,572	0.90		8.62		53
0.00		(0.89	)		10.22	(1.15	)		187,039	0.90		8.23		39
0.00		(0.91	)		11.23	4.32			155,466	0.90		7.94		39
0.00		(1.03	)		11.66	14.80			70,858	0.90		8.02		37
0.00		(0.20	)		11.10	1.06			28,873	0.92	+ (i)	8.28	+	67

0.00		(0.36	)		9.20	(3.37	)		351,454	1.65	+	7.28	+	41
0.00		(0.80	)		9.88	4.66			327,367	1.65		7.90		53
0.00		(0.81	)		10.22	(1.89	)		303,333	1.65		7.48		39
0.00		(0.82	)		11.23	3.54			286,198	1.65		7.21		39
0.00		(0.94	)		11.66	13.94			156,099	1.65		7.27		37
0.00		(0.18	)		11.10	0.86			60,269	1.67	+ (j)	7.52	+	67

0.00		(0.36	)		9.20	(3.37	)		390,114	1.65	+	7.29	+	41
0.00		(0.80	)		9.88	4.66			373,530	1.65		7.90		53
0.00		(0.81	)		10.22	(1.89	)		341,953	1.65		7.49		39
0.00		(0.82	)		11.23	3.55			370,861	1.65		7.24		39
0.00		(0.94	)		11.66	13.95			284,836	1.65		7.36		37
0.00		(0.18	)		11.10	0.88			205,297	1.68	+ (j)	7.56	+	67


$0.00	$	(0.11	)	$	10.28	(8.95	)%	$	5,201	1.05	%+	1.24	%+	144	%
0.00		(0.90	)		11.41	(22.68	)		6,426	1.06	(e)	(0.35	)	225
0.00		(0.26	)		15.76	50.36			5,327	1.05	+ (h)	0.15	+	247

0.00		(0.08	)		10.21	(9.33	)		5,649	1.80	+	0.46	+	144
0.00		(0.82	)		11.34	(23.24	)		5,705	1.81	(f)	(1.13	)	225
0.00		(0.21	)		15.68	49.18			2,437	1.80	+ (g)	(0.58	)+	247

0.00		(0.07	)		10.24	(9.35	)		10,261	1.80	+	0.49	+	144
0.00		(0.81	)		11.37	(23.21	)		13,249	1.80		(1.11	)	225
0.00		(0.20	)		15.71	49.33			7,924	1.80	+ (g)	(0.59	)+	247

Annualized.

(b)

The ratio of expenses to average net assets excluding interest expense is 1.25%.

(c)

The ratio of expenses to average net assets excluding interest expense is 2.00%.

(d)

The ratio of expenses to average net assets excluding interest expense is 1.70%.

(e)

Ratio of expenses to average net assets excluding interest expenses is 1.05%.

(f)

Ratio of expenses to average net assets excluding interest expenses is 1.80%.

(g)

If the Investment Manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.83%.

(h)

If the Investment Manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.08%.

(i)

The ratio of expenses to average net assets excluding interest expense is 0.90%.

(j)

Ratio of expenses to average net assets excluding interest expenses is 1.65%.


Prospectus		66

Year or Period Ended	Net Asset Value Beginning of Period	Net Investment Income (Loss)		Net Realized and Unrealized Gain (Loss) on Investments		Total Income (Loss) from Investment Operations		Dividends from Net Investment Income	Dividends in Excess of Net Investment Income		Distributions from Net Realized Capital Gains		Distributions in Excess of Net Realized Capital Gains

Strategic Balanced Fund
Class A
09/30/2001*	$10.42	$0.15	(a)	$(0.50	)(a)	$(0.35	)	$(0.13)	$ 0.00		$0.00		$0.00
03/31/2001	12.74	0.89	(a)	(1.90	)(a)	(1.01	)	(0.62)	0.00		0.00		(0.69	)
05/28/1999 – 03/31/2000	12.80	0.64	(a)	0.48	(a)	1.12		(0.72)	(0.15	)	(0.31	)	0.00
Class B
09/30/2001*	10.40	0.11	(a)	(0.51	)(a)	(0.40	)	(0.09)	0.00		0.00		0.00
03/31/2001	12.72	0.81	(a)	(1.90	)(a)	(1.09	)	(0.54)	0.00		0.00		(0.69	)
05/28/1999 – 03/31/2000	12.80	0.60	(a)	0.45	(a)	1.05		(0.67)	(0.15	)	(0.31	)	0.00
Class C
09/30/2001*	10.37	0.11	(a)	(0.50	)(a)	(0.39	)	(0.09)	0.00		0.00		0.00
03/31/2001	12.70	0.82	(a)	(1.92	)(a)	(1.10	)	(0.54)	0.00		0.00		(0.69	)
05/28/1999 – 03/31/2000	12.80	0.61	(a)	0.42	(a)	1.03		(0.67)	(0.15	)	(0.31	)	0.00
StocksPLUS Fund
Class A
09/30/2001*	$10.10	$(0.04	)(a)	$(0.92	)(a)	$(0.96	)	$(0.10)	$0.00		$0.00		$0.00
03/31/2001	14.06	(0.01	)(a)	(2.80	)(a)	(2.81	)	(0.24)	0.00		0.00		(0.91	)
03/31/2000	14.26	1.05	(a)	1.27	(a)	2.32		(1.04)	0.00		(0.97	)	(0.51	)
03/31/1999	14.06	0.93	(a)	1.29	(a)	2.22		(0.78)	0.00		(1.24	)	0.00
03/31/1998	11.46	1.66	(a)	3.41	(a)	5.07		(1.38)	0.00		(1.09	)	0.00
01/20/1997 – 03/31/1997	11.91	(0.10	)	(0.20	)	(0.30	)	(0.15)	0.00		0.00		0.00
Class B
09/30/2001*	9.98	(0.06	)(a)	(0.91	)(a)	(0.97	)	(0.09)	0.00		0.00		0.00
03/31/2001	13.96	(0.09	)(a)	(2.79	)(a)	(2.88	)	(0.19)	0.00		0.00		(0.91	)
03/31/2000	14.18	0.90	(a)	1.30	(a)	2.20		(0.94)	0.00		(0.97	)	(0.51	)
03/31/1999	14.01	0.84	(a)	1.26	(a)	2.10		(0.69)	0.00		(1.24	)	0.00
03/31/1998	11.44	1.61	(a)	3.35	(a)	4.96		(1.30)	0.00		(1.09	)	0.00
01/20/1997 – 03/31/1997	11.91	(0.13	)	(0.20	)	(0.33	)	(0.14)	0.00		0.00		0.00
Class C
09/30/2001*	10.03	(0.06	)(a)	(0.91	)(a)	(0.97	)	(0.09)	0.00		0.00		0.00
03/31/2001	14.00	(0.07	)(a)	(2.79	)(a)	(2.86	)	(0.20)	0.00		0.00		(0.91	)
03/31/2000	14.21	0.94	(a)	1.30	(a)	2.24		(0.97)	0.00		(0.97	)	(0.51	)
03/31/1999	14.03	0.86	(a)	1.28	(a)	2.14		(0.72)	0.00		(1.24	)	0.00
03/31/1998	11.45	1.64	(a)	3.35	(a)	4.99		(1.32)	0.00		(1.09	)	0.00
01/20/1997 – 03/31/1997	11.91	(0.12	)(a)	(0.20	)(a)	(0.32	)	(0.14)	0.00		0.00		0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


67		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate



$0.00	$	(0.13	)	$	9.94	(3.40	)%	$	3,564	0.65	%+	2.87	%+	11	%
0.00		(1.31	)		10.42	(8.58	)		3,660	0.86	(b)	7.44		651
0.00		(1.18	)		12.74	9.34			4,468	1.05	+	5.99	+	176

0.00		(0.09	)		9.91	(3.87	)		8,072	1.40	+	2.11	+	11
0.00		(1.23	)		10.40	(9.28	)		8,484	1.57	(b)	6.59		651
0.00		(1.13	)		12.72	8.61			11,604	1.80	+	5.61	+	176

0.00		(0.09	)		9.89	(3.77	)		14,700	1.40	+	2.08	+	11
0.00		(1.23	)		10.37	(9.32	)		14,004	1.58	(b)	6.76		651
0.00		(1.13	)		12.70	8.47			13,116	1.80	+	5.66	+	176


$0.00	$	(0.10	)	$	9.04	(9.62	)%	$	94,941	1.05	%+	(0.77	)%+	225	%
0.00		(1.15	)		10.10	(21.31	)		108,332	1.05		(0.05	)	270
0.00		(2.52	)		14.06	17.26			160,847	1.05		7.21		92
0.00		(2.02	)		14.26	17.07			148,748	1.05		6.66		81
0.00		(2.47	)		14.06	47.07			62,970	1.05		13.34		30
0.00		(0.15	)		11.46	(2.59	)		5,790	1.10	+ (c)	(10.69	)+	47

0.00		(0.09	)		8.92	(9.89	)		196,051	1.80	+	(1.24	)+	225
0.00		(1.10	)		9.98	(21.91	)		240,913	1.80		(0.74	)	270
0.00		(2.42	)		13.96	16.40			374,171	1.80		6.27		92
0.00		(1.93	)		14.18	16.21			281,930	1.80		6.05		81
0.00		(2.39	)		14.01	46.11			99,039	1.80		12.60		30
0.00		(0.14	)		11.44	(2.81	)		8,281	1.88	+ (d)	(15.13	)+	47

0.00		(0.09	)		8.97	(9.79	)		178,328	1.55	+	(1.23	)+	225
0.00		(1.11	)		10.03	(21.66	)		207,945	1.55		(0.59	)	270
0.00		(2.45	)		14.00	16.69			311,942	1.55		6.47		92
0.00		(1.96	)		14.21	16.48			245,088	1.55		6.19		81
0.00		(2.41	)		14.03	46.38			96,960	1.55		12.85		30
0.00		(0.14	)		11.45	(2.71	)		11,254	1.65	+ (e)	(12.79	)+	47

Annualized.

(b)

Effective September 29, 2000, the Strategic Balanced Fund did not incur advisory fee expenses.

(c)

Ratio of expenses to average net assets excluding interest expenses is 1.05%.

(d)

Ratio of expenses to average net assets excluding interest expenses is 1.80%.

(e)

Ratio of expenses to average net assets excluding interest expenses is 1.55%.


Prospectus		68

Appendix A

Description of Securities Ratings

High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by PIMCO.

Below Investment Grade, High Yield Securities (“Junk Bonds”) are those rated lower than Baa by Moody’s or BBB by S&P and comparable securities. They are considered predominantly speculative with respect to the issuer’s ability to repay principal and interest.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Corporate Short-Term Debt Ratings

Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:


A-1		PIMCO Funds: Pacific Investment Management Series

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being paid.


Prospectus A-2

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.


A-3		PIMCO Funds: Pacific Investment Management Series

PIMCO Funds: Pacific Investment Management Series

The Trust’s Statement of Additional Information (“SAI”) and annual and semi-annual reports to shareholders include additional information about the Funds. The SAI and the financial statements included in the Funds’ most recent annual report to shareholders are incorporated by reference into this prospectus, which means they are part of this Prospectus for legal purposes. The Funds’ annual report discusses the market conditions and investment strategies that significantly affected each Fund’s performance during its last fiscal year.

The SAI includes the PIMCO Funds Shareholders’ Guide for Class A, B and C Shares, a separate booklet which contains more detailed information about Fund purchase, redemption and exchange options and procedures and other information about the Funds. You can get a free copy of the Guide together with or separately from the rest of the SAI.

You may get free copies of any of these materials, request other information about a Fund, or make shareholder inquiries by calling 1-800-426-0107, or by writing to:

PIMCO Funds Distributors LLC

2187 Atlantic Street

Stamford, Connecticut 06902

You may review and copy information about the Trust, including its SAI, at the Securities and Exchange Commission’s public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the Trust on the Commission’s Web site at www.sec.gov. You may get copies of this information, with payment of a duplication fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-0102, or by e-mailing your request to publicinfo@sec.gov.

You can also visit our Web site at www.pimcofunds.com for additional information about the Funds.

Investment Company Act File no. 811-5028

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISER AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

DISTRIBUTOR

PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT 06902-6896

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT

PFPC Inc., P.O. Box 9688, Providence, RI 02940-9688

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006-2401

For further information about the PIMCO Funds, call 1-800-426-0107 or visit our Web site at http://www.pimcofunds.com.

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PZ002.4/02

Not part of the Prospectus

PIMCO Funds

Distributors LLC

2187 Atlantic Street

Stamford, CT 06902-6896

APRIL 1, 2002		PIMCO Funds Prospectus

Share Classes ^{A B C} Share Classes ^{A B} Share Class ^A		NATIONAL TAX-EXEMPT BOND FUNDS Municipal Bond Fund NATIONAL SHORT DURATION TAX-EXEMPT BOND FUNDS Short Duration Municipal Income Fund STATE-SPECIFIC TAX-EXEMPT BOND FUNDS California Intermediate Municipal Bond Fund California Municipal Bond Fund New York Municipal Bond Fund
This cover is not part of the Prospectus.

PIMCO Funds Prospectus

PIMCO Funds:

Pacific Investment Management Series

April 1, 2002

Share Classes A, B and C

This prospectus describes 5 municipal bond mutual funds offered by PIMCO Funds: Pacific Investment Management Series. The Funds provide access to the professional investment advisory services offered by Pacific Investment Management Company LLC (“PIMCO”). As of December 31, 2001, PIMCO managed approximately $241.3 billion in assets.

This prospectus explains what you should know about the Funds before you invest. Please read it carefully.


1		PIMCO Funds: Pacific Investment Management Series

Table of Contents

Summary Information		3
Fund Summaries
California Intermediate Municipal Bond Fund		5
California Municipal Bond Fund		7
Municipal Bond Fund		9
New York Municipal Bond Fund		11
Short Duration Municipal Income Fund		13
Summary of Principal Risks		15
Management of the Funds		17
Investment Options		18
How Fund Shares Are Priced		22
How to Buy and Sell Shares		22
Fund Distributions		26
Tax Consequences		26
Characteristics and Risks of Securities and Investment Techniques		27
Financial Highlights		33
Appendix A—Description of Securities Ratings		A-1


Prospectus		2

Summary Information

		Main Investments	Duration	Credit Quality(1)	Non-U.S. Dollar Denominated Securities

Tax-Exempt Bond Funds	Short Duration Municipal Income	Short and intermediate maturity municipal securities (exempt from federal income tax)	0–2 years	Baa to Aaa	0%

	Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal income tax)	3–10 years	Ba to Aaa; max 10% below Baa	0%

	California Intermediate Municipal Bond	Intermediate maturity municipal securities (exempt from federal and California income tax)	3–7 years	B to Aaa; max 10% below Baa	0%

	California Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)	3–12 years	B to Aaa; max 10% below Baa	0%

	New York Municipal Bond	Intermediate to long-term maturity municipal securities (exempt from federal and New York income tax)	3–12 years	B to Aaa; max 10% below Baa	0%

(1) As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

Fixed Income Instruments

While the Funds will primarily invest in debt securities whose interest is, in the opinion of bond counsel for the

issuer at the time of issuance, exempt from federal income tax (“Municipal Bonds”), the term “Fixed Income Instruments” as used generally in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of foreign governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.


3		PIMCO Funds: Pacific Investment Management Series

Summary Information (continued)

Duration

Credit Ratings

In this prospectus, references are made to credit ratings of debt securities which measure an issuer’s expected ability to pay principal and interest on time. Credit ratings are determined by rating organizations, such as Standard & Poor’s Ratings Service (“S&P”) or Moody’s Investors Services, Inc. (“Moody’s”). The following terms are generally used to describe the credit quality of debt securities depending on the security’s credit rating or, if unrated, credit quality as determined by PIMCO:

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Descriptions, Performance and Fees

The Funds provide a range of investment choices. The following summaries identify each Fund’s investment objective, principal investments and strategies, principal risks, performance information and fees and expenses. A more detailed “Summary of Principal Risks” describing principal risks of investing in the Funds begins after the Fund Summaries. Investors should be aware that the investments made by a Fund and the results achieved by a Fund at any given time are not expected to be the same as those made by other mutual funds for which PIMCO acts as investment adviser, including mutual funds with names, investment objectives and policies similar to the Funds.

It is possible to lose money on investments in the Funds.

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		4

PIMCO California Intermediate Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt

from federal and California income tax.

Capital appreciation is a secondary

objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate maturity municipal securities (exempt from federal and California income tax)

Average Portfolio Duration

3-7 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund invests under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and California income tax (“California Municipal Bonds”). California Municipal Bonds generally are issued by or on behalf of the State of California and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to seven-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A shares in the Average Annual Total Returns table reflect the impact of sales charges. For periods prior to the inception date of Class A shares (10/19/99), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A shares. Past performance is no guarantee of future results.


5		PIMCO Funds: Pacific Investment Management Series

PIMCO California Intermediate Municipal Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	3.07%

	Lowest (10/1/01–12/31/01)	-0.79%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class A	2.49%	5.46%

Lehman Brothers California Intermediate Municipal Bond Index(1)	4.89%	6.14%

Lipper California Intermediate Municipal Debt Fund Average(2)	4.56%	5.85%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	0.50%(1)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.36%	0.86%

(1)

Other Expenses reflect an Administrative Fee of 0.35% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.85% for Class A. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Class A shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$385	$566	$762	$1,329	$385	$566	$762	$1,329


Prospectus		6

PIMCO California Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and California income tax. Capital appreciation is a secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate to long-term maturity municipal securities (exempt from federal and California income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund invests under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and California income tax (“California Municipal Bonds”). California Municipal Bonds generally are issued by or on behalf of the State of California and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three- to twelve-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• California State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflects the impact of sales charges. For periods prior to the inception date of Class A shares (7/31/00), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A shares. Past performance is no guarantee of future results.


7		PIMCO Funds: Pacific Investment Management Series

PIMCO California Municipal Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (7/1/01–9/30/01)	4.10%

	Lowest (10/1/01–12/31/01)	-0.24%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (5/16/00)(3)

Class A	4.33%	8.18%

Lehman California Insured Municipal Index(1)	5.25%	9.30%

Lipper California Intermediate Municipal Debt Fund Average(2)	3.71%	9.03%

(1)

The Lehman California Insured Municipal Index is an unmanaged index comprised of insured California Municipal Bond issues. It is not possible to invest directly in the index.

(2)

(3)

The Fund began operations on 5/16/00. Index comparisons began on 5/31/00.

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	0.50%(1)

(1) Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase. Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.35%	0.85%

(1)

Other Expenses reflect an Administrative Fee of 0.35%.

Share Class

Example: Assuming you redeem shares at the end of each period

Example: Assuming you do not redeem your shares

Year 1

Year 3

Year 5

Year 10

Year 1

Year 3

Year 5

Year 10

Class A

$384

$563

$757

$1,318

$384

$563

$757

$1,318


Prospectus		8

PIMCO Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal income tax, consistent with preservation of capital. Capital appreciation is a secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate to long-term maturity

municipal securities (exempt from

federal income tax)

Average Portfolio Duration

3-10 years

Credit Quality

Ba to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund may invest up to 20% of its net assets in U.S. Government Securities, money market instruments and/or “private activity” bonds. For shareholders subject to the federal alternative minimum tax (“AMT”), distributions derived from “private activity” bonds must be included in their AMT calculations, and as such a portion of the Fund’s distribution may be subject to federal income tax. The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its net assets in Municipal Bonds or “private activity” bonds which are high yield securities (“junk bonds”) rated at least Ba by Moody’s or BB by S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest more than 25% of its assets in bonds of issuers in California and New York. To the extent that the Fund concentrates its investments in California or New York, it will be subject to California or New York State Specific Risk. The average portfolio duration of this Fund normally varies within a three- to ten-year time frame based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

The Fund may invest in derivatives, such as options, futures contracts or swap agreements on U.S. Government Securities and Municipal Bonds, and invest in mortgage- or asset-backed securities. The Fund may also invest in securities issued by entities whose underlying assets are Municipal Bonds, including, without limitation, residual interest bonds. The Fund may lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The Fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).

Principal Risks

Among the principal risks of investing in the Fund which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A, B and C shares in the Average Annual Total Returns table reflect the impact of sales charges. For periods prior to the inception date of Class A, B and C shares (4/1/98), performance information shown in the bar chart and table for those classes is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A, B and C shares. Past performance is no guarantee of future results.


9		PIMCO Funds: Pacific Investment Management Series

PIMCO Municipal Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (1/1/01–3/31/01)	3.46%

	Lowest (4/1/99–6/30/99)	-2.45%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (12/31/97)

Class A	4.14%	3.79%

Class B	1.55%	3.13%

Class C	5.83%	4.07%

Lehman Brothers General Municipal Bond Index(1)	5.13%	5.19%

Lipper General Municipal Fund Average(2)	3.90%	3.74%

(1)

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A, B or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	1%(1)

Class B	None	5%(2)

Class C	None	1%(3)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

The maximum CDSC is imposed on shares redeemed in the first year. For shares held longer than one year, the CDSC declines according to the schedule set forth under “Investment Options (Class A, B and C Shares—Contingent Deferred Sales Charges (CDSCs))—Class B Shares.”

(3)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

A Shares	0.25%	0.25%	0.35%	0.85%

B Shares	0.25	1.00	0.35	1.60

C Shares	0.25	0.75	0.35	1.35

(1)

(2)

Other Expenses reflect an Administrative Fee of 0.35%.

Examples. The Examples are intended to help you compare the cost of investing in Classes A, B or C of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$384	$563	$ 757	$1,318	$384	$563	$757	$1,318

Class B	663	805	1,071	1,697*	163	505	871	1,697	*

Class C	237	428	739	1,624	137	428	739	1,624

For Class B shares purchased prior to January 1, 2002, this amount is $1,601.


Prospectus		10

PIMCO New York Municipal Bond Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal and New York income tax. Capital appreciation is a secondary objective.

Fund Category

Tax Exempt Bond

Fund Focus

Intermediate to long-term maturity

municipal securities (exempt from

federal and New York income tax)

Average Portfolio Duration

3-12 years

Credit Quality

B to Aaa; maximum 10% below Baa

Dividend Frequency

Declared daily and distributed monthly

The Fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its net assets in Municipal Bonds whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from federal income tax. The Fund will invest under normal circumstances at least 65% of its assets in debt securities whose interest is, in the opinion of bond counsel for the issuer at the time of issuance, exempt from regular federal income tax and New York income tax (“New York Municipal Bonds”). New York Municipal Bonds generally are issued by or on behalf of the State of New York and its political subdivisions, financing authorities and their agencies.

The Fund may invest without limit in “private activity” bonds whose interest is a tax-preference item for purposes of the federal alternative minimum tax (“AMT”). For shareholders subject to the AMT, a substantial portion of the Fund’s distributions may not be exempt from federal income tax. The Fund may invest up to 20% of its net assets in other types of Fixed Income Instruments. The average portfolio duration of this Fund normally varies within a three-to twelve-year time frame, based on PIMCO’s forecast for interest rates. The Fund will seek income that is high relative to prevailing rates from Municipal Bonds. Capital appreciation, if any, generally arises from decreases in interest rates or improving credit fundamentals for a particular state, municipality or issuer.

Principal Risks

Among the principal risks of investing in the Fund which could adversely affect its net asset value, yield and total return are:

• Interest Rate Risk

• Credit Risk

• New York State Specific Risk

• Market Risk

• Issuer Risk

• Issuer Non-Diversification Risk

• Liquidity Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Class A shares, but do not reflect the impact of sales charges (loads). If they did, the returns would be lower than those shown. Unlike the bar chart, performance for Class A shares in the Average Annual Total Returns table reflect the impact of sales charges. For periods prior to the inception date of Class A shares (10/19/99), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual sales charges (in the Average Annual Total Returns table only), distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A shares. Past performance is no guarantee of future results.


11		PIMCO Funds: Pacific Investment Management Series

PIMCO New York Municipal Bond Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/00–12/31/00)	3.82%

	Lowest (10/1/01–12/31/01)	-0.81%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class A	3.12%	5.81%

Lehman Brothers New York Insured Municipal Bond Index(1)	4.59%	6.44%

Lipper New York Intermediate Municipal Debt Fund Avg(2)	3.64%	5.55%

(1)

The Lehman Brothers New York Insured Municipal Bond Index is an unmanaged index comprised of insured New York Municipal Bond issues. It is not possible to invest directly in the index.

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	3%	0.50%(1)

(1) Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase. Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.36%	0.86%

(1)

Share Class

Example: Assuming you redeem shares at the end of each period

Example: Assuming you do not redeem your shares

Year 1

Year 3

Year 5

Year 10

Year 1

Year 3

Year 5

Year 10

Class A

$385

$566

$762

$1,329

$385

$566

$762

$1,329


Prospectus		12

PIMCO Short Duration Municipal Income Fund

Principal

Investments and Strategies

Investment Objective

Seeks high current income exempt from federal income tax, consistent with preservation of capital.

Fund Category

Tax Exempt Bond

Fund Focus

Short and intermediate maturity municipal securities (exempt from federal income tax)

Average Portfolio Duration

0-2 years

Credit Quality

Baa to Aaa

Dividend Frequency

Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Mortgage Risk

• Leveraging Risk

• Management Risk

• California State Specific Risk

• New York State Specific Risk

Please see “Summary of Principal Risks” following the Fund Summaries for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the information to its right show performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. This is because the Fund has not offered Class A or Class C shares for a full calendar year. Although Class A and Class C shares would have annual returns similar to those of Institutional Class shares (because all the Fund’s shares represent interests in the same portfolio of securities), Class A and Class C performance would be lower than Institutional Class performance because of the higher expenses paid by Class A and Class C shares. The Average Annual Total Returns table also shows estimated historical performance for Class A and Class C shares. The performance of Class A and Class C shares is based on the performance of the Fund’s Institutional Class shares, adjusted to reflect the actual 12b-1/service fees and other expenses paid by Class A and Class C shares. Past performance is no guarantee of future results.


13		PIMCO Funds: Pacific Investment Management Series

PIMCO Short Duration Municipal Income Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (10/1/00–12/31/00)	2.01%

	Lowest (10/1/01–12/31/01)	0.75%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	Fund Inception (8/31/99)

Class A	2.43%	3.80%

Class C	2.78%	3.91%

Lehman Brothers 1-Year Municipal Bond Index(1)	5.77%	5.12%

Lipper Short Municipal Debt Fund Average(2)	4.71%	4.55%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A or C shares of the Fund:

Shareholder fees (fees paid directly from your investment)

	Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	Maximum Contingent Deferred Sales Charge (Load) (as a percentage of original purchase price)

Class A	2.00%	0.50%(1)

Class C	None	1%(2)

(1)

Imposed only in certain circumstances where Class A shares are purchased without a front-end sales charge at the time of purchase.

(2)

The CDSC on Class C shares is imposed only on shares redeemed in the first year.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees(1)	Other Expenses(2)	Total Annual Fund Operating Expenses

A Shares	0.20%	0.25%	0.35%	0.80%

C Shares	0.20	0.55	0.35	1.10

(1)

Due to the 12b-1 distribution fee imposed on Class C shares, a Class C shareholder may, depending upon the length of time the shares are held, pay more than the economic equivalent of the maximum front-end sales charges permitted by relevant rules of the National Association of Securities Dealers, Inc.

(2)

Other Expenses reflect an Administrative Fee of 0.35%.

Examples. The Examples are intended to help you compare the cost of investing in Classes A or C of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, your investment has a 5% return each year, the reinvestment of all dividends and distributions, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Example: Assuming you redeem shares at the end of each period				Example: Assuming you do not redeem your shares
Share Class	Year 1	Year 3	Year 5	Year 10	Year 1	Year 3	Year 5	Year 10

Class A	$528	$694	$874	$1,395	$528	$694	$874	$1,395

Class C	212	350	606	1,340	112	350	606	1,340


Prospectus		14

Summary of Principal Risks

Interest Rate Risk

Credit Risk

A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal Bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.

Market Risk

Issuer Risk

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Funds with principal investment strategies that involve derivatives or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk.

Derivatives Risk

Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Funds may use are referenced under “Characteristics and Risks of Securities and Investment Techniques—Derivatives” in this prospectus and described in more detail under “Investment Objectives and Policies” in the Statement of Additional Information. The Funds typically use derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The Funds may also use derivatives for leverage in which case their use would involve leveraging risk. A Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. A fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.


15		PIMCO Funds: Pacific Investment Management Series

Mortgage Risk

A Fund that purchases mortgage-related securities is subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, a Fund that holds mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of a Fund because the Fund will have to reinvest that money at the lower prevailing interest rates.

Issuer Non-Diversification Risk

Focusing investments in a small number of issuers, industries or foreign currencies increases risk. Funds that are “non-diversified” may invest a greater percentage of its assets in the securities of a single issuer (such as bonds issued by a particular state) than Funds that are “diversified.” Funds that invest in a relatively small number of issuers are more susceptible to risks associated with a single economic, political or regulatory occurrence than a more diversified portfolio might be. Some of those issuers also may present substantial credit or other risks. Similarly, a Fund may be more sensitive to adverse economic, business or political developments if it invests a substantial portion of its assets in the bonds of similar projects or from issuers in a similar state.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among, others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.

Management Risk

California State Specific Risk

A Fund that concentrates its investments in California municipal bonds, may be affected significantly by economic, regulatory or political developments affecting the ability of California issuers to pay interest or repay principal. Provisions of the California Constitution and State statutes which limit the taxing and spending authority of California governmental entities may impair the ability of California issuers to pay principal and/or interest on their obligations. While California’s economy is broad, it does have major concentrations in high technology, aerospace and defense-related manufacturing, trade, entertainment, real estate and financial services, and may be sensitive to economic problems affecting those industries. Future California political and economic developments, constitutional amendments, legislative measures, executive orders, administrative regulations, litigation and voter initiatives could have an adverse effect on the debt obligations of California issuers.

New York State Specific Risk

A Fund that concentrates its investments in New York municipal bonds may be affected significantly by economic, regulatory or political developments affecting the ability of New York issuers to pay interest or repay principal. Certain issuers of New York municipal bonds have experienced serious financial difficulties in the past and reoccurrence of these difficulties may impair the ability of certain New York issuers to pay principal or interest on their obligations. The financial health of New York City affects that of the State, and when New York City experiences financial difficulty it may have an adverse affect on New York municipal bonds held by the Fund. The growth rate of New York has at times been somewhat slower than the nation overall. The economic and financial condition of New York also may be affected by various financial, social, economic and political factors.


Prospectus		16

Management of the Funds

Investment Adviser and Administrator

Advisory Fees

Fund		Advisory Fee

Municipal Bond, California Municipal Bond, California Intermediate Municipal Bond and New York Municipal Bond Funds		0.25%

The Short Duration Municipal Income Fund was not operational during the fiscal year ended March 31, 2001. The investment advisory fee for the Short Duration Municipal Income Fund is at an annual rate of 0.20%, based upon the average daily net assets of the Fund.

Administrative Fees

Each Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Class A, Class B and Class C shareholders of a Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides or procures administrative services for Class A, Class B and Class C shareholders and also bears the costs of various third-party services required by the Funds, including audit, custodial, portfolio accounting, legal transfer agency and printing costs.

For the fiscal year ended March 31, 2001, the Funds paid monthly administrative fees to PIMCO at the following annual rates (stated as a percentage of the average daily net assets of each Fund taken separately):

Fund		Administrative Fees

Municipal Bond, California Municipal Bond, California Intermediate Municipal Bond and New York Municipal Bond Funds		0.35%

The Short Duration Municipal Income Fund was not operational during the fiscal year ended March 31, 2001. The administrative fee for the Short Duration Municipal Income Fund is at an annual rate of 0.35%, based upon the average daily net assets of the Fund.

Individual Portfolio Manager

The following individual has primary responsibility for managing each of the Funds.

Fund	Portfolio Manager	Since	Recent Professional Experience

California Intermediate Municipal Bond	Mark V. McCray	4/00	Executive Vice President, PIMCO. He joined PIMCO as a Portfolio Manager in 2000. Prior to that, he was a bond trader from 1992-1999 at Goldman Sachs & Co. where he was appointed Vice President in 1996 and named co-head of municipal bond trading in 1997 with responsibility for the firm’s proprietary account and supervised municipal bond traders.
California Municipal Bond		5/00*
Municipal Bond		4/00
New York Municipal Bond		4/00
Short Duration Municipal Income		4/00

* Since inception of the Fund.

Distributor


17		PIMCO Funds: Pacific Investment Management Series

Investment Options—Class A, B and C Shares

The Trust offers investors Class A, Class B and Class C shares of the Municipal Bond Fund, Class A and Class C shares of the Short Duration Municipal Income Fund and Class A shares of the California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds in this prospectus. Each class of shares is subject to different types and levels of sales charges than the other classes and bears a different level of expenses.

The class of shares that is best for you depends upon a number of factors, including the amount and the intended length of your investment. The following summarizes key information about each class to help you make your investment decision, including the various expenses associated with each class. More extensive information about the Trust’s multi-class arrangements is included in the PIMCO Funds Shareholders Guide for Class A, B and C Shares (the “Guide”), which is included as part of the Statement of Additional Information and can be obtained free of charge from the Distributor. See “How to Buy and Sell Shares—PIMCO Funds Shareholders Guide” below.

Class A Shares

•

You pay an initial sales charge when you buy Class A shares of any Fund. The maximum initial sales charge is 2.00% for the Short Duration Municipal Income Fund and 3.00% for all of the other Funds. The sales charge is deducted from your investment so that not all of your purchase payment is invested.

•

You may be eligible for a reduction or a complete waiver of the initial sales charge under a number of circumstances. For example, you normally pay no sales charge if you purchase $250,000 ($1,000,000 in the case of the Municipal Bond Fund) or more of Class A shares. Please see the Guide for details.

•

You normally pay no contingent deferred sales charge (“CDSC”) when you redeem Class A shares, although you may pay a 0.50% CDSC (1% in the case of the Municipal Bond Fund) if you purchase $250,000 ($1,000,000 in the case of the Municipal Bond Fund) or more of Class A shares (and therefore pay no initial sales charge) and then redeem the shares during the first 18 months after your initial purchase. The Class A CDSC is waived for certain categories of investors and does not apply if you are otherwise eligible to purchase Class A shares without a sales charge. Please see the Guide for details.

Class B Shares

•

You do not pay an initial sales charge when you buy Class B shares. The full amount of your purchase payment is invested initially.

•

Class C Shares

•

You do not pay an initial sales charge when you buy Class C shares. The full amount of your purchase payment is invested initially.

•

Class C shares are subject to higher 12b-1 fees than Class A shares. Therefore, Class C shareholders normally pay higher annual expenses and receive lower dividends than Class A shareholders.

•


Prospectus		18

The following provides additional information about the sales charges and other expenses associated with Class A, Class B and Class C shares.

Initial Sales Charges--Class A Shares

Unless you are eligible for a waiver, the public offering price you pay when you buy Class A shares of the Funds is the net asset value (“NAV”) of the shares plus an initial sales charge. The initial sales charge varies depending upon the size of your purchase, as set forth below. No sales charge is imposed where Class A shares are issued to you pursuant to the automatic reinvestment of income dividends or capital gains distributions.

Municipal Bond Fund

Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

$0–$49,999	3.09%	3.00%

$50,000–$99,999	2.56%	2.50%

$100,000–$249,999	2.04%	2.00%

$250,000–$499,999	1.52%	1.50%

$500,000–$999,999	1.27%	1.25%

$1,000,000 +	0.00%*	0.00%*

California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds
Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

$0–$49,999	3.09%	3.00%

$50,000–$99,999	2.04%	2.00%

$100,000–$249,999	1.01%	1.00%

$250,000 +	0.00%**	0.00%**

Short Duration Municipal Income Fund
Amount of Purchase	Initial Sales Charge as % of Net Amount Invested	Initial Sales Charge as % of Public Offering Price

$0–$49,999	2.04%	2.00%

$50,000–$99,999	1.78%	1.75%

$100,000–$249,999	1.52%	1.50%

$250,000 +	0.00%**	0.00%**

* As shown, investors that purchase $1,000,000 or more of the Fund’s Class A shares will not pay any initial sales charge on the purchase. However, purchasers of $1,000,000 or more of Class A shares may be subject to a CDSC of 1% if the shares are redeemed during the first 18 months after their purchase. See “CDSCs on Class A Shares” below. As shown, investors that purchase $250,000 or more of the Funds’ Class A shares will not pay any initial sales charge on the purchase. However, certain purchasers of $250,000 or more of Class A shares may be subject to a CDSC of 0.50% if the shares are redeemed during the first 18 months after their purchase. See ‘‘CDSCs on Class A Shares’’ below. Contingent Deferred Sales Charges (CDSCs)--Class B and Class C Shares Unless you are eligible for a waiver, if you sell (redeem) your Class B or Class C shares of the Municipal Bond Fund or Class C shares of the Short Duration Municipal Income Fund within the time periods specified below, you will pay a CDSC according to the following schedules. Class B Shares**
Years Since Purchase Payment was Made	Percentage Contingent Deferred Sales Charge

First	5

Second	4

Third	3

Fourth	3

Fifth	2

Sixth	1

Seventh and thereafter	0*

* After the eighth year, Class B shares convert into Class A shares. As noted above, Class B shares purchased prior to January 1, 2002, convert into Class A shares after seven years.


19		PIMCO Funds: Pacific Investment Management Series

Class C Shares

Years Since Purchase Payment was Made		Percentage Contingent Deferred Sales Charge

First		1

Thereafter		0

CDSCs on Class A Shares

Unless a waiver applies, investors who purchase $250,000 ($1,000,000 in the case of the Municipal Bond Fund) or more of Class A shares (and, thus, pay no initial sales charge) will be subject to a 0.50% CDSC (1% in the case of the Municipal Bond Fund) if the shares are redeemed within 18 months of their purchase. The Class A CDSC does not apply if you are otherwise eligible to purchase Class A shares without an initial sales charge or are eligible for a waiver of the CDSC. See “Reductions and Waivers of Initial Sales Charges and CDSCs” below.

How CDSCs are Calculated

For instance, the following example illustrates the operation of the Class B CDSC:

•

Under the new calculation method, the following rules will apply:

•

Shares acquired through the reinvestment of dividends or capital gains distributions will be redeemed first and will not be subject to any CDSC.

•

CDSCs will be deducted from the proceeds of your redemption, not from amounts remaining in your account.

•

In determining whether a CDSC is payable, the first-in first-out, or “FIFO,” method will be used to determine which shares are being redeemed.


Prospectus		20

The following example illustrates the operation of the Class B CDSC beginning no later than January 1, 2008:

•

Reductions and Waivers of Initial Sales Charges and CDSCs

Distribution and Servicing (12b-1) Plans

Class A	Servicing Fee	Distribution Fee

All Funds	0.25%	0.00%


Class B

Municipal Bond Fund	0.25%	0.75%


Class C

Municipal Bond Fund	0.25%	0.50%

Short Duration Municipal Income Fund	0.25%	0.30%


21		PIMCO Funds: Pacific Investment Management Series

How Fund Shares Are Priced

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Certain securities or investments for which daily market quotations are not readily available may be valued, pursuant to guidelines established by the Board of Trustees, with reference to other securities or indices. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost. Exchange traded options, futures and options on futures are valued at the settlement price determined by the exchange. Other securities for which market quotes are not readily available are valued at fair value as determined in good faith by the Board of Trustees or persons acting at their direction.

How to Buy and Sell Shares

The following section provides basic information about how to buy, sell (redeem) and exchange shares of the Funds.

PIMCO Funds Shareholders' Guide

•

Automated telephone and wire transfer procedures

•

Automatic purchase, exchange and withdrawal programs

•

Programs that establish a link from your Fund account to your bank account

•

Special arrangements for tax-qualified retirement plans

•

Investment programs which allow you to reduce or eliminate the initial sales charges

•

Categories of investors that are eligible for waivers or reductions of initial sales charges and CDSCs

Calculation of Share Price and Redemption Payments

When you buy shares of the Funds, you pay a price equal to the NAV of the shares, plus any applicable sales charge. When you sell (redeem) shares, you receive an amount equal to the NAV of the shares, minus any applicable CDSC. NAVs are determined at the close of regular trading (normally, 4:00 p.m. Eastern time) on each day the New York Stock Exchange is open. See “How Fund Shares Are Priced” above for details. Generally, purchase and redemption orders for Fund shares are processed at the NAV next calculated after your order is received by the Distributor. There are certain exceptions where an order is received by a broker or dealer prior to the NYSE Close and then transmitted to the Distributor after the NAV has been calculated for that day (in which case the order may be processed according to that day’s NAV). Please see the Guide for details.


Prospectus		22

Buying Shares

You can buy Class A, Class B or Class C shares of the Funds in the following ways:

•

Through your broker, dealer or other financial intermediary. Your broker, dealer or other intermediary may establish higher minimum investment requirements than the Trust and may also independently charge you transaction fees and additional amounts (which may vary) in return for its services, which will reduce your return. Shares you purchase through your broker, dealer or other intermediary will normally be held in your account with that firm.

•

Directly from the Trust. To make direct investments, you must open an account with the Distributor and send payment for your shares either by mail or through a variety of other purchase options and plans offered by the Trust.

If you wish to invest directly by mail, please send a check payable to PIMCO Funds Distributors LLC, along with a completed application form to:

PIMCO Funds Distributors LLC

P.O. Box 9688

Providence, RI 02940-0926

The Guide describes a number of additional ways you can make direct investments, including through the PIMCO Funds Auto-Invest and PIMCO Funds Fund Link programs. You can obtain a Guide free of charge from the Distributor by written request or by calling 1-800-426-0107. See “PIMCO Funds Shareholders’ Guide” above.

The Distributor, in its sole discretion, may accept or reject any order for purchase of Fund shares. No share certificates will be issued unless specifically requested in writing.

Investment Minimums. The following investment minimums apply for purchases of Class A, Class B and Class C shares.

		Initial Investment				Subsequent Investments

		$2,500 per Fund				$100 per Fund

Small Account Fee

Minimum Account Size

Exchanging Shares

You may exchange your Class A, Class B or Class C shares of any Fund for the same Class of shares of any other Fund or of a series of PIMCO Funds: Pacific Investment Management Series or PIMCO Funds: Multi-Manager Series. Shares are exchanged on the basis of their respective NAVs next calculated


23		PIMCO Funds: Pacific Investment Management Series

after your exchange order is received by the Distributor. Currently, the Trust does not charge any exchange fees or charges. Exchanges are subject to the $2,500 minimum initial purchase requirements for each Fund, except with respect to tax-qualified programs and exchanges effected through the PIMCO Funds Auto-Exchange plan. If you maintain your account with the Distributor, you may exchange shares by completing a written exchange request and sending it to PIMCO Funds Distributors LLC, P.O. Box 9688, Providence, RI 02940-0926. You can get an exchange form by calling the Distributor at 1-800-426-0107.

The Trust reserves the right to refuse exchange purchase if, in the judgment of PIMCO, the purchase would adversely affect a Fund and its shareholders. In particular, a pattern of exchanges characteristic of “market-timing” strategies may be deemed by PIMCO to be detrimental to the Trust or a particular Fund. Currently, the Trust limits the number of “round trip” exchanges an investor may make. An investor makes a “round trip” exchange when the investor purchases shares of a particular Fund, subsequently exchanges those shares for shares of a different PIMCO Fund and then exchanges back into the originally purchased Fund. The Trust has the right to refuse any exchange for any investor who completes (by making the exchange back into the shares of the originally purchased Fund) more than six round trip exchanges in any twelve-month period. Although the Trust has no current intention of terminating or modifying the exchange privilege other than as set forth in the preceding sentence, it reserves the right to do so at any time. Except as otherwise permitted by the Securities and Exchange Commission, the Trust will give you 60 days’ advance notice if it exercises its right to terminate or materially modify the exchange privilege. The Guide provides more detailed information about the exchange privilege, including the procedures you must follow and additional exchange options. You can obtain a Guide free of charge from the Distributor by written request or by calling 1-800-426-0107. See “PIMCO Funds Shareholders’ Guide” above.

Selling Shares

You can sell (redeem) Class A, Class B or Class C shares of the Funds in the following ways:

• Directly from the Trust by Written Request. To redeem shares directly from the Trust by written request (whether or not the shares are represented by certificates), you must send the following items to the Trust’s Transfer Agent, PFPC Inc., P.O. Box 9688, Providence, RI 02940-9688:

(3) any share certificates issued for any of the shares to be redeemed (see “Certificated Shares” below); and

A signature guarantee is not required for redemptions, requested by and payable to all shareholders of record for the account, and to be sent to the address of record for that account. To avoid delay in redemption or transfer, if you have any questions about these requirements you should contact the Transfer Agent in writing or call 1-800-426-0107 before submitting a request. Written redemption or transfer requests will not be honored until all required documents in the proper form have been received by the Transfer Agent. You cannot redeem your shares by written request if they are held in broker “street name” accounts—you must redeem through your broker.


Prospectus		24

redemptions up to $2,500 by a trustee of a qualified retirement plan, the administrator for which has an agreement with the Distributor.

The Guide describes a number of additional ways you can redeem your shares, including:

•

Telephone requests to the Transfer Agent

•

PIMCO Funds Automated Telephone System (ATS)

•

Expedited wire transfers

•

Automatic Withdrawal Plan

•

PIMCO Funds Fund Link

Unless you specifically elect otherwise, your initial account application permits you to redeem shares by telephone subject to certain requirements. To be eligible for ATS, expedited wire transfer, Automatic Withdrawal Plan, and Fund Link privileges, you must specifically elect the particular option on your account application and satisfy certain other requirements. The Guide describes each of these options and provides additional information about selling shares. You can obtain an Guide free of charge from the Distributor by written request or by calling 1-800-426-0107.

Timing of Redemption Payments

Redemptions In Kind

Certificated Shares

Signature Guarantee


25		PIMCO Funds: Pacific Investment Management Series

Fund Distributions

Each Fund distributes substantially all of its net investment income to shareholders in the form of dividends. You begin earning dividends on Fund shares the day after the Trust receives your purchase payment. Dividends paid by each Fund with respect to each class of shares are calculated in the same manner and at the same time, but dividends on Class B and Class C shares are expected to be lower than dividends on Class A shares as a result of the distribution fees applicable to Class B and Class C shares. The Funds intend to declare daily and distribute dividends monthly to shareholders of record.

You can choose from the following distribution options:

•

Reinvest all distributions in additional shares of the same class of your Fund at NAV. This will be done unless you elect another option.

•

Invest all distributions in shares of the same class of any other Fund or another series of PIMCO Funds: Pacific Investment Management Series or PIMCO Funds: Multi-Manager Series which offers that class at NAV. You must have an account existing in the Fund or series selected for investment with the identical registered name. You must elect this option on your account application or by a telephone request to the Transfer Agent at 1-800-426-0107.

•

You do not pay any sales charges on shares you receive through the reinvestment of Fund distributions.

If you elect to receive Fund distributions in cash and the postal or other delivery service is unable to deliver checks to your address of record, the Trust’s Transfer Agent will hold the returned check for your benefit in a non-interest bearing account.

Tax Consequences

The following Information is meant as a general summary for U.S. taxpayers. Please see the SAI for additional information. You should rely on your own tax adviser for advice about the particular federal, state and local tax consequences to you of investing in each Fund.

Each Fund will distribute substantially all of its income and gains to its shareholders every year, and shareholders will be taxed on distributions they receive unless the distribution is derived from tax-exempt income and is designated as an “exempt-interest dividend.”

• Dividends paid to shareholders of each Fund and derived from Municipal Bond interest are expected to be designated by each Fund as “exempt-interest dividends” and shareholders may generally exclude such dividends from gross income for federal income tax purposes. The federal tax exemption for “exempt-interest dividends” from Municipal Bonds does not necessarily result in the exemption of such dividends from state and local taxes although the California Intermediate Municipal Bond Fund, California Municipal Bond Fund, and the New York Municipal Bond Fund intend to arrange their affairs so that a portion of such distributions will be exempt from state taxes in the respective state. Each Fund may invest a portion of its assets in securities that generate income that is not exempt from federal or state income tax. Dividends derived from taxable interest or capital gains will be subject to federal income tax. If a Fund invests in “private activity bonds,” certain shareholders may become subject to alternative minimum tax on the part of the Fund’s distributions derived from interest on such bonds.

• If you are subject to U.S. federal income tax, you will be subject to tax on Fund distributions derived from taxable interest or capital gains whether you received them in cash or reinvested them in additional shares of the Funds. For federal income tax purposes, Fund distributions that are taxable will be taxable to you as either ordinary income or capital gains. Ordinary taxable Fund dividends (i.e., distributions of investment income) are taxable to you as ordinary income. If the Fund designates a dividend as a capital gain distribution, you will pay tax on that dividend at the long-term capital gains


Prospectus		26

tax rate, no matter how long you have held your Fund shares. Distributions of gains from investments that the Fund owned for one year or less will generally be taxable to you as ordinary income.

Taxable Fund distributions are taxable to you even if they are paid from income or gains earned by a Fund prior to your investment and thus were included in the price you paid for your shares. For example, if you purchase shares on or just before the record date of a Fund distribution, you will pay full price for the shares and may receive a portion of your investment back as a taxable distribution.

You will generally have a taxable capital gain or loss if you dispose of your Fund shares by redemption, exchange or sale. The amount of the gain or loss and the rate of tax will depend primarily upon how much you pay for the shares, how much you sell them for, and how long you hold them. When you exchange shares of a Fund for shares of another series, the transaction will be treated as a sale of the Fund shares for these purposes, and any gain on those shares will generally be subject to federal income tax.

The Funds seek to produce income that is generally exempt from U.S. income tax and will not benefit investors in tax-sheltered retirement plans or individuals not subject to U.S. income tax. Further, the California Intermediate Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds seek to produce income that is generally exempt from the relevant state’s income tax and will not benefit individuals that are not subject to that state’s income tax.

This section relates only to federal income tax; the consequences under other tax laws may differ. Shareholders should consult their tax advisers as to the possible application of foreign, state and local income tax laws to Fund dividends and capital distributions. Please see the Statement of Additional Information for additional information regarding the tax aspects of investing in the Funds.

Characteristics and Risks of Securities and Investment Techniques

Securities Selection

In selecting securities for a Fund, PIMCO develops an outlook for interest rates and the economy; analyzes credit and call risks, and uses other security selection techniques. The proportion of a Fund’s assets committed to investment in securities with particular characteristics (such as quality, sector, interest rate or maturity) varies based on PIMCO’s outlook for the U.S. economy, the financial markets and other factors.

PIMCO attempts to identify areas of the bond market that are undervalued relative to the rest of the market. PIMCO identifies these areas by grouping bonds into sectors. Sophisticated proprietary software then assists in evaluating sectors and pricing specific securities. Once investment opportunities are identified, PIMCO will shift assets among sectors depending upon changes in relative valuations and credit spreads. There is no guarantee that PIMCO’s security selection techniques will produce the desired results.

U.S. Government Securities

Municipal Bonds


27		PIMCO Funds: Pacific Investment Management Series

ability of an issuer to make payments could be affected by litigation, legislation or other political events or the bankruptcy of the issuer. Lower rated municipal bonds are subject to greater credit and market risk than higher quality municipal bonds. The types of municipal bonds in which the Funds may invest include municipal lease obligations. The Funds may also invest in securities issued by entities whose underlying assets are municipal bonds.

Mortgage-Related and Other Asset-Backed Securities

Each Fund may invest in mortgage- or other asset-backed securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

Loan Participations and Assignments

The Funds may invest in fixed- and floating-rate loans, which investments generally will be in the form of loan participations and assignments of portions of such loans. Participations and assignments involve special types of risk, including credit risk, interest rate risk, liquidity risk, and the risks of being a lender. If a Fund purchases a participation, it may only be able to enforce its rights through the lender, and may assume the credit risk of the lender in addition to the borrower.

Corporate Debt Securities

High Yield Securities


Prospectus		28

Credit Ratings and Unrated Securities. Rating agencies are private services that provide ratings of the credit quality of fixed income securities, including convertible securities. Appendix A to this prospectus describes the various ratings assigned to fixed income securities by Moody’s and S&P. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. A Fund will not necessarily sell a security when its rating is reduced below its rating at the time of purchase. PIMCO does not rely solely on credit ratings, and develops its own analysis of issuer credit quality.

Variable and Floating Rate Securities

Inflation-Indexed Bonds

Event-Linked Bonds

Convertible and Equity Securities


29		PIMCO Funds: Pacific Investment Management Series

While the Funds intend to invest primarily in fixed income securities, each may invest in convertible securities or equity securities. While some countries or companies may be regarded as favorable investments, pure fixed income opportunities may be unattractive or limited due to insufficient supply, or legal or technical restrictions. In such cases, a Fund may consider convertible securities or equity securities to gain exposure to such investments.

Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings

Derivatives

Each Fund may, but is not required to, use certain derivative instruments for risk management purposes or as part of its investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. A description of these and other derivative instruments that the Funds may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.

Liquidity Risk. Liquidity risk exists when a particular derivative instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.


Prospectus		30

changes. To limit leverage risk, each Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments.

Delayed Funding Loans and Revolving Credit Facilities

The Funds may also enter into, or acquire participations in, delayed funding loans and revolving credit facilities, in which a lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. These commitments may have the effect of requiring a Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that a Fund is committed to advance additional funds, it will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees in an amount sufficient to meet such commitments. Delayed funding loans and revolving credit facilities are subject to credit, interest rate and liquidity risk and the risks of being a lender.

When-Issued, Delayed Delivery and Forward Commitment Transactions

Each Fund may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments). When-issued transactions, delayed delivery purchases and forward commitments involve a risk of loss if the value of the securities declines prior to the settlement date. This risk is in addition to the risk that the Fund’s other assets will decline in value. Therefore, these transactions may result in a form of leverage and increase a Fund’s overall investment exposure. Typically, no income accrues on securities a Fund has committed to purchase prior to the time delivery of the securities is made, although a Fund may earn income on securities it has segregated to cover these positions.

Investment in Other Investment Companies

Each Fund may invest up to 10% of its assets in securities of other investment companies, such as closed-end management investment companies, or in pooled accounts or other investment vehicles. As a shareholder of an investment company, a Fund may indirectly bear service and other fees which are in addition to the fees the Fund pays its service providers.


31		PIMCO Funds: Pacific Investment Management Series

Short Sales

resulting in a loss to the Fund. A Fund making a short sale must segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its position in a permissible manner.

Illiquid Securities

Loans of Portfolio Securities

Portfolio Turnover

Temporary Defensive Strategies

For temporary or defensive purposes, each fund may invest without limit in U.S. debt securities, including taxable and short-term money market securities, when PIMCO deems it appropriate to do so. When a Fund engages in such strategies, it may not achieve its investment objective.

Changes in Investment Objectives and Policies

Percentage Investment Limitations

Other Investments and Techniques


Prospectus		32

Financial Highlights

The financial highlights table is intended to help you understand the financial performance of Class A, Class B and Class C shares of the Municipal Bond Fund and Class A shares of the California Intermediate Municipal Bond, California Municipal Bond and New York Municipal Bond Funds since the class of shares for each Fund was first offered. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a particular class of shares of a Fund, assuming reinvestment of all dividends and distributions. This information, except for the period ended September 30, 2001, has been audited by PricewaterhouseCoopers LLP, whose report, along with each Fund’s financial statements, are included in the Trust’s annual report to shareholders. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year or Period Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income (Loss) from Investment Operations			Dividends from Net Investment Income			Dividends in Excess of Net Investment Income		Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains

California Intermediate Municipal
Bond Fund
Class A
09/30/2001*	$	10.60	$	0.20(a	)	$	0.19	(a)	$	0.39		$	(0.20	)	$	0.00	$	0.00		$	0.00
03/31/2001		10.05		0.43(a	)		0.57	(a)		1.00			(0.42	)		0.00		(0.03	)		0.00
10/19/1999 – 03/31/2000		9.94		0.18(a	)		0.12	(a)		0.30			(0.17	)		0.00		(0.02	)		0.00
California Municipal Bond Fund
Class A
09/30/2001*	$	10.35	$	0.18(a	)	$	0.31	(a)	$	0.49		$	(0.18	)	$	0.00	$	0.00		$	0.00
07/31/2000 – 03/31/2001		10.35		0.27(a	)		0.46	(a)		0.73			(0.30	)		0.00		(0.43	)		0.00
Municipal Bond Fund
Class A
09/30/2001*	$	10.02	$	0.22(a	)	$	0.21	(a)	$	0.43		$	(0.23	)	$	0.00	$	0.00		$	0.00
03/31/2001		9.47		0.44(a	)		0.55	(a)		0.99			(0.44	)		0.00		0.00			0.00
03/31/2000		10.12		0.43(a	)		(0.65	)(a)		(0.22	)		(0.43	)		0.00		0.00			0.00
03/31/1999		9.97		0.41(a	)		0.15	(a)		0.56			(0.41	)		0.00		0.00			0.00
Class B
09/30/2001*		10.02		0.19(a	)		0.20	(a)		0.39			(0.19	)		0.00		0.00			0.00
03/31/2001		9.47		0.37(a	)		0.55	(a)		0.92			(0.37	)		0.00		0.00			0.00
03/31/2000		10.12		0.36(a	)		(0.65	)(a)		(0.29	)		(0.36	)		0.00		0.00			0.00
03/31/1999		9.97		0.34(a	)		0.14	(a)		0.48			(0.33	)		0.00		0.00			0.00
Class C
09/30/2001*		10.02		0.20(a	)		0.20	(a)		0.40			(0.20	)		0.00		0.00			0.00
03/31/2001		9.47		0.39(a	)		0.55	(a)		0.94			(0.39	)		0.00		0.00			0.00
03/31/2000		10.12		0.38(a	)		(0.65	)(a)		(0.27	)		(0.38	)		0.00		0.00			0.00
03/31/1999		9.97		0.36(a	)		0.15	(a)		0.51			(0.36	)		0.00		0.00			0.00
New York Municipal Bond Fund
Class A
09/30/2001*	$	10.64	$	0.22(a	)	$	0.18	(a)	$	0.40		$	(0.22	)	$	0.00	$	0.00		$	0.00
03/31/2001		9.94		0.43(a	)		0.77	(a)		1.20			(0.41	)		0.00		(0.09	)		0.00
10/19/1999 – 03/31/2000		9.90		0.16(a	)		0.07	(a)		0.23			(0.17	)		0.00		(0.02	)		0.00

Unaudited

Annualized

(a)

Per share amounts based on average number of shares outstanding during the period.


33		PIMCO Funds: Pacific Investment Management Series

Total Distributions	Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate




$(0.20)	$	10.79	3.72	%	$	28,990	0.85	%+	3.67	%+	35	%
(0.45)		10.60	10.19			29,035	0.86	(e)	4.19		257
(0.19)		10.05	2.94			1,793	0.85	+ (b)	3.96	+	357


$(0.18)	$	10.66	4.79	%	$	956	0.85	%+	3.39	%+	36	%
(0.73)		10.35	7.72			706	0.85	+ (d)	3.89	+	338


$(0.23)	$	10.22	4.32	%	$	15,968	0.85	%+	4.43	%+	48	%
(0.44)		10.02	10.74			11,381	0.85		4.52		306
(0.43)		9.47	(2.16	)		8,666	0.85		4.44		145
(0.41)		10.12	5.67			7,020	0.86	(e)	4.10		70

(0.19)		10.22	3.93			11,988	1.60	+	3.71	+	48
(0.37)		10.02	9.92			8,513	1.60		3.79		306
(0.36)		9.47	(2.89	)		5,314	1.60		3.69		145
(0.33)		10.12	4.88			6,070	1.61	(f)	3.33		70

(0.20)		10.22	4.06			38,008	1.35	+	3.97	+	48
(0.39)		10.02	10.20			30,539	1.35		4.06		306
(0.38)		9.47	(2.64	)		28,674	1.35		3.94		145
(0.36)		10.12	5.13			37,913	1.35		3.60		70


$(0.22)	$	10.82	3.74	%	$	1,462	0.85	%+	4.04	%+	106	%
(0.50)		10.64	12.38			186	0.86	(e)	4.15		973
(0.19)		9.94	2.30			10	0.89	+ (c)(e)	3.68	+	270

(b)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.63%.

(c)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 1.88%.

(d)

If the investment manager had not reimbursed expenses, the ratio of expenses to average net assets would have been 2.43%.

(e)

Ratio of expenses to average net assets excluding interest expense is 0.85%.

(f)

Ratio of expenses to average net assets excluding interest expense is 1.60%.


Prospectus		34

Appendix A

Description of Securities Ratings

A Fund’s investment may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by Moody’s or S&P or, if unrated, determined by PIMCO to be of comparable quality). The percentage of a Fund’s assets invested in securities particular rating category will vary. The following terms are generally used to described the credit quality of fixed income securities:

High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated deemed comparable by PIMCO.

Below Investment Grade, High Yield Securities (“Junk Bonds”) are those rated lower than Baa by Moody’s or BBB by S&P and comparable securities. They are considered predominantly speculative with respect to the issuer’s ability to repay principal and interest.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.


A-1		PIMCO Funds: Pacific Investment Management Series

Corporate Short-Term Debt Ratings

Moody’s employes the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Short-Term Municipal Bond Ratings

MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.

SG: This designation denotes speculative quality. Debt instruments in this category lack margins of protection.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

Prospectus A-2

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.


A-3		PIMCO Funds: Pacific Investment Management Series

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.

Prospectus A-4

PIMCO Funds: Pacific Investment Management Series

The Trust’s Statement of Additional Information (“SAI”) includes additional information about the Funds. The SAI is incorporated by reference into this prospectus, which means it is part of this prospectus for legal purposes.

The SAI includes the PIMCO Funds Shareholders Guide for Class A, B and C Shares, a separate booklet which contains more detailed information about Fund purchase, redemption and exchange options and procedures and other information about the Funds. You can get a free copy of the Guide together with or separately from the rest of the SAI.

You may get free copies of the SAI, request other information about a Fund, or make shareholder inquiries by calling the Trust at 1-800-426-0107, or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by writing to:

PIMCO Funds Pacific Investment Management Series

840 Newport Center Drive, Suite 300

Newport Beach, CA 92660

You can also visit our Web site at www.pimcofunds.com for additional information about the Funds.

You may review and copy information about the Trust, including its SAI, at the Securities and Exchange Commission’s public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the Trust on the Commission’s Web site at www.sec.gov. You may get copies of this information, with payment of a duplication fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-0102, or by e-mailing your request to publicinfo@sec.gov.

Investment Company Act File no. 811-5028

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISER AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

DISTRIBUTOR

PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT 06902-6896

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT

PFPC Inc., P.O. Box 9688, Providence, RI 02940-9688

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006-2401

For further information about the PIMCO Funds, call 1-800-426-0107 or visit our Web site at http://www.pimcofunds.com.

Not

part of the prospectus

Stay connected with

www.pimcofunds.com

Fund information, manager commentary and more at www.pimcofunds.com

Fund Information Section

Click “Fund Information” on our Home page for current data on all of the PIMCO Funds. You will find:

n Daily share prices and year-to-date performance figures.

n Historical performance, portfolio holdings and risk analysis.

n Morningstar ratings and Lipper category rankings.

Bond Center

Manager Commentary

The site houses timely updates and analysis from our stock and bond fund managers, including:

n End-of-day reports and investment insights.

n Manager newsletters on a range of topics from global financial markets to technology to the Federal Reserve.

n Manager media appearances. You can view video clips or read transcripts.

Free E-mail Newsletters

RCM Funds

Account Access

Easy and secure account access gives you a snapshot of your holdings plus detailed transaction history. Simply click “Account Access’’ on the PIMCO Funds Home page and enter your verification information.*

Receive Shareholder Communications Online

*Available only to shareholders who receive account statements directly from PIMCO Funds.

PZ002.4/02				Not part of the Prospectus

PIMCO Funds

Distributors LLC

2187 Atlantic Street

Stamford, CT 06902-6896

		PIMCO Funds Prospectus

Pacific Investment Management Series April 1, 2002 Share Classes ^Ins^{Institutional} ^Adm^{Administrative}		INTERMEDIATE DURATION BOND FUND Total Return Fund




		This cover is not part of the prospectus

PIMCO Funds Prospectus

PIMCO Funds: Pacific Investment Management Series

April 1, 2002

Share Classes Institutional and Administrative

This prospectus describes the PIMCO Total Return Fund. The Fund provides access to the professional investment advisory services offered by Pacific Investment Management Company LLC (“PIMCO”). As of December 31, 2001, PIMCO managed approximately $241.3 billion in assets.

This prospectus explains what you should know about the Fund before you invest. Please read it carefully.


Prospectus		1

Table of Contents

Summary Information		3
Fund Summary
Total Return Fund		4
Summary of Principal Risks		6
Management of the Fund		8
Investment Options		9
Purchases, Redemptions and Exchanges		10
How Fund Shares are Priced		14
Fund Distributions		15
Tax Consequences		15
Characteristics and Risks of Securities and Investment Techniques		16
Financial Highlights		26
Appendix A—Description of Securities Ratings		A-1


2		PIMCO Funds: Pacific Investment Management Series

Summary Information

The table below compares certain investment characteristics of the Fund. Other important characteristics are described in the Fund Summary beginning on page 4. Following the table are certain key concepts which are used throughout the prospectus.

	Main Investments	Duration	Credit Quality(1)	Non-U.S. Dollar Denominated Securities(2)

Total Return Fund	Intermediate maturity fixed income securities	3-6 years	B to Aaa; max 10% below Baa	0-20%

(1)

As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

(2)

The percentage limitation relates to non-U.S. dollar-denominated securities. The Fund may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers.

Fixed Income Instruments

The “Fixed Income Instruments” as used in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.

Duration

Credit Ratings

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Description, Performance and Fees

The following summary identifies the Fund’s investment objective, principal investments and strategies, principal risks, performance information and fees and expenses. A more detailed “Summary of Principal Risks” describing principal risks of investing in the Fund begins after the Fund Summary. Investors should be aware that the investments made by the Fund and the results achieved by the Fund at any given time are not expected to be the same as those made by other mutual funds for which PIMCO acts as investment adviser, including mutual funds with names, investment objectives and policies similar to the Fund.

It is possible to lose money on investments in the Fund.

An investment in the Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		3

PIMCO Total Return Fund

Ticker Symbols:

PTTRX (Inst. Class)

PTRAX (Admin. Class)


Principal Investments and Strategies		Investment Objective Seeks maximum total return, consistent with preservation of capital and prudent investment management		Fund Focus Intermediate maturity fixed income securities Average Portfolio Duration 3-6 years		Credit Quality B to Aaa; maximum 10% below Baa Dividend Frequency Declared daily and distributed monthly

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summary for a description of these and other risks of investing in the Fund.

Performance Information


4		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund (continued)

Calendar Year Total Returns — Institutional Class



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	6.49%

	Lowest (1st Qtr. ’94)	-2.69%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Institutional Class	9.49%	8.15%	8.25%

Administrative Class	9.22%	7.88%	7.99%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Institutional Class or Administrative Class shares of the Fund:

Shareholder Fees (fees paid directly from your investment)

None

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

Share Class	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Institutional	0.25%	None	0.24%	0.49%

Administrative	0.25	0.25%	0.24	0.74


(1) Other Expenses reflect an Administrative Fee of 0.18% and interest expense. Total Annual Fund Operating Expenses excluding interest expense is 0.43% for the Institutional Class and 0.68% for the Administrative Class. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Institutional Class or Administrative Class shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in the noted class of shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Examples also assume that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

Share Class	Year 1	Year 3	Year 5	Year 10

Institutional	$50	$157	$274	$616

Administrative	76	237	411	918


Prospectus		5

Summary of Principal Risks

The value of your investment in the Fund changes with the values of the Fund’s investments. Many factors can affect those values. The factors that are most likely to have a material effect on the Fund’s portfolio as a whole are called “principal risks.” The principal risks of the Fund are identified in the Fund Summary and are described in this section. The Fund may be subject to additional principal risks and risks other than those described below because the types of investments made by the Fund can change over time. Securities and investment techniques mentioned in this summary and described in greater detail under “Characteristics and Risks of Securities and Investment Techniques” appear in bold type. That section and “Investment Objectives and Policies” in the Statement of Additional Information also include more information about the Fund, its investments and the related risks. There is no guarantee that the Fund will be able to achieve its investment objective.

Interest Rate Risk

As interest rates rise, the value of fixed income securities held by the Fund are likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations.

Credit Risk

The Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.

Market Risk

The market price of securities owned by the Fund may go up or down, sometimes rapidly or unpredictably. Securities may decline in value due to factors affecting securities markets generally or particular industries represented in the securities markets. The value of a security may decline due to general market conditions which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an industry. Equity securities generally have greater price volatility than fixed income securities.

Issuer Risk

Liquidity Risk

Liquidity risk exists when particular investments are difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price. Investing in foreign securities, derivatives or securities with substantial market and/or credit risk will tend to increase liquidity risk.

Derivatives Risk

Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Fund may use are referenced under “Characteristics and Risks of Securities and Investment Techniques—Derivatives” in this prospectus and described in more detail under “Investment Objectives and Policies” in the Statement of Additional Information. The Fund may sometimes use derivatives as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The Fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The Fund’s use of derivative instruments involves risks different from, or greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. If the Fund invests in a derivative instrument it could lose more than the principal amount


6		PIMCO Funds: Pacific Investment Management Series

invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Mortgage Risk

When the Fund purchases mortgage-related securities, it is subject to certain additional risks. Rising interest rates tend to extend the duration of mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, if the Fund holds mortgage-related securities it may exhibit additional volatility. This is known as extension risk. In addition, mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of the Fund because it will have to reinvest that money at the lower prevailing interest rates.

Foreign (Non-U.S.) Investment Risk

When the Fund invests in foreign securities, it may experience more rapid and extreme changes in value than if it invested exclusively in securities of U.S. companies. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally, issuers of foreign securities are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. Also, nationalization, expropriation or confiscatory taxation, currency blockage, political changes or diplomatic developments could adversely affect the Fund’s investments in a foreign country. In the event of nationalization, expropriation or other confiscation, the Fund could lose its entire investment in foreign securities. Adverse conditions in a certain region can adversely affect securities of other countries whose economies appear to be unrelated. To the extent that the Fund invests a significant portion of its assets in a concentrated geographic area like Eastern Europe or Asia, the Fund will generally have more exposure to regional economic risks associated with foreign investments.

Currency Risk

When the Fund invests directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign currencies, it is subject to the risk that those currencies will decline in value relative to the U.S. Dollar, or, in the case of hedging positions, that the U.S. Dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the U.S. or abroad.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, will cause the Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s portfolio securities.

Management Risk

The Fund is subject to management risk because it is an actively managed investment portfolio. PIMCO and the portfolio manager will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results.


Prospectus		7

Management of the Fund

Investment Adviser and Administrator

PIMCO serves as the investment adviser and the administrator (serving in its capacity as administrator, the “Administrator”) for the Fund. Subject to the supervision of the Board of Trustees, PIMCO is responsible for managing the investment activities of the Fund and the Fund’s business affairs and other administrative matters.

Advisory Fees

The Fund pays PIMCO a fee in return for providing investment advisory services. For the fiscal year ended March 31, 2001, the Fund paid monthly advisory fees to PIMCO at the annual rate (stated as a percentage of the average daily net assets of the Fund) of 0.25%.

Administrative Fees

The Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Institutional and Administrative Class shareholders of the Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides or procures administrative services for Institutional and Administrative Class shareholders and also bears the costs of various third-party services required by the Fund, including audit, custodial, portfolio accounting, legal, transfer agency and printing costs.

For the fiscal year ended March 31, 2001, the Fund paid PIMCO monthly administrative fees at the following annual rate (stated as a percentage of the average daily net assets attributable in the aggregate to the Fund’s Institutional and Administrative Class shares) of 0.18%.

Individual Portfolio Manager

The following person has primary responsibility for managing the Fund.

Portfolio Manager	Since	Recent Professional Experience

William H. Gross	5/87*	Managing Director, Chief Investment Officer and a founding partner of PIMCO.

* Since inception of the Fund.

Distributor

The Fund’s Distributor is PIMCO Funds Distributors LLC, an indirect subsidiary of Allianz Dresdner Asset Management of America L.P. The Distributor, located at 2187 Atlantic Street, Stamford CT 06902, is a broker-dealer registered with the Securities and Exchange Commission.


8		PIMCO Funds: Pacific Investment Management Series

Investment Options—

Institutional Class and Administrative Class Shares

The Fund offers investors Institutional Class and Administrative Class shares in this prospectus.

The Fund does not charge any sales charges (loads) or other fees in connection with purchases, sales (redemptions) or exchanges of Institutional Class or Administrative Class shares. Administrative Class shares are subject to a higher level of operating expenses than Institutional Class shares due to the additional service and/or distribution fees paid by Administrative Class shares as described below. Therefore, Institutional Class shares will generally pay higher dividends and have a more favorable investment return than Administrative Class shares.

• Service and Distribution (12b-1) Fees—Administrative Class Shares. The Trust has adopted both an Administrative Services Plan and a Distribution Plan for the Administrative Class shares of the Fund. The Distribution Plan has been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“1940 Act”), as amended.

Each Plan allows the Fund to use its Administrative Class assets to reimburse financial intermediaries that provide services relating to Administrative Class shares. The Distribution Plan permits reimbursement for expenses in connection with the distribution and marketing of Administrative Class shares and/or the provision of shareholder services to Administrative Class shareholders. The Administrative Services Plan permits reimbursement for services in connection with the administration of plans or programs that use Administrative Class shares of the Fund as their funding medium and for related expenses.

In combination, the Plans permit the Fund to make total reimbursements at an annual rate of up to 0.25% of the Fund’s average daily net assets attributable to its Administrative Class shares. The same entity may not receive both distribution and administrative services fees with respect to the same Administrative Class assets, but may receive fees under each Plan with respect to separate assets. Because these fees are paid out of the Fund’s Administrative Class assets on an ongoing basis, over time they will increase the cost of an investment in Administrative Class shares, and Distribution Plan fees may cost an investor more than other types of sales charges.

• Arrangements with Service Agents. Institutional Class and Administrative Class shares of the Fund may be offered through certain brokers and financial intermediaries (“service agents”) that have established a shareholder servicing relationship with the Fund on behalf of their customers. The Fund pays no compensation to such entities other than service and/or distribution fees paid with respect to Administrative Class shares. Service agents may impose additional or different conditions than the Fund on purchases, redemptions or exchanges of Fund shares by their customers. Service agents may also independently establish and charge their customers transaction fees, account fees and other amounts in connection with purchases, sales and redemptions of Fund shares in addition to any fees charged by the Fund. These additional fees may vary over time and would increase the cost of the customer’s investment and lower investment returns. Each service agent is responsible for transmitting to its customers a schedule of any such fees and information regarding any additional or different conditions regarding purchases, redemptions and exchanges. Shareholders who are customers of service agents should consult their service agents for information regarding these fees and conditions.


Prospectus		9

Purchases, Redemptions and Exchanges

Purchasing Shares

Investors may purchase Institutional Class and Administrative Class shares of the Fund at the relevant net asset value (“NAV”) of that class without a sales charge or other fee.

Administrative Class shares are offered primarily through employee benefit plan alliances, broker-dealers and other intermediaries, and the Fund pays service and/or distribution fees to these entities for services they provide to Administrative Class shareholders.

Pension and profit-sharing plans, employee benefit trusts and employee benefit plan alliances and “wrap account” programs established with broker-dealers or financial intermediaries may purchase shares of either class only if the plan or program for which the shares are being acquired will maintain an omnibus or pooled account for the Fund and will not require the Fund to pay any type of administrative payment per participant account to any third party. Shares may be offered to clients of PIMCO and its affiliates, and to the benefit plans of PIMCO and its affiliates.

The Fund and the Distributor may waive the minimum initial investment for other categories of investors at their discretion.

• Timing of Purchase Orders and Share Price Calculations. A purchase order received by the Fund’s transfer agent, National Financial Data Services (“Transfer Agent”), prior to the close of regular trading (normally 4:00 p.m., Eastern time) on the New York Stock Exchange, on a day the Fund is open for business, together with payment made in one of the ways described below, will be effected at that day’s NAV. An order received after the close of regular trading on the New York Stock Exchange will be effected at the NAV determined on the next business day. However, orders received by certain retirement plans and other financial intermediaries on a business day prior to the close of regular trading on the New York Stock Exchange and communicated to the Transfer Agent prior to 9:00 a.m., Eastern time, on the following business day will be effected at the NAV determined on the prior business day. The Fund is “open for business” on each day the New York Stock Exchange is open for trading, which excludes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchase orders will be accepted only on days on which the Fund is open for business.

Except as described below, an investor may purchase Institutional Class and Administrative Class shares only by wiring federal funds to the Fund’s Transfer Agent, National Financial Data Services, 330 West 9th Street, 4th Floor, Kansas City, Missouri 64105. Before wiring federal funds, the investor must telephone the Fund at 1-800-927-4648 to receive instructions for wire transfer and must provide the following information: name of authorized person, shareholder name, shareholder account number, name of Fund and share class, amount being wired, and wiring bank name.


10		PIMCO Funds: Pacific Investment Management Series

• Additional Investments. An investor may purchase additional Institutional Class and Administrative Class shares of the Fund at any time by calling the Fund and wiring federal funds to the Transfer Agent as outlined above.

• Other Purchase Information. Purchases of the Fund’s Institutional Class and Administrative Class shares will be made in full and fractional shares. In the interest of economy and convenience, certificates for shares will not be issued.

The Fund and the Distributor each reserves the right, in its sole discretion, to suspend the offering of shares of the Fund or to reject any purchase order, in whole or in part, when, in the judgment of management, such suspension or rejection is in the best interests of the Fund.

An investor should invest in the Fund for long-term investment purposes only. The Fund and PIMCO each reserves the right to restrict purchases of Fund shares (including exchanges) when a pattern of frequent purchases and sales made in response to short-term fluctuations in share price appears evident. Notice of any such restrictions, if any, will vary according to the particular circumstances.

Institutional Class and Administrative Class shares of the Fund are not qualified or registered for sale in all states. Investors should inquire as to whether shares of the Fund are available for offer and sale in the investor’s state of residence. Shares of the Fund may not be offered or sold in any state unless registered or qualified in that jurisdiction or unless an exemption from registration or qualification is available.

Subject to the approval of the Fund, an investor may purchase shares of the Fund with liquid securities that are eligible for purchase by the Fund (consistent with the Fund’s investment policies and restrictions) and that have a value that is readily ascertainable in accordance with the Fund’s valuation policies. These transactions will be effected only if PIMCO intends to retain the security in the Fund as an investment. Assets purchased by the Fund in such a transaction will be valued in generally the same manner as they would be valued for purposes of pricing the Fund’s shares, if such assets were included in the Fund’s assets at the time of purchase. The Fund reserves the right to amend or terminate this practice at any time.

• Retirement Plans. Shares of the Fund are available for purchase by retirement and savings plans, including Keogh plans, 401(k) plans, 403(b) custodial accounts, and Individual Retirement Accounts. The administrator of a plan or employee benefits office can provide participants or employees with detailed information on how to participate in the plan and how to elect the Fund as an investment option. Participants in a retirement or savings plan may be permitted to elect different investment options, alter the amounts contributed to the plan, or change how contributions are allocated among investment options in accordance with the plan’s specific provisions. The plan administrator or employee benefits office should be consulted for details. For questions about participant accounts, participants should contact their employee benefits office, the plan administrator, or the organization that provides recordkeeping services for the plan. Investors who purchase shares through retirement plans should be aware that plan administrators may aggregate purchase and redemption orders for participants in the plan. Therefore, there may be a delay between the time the investor places an order with the plan administrator and the time the order is forwarded to the Transfer Agent for execution.

Redeeming Shares


Prospectus		11

California 92660. The redemption request should state the Fund from which the shares are to be redeemed, the class of shares, the number or dollar amount of the shares to be redeemed and the account number. The request must be signed exactly as the names of the registered owners appear on the Fund’s account records, and the request must be signed by the minimum number of persons designated on the Client Registration Application that are required to effect a redemption.

• Redemptions by Telephone or Other Wire Communication. An investor that elects this option on the Client Registration Application (or subsequently in writing) may request redemptions of shares by calling the Fund at 1-800-927-4648, by sending a facsimile to 1-949-725-6830, by sending an e-mail to shareholder.services@pimco.com, or by other means of wire communication. Investors should state the Fund and class from which the shares are to be redeemed, the number or dollar amount of the shares to be redeemed, the account number and the signature (which may be an electronic signature) of an authorized signatory. Redemption requests of an amount of $10 million or more may be initiated by telephone or by e-mail, but must be confirmed in writing by an authorized party prior to processing.

In electing a telephone redemption, the investor authorizes PIMCO and the Transfer Agent to act on telephone instructions from any person representing himself to be the investor, and reasonably believed by PIMCO or the Transfer Agent to be genuine. Neither the Fund nor the Transfer Agent may be liable for any loss, cost or expense for acting on instructions (whether in writing or by telephone) believed by the party receiving such instructions to be genuine and in accordance with the procedures described in this prospectus. Shareholders should realize that by electing the telephone, or wire or e-mail redemption option, they may be giving up a measure of security that they might have if they were to redeem their shares in writing. Furthermore, interruptions in service may mean that a shareholder will be unable to effect a redemption by telephone or e-mail when desired. The Transfer Agent also provides written confirmation of transactions initiated by telephone as a procedure designed to confirm that telephone instructions are genuine (written confirmation is also provided for redemption requests received in writing or via e-mail). All telephone transactions are recorded, and PIMCO or the Transfer Agent may request certain information in order to verify that the person giving instructions is authorized to do so. The Fund or Transfer Agent may be liable for any losses due to unauthorized or fraudulent telephone transactions if it fails to employ reasonable procedures to confirm that instructions communicated by telephone are genuine. All redemptions, whether initiated by letter or telephone, will be processed in a timely manner, and proceeds will be forwarded by wire in accordance with the redemption policies of the Fund detailed below. See “Other Redemption Information.”

• Timing of Redemption Requests and Share Price Calculations. A redemption request received by the Fund or its designee prior to the close of regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern time), on a day the Fund is open for business, is effective on that day. A redemption request received after that time becomes effective on the next business day. Redemption requests for Fund shares are effected at the NAV per share next determined after receipt of a redemption request by the Fund or its designee. The request must properly identify all relevant information such as account number, redemption amount (in dollars or shares), the Fund name, and must be executed or initiated by the appropriate signatories.


12		PIMCO Funds: Pacific Investment Management Series

• Other Redemption Information. Redemption proceeds will ordinarily be wired to the investor’s bank within three business days after the redemption request, but may take up to seven business days. Redemption proceeds will be sent by wire only to the bank name designated on the Client Registration Application. Redemptions of Fund shares may be suspended when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Fund to dispose of its securities or to determine fairly the value of its net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors. Under these and other unusual circumstances, the Fund may suspend redemptions or postpone payment for more than seven days, as permitted by law.

For shareholder protection, a request to change information contained in an account registration (for example, a request to change the bank designated to receive wire redemption proceeds) must be received in writing, signed by the minimum number of persons designated on the Client Registration Application that are required to effect a redemption, and accompanied by a signature guarantee from any eligible guarantor institution, as determined in accordance with the Fund’s procedures. Shareholders should inquire as to whether a particular institution is an eligible guarantor institution. A signature guarantee cannot be provided by a notary public. In addition, corporations, trusts, and other institutional organizations are required to furnish evidence of the authority of the persons designated on the Client Registration Application to effect transactions for the organization.

Due to the relatively high cost of maintaining small accounts, the Fund reserves the right to redeem Institutional Class and Administrative Class shares in any account for their then-current value (which will be promptly paid to the investor) if at any time, due to redemption by the investor, the shares in the account do not have a value of at least $100,000. A shareholder will receive advance notice of a mandatory redemption and will be given at least 30 days to bring the value of its account up to at least $100,000. This mandatory redemption policy does not apply to participants in PIMCO Advisors Portfolio Strategies, a managed product sponsored by PIMCO Advisors.

The Fund agrees to redeem shares of the Fund solely in cash up to the lesser of $250,000 or 1% of the Fund’s net assets during any 90-day period for any one shareholder. In consideration of the best interests of the remaining shareholders, the Fund reserves the right to pay any redemption proceeds exceeding this amount in whole or in part by a distribution in kind of securities held by the Fund in lieu of cash. It is highly unlikely that shares would ever be redeemed in kind. When shares are redeemed in kind, the redeeming shareholder should expect to incur transaction costs upon the disposition of the securities received in the distribution.

Exchange Privilege

An investor may exchange Institutional Class or Administrative Class shares of the Fund for shares of the same class of any other Fund or other series of the Trust that offers that class based on the respective NAVs of the shares involved. An exchange may be made by following the redemption procedure described above under “Redemptions by Mail” or, if the investor has elected the telephone redemption option, by calling the Trust at 1-800-927-4648. An investor may also exchange shares of the Fund for shares of the same class of a series of PIMCO Funds: Multi-Manager Series, an affiliated mutual fund family composed primarily of equity portfolios managed by PIMCO Advisors and its subsidiaries. Shareholders interested in such an exchange may request a prospectus for these other series by contacting PIMCO Funds at the same address and telephone number as the Fund.

An investor may exchange shares only with respect to Funds or other eligible series that are registered in the investor’s state of residence or where an exemption from registration is available. An exchange order is treated the same for tax purposes as a redemption followed by a purchase and may result in a capital gain or loss, and special rules may apply in computing tax basis when determining gain or loss. See “Tax Consequences” in this prospectus and “Taxation” in the Statement of Additional Information.

The Fund reserves the right to refuse exchange purchases if, in the judgment of PIMCO, the purchase would adversely affect the Fund and its shareholders. In particular, a pattern of exchanges characteristic of “market-


Prospectus		13

timing” strategies may be deemed by PIMCO to be detrimental to the Fund. Currently, the Fund limits the number of “round trip” exchanges investors may make. An investor makes a “round trip” exchange when the investor purchases shares of the Fund, subsequently exchanges those shares for shares of a different PIMCO Fund, and then exchanges back into the Fund. The Fund has the right to refuse any exchange for any investor who completes (by making the exchange back into the shares of the Fund) more than six round trip exchanges in any twelve-month period. The Fund reserves the right to impose additional restrictions on exchanges at any time, although it will attempt to give shareholders 30 days’ prior notice whenever it is reasonably able to do so.

How Fund Shares Are Priced

The net asset value (“NAV”) of the Fund’s Institutional and Administrative Class shares is determined by dividing the total value of the Fund’s portfolio investments and other assets attributable to that class, less any liabilities, by the total number of shares outstanding of that class.

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Certain securities or investments for which daily market quotations are not readily available may be valued, pursuant to guidelines established by the Board of Trustees, with reference to other securities or indices. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost. Exchange traded options, futures and options on futures are valued at the settlement price determined by the exchange. Other securities for which market quotes are not readily available are valued at fair value as determined in good faith by the Board of Trustees or persons acting at their direction.

Investments initially valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the New York Stock Exchange is closed and an investor is not able to purchase, redeem or exchange shares.

Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern time) (the “NYSE Close”) on each day that the New York Stock Exchange is open. For purposes of calculating the NAV, the Fund normally uses pricing data for domestic equity securities received shortly after the NYSE Close and does not normally take into account trading, clearances or settlements that take place after the NYSE Close. Domestic fixed income and foreign securities are normally priced using data reflecting the earlier closing of the principal markets for those securities. Information that becomes known to the Fund or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day.

In unusual circumstances, instead of valuing securities in the usual manner, the Fund may value securities at fair value or estimate their value as determined in good faith by the Board of Trustees, generally based upon recommendations provided by PIMCO. Fair valuation may also be used if extraordinary events occur after the close of the relevant market but prior to the NYSE Close.

Under certain circumstances, the per share NAV of the Administrative Class shares of the Fund may be lower than the per share NAV of the Institutional Class shares as a result of the daily expense accruals of the service and/or distribution fees paid by Administrative Class shares. Generally, if the Fund pays income dividends, those dividends are expected to differ over time by approximately the amount of the expense accrual differential between the two classes.


14		PIMCO Funds: Pacific Investment Management Series

Fund Distributions

The Fund distributes substantially all of its net investment income to shareholders in the form of dividends. You begin earning dividends on Fund shares the day after the Trust receives your purchase payment. Dividends paid by the Fund with respect to each class of shares are calculated in the same manner and at the same time, but dividends on Administrative Class shares are expected to be lower than dividends on Institutional Class shares as a result of the distribution fees applicable to Administrative Class shares. The Fund intends to declare income dividends daily to shareholders of record and distribute them monthly.

The Fund’s dividend and capital gain distributions with respect to a particular class of shares will automatically be reinvested in additional shares of the same class of the Fund at NAV unless the shareholder elects to have the distributions paid in cash. A shareholder may elect to have distributions paid in cash on the Client Registration Application or by submitting a written request, signed by the appropriate signatories, indicating the account number, Fund name(s) and wiring instructions. Shareholders do not pay any sales charges on shares received through the reinvestment of Fund distributions.

Tax Consequences

• Taxes on Fund Distributions. A shareholder subject to U.S. federal income tax will be subject to tax on Fund distributions whether they are paid in cash or reinvested in additional shares of the Fund. For federal income tax purposes, Fund distributions will be taxable to the shareholder as either ordinary income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable to shareholders as ordinary income. Federal taxes on Fund distributions of gains are determined by how long the Fund owned the investments that generated the gains, rather than how long a shareholder has owned the shares. Distributions of gains from investments that the Fund owned for more than one year will generally be taxable to shareholders as long-term capital gains. Distributions of gains from investments that the Fund owned for one year or less will generally be taxable as ordinary income.

Fund distributions are taxable to shareholders even if they are paid from income or gains earned by the Fund prior to the shareholder’s investment and thus were included in the price paid for the shares. For example, a shareholder who purchases shares on or just before the record date of the Fund distribution will pay full price for the shares and may receive a portion of his or her investment back as a taxable distribution.

• Taxes on Redemption or Exchanges of Shares. Any gain resulting from the sale of Fund shares will generally be subject to federal income tax. When a shareholder exchanges shares of the Fund for shares of another series, the transaction will be treated as a sale of the Fund shares for these purposes, and any gain on those shares will generally be subject to federal income tax.


Prospectus		15

Characteristics and Risks of

Securities and Investment Techniques

This section provides additional information about some of the principal investments and related risks of the Fund described under “Summary Information” above. It also describes characteristics and risks of additional securities and investment techniques that may be used by the Fund from time to time. Most of these securities and investment techniques are discretionary, which means that PIMCO can decide whether to use them or not. This prospectus does not attempt to disclose all of the various types of securities and investment techniques that may be used by the Fund. As with any mutual fund, investors in the Fund rely on the professional investment judgment and skill of PIMCO and the individual portfolio managers. Please see “Investment Objectives and Policies” in the Statement of Additional Information for more detailed information about the securities and investment techniques described in this section and about other strategies and techniques that may be used by the Fund.

Securities Selection

The Fund seeks maximum total return. The total return sought by the Fund consists of both income earned on the Fund’s investments and capital appreciation, if any, arising from increases in the market value of the Fund’s holdings. Capital appreciation of fixed income securities generally results from decreases in market interest rates or improving credit fundamentals for a particular market sector or security.

In selecting securities for the Fund, PIMCO develops an outlook for interest rates, currency exchange rates and the economy; analyzes credit and call risks, and uses other security selection techniques. The proportion of the Fund’s assets committed to investment in securities with particular characteristics (such as quality, sector, interest rate or maturity) varies based on PIMCO’s outlook for the U.S. economy and the economies of other countries in the world, the financial markets and other factors.

U.S. Government Securities

Municipal Bonds

Municipal bonds are generally issued by states and local governments and their agencies, authorities and other instrumentalities. Municipal bonds are subject to interest rate, credit and market risk. The ability of an issuer to make payments could be affected by litigation, legislation or other political events or the bankruptcy of the issuer. Lower rated municipal bonds are subject to greater credit and market risk than higher quality municipal bonds. The types of municipal bonds in which the Fund may invest include municipal lease obligations. The Fund may also invest in securities issued by entities whose underlying assets are municipal bonds.

The Fund may invest, without limitation, in residual interest bonds, which are created by depositing municipal securities in a trust and dividing the income stream of an underlying municipal bond in two parts, one, a variable rate security and the other, a residual interest bond. The interest rate for the variable rate security is determined by an index or an auction process held approximately every 7 to 35 days, while the residual interest bond holder receives the balance of the income from the underlying municipal bond less an auction fee. The market prices of residual interest bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase.


16		PIMCO Funds: Pacific Investment Management Series

Mortgage-Related and Other Asset-Backed Securities

The Fund may invest all of its assets in mortgage- or other asset-backed securities. Mortgage-related securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

The value of some mortgage- or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Fund to a lower rate of return upon reinvestment of principal. When interest rates rise, the value of a mortgage-related security generally will decline; however, when interest rates are declining, the value of mortgage-related securities with prepayment features may not increase as much as other fixed income securities. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If unanticipated rates of prepayment on underlying mortgages increase the effective maturity of a mortgage-related security, the volatility of the security can be expected to increase. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.

One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity from these securities. The Fund may not invest more than 5% of its assets in any combination of IO, PO, or inverse floater securities. The Fund may invest in other asset-backed securities that have been offered to investors.

Loan Participations and Assignments

The Fund may invest in fixed- and floating-rate loans, which investments generally will be in the form of loan participations and assignments of portions of such loans. Participations and assignments involve special types of risk, including credit risk, interest rate risk, liquidity risk, and the risks of being a lender. If the Fund purchases a participation, it may only be able to enforce its rights through the lender, and may assume the credit risk of the lender in addition to the borrower.

Corporate Debt Securities

High Yield Securities


Prospectus		17

describes the various ratings assigned to fixed income securities by Moody’s and S&P. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. The Fund will not necessarily sell a security when its rating is reduced below its rating at the time of purchase. PIMCO does not rely solely on credit ratings, and develops its own analysis of issuer credit quality.

The Fund may purchase unrated securities (which are not rated by a rating agency) if its portfolio manager determines that the security is of comparable quality to a rated security that the Fund may purchase. Unrated securities may be less liquid than comparable rated securities and involve the risk that the portfolio manager may not accurately evaluate the security’s comparative credit rating. Analysis of the creditworthiness of issuers of high yield securities may be more complex than for issuers of higher-quality fixed income securities. To the extent that the Fund invests in high yield and/or unrated securities, the Fund’s success in achieving its investment objective may depend more heavily on the portfolio manager’s creditworthiness analysis than if the Fund invested exclusively in higher-quality and rated securities.

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The Fund may invest in floating rate debt instruments (“floaters”) and engage in credit spread trades. While floaters provide a certain degree of protection against rises in interest rates, the Fund will participate in any declines in interest rates as well. The Fund may also invest in inverse floating rate debt instruments (“inverse floaters”). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. The Fund may not invest more than 5% of its assets in any combination of inverse floater, interest only, or principal only securities.

Inflation-Indexed Bonds

Event-Linked Bonds

The Fund may invest in “event-linked bonds,” which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific “trigger” event, such as a hurricane, earthquake, or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as “catastrophe bonds.” If a trigger event occurs, the Fund may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose the Fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Event-linked bonds may also be subject to liquidity risk.


18		PIMCO Funds: Pacific Investment Management Series

Convertible and Equity Securities

The Fund may invest in convertible securities. Convertible securities are generally preferred stocks and other securities, including fixed income securities and warrants, that are convertible into or exercisable for common stock at a stated price or rate. The price of a convertible security will normally vary in some proportion to changes in the price of the underlying common stock because of this conversion or exercise feature. However, the value of a convertible security may not increase or decrease as rapidly as the underlying common stock. A convertible security will normally also provide income and is subject to interest rate risk. Convertible securities may be lower-rated securities subject to greater levels of credit risk. The Fund may be forced to convert a security before it would otherwise choose, which may have an adverse effect on the Fund’s ability to achieve its investment objective.

While the Fund intends to invest primarily in fixed income securities, it may invest in convertible securities or equity securities. While some countries or companies may be regarded as favorable investments, pure fixed income opportunities may be unattractive or limited due to insufficient supply, or legal or technical restrictions. In such cases, the Fund may consider convertible securities or equity securities to gain exposure to such investments.

Equity securities generally have greater price volatility than fixed income securities. The market price of equity securities owned by the Fund may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting equity securities markets generally or particular industries represented in those markets. The value of an equity security may also decline for a number of reasons which directly relate to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.

Foreign Securities

Investing in foreign securities involves special risks and considerations not typically associated with investing in U.S. securities. Shareholders should consider carefully the substantial risks involved in securities issued by foreign companies and governments of foreign countries. These risks include: differences in accounting, auditing and financial reporting standards; generally higher commission rates on foreign portfolio transactions; the possibility of nationalization, expropriation or confiscatory taxation; adverse changes in investment or exchange control regulations; and political instability. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. The securities markets, values of securities, yields and risks associated with foreign securities markets may change independently of each other. Also, foreign securities and dividends and interest payable on those securities may be subject to foreign taxes, including taxes withheld from payments on those securities. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Investments in foreign securities may also involve higher custodial costs than domestic investments and additional transaction costs with respect to foreign currency conversions. Changes in foreign exchange rates also will affect the value of securities denominated or quoted in foreign currencies.

The Fund also may invest in sovereign debt issued by governments, their agencies or instrumentalities, or other government-related entities. Holders of sovereign debt may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. In addition, there is no bankruptcy proceeding by which defaulted sovereign debt may be collected.

• Emerging Market Securities. The Fund may invest up to 10% of its assets in securities of issuers based in countries with developing (or “emerging market”) economies. Investing in emerging market securities imposes risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; possible repatriation of investment


Prospectus		19

income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.

Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause the Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security.

The Fund may invest in Brady Bonds, which are securities created through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with a debt restructuring. Investments in Brady Bonds may be viewed as speculative. Brady Bonds acquired by the Fund may be subject to restructuring arrangements or to requests for new credit, which may cause the Fund to suffer a loss of interest or principal on any of its holdings.

Foreign (Non-U.S.) Currencies

If the Fund invests directly in foreign currencies or in securities that trade in, or receive revenues in, foreign currencies, it will be subject to currency risk. Foreign currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or perceived changes in interest rates and other complex factors. Currency exchange rates also can be affected unpredictably by intervention (or the failure to intervene) by U.S. or foreign governments or central banks, or by currency controls or political developments. For example, uncertainty surrounds the introduction of the euro (a common currency unit for the European Union) and the effect it may have on the value of European currencies as well as securities denominated in local European currencies. These and other currencies in which the Fund’s assets are denominated may be devalued against the U.S. dollar, resulting in a loss to the Fund.

• Foreign Currency Transactions. The Fund may engage in foreign currency transactions on a spot (cash) basis, and enter into forward foreign currency exchange contracts and invest in foreign currency futures contracts and options on foreign currencies and futures. A forward foreign currency exchange contract, which involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract, reduces the Fund’s exposure to changes in the value of the currency it will deliver and increases its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. A contract to sell foreign currency would limit any potential gain which might be realized if the value of the hedged currency increases. The Fund may enter into these contracts to hedge against foreign exchange risk, to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one currency to another. Suitable hedging transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for the Fund to benefit from favorable


20		PIMCO Funds: Pacific Investment Management Series

fluctuations in relevant foreign currencies. The Fund may use one currency (or a basket of currencies) to hedge against adverse changes in the value of another currency (or a basket of currencies) when exchange rates between the two currencies are positively correlated. The Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees to cover its obligations under forward foreign currency exchange contracts entered into for non-hedging purposes.

Repurchase Agreements

The Fund may enter into repurchase agreements, in which the Fund purchases a security from a bank or broker-dealer and agrees to repurchase the security at the Fund’s cost plus interest within a specified time. If the party agreeing to repurchase should default, the Fund will seek to sell the securities which it holds. This could involve procedural costs or delays in addition to a loss on the securities if their value should fall below their repurchase price. Repurchase agreements maturing in more than seven days are considered illiquid securities.

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings

The Fund may enter into reverse repurchase agreements and dollar rolls, subject to the Fund’s limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by the Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. The Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its obligations under reverse repurchase agreements, dollar rolls, and other borrowings. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for the Fund.

The Fund may borrow money to the extent permitted under the 1940 Act. This means that, in general, the Fund may borrow money from banks for any purpose on a secured basis in an amount up to ¹/3 of the Fund’s total assets. The Fund may also borrow money for temporary administrative purposes on an unsecured basis in an amount not to exceed 5% of the Fund’s total assets.

Derivatives

The Fund may, but is not required to, use derivative instruments for risk management purposes or as part of its investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. The Fund may invest some or all of its assets in derivative instruments. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by the Fund will succeed. A description of these and other derivative instruments that the Fund may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.

The Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other more traditional investments. A description of various risks associated with particular derivative instruments is included in “Investment Objectives and Policies” in the Statement of Additional Information. The following provides a more general discussion of important risk factors relating to all derivative instruments that may be used by the Fund.


Prospectus		21

Leverage Risk. Because many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When the Fund uses derivatives for leverage, investments in the Fund will tend to be more volatile, resulting in larger gains or losses in response to market changes. To limit leverage risk, the Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments.

Lack of Availability. Because the markets for certain derivative instruments (including markets located in foreign countries) are relatively new and still developing, suitable derivatives transactions may not be available in all circumstances for risk management or other purposes. There is no assurance that the Fund will engage in derivatives transactions at any time or from time to time. The Fund’s ability to use derivatives may also be limited by certain regulatory and tax considerations.

Market and Other Risks. Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to the Fund’s interest. If a portfolio manager incorrectly forecasts the values of securities, currencies or interest rates or other economic factors in using derivatives for the Fund, the Fund might have been in a better position if it had not entered into the transaction at all. While some strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments. The Fund may also have to buy or sell a security at a disadvantageous time or price because the Fund is legally required to maintain offsetting positions or asset coverage in connection with certain derivatives transactions.

Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indexes. Many derivatives, in particular privately negotiated derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the Fund. Also, the value of derivatives may not correlate perfectly, or at all, with the value of the assets, reference rates or indexes they are designed to closely track. In addition, the Fund’s use of derivatives may cause the Fund to realize higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if the Fund had not used such instruments.

Delayed Funding Loans and Revolving Credit Facilities

The Fund may also enter into, or acquire participations in, delayed funding loans and revolving credit facilities, in which a lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. These commitments may have the effect of requiring the Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company’s financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees in an amount sufficient to meet such commitments. Delayed funding loans and revolving credit facilities are subject to credit, interest rate and liquidity risk and the risks of being a lender.


22		PIMCO Funds: Pacific Investment Management Series

When-Issued, Delayed Delivery and Forward Commitment Transactions

The Fund may purchase securities which it is eligible to purchase on a when-issued basis, may purchase and sell such securities for delayed delivery and may make contracts to purchase such securities for a fixed price at a future date beyond normal settlement time (forward commitments). When-issued transactions, delayed delivery purchases and forward commitments involve a risk of loss if the value of the securities declines prior to the settlement date. This risk is in addition to the risk that the Fund’s other assets will decline in value. Therefore, these transactions may result in a form of leverage and increase the Fund’s overall investment exposure. Typically, no income accrues on securities the Fund has committed to purchase prior to the time delivery of the securities is made, although the Fund may earn income on securities it has segregated to cover these positions.

Investment in Other Investment Companies

The Fund may invest up to 10% of its assets in securities of other investment companies, such as closed-end management investment companies, or in pooled accounts or other investment vehicles which invest in foreign markets. As a shareholder of an investment company, the Fund may indirectly bear service and other fees which are in addition to the fees the Fund pays its service providers.

Subject to the restrictions and limitations of the 1940 Act, the Fund may elect to pursue its investment objective either by investing directly in securities, or by investing in one or more underlying investment vehicles or companies that have substantially similar investment objectives, policies and limitations as the Fund.

Short Sales

The Fund may make short sales as part of its overall portfolio management strategies or to offset a potential decline in value of a security. A short sale involves the sale of a security that is borrowed from a broker or other institution to complete the sale. Short sales expose the Fund to the risk that it will be required to acquire, convert or exchange securities to replace the borrowed securities (also known as “covering” the short position) at a time when the securities sold short have appreciated in value, thus resulting in a loss to the Fund. The Fund making a short sale must segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its position in a permissible manner.

Illiquid Securities

The Fund may invest up to 15% of its net assets in illiquid securities. Certain illiquid securities may require pricing at fair value as determined in good faith under the supervision of the Board of Trustees. A portfolio manager may be subject to significant delays in disposing of illiquid securities, and transactions in illiquid securities may entail registration expenses and other transaction costs that are higher than those for transactions in liquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the securities. Restricted securities, i.e., securities subject to legal or contractual restrictions on resale, may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 and certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets.

Loans of Portfolio Securities

For the purpose of achieving income, the Fund may lend its portfolio securities to brokers, dealers, and other financial institutions provided a number of conditions are satisfied, including that the loan is fully collateralized. Please see “Investment Objectives and Policies” in the Statement of Additional Information for details. When the Fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the Fund will also receive a fee or interest on the collateral. Securities lending involves the risk of loss of rights in the collateral or delay in recovery of the collateral if the borrower fails to return the security loaned or becomes insolvent. The Fund may pay lending fees to a party arranging the loan.

Portfolio Turnover

The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the Fund is known as “portfolio turnover.” The Fund may engage in


Prospectus		23

frequent and active trading of portfolio securities to achieve its investment objective, particularly during periods of volatile market movements. High portfolio turnover (e.g., over 100%) involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales may also result in realization of taxable capital gains, including short-term capital gains (which are generally taxed at ordinary income tax rates). The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s performance.

Temporary Defensive Strategies

For temporary or defensive purposes, the Fund may invest without limit in U.S. debt securities, including taxable securities and short-term money market securities, when PIMCO deems it appropriate to do so. When the Fund engages in such strategies, it may not achieve its investment objective.

Changes in Investment Objectives and Policies

The investment objective of the Fund is fundamental and may not be changed without shareholder approval. Unless otherwise stated, all other investment policies of the Fund may be changed by the Board of Trustees without shareholder approval.

Percentage Investment Limitations

Unless otherwise stated, all percentage limitations on Fund investments listed in this prospectus will apply at the time of investment. The Fund would not violate these limitations unless an excess or deficiency occurs or exists immediately after and as a result of an investment.

Other Investments and Techniques

The Fund may invest in other types of securities and use a variety of investment techniques and strategies which are not described in this prospectus. These securities and techniques may subject the Fund to additional risks. Please see the Statement of Additional Information for additional information about the securities and investment techniques described in this prospectus and about additional securities and techniques that may be used by the Fund.


24		PIMCO Funds: Pacific Investment Management Series

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Prospectus		25

Financial Highlights

The financial highlights table is intended to help a shareholder understand the financial performance of Institutional and Administrative Class shares of the Fund for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in a particular class of shares of the Fund, assuming reinvestment of all dividends and distributions. This information, except for the period ended September 30, 2001, has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund’s financial statements, is included in the Fund’s annual report to shareholders. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year Ended	Net Asset Value Beginning of Period		Net Investment Income (Loss)			Net Realized and Unrealized Gain (Loss) on Investments			Total Income from Investment Operations		Dividends from Net Investment Income			Dividends in Excess of Net Investment Income			Distributions from Net Realized Capital Gains			Distributions in Excess of Net Realized Capital Gains


Total Return Fund
Institutional Class
09/30/2001*	$	10.52	$	0.29	(a)	$	0.35	(a)	$	0.64	$	(0.29	)	$	0.00		$	0.00		$	0.00
03/31/2001		9.96		0.67	(a)		0.56	(a)		1.23		(0.65	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.63	(a)		(0.40	)(a)		0.23		(0.60	)		(0.03	)		0.00			0.00
03/31/1999		10.62		0.63	(a)		0.16	(a)		0.79		(0.63	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.64	(a)		0.62	(a)		1.26		(0.62	)		(0.02	)		(0.27	)		0.00
03/31/1997		10.29		0.68			(0.02	)		0.66		(0.66	)		(0.02	)		0.00			0.00
Administrative Class
09/30/2001*		10.52		0.28	(a)		0.35	(a)		0.63		(0.28	)		0.00			0.00			0.00
03/31/2001		9.96		0.64	(a)		0.56	(a)		1.20		(0.62	)		(0.02	)		0.00			0.00
03/31/2000		10.36		0.61	(a)		(0.41	)(a)		0.20		(0.58	)		(0.02	)		0.00			0.00
03/31/1999		10.62		0.61	(a)		0.16	(a)		0.77		(0.61	)		0.00			(0.24	)		(0.18	)
03/31/1998		10.27		0.61	(a)		0.63	(a)		1.24		(0.60	)		(0.02	)		(0.27	)		0.00
03/31/1997		10.29		0.66	(a)		(0.02	)(a)		0.64		(0.64	)		(0.02	)		0.00			0.00

Unaudited

(a)

Per share amounts based on average number of shares outstanding during the period.


26		PIMCO Funds: Pacific Investment Management Series

Tax Basis Return of Capital	Total Distributions			Net Asset Value End of Period		Total Return		Net Assets End of Period (000’s)		Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income to Average Net Assets		Portfolio Turnover Rate




$0.00	$	(0.29	)	$	10.87	6.22	%	$	34,042,435	0.43	%+	5.51	%+	256	%
0.00		(0.67	)		10.52	12.80			31,746,629	0.49	(b)	6.57		450
0.00		(0.63	)		9.96	2.33			24,900,321	0.54	(b)	6.25		223
0.00		(1.05	)		10.36	7.60			21,711,396	0.43		5.91		154
0.00		(0.91	)		10.62	12.63			16,484,119	0.43		6.06		206
0.00		(0.68	)		10.27	6.60			12,528,536	0.43		6.60		173

0.00		(0.28	)		10.87	6.09			7,092,788	0.68	+	5.22	+	256
0.00		(0.64	)		10.52	12.52			5,353,222	0.74	(c)	6.31		450
0.00		(0.60	)		9.96	2.07			3,233,785	0.79	(c)	6.01		223
0.00		(1.03	)		10.36	7.33			1,972,984	0.68		5.52		154
0.00		(0.89	)		10.62	12.36			481,730	0.68		5.74		206
0.00		(0.66	)		10.27	6.34			151,194	0.68		6.35		173

Annualized.

(b)

Ratio of expenses to average net assets excluding interest expense is 0.43%.

(c)

Ratio of expenses to average net assets excluding interest expense is 0.68%.


Prospectus		27

Appendix A

Description of Securities Ratings

The Fund’s investments may range in quality from securities rated in the lowest category in which the Fund is permitted to invest to securities rated in the highest category (as rated by Moody’s or S&P or, if unrated, determined by PIMCO to be of comparable quality). The percentage of the Fund’s assets invested in securities in a particular rating category will vary. The following terms are generally used to describe the credit quality of fixed income securities:

High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by PIMCO.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc.

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.


A-1		PIMCO Funds: Pacific Investment Management Series

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Corporate Short-Term Debt Ratings

Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Short-Term Municipal Bond Ratings

MIG 2/VMIG 2: This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group.


Prospectus A-2

SG: This designation denotes speculative quality. Debt instruments in this category lack margins of protection.

Standard & Poor's Ratings Service

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

Speculative Grade

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being paid.


A-3		PIMCO Funds: Pacific Investment Management Series

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.


Prospectus A-4

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISER AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

TRANSFER AGENT

National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas City, MO 64105

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006

The Trust’s Statement of Additional Information (“SAI”) and annual and semi-annual reports to shareholders include additional information about the Fund. The SAI and the financial statements included in the Fund’s most recent annual report to shareholders are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Fund’s annual report discusses the market conditions and invest- ment strategies that significantly affected the Fund’s performance during its last fiscal year.

You may get free copies of any of these materials, request other information about the Fund, or make shareholder inquiries by calling the Trust at 1-800-927-4648 or PIMCO Infolink Audio Response Network at 1-800-987-4626, or by writing to:

PIMCO Funds: Pacific Investment Management Series

840 Newport Center Drive

Suite 300

Newport Beach, CA 92660

Reference the Trust’s Investment Company Act file number in your correspondence.

Investment Company Act file no. 811-5028

PIMCO Funds

840 Newport Center Drive

Suite 300

Newport Beach, CA 92660

PIMS TR INST 04.02

APRIL 1, 2002

PIMCO Total Return

Funds Prospectus

An Intermediate Duration Bond Fund

Share Class

OBJECTIVE

Seeking maximum total return, consistent with preservation

of capital and prudent investment management.

MANAGER

Bill Gross, Founder and Managing Director of PIMCO,

has over 30 years of investment experience. With over $240 billion

in fixed-income assets under management (as of 12/31/01),

PIMCO is one of the largest bond managers in the country.

FOR MORE INFORMATION

For the latest PIMCO Total Return Fund performance, call

1-888-87-PIMCO, or visit our Web site at www.pimcofunds.com.

This cover is not part of the Prospectus.

PIMCO Total Return Fund Prospectus

PIMCO Funds:

Pacific Investment

Management Series

April 1, 2002

Share Class

This prospectus explains what you should know about the Fund before you invest. Please read it carefully.

This prospectus is intended for participants in designated employer-sponsored retirement or savings plans. The administrator of your retirement plan or your employee benefits office can provide you with detailed information on how to participate in your plan and how to elect the Fund as an investment option.


Prospectus		1

Table of Contents

Summary Information		3
Total Return Fund		4
Summary of Principal Risks		6
Management of the Fund		7
How Fund Shares are Priced		8
How to Buy and Sell Shares		9
Fund Distributions		10
Tax Consequences		10
Characteristics and Risks of Securities and Investment Techniques		11
Financial Highlights		20
Appendix A—Description of Securities Ratings		A-1


2		PIMCO Funds: Pacific Investment Management Series

Summary Information

The table below describes certain investment characteristics of the Fund. Other important characteristics are described in the Fund Summary beginning on page 4. Following the table are certain key concepts which are used throughout the prospectus.

	Main Investments	Duration	Credit Quality (1)	Foreign (2)

Total Return Fund	Intermediate maturity fixed income securities	3–6 years	B to Aaa; max 100% below Baa	0–20%

(1)

As rated by Moody’s Investors Service, Inc., or equivalently rated by Standard & Poor’s Ratings Service, or if unrated, determined by PIMCO to be of comparable quality.

(2)

The percentage limitation relates to non-U.S. dollar denominated securities. The Fund may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers.

Fixed Income Instruments

“Fixed Income Instruments” as used in this prospectus includes:

•

securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (“U.S. Government Securities”);

•

corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;

•

mortgage-backed and other asset-backed securities;

•

inflation-indexed bonds issued both by governments and corporations;

•

structured notes, including hybrid or “indexed” securities, event-linked bonds and loan participations;

•

delayed funding loans and revolving credit facilities;

•

bank certificates of deposit, fixed time deposits and bankers’ acceptances;

•

repurchase agreements and reverse repurchase agreements;

•

debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;

•

obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and

•

obligations of international agencies or supranational entities.

Duration

Credit Ratings

•

high quality

•

investment grade

•

below investment grade (“high yield securities” or “junk bonds”)

For a further description of credit ratings, see “Appendix A—Description of Securities Ratings.”

Fund Descriptions, Performance and Fees

It is possible to lose money on investments in the Fund.

An investment in the Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency.


Prospectus		3

PIMCO Total Return Fund

Principal Investments and Strategies		Investment Objective Seeks maximum total return, consistent with preservation of capital and prudent investment management Fund Category Intermediate Duration Bond		Fund Focus Intermediate maturity fixed income securities Average Portfolio Duration 3-6 years		Credit Quality B to Aaa; maximum 10% below Baa Dividend Frequency Declared daily and distributed monthly

The Fund invests primarily in investment grade debt securities, but may invest up to 10% of its assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or S&P, or, if unrated, determined by PIMCO to be of comparable quality. The Fund may invest up to 20% of its assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar-denominated securities of foreign issuers. The Fund will normally hedge at least 75% of its exposure to foreign currency to reduce the risk of loss due to fluctuations in currency exchange rates.

Principal Risks

Among the principal risks of investing in the Fund, which could adversely affect its net asset value, yield and total return, are:

• Interest Rate Risk

• Credit Risk

• Market Risk

• Issuer Risk

• Derivatives Risk

• Liquidity Risk

• Mortgage Risk

• Foreign Investment Risk

• Currency Risk

• Leveraging Risk

• Management Risk

Please see “Summary of Principal Risks” following the Fund Summary for a description of these and other risks of investing in the Fund.

Performance Information

The top of the next page shows summary performance information for the Fund’s Class A shares in a bar chart and an Average Annual Total Returns table. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how the Fund’s average annual returns compare with the returns of a broad-based securities market index and an index of similar funds. The bar chart and the Average Annual Total Returns table do not reflect the deduction of sales charges (loads) that may apply if Class A shares are purchased outside of a designated employer-sponsored retirement or savings plan. If sales charges (loads) were reflected, the returns would be lower than those shown. For periods prior to the inception date of Class A shares (1/13/97), performance information shown in the bar chart and table is based on the performance of the Fund’s Institutional Class shares, which are offered in a different prospectus. The prior Institutional Class performance has been adjusted to reflect the actual distribution and/or service (12b-1) fees, administrative fees and other expenses paid by Class A shares. Past performance is no guarantee of future results.


4		PIMCO Funds: Pacific Investment Management Series

PIMCO Total Return Fund (continued)

Calendar Year Total Returns — Class A



	Highest and Lowest Quarter Returns
	(for periods shown in the bar chart)

	Highest (3rd Qtr. ’01)	6.37%

	Lowest (1st Qtr. ’94)	-2.80%
Calendar Year End (through 12/31)

Average Annual Total Returns (for periods ended 12/31/01)

	1 Year	5 Years	10 Years

Class A	8.98%	7.65%	7.76%

Lehman Brothers Aggregate Bond Index(1)	8.44%	7.43%	7.23%

Lipper Intermediate Investment Grade Debt Fund Avg(2)	7.59%	6.44%	6.74%

(1)

(2)

Fees and Expenses of the Fund

These tables describe the fees and expenses you may pay if you buy and hold Class A shares of the Fund:


Shareholder fees (fees paid directly from your investment)		None(1)

(1)

The shares in this prospectus are offered to participants in designated employer-sponsored retirement or savings plans without a sales load. Class A shares purchased other than through such plans may be subject to a sales load.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

	Advisory Fees	Distribution and/or Service (12b-1) Fees	Other Expenses(1)	Total Annual Fund Operating Expenses

Class A	0.25%	0.25%	0.46%	0.96%

(1) Other Expenses reflect an Administrative Fee of 0.40% and interest expense. Total Annual Fund Operating Expenses for the class excluding interest expense is 0.90%. Interest expense is generally incurred as a result of investment management activities.

Examples. The Examples are intended to help you compare the cost of investing in Class A shares of the Fund with the costs of investing in other mutual funds. The Examples assume that you invest $10,000 in Class A shares for the time periods indicated, and then redeem all your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, the reinvestment of all dividends and distributions, and the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, the Examples show what your costs would be based on these assumptions.

	Year 1	Year 3	Year 5	Year 10

Class A	$98	$306	$531	$1,178


Prospectus		5

Summary of Principal Risks

The value of your investment in the Fund changes with the values of the Fund’s investments. Many factors can affect those values. The factors that are most likely to have a material effect on the Fund’s portfolio as a whole are called “principal risks.” The principal risks of the Fund are identified in the Fund Summary and are summarized in this section. The Fund may be subject to additional principal risks and risks other than those described below because the types of investments made by the Fund can change over time. Securities and investment techniques mentioned in this summary and described in greater detail under “Characteristics and Risks of Securities and Investment Techniques” appear in bold type. That section and “Investment Objectives and Policies” in the Statement of Additional Information also include more information about the Fund, its investments and the related risks. There is no guarantee that the Fund will be able to achieve its investment objective.

Interest Rate Risk

As interest rates rise, the value of fixed income securities in the Fund’s portfolio are likely to decrease. Securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations.

Credit Risk

The Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest. Funds that invest in high yield securities and unrated securities of similar credit quality (commonly known as “junk bonds”) may be subject to greater levels of interest rate, credit and liquidity risk than Funds that do not invest in such securities. These securities are considered predominately speculative with respect to the issuer’s continuing ability to make principal and interest payments. An economic downturn or period of rising interest rates could adversely affect the market for these securities and reduce a Fund’s ability to sell these securities (liquidity risk).

Market Risk

Issuer Risk

Liquidity Risk

Derivatives Risk

Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Fund may use are referenced under “Characteristics and Risks of Securities and Investment Techniques—Derivatives” in this prospectus and described in more detail under “Investment Objectives and Policies” in the Statement of Additional Information. The Fund may sometimes use derivatives as part of a strategy designed to reduce exposure to other risks, such as interest rate or currency risk. The Fund may also use derivatives for leverage, in which case their use would involve leveraging risk. The Fund’s use of derivative instruments involves risks different from, or greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks described elsewhere in this section, such as liquidity risk, interest rate risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. If the Fund invests in a derivative instrument


6		PIMCO Funds: Pacific Investment Management Series

it could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Mortgage Risk

Foreign (Non-U.S.) Investment Risk

Currency Risk

When the Fund invests directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign currencies, it is subject to the risk that those currencies will decline in value relative to the U.S. Dollar, or, in the case of hedging positions, that the U.S. Dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the U.S. or abroad.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, loans of portfolios securities, and the use of when-issued, delayed delivery or forward commitment transactions. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, PIMCO will segregate liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage, including borrowing, will cause the Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s portfolio securities.

Management Risk

The Fund is subject to management risk because it is an actively managed investment portfolio. PIMCO and each individual portfolio manager will apply investment techniques and risk analyses in making investment decisions for the Funds, but there can be no guarantee that these will produce the desired results.

Management of the Fund

Investment Adviser and Administrator


Prospectus		7

Advisory Fees

Administrative Fees

The Fund pays for the administrative services it requires under a fee structure which is essentially fixed. Class A shareholders of the Fund pay an administrative fee to PIMCO, computed as a percentage of the Fund’s assets attributable in the aggregate to that class of shares. PIMCO, in turn, provides administrative services for Class A shareholders and also bears the costs of various third-party services required by the Fund, including audit, custodial, portfolio accounting, legal, transfer agency and printing costs.

For the fiscal year ended March 31, 2001, the Fund paid PIMCO monthly administrative fees at the annual rate (stated as a percentage of the average daily net assets attributable in the aggregate to the Fund’s Class A shares) of 0.40%.

Individual Portfolio Manager

The following person has primary responsibility for managing the Fund.

Portfolio Manager	Since	Recent Professional Experience

William H. Gross	5/87*	Managing Director, Chief Investment Officer and a founding partner of PIMCO.

* Since inception of the Fund.

Distributor

The Fund’s Distributor is PIMCO Funds Distributors LLC, an indirect subsidiary of Allianz Dresdner Asset Management of America L.P. The Distributor, located at 2187 Atlantic Street, Stamford, CT 06902, is a broker-dealer registered with the SEC.

Distribution and Servicing (12b-1) Plan

The Fund pays fees to the Distributor on an ongoing basis as compensation for the services the Distributor renders and the expenses it bears in connection with personal services rendered to Fund shareholders and the maintenance of shareholder accounts (“servicing fees”). These payments are made pursuant to a Distribution and Servicing Plan (“12b-1 Plan”) adopted by the Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940 (“1940 Act”), as amended.

The maximum annual rate at which the servicing fees may be paid under the 12b-1 Plan (calculated as a percentage of the Fund’s average daily net assets attributable to Class A shares) is 0.25%.

How Fund Shares Are Priced

The net asset value (“NAV”) of a Fund’s Class A shares is determined by dividing the total value of a Fund’s portfolio investments and other assets attributable to that class, less any liabilities, by the total number of shares outstanding of that class.

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, based on quotes obtained from a quotation reporting system, established market makers, or pricing services. Certain securities or investments for which daily market quotations are not readily available may be valued, pursuant to guidelines established by the Board of Trustees, with reference to other securities or indices. Short-term investments having a maturity of 60 days or less are generally valued at amortized cost. Exchange traded options, futures and options on futures are valued at the settlement price determined by the exchange. Other securities for which market quotes are not readily available are valued at fair value as determined in good faith by the Board of Trustees or persons acting at their direction.


8		PIMCO Funds: Pacific Investment Management Series

Fund shares are valued as of the close of regular trading (normally 4:00 p.m., Eastern time) (the “NYSE Close”) on each day that the New York Stock Exchange is open. For purposes of calculating the NAV, the Fund normally uses pricing data for domestic equity securities received shortly after the NYSE Close and do not normally take into account trading, clearances or settlements that take place after the NYSE Close. Domestic fixed income and foreign securities are normally priced using data reflecting the earlier closing of the principal markets for those securities. Information that becomes known to the Fund or its agents after the NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day.

How to Buy and Sell Shares

The following section provides basic information about how to buy and sell (redeem) shares of the Fund.

Calculation of Share Price and Redemption Payments

When you buy shares of the Fund, you pay a price equal to the NAV of the shares, and when you sell (redeem) shares, you receive an amount equal to the NAV of the shares. NAVs are determined at the close of regular trading (normally 4:00 p.m., Eastern time) on each day the New York Stock Exchange is open. See “How Fund Shares Are Priced” above for details. Generally, purchase and redemption orders for Fund shares are processed at the NAV next calculated after your order is received by the Distributor. However, contributions received by the Distributor after the offering price is determined that day will receive such offering price if the contributions were received by the plan administrator prior to such determination and were transmitted to and received by the Distributor prior to 10:00 Eastern time on the next business day.

Buying Shares

The Class A shares of the Fund offered through this prospectus are available as an investment option in retirement or savings plans. The administrator of such a plan or your employee benefits office can provide detailed information on how to participate in such a plan and how to elect the Fund as an investment option. The terms of a plan may restrict the frequency or timing of your contributions, allocations or redemptions, which may have the effect of limiting your ability to respond to changing markets conditions.

You may be permitted to elect different investment options, alter the amounts contributed to your plan, or change how contributions are allocated among investment options in accordance with the plan’s specific provisions. You should consult the plan administrator or your employee benefits office for more details.

Questions about the Fund should be directed to the Distributor at 1-800-426-0107. Questions about your plan account should be directed to the plan administrator or the organization that provides recordkeeping services for the plan.

The Distributor, in its sole discretion, may accept or reject any order for purchase of Fund shares. The sale of shares will be suspended during any period in which the New York Stock Exchange is closed for other than weekends or holidays, or, if permitted by the rules of the Securities and Exchange Commission, when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Fund to dispose of its securities or determine fairly its net asset value, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors.


Prospectus		9

The Fund sells Class A shares at NAV without a sales load to trustees or other fiduciaries purchasing shares for certain plans sponsored by employers, professional organizations or associations or charitable organizations, the trustee, administrator, fiduciary, broker, trust company or registered investment adviser for which has an agreement with the Distributor with respect to such purchases, and to participants in such plans and their spouses purchasing for their account(s). Class A shares sold other than through designated employer-sponsored retirement or savings plans may have different sales charges and expense levels. The Distributor will pay a commission to dealers who sell Class A shares of the Fund at net asset value to certain employer-sponsored plans according to the following schedule: 0.50% of the first $2,000,000 and 0.25% of amounts over $2,000,000. From time to time, the Distributor, its parent and/or its affiliates may make additional payments to one or more participating brokers based upon factors such as the level of sales or the length of time clients’ assets have remained in the Trust.

Exchanges

Your plan may allow exchanges from one investment option to another. You should check with the plan administrator for details on the rules governing exchanges in the plan, including the frequency of permitted exchanges. Certain investment options may be subject to unique restrictions. Exchanges are accepted by the Trust only as permitted by your plan.

Selling Shares

Your plan administrator or employee benefits office can provide you with information on how to sell (redeem) the Fund’s shares. You will not pay any special fees or charges to the Trust or the Distributor when you sell your shares. Redemptions of Fund shares may be suspended when trading on the New York Stock Exchange is restricted or during an emergency which makes it impracticable for the Funds to dispose of their securities or to determine fairly the value of their net assets, or during any other period as permitted by the Securities and Exchange Commission for the protection of investors.

Fund Distributions

In addition, the Fund distributes any net capital gains it earns from the sale of portfolio securities to shareholders no less frequently than annually. Net short-term capital gains may be paid more frequently. Distributions are reinvested in additional shares of the same class of your Fund at NAV. You do not pay any sales charges on shares you receive through the reinvestment of Fund distributions.

Tax Consequences

Distributions received by tax-exempt shareholders will not be subject to federal income tax to the extent permitted under applicable tax law. To the extent that you are not exempt from tax on Fund distributions, you will be subject to tax on Fund distributions whether you received them in cash or reinvested them in additional shares of the Fund. For federal income tax purposes, Fund distributions will be taxable as either ordinary income or capital gains.

Fund dividends (i.e., distributions of investment income) are taxable as ordinary income. Federal taxes on Fund distributions of gains are determined by how long the Fund owned the investments that generated the gains, rather than how long you have owned your shares. Distributions of gains from investments that a Fund owned for more than one year will generally be taxable as long-term capital gains. Distributions of gains from investments that the Fund owned for one year or less will generally be taxable as ordinary income.


10		PIMCO Funds: Pacific Investment Management Series

Characteristics and Risks of Securities and Investment

Techniques

Securities Selection

The Fund seeks maximum total return. The total return sought by the Fund consists of both income earned on a Fund’s investments and capital appreciation, if any, arising from increases in the market value of the Fund’s holdings. Capital appreciation of fixed income securities generally results from decreases in market interest rates or improving credit fundamentals for a particular market sector or security.

In selecting securities for the Fund, PIMCO develops an outlook for interest rates, foreign currency exchange rates and the economy; analyzes credit and call risks, and uses other security selection techniques. The proportion of the Fund’s assets committed to investment in securities with particular characteristics (such as quality, sector, interest rate or maturity) varies based on PIMCO’s outlook for the U.S. and foreign economies, the financial markets and other factors.

U.S. Government Securities

U.S. Government securities are obligations of, or guaranteed by, the U.S. Government, its agencies or government-sponsored enterprises. U.S. Government securities are subject to market and interest rate risk, and may be subject to varying degrees of credit risk. U.S. Government securities include zero coupon securities, which tend to be subject to greater market risk than interest-paying securities of similar maturities.

Municipal Bonds

Mortgage-Related and Other Asset-Backed Securities


Prospectus		11

Fund to a lower rate of return upon reinvestment of principal. When interest rates rise, the value of a mortgage-related security generally will decline; however, when interest rates are declining, the value of mortgage-related securities with prepayment features may not increase as much as other fixed income securities. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may shorten or extend the effective maturity of the security beyond what was anticipated at the time of purchase. If unanticipated rates of prepayment on underlying mortgages increase the effective maturity of a mortgage-related security, the volatility of the security can be expected to increase. The value of these securities may fluctuate in response to the market’s perception

of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.

One type of SMBS has one class receiving all of the interest from the mortgage assets (the interest-only, or “IO” class), while the other class will receive all of the principal (the principal-only, or “PO” class). The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Fund’s yield to maturity from these securities. The Fund may not invest more than 5% of its net assets in any combination of IO, PO, or inverse floater securities. The Fund may invest in other asset-backed securities that have been offered to investors.

Loan Participations and Assignments

Corporate Debt Securities

High Yield Securities

• Credit Ratings and Unrated Securities. Rating agencies are private services that provide ratings of the credit quality of fixed income securities, including convertible securities. Appendix A to the prospectus describes the various ratings assigned to fixed income securities by Moody’s and S&P. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risks. Rating agencies may fail to make timely changes in credit ratings and an issuer’s current financial condition may be better or worse than a rating indicates. The Fund will not necessarily sell a security when its rating is reduced below its rating at the time of purchase. PIMCO does not rely solely on credit ratings, and develops its own analysis of issuer credit quality.


12		PIMCO Funds: Pacific Investment Management Series

Variable and Floating Rate Securities

Variable and floating rate securities provide for a periodic adjustment in the interest rate paid on the obligations. The Fund may invest in floating rate debt instruments (“floaters”) and engage in credit spread trades. While floaters provide a certain degree of protection against rises in interest rates, the Fund will participate in any declines in interest rates as well. The Fund may also invest in inverse floating rate debt instruments (“inverse floaters”). An inverse floater may exhibit greater price volatility than a fixed rate obligation of similar credit quality. The Fund may not invest more than 5% of its net assets in any combination of inverse floater, interest only, or principal only securities.

Inflation-Indexed Bonds

Event-Linked Bonds

The Fund may invest in “event-linked bonds,” which are fixed income securities for which the return of principal and payment of interest is contingent on the non-occurrence of a specific “trigger” event, such as a hurricane or an earthquake or other physical or weather-related phenomenon. Some event-linked bonds are commonly referred to as “catastrophe bonds.” If a trigger event occurs, the Fund may lose a portion or all of its principal invested in the bond. Event-linked bonds often provide for an extension of maturity to process and audit loss claims where a trigger event has, or possibly has, occurred. An extension of maturity may increase volatility. Event-linked bonds may also expose the Fund to certain unanticipated risks including credit risk, adverse regulatory or jurisdictional interpretations, and adverse tax consequences. Catastrophe bonds may also be subject to liquidity risk.

Convertible and Equity Securities

Foreign Securities


Prospectus		13

on foreign portfolio transactions; the possibility of nationalization, expropriation or confiscatory taxation; adverse changes in investment or exchange control regulations; and political instability. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rates of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. The securities markets, values of securities, yields and risks associated with foreign securities markets may change independently of each other. Also, foreign securities and dividends and interest payable on those securities may be subject to foreign taxes, including taxes withheld from payments on those securities. Foreign securities often trade with less frequency and volume than domestic securities and therefore may exhibit greater price volatility. Investments in foreign securities may also involve higher custodial costs than domestic investments and additional transaction costs with respect to

foreign currency conversions. Changes in foreign exchange rates also will affect the value of securities denominated or quoted in foreign currencies.

Ÿ Emerging Market Securities. The Fund may invest up to 10% of its assets in securities of issuers based in countries with developing (or “emerging market”) economies. Investing in emerging market securities imposes risks different from, or greater than, risks of investing in domestic securities or in foreign, developed countries. These risks include: smaller market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions on foreign investment; possible repatriation of investment income and capital. In addition, foreign investors may be required to register the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain emerging market countries.

Additional risks of emerging markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions. Settlement problems may cause the Fund to miss attractive investment opportunities, hold a portion of its assets in cash pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser of the security.

Foreign Currencies

Ÿ Foreign Currency Transactions. The Fund may engage in foreign currency transactions on a spot (cash) basis, and enter into forward foreign currency exchange contracts and invest in foreign currency futures contracts and options on foreign currencies and futures. A forward foreign currency exchange


14		PIMCO Funds: Pacific Investment Management Series

contract, which involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract, reduces the Fund’s exposure to changes in the value of the currency it will deliver and increases its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. A contract to sell foreign currency would limit any potential gain which might be realized if the value of the hedged currency increases. The Fund may enter into these contracts to hedge against foreign exchange risk, to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one currency to another. Suitable hedging transactions may not be available in all circumstances and there can be no assurance that the Fund will engage in such transactions at any given time or from time to time. Also, such transactions may not be successful and may eliminate any chance for the Fund to benefit from favorable fluctuations in relevant foreign currencies. The Fund may use one currency (or a basket of currencies) to hedge against adverse changes in the value of another currency (or a basket of currencies) when exchange rates between the two currencies are positively correlated. The Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees to cover its obligations under forward foreign currency exchange contracts entered into for non-hedging purposes.

Repurchase Agreements

Reverse Repurchase Agreements, Dollar Rolls and Other Borrowings

The Fund may enter into reverse repurchase agreements and dollar rolls, subject to the Fund’s limitations on borrowings. A reverse repurchase agreement or dollar roll involves the sale of a security by a Fund and its agreement to repurchase the instrument at a specified time and price, and may be considered a form of borrowing for some purposes. The Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees to cover its obligations under reverse repurchase agreements, dollar rolls, and other borrowings. Reverse repurchase agreements, dollar rolls and other forms of borrowings may create leveraging risk for the Fund.

The Fund may borrow money to the extent permitted under the 1940 Act. This means that, in general, a Fund may borrow money from banks for any purpose on a secured basis in an amount up to ¹/3 of the Fund’s total assets. A Fund may also borrow money for temporary administrative purposes on an unsecured basis in an amount not to exceed 5% of the Fund’s total assets.

Derivatives

The Fund may, but is not required to, use derivative instruments for risk management purposes or as part of its investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indexes. Examples of derivative instruments include options contracts, futures contracts, options on futures contracts and swap agreements. The Fund may invest all of its assets in derivative instruments, subject to the Fund’s objectives and policies. A portfolio manager may decide not to employ any of these strategies and there is no assurance that any derivatives strategy used by a Fund will succeed. A description of these and other derivative instruments that the Funds may use are described under “Investment Objectives and Policies” in the Statement of Additional Information.

The Fund’s use of derivative instruments involves risks different from, or greater than, the risks associated with investing directly in securities and other more traditional investments. A description of various risks associated with particular derivative instruments is included in “Investment Objectives and Policies” in the Statement of Additional Information. The following provides a more general discussion of important risk factors relating to all derivative instruments that may be used by the Fund.

Management Risk Derivative products are highly specialized instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions.


Prospectus		15

Credit Risk The use of a derivative instrument involves the risk that a loss may be sustained as a result of the failure of another party to the contract (usually referred to as a “counterparty”) to make required payments or otherwise comply with the contract’s terms.

Liquidity Risk Liquidity risk exists when a particular derivative instrument is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as is the case with many privately negotiated derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.

Leverage Risk Because many derivatives have a leverage component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment. When the Fund uses derivatives for leverage, investments

in that Fund will tend to be more volatile, resulting in larger gains or losses in response to market changes. To limit leverage risk, the Fund will segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments.

Lack of Availability Because the markets for certain derivative instruments (including markets located in foreign countries) are relatively new and still developing, suitable derivatives transactions may not be available in all circumstances for risk management or other purposes. There is no assurance that the Fund will engage in derivatives transactions at any time or from time to time. The Fund’s ability to use derivatives may also be limited by certain regulatory and tax considerations.

Market and Other Risks Like most other investments, derivative instruments are subject to the risk that the market value of the instrument will change in a way detrimental to the Fund’s interest. If a portfolio manager incorrectly forecasts the values of securities, currencies or interest rates or other economic factors in using derivatives for the Fund, the Fund might have been in a better position if it had not entered into the transaction at all. While some strategies involving derivative instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments. The Fund may also have to buy or sell a security at a disadvantageous time or price because the Fund is legally required to maintain offsetting positions or asset coverage in connection with certain derivatives transactions.

Other risks in using derivatives include the risk of mispricing or improper valuation of derivatives and the inability of derivatives to correlate perfectly with underlying assets, rates and indexes. Many derivatives, in particular privately negotiated derivatives, are complex and often valued subjectively. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the Fund. Also, the value of derivatives may not correlate perfectly, or at all, with the value of the assets, reference rates or indexes they are designed to closely track. In addition, the Fund’s use of derivatives may cause the Fund to realize higher amounts of short-term capital gains (generally taxed at ordinary income tax rates) than if the Fund had not used such instruments.

Delayed Funding Loans and Revolving Credit Facilities

When-Issued, Delayed Delivery and Forward Commitment Transactions


16		PIMCO Funds: Pacific Investment Management Series

Investment in Other Investment Companies

Short Sales

from a broker or other institution to complete the sale. Short sales expose the Fund to the risk that it will be required to acquire, convert or exchange securities to replace the borrowed securities (also known as “covering” the short position) at a time when the securities sold short have appreciated in value, thus resulting in a loss to the Fund. When the Fund makes a short sale, it must segregate assets determined to be liquid by PIMCO in accordance with procedures established by the Board of Trustees or otherwise cover its position in a permissible manner.

Illiquid Securities

The Fund may invest up to 15% of its net assets in illiquid securities. Certain illiquid securities may require pricing at fair value as determined in good faith under the supervision of the Board of Trustees. The Fund may be subject to significant delays in disposing of illiquid securities, and transactions in illiquid securities may entail registration expenses and other transaction costs that are higher than those for transactions in liquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued the securities. Restricted securities, i.e., securities subject to legal or contractual restrictions on resale, may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933 and certain commercial paper) may be treated as liquid, although they may be less liquid than registered securities traded on established secondary markets.

Loans of Portfolio Securities

Portfolio Turnover

The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by a Fund is known as “portfolio turnover.” The Fund may engage in frequent and active trading of portfolio securities to achieve its investment objective, particularly during periods of volatile market movements. High portfolio turnover (e.g., over 100%) involves correspondingly greater expenses to the Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales may also result in realization of taxable capital gains, including short-term capital gains (which are generally taxed at ordinary income tax rates). The trading costs and tax effects associated with portfolio turnover may adversely affect the Fund’s performance.

Temporary Defensive Strategies

For temporary or defensive purposes, the Fund may invest without limit in U.S. debt securities, including short-term money market securities, when PIMCO deems it appropriate to do so. When the Fund engages in such strategies, it may not achieve its investment objective.

Changes in Investment Objectives and Policies

Percentage Investment Limitations


Prospectus		17

Other Investments and Techniques


18		PIMCO Funds: Pacific Investment Management Series

(THIS PAGE INTENTIONALLY LEFT BLANK)


Prospectus		19

Financial Highlights

The financial highlights table is intended to help you understand the financial performance of Class A shares of the Fund since the class of shares was first offered. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in Class A shares of the Fund, assuming reinvestment of all dividends and distributions. This information, except for the period ended September 30, 2001, has been audited by PricewaterhouseCoopers LLP, whose report, along with the Fund’s financial statements, are included in the Trust’s annual report to shareholders. The annual report is incorporated by reference in the Statement of Additional Information and is available free of charge upon request from the Distributor.

Year or Period Ended	Net Asset Value Beginning of Period	Net Investment Income (Loss)		Net Realized/ Unrealized Gain (Loss) on Investments			Total Income from Investment Operations	Dividends from Net Investment Income	Dividends in Excess of Net Investment Income			Distribution from Net Realized Capital Gains		Distributions in Excess of Net Realized Capital Gains

Total Return Fund
Class A
09/30/2001*	$10.52	$0.26	(b)		$0.36	(b)	$0.62	$(0.27)		$0.00		$0.00		$0.00
03/31/2001	9.96	0.62	(b)		0.56	(b)	1.18	(0.60)		(0.02	)	0.00		0.00
03/31/2000	10.36	0.58	(b)		(0.40	)(b)	0.18	(0.56)		(0.02	)	0.00		0.00
03/31/1999	10.62	0.58	(b)		0.16	(b)	0.74	(0.58)		0.00		(0.24	)	(0.18	)
03/31/1998	10.27	0.58	(b)		0.63	(b)	1.21	(0.57)		(0.02	)	(0.27	)	0.00
01/13/1997 – 03/31/1997(a)	10.40	0.12			(0.12	)	0.00	(0.13)		0.00		0.00		0.00

Unaudited

Annualized

(a)

From commencement of operations, January 13, 1997

(b)

Per share amounts based on average number of shares outstanding during the period.


20		PIMCO Funds: Pacific Investment Management Series

Total Distributions	Net Asset Value End of Period	Total Return		Net Assets End of Period (000s)	Ratio of Expenses to Average Net Assets		Ratio of Net Investment Income (Loss) to Average Net Assets		Portfolio Turnover Rate



$(0.27)	$10.87	5.97	%	$3,908,906	0.90	%+	5.01	%+	256	%
(0.62)	10.52	12.27		3,061,033	0.96	(c)	6.08		450
(0.58)	9.96	1.85		1,947,405	1.01	(c)	5.79		223
(1.00)	10.36	7.09		1,140,606	0.90		5.37		154
(0.86)	10.62	12.11		533,893	0.90		5.46		206
(0.13)	10.27	0.02		115,742	0.91	+(c)	6.08	+	173

(c)

Ratio of expenses to average net assets excluding interest expense is 0.90%.


Prospectus		21

Appendix A

Description of Securities Ratings

High Quality Debt Securities are those rated in one of the two highest rating categories (the highest category for commercial paper) or, if unrated, deemed comparable by PIMCO.

Investment Grade Debt Securities are those rated in one of the four highest rating categories or, if unrated, deemed comparable by PIMCO.

Following is a description of Moody’s and S&P’s rating categories applicable to fixed income securities.

Moody's Investors Service, Inc

Corporate and Municipal Bond Ratings

Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

C: Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.


A-1		PIMCO Funds: Pacific Investment Management Series

Corporate Short-Term Debt Ratings

Moody’s employs the following three designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers:

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.

Standard & Poor's Ratings Services

Corporate and Municipal Bond Ratings

Investment Grade

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree.

Speculative Grade


Prospectus A-2

capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

CI: The rating CI is reserved for income bonds on which no interest is being paid.

Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

The absence of an “r” symbol should not be taken as an indication that an obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Commercial Paper Rating Definitions

A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.

B: Issues rated B are regarded as having only speculative capacity for timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.


A-3		PIMCO Funds: Pacific Investment Management Series

PIMCO Funds: Pacific Investment Management Series

The Trust’s Statement of Additional Information (“SAI”) and annual and semi-annual reports to shareholders include additional information about the Fund. The SAI and the financial statements included in the Fund’s most recent annual report to shareholders are incorporated by reference into this prospectus, which means they are part of this prospectus for legal purposes. The Fund’s annual report discusses the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.

You may get free copies of any of these materials, request other information about the Fund, or make shareholder inquiries by calling 1-800-426-0107, or by writing to:

PIMCO Funds Distributors LLC

2187 Atlantic Street

Stamford, Connecticut 06902

You may review and copy information about the Trust, including its SAI, at the Securities and Exchange Commission’s public reference room in Washington, D.C. You may call the Commission at 1-202-942-8090 for information about the operation of the public reference room. You may also access reports and other information about the Trust on the Commission’s Web site at www.sec.gov. You may get copies of this information, with payment of a duplication fee, by writing the Public Reference Section of the Commission, Washington, D.C. 20549-0102, or by e-mailing your request to publicinfo@sec.gov.

You can also visit our Web site at www.pimcofunds.com for additional information about the Fund.

Investment Company Act File no. 811-5028

PIMCO Funds: Pacific Investment Management Series

INVESTMENT ADVISOR AND ADMINISTRATOR

PIMCO, 840 Newport Center Drive, Suite 300, Newport Beach, CA 92660

DISTRIBUTOR

PIMCO Funds Distributors LLC, 2187 Atlantic Street, Stamford, CT 06902-6896

CUSTODIAN

State Street Bank & Trust Co., 801 Pennsylvania, Kansas City, MO 64105

SHAREHOLDER SERVICING AGENT AND TRANSFER AGENT

PFPC Inc., P.O. Box 9688, Providence, RI 02940

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601

LEGAL COUNSEL

Dechert Price & Rhoads, 1775 Eye Street N.W., Washington, D.C. 20006-2401

For further information about the PIMCO Funds, call 1-800-426-0107 or visit our Web site at http://www.pimcofunds.com.

This page is not part of the prospectus that begins on page 1.

Stay connected with

www.pimcofunds.com

Fund information, manager commentary and more at www.pimcofunds.com

Fund Information Section

Click “Fund Information” on our Home page for current data on all of the PIMCO Funds. You will find:

n Daily share prices and year-to-date performance figures.

n Historical performance, portfolio holdings and risk analysis.

n Morningstar ratings and Lipper category rankings.

Bond Center

PIMCO Funds offers you access to some of the most respected bond managers in the country. Visit our site’s Bond Center to learn what these managers are thinking about the economy and the bond markets. You may also want to take the time to click through “About Bond Investing” which includes more detailed discussions of investment strategies and techniques.

Manager Commentary

The site houses timely updates and analysis from our stock and bond fund managers, including:

n End-of-day reports and investment insights.

n Manager newsletters on a range of topics from global financial markets to technology to the Federal Reserve.

n Manager media appearances. You can view video clips or read transcripts.

Free E-mail Newsletters

Have any of PIMCO’s manager newsletters delivered by e-mail. If you’re already registered, click “Preferences” on the Home page, then “Change My Personal Information” and check the newsletters you’d like to receive.

RCM Funds

Account Access

Easy and secure account access gives you a snapshot of your holdings plus detailed transaction history. Simply click “Account Access” on the PIMCO Funds Home page and enter your verification information.*

Receive Shareholder Communications Online

*Available only to shareholders who receive account statements directly from PIMCO Funds.

PZ007.4/02				Not part of the Prospectus

PIMCO Funds

Distributors LLC

2187 Atlantic Street

Stamford, CT 06902-6896



                                  PIMCO Funds:
                      Pacific Investment Management Series

                       Statement of Additional Information

     This Statement of Additional Information is not a prospectus, and should be
read in conjunction with the prospectuses of PIMCO Funds: Pacific Investment
Management Series, as supplemented from time to time. The Trust offers up to
eight classes of shares of each of its Funds. Class A, Class B, and Class C
shares of certain Funds are offered through the "Class A, B and C Prospectus"
(dated April 1, 2002), Class A, B and C of the Municipal Bond Fund, Class A and
C of the Short Duration Municipal Income Fund and Class A of the California
Intermediate Municipal Bond Fund, California Municipal Bond Fund and New York
Municipal Bond Fund are offered through the "Municipal Bond Prospectus" (dated
April 1, 2002), Class D shares of the Funds are offered through the "Class D
Prospectus" (dated April 1, 2002), Institutional Class and Administrative Class
shares of the Funds are offered through the "Institutional Prospectus" (dated
April 1, 2002), Institutional Class and Administrative Class shares of the Total
Return Fund (dated April 1, 2002), Class A shares of the Total Return Fund
(dated April 1, 2002) and shares of the Liquid Assets Fund (dated December 4,
2001) are each offered through a separate prospectus, as amended or supplemented
from time to time (collectively, the "Prospectuses"). Additionally, Class J and
Class K shares for certain Funds are offered solely to non-U.S. investors
outside the United States. This information does not constitute an offer of
Class J shares or Class K shares to any person who resides within the United
States.

Audited financial statements for the Trust, as of March 31, 2001, including
notes thereto, and the reports of PricewaterhouseCoopers LLP thereon, are
incorporated by reference from the Trust's March 31, 2001 Annual Reports.
Further, unaudited financial statements for the Trust, as of September 30, 2001,
including notes thereto, are incorporated by reference from the Trust's
September 30, 2001 Semi-Annual Reports. Copies of Prospectuses, Annual or
Semi-Annual Reports, and the PIMCO Funds Shareholders' Guide for Class A, B and
C Shares (the "Guide"), which is a part of this Statement of Additional
Information, may be obtained free of charge at the addresses and telephone
number(s) listed below.

     Institutional Prospectus and                Class A, B and C and Class D
     Annual and Semi-Annual Reports:             Prospectuses, Annual and
                                                 Semi-Annual Reports, and the
                                                 Guide:

     PIMCO Funds                                 PIMCO Funds Distributors LLC
     840 Newport Center Drive                    2187 Atlantic Street
     Suite 300                                   Stamford, Connecticut 06902
     Newport Beach, California 92660             Telephone:  (800) 426-0107
     Telephone:  (800) 927-4648

April 1, 2002




                                                     TABLE OF CONTENTS
                                                                                                                Page

THE TRUST.........................................................................................................1

INVESTMENT OBJECTIVES AND POLICIES................................................................................1

         Municipal Bonds..........................................................................................1
         Mortgage-Related and Other Asset-Backed Securities.......................................................6
         Bank Obligations........................................................................................10
         Loan Participations.....................................................................................10
         Corporate Debt Securities...............................................................................12
         High Yield Securities ("Junk Bonds")....................................................................12
         Participation on Creditors Committees...................................................................13
         Variable and Floating Rate Securities...................................................................13
         Inflation-Indexed Bonds.................................................................................14
         Event-Linked Bonds......................................................................................14
         Convertible Securities..................................................................................15
         Warrants to Purchase Securities.........................................................................15
         Foreign Securities......................................................................................16
         Foreign Currency Transactions...........................................................................17
         Foreign Currency Exchange-Related Securities............................................................18
         Borrowing...............................................................................................19
         Derivative Instruments..................................................................................21
         Hybrid Instruments......................................................................................29
         Delayed Funding Loans and Revolving Credit Facilities...................................................29
         When-Issued, Delayed Delivery and Forward Commitment Transactions.......................................30
         Short Sales.............................................................................................30
         Illiquid Securities.....................................................................................31
         Loans of Portfolio Securities...........................................................................31
         Social Investment Policies..............................................................................31

INVESTMENT RESTRICTIONS..........................................................................................32

         Fundamental Investment Restrictions.....................................................................32
         Non-Fundamental Investment Restrictions.................................................................33
         Non-Fundamental Operating Policies Relating to the Sale of Shares of Total Return Fund in Japan.........34

MANAGEMENT OF THE TRUST..........................................................................................36

         Trustees and Officers...................................................................................36
         Compensation Table......................................................................................39
         Investment Adviser......................................................................................40
         Advisory Agreement......................................................................................41
         Fund Administrator......................................................................................42

DISTRIBUTION OF TRUST SHARES.....................................................................................45

         Distributor and Multi-Class Plan........................................................................45
         Initial Sales Charge and Contingent Deferred Sales Charge...............................................46
         Distribution and Servicing Plans for Class A, Class B and Class C Shares................................46
         Payments Pursuant to Class A Plan.......................................................................49
         Payments Pursuant to Class B Plan.......................................................................50
         Payments Pursuant to Class C Plan.......................................................................51
         Distribution and Administrative Services Plans for Administrative Class Shares..........................53
         Payments Pursuant to the Administrative Plans...........................................................55
         Plan for Class D Shares.................................................................................55
         Payments Pursuant to Class D Plan.......................................................................57
         Distribution and Servicing Plan for Class J and Class K Shares..........................................57

                                      -i-

         Purchases, Exchanges and Redemptions....................................................................58

PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................60

         Investment Decisions and Portfolio Transactions.........................................................60
         Brokerage and Research Services.........................................................................60
         Portfolio Turnover......................................................................................61

NET ASSET VALUE..................................................................................................62

TAXATION ........................................................................................................62

         Distributions...........................................................................................64
         Sales of Shares.........................................................................................65
         Backup Withholding......................................................................................65
         Options, Futures and Forward Contracts, and Swap Agreements.............................................65
         Short Sales.............................................................................................66
         Passive Foreign Investment Companies....................................................................66
         Foreign Currency Transactions...........................................................................67
         Foreign Taxation........................................................................................67
         Original Issue Discount and Market Discount.............................................................67
         Constructive Sales......................................................................................68
         Non-U.S.Shareholders....................................................................................68
         Other Taxation..........................................................................................69

OTHER INFORMATION................................................................................................69

         Capitalization..........................................................................................69
         Performance Information.................................................................................69
         Calculation of Yield....................................................................................70
         Calculation of Total Return.............................................................................73
         Potential College Cost Table............................................................................79
         Voting Rights...........................................................................................82
         The Reorganization of the PIMCO Money Market and Total Return II Funds.................................114
         The Reorganization of the PIMCO Global Bond Fund II....................................................114
         Code of Ethics.........................................................................................114
         Custodian, Transfer Agent and Dividend Disbursing Agent................................................114
         Independent Accountants................................................................................115
         Counsel................................................................................................115
         Registration Statement.................................................................................115
         Financial Statements...................................................................................115




                                      -ii-



                                    THE TRUST

     PIMCO Funds (the "Trust") is an open-end management investment company
("mutual fund") consisting of separate investment portfolios (the "Funds"),
including:


Money Market Fund                                        High Yield Fund
Liquid Assets Fund                                       Long-Term U.S. Government Fund
Short-Term Fund                                          Long Duration Fund
Low Duration Fund                                        Global Bond Fund
Low Duration Fund II                                     Global Bond Fund II
Low Duration Fund III                                    Foreign Bond Fund
GNMA Fund                                                Emerging Markets Bond Fund
Moderate Duration Fund                                   Short Duration Municipal Income Fund
Real Return Fund                                         Municipal Bond Fund
Real Return Fund II                                      California Intermediate Municipal Bond Fund
Real Return Asset Fund                                   California Municipal Bond Fund
Total Return Fund                                        New York Municipal Bond Fund
Total Return Fund II                                     Strategic Balanced Fund
Total Return Fund III                                    Convertible Fund
Total Return Mortgage Fund                               European Convertible Fund
Commercial Mortgage Securities Fund                      StocksPLUS Fund
Investment Grade Corporate Bond Fund                     StocksPLUS Short Strategy Fund


                       INVESTMENT OBJECTIVES AND POLICIES

     The investment objectives and general investment policies of each Fund are
described in the Prospectuses. Additional information concerning the
characteristics of certain of the Funds' investments is set forth below. The
Strategic Balanced Fund invests all of its assets in the StocksPLUS and Total
Return Funds. These Funds are referred to in this Statement as "Underlying
Funds." By investing in Underlying Funds, the Strategic Balanced Fund may have
an indirect investment interest in some or all of the securities and instruments
described below depending upon how its assets are allocated between the
Underlying Funds.

Municipal Bonds

     Each Fund may invest in securities issued by states, municipalities and
other political subdivisions, agencies, authorities and instrumentalities of
states and multi-state agencies or authorities. It is a policy of the Short
Duration Municipal Income, Municipal Bond, California Intermediate Municipal
Bond, California Municipal Bond, and New York Municipal Bond Funds
(collectively, the "Municipal Funds") to have 80% of its net assets invested in
debt obligations the interest on which, in the opinion of bond counsel to the
issuer at the time of issuance, is exempt from federal income tax ("Municipal
Bonds"). In the case of the California Intermediate Municipal Bond, California
Municipal Bond, and New York Municipal Bond Funds, the Funds will invest, under
normal circumstances, at least 65% of their net assets in debt securities whose
interest is, in the opinion of bond counsel for the issuers at the time of
issuance, exempt from federal income tax and California or New York income tax,
respectively. The ability of the Fund to invest in securities other than
Municipal Bonds is limited by a requirement of the Internal Revenue Code that at
least 50% of the Fund's total assets be invested in Municipal Bonds at the end
of each calendar quarter. See "Taxes."

     The Municipal Bond Fund may, from time to time, invest more than 25% of its
assets in Municipal Bonds of issuers in California and New York, and, if so,
will be subject to the California and New York state-specific risks discussed in
the "Summary of Risks" section of the Prospectus and in this "Municipal Bonds"
section of this Statement of Additional Information, but neither Fund has any
present intention to invest more than that amount in a particular state.



     Municipal Bonds share the attributes of debt/fixed income securities in
general, but are generally issued by states, municipalities and other political
subdivisions, agencies, authorities and instrumentalities of states and
multi-state agencies or authorities. Specifically, California and New York
Municipal Bonds generally are issued by or on behalf of the State of California
and New York, respectively, and their political subdivisions and financing
authorities, and local governments. The Municipal Bonds which the Municipal
Funds may purchase include general obligation bonds and limited obligation bonds
(or revenue bonds), including industrial development bonds issued pursuant to
former federal tax law. General obligation bonds are obligations involving the
credit of an issuer possessing taxing power and are payable from such issuer's
general revenues and not from any particular source. Limited obligation bonds
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Tax-exempt private activity bonds and industrial
development bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of private activity bonds
and industrial development bonds are usually related to the credit of the
corporate user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user (and/or any
guarantor).

     Under the Internal Revenue Code, certain limited obligation bonds are
considered "private activity bonds" and interest paid on such bonds is treated
as an item of tax preference for purposes of calculating federal alternative
minimum tax liability.

     The Municipal Funds may invest in municipal lease obligations. A lease is
not a full faith and credit obligation of the issuer and is usually backed only
by the borrowing government's unsecured pledge to make annual appropriations for
lease payments. There have been challenges to the legality of lease financing in
numerous states, and, from time to time, certain municipalities have considered
not appropriating money for lease payments. In deciding whether to purchase a
lease obligation, the Municipal Funds will assess the financial condition of the
borrower, the merits of the project, the level of public support for the
project, and the legislative history of lease financing in the state. These
securities may be less readily marketable than other municipals. A Municipal
Fund may also purchase unrated lease obligations if determined by PIMCO to be of
comparable quality to rated securities in which the Fund is permitted to invest.

     The Municipal Funds may seek to enhance their yield through the purchase of
private placements. These securities are sold through private negotiations,
usually to institutions or mutual funds, and may have resale restrictions. Their
yields are usually higher than comparable public securities to compensate the
investor for their limited marketability. A Municipal Fund may not invest more
than 15% of its net assets in illiquid securities, including unmarketable
private placements.

     Some longer-term Municipal Bonds give the investor the right to "put" or
sell the security at par (face value) within a specified number of days
following the investor's request - usually one to seven days. This demand
feature enhances a security's liquidity by shortening its effective maturity and
enables it to trade at a price equal to or very close to par. If a demand
feature terminates prior to being exercised, a Municipal Fund would hold the
longer-term security, which could experience substantially more volatility.

     The Municipal Funds may invest in municipal warrants, which are essentially
call options on Municipal Bonds. In exchange for a premium, they give the
purchaser the right, but not the obligation, to purchase a Municipal Bond in the
future. A Municipal Fund might purchase a warrant to lock in forward supply in
an environment where the current issuance of bonds is sharply reduced. Like
options, warrants may expire worthless and they may have reduced liquidity. A
Municipal Fund will not invest more than 5% of its net assets in municipal
warrants.

     The Municipal Funds may invest in Municipal Bonds with credit enhancements
such as letters of credit, municipal bond insurance and Standby Bond Purchase
Agreements ("SBPAs"). Letters of credit that are issued by a third party,
usually a bank, to enhance liquidity and ensure repayment of principal and any
accrued interest if the underlying Municipal Bond should default. Municipal bond
insurance, which is usually purchased by the bond issuer from a private,
nongovernmental insurance company, provides an unconditional and irrevocable
guarantee that the insured bond's principal and interest will be paid when due.
Insurance does not guarantee the price of the bond or the share price of any
fund. The credit rating of an insured bond reflects the credit rating of the
insurer, based on its claims-paying ability. The obligation of a municipal bond
insurance company to pay a claim extends over the life of each insured bond.
Although defaults on insured Municipal Bonds have been low to date and

                                     - 2 -



municipal bond insurers have met their claims, there is no assurance this will
continue. A higher-than-expected default rate could strain the insurer's loss
reserves and adversely affect its ability to pay claims to bondholders. The
number of municipal bond insurers is relatively small, and not all of them have
the highest rating. An SBPA is a liquidity facility provided to pay the purchase
price of bonds that cannot be re-marketed. The obligation of the liquidity
provider (usually a bank) is only to advance funds to purchase tendered bonds
that cannot be remarketed and does not cover principal or interest under any
other circumstances. The liquidity provider's obligations under the SBPA are
usually subject to numerous conditions, including the continued creditworthiness
of the underlying borrower.

     The Municipal Funds may invest in Residual Interest Bonds, which are
created by dividing the income stream provided by an underlying bond to create
two securities, one short term and one long term. The interest rate on the
short-term component is reset by an index or auction process normally every
seven to 35 days. After income is paid on the short-term securities at current
rates, the residual income goes to the long-term securities. Therefore, rising
short-term interest rates result in lower income for the longer-term portion,
and vice versa. The longer-term bonds can be very volatile and may be less
liquid than other Municipal Bonds of comparable maturity. To the extent
permitted by each Fund's investment objectives and general investment policies,
a Fund, without limitation, may invest in Residual Interest Bonds.

     The Municipal Funds also may invest in participation interests.
Participation interests are various types of securities created by converting
fixed rate bonds into short-term, variable rate certificates. These securities
have been developed in the secondary market to meet the demand for short-term,
tax-exempt securities. The Municipal Funds will invest only in securities deemed
tax-exempt by a nationally recognized bond counsel, but there is no guarantee
the interest will be exempt because the IRS has not issued a definitive ruling
on the matter.

     Municipal Bonds are subject to credit and market risk. Generally, prices of
higher quality issues tend to fluctuate less with changes in market interest
rates than prices of lower quality issues and prices of longer maturity issues
tend to fluctuate more than prices of shorter maturity issues.

     The Municipal Funds may purchase and sell portfolio investments to take
advantage of changes or anticipated changes in yield relationships, markets or
economic conditions. The Municipal Funds may also sell Municipal Bonds due to
changes in PIMCO's evaluation of the issuer or cash needs resulting from
redemption requests for Fund shares. The secondary market for Municipal Bonds
typically has been less liquid than that for taxable debt/fixed income
securities, and this may affect the Fund's ability to sell particular Municipal
Bonds at then-current market prices, especially in periods when other investors
are attempting to sell the same securities.

     Prices and yields on Municipal Bonds are dependent on a variety of factors,
including general money-market conditions, the financial condition of the
issuer, general conditions of the Municipal Bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
A number of these factors, including the ratings of particular issues, are
subject to change from time to time. Information about the financial condition
of an issuer of Municipal Bonds may not be as extensive as that which is made
available by corporations whose securities are publicly traded.

     Each Fund may purchase custodial receipts representing the right to receive
either the principal amount or the periodic interest payments or both with
respect to specific underlying Municipal Bonds. In a typical custodial receipt
arrangement, an issuer or third party owner of Municipal Bonds deposits the
bonds with a custodian in exchange for two classes of custodial receipts. The
two classes have different characteristics, but, in each case, payments on the
two classes are based on payments received on the underlying Municipal Bonds. In
no event will the aggregate interest paid with respect to the two classes exceed
the interest paid by the underlying Municipal Bond. Custodial receipts are sold
in private placements. The value of a custodial receipt may fluctuate more than
the value of a Municipal Bond of comparable quality and maturity.

     Obligations of issuers of Municipal Bonds are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors. Congress or state legislatures may seek to extend the time for
payment of principal or interest, or both, or to impose other constraints upon
enforcement of such obligations. There is also the possibility that as a result
of litigation or other conditions, the power or ability of issuers to meet their
obligations for the payment of interest and principal on their Municipal Bonds
may be materially affected or their

                                     - 3 -



obligations may be found to be invalid or unenforceable. Such litigation or
conditions may from time to time have the effect of introducing uncertainties in
the market for Municipal Bonds or certain segments thereof, or of materially
affecting the credit risk with respect to particular bonds. Adverse economic,
business, legal or political developments might affect all or a substantial
portion of a Fund's Municipal Bonds in the same manner. In particular, the
California Intermediate Municipal Bond, New York Municipal Bond, and California
Municipal Bond Funds are subject to the risks inherent in concentrating
investment in a particular state or region. The following summarizes information
drawn from official statements, and other public documents available relating to
issues potentially affecting securities offerings of issuers domiciled in the
states of California and New York. PIMCO has not independently verified the
information, but has no reason to believe that it is substantially different.

     California. The California Intermediate Municipal Bond Fund and the
California Municipal Bond Fund may be particularly affected by political,
economic or regulatory developments affecting the ability of California issuers
to pay interest or repay principal. Provisions of the California Constitution
and State statutes that limit the taxing and spending authority of California
governmental entities may impair the ability of California governmental issuers
to maintain debt service on their obligations. Future California political and
economic developments, constitutional amendments, legislative measures,
executive orders, administrative regulations, litigation and voter initiatives
could have an adverse effect on the debt obligations of California issuers.

     Certain debt obligations held by the California Intermediate Municipal Bond
Fund and the California Municipal Bond Fund may be obligations of issuers that
rely in whole or in substantial part on California state government revenues for
the continuance of their operations and payment of their obligations. Whether
and to what extent the California Legislature will continue to appropriate a
portion of the State's General Fund to counties, cities and their various
entities, which do depend upon State government appropriations, is not entirely
certain. To the extent local entities do not receive money from the state
government to pay for their operations and services, their ability to pay debt
service on obligations held by the California Intermediate Municipal Bond Fund
and the California Municipal Bond Fund may be impaired.

     Certain tax-exempt securities in which the California Intermediate
Municipal Bond Fund and the California Municipal Bond Fund may invest may be
obligations payable solely from the revenues of specific institutions, or may be
secured by specific properties, which are subject to provisions of California
law that could adversely affect the holders of such obligations. For example,
the revenues of California health care institutions may be subject to state
laws, and California law limits the remedies of a creditor secured by a mortgage
or deed of trust on real property.

     California is the most populous state in the nation with a total population
estimated at over 34 million. The State now comprises approximately 12.5% of the
nation's population and 12.7% of its total personal income. Its economy is broad
and diversified with concentrations in high technology research and
manufacturing, aerospace and defense-related manufacturing, trade,
entertainment, real estate, and financial services. The State economy's
concentration on such sectors may open it to sensitivity to the overall
performance of such industries. For example, the State suffered a severe
recession in the early 1990's, which was predominantly tied to large spending
cutbacks in defense/aerospace industries and military base closures and a major
drop in real estate construction. More recently, the national economic slowdown
that is heavily associated with the decline of the technology heavy NASDAQ
index, has begun to impact the high technology sector of California's economy.

     After a period of robust growth over the last three years, the State's
economic forecast reflects slower growth in 2001. Although the State's economic
growth continues to outperform the rest of the nation, California is not immune
from the nationwide economic slowdown and employment growth rates have already
begun to decelerate.

     California has recently experienced serious energy shortages that led the
Governor of California to declare a state of emergency in January 2001.
California's difficulties with energy supplies could pose serious risks to the
State's economy. The State instituted rolling electricity blackouts in 2001 and
remains braced for anticipated energy shortages as well as increased energy
costs. The severity and long-term impact of these developments on the State's
economy is difficult to predict, but any significant interruptions in energy
supply or rate increases could adversely affect California's economy.

                                     - 4 -



     Currently, California's general obligation bonds have been assigned ratings
of A+, Aa3, and AA by Standard & Poor's Ratings Services ("S&P"), Moody's
Investor Service, Inc. ("Moody's") and Fitch, respectively. These ratings
reflect a downward revision by S&P in April 2001 and by Moody's in May 2001.
Both downgrades were the result of each ratings agency's concerns regarding
California's energy situation and its potential impact on the State's economy.
It should be recognized that these ratings are not an absolute standard of
quality, but rather general indicators. There is no assurance that a particular
rating will continue for any given period of time or that any such rating will
not be revised downward or withdrawn entirely if, in the judgment of the agency
establishing the rating, circumstances so warrant. A downward revision or
withdrawal of such ratings, or either of them, may have an effect on the market
price of the State Municipal Obligations in which the California Intermediate
Municipal Bond Fund or the California Municipal Bond Fund invest.

     Revenue bonds represent both obligations payable from State
revenue-producing enterprises and projects, which are not payable from the
General Fund, and conduit obligations payable only from revenues paid by private
users of facilities financed by such revenue bonds, are liable. Such enterprises
and projects include transportation projects, various public works and
exposition projects, educational facilities (including the California State
University and University of California systems), housing, health facilities,
and pollution control facilities.

     The State is party to numerous legal proceedings, many of which normally
occur in governmental operations and which, if decided against the State, might
require the State to make significant future expenditures or impair future
revenue sources.

     Constitutional and statutory amendments as well as budget developments may
affect the ability of California issuers to pay interest and principal on their
obligations. The overall effect may depend upon whether a particular California
tax-exempt security is a general or limited obligation bond and on the type of
security provided for the bond. It is possible that measures affecting the
taxing or spending authority of California or its political subdivisions may be
approved or enacted in the future.

     New York. Because the New York Municipal Bond Fund concentrates its
investments in New York tax-exempt bonds, the Fund may be affected significantly
by economic or regulatory developments, affecting the ability of New York
tax-exempt issuers to pay interest or repay principal. Investors should be aware
that certain issuers of New York tax-exempt securities have at times experienced
serious financial difficulties. A reoccurrence of these difficulties may impair
the ability of certain New York issuers to maintain debt service on their
obligations.

     The economic and financial condition of the State also may be affected by
various financial, social, economic and political factors. For example, the
securities industry is more central to New York's economy than to the national
economy, therefore any significant decline in stock market performance could
adversely effect the State's income and employment levels. Furthermore, such
social, economic and political factors can be very complex, may vary from year
to year and can be the result of actions taken not only by the State and its
agencies and instrumentalities, but also by entities, such as the Federal
government, that are not under the control of the State.

     The fiscal stability of New York State is related to the fiscal stability
of the State's municipalities, its agencies and authorities (which generally
finance, construct and operate revenue-producing public benefit facilities).
This is due in part to the fact that agencies, authorities and local governments
in financial trouble often seek State financial assistance. The experience has
been that if New York City or any of its agencies or authorities suffers serious
financial difficulty, both the ability of the State, New York City, the State's
political subdivisions, the agencies and the authorities to obtain financing in
the public credit markets and the market price of outstanding New York
tax-exempt securities will be adversely affected.

     State actions affecting the level of receipts and disbursements, the
relative strength of the State and regional economies and actions of the federal
government may create budget gaps for the State. These gaps may result from
significant disparities between recurring revenues and the costs of maintaining
or increasing the level of spending for State programs. To address a potential
imbalance in any given fiscal year, the State would be required to take actions
to increase receipts and/or reduce disbursements as it enacts the budget for
that year. Under the State constitution, the governor is required to propose a
balanced budget each year. There can be no assurance, however, that the
legislature will enact the governor's proposals or that the State's actions will
be sufficient to preserve budgetary balance in a given fiscal year or to align
recurring receipts and disbursements in future fiscal years.

                                     - 5 -



     The fiscal stability of the State is related to the fiscal stability of its
public authorities. Authorities have various responsibilities, including those
that finance, construct and/or operate revenue-producing public facilities.
Authorities are not subject to the constitutional restrictions on the incurrence
of debt that apply to the State itself, and may issue bonds and notes within the
amounts and restrictions set forth in their legislative authorization.

     Authorities are generally supported by revenues generated by the projects
financed or operated, such as tolls charged for use of highways, bridges or
tunnels, charges for electric power, electric and gas utility services, rentals
charged for housing units and charges for occupancy at medical care facilities.
In addition, State legislation authorizes several financing techniques for
authorities. Also, there are statutory arrangements providing for State local
assistance payments otherwise payable to localities, to be made under certain
circumstances directly to the authorities. Although the State has no obligation
to provide additional assistance to localities whose local assistance payments
have been paid to authorities under these arrangements, if local assistance
payments are diverted the affected localities could seek additional State
assistance. Some authorities also receive monies from State appropriations to
pay for the operating costs of certain of their programs.

     As of March 16, 2001, S&P had given the State's general obligation bonds a
rating of AA, Moody's had given the State's general obligation bonds a rating of
A2 and Fitch had given the bonds a rating of AA. There is no assurance that a
particular rating will continue for any given period of time or that any such
rating will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant. A
downward revision or withdrawal of such ratings, or either of them, may have an
effect on the market price of the State municipal obligations in which the New
York Municipal Bond Fund invests.

     Over the long term, the State and New York City may face potential economic
problems. New York City accounts for a large portion of the State's population
and personal income, and New York City's financial health affects the State in
numerous ways. New York City continues to require significant financial
assistance from the State and depends on State aid to both enable it to balance
its budget and to meet its cash requirements. The State could also be affected
by the ability of the City to market its securities successfully in the public
credit markets.

Mortgage-Related and Other Asset-Backed Securities

     Mortgage-related securities are interests in pools of residential or
commercial mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations. See "Mortgage Pass-Through
Securities." Certain of the Funds may also invest in debt securities which are
secured with collateral consisting of mortgage-related securities (see
"Collateralized Mortgage Obligations"), and in other types of mortgage-related
securities.

     Mortgage Pass-Through Securities. Interests in pools of mortgage-related
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential or commercial mortgage loans, net of any fees
paid to the issuer or guarantor of such securities. Additional payments are
caused by repayments of principal resulting from the sale of the underlying
property, refinancing or foreclosure, net of fees or costs which may be
incurred. Some mortgage-related securities (such as securities issued by the
"Government National Mortgage Association," or "GNMA") are described as
"modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.

     The rate of prepayments on underlying mortgages will affect the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying mortgages increase in the effective maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

                                     - 6 -



     The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly owned United States Government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the United States Government, the timely
payment of principal and interest on securities issued by institutions approved
by GNMA (such as savings and loan institutions, commercial banks and mortgage
bankers) and backed by pools of mortgages insured by the Federal Housing
Administration (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").

     Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) residential mortgages from a list of
approved seller/servicers which include state and federally chartered savings
and loan associations, mutual savings banks, commercial banks and credit unions
and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as
to timely payment of principal and interest by FNMA but are not backed by the
full faith and credit of the United States Government. FHLMC was created by
Congress in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. It is a government-sponsored corporation
formerly owned by the twelve Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the United
States Government.

     Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition, be the originators and/or servicers of the underlying mortgage
loans as well as the guarantors of the mortgage-related securities. Pools
created by such non-governmental issuers generally offer a higher rate of
interest than government and government-related pools because there are no
direct or indirect government or agency guarantees of payments in the former
pools. However, timely payment of interest and principal of these pools may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers. The
insurance and guarantees are issued by governmental entities, private insurers
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of the issuers thereof will be considered in determining whether a
mortgage-related security meets the Trust's investment quality standards. There
can be no assurance that the private insurers or guarantors can meet their
obligations under the insurance policies or guarantee arrangements. The Funds
may buy mortgage-related securities without insurance or guarantees if, through
an examination of the loan experience and practices of the originator/servicers
and poolers, PIMCO determines that the securities meet the Trust's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable. No Fund will purchase mortgage-related securities or any other
assets which in PIMCO's opinion are illiquid if, as a result, more than 15% of
the value of the Fund's net assets will be illiquid (10% in the case of the
Money Market and Liquid Assets Funds).

     Mortgage-backed securities that are issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, are not subject to the Funds'
industry concentration restrictions, set forth below under "Investment
Restrictions," by virtue of the exclusion from that test available to all U.S.
Government securities. In the case of privately issued mortgage-related
securities, the Funds take the position that mortgage-related securities do not
represent interests in any particular "industry" or group of industries. The
assets underlying such securities may be represented by a portfolio of first
lien residential mortgages (including both whole mortgage loans and mortgage
participation interests) or portfolios of mortgage pass-through securities
issued or guaranteed by GNMA, FNMA or FHLMC. Mortgage loans underlying a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of private issue mortgage-related securities whose underlying
assets are neither U.S. Government securities nor U.S. Government-insured
mortgages, to the extent that real properties securing such assets may be
located in the same geographical region, the security may be subject to a
greater risk of default than other comparable securities in the event of adverse
economic, political or business developments that may affect such region and,
ultimately, the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.

                                     - 7 -



     Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, on a monthly basis. CMOs
may be collateralized by whole mortgage loans, but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.

     CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.

     In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begins to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.

     FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are made
semi-annually, as opposed to monthly. The amount of principal payable on each
semiannual payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which, in turn, is equal to approximately 100% of FHA
prepayment experience applied to the mortgage collateral pool. All sinking fund
payments in the CMOs are allocated to the retirement of the individual classes
of bonds in the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum
sinking fund obligation for any payment date are paid to the holders of the CMOs
as additional sinking fund payments. Because of the "pass-through" nature of all
principal payments received on the collateral pool in excess of FHLMC's minimum
sinking fund requirement, the rate at which principal of the CMOs is actually
repaid is likely to be such that each class of bonds will be retired in advance
of its scheduled maturity date.

     If collection of principal (including prepayments) on the mortgage loans
during any semi-annual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.

     Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.

     Commercial Mortgage-Backed Securities include securities that reflect an
interest in, and are secured by, mortgage loans on commercial real property. The
market for commercial mortgage-backed securities developed more recently and in
terms of total outstanding principal amount of issues is relatively small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial mortgage-backed securities reflect
the risks of investing in the real estate securing the underlying mortgage
loans. These risks reflect the effects of local and other economic conditions on
real estate markets, the ability of tenants to make loan payments, and the
ability of a property to attract and retain tenants. Commercial mortgage-backed
securities may be less liquid and exhibit greater price volatility than other
types of mortgage- or asset-backed securities.

     Other Mortgage-Related Securities. Other mortgage-related securities
include securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property, including mortgage dollar rolls, CMO residuals or stripped
mortgage-backed securities

                                     - 8 -



("SMBS"). Other mortgage-related securities may be equity or debt securities
issued by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.

     CMO Residuals. CMO residuals are mortgage securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.

     The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the CMOs
and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments. Each payment of such excess
cash flow to a holder of the related CMO residual represents income and/or a
return of capital. The amount of residual cash flow resulting from a CMO will
depend on, among other things, the characteristics of the mortgage assets, the
coupon rate of each class of CMO, prevailing interest rates, the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular, the yield to maturity on CMO residuals is extremely sensitive to
prepayments on the related underlying mortgage assets, in the same manner as an
interest-only ("IO") class of stripped mortgage-backed securities. See "Other
Mortgage-Related Securities--Stripped Mortgage-Backed Securities." In addition,
if a series of a CMO includes a class that bears interest at an adjustable rate,
the yield to maturity on the related CMO residual will also be extremely
sensitive to changes in the level of the index upon which interest rate
adjustments are based. As described below with respect to stripped
mortgage-backed securities, in certain circumstances a Fund may fail to recoup
fully its initial investment in a CMO residual.

     CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently may
not have the liquidity of other more established securities trading in other
markets. Transactions in CMO residuals are generally completed only after
careful review of the characteristics of the securities in question. In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not have
been registered under the Securities Act of 1933, as amended (the "1933 Act").
CMO residuals, whether or not registered under the 1933 Act, may be subject to
certain restrictions on transferability, and may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.

     Stripped Mortgage-Backed Securities. SMBS are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
U.S. Government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose entities of the foregoing.

     SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the mortgage assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the "IO" class), while
the other class will receive all of the principal (the principal-only or "PO"
class). The yield to maturity on an IO class is extremely sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on a Fund's yield to maturity from these securities. If the underlying
mortgage assets experience greater than anticipated prepayments of principal, a
Fund may fail to recoup some or all of its initial investment in these
securities even if the security is in one of the highest rating categories.

     Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these securities
were only recently developed. As a result, established trading markets have not
yet developed and, accordingly, these securities may be deemed "illiquid" and
subject to a Fund's limitations on investment in illiquid securities.

     Other Asset-Backed Securities. Similarly, PIMCO expects that other
asset-backed securities (unrelated to mortgage loans) will be offered to
investors in the future. Several types of asset-backed securities have already
been


                                     - 9 -



offered to investors, including Certificates for Automobile ReceivablesSM
("CARSSM"). CARSSM represent undivided fractional interests in a trust whose
assets consist of a pool of motor vehicle retail installment sales contracts and
security interests in the vehicles securing the contracts. Payments of principal
and interest on CARSSM are passed through monthly to certificate holders, and
are guaranteed up to certain amounts and for a certain time period by a letter
of credit issued by a financial institution unaffiliated with the trustee or
originator of the trust. An investor's return on CARSSM may be affected by early
prepayment of principal on the underlying vehicle sales contracts. If the letter
of credit is exhausted, the trust may be prevented from realizing the full
amount due on a sales contract because of state law requirements and
restrictions relating to foreclosure sales of vehicles and the obtaining of
deficiency judgments following such sales or because of depreciation, damage or
loss of a vehicle, the application of federal and state bankruptcy and
insolvency laws, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.

     Consistent with a Fund's investment objectives and policies, PIMCO also may
invest in other types of asset-backed securities.

Bank Obligations

     Bank obligations in which the Funds may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposits may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits. A Fund will not invest in
fixed time deposits which (1) are not subject to prepayment or (2) provide for
withdrawal penalties upon prepayment (other than overnight deposits) if, in the
aggregate, more than 15% of its net assets (10% in the case of the Money Market
and Liquid Assets Funds) would be invested in such deposits, repurchase
agreements maturing in more than seven days and other illiquid assets.

     The Money Market, Liquid Assets, Low Duration II, GNMA, Total Return II,
Real Return II, Total Return Mortgage, Commercial Mortgage Securities, Long-Term
U.S. Government, Short Duration Municipal Income, Municipal Bond, California
Intermediate Municipal Bond, California Municipal Bond, and New York Municipal
Bond Funds may invest in the same types of bank obligations as the other Funds,
but they must be U.S. dollar-denominated. Subject to the Trust's limitation on
concentration of no more than 25% of its assets in the securities of issuers in
a particular industry, there is no limitation on the amount of a Fund's assets
which may be invested in obligations of foreign banks which meet the conditions
set forth herein.

     Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that their obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks or the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not generally subject to examination by any U.S.
Government agency or instrumentality.

Loan Participations

     Certain Funds may purchase participations in commercial loans. Such
indebtedness may be secured or unsecured. Loan participations typically
represent direct participation in a loan to a corporate borrower, and generally
are offered by banks or other financial institutions or lending syndicates. The
Funds may participate in such syndications, or can buy part of a loan, becoming
a part lender. When purchasing loan participations, a Fund

                                     - 10 -



assumes the credit risk associated with the corporate borrower and may assume
the credit risk associated with an interposed bank or other financial
intermediary. The participation interests in which a Fund intends to invest may
not be rated by any nationally recognized rating service.

     A loan is often administered by an agent bank acting as agent for all
holders. The agent bank administers the terms of the loan, as specified in the
loan agreement. In addition, the agent bank is normally responsible for the
collection of principal and interest payments from the corporate borrower and
the apportionment of these payments to the credit of all institutions which are
parties to the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the corporate borrower, the
Fund may have to rely on the agent bank or other financial intermediary to apply
appropriate credit remedies against a corporate borrower.

     A financial institution's employment as agent bank might be terminated in
the event that it fails to observe a requisite standard of care or becomes
insolvent. A successor agent bank would generally be appointed to replace the
terminated agent bank, and assets held by the agent bank under the loan
agreement should remain available to holders of such indebtedness. However, if
assets held by the agent bank for the benefit of a Fund were determined to be
subject to the claims of the agent bank's general creditors, the Fund might
incur certain costs and delays in realizing payment on a loan or loan
participation and could suffer a loss of principal and/or interest. In
situations involving other interposed financial institutions (e.g., an insurance
company or governmental agency) similar risks may arise.

     Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the corporate borrower for payment of principal and
interest. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protection than an unsecured loan
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a secured loan would
satisfy the corporate borrower's obligation, or that the collateral can be
liquidated.

     The Funds may invest in loan participations with credit quality comparable
to that of issuers of its securities investments. Indebtedness of companies
whose creditworthiness is poor involves substantially greater risks, and may be
highly speculative. Some companies may never pay off their indebtedness, or may
pay only a small fraction of the amount owed. Consequently, when investing in
indebtedness of companies with poor credit, a Fund bears a substantial risk of
losing the entire amount invested.

     Each Fund limits the amount of its total assets that it will invest in any
one issuer or in issuers within the same industry (see "Investment
Restrictions"). For purposes of these limits, a Fund generally will treat the
corporate borrower as the "issuer" of indebtedness held by the Fund. In the case
of loan participations where a bank or other lending institution serves as a
financial intermediary between a Fund and the corporate borrower, if the
participation does not shift to the Fund the direct debtor-creditor relationship
with the corporate borrower, Securities and Exchange Commission ("SEC")
interpretations require the Fund to treat both the lending bank or other lending
institution and the corporate borrower as "issuers" for the purposes of
determining whether the Fund has invested more than 5% of its total assets in a
single issuer. Treating a financial intermediary as an issuer of indebtedness
may restrict a Funds' ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.

     Loans and other types of direct indebtedness may not be readily marketable
and may be subject to restrictions on resale. In some cases, negotiations
involved in disposing of indebtedness may require weeks to complete.
Consequently, some indebtedness may be difficult or impossible to dispose of
readily at what PIMCO believes to be a fair price. In addition, valuation of
illiquid indebtedness involves a greater degree of judgment in determining a
Fund's net asset value than if that value were based on available market
quotations, and could result in significant variations in the Fund's daily share
price. At the same time, some loan interests are traded among certain financial
institutions and accordingly may be deemed liquid. As the market for different
types of indebtedness develops, the liquidity of these instruments is expected
to improve. In addition, the Funds currently intend to treat indebtedness for
which there is no readily available market as illiquid for purposes of the
Funds' limitation on illiquid investments. Investments in loan participations
are considered to be debt obligations for purposes of the Trust's investment
restriction relating to the lending of funds or assets by a Portfolio.

                                     - 11 -



     Investments in loans through a direct assignment of the financial
institution's interests with respect to the loan may involve additional risks to
the Funds. For example, if a loan is foreclosed, a Fund could become part owner
of any collateral, and would bear the costs and liabilities associated with
owning and disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, a Fund could be held liable
as co-lender. It is unclear whether loans and other forms of direct indebtedness
offer securities law protections against fraud and misrepresentation. In the
absence of definitive regulatory guidance, the Funds rely on PIMCO's research in
an attempt to avoid situations where fraud or misrepresentation could adversely
affect the Funds.

Corporate Debt Securities

     A Fund's investments in U.S. dollar or foreign currency-denominated
corporate debt securities of domestic or foreign issuers are limited to
corporate debt securities (corporate bonds, debentures, notes and other similar
corporate debt instruments, including convertible securities) which meet the
minimum ratings criteria set forth for the Fund, or, if unrated, are in PIMCO's
opinion comparable in quality to corporate debt securities in which the Fund may
invest.

     Corporate income-producing securities may include forms of preferred or
preference stock. The rate of interest on a corporate debt security may be
fixed, floating or variable, and may vary inversely with respect to a reference
rate. The rate of return or return of principal on some debt obligations may be
linked or indexed to the level of exchange rates between the U.S. dollar and a
foreign currency or currencies. Debt securities may be acquired with warrants
attached.

     Securities rated Baa and BBB are the lowest which are considered
"investment grade" obligations. Moody's describes securities rated Baa as
"medium-grade" obligations; they are "neither highly protected nor poorly
secured . . . [i]nterest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well." S&P describes securities rated BBB as "regarded as
having an adequate capacity to pay interest and repay principal . . . [w]hereas
it normally exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal . . . than in higher rated categories." For a
discussion of securities rated below investment grade, see "High Yield
Securities ("Junk Bonds")" below.

High Yield Securities ("Junk Bonds")

     Investments in securities rated below investment grade that are eligible
for purchase by certain of the Funds and in particular, by the High Yield,
Emerging Markets, Convertible and European Convertible Funds are described as
"speculative" by both Moody's and S&P. Investment in lower rated corporate debt
securities ("high yield securities" or "junk bonds") generally provides greater
income and increased opportunity for capital appreciation than investments in
higher quality securities, but they also typically entail greater price
volatility and principal and income risk. These high yield securities are
regarded as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of debt securities that are high yield may be more
complex than for issuers of higher quality debt securities.

     High yield securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of high yield securities have been found to be less sensitive to
interest-rate changes than higher-rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A projection of
an economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield security prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If an issuer of high yield securities
defaults, in addition to risking payment of all or a portion of interest and
principal, the Funds investing in such securities may incur additional expenses
to seek recovery. In the case of high yield securities structured as zero-coupon
or pay-in-kind securities, their market prices are affected to a greater extent
by interest rate changes, and therefore tend to be more volatile than securities
which pay interest periodically and in cash. PIMCO seeks to reduce these risks
through diversification, credit analysis and attention to current developments
and trends in both the economy and financial markets.

                                     - 12 -



     The secondary market on which high yield securities are traded may be less
liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which the Funds
could sell a high yield security, and could adversely affect the daily net asset
value of the shares. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of high
yield securities, especially in a thinly-traded market. When secondary markets
for high yield securities are less liquid than the market for higher grade
securities, it may be more difficult to value the securities because such
valuation may require more research, and elements of judgment may play a greater
role in the valuation because there is less reliable, objective data available.
PIMCO seeks to minimize the risks of investing in all securities through
diversification, in-depth credit analysis and attention to current developments
in interest rates and market conditions.

     The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. PIMCO
does not rely solely on credit ratings when selecting securities for the Funds,
and develops its own independent analysis of issuer credit quality. If a credit
rating agency changes the rating of a portfolio security held by a Fund, the
Fund may retain the portfolio security if PIMCO deems it in the best interest of
shareholders.

Participation on Creditors Committees

     A Fund (in particular, the High Yield Fund) may from time to time
participate on committees formed by creditors to negotiate with the management
of financially troubled issuers of securities held by the Fund. Such
participation may subject a Fund to expenses such as legal fees and may make a
Fund an "insider" of the issuer for purposes of the federal securities laws, and
therefore may restrict such Fund's ability to trade in or acquire additional
positions in a particular security when it might otherwise desire to do so.
Participation by a Fund on such committees also may expose the Fund to potential
liabilities under the federal bankruptcy laws or other laws governing the rights
of creditors and debtors. A Fund will participate on such committees only when
PIMCO believes that such participation is necessary or desirable to enforce the
Fund's rights as a creditor or to protect the value of securities held by the
Fund.

Variable and Floating Rate Securities

     Variable and floating rate securities provide for a periodic adjustment in
the interest rate paid on the obligations. The terms of such obligations must
provide that interest rates are adjusted periodically based upon an interest
rate adjustment index as provided in the respective obligations. The adjustment
intervals may be regular, and range from daily up to annually, or may be event
based, such as based on a change in the prime rate. The Money Market and Liquid
Assets Funds may invest in a variable rate security having a stated maturity in
excess of 397 calendar days if the interest rate will be adjusted, and the Fund
may demand payment of principal from the issuers, within the period.

     Certain Funds may invest in floating rate debt instruments ("floaters") and
(except the Money Market and Liquid Assets Funds) engage in credit spread
trades. The interest rate on a floater is a variable rate which is tied to
another interest rate, such as a money-market index or Treasury bill rate. The
interest rate on a floater resets periodically, typically every six months.
While, because of the interest rate reset feature, floaters provide a Fund with
a certain degree of protection against rises in interest rates, a Fund will
participate in any declines in interest rates as well. A credit spread trade is
an investment position relating to a difference in the prices or interest rates
of two securities or currencies, where the value of the investment position is
determined by movements in the difference between the prices or interest rates,
as the case may be, of the respective securities or currencies.

     Each Fund (except the Money Market and Liquid Assets Funds) may also invest
in inverse floating rate debt instruments ("inverse floaters"). The interest
rate on an inverse floater resets in the opposite direction from the market rate
of interest to which the inverse floater is indexed. An inverse floating rate
security may exhibit greater price volatility than a fixed rate obligation of
similar credit quality. The Funds have adopted a policy under which no Fund will
invest more than 5% of its assets in any combination of inverse floater,
interest only ("IO"), or principal only ("PO") securities.

                                     - 13 -



Inflation-Indexed Bonds

     Inflation-indexed bonds are fixed income securities whose principal value
is periodically adjusted according to the rate of inflation. Two structures are
common. The U.S. Treasury and some other issuers use a structure that accrues
inflation into the principal value of the bond. Most other issuers pay out the
CPI accruals as part of a semiannual coupon.

     Inflation-indexed securities issued by the U.S. Treasury have maturities of
five, ten or thirty years, although it is possible that securities with other
maturities will be issued in the future. The U.S. Treasury securities pay
interest on a semi-annual basis, equal to a fixed percentage of the
inflation-adjusted principal amount. For example, if a Fund purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return
coupon (payable 1.5% semi-annually), and inflation over the first six months
were 1%, the mid-year par value of the bond would be $1,010 and the first
semi-annual interest payment would be $15.15 ($1,010 times 1.5%). If inflation
during the second half of the year resulted in the whole years' inflation
equaling 3%, the end-of-year par value of the bond would be $1,030 and the
second semi-annual interest payment would be $15.45 ($1,030 times 1.5%).

     If the periodic adjustment rate measuring inflation falls, the principal
value of inflation-indexed bonds will be adjusted downward, and consequently the
interest payable on these securities (calculated with respect to a smaller
principal amount) will be reduced. Repayment of the original bond principal upon
maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury
inflation-indexed bonds, even during a period of deflation. However, the current
market value of the bonds is not guaranteed, and will fluctuate. The Funds may
also invest in other inflation related bonds which may or may not provide a
similar guarantee. If a guarantee of principal is not provided, the adjusted
principal value of the bond repaid at maturity may be less than the original
principal.

     The value of inflation-indexed bonds is expected to change in response to
changes in real interest rates. Real interest rates in turn are tied to the
relationship between nominal interest rates and the rate of inflation.
Therefore, if inflation were to rise at a faster rate than nominal interest
rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a
faster rate than inflation, real interest rates might rise, leading to a
decrease in value of inflation-indexed bonds.

     While these securities are expected to be protected from long-term
inflationary trends, short-term increases in inflation may lead to a decline in
value. If interest rates rise due to reasons other than inflation (for example,
due to changes in currency exchange rates), investors in these securities may
not be protected to the extent that the increase is not reflected in the bond's
inflation measure.

     The periodic adjustment of U.S. inflation-indexed bonds is tied to the
Consumer Price Index for Urban Consumers ("CPI-U"), which is calculated monthly
by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in
the cost of living, made up of components such as housing, food, transportation
and energy. Inflation-indexed bonds issued by a foreign government are generally
adjusted to reflect a comparable inflation index, calculated by that government.
There can be no assurance that the CPI-U or any foreign inflation index will
accurately measure the real rate of inflation in the prices of goods and
services. Moreover, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the United
States.

     Any increase in the principal amount of an inflation-indexed bond will be
considered taxable ordinary income, even though investors do not receive their
principal until maturity.

Event-Linked Bonds

     Event-linked bonds are fixed income securities, for which the return of
principal and payment of interest is contingent on the non-occurrence of a
specific "trigger" event, such as a hurricane, earthquake, or other physical or
weather-related phenomenon. They may be issued by government agencies, insurance
companies, reinsurers, special purpose corporations or other on-shore or
off-shore entities. If a trigger event causes losses exceeding a specific amount
in the geographic region and time period specified in a bond, a Fund investing
in the bond may lose a portion or all of its principal invested in the bond. If
no trigger event occurs, the Fund will recover its principal

                                     - 14 -



plus interest. For some event-linked bonds, the trigger event or losses may be
based on company-wide losses, index-portfolio losses, industry indices, or
readings of scientific instruments rather than specified actual losses. Often
the event-linked bonds provide for extensions of maturity that are mandatory, or
optional at the discretion of the issuer, in order to process and audit loss
claims in those cases where a trigger event has, or possibly has, occurred. In
addition to the specified trigger events, event-linked bonds may also expose the
Fund to certain unanticipated risks including but not limited to issuer (credit)
default, adverse regulatory or jurisdictional interpretations, and adverse tax
consequences.

     Event-linked bonds are a relatively new type of financial instrument. As
such, there is no significant trading history of these securities, and there can
be no assurance that a liquid market in these instruments will develop. See
"Illiquid Securities" below. Lack of a liquid market may impose the risk of
higher transaction costs and the possibility that a Fund may be forced to
liquidate positions when it would not be advantageous to do so. Event-linked
bonds are typically rated, and a Fund will only invest in catastrophe bonds that
meet the credit quality requirements for the Fund.

Convertible Securities

     A convertible debt security is a bond, debenture, note, or other security
that entitles the holder to acquire common stock or other equity securities of
the same or a different issuer. A convertible security generally entitles the
holder to receive interest paid or accrued until the convertible security
matures or is redeemed, converted or exchanged. Before conversion, convertible
securities have characteristics similar to non-convertible debt securities.
Convertible securities rank senior to common stock in a corporation's capital
structure and, therefore, generally entail less risk than the corporation's
common stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed income security.

     Because of the conversion feature, the price of the convertible security
will normally fluctuate in some proportion to changes in the price of the
underlying asset, and as such is subject to risks relating to the activities of
the issuer and/or general market and economic conditions. The income component
of a convertible security may tend to cushion the security against declines in
the price of the underlying asset. However, the income component of convertible
securities causes fluctuations based upon changes in interest rates and the
credit quality of the issuer. In addition, convertible securities are often
lower-rated securities.

     A convertible security may be subject to redemption at the option of the
issuer at a predetermined price. If a convertible security held by a Fund is
called for redemption, the Fund would be required to permit the issuer to redeem
the security and convert it to underlying common stock, or would sell the
convertible security to a third party, which may have an adverse effect on the
Fund's ability to achieve its investment objective. A Fund generally would
invest in convertible securities for their favorable price characteristics and
total return potential and would normally not exercise an option to convert
unless the security is called or conversion is forced.

Warrants to Purchase Securities

     The Funds may invest in or acquire warrants to purchase equity or fixed
income securities. Bonds with warrants attached to purchase equity securities
have many characteristics of convertible bonds and their prices may, to some
degree, reflect the performance of the underlying stock. Bonds also may be
issued with warrants attached to purchase additional fixed income securities at
the same coupon rate. A decline in interest rates would permit a Fund to buy
additional bonds at the favorable rate or to sell the warrants at a profit. If
interest rates rise, the warrants would generally expire with no value.

     A Fund will not invest more than 5% of its net assets, valued at the lower
of cost or market, in warrants to purchase securities. Warrants acquired in
units or attached to securities will be deemed without value for purposes of
this restriction.

                                     - 15 -



Foreign Securities

     Each Fund (except the Low Duration II, Total Return II, Real Return II,
Long-Term U.S. Government, Short Duration Municipal Income, Municipal Bond,
California Intermediate Municipal Bond, California Municipal Bond, and New York
Municipal Bond Funds) may invest in corporate debt securities of foreign issuers
(including preferred or preference stock), certain foreign bank obligations (see
"Bank Obligations") and U.S. dollar or foreign currency-denominated obligations
of foreign governments or their subdivisions, agencies and instrumentalities,
international agencies and supranational entities. The Money Market, Liquid
Assets, Commercial Mortgage Securities, GNMA, Real Return II and Total Return
Mortgage Funds may invest in securities of foreign issuers only if they are U.S.
dollar-denominated. The High Yield Fund may invest up to 15% of its assets in
Euro-denominated securities.

     Securities traded in certain emerging market countries, including the
emerging market countries in Eastern Europe, may be subject to risks in addition
to risks typically posed by international investing due to the inexperience of
financial intermediaries, the lack of modern technology, and the lack of a
sufficient capital base to expand business operations. Additionally, former
Communist regimes of a number of Eastern European countries previously
expropriated a large amount of property, the claims on which have not been
entirely settled. There can be no assurance that a Fund's investments in Eastern
Europe will not also be expropriated, nationalized or otherwise confiscated.

     Each Fund (except the Low Duration II, Total Return II, Real Return II,
Long-Term U.S. Government, Short Duration Municipal Income, Municipal Bond,
California Intermediate Municipal Bond, California Municipal Bond, and New York
Municipal Bond Funds) may invest in Brady Bonds. Brady Bonds are securities
created through the exchange of existing commercial bank loans to sovereign
entities for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas
F. Brady (the "Brady Plan"). Brady Plan debt restructurings have been
implemented in a number of countries, including: Argentina, Bolivia, Brazil,
Bulgaria, Costa Rica, the Dominican Republic, Ecuador, Jordan, Mexico, Niger,
Nigeria, Panama, Peru, the Philippines, Poland, Uruguay, and Venezuela.

     Brady Bonds may be collateralized or uncollateralized, are issued in
various currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter secondary market. Brady Bonds are not considered to be U.S.
Government securities. U.S. dollar-denominated, collateralized Brady Bonds,
which may be fixed rate par bonds or floating rate discount bonds, are generally
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the Brady Bonds. Interest payments on these Brady Bonds
generally are collateralized on a one-year or longer rolling-forward basis by
cash or securities in an amount that, in the case of fixed rate bonds, is equal
to at least one year of interest payments or, in the case of floating rate
bonds, initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest payments
but generally are not collateralized. Brady Bonds are often viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk").

     Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and interest coupon payments
collateralized on an 18-month rolling-forward basis by funds held in escrow by
an agent for the bondholders. A significant portion of the Venezuelan Brady
Bonds and the Argentine Brady Bonds issued to date have principal repayments at
final maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral denominated in other currencies) and/or interest coupon payments
collateralized on a 14-month (for Venezuela) or 12-month (for Argentina)
rolling-forward basis by securities held by the Federal Reserve Bank of New York
as collateral agent.

     Brady Bonds involve various risk factors including residual risk and the
history of defaults with respect to commercial bank loans by public and private
entities of countries issuing Brady Bonds. There can be no assurance that Brady
Bonds in which the Funds may invest will not be subject to restructuring
arrangements or to requests for new credit, which may cause the Funds to suffer
a loss of interest or principal on any of its holdings.

                                     - 16 -



     Investment in sovereign debt can involve a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
able or willing to repay the principal and/or interest when due in accordance
with the terms of the debt. A governmental entity's willingness or ability to
repay principal and interest due in a timely manner may be affected by, among
other factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of the debt service burden to the economy as a whole, the
governmental entity's policy toward the International Monetary Fund, and the
political constraints to which a governmental entity may be subject.
Governmental entities may also depend on expected disbursements from foreign
governments, multilateral agencies and others to reduce principal and interest
arrearages on their debt. The commitment on the part of these governments,
agencies and others to make such disbursements may be conditioned on a
governmental entity's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may result in the cancellation of such third
parties' commitments to lend funds to the governmental entity, which may further
impair such debtor's ability or willingness to service its debts in a timely
manner. Consequently, governmental entities may default on their sovereign debt.
Holders of sovereign debt (including the Funds) may be requested to participate
in the rescheduling of such debt and to extend further loans to governmental
entities. There is no bankruptcy proceeding by which sovereign debt on which
governmental entities have defaulted may be collected in whole or in part.

     A Fund's investments in foreign currency denominated debt obligations and
hedging activities will likely produce a difference between its book income and
its taxable income. This difference may cause a portion of the Fund's income
distributions to constitute returns of capital for tax purposes or require the
Fund to make distributions exceeding book income to qualify as a regulated
investment company for federal tax purposes.

     The Emerging Markets Bond Fund will consider an issuer to be economically
tied to a country with an emerging securities market if (1) the issuer is
organized under the laws of, or maintains its principal place of business in,
the country, (2) its securities are principally traded in the country's
securities markets, or (3) the issuer derived at least half of its revenues or
profits from goods produced or sold, investments made, or services performed in
the country, or has at least half of its assets in that country.

Foreign Currency Transactions

     All Funds that may invest in foreign currency-denominated securities also
may purchase and sell foreign currency options and foreign currency futures
contracts and related options (see "Derivative Instruments"), and may engage in
foreign currency transactions either on a spot (cash) basis at the rate
prevailing in the currency exchange market at the time or through forward
currency contracts ("forwards") with terms generally of less than one year.
Funds may engage in these transactions in order to protect against uncertainty
in the level of future foreign exchange rates in the purchase and sale of
securities. The Funds may also use foreign currency options and foreign currency
forward contracts to increase exposure to a foreign currency or to shift
exposure to foreign currency fluctuations from one country to another.

     A forward involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts may be bought or sold to protect a Fund against a possible loss
resulting from an adverse change in the relationship between foreign currencies
and the U.S. dollar or to increase exposure to a particular foreign currency.
Open positions in forwards used for non-hedging purposes will be covered by the
segregation with the Trust's custodian of assets determined to be liquid by
PIMCO in accordance with procedures established by the Board of Trustees, and
are marked to market daily. Although forwards are intended to minimize the risk
of loss due to a decline in the value of the hedged currencies, at the same
time, they tend to limit any potential gain which might result should the value
of such currencies increase. Forwards will be used primarily to adjust the
foreign exchange exposure of each Fund with a view to protecting the outlook,
and the Funds might be expected to enter into such contracts under the following
circumstances:

     Lock In. When PIMCO desires to lock in the U.S. dollar price on the
purchase or sale of a security denominated in a foreign currency.


                                     - 17 -



     Cross Hedge. If a particular currency is expected to decrease against
another currency, a Fund may sell the currency expected to decrease and purchase
a currency which is expected to increase against the currency sold in an amount
approximately equal to some or all of the Fund's portfolio holdings denominated
in the currency sold.

     Direct Hedge. If PIMCO wants to a eliminate substantially all of the risk
of owning a particular currency, and/or if PIMCO thinks that a Fund can benefit
from price appreciation in a given country's bonds but does not want to hold the
currency, it may employ a direct hedge back into the U.S. dollar. In either
case, a Fund would enter into a forward contract to sell the currency in which a
portfolio security is denominated and purchase U.S. dollars at an exchange rate
established at the time it initiated the contract. The cost of the direct hedge
transaction may offset most, if not all, of the yield advantage offered by the
foreign security, but a Fund would hope to benefit from an increase (if any) in
value of the bond.

     Proxy Hedge. PIMCO might choose to use a proxy hedge, which may be less
costly than a direct hedge. In this case, a Fund, having purchased a security,
will sell a currency whose value is believed to be closely linked to the
currency in which the security is denominated. Interest rates prevailing in the
country whose currency was sold would be expected to be closer to those in the
U.S. and lower than those of securities denominated in the currency of the
original holding. This type of hedging entails greater risk than a direct hedge
because it is dependent on a stable relationship between the two currencies
paired as proxies and the relationships can be very unstable at times.

     Costs of Hedging. When a Fund purchases a foreign bond with a higher
interest rate than is available on U.S. bonds of a similar maturity, the
additional yield on the foreign bond could be substantially reduced or lost if
the Fund were to enter into a direct hedge by selling the foreign currency and
purchasing the U.S. dollar. This is what is known as the "cost" of hedging.
Proxy hedging attempts to reduce this cost through an indirect hedge back to the
U.S. dollar.

     It is important to note that hedging costs are treated as capital
transactions and are not, therefore, deducted from a Fund's dividend
distribution and are not reflected in its yield. Instead such costs will, over
time, be reflected in a Fund's net asset value per share.

     Tax Consequences of Hedging. Under applicable tax law, the Funds may be
required to limit their gains from hedging in foreign currency forwards,
futures, and options. Although the Funds are expected to comply with such
limits, the extent to which these limits apply is subject to tax regulations as
yet unissued. Hedging may also result in the application of the mark-to-market
and straddle provisions of the Internal Revenue Code. Those provisions could
result in an increase (or decrease) in the amount of taxable dividends paid by
the Funds and could affect whether dividends paid by the Funds are classified as
capital gains or ordinary income.

Foreign Currency Exchange-Related Securities

     Foreign currency warrants. Foreign currency warrants such as Currency
Exchange Warrants(SM) ("CEWs(SM)") are warrants which entitle the holder to
receive from their issuer an amount of cash (generally, for warrants issued in
the United States, in U.S. dollars) which is calculated pursuant to a
predetermined formula and based on the exchange rate between a specified foreign
currency and the U.S. dollar as of the exercise date of the warrant. Foreign
currency warrants generally are exercisable upon their issuance and expire as of
a specified date and time. Foreign currency warrants have been issued in
connection with U.S. dollar-denominated debt offerings by major corporate
issuers in an attempt to reduce the foreign currency exchange risk which, from
the point of view of prospective purchasers of the securities, is inherent in
the international fixed-income marketplace. Foreign currency warrants may
attempt to reduce the foreign exchange risk assumed by purchasers of a security
by, for example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese yen or the euro. The formula used to determine the amount payable upon
exercise of a foreign currency warrant may make the warrant worthless unless the
applicable foreign currency exchange rate moves in a particular direction (e.g.,
unless the U.S. dollar appreciates or depreciates against the particular foreign
currency to which the warrant is linked or indexed). Foreign currency warrants
are severable from the debt obligations with which they may be offered, and may
be listed on exchanges. Foreign currency warrants may be exercisable only in
certain minimum amounts, and an investor wishing to exercise warrants who
possesses less than the minimum number required for exercise may be required
either to sell the warrants or to purchase additional warrants, thereby
incurring additional transaction costs. In the case of any exercise of warrants,
there may

                                     - 18 -



be a time delay between the time a holder of warrants gives instructions to
exercise and the time the exchange rate relating to exercise is determined,
during which time the exchange rate could change significantly, thereby
affecting both the market and cash settlement values of the warrants being
exercised. The expiration date of the warrants may be accelerated if the
warrants should be delisted from an exchange or if their trading should be
suspended permanently, which would result in the loss of any remaining "time
value" of the warrants (i.e., the difference between the current market value
and the exercise value of the warrants), and, in the case the warrants were
"out-of-the-money," in a total loss of the purchase price of the warrants.
Warrants are generally unsecured obligations of their issuers and are not
standardized foreign currency options issued by the Options Clearing Corporation
("OCC"). Unlike foreign currency options issued by OCC, the terms of foreign
exchange warrants generally will not be amended in the event of governmental or
regulatory actions affecting exchange rates or in the event of the imposition of
other regulatory controls affecting the international currency markets. The
initial public offering price of foreign currency warrants is generally
considerably in excess of the price that a commercial user of foreign currencies
might pay in the interbank market for a comparable option involving
significantly larger amounts of foreign currencies. Foreign currency warrants
are subject to significant foreign exchange risk, including risks arising from
complex political or economic factors.

     Principal exchange rate linked securities. Principal exchange rate linked
securities ("PERLs(SM)") are debt obligations the principal on which is payable
at maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The return
on "standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
dollar, and is adversely affected by increases in the foreign exchange value of
the U.S. dollar; "reverse" principal exchange rate linked securities are like
the "standard" securities, except that their return is enhanced by increases in
the value of the U.S. dollar and adversely impacted by increases in the value of
foreign currency. Interest payments on the securities are generally made in U.S.
dollars at rates that reflect the degree of foreign currency risk assumed or
given up by the purchaser of the notes (i.e., at relatively higher interest
rates if the purchaser has assumed some of the foreign exchange risk, or
relatively lower interest rates if the issuer has assumed some of the foreign
exchange risk, based on the expectations of the current market). Principal
exchange rate linked securities may in limited cases be subject to acceleration
of maturity (generally, not without the consent of the holders of the
securities), which may have an adverse impact on the value of the principal
payment to be made at maturity.

     Performance indexed paper. Performance indexed paper ("PIPs(SM)") is U.S.
dollar-denominated commercial paper the yield of which is linked to certain
foreign exchange rate movements. The yield to the investor on performance
indexed paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is below,
and a potential maximum rate of return that is above, market yields on U.S.
dollar-denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of the
spot exchange rate two business days prior to maturity.

Borrowing

     Each Fund may borrow money to the extent permitted under the Investment
Company Act of 1940, as amended ("1940 Act"), and as interpreted, modified or
otherwise permitted by regulatory authority having jurisdiction, from time to
time. This means that, in general, a Fund may borrow money from banks for any
purpose on a secured basis in an amount up to 1/3 of the Fund's total assets. A
Fund may also borrow money for temporary administrative purposes on an unsecured
basis in an amount not to exceed 5% of the Fund's total assets.

     Specifically, provisions of the 1940 Act require a Fund to maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed, with an
exception for borrowings not in excess of 5% of the Fund's total assets made for
temporary administrative purposes. Any borrowings for temporary administrative
purposes in excess of 5% of the Fund's total assets must maintain continuous
asset coverage. If the 300% asset coverage should decline as a result of market
fluctuations or other reasons, a Fund may be required to sell some of its
portfolio holdings within three days to reduce the debt and

                                     - 19 -



restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time.

     As noted below, a Fund also may enter into certain transactions, including
reverse repurchase agreements, mortgage dollar rolls, and sale-buybacks, that
can be viewed as constituting a form of borrowing or financing transaction by
the Fund. To the extent a Fund covers its commitment under a reverse repurchase
agreement (or economically similar transaction) by the segregation of assets
determined in accordance with procedures adopted by the Trustees, equal in value
to the amount of the Fund's commitment to repurchase, such an agreement will not
be considered a "senior security" by the Fund and therefore will not be subject
to the 300% asset coverage requirement otherwise applicable to borrowings by the
Funds. Borrowing will tend to exaggerate the effect on net asset value of any
increase or decrease in the market value of a Fund's portfolio. Money borrowed
will be subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. A Fund also may be required to
maintain minimum average balances in connection with such borrowing or to pay a
commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
The Global Bond Fund II has adopted a non-fundamental investment restriction
under which the Fund may not borrow in excess of 10% of the value of its total
assets and then only from banks as a temporary measure to facilitate the meeting
of redemption requests (not for leverage) or for extraordinary or emergency
purposes. Non-fundamental investment restrictions may be changed without
shareholder approval.

     A Fund may enter into reverse repurchase agreements, mortgage dollar rolls,
and economically similar transactions. A reverse repurchase agreement involves
the sale of a portfolio-eligible security by a Fund, coupled with its agreement
to repurchase the instrument at a specified time and price. Under a reverse
repurchase agreement, the Fund continues to receive any principal and interest
payments on the underlying security during the term of the agreement. The Fund
typically will segregate assets determined to be liquid by PIMCO in accordance
with procedures established by the Board of Trustees, equal (on a daily
mark-to-market basis) to its obligations under reverse repurchase agreements.
However, reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund may decline below the repurchase price of the
securities sold by the Fund which it is obligated to repurchase. To the extent
that positions in reverse repurchase agreements are not covered through the
segregation of liquid assets at least equal to the amount of any forward
purchase commitment, such transactions would be subject to the Funds'
limitations on borrowings, which would, among other things, restrict the
aggregate of such transactions (plus any other borrowings) to 1/3 (for each Fund
except the Global Bond Fund II) of a Fund's total assets.

     A "mortgage dollar roll" is similar to a reverse repurchase agreement in
certain respects. In a "dollar roll" transaction a Fund sells a mortgage-related
security, such as a security issued by GNMA, to a dealer and simultaneously
agrees to repurchase a similar security (but not the same security) in the
future at a pre-determined price. A "dollar roll" can be viewed, like a reverse
repurchase agreement, as a collateralized borrowing in which a Fund pledges a
mortgage-related security to a dealer to obtain cash. Unlike in the case of
reverse repurchase agreements, the dealer with which a Fund enters into a dollar
roll transaction is not obligated to return the same securities as those
originally sold by the Fund, but only securities which are "substantially
identical." To be considered "substantially identical," the securities returned
to a Fund generally must: (1) be collateralized by the same types of underlying
mortgages; (2) be issued by the same agency and be part of the same program; (3)
have a similar original stated maturity; (4) have identical net coupon rates;
(5) have similar market yields (and therefore price); and (6) satisfy "good
delivery" requirements, meaning that the aggregate principal amounts of the
securities delivered and received back must be within 2.5% of the initial amount
delivered.

     A Fund's obligations under a dollar roll agreement must be covered by
segregated liquid assets equal in value to the securities subject to repurchase
by the Fund. As with reverse repurchase agreements, to the extent that positions
in dollar roll agreements are not covered by segregated liquid assets at least
equal to the amount of any forward purchase commitment, such transactions would
be subject to the Funds' restrictions on borrowings. Furthermore, because dollar
roll transactions may be for terms ranging between one and six months, dollar
roll transactions may be deemed "illiquid" and subject to a Fund's overall
limitations on investments in illiquid securities.

     A Fund also may effect simultaneous purchase and sale transactions that are
known as "sale-buybacks." A sale-buyback is similar to a reverse repurchase
agreement, except that in a sale-buyback, the counterparty who

                                     - 20 -



purchases the security is entitled to receive any principal or interest payments
make on the underlying security pending settlement of the Fund's repurchase of
the underlying security. A Fund's obligations under a sale-buyback typically
would be offset by liquid assets equal in value to the amount of the Fund's
forward commitment to repurchase the subject security.

Derivative Instruments

     In pursuing their individual objectives the Funds (except the Money Market
and Liquid Assets Funds) may purchase and sell (write) both put options and call
options on securities, swap agreements, securities indexes, commodity indexes
and foreign currencies, and enter into interest rate, foreign currency, index
and commodity futures contracts and purchase and sell options on such futures
contracts ("futures options") for hedging purposes or as part of their overall
investment strategies, except that those Funds that may not invest in foreign
currency-denominated securities may not enter into transactions involving
currency futures or options. The Funds (except the Money Market, Liquid Assets,
Low Duration II, Total Return II, Real Return II, Long-Term U.S. Government,
Short Duration Municipal Income, Municipal Bond, California Intermediate
Municipal Bond, California Municipal Bond, and New York Municipal Bond Funds)
also may purchase and sell foreign currency options for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another. The Funds (except the Money Market and
Liquid Assets Fund) also may enter into swap agreements with respect to interest
rates, commodities, and indexes of securities or commodities, and to the extent
it may invest in foreign currency-denominated securities, may enter into swap
agreements with respect to foreign currencies. The Funds may invest in
structured notes. If other types of financial instruments, including other types
of options, futures contracts, or futures options are traded in the future, a
Fund may also use those instruments, provided that the Trustees determine that
their use is consistent with the Fund's investment objective.

     The value of some derivative instruments in which the Funds invest may be
particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Funds, the ability of a Fund to successfully utilize
these instruments may depend in part upon the ability of PIMCO to forecast
interest rates and other economic factors correctly. If PIMCO incorrectly
forecasts such factors and has taken positions in derivative instruments
contrary to prevailing market trends, the Funds could be exposed to the risk of
loss.

     The Funds might not employ any of the strategies described below, and no
assurance can be given that any strategy used will succeed. If PIMCO incorrectly
forecasts interest rates, market values or other economic factors in utilizing a
derivatives strategy for a Fund, the Fund might have been in a better position
if it had not entered into the transaction at all. Also, suitable derivative
transactions may not be available in all circumstances. The use of these
strategies involves certain special risks, including a possible imperfect
correlation, or even no correlation, between price movements of derivative
instruments and price movements of related investments. While some strategies
involving derivative instruments can reduce the risk of loss, they can also
reduce the opportunity for gain or even result in losses by offsetting favorable
price movements in related investments or otherwise, due to the possible
inability of a Fund to purchase or sell a portfolio security at a time that
otherwise would be favorable or the possible need to sell a portfolio security
at a disadvantageous time because the Fund is required to maintain asset
coverage or offsetting positions in connection with transactions in derivative
instruments, and the possible inability of a Fund to close out or to liquidate
its derivatives positions. In addition, a Fund's use of such instruments may
cause the Fund to realize higher amounts of short-term capital gains (generally
taxed at ordinary income tax rates) than if it had not used such instruments.

     Options on Securities and Indexes. A Fund may, to the extent specified
herein or in the Prospectuses, purchase and sell both put and call options on
fixed income or other securities or indexes in standardized contracts traded on
foreign or domestic securities exchanges, boards of trade, or similar entities,
or quoted on NASDAQ or on an over-the-counter market, and agreements, sometimes
called cash puts, which may accompany the purchase of a new issue of bonds from
a dealer.

     An option on a security (or index) is a contract that gives the holder of
the option, in return for a premium, the right to buy from (in the case of a
call) or sell to (in the case of a put) the writer of the option the security
underlying the option (or the cash value of the index) at a specified exercise
price at any time during the term of the option. The writer of an option on a
security has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price or to pay the exercise
price upon delivery of the underlying security.

                                     - 21 -



Upon exercise, the writer of an option on an index is obligated to pay the
difference between the cash value of the index and the exercise price multiplied
by the specified multiplier for the index option. (An index is designed to
reflect features of a particular financial or securities market, a specific
group of financial instruments or securities, or certain economic indicators.)

     A Fund will write call options and put options only if they are "covered."
In the case of a call option on a security, the option is "covered" if the Fund
owns the security underlying the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or, if additional
cash consideration is required, cash or other assets determined to be liquid by
PIMCO in accordance with procedures established by the Board of Trustees, in
such amount are segregated by its custodian) upon conversion or exchange of
other securities held by the Fund. For a call option on an index, the option is
covered if the Fund maintains with its custodian assets determined to be liquid
by PIMCO in accordance with procedures established by the Board of Trustees, in
an amount equal to the contract value of the index. A call option is also
covered if the Fund holds a call on the same security or index as the call
written where the exercise price of the call held is (i) equal to or less than
the exercise price of the call written, or (ii) greater than the exercise price
of the call written, provided the difference is maintained by the Fund in
segregated assets determined to be liquid by PIMCO in accordance with procedures
established by the Board of Trustees. A put option on a security or an index is
"covered" if the Fund segregates assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees equal to the
exercise price. A put option is also covered if the Fund holds a put on the same
security or index as the put written where the exercise price of the put held is
(i) equal to or greater than the exercise price of the put written, or (ii) less
than the exercise price of the put written, provided the difference is
maintained by the Fund in segregated assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees.

     If an option written by a Fund expires unexercised, the Fund realizes a
capital gain equal to the premium received at the time the option was written.
If an option purchased by a Fund expires unexercised, the Fund realizes a
capital loss equal to the premium paid. Prior to the earlier of exercise or
expiration, an exchange traded option may be closed out by an offsetting
purchase or sale of an option of the same series (type, exchange, underlying
security or index, exercise price, and expiration). There can be no assurance,
however, that a closing purchase or sale transaction can be effected when the
Fund desires.

     A Fund may sell put or call options it has previously purchased, which
could result in a net gain or loss depending on whether the amount realized on
the sale is more or less than the premium and other transaction costs paid on
the put or call option which is sold. Prior to exercise or expiration, an option
may be closed out by an offsetting purchase or sale of an option of the same
series. A Fund will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from writing
the option, or, if it is more, the Fund will realize a capital loss. If the
premium received from a closing sale transaction is more than the premium paid
to purchase the option, the Fund will realize a capital gain or, if it is less,
the Fund will realize a capital loss. The principal factors affecting the market
value of a put or a call option include supply and demand, interest rates, the
current market price of the underlying security or index in relation to the
exercise price of the option, the volatility of the underlying security or
index, and the time remaining until the expiration date.

     The premium paid for a put or call option purchased by a Fund is an asset
of the Fund. The premium received for an option written by a Fund is recorded as
a deferred credit. The value of an option purchased or written is marked to
market daily and is valued at the closing price on the exchange on which it is
traded or, if not traded on an exchange or no closing price is available, at the
mean between the last bid and asked prices.

     The Funds may write covered straddles consisting of a combination of a call
and a put written on the same underlying security. A straddle will be covered
when sufficient assets are deposited to meet the Funds' immediate obligations.
The Funds may use the same liquid assets to cover both the call and put options
where the exercise price of the call and put are the same, or the exercise price
of the call is higher than that of the put. In such cases, the Funds will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."

     Risks Associated with Options on Securities and Indexes. There are several
risks associated with transactions in options on securities and on indexes. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the

                                     - 22 -



exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events.

     During the option period, the covered call writer has, in return for the
premium on the option, given up the opportunity to profit from a price increase
in the underlying security above the exercise price, but, as long as its
obligation as a writer continues, has retained the risk of loss should the price
of the underlying security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying security at the exercise price. If a put
or call option purchased by the Fund is not sold when it has remaining value,
and if the market price of the underlying security remains equal to or greater
than the exercise price (in the case of a put), or remains less than or equal to
the exercise price (in the case of a call), the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security.

     There can be no assurance that a liquid market will exist when a Fund seeks
to close out an option position. If a Fund were unable to close out an option
that it had purchased on a security, it would have to exercise the option in
order to realize any profit or the option may expire worthless. If a Fund were
unable to close out a covered call option that it had written on a security, it
would not be able to sell the underlying security unless the option expired
without exercise. As the writer of a covered call option, a Fund forgoes, during
the option's life, the opportunity to profit from increases in the market value
of the security covering the call option above the sum of the premium and the
exercise price of the call.

     If trading were suspended in an option purchased by a Fund, the Fund would
not be able to close out the option. If restrictions on exercise were imposed,
the Fund might be unable to exercise an option it has purchased. Except to the
extent that a call option on an index written by the Fund is covered by an
option on the same index purchased by the Fund, movements in the index may
result in a loss to the Fund; however, such losses may be mitigated by changes
in the value of the Fund's securities during the period the option was
outstanding.

     Foreign Currency Options. Funds that invest in foreign currency-denominated
securities may buy or sell put and call options on foreign currencies. A Fund
may buy or sell put and call options on foreign currencies either on exchanges
or in the over-the-counter market. A put option on a foreign currency gives the
purchaser of the option the right to sell a foreign currency at the exercise
price until the option expires. A call option on a foreign currency gives the
purchaser of the option the right to purchase the currency at the exercise price
until the option expires. Currency options traded on U.S. or other exchanges may
be subject to position limits which may limit the ability of a Fund to reduce
foreign currency risk using such options. Over-the-counter options differ from
traded options in that they are two-party contracts with price and other terms
negotiated between buyer and seller, and generally do not have as much market
liquidity as exchange-traded options.

     Futures Contracts and Options on Futures Contracts. A futures contract is
an agreement between two parties to buy and sell a security or commodity for a
set price on a future date. These contracts are traded on exchanges, so that, in
most cases, either party can close out its position on the exchange for cash,
without delivering the security or commodity. An option on a futures contract
gives the holder of the option the right to buy or sell a position in a futures
contract to the writer of the option, at a specified price and on or before a
specified expiration date.

     Each Fund (except the Money Market and Liquid Assets Funds) may invest in
futures contracts and options thereon ("futures options") with respect to, but
not limited to, interest rates, commodities, and security or commodity indexes.
To the extent that a Fund may invest in foreign currency-denominated securities,
it may also invest in foreign currency futures contracts and options thereon.

     An interest rate, commodity, foreign currency or index futures contract
provides for the future sale by one party and purchase by another party of a
specified quantity of a financial instrument, commodity, foreign currency or the
cash value of an index at a specified price and time. A futures contract on an
index is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the index contract was

                                     - 23 -



originally written. Although the value of an index might be a function of the
value of certain specified securities, no physical delivery of these securities
is made. A public market exists in futures contracts covering a number of
indexes as well as financial instruments and foreign currencies, including: the
S&P 500; the S&P Midcap 400; the Nikkei 225; the NYSE composite; U.S. Treasury
bonds; U.S. Treasury notes; GNMA Certificates; three-month U.S. Treasury bills;
90-day commercial paper; bank certificates of deposit; Eurodollar certificates
of deposit; the Australian dollar; the Canadian dollar; the British pound; the
Japanese yen; the Swiss franc; the Mexican peso; and certain multinational
currencies, such as the euro. It is expected that other futures contracts will
be developed and traded in the future. Certain of the Funds may also invest in
commodity futures contracts and options thereon. A commodity futures contract is
an agreement between two parties, in which one party agrees to buy a commodity,
such as an energy, agricultural or metal commodity from the other party at a
later date at a price and quantity agreed-upon when the contract is made.

     A Fund may purchase and write call and put futures options, as specified
for that Fund in the Prospectuses. Futures options possess many of the same
characteristics as options on securities and indexes (discussed above). A
futures option gives the holder the right, in return for the premium paid, to
assume a long position (call) or short position (put) in a futures contract at a
specified exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position. In the case of
a put option, the opposite is true.

     To comply with applicable rules of the Commodity Futures Trading Commission
("CFTC") under which the Trust and the Funds avoid being deemed a "commodity
pool" or a "commodity pool operator," each Fund intends generally to limit its
use of futures contracts and futures options to "bona fide hedging"
transactions, as such term is defined in applicable regulations, interpretations
and practice. For example, a Fund might use futures contracts to hedge against
anticipated changes in interest rates that might adversely affect either the
value of the Fund's securities or the price of the securities which the Fund
intends to purchase. A Fund's hedging activities may include sales of futures
contracts as an offset against the effect of expected increases in interest
rates, and purchases of futures contracts as an offset against the effect of
expected declines in interest rates. Although other techniques could be used to
reduce that Fund's exposure to interest rate fluctuations, the Fund may be able
to hedge its exposure more effectively and perhaps at a lower cost by using
futures contracts and futures options.

     A Fund will only enter into futures contracts and futures options which are
standardized and traded on a U.S. or foreign exchange, board of trade, or
similar entity, or quoted on an automated quotation system.

     When a purchase or sale of a futures contract is made by a Fund, the Fund
is required to deposit with its custodian (or broker, if legally permitted) a
specified amount of assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees ("initial margin"). The margin
required for a futures contract is set by the exchange on which the contract is
traded and may be modified during the term of the contract. Margin requirements
on foreign exchanges may be different than U.S. exchanges. The initial margin is
in the nature of a performance bond or good faith deposit on the futures
contract which is returned to the Fund upon termination of the contract,
assuming all contractual obligations have been satisfied. Each Fund expects to
earn interest income on its initial margin deposits. A futures contract held by
a Fund is valued daily at the official settlement price of the exchange on which
it is traded. Each day the Fund pays or receives cash, called "variation
margin," equal to the daily change in value of the futures contract. This
process is known as "marking to market." Variation margin does not represent a
borrowing or loan by a Fund but is instead a settlement between the Fund and the
broker of the amount one would owe the other if the futures contract expired. In
computing daily net asset value, each Fund will mark to market its open futures
positions.

     A Fund is also required to deposit and maintain margin with respect to put
and call options on futures contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures contract (and the related
initial margin requirements), the current market value of the option, and other
futures positions held by the Fund.

     Although some futures contracts call for making or taking delivery of the
underlying securities or commodities, generally these obligations are closed out
prior to delivery by offsetting purchases or sales of matching futures contracts
(same exchange, underlying security or index, and delivery month). Closing out a
futures contract sale is effected by purchasing a futures contract for the same
aggregate amount of the specific type of financial

                                     - 24 -



instrument or commodity with the same delivery date. If an offsetting purchase
price is less than the original sale price, the Fund realizes a capital gain, or
if it is more, the Fund realizes a capital loss. Conversely, if an offsetting
sale price is more than the original purchase price, the Fund realizes a capital
gain, or if it is less, the Fund realizes a capital loss. The transaction costs
must also be included in these calculations.

     The Funds may write covered straddles consisting of a call and a put
written on the same underlying futures contract. A straddle will be covered when
sufficient assets are deposited to meet the Funds' immediate obligations. A Fund
may use the same liquid assets to cover both the call and put options where the
exercise price of the call and put are the same, or the exercise price of the
call is higher than that of the put. In such cases, the Funds will also
segregate liquid assets equivalent to the amount, if any, by which the put is
"in the money."

     Limitations on Use of Futures and Futures Options. In general, the Funds
intend to enter into positions in futures contracts and related options only for
"bona fide hedging" purposes. With respect to positions in futures and related
options that do not constitute bona fide hedging positions, a Fund will not
enter into a futures contract or futures option contract if, immediately
thereafter, the aggregate initial margin deposits relating to such positions
plus premiums paid by it for open futures option positions, less the amount by
which any such options are "in-the-money," would exceed 5% of the Fund's net
assets. A call option is "in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A put option is
"in-the-money" if the exercise price exceeds the value of the futures contract
that is the subject of the option.

     When purchasing a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees, that, when
added to the amounts deposited with a futures commission merchant as margin, are
equal to the market value of the futures contract. Alternatively, the Fund may
"cover" its position by purchasing a put option on the same futures contract
with a strike price as high or higher than the price of the contract held by the
Fund.

     When selling a futures contract, a Fund will maintain with its custodian
(and mark-to-market on a daily basis) assets determined to be liquid by PIMCO in
accordance with procedures established by the Board of Trustees, that are equal
to the market value of the instruments underlying the contract. Alternatively,
the Fund may "cover" its position by owning the instruments underlying the
contract (or, in the case of an index futures contract, a portfolio with a
volatility substantially similar to that of the index on which the futures
contract is based), or by holding a call option permitting the Fund to purchase
the same futures contract at a price no higher than the price of the contract
written by the Fund (or at a higher price if the difference is maintained in
liquid assets with the Trust's custodian).

     When selling a call option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by PIMCO in accordance with procedures established by the Board of
Trustees, that, when added to the amounts deposited with a futures commission
merchant as margin, equal the total market value of the futures contract
underlying the call option. Alternatively, the Fund may cover its position by
entering into a long position in the same futures contract at a price no higher
than the strike price of the call option, by owning the instruments underlying
the futures contract, or by holding a separate call option permitting the Fund
to purchase the same futures contract at a price not higher than the strike
price of the call option sold by the Fund.

     When selling a put option on a futures contract, a Fund will maintain with
its custodian (and mark-to-market on a daily basis) assets determined to be
liquid by PIMCO in accordance with procedures established by the Board of
Trustees, that equal the purchase price of the futures contract, less any margin
on deposit. Alternatively, the Fund may cover the position either by entering
into a short position in the same futures contract, or by owning a separate put
option permitting it to sell the same futures contract so long as the strike
price of the purchased put option is the same or higher than the strike price of
the put option sold by the Fund.

     To the extent that securities with maturities greater than one year are
used to segregate assets to cover a Fund's obligations under futures contracts
and related options, such use will not eliminate the risk of a form of leverage,
which may tend to exaggerate the effect on net asset value of any increase or
decrease in the market value of a Fund's portfolio, and may require liquidation
of portfolio positions when it is not advantageous to do so. However, any
potential risk of leverage resulting from the use of securities with maturities
greater than one year

                                     - 25 -



may be mitigated by the overall duration limit on a Fund's portfolio securities.
Thus, the use of a longer-term security may require a Fund to hold offsetting
short-term securities to balance the Fund's portfolio such that the Fund's
duration does not exceed the maximum permitted for the Fund in the Prospectuses.

     The requirements for qualification as a regulated investment company also
may limit the extent to which a Fund may enter into futures, futures options or
forward contracts. See "Taxation."

     Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be no guarantee
that there will be a correlation between price movements in the hedging vehicle
and in the Fund securities being hedged. In addition, there are significant
differences between the securities and futures markets that could result in an
imperfect correlation between the markets, causing a given hedge not to achieve
its objectives. The degree of imperfection of correlation depends on
circumstances such as variations in speculative market demand for futures and
futures options on securities, including technical influences in futures trading
and futures options, and differences between the financial instruments being
hedged and the instruments underlying the standard contracts available for
trading in such respects as interest rate levels, maturities, and
creditworthiness of issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-conceived hedge may
be unsuccessful to some degree because of market behavior or unexpected interest
rate trends.

     Futures contracts on U.S. Government securities historically have reacted
to an increase or decrease in interest rates in a manner similar to that in
which the underlying U.S. Government securities reacted. To the extent, however,
that a Municipal Bond Fund enters into such futures contracts, the value of such
futures will not vary in direct proportion to the value of the Fund's holdings
of Municipal Bonds (as defined above). Thus, the anticipated spread between the
price of the futures contract and the hedged security may be distorted due to
differences in the nature of the markets. The spread also may be distorted by
differences in initial and variation margin requirements, the liquidity of such
markets and the participation of speculators in such markets.

     Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of the current trading
session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For example, futures prices have
occasionally moved to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial losses.

     There can be no assurance that a liquid market will exist at a time when a
Fund seeks to close out a futures or a futures option position, and that Fund
would remain obligated to meet margin requirements until the position is closed.
In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result, there can be no
assurance that an active secondary market will develop or continue to exist.

     Risks Associated with Commodity Futures Contracts. There are several
additional risks associated with transactions in commodity futures contracts.

     Storage. Unlike the financial futures markets, in the commodity futures
markets there are costs of physical storage associated with purchasing the
underlying commodity. The price of the commodity futures contract will reflect
the storage costs of purchasing the physical commodity, including the time value
of money invested in the physical commodity. To the extent that the storage
costs for an underlying commodity change while the Fund is invested in futures
contracts on that commodity, the value of the futures contract may change
proportionately.

     Reinvestment. In the commodity futures markets, producers of the
underlying commodity may decide to hedge the price risk of selling the
commodity by selling futures contracts today to lock in the price of the
commodity at delivery tomorrow. In order to induce speculators to purchase the
other side of the same futures

                                     - 26 -


contract, the commodity producer generally must sell the futures contract at a
lower price than the expected future spot price. Conversely, if most hedgers in
the futures market are purchasing futures contracts to hedge against a rise in
prices, then speculators will only sell the other side of the futures contract
at a higher futures price than the expected future spot price of the commodity.
The changing nature of the hedgers and speculators in the commodity markets will
influence whether futures prices are above or below the expected future spot
price, which can have significant implications for a Fund. If the nature of
hedgers and speculators in futures markets has shifted when it is time for a
Fund to reinvest the proceeds of a maturing contract in a new futures contract,
the Fund might reinvest at higher or lower futures prices, or choose to pursue
other investments.

     Other Economic Factors. The commodities which underlie commodity futures
contracts may be subject to additional economic and non-economic variables, such
as drought, floods, weather, livestock disease, embargoes, tariffs, and
international economic, political and regulatory developments. These factors may
have a larger impact on commodity prices and commodity-linked instruments,
including futures contracts, than on traditional securities. Certain commodities
are also subject to limited pricing flexibility because of supply and demand
factors. Others are subject to broad price fluctuations as a result of the
volatility of the prices for certain raw materials and the instability of
supplies of other materials. These additional variables may create additional
investment risks which subject a Fund's investments to greater volatility than
investments in traditional securities.

     Additional Risks of Options on Securities, Futures Contracts, Options on
Futures Contracts, and Forward Currency Exchange Contracts and Options Thereon.
Options on securities, futures contracts, options on futures contracts, and
options on currencies may be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions in the United States;
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities. The value of such positions also could be adversely affected by (i)
other complex foreign political, legal and economic factors, (ii) lesser
availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during non-business hours in the United States,
(iv) the imposition of different exercise and settlement terms and procedures
and margin requirements than in the United States, and (v) lesser trading
volume.

     Swap Agreements and Options on Swap Agreements. Each Fund (except the Money
Market and Liquid Assets Funds) may engage in swap transactions, including, but
not limited to, swap agreements on interest rates, security or commodity
indexes, specific securities and commodities, and credit and event-linked swaps.
To the extent a Fund may invest in foreign currency-denominated securities, it
may also invest in currency exchange rate swap agreements. A Fund may also enter
into options on swap agreements ("swap options").

     A Fund may enter into swap transactions for any legal purpose consistent
with its investment objective and policies, such as for the purpose of
attempting to obtain or preserve a particular return or spread at a lower cost
than obtaining a return or spread through purchases and/or sales of instruments
in other markets, to protect against currency fluctuations, as a duration
management technique, to protect against any increase in the price of securities
a Fund anticipates purchasing at a later date, or to gain exposure to certain
markets in the most economical way possible.

     Swap agreements are two party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than one
year. In a standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments, which may be adjusted for an interest
factor. The gross returns to be exchanged or "swapped" between the parties are
generally calculated with respect to a "notional amount," i.e., the return on or
increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
or commodities representing a particular index. Forms of swap agreements include
interest rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; interest rate floors, under which, in return for a premium, one
party agrees to make payments to the other to the extent that interest rates
fall below a specified rate, or "floor"; and interest rate collars, under which
a party sells a cap and purchases a floor or vice versa in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels. Consistent with a Fund's investment objectives and general investment
polices, certain of the Funds may invest in commodity swap agreements. For
example, an investment in a commodity swap agreement may involve the exchange of
floating-rate interest payments for the

                                     - 27 -



total return on a commodity index. In a total return commodity swap, a Fund will
receive the price appreciation of a commodity index, a portion of the index, or
a single commodity in exchange for paying an agreed-upon fee. If the commodity
swap is for one period, a Fund may pay a fixed fee, established at the outset of
the swap. However, if the term of the commodity swap is more than one period,
with interim swap payments, a Fund may pay an adjustable or floating fee. With a
"floating" rate, the fee may be pegged to a base rate, such as the London
Interbank Offered Rate, and is adjusted each period. Therefore, if interest
rates increase over the term of the swap contract, a Fund may be required to pay
a higher fee at each swap reset date.

     A swap option is a contract that gives a counterparty the right (but not
the obligation) in return for payment of a premium, to enter into a new swap
agreement or to shorten, extend, cancel or otherwise modify an existing swap
agreement, at some designated future time on specified terms. Each Fund (except
the Money Market and Liquid Assets Funds) may write (sell) and purchase put and
call swap options.

     Most swap agreements entered into by the Funds would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, a
Fund's current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). A Fund's current obligations under a swap agreement will be
accrued daily (offset against any amounts owed to the Fund) and any accrued but
unpaid net amounts owed to a swap counterparty will be covered by the
segregation of assets determined to be liquid by PIMCO in accordance with
procedures established by the Board of Trustees, to avoid any potential
leveraging of the Fund's portfolio. Obligations under swap agreements so covered
will not be construed to be "senior securities" for purposes of the Fund's
investment restriction concerning senior securities. A Fund will not enter into
a swap agreement with any single party if the net amount owed or to be received
under existing contracts with that party would exceed 5% of the Fund's assets.

     Whether a Fund's use of swap agreements or swap options will be successful
in furthering its investment objective of total return will depend on PIMCO's
ability to predict correctly whether certain types of investments are likely to
produce greater returns than other investments. Because they are two party
contracts and because they may have terms of greater than seven days, swap
agreements may be considered to be illiquid. Moreover, a Fund bears the risk of
loss of the amount expected to be received under a swap agreement in the event
of the default or bankruptcy of a swap agreement counterparty. The Funds will
enter into swap agreements only with counterparties that meet certain standards
of creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
the Funds' ability to use swap agreements. The swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect a
Fund's ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.

     Depending on the terms of the particular option agreement, a Fund will
generally incur a greater degree of risk when it writes a swap option than it
will incur when it purchases a swap option. When a Fund purchases a swap option,
it risks losing only the amount of the premium it has paid should it decide to
let the option expire unexercised. However, when a Fund writes a swap option,
upon exercise of the option the Fund will become obligated according to the
terms of the underlying agreement.

     Certain swap agreements are exempt from most provisions of the Commodity
Exchange Act ("CEA") and, therefore, are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations approved by the CFTC.
To qualify for this exemption, a swap agreement must be entered into by
"eligible participants," which includes the following, provided the
participants' total assets exceed established levels: a bank or trust company,
savings association or credit union, insurance company, investment company
subject to regulation under the 1940 Act, commodity pool, corporation,
partnership, proprietorship, organization, trust or other entity, employee
benefit plan, governmental entity, broker-dealer, futures commission merchant,
natural person, or regulated foreign person. To be eligible, natural persons and
most other entities must have total assets exceeding $10 million; commodity
pools and employee benefit plans must have assets exceeding $5 million. In
addition, an eligible swap transaction must meet three conditions. First, the
swap agreement may not be part of a fungible class of agreements that are
standardized as to their material economic terms. Second, the creditworthiness
of parties with actual or potential obligations under the swap agreement must be
a material consideration in entering into or

                                     - 28 -



determining the terms of the swap agreement, including pricing, cost or credit
enhancement terms. Third, swap agreements may not be entered into and traded on
or through a multilateral transaction execution facility.

     This exemption is not exclusive, and participants may continue to rely on
existing exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap transactions from regulation as futures
or commodity option transactions under the CEA or its regulations. The Policy
Statement applies to swap transactions settled in cash that (1) have
individually tailored terms, (2) lack exchange-style offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.

     Structured Notes. Structured notes are derivative debt securities, the
interest rate or principal of which is determined by an unrelated indicator.
Indexed securities include structured notes as well as securities other than
debt securities, the interest rate or principal of which is determined by an
unrelated indicator. Indexed securities may include a multiplier that multiplies
the indexed element by a specified factor and, therefore, the value of such
securities may be very volatile. To the extent a Fund invests in these
securities, however, PIMCO analyzes these securities in its overall assessment
of the effective duration of the Fund's portfolio in an effort to monitor the
Fund's interest rate risk.

Hybrid Instruments

     A hybrid instrument can combine the characteristics of securities,
commodities, futures, and options. For example, the principal amount or interest
rate of a hybrid could be tied (positively or negatively) to the price of some
commodity, currency or securities index or another interest rate (each a
"benchmark"). The interest rate or (unlike most fixed income securities) the
principal amount payable at maturity of a hybrid security may be increased or
decreased, depending on changes in the value of the benchmark.

     Hybrids can be used as an efficient means of pursuing a variety of
investment goals, including currency hedging, duration management, and increased
total return. Hybrids may not bear interest or pay dividends. The value of a
hybrid or its interest rate may be a multiple of a benchmark and, as a result,
may be leveraged and move (up or down) more steeply and rapidly than the
benchmark. These benchmarks may be sensitive to economic and political events,
such as commodity shortages and currency devaluations, which cannot be readily
foreseen by the purchaser of a hybrid. Under certain conditions, the redemption
value of a hybrid could be zero. Thus, an investment in a hybrid may entail
significant market risks that are not associated with a similar investment in a
traditional, U.S. dollar-denominated bond that has a fixed principal amount and
pays a fixed rate or floating rate of interest. The purchase of hybrids also
exposes a Fund to the credit risk of the issuer of the hybrids. These risks may
cause significant fluctuations in the net asset value of the Fund. Accordingly,
no Fund will invest more than 5% of its assets in hybrid instruments.

     Certain issuers of structured products such as hybrid instruments may be
deemed to be investment companies as defined in the 1940 Act. As a result, the
Funds' investments in these products will be subject to limits applicable to
investments in investment companies and may be subject to restrictions contained
in the 1940 Act.

Delayed Funding Loans and Revolving Credit Facilities

     Each Fund (except the Money Market, Liquid Assets, and Municipal Bond
Funds) may enter into, or acquire participations in, delayed funding loans and
revolving credit facilities. Delayed funding loans and revolving credit
facilities are borrowing arrangements in which the lender agrees to make loans
up to a maximum amount upon demand by the borrower during a specified term. A
revolving credit facility differs from a delayed funding loan in that as the
borrower repays the loan, an amount equal to the repayment may be borrowed again
during the term of the revolving credit facility. Delayed funding loans and
revolving credit facilities usually provide for floating or variable rates of
interest. These commitments may have the effect of requiring a Fund to increase
its investment in a company at a time when it might not otherwise decide to do
so (including at a time when the company's financial condition makes it unlikely
that such amounts will be repaid). To the extent that a Fund is committed to
advance additional funds, it will at all times segregate assets, determined to
be liquid by PIMCO in accordance with procedures established by the Board of
Trustees, in an amount sufficient to meet such commitments.

                                     - 29 -



     The Funds may invest in delayed funding loans and revolving credit
facilities with credit quality comparable to that of issuers of its securities
investments. Delayed funding loans and revolving credit facilities may be
subject to restrictions on transfer, and only limited opportunities may exist to
resell such instruments. As a result, a Fund may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value. The Funds currently intend to treat delayed funding loans and
revolving credit facilities for which there is no readily available market as
illiquid for purposes of the Funds' limitation on illiquid investments. For a
further discussion of the risks involved in investing in loan participations and
other forms of direct indebtedness see "Loan Participations." Participation
interests in revolving credit facilities will be subject to the limitations
discussed in "Loan Participations." Delayed funding loans and revolving credit
facilities are considered to be debt obligations for purposes of the Trust's
investment restriction relating to the lending of funds or assets by a
Portfolio.

When-Issued, Delayed Delivery and Forward Commitment Transactions

     Each of the Funds may purchase or sell securities on a when-issued, delayed
delivery, or forward commitment basis. When such purchases are outstanding, the
Fund will segregate until the settlement date assets determined to be liquid by
PIMCO in accordance with procedures established by the Board of Trustees, in an
amount sufficient to meet the purchase price. Typically, no income accrues on
securities a Fund has committed to purchase prior to the time delivery of the
securities is made, although a Fund may earn income on securities it has
segregated.

     When purchasing a security on a when-issued, delayed delivery, or forward
commitment basis, the Fund assumes the rights and risks of ownership of the
security, including the risk of price and yield fluctuations, and takes such
fluctuations into account when determining its net asset value. Because the Fund
is not required to pay for the security until the delivery date, these risks are
in addition to the risks associated with the Fund's other investments. If the
Fund remains substantially fully invested at a time when when-issued, delayed
delivery, or forward commitment purchases are outstanding, the purchases may
result in a form of leverage.

     When the Fund has sold a security on a when-issued, delayed delivery, or
forward commitment basis, the Fund does not participate in future gains or
losses with respect to the security. If the other party to a transaction fails
to deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity or could suffer a loss. A Fund may dispose of or renegotiate a
transaction after it is entered into, and may sell when-issued, delayed delivery
or forward commitment securities before they are delivered, which may result in
a capital gain or loss. There is no percentage limitation on the extent to which
the Funds may purchase or sell securities on a when-issued, delayed delivery, or
forward commitment basis.

Short Sales

     Certain of the Funds, particularly the StocksPLUS Short Strategy Fund, may
make short sales of securities as part of their overall portfolio management
strategies involving the use of derivative instruments and to offset potential
declines in long positions in similar securities. A short sale is a transaction
in which a Fund sells a security it does not own in anticipation that the market
price of that security will decline.

     When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any accrued interest and dividends on such borrowed
securities.

     If the price of the security sold short increases between the time of the
short sale and the time and the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. The successful use of short selling may be
adversely affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.

     To the extent that a Fund engages in short sales, it will provide
collateral to the broker-dealer and (except in the case of short sales "against
the box") will maintain additional asset coverage in the form of segregated
assets

                                     - 30 -



determined to be liquid by PIMCO in accordance with procedures established by
the Board of Trustees. Each Fund, except the StocksPLUS Short Strategy Fund,
does not intend to enter into short sales (other than those "against the box")
if immediately after such sale the aggregate of the value of all collateral plus
the amount of the segregated assets exceeds one-third of the value of the Fund's
assets. This percentage may be varied by action of the Trustees. A short sale is
"against the box" to the extent that the Fund contemporaneously owns, or has the
right to obtain at no added cost, securities identical to those sold short. The
Funds will engage in short selling to the extent permitted by the 1940 Act and
rules and interpretations thereunder.

Illiquid Securities

     The Funds may invest up to 15% of their net assets in illiquid securities
(10% in the case of the Money Market and Liquid Assets Funds). The term
"illiquid securities" for this purpose means securities that cannot be disposed
of within seven days in the ordinary course of business at approximately the
amount at which a Fund has valued the securities. Illiquid securities are
considered to include, among other things, written over-the-counter options,
securities or other liquid assets being used as cover for such options,
repurchase agreements with maturities in excess of seven days, certain loan
participation interests, fixed time deposits which are not subject to prepayment
or provide for withdrawal penalties upon prepayment (other than overnight
deposits), and other securities whose disposition is restricted under the
federal securities laws (other than securities issued pursuant to Rule 144A
under the 1933 Act and certain commercial paper that PIMCO has determined to be
liquid under procedures approved by the Board of Trustees).

     Illiquid securities may include privately placed securities, which are sold
directly to a small number of investors, usually institutions. Unlike public
offerings, such securities are not registered under the federal securities laws.
Although certain of these securities may be readily sold, others may be
illiquid, and their sale may involve substantial delays and additional costs.

Loans of Portfolio Securities

     For the purpose of achieving income, each Fund may lend its portfolio
securities to brokers, dealers, and other financial institutions, provided: (i)
the loan is secured continuously by collateral consisting of U.S. Government
securities, cash or cash equivalents (negotiable certificates of deposits,
bankers' acceptances or letters of credit) maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (ii) the Fund may at any time call the loan and obtain the return of the
securities loaned; (iii) the Fund will receive any interest or dividends paid on
the loaned securities; and (iv) the aggregate market value of securities loaned
will not at any time exceed 331/3% of the total assets of the Fund.

Social Investment Policies

     The Low Duration Fund III and Total Return Fund III will not, as a matter
of non-fundamental operating policy, invest in the securities of any issuer
determined by PIMCO to be engaged principally in the provision of healthcare
services, the manufacture of alcoholic beverages, tobacco products,
pharmaceuticals, military equipment, or the operation of gambling casinos. The
Funds will also avoid, to the extent possible on the basis of information
available to PIMCO, the purchase of securities of issuers engaged in the
production or trade of pornographic materials. An issuer will be deemed to be
principally engaged in an activity if it derives more than 10% of its gross
revenues from such activities. Evaluation of any particular issuer with respect
to these criteria may involve the exercise of subjective judgment by PIMCO.
PIMCO's determination of issuers engaged in such activities at any given time
will, however, be based upon its good faith interpretation of available
information and its continuing and reasonable best efforts to obtain and
evaluate the most current information available, and to utilize such
information, as it becomes available, promptly and expeditiously in portfolio
management for the Funds. In making its analysis, PIMCO may rely, among other
things, upon information contained in such publications as those produced by the
Investor Responsibility Research Center, Inc.

                                     - 31 -



                             INVESTMENT RESTRICTIONS

Fundamental Investment Restrictions

     Each Fund's investment objective, except for the Global Bond Fund II, as
set forth in the Prospectuses under "Investment Objectives and Policies,"
together with the investment restrictions set forth below, are fundamental
policies of the Fund and may not be changed with respect to a Fund without
shareholder approval by vote of a majority of the outstanding shares of that
Fund. The term "assets" shall mean "total assets" in the prospectus, or this
SAI.

(1)  A Fund may not concentrate its investments in a particular industry, as
     that term is used in the Investment Company Act of 1940, as amended, and as
     interpreted, modified, or otherwise permitted by regulatory authority
     having jurisdiction, from time to time (except that the Money Market and
     Liquid Assets Funds may concentrate their investments in securities or
     obligations issued by U.S. banks).

(2)  A Fund may not, with respect to 75% of the Fund's total assets, purchase
     the securities of any issuer, except securities issued or guaranteed by the
     U.S. government or any of its agencies or instrumentalities, if, as a
     result (i) more than 5% of the Fund's total assets would be invested in the
     securities of that issuer, or (ii) the Fund would hold more than 10% of the
     outstanding voting securities of that issuer; (This investment restriction
     is not applicable to the Real Return, Real Return Asset, Commercial
     Mortgage Securities, Global Bond, Global Bond II, Foreign Bond, Emerging
     Markets Bond, California Intermediate Municipal Bond, California Municipal
     Bond, and New York Municipal Bond Fund.) For the purpose of this
     restriction, each state and each separate political subdivision, agency,
     authority or instrumentality of such state, each multi-state agency or
     authority, and each guarantor, if any, are treated as separate issuers of
     Municipal Bonds.

(3)  A Fund may not purchase or sell real estate, although it may purchase
     securities secured by real estate or interests therein, or securities
     issued by companies which invest in real estate, or interests therein.

(4)  A Fund may not purchase or sell commodities or commodities contracts or
     oil, gas or mineral programs. This restriction shall not prohibit a Fund,
     subject to restrictions described in the Prospectuses and elsewhere in this
     Statement of Additional Information, from purchasing, selling or entering
     into futures contracts, options on futures contracts, foreign currency
     forward contracts, foreign currency options, or any interest rate,
     securities-related or foreign currency-related hedging instrument,
     including swap agreements and other derivative instruments, subject to
     compliance with any applicable provisions of the federal securities or
     commodities laws (This restriction is not applicable to the Global Bond
     Fund II, but see non-fundamental restriction "F").

(5)  A Fund may borrow money or issue any senior security, only as permitted
     under the Investment Company Act of 1940, as amended, and as interpreted,
     modified, or otherwise permitted by regulatory authority having
     jurisdiction, from time to time.

(6)  A Fund may make loans only as permitted under the Investment Company Act of
     1940, as amended, and as interpreted, modified, or otherwise permitted by
     regulatory authority having jurisdiction, from time to time.

(7)  A Fund may not act as an underwriter of securities of other issuers, except
     to the extent that in connection with the disposition of portfolio
     securities, it may be deemed to be an underwriter under the federal
     securities laws.

(8)  Notwithstanding any other fundamental investment policy or limitation, it
     is a fundamental policy of each Fund that it may pursue its investment
     objective by investing in one or more underlying investment companies or
     vehicles that have substantially similar investment objectives, policies
     and limitations as the Fund.

                                     - 32 -



Non-Fundamental Investment Restrictions

     Each Fund is also subject to the following non-fundamental restrictions and
policies (which may be changed without shareholder approval) relating to the
investment of its assets and activities.

(A)  A Fund may not invest more than 15% of the net assets of a Fund (10% in the
     case of the Money Market and Liquid Assets Funds) (taken at market value at
     the time of the investment) in "illiquid securities," illiquid securities
     being defined to include securities subject to legal or contractual
     restrictions on resale (which may include private placements), repurchase
     agreements maturing in more than seven days, certain loan participation
     interests, fixed time deposits which are not subject to prepayment or
     provide for withdrawal penalties upon prepayment (other than overnight
     deposits), certain options traded over the counter that a Fund has
     purchased, securities or other liquid assets being used to cover such
     options a Fund has written, securities for which market quotations are not
     readily available, or other securities which legally or in PIMCO's opinion
     may be deemed illiquid (other than securities issued pursuant to Rule 144A
     under the Securities Act of 1933 and certain commercial paper that PIMCO
     has determined to be liquid under procedures approved by the Board of
     Trustees).

(B)  A Fund may not purchase securities on margin, except for use of short-term
     credit necessary for clearance of purchases and sales of portfolio
     securities, but it may make margin deposits in connection with covered
     transactions in options, futures, options on futures and short positions.

(C)  A Fund may not invest more than 5% of the assets of a Fund (taken at market
     value at the time of investment) in any combination of interest only,
     principal only, or inverse floating rate securities.

(D)  The Global Bond Fund II may not borrow money in excess of 10% of the value
     (taken at the lower of cost or current value) of the Fund's total assets
     (not including the amount borrowed) at the time the borrowing is made, and
     then only from banks as a temporary measure to facilitate the meeting of
     redemption requests (not for leverage) which might otherwise require the
     untimely disposition of portfolio investments or for extraordinary or
     emergency purposes (Such borrowings will be repaid before any additional
     investments are purchased.); or pledge, hypothecate, mortgage or otherwise
     encumber its assets in excess of 10% of the Fund's total assets (taken at
     cost) and then only to secure borrowings permitted above (The deposit of
     securities or cash or cash equivalents in escrow in connection with the
     writing of covered call or put options, respectively, is not deemed to be
     pledges or other encumbrances. For the purpose of this restriction,
     collateral arrangements with respect to the writing of options, futures
     contracts, options on futures contracts, and collateral arrangements with
     respect to initial and variation margin are not deemed to be a pledge of
     assets and neither such arrangements nor the purchase or sale of futures or
     related options are deemed to be the issuance of a senior security).

(E)  A Fund may not maintain a short position, or purchase, write or sell puts,
     calls, straddles, spreads or combinations thereof, except on such
     conditions as may be set forth in the Prospectuses and in this Statement of
     Additional Information.

(F)  The Global Bond Fund II may not purchase or sell commodities or commodity
     contracts except that the Fund may purchase and sell financial futures
     contracts and related options.

     Currency Hedging. In addition, the Trust has adopted a non-fundamental
policy pursuant to which each Fund that may invest in securities denominated in
foreign currencies, except the Global Bond, and Emerging Markets Bond, and
Convertible Funds, will hedge at least 75% of its exposure to foreign currency
using the techniques described in the Prospectuses. There can be no assurance
that currency hedging techniques will be successful.

     Under the 1940 Act, a "senior security" does not include any promissory
note or evidence of indebtedness where such loan is for temporary purposes only
and in an amount not exceeding 5% of the value of the total assets of the issuer
at the time the loan is made. A loan is presumed to be for temporary purposes if
it is repaid within sixty days and is not extended or renewed. To the extent
that borrowings for temporary administrative purposes exceed

                                     - 33 -


5% of the total assets of a Fund (except the Global Bond Fund II), such excess
shall be subject to the 300% asset coverage requirement.

     To the extent a Fund covers its commitment under a reverse repurchase
agreement (or economically similar transaction) by the segregation of assets
determined to be liquid in accordance with procedures adopted by the Trustees,
equal in value to the amount of the Fund's commitment to repurchase, such an
agreement will not be considered a "senior security" by the Fund and therefore
will not be subject to the 300% asset coverage requirement otherwise applicable
to borrowings by the Fund.

     The staff of the SEC has taken the position that purchased over-the-counter
("OTC") options and the assets used as cover for written OTC options are
illiquid securities. Therefore, the Funds have adopted an investment policy
pursuant to which a Fund will not purchase or sell OTC options if, as a result
of such transactions, the sum of: 1) the market value of OTC options currently
outstanding which are held by the Fund, 2) the market value of the underlying
securities covered by OTC call options currently outstanding which were sold by
the Fund and 3) margin deposits on the Fund's existing OTC options on futures
contracts, exceeds 15% of the net assets of the Fund, taken at market value,
together with all other assets of the Fund which are illiquid or are otherwise
not readily marketable. However, if an OTC option is sold by the Fund to a
primary U.S. Government securities dealer recognized by the Federal Reserve Bank
of New York and if the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities equal to
the repurchase price less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying securities minus the option's
strike price). The repurchase price with the primary dealers is typically a
formula price which is generally based on a multiple of the premium received for
the option, plus the amount by which the option is "in-the-money." This policy
is not a fundamental policy of the Funds and may be amended by the Trustees
without the approval of shareholders. However, the Funds will not change or
modify this policy prior to the change or modification by the SEC staff of its
position.

     Unless otherwise indicated, all limitations applicable to Fund investments
(as stated above and elsewhere in this Statement of Additional Information)
apply only at the time a transaction is entered into. Any subsequent change in a
rating assigned by any rating service to a security (or, if unrated, deemed to
be of comparable quality), or change in the percentage of Fund assets invested
in certain securities or other instruments, or change in the average duration of
a Fund's investment portfolio, resulting from market fluctuations or other
changes in a Fund's total assets will not require a Fund to dispose of an
investment until PIMCO determines that it is practicable to sell or close out
the investment without undue market or tax consequences to the Fund. In the
event that ratings services assign different ratings to the same security, PIMCO
will determine which rating it believes best reflects the security's quality and
risk at that time, which may be the higher of the several assigned ratings.

     The Funds interpret their policy with respect to the purchase and sale of
commodities or commodities contracts under Fundamental Investment Restriction
No. 4 above to permit the Funds, subject to each Fund's investment objectives
and general investment policies (as stated in the prospectus and elsewhere in
this Statement of Additional Information), to invest in commodity futures
contracts and options thereon and commodity-related swap agreements.

     The Funds interpret their policies with respect to borrowing and lending to
permit such activities as may be lawful for the Funds, to the full extent
permitted by the 1940 Act or by exemption from the provisions therefrom pursuant
to exemptive order of the SEC. The Funds have filed an application seeking an
order from the SEC to permit the Funds to enter into transactions among
themselves with respect to the investment of daily cash balances of the Funds in
shares of the money market and/or short-term bond funds, as well as the use of
daily excess cash balances of the money market and/or short-term bond funds in
inter-fund lending transactions with the other Funds for temporary cash
management purposes. The interest paid by a Fund in such an arrangement will be
less than that otherwise payable for an overnight loan, and will be in excess of
the overnight rate the money market and/or short-term bond funds could otherwise
earn as lender in such a transaction.

Non-Fundamental Operating Policies Relating to the Sale of Shares of Total
Return Fund in Japan

     In connection with an offering of Administrative Class shares of the Total
Return Fund in Japan, the Trust has adopted the following non-fundamental
operating policies (which may be changed without shareholder

                                     - 34 -



approval) with respect to the Total Return Fund. These non-fundamental policies
will remain in effect only so long as (i) they are required in accordance with
standards of the Japanese Securities Dealers Association and (ii) shares of the
Total Return Fund are being offered in Japan.

(1)  The Trust will not sell shares of the Total Return Fund in Japan except
     through PIMCO Funds Distributors LLC.

(2)  The Trust has appointed, and will maintain the appointment of, a bank or
     trust company as the place for safe-keeping of its assets in connection
     with the Total Return Fund.

(3)  The Tokyo District Court shall have the jurisdiction over any and all
     litigation related to transactions in any class of shares of the Total
     Return Fund acquired by Japanese investors as required by Article 26, Item
     4 of the Rules Concerning Transactions of Foreign Securities of the Japan
     Securities Dealers Association.

(4)  The Total Return Fund may not make short sales of securities or maintain a
     short position for the account of the Fund unless the total current value
     of the securities being the subject of short sales or of the short position
     is equal to or less than the net asset value of the Total Return Fund.

(5)  The Total Return Fund may not borrow money in excess of 10% of the value
     (taken at the lower of cost or current value) of its total assets (not
     including the amount borrowed) at the time the borrowing is made, except
     for extraordinary or emergency purposes, such as in the case of a merger,
     amalgamation or the like.

(6)  The Total Return Fund may not acquire more than 50% of the outstanding
     voting securities of any issuer, if aggregated with the portion of holding
     in such securities by any and all other mutual funds managed by PIMCO.

(7)  The Total Return Fund may not invest more than 15% of its total assets in
     voting securities privately placed, mortgage securities or unlisted voting
     securities which cannot be readily disposed of. This restriction shall not
     be applicable to securities determined by PIMCO to be liquid and for which
     a market price (including a dealer quotation) is generally obtainable or
     determinable.

(8)  None of the portfolio securities of the Total Return Fund may be purchased
     from or sold or loaned to any Trustee of the Trust, PIMCO, acting as
     investment adviser of the Trust, or any affiliate thereof or any of their
     directors, officers or employees, or any major shareholder thereof (meaning
     a shareholder who holds to the actual knowledge of PIMCO, on his own
     account whether in his own or other name (as well as a nominee's name), 10%
     or more of the total issued outstanding shares of such a company) acting as
     principal or for their own account unless the transaction is made within
     the investment restrictions set forth in the Fund's prospectus and
     statement of additional information and either (i) at a price determined by
     current publicly available quotations (including a dealer quotation) or
     (ii) at competitive prices or interest rates prevailing from time to time
     on internationally recognized securities markets or internationally
     recognized money markets (including a dealer quotation).

     All percentage limitations on investments described in the restrictions
relating to the sale of shares in Japan will apply at the time of the making of
an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment. If any violation of the foregoing investment restrictions occurs,
the Trust will, promptly after discovery of the violation, take such action as
may be necessary to cause the violation to cease, which shall be the only
obligation of the Trust and the only remedy in respect of the violation.

     If any of the foregoing standards shall, at any time when shares of the
Total Return Fund are being offered for subscription by the Trust in Japan or
thereafter, no longer be required in accordance with the standards of the
Japanese Securities Dealers Association, then such standards shall no longer
apply.

                             MANAGEMENT OF THE TRUST

                                     - 35 -



Trustees and Officers

     The business of the Trust is managed under the direction of the Trust's
Board of Trustees. Subject to the provisions of the Trust's Declaration of
Trust, its By-Laws and Massachusetts law, the Trustees have all powers necessary
and convenient to carry out this responsibility, including the election and
removal of the Trust's officers.

     The Trustees and Executive Officers of the Trust, their ages, their
business address and a description of their principal occupations during the
past five years are listed below. Unless otherwise indicated, the address of all
persons below is 840 Newport Center Drive, Suite 300, Newport Beach, California
92660.


                                                         Position with                        Principal Occupation(s)
Name, Address and Age                                      the Trust                         During the Past Five Years
-----------------------------------------------------------------------------------------------------------------------------------
Brent R. Harris*                                  Chairman of the  Board and      Managing Director, PIMCO.  Board of Governors,
Age 42                                            Trustee                         Investment Company Institute; Chairman and
                                                                                  Director, PIMCO Commercial Mortgage Securities
                                                                                  Trust, Inc.; Chairman and Trustee, PIMCO
                                                                                  Variable Insurance Trust.

R. Wesley Burns*                                  President and Trustee           Managing Director, PIMCO.  President and
Age 42                                                                            Director, PIMCO Commercial Mortgage Securities
                                                                                  Trust, Inc.; President and Trustee, PIMCO
                                                                                  Variable Insurance Trust.  Formerly, Executive
                                                                                  Vice President, PIMCO and PIMCO Funds:
                                                                                  Multi-Manager Series.

Guilford C. Babcock+                              Trustee                         Private Investor.  Director, PIMCO Commercial
Age 71                                                                            Mortgage Securities Trust, Inc.; Trustee, PIMCO
                                                                                  Variable Insurance Trust; Director, Growth Fund
                                                                                  of America and Fundamental Investors Fund of
                                                                                  the Capital Group; Director, Good Hope Medical
                                                                                  Foundation.  Formerly, Associate Professor of
                                                                                  Finance, University of Southern California.

E. Philip Cannon+                                 Trustee                         Proprietor, Cannon & Company, an affiliate of
Age 61                                                                            Inverness Management LLC, (a private equity
                                                                                  investment firm).  Director, PIMCO Commercial
                                                                                  Mortgage Securities Trust, Inc.; Trustee, PIMCO
                                                                                  Variable Insurance Trust; Trustee of PIMCO
                                                                                  Funds:  Multi-Manager Series.  Formerly,
                                                                                  Headmaster, St. John's School, Houston, Texas;
                                                                                  Trustee of PIMCO Advisors Funds and Cash
                                                                                  Accumulation Trust.

Vern O. Curtis+                                   Trustee                         Private Investor.  Director, PIMCO Commercial
Age 67                                                                            Mortgage Securities Trust, Inc.; Trustee, PIMCO
                                                                                  Variable Insurance Trust; Director, Public
                                                                                  Storage Business Parks, Inc., (a Real Estate
                                                                                  Investment Trust); Director, Fresh Choice, Inc.
                                                                                  (restaurant company).  Formerly, charitable
                                                                                  work, The Church of Jesus Christ of Latter-day
                                                                                  Saints.


                                     - 36 -

Position with Principal Occupation(s)
Name, Address and Age the Trust During the Past Five Years
-----------------------------------------------------------------------------------------------------------------------------------
J. Michael Hagan+ Trustee Private Investor. Director, PIMCO Commercial
Age 62 Mortgage Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust. Board of Directors
for Ameron International (manufacturing),
Freedom Communications, Remedy Temp (staffing)
and Saint Gobain Company. Member of the Board
of Regents at Santa Clara University, the Board
of Taller San Jose, and the Board of Trustees
of the South Coast Repertory Theater.
Formerly, Chairman and CEO, Furon Company
(manufacturing).

Thomas P. Kemp+ Trustee Private Investor. Director, PIMCO Commercial
Age 71 Mortgage Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust. Formerly,
Co-Chairman, U.S. Committee to Assist Russian
Reform; Director, Union Financial Corp.

William J. Popejoy+ Trustee President, Pacific Capital Investors; Chairman,
Age 64 PacPro (vinyl assembly products; formerly
Western Printing). Director, PIMCO Commercial
Mortgage Securities Trust, Inc.; Trustee, PIMCO
Variable Insurance Trust. Formerly, Director,
California State Lottery; Chief Executive
Officer, Orange County, California.

Michael G. Dow Senior Vice President Senior Vice President, PIMCO. Formerly, Fixed
Age 38 Income Specialist, Salomon Brothers, Inc.; Vice
President Operations, Citibank NA Global
Consumer Banking Group.

William H. Gross Senior Vice President Managing Director, PIMCO. Senior Vice
Age 58 President, PIMCO Variable Insurance Trust.

Margaret Isberg Senior Vice President Managing Director, PIMCO.
Age 45

John S. Loftus Senior Vice President Managing Director, PIMCO.
Age 42

Jeffrey M. Sargent Senior Vice President Senior Vice President, PIMCO. Senior Vice
Age 39 President, PIMCO Commercial Mortgage Securities
Trust, Inc. and PIMCO Variable Insurance Trust;
Vice President, PIMCO Funds: Multi-Manager
Series. Formerly, Vice President, PIMCO.

Leland T. Scholey Senior Vice President Senior Vice President, PIMCO. Formerly, Vice
Age 49 President, PIMCO.

Raymond C. Hayes Vice President Vice President, PIMCO. Formerly, Marketing
Age 57 Director, Pacific Financial Asset Management
Corporation.

- 37 -

Thomas J. Kelleher, III Vice President Vice President, PIMCO. Formerly, associated
Age 51 with Delaware Trust, Mellon Bank and Girard
Trust (bank trust departments).

Henrik P. Larsen Vice President Vice President and Manager, Fund
Age 32 Administration, PIMCO. Vice President, PIMCO
Commercial Mortgage Securities Trust, Inc.,
PIMCO Variable Insurance Trust and PIMCO
Funds: Multi-Manager Series. Formerly,
Manager, PIMCO.

Andre J. Mallegol, III Vice President Vice President, PIMCO. Formerly, associated
Age 35 with Fidelity Investments Institutional
Services Company.

Scott Millimet Vice President Vice President, PIMCO. Formerly, Executive
Age 44 Vice President with Back Bay Advisors.

James F. Muzzy Vice President Managing Director, PIMCO. Senior Vice
Age 62 President, PIMCO Variable Insurance Trust.

Douglas J. Ongaro Vice President Vice President, PIMCO. Formerly, Regional
Age 41 Marketing Manager, Charles Schwab & Co., Inc.

David J. Pittman Vice President Vice President, PIMCO. Formerly, a senior
Age 54 executive with Bank of America, the Northern
Trust Co. and NationsBank.

Mark A. Romano Vice President Vice President, PIMCO. Formerly, associated
Age 43 with Wells Fargo's institutional money
management group and First Interstate's
Pacifica family of mutual funds.

Scott M. Spalding Vice President Vice President, PIMCO. Formerly, associated
Age 32 with PacificCare Healthcare Systems.

William S. Thompson, Jr. Vice President Chief Executive Officer and Managing Director,
Age 56 PIMCO. Vice President, PIMCO Commercial
Mortgage Securities Trust, Inc.; Senior Vice
President, PIMCO Variable Insurance Trust.

John P. Hardaway Treasurer Senior Vice President, PIMCO. Treasurer, PIMCO
Age 44 Commercial Mortgage Securities Trust, Inc.,
PIMCO Variable Insurance Trust and PIMCO Funds:
Multi-Manager Series. Formerly, Vice
President, PIMCO.

- 38 -

Erik C. Brown Assistant Treasurer Vice President, PIMCO. Assistant Treasurer,
Age 34 PIMCO Commercial Mortgage Securities Trust,
Inc., PIMCO Variable Insurance Trust and PIMCO
Funds: Multi-Manager Series. Formerly, Senior
Manager with Deloitte and Touche; Manager with
PricewaterhouseCoopers LLC.

Michael J. Willemsen Assistant Secretary Vice President, PIMCO. Assistant Secretary,
Age 42 PIMCO Commercial Mortgage Securities Trust,
Inc. and PIMCO Variable Insurance Trust.
Formerly, Project Lead, PIMCO.

-------------------
* Each of Mr. Harris and Mr. Burns is an "interested person" of the Trust
(as that term is defined in the 1940 Act) because of his affiliations with
PIMCO.
+ Trustees can be reached by mail addressed to their attention at PIMCO at 840
Newport Center Drive, Suite 300, Newport Beach, CA 92660.

Compensation Table

The following table sets forth information regarding compensation received
by the Trustees for the fiscal year ended March 31, 2001.

Aggregate Total Compensation from Trust
Compensation and Fund Complex Paid to
Name and Position from Trust/1/ Trustees/2/
----------------- ------------- -----------
Guilford C. Babcock $60,750 $60,750
Trustee

E. Philip Cannon $66,961/3/ $137,311/4/
Trustee

Vern O. Curtis $63,278 $63,639
Trustee

J. Michael Hagan $60,750 $60,750
Trustee

Thomas P. Kemp $60,750 $60,750
Trustee

William J. Popejoy $60,750 $60,750
Trustee

1 Each Trustee, other than those affiliated with PIMCO or its affiliates,
received an annual retainer of $45,000 plus $3,000 for each Board of
Trustees meeting attended. Effective January 1, 2001, each Trustee, other
than those affiliated with PIMCO or its affiliates, receives an annual
retainer of $60,000 plus $3,000 for each Board of Trustees meeting attended
in person and $500 for each meeting attended telephonically, plus
reimbursement of related expenses. In addition, a Trustee serving as a
Committee Chair, other than those affiliated with PIMCO or its affiliates,
receives an additional annual retainer of $1,500. For the fiscal

- 39 -



     year ended March 31, 2001, the unaffiliated Trustees as a group received
     compensation in the amount of $278,079.

2    Each Trustee also serves as a Director of PIMCO Commercial Mortgage
     Securities Trust, Inc., a registered closed-end management investment
     company, and as a Trustee of PIMCO Variable Insurance Trust, a registered
     open-end management investment company. For their services to PIMCO
     Commercial Mortgage Securities Trust, Inc., the Directors listed above
     received an annual retainer of $6,000 plus $1,000 for each Board of
     Directors meeting attended in person and $500 for each meeting attended
     telephonically, plus reimbursement of related expenses. In addition, a
     Director serving as a Committee Chair, other than those affiliated with
     PIMCO or its affiliates, receives an additional annual retainer of $500.
     For the fiscal year ended December 31, 2000, the unaffiliated Directors as
     a group received compensation in the amount of $48,852.

     The Trustees listed above, for their services as Trustees of PIMCO Variable
     Insurance Trust, receive an annual retainer of $4,000 plus $1,500 for each
     Board of Trustees meeting attended in person and $500 for each meeting
     attended telephonically, plus reimbursement of related expenses. In
     addition, a Trustee serving as a Committee Chair, other than those
     affiliated with PIMCO or its affiliates, receives an additional annual
     retainer of $500. For the fiscal year ended December 31, 2000, the
     unaffiliated Trustees as a group received compensation in the amount of
     $48,852.

3    The Trust, PIMCO Commercial Mortgage Securities Trust, Inc., and PIMCO
     Variable Insurance Trust have adopted a deferred compensation plan. For
     fiscal year ended December 31, 2000, Mr. Cannon elected to have $5,500 and
     $5,000 in compensation deferred from the PIMCO Commercial Mortgage
     Securities Trust, Inc. and PIMCO Variable Insurance Trust, respectively.
     For fiscal year ended March 31, 2001, Mr. Cannon elected to have $46,500 in
     compensation from the Trust deferred.

4    Mr. Cannon also serves as a Trustee of PIMCO Funds: Multi-Manager Series
     which has adopted a deferred compensation plan. For the fiscal year ended
     December 31, 2000, Mr. Cannon elected to have $61,000 in compensation from
     that Trust deferred.

Investment Adviser

     Pacific Investment Management Company LLC ("PIMCO"), a Delaware limited
liability company, serves as investment adviser to the Funds pursuant to an
investment advisory contract ("Advisory Contract") between PIMCO and the Trust.
PIMCO is a subsidiary of Allianz Dresdner Asset Management of America L.P.
("ADAM of America"). ADAM of America was organized as a limited partnership
under Delaware law in 1987. ADAM of America's sole general partner is Allianz
PacLife Partners LLC. Allianz-Paclife Partners LLC is a Delaware limited
liability company with two members, ADAM U.S. Holding LLC, a Delaware limited
liability company and Pacific Asset Management LLC, a Delaware limited liability
company. ADAM U.S. Holding LLC is a wholly-owned subsidiary of Allianz Dresdner
Asset Management of America LLC which is a wholly-owned subsidiary of Allianz of
America, Inc., which is wholly owned by Allianz AG. Pacific Asset Management LLC
is a wholly-owned subsidiary of Pacific Life Insurance Company, which is a
wholly-owned subsidiary of Pacific Mutual Holding Company.

     PIMCO is located at 840 Newport Center Drive, Suite 300, Newport Beach,
California 92660. PIMCO had approximately $241.3 billion of assets under
management as of December 31, 2001.

     Allianz AG is a European based insurance and financial services holding
company and a publicly traded German company. As of December 31, 2001, the
Allianz Group (including PIMCO) had assets under management of more than $1.02
trillion.

     Significant institutional shareholders of Allianz AG currently include
Munchener Ruckversicherungs-Gesellschaft AG ("Munich Re") and Bayerische
Hypo-und Vereinsbank AG ("HypoVereinsbank"). Allianz has significant holdings in
BASF AG, Bayer AG, Daimler Chrysler, Deutsche Bank AG and Schering AG. These
entities as well as certain broker-dealers that might be controlled by or
affiliated with Allianz AG or these entities (collectively, the "Affiliated
Brokers"), may be considered to be affiliated persons of PIMCO. Absent an SEC

                                     - 40 -



exemption or other relief, the Funds generally are precluded from effecting
principal transactions with the Affiliated Brokers, and its ability to purchase
securities being underwritten by an Affiliated Broker or to utilize the
Affiliated Brokers for agency transactions is subject to restrictions. PIMCO
does not believe that the restrictions on transactions with the Affiliated
Brokers described above materially adversely affect its ability to provide
services to the Funds, the Funds' ability to take advantage of market
opportunities, or the Funds' overall performance.

Advisory Agreement

     PIMCO is responsible for making investment decisions and placing orders for
the purchase and sale of the Trust's investments directly with the issuers or
with brokers or dealers selected by it in its discretion. See "Portfolio
Transactions." PIMCO also furnishes to the Board of Trustees, which has overall
responsibility for the business and affairs of the Trust, periodic reports on
the investment performance of each Fund.

     Under the terms of the Advisory Contract, PIMCO is obligated to manage the
Funds in accordance with applicable laws and regulations. The investment
advisory services of PIMCO to the Trust are not exclusive under the terms of the
Advisory Contract. PIMCO is free to, and does, render investment advisory
services to others. The current Advisory Contract, dated May 5, 2000, as
supplemented from time to time, was last approved by the Board of Trustees,
including a majority of the Trustees who are not parties to the Advisory
Contract or interested persons of such parties ("Independent Trustees"), at a
meeting held on August 21, 2001.

     PIMCO is responsible for determining how the assets of the Strategic
Balanced Fund are allocated and reallocated from time to time between the
Underlying Funds. The Fund does not pay any fees to PIMCO in return for these
services under the Advisory Agreement. The Fund does, however, indirectly pay a
proportionate share of the advisory fees paid to PIMCO by the Underlying Funds
in which the Fund invests.

     The Advisory Contract will continue in effect on a yearly basis provided
such continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Trust or by the Board of Trustees and (ii)
by a majority of the Independent Trustees. The Advisory Contract may be
terminated without penalty by vote of the Trustees or the shareholders of the
Trust, or by PIMCO, on 60 days' written notice by either party to the contract
and will terminate automatically if assigned.

     PIMCO currently receives a monthly investment advisory fee from each Fund
at an annual rate based on average daily net assets of the Funds as follows:


                                                                                   Advisory
Fund                                                                               Fee Rate
----                                                                               --------
Liquid Assets Fund                                                                   0.10%

Money Market Fund                                                                    0.15%

Short Duration Municipal Income Fund                                                 0.20%

Commercial Mortgage Securities, Convertible, StocksPLUS
  and StocksPLUS Short Strategy Funds                                                0.40%

Emerging Markets Bond Fund                                                           0.45%

Real Return Asset and European Convertible Fund                                      0.50%

All other Funds                                                                      0.25%

     For the fiscal years ended March 31, 2001, 2000 and 1999, the aggregate
amount of the advisory fees paid by each operational Fund was as follows:

                                     - 41 -



                                                                 Year Ended        Year Ended           Year Ended
Fund                                                               3/31/01           3/31/00              3/31/99
----                                                               -------           -------              -------
Money Market Fund                                                 $  595,731         $  754,997            $ 364,480
Short-Term Fund                                                    1,707,119          1,610,960            1,163,042
Low Duration Fund                                                 10,648,205         10,480,477            8,636,635
Low Duration Fund II                                               1,517,422          1,154,518            1,060,930
Low Duration Fund III                                                 99,814             69,310               61,917
GNMA                                                                  20,257             10,454                9,728
Moderate Duration Fund                                             1,179,075            859,866              685,876
Real Return Fund                                                   1,358,282            286,410               37,011
Total Return Fund                                                 89,506,328         72,341,826           55,229,968
Total Return Fund II                                               3,840,097          2,997,701            2,107,392
Total Return Fund III                                              1,970,439          1,435,291            1,045,573
Total Return Mortgage Fund                                            41,637             10,026                9,766
High Yield Fund                                                    7,084,431          8,796,696            6,323,956
Investment Grade Corporate Bond Fund                                  12,277                N/A                  N/A
Long-Term U.S. Government Fund                                     1,026,205            863,294              419,981
Short Duration Municipal Income Fund                                  26,241             12,387                  N/A
Municipal Bond Fund                                                  153,408            140,711              107,083
California Intermediate Municipal Bond Fund                          235,549              6,312                  N/A
California Municipal Bond Fund                                        23,189                N/A                  N/A
New York Municipal Bond Fund                                           8,227              4,402                  N/A
Global Bond Fund                                                     731,816            682,166              666,901
Global Bond Fund II                                                  191,774            143,465              106,821
Foreign Bond Fund                                                  1,477,689          1,455,350            1,325,590
Emerging Markets Bond Fund                                           211,416             86,725               19,121
European Convertible Fund                                              8,367                N/A                  N/A
Strategic Balanced Fund                                              217,176            526,900              201,742
Convertible Fund                                                     592,451            266,262                  N/A
StocksPLUS Fund                                                    5,319,379          5,710,564            3,432,600

Fund Administrator

     PIMCO also serves as Administrator to the Funds pursuant to an
administration agreement (the "Administration Agreement") with the Trust. PIMCO
provides the Funds with certain administrative and shareholder services
necessary for Fund operations and is responsible for the supervision of other
Fund service providers. PIMCO may in turn use the facilities or assistance of
its affiliates to provide certain services under the Administration Agreement,
on terms agreed between PIMCO and such affiliates. The administrative services
provided by PIMCO include but are not limited to: (1) shareholder servicing
functions, including preparation of shareholder reports and communications, (2)
regulatory compliance, such as reports and filings with the SEC and state
securities commissions, and (3) general supervision of the operations of the
Funds, including coordination of the services performed by the Funds' transfer
agent, custodian, legal counsel, independent accountants, and others. PIMCO (or
an affiliate of PIMCO) also furnishes the Funds with office space facilities
required for conducting the business of the Funds, and pays the compensation of
those officers, employees and Trustees of the Trust affiliated with PIMCO. In
addition, PIMCO, at its own expense, arranges for the provision of legal, audit,
custody, transfer agency and other services for the Funds, and is responsible
for the costs of registration of the Trust's shares and the printing of
prospectuses and shareholder reports for current shareholders. PIMCO has
contractually agreed to provide these services, and to bear these expenses, at
the following rates for each Fund (each expressed as a percentage of the Fund's
average daily net assets attributable to its classes of shares on an annual
basis):


                                                                          Administrative Fee Rate
                                                                          -----------------------
                                                        Institutional and     Class A, B                      Class
Fund                                                  Administrative Class       and C        Class D*       J and K
----                                                  --------------------       -----        -------        -------
Liquid Assets Fund                                            0.05%               N/A            N/A           N/A
Money Market Fund                                             0.20%              0.35%          0.45%         0.25%
Short-Term Fund                                               0.20%              0.35%          0.50%         0.25%

                                     - 42 -



                                                                          Administrative Fee Rate
                                                                          -----------------------
                                                        Institutional and     Class A, B                      Class
Fund                                                  Administrative Class       and C        Class D*       J and K
----                                                  --------------------       -----        -------        -------
Low Duration and Total Return Funds                           0.18%              0.40%          0.50%         0.25%
Moderate Duration Fund                                        0.20%              0.40%          0.65%         0.25%
Short Duration Municipal Income Fund                          0.19%              0.35%          0.60%         0.25%
Municipal Bond Fund                                           0.24%              0.35%          0.60%         0.25%
California Intermediate Municipal Bond, California            0.22%              0.35%          0.60%         0.25%
Municipal Bond and New York Municipal Bond Funds
Global Bond and Global Bond II Funds                          0.30%              0.45%          0.70%         0.30%
Foreign Bond Fund                                             0.25%              0.45%          0.70%         0.25%
Emerging Markets Bond Fund                                    0.40%              0.55%          0.80%         0.30%
Strategic Balanced Fund                                       0.05%              0.40%          0.65%         0.25%
GNMA Fund                                                     0.25%              0.50%          0.75%         0.25%
Real Return Fund                                              0.20%              0.40%          0.65%         0.25%
Real Return Fund II                                           0.20%              0.40%          0.65%          N/A
Real Return Asset Fund                                        0.25%              0.40%          0.65%          N/A
All other Funds                                               0.25%              0.40%          0.65%         0.25%


------------------------
*    As described below, the Administration Agreement includes a plan adopted
     under Rule 12b-1 which provides for the payment of up to 0.25% of the Class
     D Administrative Fee rate as reimbursement for expenses in respect of
     activities that may be deemed to be primarily intended to result in the
     sale of Class D shares.

     Except for the expenses paid by PIMCO, the Trust bears all costs of its
operations. The Funds are responsible for: (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 or its subsidiaries or
affiliates; (ii) taxes and governmental fees; (iii) brokerage fees and
commissions and other portfolio transaction expenses; (iv) costs of borrowing
money, including interest expenses; (v) fees and expenses of the Trustees who
are not "interested persons" of PIMCO 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 ("Class-specific expenses").

     Class-specific expenses include distribution and service fees payable with
respect to different classes of shares and administrative fees as described
above, and may include certain other expenses as permitted by the Trust's
Amended and Restated Multi-Class Plan adopted pursuant to Rule 18f-3 under the
1940 Act and subject to review and approval by the Trustees.

     The Administration Agreement may be terminated by the Trustees, or by a
vote of a majority of the outstanding voting securities of the Trust, Fund, or
Class as applicable, at any time on 60 days' written notice. Following the
expiration of the one-year period commencing with the effectiveness of the
Administration Agreement, it may be terminated by PIMCO, also on 60 days'
written notice.

     The Strategic Balanced Fund indirectly pays a proportionate share of the
administrative fees paid to PIMCO by the Underlying Funds in which the Fund
invests.

     The Administration Agreement is subject to annual approval by the Board,
including a majority of the Trust's Independent Trustees (as that term is
defined in the 1940 Act). The current Administration Agreement, dated May 5,
2000, as supplemented from time to time, was last approved by the Board of
Trustees, including all of the Independent Trustees at a meeting held on August
21, 2001. In approving the Administration Agreement, the Trustees determined
that: (1) the Administration Agreement is in the best interests of the Funds and
their shareholders; (2) the services to be performed under the Agreement are
services required for the operation of the Funds; (3) PIMCO is able to provide,
or to procure, services for the Funds which are at least equal in nature and
quality to services that could be provided by others; and (4) the fees to be
charged pursuant to the Agreement are fair and reasonable in light of the usual
and customary charges made by others for services of the same nature and
quality.

                                     - 43 -



     For the fiscal years ended March 31, 2001, 2000 and 1999, the aggregate
amount of the administrative fees paid by each operational Fund was as follows:


                                                               Year Ended           Year Ended           Year Ended
Fund                                                             3/31/01              3/31/00              3/31/99
----                                                             -------              -------              -------
Money Market Fund                                              $1,055,918          $1,325,685             $ 731,013
Short-Term Fund                                                 1,529,935           1,445,630             1,024,794
Low Duration Fund                                               8,636,136           8,469,311             6,841,437
Low Duration Fund II                                            1,513,253           1,154,518             1,060,930
Low Duration Fund III                                              99,853              69,259                61,917
GNMA                                                               20,262              10,454                 9,728
Moderate Duration Fund                                            943,260             687,893               548,701
Real Return Fund                                                1,559,146             333,697                48,397
Total Return Fund                                              73,048,093          58,764,667            43,425,035
Total Return Fund II                                            3,839,588           2,997,701             2,107,391
Total Return Fund III                                           1,970,778           1,435,291             1,045,572
Total Return Mortgage Fund                                         43,807              10,179                 9,937
High Yield Fund                                                 8,316,046          10,201,282             7,243,110
Long-Term U.S. Government Fund                                  1,199,085           1,007,625               508,159
Investment Grade Corporate Bond Fund                               12,277                 N/A                   N/A
Short Duration Municipal Income Fund                               24,945              11,770                   N/A
Municipal Bond Fund                                               196,287             189,404               145,118
California Intermediate Municipal Bond Fund                       257,061               6,412                   N/A
California Municipal Bond Fund                                     22,381                 N/A                   N/A
New York Municipal Bond Fund                                        7,942               4,234                   N/A
Global Bond Fund                                                  878,179             818,605               800,281
Global Bond Fund II                                               247,485             192,384               151,390
Foreign Bond Fund                                               1,757,855           1,668,942             1,454,801
Emerging Markets Bond Fund                                        191,697              79,064                18,034
European Convertible Fund                                           4,154                 N/A                   N/A
Strategic Balanced Fund                                           223,761             353,282               126,263
Convertible Fund                                                  405,525             172,987                   N/A
StocksPLUS Fund                                                 4,439,129           4,783,693             2,757,948


     Under the Administration Agreement, the Administrator or an affiliate may
pay financial service firms a portion of the Class D administration fees in
return for the firms' services (normally not to exceed an annual rate of 0.35%
of a Fund's average daily net assets attributable to Class D shares purchase
through such firms). The Administration Agreement includes a plan specific to
Class D shares that has been adopted in conformity with the requirements set
forth under Rule 12b-1 of the 1940 Act to allow for payment of up to 0.25% per
annum of the Class D administrative fees as reimbursement for expenses in
respect of activities that may be deemed to be primarily intended to result in
the sale of Class D shares. The principal types of activities for which such
payments may be made are services in connection with the distribution and
marketing of Class D shares and/or the provision of shareholder services. See
"Distribution of Trust Shares - Plan for Class D Shares."

                          DISTRIBUTION OF TRUST SHARES

Distributor and Multi-Class Plan

     PIMCO Funds Distributors LLC (the "Distributor") serves as the principal
underwriter of each class of the Trust's shares pursuant to a distribution
contract ("Distribution Contract") with the Trust which is subject to annual
approval by the Board. The Distributor is an indirect subsidiary of PIMCO
Advisors. The Distributor, located at 2187 Atlantic Street, Stamford,
Connecticut 06902, is a broker-dealer registered with the Securities and
Exchange Commission. The Distribution Contract is terminable with respect to a
Fund or class without penalty, at any time,

                                     - 44 -



by the Fund or class by not more than 60 days' nor less than 30 days' written
notice to the Distributor, or by the Distributor upon not more than 60 days' nor
less than 30 days' written notice to the Trust. The Distributor is not obligated
to sell any specific amount of Trust shares.

     The Distribution Contract will continue in effect with respect to each Fund
and each class of shares thereof for successive one-year periods, provided that
each such continuance is specifically approved (i) by the vote of a majority of
the Trustees who are not interested persons of the Trust (as defined in the 1940
Act) and who have no direct or indirect financial interest in the Distribution
Contract, the Administration Agreement or the Distribution and/or Servicing
Plans described below; and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose. If the
Distribution Contract is terminated (or not renewed) with respect to one or more
Funds or classes thereof, it may continue in effect with respect to any class of
any Fund as to which it has not been terminated (or has been renewed).

     The Trust offers eight classes of shares: Class A, Class B, Class C, Class
D, Class J, Class K, the Institutional Class and the Administrative Class.

     Class A, Class B and Class C shares of the Trust are offered through firms
("participating brokers") which are members of the National Association of
Securities Dealers, Inc. ("NASD"), and which have dealer agreements with the
Distributor, or which have agreed to act as introducing brokers for the
Distributor ("introducing brokers").

     Class D shares are generally offered to clients of financial service firms,
such as broker-dealers or registered investment advisors, with which the
Distributor has an agreement for the use of PIMCO Funds: Pacific Investment
Management Series in particular investment products, programs or accounts for
which a fee may be charged.

     Class J and Class K shares are offered only to non-U.S. investors outside
the United States. Class J and Class K shares are offered through foreign broker
dealers, banks and other financial institutions and are offered to non-U.S.
investors as well as through various non-U.S. investment products, programs or
accounts for which a fee may be charged by investment intermediaries in addition
to those described in the Prospectus and SAI.

     Institutional Class shares are offered primarily for direct investment by
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, corporations and high net worth individuals.
(Institutional Class shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to the customer's investment in the Funds.) Administrative Class shares
are offered primarily through employee benefit plans alliances, broker-dealers,
and other intermediaries, and each Fund pays service or distribution fees to
such entities for services they provide to Administrative Class shareholders.

     The Trust has adopted an Amended and Restated Multi-Class Plan
("Multi-Class Plan") pursuant to Rule 18f-3 under the 1940 Act. Under the
Multi-Class Plan, shares of each class of each Fund represent an equal pro rata
interest in such Fund and, generally, have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class has a
different designation; (b) each class of shares bears any class-specific
expenses allocated to it; and (c) each class has exclusive voting rights on any
matter submitted to shareholders that relates solely to its distribution or
service arrangements, and each class has separate voting rights on any matter
submitted to shareholders in which the interests of one class differ from the
interests of any other class.

     Each class of shares bears any class specific expenses allocated to such
class, such as expenses related to the distribution and/or shareholder servicing
of such class. In addition, each class may, at the Trustees' discretion, also
pay a different share of other expenses, not including advisory or custodial
fees or other expenses related to the management of the Trust's assets, if these
expenses are actually incurred in a different amount by that class, or if the
class receives services of a different kind or to a different degree than the
other classes. All other expenses are allocated to each class on the basis of
the net asset value of that class in relation to the net asset value of the

                                     - 45 -



particular Fund. In addition, each class may have a differing sales charge
structure, and differing exchange and conversion features.

Initial Sales Charge and Contingent Deferred Sales Charge

     As described in the Class A, B and C Prospectus under the caption
"Investment Options (Class A, B and C Shares)," Class A shares of the Trust
(except with respect to the Money Market Fund) are sold pursuant to an initial
sales charge, which declines as the amount of purchase reaches certain defined
levels. For the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Distributor received an aggregate of $6,167,114, $4,625,293 and
$6,227,864, respectively, and retained $949,986, $618,123 and $750,751,
respectively, in initial sales charges paid by Class A shareholders of the
Trust.

     As described in the Class A, B and C Prospectus under the caption
"Investment Options (Class A, B and C Shares)," a contingent deferred sales
charge is imposed upon certain redemptions of the Class A, Class B and Class C
shares. No contingent deferred sales charge is currently imposed upon
redemptions of Class D, Institutional Class or Administrative Class shares.
Because contingent deferred sales charges are calculated on a fund-by-fund
basis, shareholders should consider whether to exchange shares of one fund for
shares of another fund prior to redeeming an investment if such an exchange
would reduce the contingent deferred sales charge applicable to such
redemptions.

     During the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Distributor received the following aggregate amounts in contingent
deferred sales charges on Class A shares, Class B shares and Class C shares of
the Funds:


                                              Year Ended      Year Ended         Year Ended
                                                3/31/01         3/31/00           3/31/99
                                                -------         -------           -------
         Class A                                $1,295,898     $  337,940          $ 37,142

         Class B                                 5,221,113      5,822,553         1,653,443

         Class C                                   508,383      1,077,578           543,223

     In certain cases described in the Class A, B and C Prospectus, the
contingent deferred sales charge is waived on redemptions of Class A, Class B or
Class C shares for certain classes of individuals or entities on account of (i)
the fact that the Trust's sales-related expenses are lower for certain of such
classes than for classes for which the contingent deferred sales charge is not
waived, (ii) waiver of the contingent deferred sales charge with respect to
certain of such classes is consistent with certain Internal Revenue Code
policies concerning the favored tax treatment of accumulations, and (iii) with
respect to certain of such classes, considerations of fairness, and competitive
and administrative factors.

Distribution and Servicing Plans for Class A, Class B and Class C Shares

     As stated in the text of the Class A, B and C Prospectus under the caption
"Management of the Trust--Distribution and Servicing (12b-1) Plans," Class A,
Class B and Class C shares of the Trust are continuously offered through
participating brokers which are members of the NASD and which have dealer
agreements with the Distributor, or which have agreed to act as introducing
brokers.

     Pursuant to separate Distribution and Servicing Plans for Class A, Class B
and Class C shares (the "Retail Plans"), as described in the Class A, B and C
Prospectus, in connection with the distribution of Class B and Class C shares of
the Trust, the Distributor receives certain distribution fees from the Trust,
and in connection with personal services rendered to Class A, Class B and Class
C shareholders of the Trust and the maintenance of shareholder accounts, the
Distributor receives certain servicing fees from the Trust. Subject to the
percentage limitations on these distribution and servicing fees set forth below,
the distribution and servicing fees may be paid with respect to services
rendered and expenses borne in the past with respect to Class A, Class B and
Class C shares as to which no distribution and servicing fees were paid on
account of such limitations. As described in the Class A, B and C

                                     - 46 -



Prospectus, the Distributor pays (i) all or a portion of the distribution fees
it receives from the Trust to participating and introducing brokers, and (ii)
all or a portion of the servicing fees it receives from the Trust to
participating and introducing brokers, certain banks and other financial
intermediaries.

     The Distributor makes distribution and servicing payments to participating
brokers and servicing payments to certain banks and other financial
intermediaries in connection with the sale of Class B and Class C shares and
servicing payments to participating brokers, certain banks and other financial
intermediaries in connection with the sale of Class A shares. In the case of
Class A shares, these parties are also compensated based on the amount of the
front-end sales charge reallowed by the Distributor, except in cases where Class
A shares are sold without a front-end sales charge (although the Distributor may
pay brokers additional compensation in connection with sales of Class A shares
without a sales charge). In the case of Class B shares, participating brokers
and other financial intermediaries are compensated by an advance of a sales
commission by the Distributor. In the case of Class C shares, part or all of the
first year's distribution and servicing fee is generally paid at the time of
sale. Pursuant to a Distribution Contract with the Trust, with respect to each
Fund's Class A, Class B and Class C shares, the Distributor bears various other
promotional and sales related expenses, including the cost of printing and
mailing prospectuses to persons other than current shareholders.

     The Retail Plans were adopted pursuant to Rule 12b-l under the 1940 Act and
are of the type known as "compensation" plans. This means that, although the
Trustees of the Trust are expected to take into account the expenses of the
Distributor and its predecessors in their periodic review of the Retail Plans,
the fees are payable to compensate the Distributor for services rendered even if
the amount paid exceeds the Distributor's expenses.

     The distribution fee applicable to Class B and Class C shares may be spent
by the Distributor on any activities or expenses primarily intended to result in
the sale of Class B or Class C shares, respectively, including compensation to,
and expenses (including overhead and telephone expenses) of, financial
consultants or other employees of the Distributor or of participating or
introducing brokers who engage in distribution of Class B or Class C shares,
printing of prospectuses and reports for other than existing Class B or Class C
shareholders, advertising, and preparation, printing and distribution of sales
literature. The servicing fee, applicable to Class A, Class B and Class C shares
of the Trust, may be spent by the Distributor on personal services rendered to
shareholders of the Trust and the maintenance of shareholder accounts, including
compensation to, and expenses (including telephone and overhead expenses) of,
financial consultants or other employees of participating or introducing
brokers, certain banks and other financial intermediaries who aid in the
processing of purchase or redemption requests or the processing of dividend
payments, who provide information periodically to shareholders showing their
positions in a Fund's shares, who forward communications from the Trust to
shareholders, who render ongoing advice concerning the suitability of particular
investment opportunities offered by the Trust in light of the shareholders'
needs, who respond to inquiries from shareholders relating to such services, or
who train personnel in the provision of such services. Distribution and
servicing fees may also be spent on interest relating to unreimbursed
distribution or servicing expenses from prior years.

     Many of the Distributor's sales and servicing efforts involve the Trust as
a whole, so that fees paid by Class A, Class B or Class C shares of any Fund may
indirectly support sales and servicing efforts relating to the other Funds'
shares of the same class. In reporting its expenses to the Trustees, the
Distributor itemizes expenses that relate to the distribution and/or servicing
of a single Fund's shares, and allocates other expenses among the Funds based on
their relative net assets. Expenses allocated to each Fund are further allocated
among its classes of shares annually based on the relative sales of each class,
except for any expenses that relate only to the sale or servicing of a single
class. The Distributor may make payments to brokers (and with respect to
servicing fees only, to certain banks and other financial intermediaries) of up
to the following percentages annually of the average daily net assets
attributable to shares in the accounts of their customers or clients:


                                        Servicing         Distribution
Class A                                 Fee(1)            Fee(1)
===========================================================================
Money Market Fund                       0.10%             N/A
---------------------------------------------------------------------------
All other Funds                         0.25%             None

                                     - 47 -



Class B(2)
---------------------------------------------------------------------------
All Funds                               0.25%             None
---------------------------------------------------------------------------

Class C - Shares purchased on or after 7/1/91(3)
---------------------------------------------------------------------------
Money Market Fund                       0.10%             0.00%
---------------------------------------------------------------------------
Short-Term and Short Duration           0.25%             0.25%
Municipal Income Funds
---------------------------------------------------------------------------
Low Duration, Real Return, Municipal    0.25%             0.45%
Bond, California Intermediate
Municipal Bond, California Municipal
Bond, New York Municipal Bond and
StocksPLUS Funds
---------------------------------------------------------------------------
All other Funds                         0.25%             0.65%

Class C - Shares purchased before 7/1/91
---------------------------------------------------------------------------
Money Market Fund                       0.10%             0.00%
---------------------------------------------------------------------------
All other Funds                         0.25%             None
---------------------------------------------------------------------------

(1)  Applies, in part, to Class A, Class B and Class C shares of the Trust
     issued to former shareholders of PIMCO Advisors Funds in connection with
     the reorganizations/mergers of series of PIMCO Advisors Funds as/with Funds
     of the Trust in a transaction which took place on January 17, 1997.
(2)  Payable only with respect to shares outstanding for one year or more.
(3)  Payable only with respect to shares outstanding for one year or more except
     in the case of shares for which no payment is made to the party at the time
     of sale.

     The Distributor may from time to time pay additional cash bonuses or other
incentives to selected participating brokers in connection with the sale or
servicing of Class A, Class B and Class C shares of the Funds. On some
occasions, such bonuses or incentives may be conditioned upon the sale of a
specified minimum dollar amount of the shares of a Fund and/or all of the Funds
together or a particular class of shares, during a specific period of time. The
Distributor currently expects that such additional bonuses or incentives will
not exceed .50% of the amount of any sale. Pacific Investment Management (in its
capacity as administrator) may also pay participating brokers and other
intermediaries for sub-transfer agency and other services.

     If in any year the Distributor's expenses incurred in connection with the
distribution of Class B and Class C shares and, for Class A, Class B and Class C
shares, in connection with the servicing of shareholders and the maintenance of
shareholder accounts, exceed the distribution and/or servicing fees paid by the
Trust, the Distributor would recover such excess only if the Retail Plan with
respect to such class of shares continues to be in effect in some later year
when the distribution and/or servicing fees exceed the Distributor's expenses.
The Trust is not obligated to repay any unreimbursed expenses that may exist at
such time, if any, as the relevant Retail Plan terminates.

     Each Retail Plan may be terminated with respect to any Fund to which the
Plan relates by vote of a majority of the Trustees who are not interested
persons of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or the Distribution
Contract ("Disinterested Trustees") or by vote of a majority of the outstanding
voting securities of the relevant class of that Fund. Any change in any Retail
Plan that would materially increase the cost to the class of shares of any Fund
to which the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly written reports of such
costs and the purposes for which such costs have been incurred. Each Retail Plan
may be amended by vote of the Disinterested Trustees cast in person at a meeting
called for the purpose. As long as the Retail Plans are in effect,

                                     - 48 -



selection and nomination of those Trustees who are not interested persons of the
Trust shall be committed to the discretion of such Disinterested Trustees.

     The Retail Plans will continue in effect with respect to each Fund and each
class of shares thereof for successive one-year periods, provided that each such
continuance is specifically approved (i) by the vote of a majority of the
Disinterested Trustees and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.

     The Retail Plans went into effect for the Trust in January 1997. If a
Retail Plan is terminated (or not renewed) with respect to one or more Funds, it
may continue in effect with respect to any class of any Fund as to which it has
not been terminated (or has been renewed).

     The Trustees believe that the Retail Plans will provide benefits to the
Trust. The Trustees believe that the Retail Plans will result in greater sales
and/or fewer redemptions of Trust shares, although it is impossible to know for
certain the level of sales and redemptions of Trust shares that would occur in
the absence of the Retail Plans or under alternative distribution schemes.
Although the Funds' expenses are essentially fixed, the Trustees believe that
the effect of the Retail Plans on sales and/or redemptions may benefit the Trust
by reducing Fund expense ratios and/or by affording greater flexibility to
Portfolio Managers. From time to time, expenses of the Distributor incurred in
connection with the sale of Class B and Class C shares of the Funds, and in
connection with the servicing of Class B and Class C shareholders of the Funds
and the maintenance of shareholder accounts, may exceed the distribution and
servicing fees collected by the Distributor. The Trustees consider such
unreimbursed amounts, among other factors, in determining whether to cause the
Funds to continue payments of distribution and servicing fees in the future with
respect to Class B and Class C shares.

Payments Pursuant to Class A Plan

     For the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Trust paid the Distributor an aggregate of $8,055,920, $6,082,941 and
$3,158,937, respectively, pursuant to the Distribution and Servicing Plan for
Class A shares, of which the indicated amounts were attributable to the
following Funds:


                                                          Year Ended         Year Ended           Year Ended
Fund                                                       3/31/01             3/31/00              3/31/99
----                                                       -------             -------              -------
Money Market Fund                                          $ 63,732           $ 109,208             $ 79,137
Short-Term Fund                                             204,603             209,633              123,595
Low Duration Fund                                           620,464             566,330              382,868
Real Return Fund                                            103,952              25,380                6,053
Total Return Fund                                         5,783,098           4,053,760            1,980,636
Total Return Mortgage Fund                                      576                 N/A                  N/A
High Yield Fund                                             491,894             471,207              234,956
Long-Term U.S. Government Fund                              131,419              81,888               39,481
Global Bond Fund II                                           5,559               6,937               12,179
Foreign Bond Fund                                           167,687             107,878               52,053
Emerging Markets Bond Fund                                    1,331                 587                  498
Municipal Bond Fund                                          19,443              22,682               14,101
California Intermediate Municipal                            68,463                 795                  N/A
   Bond Fund
California Municipal Bond Fund                                  252                 N/A                  N/A
New York Municipal Bond Fund                                     51                  12                  N/A
Strategic Balanced Fund                                      10,098               6,235                  N/A
European Convertible Fund                                         9                 N/A                  N/A
Convertible Fund                                             15,351               3,505                  N/A
StocksPLUS Fund                                             367,939             416,904              233,380


                                     - 49 -



     During the fiscal year ended March 31, 2001, the amounts collected pursuant
to the Distribution and Servicing Plan for Class A shares were used as follows:
sales commissions and other compensation to sales personnel, $6,122,499;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $1,933,421.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:


                                                                                  Sales Material
                                                                                    and Other
Fund                                                       Compensation              Expenses              Total
----                                                       ------------              --------              -----
Money Market Fund                                              $ 98,823              $ 29,628          $ 123,451
Short-Term Fund                                                 125,293                39,566            164,859
Low Duration Fund                                               404,241               127,655            531,897
Real Return Fund                                                140,650                44,416            185,066
Total Return Fund                                             4,482,103             1,415,401          5,897,504
Total Return Mortgage Fund                                        1,137                   359              1,496
GNMA                                                                 16                     5                 21
High Yield Fund                                                 386,792               122,145            508,937
Long-Term U.S. Government Fund                                  117,740                37,181            154,921
Global Bond Fund II                                               4,032                 1,273              5,306
Foreign Bond Fund                                               124,820                39,417            164,237
Emerging Markets Bond Fund                                        1,685                   532              2,217
European Convertible Fund                                            15                     5                 20
Municipal Bond Fund                                              16,463                 5,199             21,662
California Municipal Fund                                         1,044                   330              1,374
California Intermediate Municipal                                42,934                13,558             56,492
   Bond Fund
New York Municipal Bond Fund                                        276                    87                363
Strategic Balanced Fund                                           5,421                 1,712              7,133
Convertible Fund                                                  9,521                 3,007             12,528
StocksPLUS Fund                                                 164,492                51,945            216,437

Payments Pursuant to Class B Plan

     For the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Trust paid the Distributor an aggregate of $15,793,100, $14,835,909
and $8,169,978, respectively, pursuant to the Distribution and Servicing Plan
for Class B shares, of which the indicated amounts were attributable to the
following Funds:


                                                        Year Ended          Year Ended            Year Ended
Fund                                                      3/31/01             3/31/00              3/31/99
----                                                      -------             -------              -------
Money Market Fund                                     $   239,885         $    182,595       $      86,809
Short-Term Fund                                            66,389               47,772              21,254
Low Duration Fund                                         766,462              720,752             433,206
Real Return Fund                                          250,760               77,808              28,545
Total Return Fund                                       7,368,323            6,386,543           3,372,168
Total Return Mortgage Fund                                  1,667                  N/A                 N/A
High Yield Fund                                         2,952,887            3,180,767           2,065,488
Long-Term U.S. Government Fund                            385,053              375,143             229,521
Global Bond Fund II                                        45,017               49,328              11,000
Foreign Bond Fund                                         258,249              236,078             164,040
Emerging Markets Bond Fund                                 12,778                8,171               2,953
Municipal Bond Fund                                        58,902               58,146              10,000
Strategic Balanced Fund                                   102,592               65,297                 N/A

                                     - 50 -


Convertible Fund                                           48,249                6,285                 N/A
StocksPLUS Fund                                         3,235,886            3,441,224           1,679,748

     During the fiscal year ended March 31, 2001, the amounts collected pursuant
to the Distribution and Servicing Plan for Class B shares were used as follows:
sales commissions and other compensation to sales personnel, $12,002,756;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $3,790,344.
These totals, if allocated among (i) compensation and (ii) sales materials and
other expenses for each Fund, were as follows:


                                                                                  Sales Material
                                                                                    and Other
Fund                                                       Compensation              Expenses               Total
----                                                       ------------              --------               -----
Money Market Fund                                             $ 248,862             $ 78,588            $ 327,449
Short-Term Fund                                                  46,058               14,545               60,602
Low Duration Fund                                               578,888              182,807              761,695
Real Return Fund                                                351,054              110,859              461,913
Total Return Fund                                             6,337,208            2,001,223            8,338,431
Total Return Mortgage Fund                                        5,312                1,678                6,990
High Yield Fund                                               2,128,017              672,005            2,800,023
Long-Term U.S. Government Fund                                  353,651              111,679              465,331
Global Bond Fund II                                              34,181               10,794               44,975
Foreign Bond Fund                                               187,026               59,061              246,086
Emerging Markets Bond Fund                                       10,545                3,330               13,876
Municipal Bond Fund                                              55,181               17,426               72,607
Strategic Balanced Fund                                          55,397               17,494               72,890
Convertible Fund                                                 37,175               11,739               48,914
StocksPLUS Fund                                               1,574,202              497,116            2,071,318

Payments Pursuant to Class C Plan

     For the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Trust paid the Distributor an aggregate of $15,860,701, 15,752,921 and
$11,016,443, respectively, pursuant to the Distribution and Servicing Plan for
Class C shares, of which the indicated amounts were attributable to the
following Funds:


                                                              Year Ended           Year Ended           Year Ended
Fund                                                            3/31/01             3/31/00               3/31/99
----                                                            -------             -------               -------
Money Market Fund                                            $   87,507           $   85,213           $   75,541
Short-Term Fund                                                 105,798               96,622               61,224
Low Duration Fund                                               834,108              886,691              645,396
Real Return Fund                                                271,991               63,886               16,396
Total Return Fund                                             8,139,338            7,576,924            5,309,578
Total Return Mortgage Fund                                        5,566                  N/A                  N/A
High Yield Fund                                               3,316,077            3,820,412            3,098,891
Long-Term U.S. Government Fund                                  248,741              259,510              200,406
Global Bond Fund II                                              48,452               57,768               49,000
Foreign Bond Fund                                               312,825              302,947              237,914
Emerging Markets Bond Fund                                        5,161                2,646                1,972
Municipal Bond Fund                                             212,868              250,017               10,000
Strategic Balanced Fund                                         128,151               67,806                  N/A
Convertible Fund                                                125,211               23,512                  N/A
StocksPLUS Fund                                               2,018,908            2,258,967            1,097,998


                                     - 51 -


     During the fiscal year ended March 31, 2001, the amounts collected pursuant
to the Distribution and Servicing Plan for Class C shares were used as follows:
sales commissions and other compensation to sales personnel, $12,054,133;
preparing, printing and distributing sales material and advertising (including
preparing, printing and distributing prospectuses to non-shareholders), and
other expenses (including data processing, legal and operations), $3,806,568.

     These totals, if allocated among (i) compensation and (ii) sales materials
and other expenses for each Fund, were as follows:


                                                                                  Sales Material
                                                                                     and Other
Fund                                                        Compensation             Expenses               Total
----                                                        ------------             --------               -----
Money Market Fund                                            $  618,230            $  195,230           $  813,460
Short-Term Fund                                                 130,648                41,257              171,906
Low Duration Fund                                               665,274               210,087              875,361
Real Return Fund                                                453,406               143,181              596,586
Total Return Fund                                             6,165,454             1,946,985            8,112,439
Total Return Mortgage                                            10,628                 3,356               13,984
High Yield Fund                                               2,085,661               658,630            2,744,291
Long-Term U.S. Government Fund                                  201,116                63,510              264,627
Global Bond Fund II                                              29,173                 9,213               38,386
Foreign Bond Fund                                               197,576                62,392              259,968
Emerging Markets Bond Fund                                        4,431                 1,399                5,830
Municipal Bond Fund                                             171,192                54,061              225,252
Strategic Balanced Fund                                          78,663                24,841              103,504
Convertible Fund                                                 75,123                23,723               98,847
StocksPLUS Fund                                               1,167,558               368,702            1,536,260

     From time to time, expenses of principal underwriters incurred in
connection with the distribution of Class B and Class C shares of the Funds, and
in connection with the servicing of Class A, Class B and Class C shareholders of
the Funds and the maintenance of Class A, Class B and Class C shareholder
accounts, may exceed the distribution and/or servicing fees collected by the
Distributor. Class A, Class B and Class C Distribution and Servicing Plans,
which are similar to the Trust's current Plans, were in effect prior to January
17, 1997 in respect of the series of PAF that was the predecessor of the Global
Bond Fund II. As of March 31, 2001, such expenses were approximately $31,692,000
in excess of payments under the Class A Plan, $54,370,000 in excess of payments
under the Class B Plan and $3,948,000 in excess of payments under the Class C
Plan.

     The allocation of such excess (on a pro rata basis) among the Funds listed
below as of March 31, 2001 was as follows:


Fund                                                           Class A               Class B               Class C
----                                                           -------               -------               -------
Money Market Fund                                           $   485,658           $ 1,127,291           $  202,484
Short-Term Fund                                                 648,555               208,633               42,790
Low Duration Fund                                             2,092,482             2,622,243              217,892
Real Return Fund                                                728,050             1,590,201              148,501
Total Return Fund                                            23,200,789            28,706,238            2,019,325
High Yield Fund                                               2,002,158             9,639,478              683,101
Long-Term U.S. Government Fund                                  609,461             1,601,967               65,870
GNMA Fund                                                            80                   N/A                  N/A
Global Bond Fund II                                              20,873               154,832                9,555
Foreign Bond Fund                                               646,110               847,187               64,711
Emerging Markets Bond Fund                                        8,721                47,769                1,451


                                     - 52 -



Fund                                                           Class A               Class B               Class C
----                                                           -------               -------               -------
European Convertible Fund                                           77                   N/A                   N/A
Municipal Bond Fund                                             85,218               249,960                56,069
California Municipal Fund                                        5,407                   N/A                   N/A
California Intermediate Municipal                              222,239                   N/A                   N/A
   Bond Fund
New York Municipal Bond Fund                                     1,427                   N/A                   N/A
Strategic Balanced Fund                                         28,060               250,936                25,764
Convertible Fund                                                49,286               168,394                24,605
StocksPLUS Fund                                                851,465             7,130,809               382,401

     The allocation of such excess (on a pro rata basis) among the Funds,
calculated as a percentage of net assets of each Fund listed below as of March
31, 2001 was as follows:


Fund                                                           Class A              Class B             Class C
----                                                           -------              -------             -------
Money Market Fund                                                0.77%                2.96%               0.18%
Short-Term Fund                                                  0.77                2.96                 0.18
Low Duration Fund                                                0.77                2.96                 0.18
Total Return Fund                                                0.77                2.96                 0.18
Real Return Fund                                                 0.77                2.96                 0.18
High Yield Fund                                                  0.77                2.96                 0.18
Long-Term U.S. Government Fund                                   0.77                2.96                 0.18
GNMA Fund                                                        0.77                 N/A                 N/A
European Convertible Fund                                        0.77                 N/A                 N/A
Global Bond Fund II                                              0.77                2.96                 0.18
Foreign Bond Fund                                                0.77                2.96                 0.18
Emerging Markets Bond Fund                                       0.77                2.96                 0.18
Municipal Bond Fund                                              0.77                2.96                 0.18
California Municipal Fund                                        0.77                 N/A                 N/A
California Intermediate Municipal                                0.77                 N/A                 N/A
   Bond Fund
New York Municipal Bond Fund                                     0.77                 N/A                 N/A
Strategic Balanced Fund                                          0.77                2.96                 0.18
Convertible Fund                                                 0.77                2.96                 0.18
StocksPLUS Fund                                                  0.77                2.96                 0.18

Distribution and Administrative Services Plans for Administrative Class Shares

     The Trust has adopted an Administrative Services Plan and an Administrative
Distribution Plan (together, the "Administrative Plans") with respect to the
Administrative Class shares of each Fund.

     Under the terms of the Administrative Distribution Plan, the Trust is
permitted to reimburse, out of the assets attributable to the Administrative
Class shares of each Fund, in an amount up to 0.25% on an annual basis of the
average daily net assets of that class, financial intermediaries for costs and
expenses incurred in connection with the distribution and marketing of
Administrative Class shares and/or the provision of certain shareholder services
to its customers that invest in Administrative Class shares of the Funds. Such
services may include, but are not limited to, the following: providing
facilities to answer questions from prospective investors about a Fund;
receiving and answering correspondence, including requests for prospectuses and
statements of additional information; preparing, printing and delivering
prospectuses and shareholder reports to prospective shareholders; complying with
federal and state securities laws pertaining to the sale of Administrative Class
shares; and assisting investors in completing application forms and selecting
dividend and other account options.

     Under the terms of the Administrative Services Plan, the Trust is permitted
to reimburse, out of the assets attributable to the Administrative Class shares
of each Fund, in an amount up to 0.25% on an annual basis of the average daily
net assets of that class, financial intermediaries that provide certain
administrative services for

                                     - 53 -


Administrative Class shareholders. Such services may include, but are not
limited to, the following functions: receiving, aggregating and processing
shareholder orders; furnishing shareholder sub-accounting; providing and
maintaining elective shareholder services such as check writing and wire
transfer services; providing and maintaining pre-authorized investment plans;
communicating periodically with shareholders; acting as the sole shareholder of
record and nominee for shareholders; maintaining accounting records for
shareholders; answering questions and handling correspondence from shareholders
about their accounts; and performing similar account administrative services.

     The same entity may be the recipient of fees under both the Administrative
Class Distribution Plan and the Administrative Services Plan, but may not
receive fees under both plans with respect to the same assets. Fees paid
pursuant to either Plan may be paid for shareholder services and the maintenance
of shareholder accounts, and therefore may constitute "service fees" for
purposes of applicable rules of the National Association of Securities Dealers,
Inc. Each Plan has been adopted in accordance with the requirements of Rule
12b-1 under the 1940 Act and will be administered in accordance with the
provisions of that rule, except that shareholders will not have the voting
rights set forth in Rule 12b-1 with respect to the Administrative Services Plan
that they will have with respect to the Administrative Distribution Plan.

     Each Administrative Plan provides that it may not be amended to materially
increase the costs which Administrative Class shareholders may bear under the
Plan without the approval of a majority of the outstanding voting securities of
the Administrative Class, and by vote of a majority of both (i) the Trustees of
the Trust and (ii) those Trustees who are not "interested persons" of the Trust
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to it (the "Plan
Trustees"), cast in person at a meeting called for the purpose of voting on the
Plan and any related amendments.

     Each Administrative Plan provides that it may not take effect until
approved by vote of a majority of both (i) the Trustees of the Trust and (ii)
the disinterested Trustees defined above. The Administrative Class Distribution
Plan further provides that it may not take effect unless approved by the vote of
a majority of the outstanding voting securities of the Administrative Class.

     Each Administrative Plan provides that it shall continue in effect so long
as such continuance is specifically approved at least annually by the Trustees
and the disinterested Trustees defined above. Each Administrative Plan provides
that any person authorized to direct the disposition of monies paid or payable
by a class pursuant to the Plan or any related agreement shall provide to the
Trustees, and the Board shall review at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were made.

     Each Administrative Plan is a "reimbursement plan," which means that fees
are payable to the relevant financial intermediary only to the extent necessary
to reimburse expenses incurred pursuant to such plan. Each Administrative Plan
provides that expenses payable under the Plan may be carried forward for
reimbursement for up to twelve months beyond the date in which the expense is
incurred, subject to the limit that not more that 0.25% of the average daily net
assets of Administrative Class shares may be used in any month to pay expenses
under the Plan. Each Plan requires that Administrative Class shares incur no
interest or carrying charges.

     Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that some, if not
all, of the fees paid pursuant to both Administrative Plans will qualify as
"service fees" and therefore will not be limited by NASD rules.

     Institutional and Administrative Class shares of the Trust may also be
offered through certain brokers and financial intermediaries ("service agents")
that have established a shareholder servicing relationship with the Trust on
behalf of their customers. The Trust pays no compensation to such entities other
than service fees paid with respect to Administrative Class shares. Service
agents may impose additional or different conditions than the Trust on the
purchase, redemption or exchanges of Trust shares by their customers. Service
agents may also independently establish and charge their customers transaction
fees, account fees and other amounts in connection which purchases, sales and
redemption of Trust shares in addition to any fees charged by the Trust. Each
service agent is responsible for transmitting to its customers a schedule of any
such fees and information regarding any

                                     - 54 -


additional or different conditions regarding purchases and redemptions.
Shareholders who are customers of service agents should consult their service
agents for information regarding these fees and conditions.

Payments Pursuant to the Administrative Plans

     For the fiscal years ended March 31, 2001, March 31, 2000 and March 31,
1999, the Trust paid qualified service providers an aggregate amount of
$11,849,697, $8,385,679 and $3,691,083, respectively, pursuant to the
Administrative Services Plan and the Administrative Distribution Plan. Such
payments were allocated among the Funds listed below as follows:


                                                           Year Ended         Year Ended          Year Ended
Fund                                                         3/31/01            3/31/00             3/31/99
----                                                         -------            -------             -------
Money Market Fund                                            $21,069             $22,491             $10,213
Short-Term Fund                                               16,697              15,160              16,719
Low Duration Fund                                            345,320             307,872             297,918
Low Duration Fund II                                              92                 528              28,257
Low Duration Fund III                                             26                  50                   0
Real Return Fund                                              41,269                 N/A                 N/A
Total Return Fund                                          9,917,611           6,890,843           2,826,235
Total Return Fund II                                         156,989             125,952             135,827
Total Return Fund III                                         26,382               8,755               3,586
High Yield Fund                                            1,054,052             772,780             336,744
Long-Term U.S. Government Fund                               116,546              98,704              15,870
Municipal Bond Fund                                           10,305               6,275                 447
California Intermediate Municipal                              3,614                  14                   0
   Bond Fund
Global Bond Fund                                               5,633               7,261               2,995
Foreign Bond Fund                                             18,800              10,669               3,134
Emerging Markets Bond Fund                                    25,087              22,231                 135
Convertible Fund                                                 629                 N/A                 N/A
Strategic Balanced Fund                                        1,495                 852                   0
StocksPLUS Fund                                               88,080              95,242              13,003

     The remaining Funds did not make payments under either Administrative Plan.

Plan for Class D Shares

     As described under "Management of the Trust- Fund Administrator," the
Funds' Administration Agreement includes a plan (the "Class D Plan") adopted
pursuant to Rule 12b-1 under the 1940 Act which provides for the payment of up
to 0.25% of the Class D administrative fees as reimbursement for expenses in
respect of activities that may be deemed to be primarily intended to result in
the sale of Class D shares.

     Specifically, the Administration Agreement provides that the Administrator
shall provide in respect of Class D shares (either directly or by procuring
through other entities, including various financial services firms such as
broker-dealers and registered investment advisors ("Service Organizations"))
some or all of the following services and facilities in connection with direct
purchases by shareholders or in connection with products, programs or accounts
offered by such Service Organizations ("Special Class D Services"): (i)
facilities for placing orders directly for the purchase of a Fund's shares and
tendering a Fund's Class D shares for redemption; (ii) advertising with respect
to a Fund's Class D shares; (iii) providing information about the Funds; (iv)
providing facilities to answer questions from prospective investors about the
Funds; (v) receiving and answering correspondence, including requests for
prospectuses and statements of additional information; (vi) preparing, printing
and delivering

                                     - 55 -


prospectuses and shareholder reports to prospective shareholders; (vii)
assisting investors in applying to purchase Class D shares and selecting
dividend and other account options; and (viii) shareholder services provided by
a Service Organization that may include, but are not limited to, the following
functions: receiving, aggregating and processing shareholder orders; furnishing
shareholder sub-accounting; providing and maintaining elective shareholder
services such as check writing and wire transfer services; providing and
maintaining pre-authorized investment plans; communicating periodically with
shareholders; acting as the sole shareholder of record and nominee for
shareholders; maintaining accounting records for shareholders; answering
questions and handling correspondence from shareholders about their accounts;
issuing confirmations for transactions by shareholders; performing similar
account administrative services; providing such shareholder communications and
recordkeeping services as may be required for any program for which the Service
Organization is a sponsor that relies on Rule 3a-4 under the 1940 Act; and
providing such other similar services as may reasonably be requested to the
extent the Service Organization is permitted to do so under applicable statutes,
rules, or regulations.

     The Administrator has entered into an agreement with the Distributor under
which the distributor is compensated for providing or procuring certain of the
Class D Services at the rate of 0.25% per annum of all assets attributable to
Class D shares sold through the Distributor.

     The Trust and the Administrator understand that some or all of the Special
Class D Services pursuant to the Administration Agreement may be deemed to
represent services primarily intended to result in the sale of Class D shares.
The Administration Agreement includes the Class D Plan to account for this
possibility. The Administration Agreement provides that any portion of the fees
paid thereunder in respect of Class D shares representing reimbursement for the
Administrator's and the Distributor's expenditures and internally allocated
expenses in respect of Class D Services of any Fund shall not exceed the rate of
0.25% per annum of the average daily net assets of such Fund attributable to
Class D shares.

     In accordance with Rule 12b-1 under the 1940 Act, the Class D Plan may not
be amended to increase materially the costs which Class D shareholders may bear
under the Plan without approval of a majority of the outstanding Class D shares,
and by vote of a majority of both (i) the Trustees of the Trust and (ii) those
Trustees ("disinterested Class D Plan Trustees") who are not "interested
persons" of the Trust (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to it, cast in person at a meeting called for the purpose of voting on
the Plan and any related amendments. The Class D Plan may not take effect until
approved by a vote of a majority of both (i) the Trustees of the Trust and (ii)
the disinterested Class D Plan Trustees. In addition, the Class D Plan may not
take effect unless it is approved by the vote of a majority of the outstanding
Class D shares and it shall continue in effect so long as such continuance is
specifically approved at least annually by the Trustees and the disinterested
Class D Plan Trustees.

     With respect to the Class D Plan, the Administration Agreement requires the
Administrator to present reports as to out-of-pocket expenditures and internal
expenses allocations of the Administrator and the Distributor at least quarterly
and in a manner that permits the disinterested Class D Plan Trustees to
determine that portion of the Class D administrative fees paid thereunder which
represents reimbursements in respect of Special Class D Services.

     Rules of the NASD limit the amount of distribution fees that may be paid by
mutual funds. "Service fees," defined to mean fees paid for providing
shareholder services or the maintenance of accounts (but not transfer agency
services) are not subject to the limits. The Trust believes that most, if not
all, of the fees paid pursuant to the Class D Plan will qualify as "service
fees" and therefore will not be limited by NASD rules.

Payments Pursuant to Class D Plan

     For the fiscal year ended March 31, 2001, March 31, 2000 and March 31,
1999, the Trust paid $612,076, $263,567 and $48,375, respectively, pursuant to
the Class D Plan, of which the indicated amounts were attributable to the
following operational Funds:

                                     - 56 -



                                                             Year Ended          Year Ended          Year Ended
Fund                                                           3/31/01             3/31/00             3/31/99
----                                                           -------             -------             -------
Short-Term Fund                                                $13,325              $8,920              $1,589
Low Duration Fund                                               36,164              22,629               5,733
Real Return Fund                                                77,474              12,683                 323
Total Return Fund                                              366,874             139,747              23,268
Total Return Mortgage Fund                                       1,233                 255                 283
High Yield Fund                                                 66,440              46,520               5,873
Foreign Bond Fund                                               39,752              24,358               8,973
Emerging Markets Bond Fund                                          26                 N/A                 N/A
Convertible Fund                                                    23                 N/A                 N/A
Short Duration Muni Income Fund                                     25                   4                 N/A
Municipal Bond Fund                                              2,082               1,175                 402
California Intermediate Municipal Bond Fund                        124                   4                 N/A
California Municipal Bond Fund                                      17                 N/A                 N/A
New York Municipal Bond Fund                                        49                   4                 N/A
Strategic Balanced Fund                                            768                 439                 291
StocksPLUS Fund                                                  7,701               6,829               1,640

Distribution and Servicing Plan for Class J and Class K Shares

     Class J and Class K each has a separate distribution and servicing plan
(the "Class J-K Plans"). Distribution fees paid pursuant to the Class J-K Plans
may only be paid in connection with services provided with respect to Class J
and Class K shares.

     As stated in the Prospectus relating to Class J and Class K shares under
the caption "Service and Distribution Fees," the Distributor pays (i) all or a
portion of the distribution fees it receives from the Trust to participating and
introducing brokers, and (ii) all or a portion of the servicing fees it receives
from the Trust to participating and introducing brokers, certain banks and other
financial intermediaries.

     Each Class J-K Plan may be terminated with respect to any Fund to which the
Class J-K Plan relates by vote of a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distribution Contract ("Disinterested Trustees") or by vote of a majority of the
outstanding voting securities of the relevant class of that Fund. Pursuant to
Rule 12b-1, any change in either Class J-K Plan that would materially increase
the cost to the class of shares of any Fund to which the Plan relates requires
approval by the affected class of shareholders of that Fund. The Trustees review
quarterly written reports of such costs and the purposes for which such costs
have been incurred. Each Class J-K Plan may be amended by vote of the
Disinterested Trustees cast in person at a meeting called for the purpose. As
long as the Class J-K Plans are in effect, selection and nomination of those
Trustees who are not interested persons of the Trust shall be committed to the
discretion of such Disinterested Trustees.

     The Class J-K Plans will continue in effect with respect to each Fund and
each class of shares thereof for successive one-year periods, provided that each
such continuance is specifically approved (i) by the vote of a majority of the
Disinterested Trustees and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.

     If a Class J-K Plan is terminated (or not renewed) with respect to one or
more Funds, it may continue in effect with respect to any class of any Fund as
to which it has not been terminated (or has been renewed).

     The Trustees believe that the Class J-K Plans will provide benefits to the
Trust. The Trustees believe that the Class J-K Plans will result in greater
sales and/or fewer redemptions of Trust shares, although it is impossible to
know for certain the level of sales and redemptions of Trust shares that would
occur in the absence of the Class J-K Plans or under alternative distribution
schemes. Although the Funds' expenses are essentially fixed, the Trustees

                                     - 57 -


believe that the effect of the Class J-K Plans on sales and/or redemptions may
benefit the Trust by reducing Fund expense ratios and/or by affording greater
flexibility to Portfolio Managers. From time to time, expenses of the
Distributor incurred in connection with the sale of Class J and Class K shares
of the Funds, and in connection with the servicing of Class J and Class K
shareholders of the Funds and the maintenance of shareholder accounts, may
exceed the distribution and servicing fees collected by the Distributor. The
Trustees consider such unreimbursed amounts, among other factors, in determining
whether to cause the Funds to continue payments of distribution and servicing
fees in the future with respect to Class J and Class K shares.

Purchases, Exchanges and Redemptions

     Purchases, exchanges and redemptions of Class A, Class B, Class C and Class
D shares are discussed in the Class A, B and C and Class D Prospectuses under
the headings "How to Buy Shares," "Exchange Privilege," and "How to Redeem," and
that information is incorporated herein by reference. Purchases, exchanges and
redemptions of Institutional and Administrative Class shares and Class J and
Class K shares are discussed in the Institutional Prospectus under the headings
"Purchase of Shares," "Redemption of Shares," and "Net Asset Value," and in the
Class J and Class K supplement thereto, and that information is incorporated
herein by reference.

     Certain managed account clients of PIMCO may purchase shares of the Trust.
To avoid the imposition of duplicative fees, PIMCO may be required to make
adjustments in the management fees charged separately by PIMCO to these clients
to offset the generally higher level of management fees and expenses resulting
from a client's investment in the Trust.

     Certain clients of PIMCO whose assets would be eligible for purchase by one
or more of the Funds may purchase shares of the Trust with such assets. Assets
so purchased by a Fund will be valued in accordance with procedures adopted by
the Board of Trustees.

     Certain shares of the Funds are not qualified or registered for sale in all
states and Class J and Class K shares are not qualified or registered for sale
in the United States. Prospective investors should inquire as to whether shares
of a particular Fund or class are available for offer and sale in their state of
domicile or residence. Shares of a Fund may not be offered or sold in any state
unless registered or qualified in that jurisdiction, unless an exemption from
registration or qualification is available.

     Independent financial intermediaries unaffiliated with PIMCO may perform
shareholder servicing functions with respect to certain of their clients whose
assets may be invested in the Funds. These services, normally provided by PIMCO
directly to Trust shareholders, may include the provision of ongoing information
concerning the Funds and their investment performance, responding to shareholder
inquiries, assisting with purchases, redemptions and exchanges of Trust shares,
and other services. PIMCO may pay fees to such entities for the provision of
these services which PIMCO normally would perform, out of PIMCO's own resources.

     As described in the Class A, B and C and Class D Prospectuses under the
caption "Exchanging Shares," and in the Institutional Prospectus under the
caption "Exchange Privilege," a shareholder may exchange shares of any Fund
(except for the Liquid Assets Fund) for shares of any other Fund of the Trust or
any series of PIMCO Funds: Multi-Manager Series, within the same class on the
basis of their respective net asset values. The original purchase date(s) of
shares exchanged for purposes of calculating any contingent deferred sales
charge will carry over to the investment in the new Fund. For example, if a
shareholder invests in the Class C shares of one Fund and 6 months later (when
the contingent deferred sales charge upon redemption would normally be 1%)
exchanges his shares for Class C shares of another Fund, no sales charge would
be imposed upon the exchange but the investment in the other Fund would be
subject to the 1% contingent deferred sales charge until one year after the date
of the shareholder's investment in the first Fund as described in the Class A, B
and C Prospectus under "Alternative Purchase Arrangements." With respect to
Class B or Class C shares, or Class A shares subject to a contingent deferred
sales charge, if less than all of an investment is exchanged out of a Fund, any
portion of the investment attributable to capital appreciation and/or reinvested
dividends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in the Fund
from which the exchange was made.

                                     - 58 -


     Orders for exchanges accepted prior to the close of regular trading on the
New York Stock Exchange on any day the Trust is open for business will be
executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of regular
trading on the Exchange on any business day will be executed at the respective
net asset values determined at the close of the next business day.

     An excessive number of exchanges may be disadvantageous to the Trust.
Therefore, the Trust, in addition to its right to reject any exchange, reserves
the right to adopt a policy of terminating the exchange privilege of any
shareholder who makes more than a specified number of exchanges in a 12-month
period or in any calendar quarter. The Trust reserves the right to modify or
discontinue the exchange privilege at any time.

     The Trust reserves the right to suspend or postpone redemptions during any
period when: (a) trading on the New York Stock Exchange is restricted, as
determined by the SEC, or that Exchange is closed for other than customary
weekend and holiday closings; (b) the SEC has by order permitted such
suspension; or (c) an emergency, as determined by the SEC, exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable.

     The Trust is committed to paying in cash all requests for redemptions by
any shareholder of record of the Funds, limited in amount with respect to each
shareholder during any 90-day period to the lesser of (i) $250,000, or (ii) 1%
of the net asset value of the Trust at the beginning of such period. Although
the Trust will normally redeem all shares for cash, it may, in unusual
circumstances, redeem amounts in excess of the lesser of (i) or (ii) above by
payment in kind of securities held in the Funds' portfolios.

     The Trust has adopted procedures under which it may make
redemptions-in-kind to shareholders who are affiliated persons of a Fund. Under
these procedures, the Trust generally may satisfy a redemption request from an
affiliated person in-kind, provided that: (1) the redemption-in-kind is effected
at approximately the affiliated shareholder's proportionate share of the
distributing Fund's current net assets, and thus does not result in the dilution
of the interests of the remaining shareholders; (2) the distributed securities
are valued in the same manner as they are valued for purposes of computing the
distributing Fund's net asset value; (3) the redemption-in-kind is consistent
with the Fund's prospectus and statement of additional information; and (4)
neither the affiliated shareholder nor any other party with the ability and the
pecuniary incentive to influence the redemption-in-kind selects, or influences
the selection of, the distributed securities.

     Due to the relatively high cost of maintaining smaller accounts, the Trust
reserves the right to redeem shares in any account for their then-current value
(which will be promptly paid to the investor) if at any time, due to shareholder
redemption, the shares in the account do not have a value of at least a
specified amount, the minimums of which are currently set at $250 for Class A,
Class B and Class C shares, $2,000 for Class D shares, and $100,000 ($25,000,000
for the Liquid Assets Fund) for Institutional Class and Administrative Class
shares ($10,000 with respect to Institutional Class and Administrative Class
accounts opened before January 1, 1995). The Prospectuses may set higher minimum
account balances for one or more classes from time to time depending upon the
Trust's current policy. An investor will be notified that the value of his
account is less than the minimum and allowed at least 30 days to bring the value
of the account up to at least the specified amount before the redemption is
processed. The Declaration of Trust also authorizes the Trust to redeem shares
under certain other circumstances as may be specified by the Board of Trustees.
The Trust may also charge periodic account fees for accounts that fall below
minimum balances, as described in the Prospectuses.

                                     - 59 -


                      PORTFOLIO TRANSACTIONS AND BROKERAGE

Investment Decisions and Portfolio Transactions

     Investment decisions for the Trust and for the other investment advisory
clients of PIMCO are made with a view to achieving their respective investment
objectives. Investment decisions are the product of many factors in addition to
basic suitability for the particular client involved (including the Trust). Some
securities considered for investments by the Funds may also be appropriate for
other clients served by PIMCO. Thus, a particular security may be bought or sold
for certain clients even though it could have been bought or sold for other
clients at the same time. If a purchase or sale of securities consistent with
the investment policies of a Fund and one or more of these clients served by
PIMCO is considered at or about the same time, transactions in such securities
will be allocated among the Fund and clients in a manner deemed fair and
reasonable by PIMCO. PIMCO may aggregate orders for the Funds with simultaneous
transactions entered into on behalf of other clients of PIMCO so long as price
and transaction expenses are averaged either for that transaction or for the
day. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in
PIMCO's opinion is equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when purchases or sales of
portfolio securities for one or more clients will have an adverse effect on
other clients.

Brokerage and Research Services

     There is generally no stated commission in the case of fixed income
securities, which are traded in the over-the-counter markets, but the price paid
by the Trust usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Trust includes a disclosed, fixed
commission or discount retained by the underwriter or dealer. Transactions on
U.S. stock exchanges and other agency transactions involve the payment by the
Trust of negotiated brokerage commissions. Such commissions vary among different
brokers. Also, a particular broker may charge different commissions according to
such factors as the difficulty and size of the transaction. Transactions in
foreign securities generally involve the payment of fixed brokerage commissions,
which are generally higher than those in the United States.

     PIMCO places all orders for the purchase and sale of portfolio securities,
options and futures contracts for the relevant Fund and buys and sells such
securities, options and futures for the Trust through a substantial number of
brokers and dealers. In so doing, PIMCO uses its best efforts to obtain for the
Trust the most favorable price and execution available, except to the extent it
may be permitted to pay higher brokerage commissions as described below. In
seeking the most favorable price and execution, PIMCO, having in mind the
Trust's best interests, considers all factors it deems relevant, including, by
way of illustration, price, the size of the transaction, the nature of the
market for the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker-dealer involved and the quality
of service rendered by the broker-dealer in other transactions.

     PIMCO places orders for the purchase and sale of portfolio investments for
the Funds' accounts with brokers or dealers selected by it in its discretion. In
effecting purchases and sales of portfolio securities for the account of the
Funds, PIMCO will seek the best price and execution of the Funds' orders. In
doing so, a Fund may pay higher commission rates than the lowest available when
PIMCO believes it is reasonable to do so in light of the value of the brokerage
and research services provided by the broker effecting the transaction, as
discussed below. PIMCO also may consider sales of shares of the Trust as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Trust.

     It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receive research services from broker-dealers which execute portfolio
transactions for the clients of such advisers. Consistent with this practice,
PIMCO receives research services from many broker-dealers with which PIMCO
places the Trust's portfolio transactions. PIMCO may also receive research or
research credits from brokers which are generated from underwriting commissions
when purchasing new issues of fixed income securities or other assets for a
Fund. These services, which in some

                                     - 60 -


cases may also be purchased for cash, include such matters as general economic
and security market reviews, industry and company reviews, evaluations of
securities and recommendations as to the purchase and sale of securities. Some
of these services are of value to PIMCO in advising various of its clients
(including the Funds), although not all of these services are necessarily useful
and of value in managing the Trust. The management fee paid by the Trust is not
reduced because PIMCO and its affiliates receive such services.

     As permitted by Section 28(e) of the Securities Exchange Act of 1934, PIMCO
may cause the Trust to pay a broker-dealer which provides "brokerage and
research services" (as defined in the Act) to PIMCO an amount of disclosed
commission for effecting a securities transaction for the Trust in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.

     As noted above, PIMCO may purchase new issues of securities for the Trust
in underwritten fixed price offerings. In these situations, the underwriter or
selling group member may provide PIMCO with research in addition to selling the
securities (at the fixed public offering price) to the Trust or other advisory
clients. Because the offerings are conducted at a fixed price, the ability to
obtain research from a broker-dealer in this situation provides knowledge that
may benefit the Trust, other PIMCO clients, and PIMCO without incurring
additional costs. These arrangements may not fall within the safe harbor of
Section 28(e) because the broker-dealer is considered to be acting in a
principal capacity in underwritten transactions. However, the NASD has adopted
rules expressly permitting broker-dealers to provide bona fide research to
advisers in connection with fixed price offerings under certain circumstances.
As a general matter in these situations, the underwriter or selling group member
will provide research credits at a rate that is higher than that which is
available for secondary market transactions.

     Consistent with the Rules of the NASD and subject to seeking the most
favorable price and execution available and such other policies as the Trustees
may determine, PIMCO may also consider sales of shares of the Trust as a factor
in the selection of broker-dealers to execute portfolio transactions for the
Trust.

Portfolio Turnover

     A change in the securities held by a Fund is known as "portfolio turnover."
PIMCO manages the Funds without regard generally to restrictions on portfolio
turnover. The use of certain derivative instruments with relatively short
maturities may tend to exaggerate the portfolio turnover rate for some of the
Funds. Trading in fixed income securities does not generally involve the payment
of brokerage commissions, but does involve indirect transaction costs. The use
of futures contracts may involve the payment of commissions to futures
commission merchants. High portfolio turnover (e.g., greater than 100%) involves
correspondingly greater expenses to a Fund, including brokerage commissions or
dealer mark-ups and other transaction costs on the sale of securities and
reinvestments in other securities. The higher the rate of portfolio turnover of
a Fund, the higher these transaction costs borne by the Fund generally will be.
Such sales may result in realization of taxable capital gains (including
short-term capital gains which are generally taxed to shareholders at ordinary
income tax rates).

     The portfolio turnover rate of a Fund is calculated by dividing (a) the
lesser of purchases or sales of portfolio securities for the particular fiscal
year by (b) the monthly average of the value of the portfolio securities owned
by the Fund during the particular fiscal year. In calculating the rate of
portfolio turnover, there is excluded from both (a) and (b) all securities,
including options, whose maturities or expiration dates at the time of
acquisition were one year or less. Proceeds from short sales and assets used to
cover short positions undertaken are included in the amounts of securities sold
and purchased, respectively, during the year. Portfolio turnover rates for each
Fund for which financial highlights for at least the past five fiscal years are
provided in the Prospectuses are set forth under "Financial Highlights" in the
applicable Prospectus.

     Because PIMCO does not expect to reallocate the Strategic Balanced Fund's
assets between the Underlying Funds on a frequent basis, the portfolio turnover
rate for the Fund is expected to be modest (i.e., less than 25%) in comparison
to most mutual funds. However, the Fund indirectly bears the expenses associated
with the portfolio turnover of the Underlying Funds, which may have high (i.e.,
greater than 100%) portfolio turnover rates.

                                     - 61 -


                                 NET ASSET VALUE

     Net Asset Value is determined as indicated under "How Fund Shares are
Priced" in the Prospectuses. Net asset value will not be determined on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

     For all Funds other than Money Market and Liquid Assets Funds, portfolio
securities and other assets 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, at the mean between representative bid and
asked quotations obtained from a quotation reporting system or from established
market makers. Fixed income securities, including those to be purchased under
firm commitment agreements (other than obligations having a maturity of 60 days
or less), are normally valued on the basis of quotations obtained from brokers
and dealers or pricing services, which take into account appropriate factors
such as institutional-sized trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics, and
other market data.

     The Money Market and Liquid Assets Funds' securities are valued using the
amortized cost method of valuation. This involves valuing a security at cost on
the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Fund would receive if it sold the instrument. During such periods the yield to
investors in the Fund may differ somewhat from that obtained in a similar
investment company which uses available market quotations to value all of its
portfolio securities.

     The SEC's regulations require the Money Market and Liquid Assets Funds to
adhere to certain conditions. The Trustees, as part of their responsibility
within the overall duty of care owed to the shareholders, are required to
establish procedures reasonably designed, taking into account current market
conditions and the Fund's investment objective, to stabilize the net asset value
per share as computed for the purpose of distribution and redemption at $1.00
per share. The Trustees' procedures include a requirement to periodically
monitor, as appropriate and at such intervals as are reasonable in light of
current market conditions, the relationship between the amortized cost value per
share and the net asset value per share based upon available indications of
market value. The Trustees will consider what steps should be taken, if any, in
the event of a difference of more than 1/2 of 1% between the two. The Trustees
will take such steps as they consider appropriate, (e.g., selling securities to
shorten the average portfolio maturity) to minimize any material dilution or
other unfair results which might arise from differences between the two. The
Fund also is required to maintain a dollar-weighted average portfolio maturity
of 90 days or less, to limit its investments to instruments having remaining
maturities of 397 days or less (except securities held subject to repurchase
agreements having 397 days or less maturity) and to invest only in securities
determined by PIMCO under procedures established by the Board of Trustees to be
of high quality with minimal credit risks.

     Each Fund's liabilities are allocated among its classes. The total of such
liabilities allocated to a class plus that class's distribution and/or servicing
fees and any other expenses specially allocated to that class are then deducted
from the class's proportionate interest in the Fund's assets, and the resulting
amount for each class is divided by the number of shares of that class
outstanding to produce the class's "net asset value" per share. Under certain
circumstances, the per share net asset value of the Class B and Class C shares
of the Funds that do not declare regular income dividends on a daily basis may
be lower than the per share net asset value of the Class A shares as a result of
the daily expense accruals of the distribution fee applicable to the Class B and
Class C shares. Generally, for Funds that pay income dividends, those dividends
are expected to differ over time by approximately the amount of the expense
accrual differential between a particular Fund's classes.

                                    TAXATION

     The following summarizes certain additional federal income tax
considerations generally affecting the Funds and their shareholders. The
discussion is for general information only and does not purport to consider all
aspects of U.S. federal income taxation that might be relevant to beneficial
owners of shares of the Funds. The


                                     - 62 -


discussion is based upon current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are subject to
change, which change could be retroactive. The discussion applies only to
beneficial owners of Fund shares in whose hands such shares are capital assets
within the meaning of Section 1221 of the Code, and may not apply to certain
types of beneficial owners of shares (such as insurance companies, tax exempt
organizations, and broker-dealers) who may be subject to special rules. Persons
who may be subject to tax in more than one country should consult the provisions
of any applicable tax treaty to determine the potential tax consequences to
them. Prospective investors should consult their own tax advisers with regard to
the federal tax consequences of the purchase, ownership and disposition of Fund
shares, as well as the tax consequences arising under the laws of any state,
foreign country, or other taxing jurisdiction. The discussion here and in the
Prospectuses is not intended as a substitute for careful tax planning.

     Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under the Code. To qualify as a regulated
investment company, each Fund generally must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income derived
with respect to its business of investing in such stock, securities or
currencies ("Qualifying Income Test"); (b) diversify its holdings so that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash, U.S. Government securities,
the securities of other regulated investment companies and other securities,
with such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the Fund's total
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its total assets is invested in the securities of
any one issuer (other than U.S. Government securities or the securities of other
regulated investment companies); and (c) distribute each taxable year the sum of
(i) at least 90% of its investment company taxable income (which includes
dividends, interest and net short-term capital gains in excess of any net
long-term capital losses) and (ii) 90% of its tax exempt interest, net of
expenses allocable thereto. The Treasury Department is authorized to promulgate
regulations under which gains from foreign currencies (and options, futures, and
forward contracts on foreign currency) would constitute qualifying income for
purposes of the Qualifying Income Test only if such gains are directly related
to investing in securities. To date, such regulations have not been issued.

     As a regulated investment company, a Fund generally will not be subject to
U.S. federal income tax on its investment company taxable income and net capital
gains (any net long-term capital gains in excess of the sum of net short-term
capital losses and capital loss carryovers from prior years) designated by the
Fund as capital gain dividends, if any, that it distributes to shareholders on a
timely basis. Each Fund intends to distribute to its shareholders, at least
annually, all or substantially all of its investment company taxable income and
any net capital gains. In addition, amounts not distributed by a Fund on a
timely basis in accordance with a calendar year distribution requirement are
subject to a nondeductible 4% excise tax. To avoid the tax, a Fund must
distribute during each calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of its
capital losses (and adjusted for certain ordinary losses) for the twelve month
period ending on October 31, and (3) all ordinary income and capital gains for
previous years that were not distributed during such years. A distribution will
be treated as paid on December 31 of the calendar year if it is declared by a
Fund in October, November, or December of that year to shareholders of record on
a date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders (other than those not
subject to federal income tax) in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received. To avoid application of the excise tax, each Fund intends to make its
distributions in accordance with the calendar year distribution requirement.

     Each Municipal Fund must have at least 50% of its total assets invested in
Municipal Bonds at the end of each calendar quarter so that dividends derived
from its net interest income on Municipal Bonds and so designated by the Fund
will be "exempt-interest dividends," which are generally exempt from federal
income tax when received by an investor. A portion of the distributions paid by
a Municipal Fund may be subject to tax as ordinary income (including certain
amounts attributable to bonds acquired at a market discount). In addition, any
distributions of net short-term capital gains would be taxed a ordinary income
and any distribution of capital gain dividends would be taxed as long-term
capital gains. Certain exempt-interest dividends, as described in the Class A, B
and C Prospectus, may increase alternative minimum taxable income for purposes
of determining a shareholder's liability

                                     - 63 -


for the alternative minimum tax. In addition, exempt-interest dividends
allocable to interest from certain "private activity bonds" will not be tax
exempt for purposes of the regular income tax to shareholders who are
"substantial users" of the facilities financed by such obligations or "related
persons" of "substantial users." The tax-exempt portion of dividends paid for a
calendar year constituting "exempt-interest dividends" will be designated after
the end of that year and will be based upon the ratio of net tax-exempt income
to total net income earned by the Fund during the entire year. That ratio may be
substantially different than the ratio of net tax-exempt income to total net
income earned during a portion of the year. Thus, an investor who holds shares
for only a part of the year may be allocated more or less tax-exempt interest
dividends than would be the case if the allocation were based on the ratio of
net tax-exempt income to total net income actually earned by the Fund while the
investor was a shareholder. All or a portion of interest on indebtedness
incurred or continued by a shareholder to purchase or carry shares of a
Municipal Fund will not be deductible by the shareholder. The portion of
interest that is not deductible is equal to the total interest paid or accrued
on the indebtedness multiplied by the percentage of the Fund's total
distributions (not including distributions of the excess of net long-term
capital gains over net short-term capital losses) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal Revenue Service
for determining when borrowed funds are considered used for the purpose of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.

     Shareholders of the Municipal Funds receiving social security or railroad
retirement benefits may be taxed on a portion of those benefits as a result of
receiving tax exempt income (including exempt-interest dividends distributed by
the Fund). The tax may be imposed on up to 50% of a recipient's benefits in
cases where the sum of the recipient's adjusted gross income (with certain
adjustments, including tax-exempt interest) and 50% of the recipient's benefits,
exceeds a base amount. In addition, up to 85% of a recipient's benefits may be
subject to tax if the sum of the recipient's adjusted gross income (with certain
adjustments, including tax-exempt interest) and 50% of the recipient's benefits
exceeds a higher base amount. Shareholders receiving social security or railroad
retirement benefits should consult with their tax advisors.

     In years when a Fund distributes amounts in excess of its earnings and
profits, such distributions may be treated in part as a return of capital. A
return of capital is not taxable to a shareholder and has the effect of reducing
the shareholder's basis in the shares. Since certain of the Municipal Funds'
expenses attributable to earning tax-exempt income do not reduce such Fund's
current earnings and profits, it is possible that distributions, if any, in
excess of such Fund's net tax-exempt and taxable income will be treated as
taxable dividends to the extent of such Fund's remaining earnings and profits
(i.e., the amount of such expenses).

Distributions

     Except for exempt-interest dividends paid by the Municipal Funds, all
dividends and distributions of a Fund, whether received in shares or cash,
generally are taxable and must be reported on each shareholder's federal income
tax return. Dividends paid out of a Fund's investment company taxable income
will be taxable to a U.S. shareholder as ordinary income. Distributions received
by tax-exempt shareholders will not be subject to federal income tax to the
extent permitted under the applicable tax exemption.

     A portion of the dividends paid by the StocksPLUS Fund may qualify for the
deduction for dividends received by corporations. Dividends paid by the other
Funds generally are not expected to qualify for the deduction for dividends
received by corporations, although certain distributions from the High Yield
Fund may qualify. Distributions of net capital gains, if any, designated as
capital gain dividends, are taxable as long-term capital gains, regardless of
how long the shareholder has held a Fund's shares and are not eligible for the
dividends received deduction. Any distributions that are not from a Fund's
investment company taxable income or net realized capital gains may be
characterized as a return of capital to shareholders or, in some cases, as
capital gain. The tax treatment of dividends and distributions will be the same
whether a shareholder reinvests them in additional shares or elects to receive
them in cash.

     The Strategic Balanced Fund will not be able to offset gains realized by
one Fund in which the Fund invests against losses realized by another Fund in
which the Fund invests. The Fund's use of the fund-of-funds structure could
therefore affect the amount, timing and character of distributions to
shareholders.

                                     - 64 -


Sales of Shares

     Upon the disposition of shares of a Fund (whether by redemption, sale or
exchange), a shareholder will realize a gain or loss. Such gain or loss will be
capital gain or loss if the shares are capital assets in the shareholder's
hands, and will be long-term or short-term generally depending upon the
shareholder's holding period for the shares. Any loss realized on a disposition
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Any loss realized by a shareholder on a
disposition of shares held by the shareholder for six months or less will be
treated as a long-term capital loss to the extent of any distributions of
capital gain dividends received by the shareholder with respect to such shares.

     Depending on the Strategic Balanced Fund's percentage ownership in an
Underlying Fund both before and after a redemption, the Fund's redemption of
shares of such Underlying Fund may cause the Fund to be treated as not receiving
capital gain income on the amount by which the distribution exceeds the Fund's
tax basis in the shares of the Underlying Fund, but instead to be treated as
receiving a dividend taxable as ordinary income on the full amount of the
distribution. This could cause shareholders of the Strategic Balanced Fund to
recognize higher amounts of ordinary income than if the shareholders had held
the shares of the Underlying Funds directly. Redemptions of shares in an
Underlying Fund could also cause additional distributable gains to shareholders.

Backup Withholding

     A Fund may be required to withhold up to 30.5% of all taxable distributions
payable to shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other shareholders specified in
the Code generally are exempt from such backup withholding. Backup withholding
is not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal tax liability.

Options, Futures and Forward Contracts, and Swap Agreements

     Some of the options, futures contracts, forward contracts, and swap
agreements used by the Funds may be "section 1256 contracts." Any gains or
losses on section 1256 contracts are generally considered 60% long-term and 40%
short-term capital gains or losses ("60/40") although certain foreign currency
gains and losses from such contracts may be treated as ordinary in character.
Also, section 1256 contracts held by a Fund at the end of each taxable year
(and, for purposes of the 4% excise tax, on certain other dates as prescribed
under the Code) are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as ordinary or 60/40 gain or loss.

     Generally, the hedging transactions and certain other transactions in
options, futures and forward contracts undertaken by a Fund, may result in
"straddles" for U.S. federal income tax purposes. In some cases, the straddle
rules also could apply in connection with swap agreements. The straddle rules
may affect the character of gains (or losses) realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the tax consequences of transactions in options, futures,
forward contracts, and swap agreements to a Fund are not entirely clear. The
transactions may increase the amount of short-term capital gain realized by a
Fund which is taxed as ordinary income when distributed to shareholders.

     A Fund may make one or more of the elections available under the Code which
are applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections operate to
accelerate the recognition of gains or losses from the affected straddle
positions.

                                     - 65 -


     Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.

     Rules governing the tax aspects of swap agreements are in a developing
stage and are not entirely clear in certain respects. Accordingly, while the
Funds intend to account for such transactions in a manner they deem to be
appropriate, the Internal Revenue Service might not accept such treatment. If it
did not, the status of a Fund as a regulated investment company might be
affected. The Trust intends to monitor developments in this area. Certain
requirements that must be met under the Code in order for a Fund to qualify as a
regulated investment company may limit the extent to which a Fund will be able
to engage in swap agreements.

     The qualifying income and diversification requirements applicable to a
Fund's assets may limit the extent to which a Fund will be able to engage in
transactions in options, futures contracts, forward contracts, and swap
agreements.

Short Sales

     Certain Funds may make short sales of securities. Short sales may increase
the amount of short-term capital gain realized by a Fund, which is taxed as
ordinary income when distributed to shareholders.

Passive Foreign Investment Companies

     Certain Funds may invest in the stock of foreign corporations which may be
classified under the Code as passive foreign investment companies ("PFICs"). In
general, a foreign corporation is classified as a PFIC for a taxable year if at
least one-half of its assets constitute investment-type assets or 75% or more of
its gross income is investment-type income. If a Fund receives a so-called
"excess distribution" with respect to PFIC stock, the Fund itself may be subject
to tax on a portion of the excess distribution, whether or not the corresponding
income is distributed by the Fund to stockholders. In general, under the PFIC
rules, an excess distribution is treated as having been realized ratably over
the period during which the Fund held the PFIC stock. A Fund itself will be
subject to tax on the portion, if any, of an excess distribution that is so
allocated to prior taxable years and an interest factor will be added to the
tax, as if the tax had been payable in such prior taxable years. Certain
distributions from a PFIC as well as gain from the sale of PFIC stock are
treated as excess distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.

     A Fund may be eligible to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently is available in some circumstances,
a Fund generally would be required to include in its gross income its share of
the earnings of a PFIC on a current basis, regardless of whether distributions
are received from the PFIC in a given year. If this election were made, the
special rules, discussed above, relating to the taxation of excess
distributions, would not apply. Alternatively, another election may be available
that would involve marking to market a Fund's PFIC shares at the end of each
taxable year (and on certain other dates prescribed in the Code), with the
result that unrealized gains are treated as though they were realized and
reported as ordinary income. Any mark-to-market losses and any loss from an
actual disposition of PFIC shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income with respect to such
shares in prior years. If this election were made, tax at the Fund level under
the PFIC rules would generally be eliminated, but the Fund could, in limited
circumstances, incur nondeductible interest charges. A Fund's intention to
qualify annually as a regulated investment company may limit its elections with
respect to PFIC shares.

     Because the application of the PFIC rules may affect, among other things,
the character of gains and the amount of gain or loss and the timing of the
recognition of income with respect to PFIC shares, and may subject a Fund itself
to tax on certain income from PFIC shares, the amount that must be distributed
to shareholders and will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased substantially as compared
to a fund that did not invest in PFIC shares.

                                     - 66 -


Foreign Currency Transactions

     Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues income or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or loss. Similarly, on disposition of
debt securities denominated in a foreign currency and on disposition of certain
other instruments, gains or losses attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as "section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.

Foreign Taxation

     Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the U.S. may reduce or eliminate such
taxes. In addition, PIMCO intends to manage the Funds with the intention of
minimizing foreign taxation in cases where it is deemed prudent to do so. If
more than 50% of the value of the Global Bond, Global Bond II, Foreign Bond,
European Convertible or Emerging Markets Bond Funds' total assets at the close
of their taxable year consists of securities of foreign corporations, such Fund
will be eligible to elect to "pass-through" to the Fund's shareholders the
amount of foreign income and similar taxes paid by the Fund. If this election is
made, a shareholder generally subject to tax will be required to include in
gross income (in addition to taxable dividends actually received) his pro rata
share of the foreign taxes paid by the Fund, and may be entitled either to
deduct (as an itemized deduction) his or her pro rata share of foreign taxes in
computing his taxable income or to use it (subject to limitations) as a foreign
tax credit against his or her U.S. federal income tax liability. No deduction
for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by the Fund will
"pass-through" for that year.

     Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his or her total
foreign source taxable income. For this purpose, if the pass-through election is
made, the source of the Global Bond, Global Bond II, Foreign Bond, European
Convertible or Emerging Markets Bond Funds' income will flow through to
shareholders of the Trust. With respect to such Funds, gains from the sale of
securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency-denominated
debt securities, receivables and payables will be treated as ordinary income
derived from U.S. sources. The limitation on the foreign tax credit is applied
separately to foreign source passive income, and to certain other types of
income. Shareholders may be unable to claim a credit for the full amount of
their proportionate share of the foreign taxes paid by the Fund. The foreign tax
credit can be used to offset only 90% of the revised alternative minimum tax
imposed on corporations and individuals and foreign taxes generally are not
deductible in computing alternative minimum taxable income.

     Although the Strategic Balanced Fund may itself be entitled to a deduction
for such taxes paid by an Underlying Fund in which the Fund invests, the
Strategic Balanced Fund will not be able to pass any such credit or deduction
through to its own shareholders.

Original Issue Discount and Market Discount

     Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund may be treated as
debt securities that are issued originally at a discount. Generally, the amount
of the original issue discount ("OID") is treated as interest income and is
included in income over the term of the debt security, even though payment of
that amount is not received until a later time, usually when the debt security
matures. A portion of the OID includable in income with respect to certain
high-yield corporate debt securities may be treated as a dividend for Federal
income tax purposes.

     Some of the debt securities (with a fixed maturity date of more than one
year from the date of issuance) that may be acquired by a Fund in the secondary
market may be treated as having market discount. Generally, any gain

                                     - 67 -


recognized on the disposition of, and any partial payment of principal on, a
debt security having market discount is treated as ordinary income to the extent
the gain, or principal payment, does not exceed the "accrued market discount" on
such debt security. Market discount generally accrues in equal daily
installments. A Fund may make one or more of the elections applicable to debt
securities having market discount, which could affect the character and timing
of recognition of income.

     Some debt securities (with a fixed maturity date of one year or less from
the date of issuance) that may be acquired by a Fund may be treated as having
acquisition discount, or OID in the case of certain types of debt securities.
Generally, the Fund will be required to include the acquisition discount, or
OID, in income over the term of the debt security, even though payment of that
amount is not received until a later time, usually when the debt security
matures. The Fund may make one or more of the elections applicable to debt
securities having acquisition discount, or OID, which could affect the character
and timing of recognition of income.

     A Fund generally will be required to distribute dividends to shareholders
representing discount on debt securities that is currently includable in income,
even though cash representing such income may not have been received by the
Fund. Cash to pay such dividends may be obtained from sales proceeds of
securities held by the Fund.

Constructive Sales

     Recently enacted rules may affect the timing and character of gain if a
Fund engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If a Fund enters into certain
transactions in property while holding substantially identical property, the
Fund would be treated as if it had sold and immediately repurchased the property
and would be taxed on any gain (but not loss) from the constructive sale. The
character of gain from a constructive sale would depend upon the Fund's holding
period in the property. Loss from a constructive sale would be recognized when
the property was subsequently disposed of, and its character would depend on the
Fund's holding period and the application of various loss deferral provisions of
the Code.

Non-U.S. Shareholders

     Withholding of Income Tax on Dividends: Under the 1972 Convention and U.S.
federal tax law, dividends paid on shares beneficially held by a person who is a
"foreign person" within the meaning of the Internal Revenue Code of 1986, as
amended, are, in general, subject to withholding of U.S. federal income tax at a
rate of 30% of the gross dividend, which may, in some cases, be reduced by an
applicable tax treaty. However, if a beneficial holder who is a foreign person
has a permanent establishment in the United States, and the shares held by such
beneficial holder are effectively connected with such permanent establishment
and, in addition, the dividends are effectively connected with the conduct by
the beneficial holder of a trade or business in the United States, the dividend
will be subject to U.S. federal net income taxation at regular income tax rates.
Distributions of long-term net realized capital gains will not be subject to
withholding of U.S. federal income tax.

     Income Tax on Sale of a Fund's shares: Under U.S. federal tax law, a
beneficial holder of shares who is a foreign person is not, in general, subject
to U.S. federal income tax on gains (and is not allowed a deduction for losses)
realized on the sale of such shares unless (i) the shares in question are
effectively connected with a permanent establishment in the United States of the
beneficial holder and such gain is effectively connected with the conduct of a
trade or business carried on by such holder within the United States or (ii) in
the case of an individual holder, the holder is present in the United States for
a period or periods aggregating 183 days or more during the year of the sale and
certain other conditions are met.

     State and Local Tax: A beneficial holder of shares who is a foreign person
may be subject to state and local tax in addition to the federal tax on income
referred above.

     Estate and Gift Taxes: Under existing law, upon the death of a beneficial
holder of shares who is a foreign person, such shares will be deemed to be
property situated within the United States and will be subject to U.S. federal
estate tax. If at the time of death the deceased holder is a resident of a
foreign country and not a citizen or resident of the United States, such tax
will be imposed at graduated rates from 18% to 55% on the total value (less

                                     - 68 -


allowable deductions and allowable credits) of the decedent's property situated
within the United States. In general, there is no gift tax on gifts of shares by
a beneficial holder who is a foreign person.

     The availability of reduced U.S. taxation pursuant to the 1972 Convention
or the applicable estate tax convention depends upon compliance with established
procedures for claiming the benefits thereof and may further, in some
circumstances, depend upon making a satisfactory demonstration to U.S. tax
authorities that a foreign investor qualifies as a foreign person under U.S.
domestic tax law and the 1972 Convention.

Other Taxation

     Distributions also may be subject to additional state, local and foreign
taxes, depending on each shareholder's particular situation. Under the laws of
various states, distributions of investment company taxable income generally are
taxable to shareholders even though all or a substantial portion of such
distributions may be derived from interest on certain federal obligations which,
if the interest were received directly by a resident of such state, would be
exempt from such state's income tax ("qualifying federal obligations"). However,
some states may exempt all or a portion of such distributions from income tax to
the extent the shareholder is able to establish that the distribution is derived
from qualifying federal obligations. Moreover, for state income tax purposes,
interest on some federal obligations generally is not exempt from taxation,
whether received directly by a shareholder or through distributions of
investment company taxable income (for example, interest on FNMA Certificates
and GNMA Certificates). Each Fund will provide information annually to
shareholders indicating the amount and percentage of a Fund's dividend
distribution which is attributable to interest on federal obligations, and will
indicate to the extent possible from what types of federal obligations such
dividends are derived. Shareholders are advised to consult their own tax
advisers with respect to the particular tax consequences to them of an
investment in a Fund.

                                OTHER INFORMATION

Capitalization

     The Trust is a Massachusetts business trust established under a Declaration
of Trust dated February 19, 1987, as amended and restated March 31, 2000. The
capitalization of the Trust consists solely of an unlimited number of shares of
beneficial interest with a par value of $0.0001 each. The Board of Trustees may
establish additional series (with different investment objectives and
fundamental policies) at any time in the future. Establishment and offering of
additional series will not alter the rights of the Trust's shareholders. When
issued, shares are fully paid, non-assessable, redeemable and freely
transferable. Shares do not have preemptive rights or subscription rights. In
liquidation of a Fund, each shareholder is entitled to receive his pro rata
share of the net assets of that Fund.

     Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees or
officers of the Trust for acts or obligations of the Trust, which are binding
only on the assets and property of the Trust, and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Trust or the Trustees. The Declaration of Trust also provides for
indemnification out of Trust property for all loss and expense of any
shareholder held personally liable for the obligations of the Trust. The risk of
a shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which such disclaimer is inoperative or the Trust
itself is unable to meet its obligations, and thus should be considered remote.

Performance Information

     From time to time the Trust may make available certain information about
the performance of some or all of the classes of shares of some or all of the
Funds. Information about a Fund's performance is based on that Fund's (or its
predecessor's) record to a recent date and is not intended to indicate future
performance.

     The total return of classes of shares of all Funds may be included in
advertisements or other written material. When a Fund's total return is
advertised, it will be calculated for the past year, the past five years, and
the past ten years (or if the Fund has been offered for a period shorter than
one, five or ten years, that period will be

                                     - 69 -


substituted) since the establishment of the Fund (or its predecessor series of
PIMCO Advisors Funds for the Global Bond Fund II), as more fully described
below. For periods prior to the initial offering date of a particular class of
shares, total return presentations for the class will be based on the historical
performance of an older class of the Fund (if any) restated to reflect any
different sales charges and/or operating expenses (such as different
administrative fees and/or 12b-1/servicing fee charges) associated with the
newer class. In certain cases, such a restatement will result in performance of
the newer class which is higher than if the performance of the older class were
not restated to reflect the different operating expenses of the newer class. In
such cases, the Trust's advertisements will also, to the extent appropriate,
show the lower performance figure reflecting the actual operating expenses
incurred by the older class for periods prior to the initial offering date of
the newer class. Total return for each class is measured by comparing the value
of an investment in the Fund at the beginning of the relevant period to the
redemption value of the investment in the Fund at the end of the period
(assuming immediate reinvestment of any dividends or capital gains distributions
at net asset value). Total return may be advertised using alternative methods
that reflect all elements of return, but that may be adjusted to reflect the
cumulative impact of alternative fee and expense structures.

     The Funds may also provide current distribution information to its
shareholders in shareholder reports or other shareholder communications, or in
certain types of sales literature provided to prospective investors. Current
distribution information for a particular class of a Fund will be based on
distributions for a specified period (i.e., total dividends from net investment
income), divided by the relevant class net asset value per share on the last day
of the period and annualized. The rate of current distributions does not reflect
deductions for unrealized losses from transactions in derivative instruments
such as options and futures, which may reduce total return. Current distribution
rates differ from standardized yield rates in that they represent what a class
of a Fund has declared and paid to shareholders as of the end of a specified
period rather than the Fund's actual net investment income for that period.

     Performance information is computed separately for each class of a Fund.
The Trust may, from time to time, include the yield and effective yield of the
Money Market and Liquid Assets Funds, and the yield and total return for each
class of shares of all of the Funds in advertisements or information furnished
to shareholders or prospective investors. Each Fund may from time to time
include in advertisements the ranking of the Fund's performance figures relative
to such figures for groups of mutual funds categorized by Lipper Analytical
Services as having the same investment objectives. Information provided to any
newspaper or similar listing of the Fund's net asset values and public offering
prices will separately present each class of shares. The Funds also may compute
current distribution rates and use this information in their prospectuses and
statement of additional information, in reports to current shareholders, or in
certain types of sales literature provided to prospective investors.

Calculation of Yield

     Current yield for the Money Market and Liquid Assets Funds will be based on
the change in the value of hypothetical investment (exclusive of capital
changes) over a particular 7-day period less a pro-rata share of Fund expenses
accrued over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent.
"Effective yield" for the Money Market and Liquid Assets Funds assume that all
dividends received during an annual period have been reinvested. Calculation of
"effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:

             Effective Yield = [(Base Period Return +1)/365/7/] - 1

     The effective yield of the Money Market Fund for the seven day period ended
March 31, 2001 was as follows: Institutional Class - 5.15%, Administrative Class
- 4.88%, Class A - 4.89%, Class B - 3.97% and Class C - 4.89%.

     Quotations of yield for the remaining Funds will be based on all investment
income per share (as defined by the SEC) during a particular 30-day (or one
month) period (including dividends and interest), less expenses accrued during
the period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per share on the last day of the
period, according to the following formula:

                                     - 70 -


                  YIELD = 2[( a-b + 1)/6/-1]
                              ---
                              cd

     where a = dividends and interest earned during the period,

           b = expenses accrued for the period (net of reimbursements),

           c = the average daily number of shares outstanding during the period
               that were entitled to receive dividends, and

           d = the maximum offering price per share on the last day of the
               period.

     For the one month period ended March 31, 2001, the SEC yield of the Funds
was as follows (all numbers are annualized) (Class J and Class K shares were not
offered during the period listed):

                           SEC 30 Day Yield for Period
                              Ended March 31, 2001
                              --------------------


                                           Institutional      Administrative
Fund                                            Class              Class        Class A   Class B   Class C   Class D
----                                            -----              -----        -------   -------   -------   -------
Money Market Fund                                 5.25%             4.98%          5.00%   4.09%      4.99%    N/A
Short-Term Fund                                   8.15              7.89           7.58    6.99       7.43     7.84
Low Duration Fund                                 7.07              6.81           6.39    5.83       6.08     6.74
Low Duration Fund II                              6.45              6.21           N/A     N/A        N/A      N/A
Low Duration Fund III                             6.57              6.29           N/A     N/A        N/A      N/A
GNMA                                              7.60              N/A            7.13    N/A        N/A      N/A
Moderate Duration Fund                            6.26              N/A            N/A     N/A        N/A      N/A
Real Return Fund                                 13.17             12.91          12.33   11.94      12.20    12.74
Total Return Fund                                 6.61              6.35           5.85    5.36       5.36     6.28
Total Return Fund II                              6.00              5.75           N/A     N/A        N/A      N/A
Total Return Fund III                             6.24              5.98           N/A     N/A        N/A      N/A
Total Return Mortgage Fund                        5.90              N/A            5.24    4.76       4.72     5.50
High Yield Fund                                   9.56              9.30           8.72    8.37       8.37     9.13
Long-Term U.S. Government. Fund                   6.58              6.43           5.95    5.46       5.46     N/A
Short Duration Municipal Income                   3.61              N/A            N/A     N/A        N/A      3.22
   Fund
Municipal Bond Fund                               4.34              4.09           3.87    3.24       3.49     3.99
California Municipal Bond Fund                    3.90              N/A            3.47    N/A        N/A      3.57
California Intermediate Municipal                 4.42              4.18           3.94    N/A        N/A      4.08
   Bond Fund
New York Municipal Bond Fund                      4.18              N/A            3.56    N/A        N/A      3.82
Global Bond Fund                                  5.93              5.67           N/A     N/A        N/A      N/A
Global Bond Fund II                               6.47              N/A            5.81    5.33       5.33     N/A
Foreign Bond Fund                                 5.79              5.54           5.09    4.58       4.58     5.34
Emerging Markets Bond Fund                        8.20              7.94           7.43    7.02       7.03     7.78
European Convertible Fund                         2.27              N/A            1.78    N/A        N/A      N/A
Strategic Balanced Fund                           6.39              6.12           5.50    4.98       5.00     5.76
Convertible Fund                                  3.06              2.88           2.52    1.85       1.84     2.71
Investment Grade Corporate Bond Fund              6.70              N/A            N/A     N/A        N/A      N/A
StocksPLUS Fund                                   7.53              7.27           6.90    6.34       6.59     7.11


                                     - 71 -


     The yield of each such Fund will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio and operating
expenses of the Trust allocated to the Fund or its classes of shares. These
factors, possible differences in the methods used in calculating yield (and the
tax exempt status of distributions for the Municipal Funds) should be considered
when comparing a Fund's yield to yields published for other investment companies
and other investment vehicles. Yield should also be considered relative to
changes in the value of a Fund's various classes of shares. These yields do not
take into account any applicable contingent deferred sales charges.

     The Municipal Funds may advertise a tax equivalent yield of each class of
its shares, calculated as described above except that, for any given tax
bracket, net investment income of each class will be calculated using as gross
investment income an amount equal to the sum of (i) any taxable income of each
class of the Fund plus (ii) the tax exempt income of each class of the Fund
divided by the difference between 1 and the effective federal income tax rates
for taxpayers in that tax bracket. For example, taxpayers with the marginal
federal income tax rates indicated in the following table would have to earn the
tax equivalent yields shown in order to realize an after-tax return equal to the
corresponding tax-exempt yield shown.


                                                                                   A tax-exempt yield of
                                                                            is equivalent to a taxable yield of
    Taxable income            Taxable income       Marginal tax
     Filing Single        Married filing jointly     rate*/a/        3%        4%         5%         6%        7%
     -------------        ----------------------     --------        --        --         --         --        --
Up to $27,050**          Up to $45,200**                15%         3.53%     4.71%       5.88%      7.06%     8.24%
Over $27,050 but         Over $45,200 but               27%         4.11%     5.48%       6.85%      8.22%     9.59%
   not over $65,550         not over $109,250
Over $65,550 but         Over $109,250 but              30%         4.29%     5.71%       7.14%      8.57%    10.00%
   not over $136,750        not over $166,500
Over $136,750 but        Over $166,500 but              35%         4.62%     6.15%       7.69%      9.23%    10.77%
   not over $297,350        not over $297,350
Over $297,350            Over $297,350                38.6%         4.89%     6.51%       8.14%      9.77%    11.40%
-------------------
*    These marginal tax rates do not take into account the effect of the phase
     out of itemized deductions and personal exemptions. They represent
     tax-equivalent yields taking Federal income tax into account only. Any
     potential impact at the state income tax level has not been included.
     Source: Marginal tax rates are from The Economic Growth and Tax Relief
     Reconciliation Act of 2001, Pub. L. 107-16, 115 Stat. 38.

**   A new tax bracket of 10% has been created for a portion of the taxable
     income currently taxed at 15%. It applies to the first $6,000 of income for
     single individuals, $10,000 of income for heads of household and $12,000
     for married couples filing jointly. After 2007, the bracket applies to the
     first $7,000 for single filers and $14,000 for married couples filing
     jointly.

a    Since new tax rates were implemented on July 1, 2001, the effective
     marginal income tax rates for the entire 2001 year are 27.5%, 30.5%, 35.5%
     and 39.1%. Beginning July 1, 2001, these new tax rates are phased in over a
     period of six years, as follows:


                                           Tax Rates Prior to July 1, 2001:
                                      28%                  31%                 36%                 39.6%

                                             Tax Rates as of July 1, 2001:
        2001-2003                     27%                  30%                 35%                 38.6%
        2004-2005                     26%                  29%                 34%                 37.6%
        2006 and beyond               25%                  28%                 33%                   35%


     As is shown in the above table, the advantage of tax-exempt investing
becomes more advantageous to an investor as his or her marginal tax rate
increases.

                                     - 72 -


     The Trust, in its advertisements, may refer to pending legislation from
time to time and the possible impact of such legislation on investors,
investment strategy and related matters. This would include any tax proposals
and their effect on marginal tax rates and tax-equivalent yields. At any time in
the future, yields and total return may be higher or lower than past yields and
there can be no assurance that any historical results will continue.

Calculation of Total Return

     Quotations of average annual total return for a Fund or class will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five and ten
years (up to the life of the Fund), calculated pursuant to the following
formula: P (1 + T)/n/ = ERV (where P = a hypothetical initial payment of $1,000,
T = the average annual total return, n = the number of years, and ERV = the
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the period). Except as noted below all total return figures reflect the
deduction of a proportional share of Fund or class expenses on an annual basis,
and assume that (i) the maximum sales load (or other charges deducted from
payments) is deducted from the initial $1,000 payment and that the maximum
contingent deferred sales charge, if any, is deducted at the times, in the
amounts, and under the terms disclosed in the Prospectuses and (ii) all
dividends and distributions are reinvested when paid. The Funds also may, with
respect to certain periods of less than one year, provide total return
information for that period that is unannualized. Quotations of total return may
also be shown for other periods. Any such information would be accompanied by
standardized total return information.

     The table below sets forth the average annual total return of each class of
shares of the following Funds for the periods ended March 31, 2001. For periods
prior to the "Inception Date" of a particular class of a Fund's shares, total
return presentations for the class are based on the historical performance of
Institutional Class shares of the Fund (the oldest class) adjusted, as
necessary, to reflect any current sales charges (including any contingent
deferred sales charges) associated with the newer class and any different
operating expenses associated with the newer class, such as 12b-1 distribution
and servicing fees (which are not paid by the Institutional Class) and
administrative fee charges.

                 Total Return for Periods Ended March 31, 2001*


----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
                                                                                    Since Inception   Inception        Inception
                                                                                    of Fund           Date of          Date of
Fund                    Class**              1 Year       5 Years      10 Years     (Annualized)      Fund             Class
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Money Market            Institutional        6.20%        5.43%         4.89%           4.90%         03/01/91         03/01/91
                        Administrative       5.94         5.18          4.64            4.65                           01/24/95
                        Class A              5.94         5.13          4.61            4.62                           01/13/97
                        Class B              5.02         4.25          3.70            3.71                           01/13/97
                        Class C              5.94         5.16          4.63            4.64                           01/13/97
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Short-Term              Institutional        7.65%        6.53%         5.88%           6.51%         10/07/87         10/07/87
                        Administrative       7.40         6.27          5.61            6.24                           02/01/96
                        Class A              5.09         5.67          5.24            5.92                           01/20/97
                        Class B              1.44         5.02          4.92            5.67                           01/20/97
                        Class C              5.91         5.79          5.14            5.77                           01/20/97
                        Class D              7.33         6.21          5.56            6.19                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Low Duration            Institutional        9.44%        7.04%         7.35%           7.88%         05/11/87         05/11/87
                        Administrative       9.17         6.78          7.08            7.62                           12/31/94
                        Class A              5.67         5.90          6.53            7.15                           01/13/97
                        Class B              3.12         5.43          6.30            6.98                           01/13/97
                        Class C              7.39         6.03          6.33            6.86                           01/13/97
                        Class D              9.10         6.70          7.01            7.54                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------

                                     - 73 -



----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
                                                                                    Since Inception   Inception        Inception
                                                                                    of Fund           Date of          Date of
Fund                    Class**              1 Year       5 Years      10 Years     (Annualized)      Fund             Class
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Low Duration II         Institutional        9.74%        6.68%         N/A             6.45%         11/01/91         11/01/91
                        Administrative       9.49         6.42          N/A             6.19                           02/02/98

----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Low Duration III        Institutional        9.06%        N/A           N/A             6.25%         12/31/96         12/31/96
                        Administrative       8.82         N/A           N/A             5.99                           03/19/99
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
GNMA                    Institutional       12.96%        N/A           N/A             8.08%         07/31/97         07/31/97
                        Class A              7.50         N/A           N/A             6.33                           11/30/00
                        Class B              6.68         N/A           N/A             6.16                           05/31/01
                        Class C             10.68         N/A           N/A             6.85                           05/31/01
                        Class D             12.52         N/A           N/A             7.65                           05/31/01
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Moderate                Institutional       12.09%        N/A           N/A             7.03%         12/31/96         12/31/96
Duration
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Real Return             Institutional       14.44%        N/A           N/A             8.09%         01/29/97         01/29/97
                        Administrative      14.10         N/A           N/A             7.81                           04/28/00
                        Class A             10.55         N/A           N/A             6.87                           01/29/97
                        Class B              8.12         N/A           N/A             6.47                           01/29/97
                        Class C             12.42         N/A           N/A             7.11                           01/29/97
                        Class D             13.99         N/A           N/A             7.66                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Total Return            Institutional       12.80%        8.32%         9.11%           9.32%         05/11/87         05/11/87
                        Administrative      12.51         8.05          8.85            9.05                           09/07/94
                        Class A              7.22         6.83          8.12            8.46                           01/13/97
                        Class B              6.44         6.71          8.08            8.42                           01/13/97
                        Class C             10.44         7.02          7.84            8.02                           01/13/97
                        Class D             12.44         7.98          8.78            8.98                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Total Return II         Institutional       13.02%        7.93%         N/A             7.88%         12/30/91         12/30/91
                        Administrative      12.74         7.66          N/A             7.62                           11/30/94
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Total Return III        Institutional       12.15%        7.92%         N/A             8.75%         05/01/91         05/01/91
                        Administrative      11.83         7.63          N/A             8.47                           04/11/97
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Total Return            Institutional       13.14%        N/A           N/A             8.15%         07/31/97         07/31/97
Mortgage                Class A              7.61         N/A           N/A             6.38                           07/31/00
                        Class B              6.84         N/A           N/A             6.23                           07/31/00
                        Class C             10.82         N/A           N/A             6.92                           07/31/00
                        Class D             12.69         N/A           N/A             7.72                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Investment Grade        Institutional        N/A          N/A           N/A            15.00%+        04/28/00         04/28/00
Corporate Bond
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
High Yield              Institutional        5.85%        7.28%         N/A             9.42%         12/16/92         12/16/92
                        Administrative       5.59         7.01          N/A             9.15                           01/16/95
                        Class A              0.70         5.88          N/A             8.40                           01/13/97
                        Class B             -0.17         5.78          N/A             8.33                           01/13/97
                        Class C              3.69         6.08          N/A             8.21                           01/13/97
                        Class D              5.40         6.87          N/A             9.01                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Long-Term U.S.          Institutional       15.52%        9.62%         N/A            11.29%         07/01/91         07/01/91
Government              Administrative      15.24         9.35          N/A            11.02                           09/23/97
                        Class A              9.89         8.20          N/A            10.35                           01/20/97
                        Class B              9.22         8.07          N/A            10.28                           01/20/97
                        Class C             13.24         8.39          N/A            10.07                           01/20/97
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Short-Duration          Institutional        6.22%        N/A           N/A             5.32%         08/31/99         08/31/99
Municipal               Class D              5.78         N/A           N/A             4.89                           01/31/00
Income
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------

                                     - 74 -



----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
                                                                                    Since Inception   Inception        Inception
                                                                                    of Fund           Date of          Date of
Fund                    Class**              1 Year       5 Years      10 Years     (Annualized)      Fund             Class
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Municipal Bond          Institutional       11.13%        N/A           N/A             4.85%         12/31/97         12/31/97
                        Administrative      10.86         N/A           N/A             4.59                           09/30/98
                        Class A              7.42         N/A           N/A             3.51                           04/01/98
                        Class B              4.92         N/A           N/A             2.84                           04/01/98
                        Class C              9.20         N/A           N/A             3.96                           04/01/98
                        Class D             10.74         N/A           N/A             4.48                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
California              Institutional       10.59%        N/A           N/A             8.68%         08/31/99         08/31/99
Intermediate            Administrative      10.36         N/A           N/A             8.42                           09/07/99
Municipal Bond          Class A              6.89         N/A           N/A             6.22                           10/19/99
                        Class D             10.21         N/A           N/A             8.28                           01/31/00
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
California Municipal    Institutional        N/A          N/A           N/A            12.48%+        05/16/00         05/16/00
Bond                    Class A              N/A          N/A           N/A             8.72+                          07/31/00
                        Class D              N/A          N/A           N/A            12.19+                          07/31/00
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
New York Municipal      Institutional       12.77%        N/A           N/A             9.20%         08/31/99         08/31/99
Bond                    Class A              9.01         N/A           N/A             6.74                           10/19/99
                        Class D             12.44         N/A           N/A             8.83                           01/31/00
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Global Bond             Institutional       -0.83%        3.31%         N/A             5.24%         11/23/93         11/23/93
                        Administrative      -1.08         3.09          N/A             5.01                           08/01/96
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Foreign Bond            Institutional       11.33%       10.18%         N/A             9.92%         12/03/92         12/03/92
                        Administrative      11.05         9.91          N/A             9.65                           01/28/97
                        Class A              5.83         8.69          N/A             8.83                           01/20/97
                        Class B              4.94         8.60          N/A             8.76                           01/20/97
                        Class C              8.96         8.88          N/A             8.62                           01/20/97
                        Class D             10.84         9.71          N/A             9.45                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Emerging Markets Bond   Institutional       12.92%        N/A           N/A             7.47%         07/31/97         07/31/97
                        Administrative       2.63         N/A           N/A             7.19                           09/30/98
                        Class A              7.40         N/A           N/A             5.71                           07/31/97
                        Class B              6.71         N/A           N/A             5.62                           07/31/97
                        Class C             10.76         N/A           N/A             6.27                           07/31/97
                        Class D             12.58         N/A           N/A             7.07                            7/31/97
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Strategic Balanced      Institutional       -8.31%        N/A           N/A            11.68%         06/28/96         06/28/96
                        Administrative      -8.34         N/A           N/A            11.45                           06/30/99
                        Class A            -12.70         N/A           N/A            10.14                           05/28/99
                        Class B            -13.37         N/A           N/A            10.11                           05/28/99
                        Class C            -10.13         N/A           N/A            10.36                           05/28/99
                        Class D             -8.65         N/A           N/A            11.23                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
Convertible             Institutional      -23.00%        N/A           N/A            11.22%         03/31/99         03/31/99
                        Administrative     -22.96         N/A           N/A            11.12                           08/01/00
                        Class A            -26.16         N/A           N/A             8.81                           05/28/99
                        Class B            -26.86         N/A           N/A             8.61                           05/28/99
                        Class C            -23.93         N/A           N/A            10.51                           05/28/99
                        Class D            -22.62         N/A           N/A            11.29                           08/01/00
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
StocksPLUS              Institutional      -20.93%       14.11%         N/A            15.93%         05/14/93         05/14/93
                        Administrative     -21.21        13.70          N/A            15.56                           01/07/97
                        Class A            -23.67        12.91          N/A            14.99                           01/20/97
                        Class B            -25.48        12.53          N/A            14.67                           01/20/97
                        Class C            -22.38        13.04          N/A            14.86                           01/20/97
                        Class D            -21.27        13.61          N/A            15.44                           04/08/98
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------
European                Institutional       N/A           N/A           N/A             0.10%+        11/30/00         11/30/00
Convertible             Class A             N/A           N/A           N/A            -4.42+                          11/30/00
----------------------- ----------------- ------------- ------------- ------------- ----------------- ------------- --------------


                                     - 75 -


     +    Unannualized

     *    Average annual total return presentations for a particular class of
     shares assume payment of the current maximum sales charge (if any)
     applicable to that class at the time of purchase and assume that the
     maximum CDSC (if any) for Class A, Class B and Class C shares was deducted
     at the times, in the amounts, and under the terms discussed in the Class A,
     B and C Prospectus.

     **   For all Funds listed above, Class A, Class B, Class C, Class D and
     Administrative Class total return presentations for periods prior to the
     Inception Date of that class reflect the prior performance of Institutional
     Class shares of the Fund (the oldest class) adjusted to reflect the actual
     sales charges (none in the case of Class D and Administrative Class) of the
     newer class. The adjusted performance also reflects the higher Fund
     operating expenses associated with Class A, Class B, Class C, Class D and
     Administrative Class shares. These include (i) 12b-1 distribution and
     servicing fees, which are not paid by the Institutional Class but are paid
     by Class B and Class C (at a maximum rate of 1.00% per annum) and Class A
     and the Administrative Class (at a maximum rate of 0.25% per annum), and
     may be paid by Class D (at a maximum of 0.25% per annum), and (ii)
     administration fee charges associated with Class A, Class B and Class C
     shares (at a maximum differential of 0.22% per annum) and Class D shares
     (at a maximum differential of 0.45% per annum).

     The table below sets forth the average annual total return of certain
classes of shares of the Global Bond Fund II (which was a series of PIMCO
Advisors Funds ("PAF") prior to its reorganization as a Fund of the Trust on
January 17, 1997) for the periods ended March 31, 2001. Accordingly, "Inception
Date of Fund" refers to the inception date of the PAF predecessor series. Since
Class A shares were offered since the inception of Global Bond Fund II, total
return presentations for periods prior to the Inception Date of the
Institutional Class are based on the historical performance of Class A shares,
adjusted to reflect that the Institutional Class does not have a sales charge,
and the different operating expenses associated with the Institutional Class,
such as 12b-1 distribution and servicing fees and administration fee charges.

                 Total Return for Periods Ended March 31, 2001*


--------------------- ------------------- ------------- ------------ -------------- -------------- --------------- ---------------
                                                                                        Since
                                                                                      Inception      Inception       Inception
                                                                                       of Fund        Date of         Date of
        Fund               Class**           1 Year       5 Years      10 Years     (Annualized)        Fund           Class
--------------------- ------------------- ------------- ------------ -------------- -------------- --------------- ---------------
Global Bond II        Institutional           11.87%       8.60%         N/A              9.14%       10/02/95        02/25/98
                      Class A                  6.42        7.19          N/A             7.81                         10/02/95
                      Class B                  5.60        7.01          N/A             7.77                         10/02/95
                      Class C                  9.60        7.29          N/A             7.89                         10/02/95
--------------------- ------------------- ------------- ------------ -------------- -------------- --------------- ---------------

     *    Average annual total return presentations for a particular class of
     shares assume payment of the current maximum sales charge (if any)
     applicable to that class at the time of purchase and assume that the
     maximum CDSC (if any) for Class A, Class B and Class C shares was deducted
     at the times, in the amounts, and under the terms discussed in the Class A,
     B and C Prospectus.

     **   Institutional Class total return presentations for periods prior to
     the Inception Date of that class reflect the prior performance of Class A
     shares of the former PAF series, adjusted to reflect the fact that there
     are no sales charges on Institutional Class shares of the Fund. The
     adjusted performance also reflects any different operating expenses
     associated with Institutional Class shares. These include (i) 12b-1
     distribution and servicing fees, which are not paid by the Institutional
     Class but are paid by Class A (at a maximum rate of 0.25% per annum), and
     (ii) administration fee charges, which are lower for Institutional class
     shares (at a differential of 0.15% per annum).

                                     - 76 -


     Note also that, prior to January 17, 1997, Class A, Class B and Class C
     shares of the Global Bond Fund II were subject to a variable level of
     expenses for such services as legal, audit, custody and transfer agency
     services. As described in the Class A, B and C Prospectus, for periods
     subsequent to January 17, 1997, Class A, Class B and Class C shares of the
     Trust are subject to a fee structure which essentially fixes these expenses
     (along with other administrative expenses) under a single administrative
     fee based on the average daily net assets of the Fund attributable to Class
     A, Class B and Class C shares. Under the current fee structure, the Global
     Bond Fund II is expected to have lower total Fund operating expenses than
     its predecessor had under the fee structure for PAF (prior to January 17,
     1997). All other things being equal, the higher expenses of PAF would have
     adversely affected total return performance for the Fund after January 17,
     1997.

     The method of adjustment used in the table above for periods prior to the
     Inception Date of Institutional Class shares of the Global Bond Fund II
     resulted in performance for the period shown which is higher than if the
     historical Class A performance were not adjusted to reflect the lower
     operating expenses of the newer class. The following table shows the lower
     performance figures that would be obtained if the performance for the
     Institutional Class was calculated by tacking to the Institutional Class'
     actual performance the actual performance of Class A shares (with their
     higher operating expenses) for periods prior to the initial offering date
     of the newer class (i.e. the total return presentations below are based,
     for periods prior to the inception date of the Institutional Class, on the
     historical performance of Class A shares adjusted to reflect the current
     sales charges associated with Class A shares, but not reflecting lower
     operating expenses associated with the Institutional Class, such as lower
     administrative fee charges and/or distribution and servicing fee charges).

                  Total Return for Periods Ended March 31, 2001
         (with no adjustment for operating expenses of the Institutional
                 Class for periods prior to its Inception Date)


           --------------------- ----------------- ------------- ----------- ----------- -------------------
                   Fund               Class           1 Year      5 Years     10 Years    Since Inception
                                                                                              of Fund
                                                                                            (Annualized)
           --------------------- ----------------- ------------- ----------- ----------- -------------------
           Global Bond II        Institutional        11.87%       8.45%        N/A            8.96%
           --------------------- ----------------- ------------- ----------- ----------- -------------------

     Current distribution information for a Fund will be based on distributions
for a specified period (i.e., total dividends from net investment income),
divided by Fund net asset value per share on the last day of the period and
annualized according to the following formula:

                  DIVIDEND YIELD = (((a/b)*365)/c)

          where   a =   actual dividends distributed for the calendar month in
                        question,

                  b =   number of days of dividend declaration in the month in
                        question, and

                  c =   net asset value (NAV) calculated on the last business
                        day of the month in question.

     The rate of current distributions does not reflect deductions for
unrealized losses from transactions in derivative instruments such as options
and futures, which may reduce total return. Current distribution rates differ
from standardized yield rates in that they represent what a Fund has declared
and paid to shareholders as of the end of a specified period rather than the
Fund's actual net investment income for that same period. Distribution rates
will exclude net realized short-term capital gains. The rate of current
distributions for a Fund should be evaluated in light of these differences and
in light of the Fund's total return figures, which will always accompany any
calculation of the rate of current distributions.

                                     - 77 -


     For the month ended March 31, 2001, the current distribution rates
(annualized) for the Funds were as follows (Class J and Class K shares were not
offered during the period listed):

                                Distribution Rate
                                -----------------


                                        Institutional    Administrative
Fund                                        Class             Class          Class A    Class B    Class C    Class D
----                                        -----             -----          -------    -------    -------    -------
Money Market Fund                           5.13%             4.92%            4.93%      4.03%      4.93%      N/A
Short-Term Fund                             7.65              7.46             7.34       6.57       7.34       7.41%
Low Duration Fund                           7.23              6.98             6.77       6.04       6.77       6.93
Low Duration Fund II                        7.22              7.43             N/A        N/A        N/A        N/A
Low Duration Fund III                       6.55              6.26             N/A        N/A        N/A        N/A
GNMA                                        7.93              N/A              N/A        N/A        N/A        N/A
Moderate Duration Fund                      6.61              N/A              N/A        N/A        N/A        N/A
Real Return Fund                           12.23             12.04            11.81      11.01      11.39      11.83
Total Return Fund                           6.78              6.51             6.31       5.55       5.55       6.46
Total Return Fund II                        6.27              6.02             N/A        N/A        N/A        N/A
Total Return Fund III                       6.40              5.89             N/A        N/A        N/A        N/A
Total Return Mortgage Fund                  5.66              N/A              5.34       N/A        N/A        5.26
High Yield Fund                             9.39              9.14             9.12       8.36       8.34       9.09
Long-Term U.S. Govt. Fund                   6.68              6.45             6.30       5.52       5.70       N/A
Short Duration Municipal Fund               3.40              N/A              N/A        N/A        N/A        3.00
Municipal Bond Fund                         4.58              4.34             4.23       3.48       3.75       4.23
California Municipal                        4.30              N/A              N/A        N/A        N/A        N/A
 Bond Fund
California Intermediate Municipal           4.34              4.08             4.01       N/A        N/A        3.99
 Bond Fund
Investment Grade Corporate Bond Fund        7.03              N/A              N/A        N/A        N/A        N/A
European Convertible Fund                   0.00              N/A              N/A        N/A        N/A        N/A
New York Municipal Bond Fund                4.69              N/A              4.28       N/A        N/A        4.33
Global Bond Fund                            5.27              5.01             N/A        N/A        N/A        N/A
Global Bond Fund II                         5.84              N/A              5.42       4.69       4.69       N/A
Foreign Bond Fund                           5.30              5.04             4.86       4.10       4.08       4.85
Emerging Markets Bond Fund                  8.25              7.99             7.93       6.95       7.12       7.85
Strategic Balanced Fund                    10.76             10.02             N/A        N/A        N/A        N/A
Convertible Fund                            4.08              3.53             N/A        N/A        N/A        N/A
StocksPLUS Fund                             0.00              0.00             N/A        N/A        N/A        N/A

     Performance information for a Fund may also be compared to various
unmanaged indexes, such as the Standard & Poor's 500 Index, the Dow Jones
Industrial Average, the Lehman Brothers Aggregate Bond Index, the Lehman
Brothers Mortgage Index, the Merrill Lynch 1 to 3 Year Treasury Index, the
Lehman Brothers Intermediate Government/Corporate Bond Index, the Lehman U.S.
High Yield Index, indexes prepared by Lipper Analytical Services, Inc., the J.P.
Morgan Global Index (Unhedged), the J.P. Morgan Emerging Markets Bond Index
Plus, the Salomon Brothers 3-Month Treasury Bill Index, and the J.P. Morgan Non
U.S. Index (Hedged). Unmanaged indexes (i.e., other than Lipper) generally do
not reflect deductions for administrative and management costs and expenses.
PIMCO may report to shareholders or to the public in advertisements concerning
the performance of PIMCO as adviser to clients other than the Trust, or on the
comparative performance or standing of PIMCO in relation to other money
managers. PIMCO also may provide current or prospective private account clients,
in connection with standardized performance information for the Funds,
performance information for the Funds gross of fees and expenses for the purpose
of assisting such clients in evaluating similar performance information provided
by other investment managers or institutions. Comparative information may be
compiled or provided by independent ratings services or by news organizations.
Any performance information, whether related to the Funds or to PIMCO, should be
considered in light of the Funds' investment objectives and policies,
characteristics and

                                     - 78 -


quality of the Funds, and the market conditions during the time period
indicated, and should not be considered to be representative of what may be
achieved in the future.

     Advertisements and information relating to the Global Bond Fund II may use
data comparing the total returns of the top foreign bond market as compared to
the total return of the U.S. bond market for a particular year. For instance,
the following table sets forth the total return of the top foreign bond market
compared to the total return for the U.S. bond market for the years 1986 through
2000. Performance is shown in U.S. dollar terms, hedged for currency rate
changes and is no way indicative of the performance of the Global Bond Fund II.

                         Top Foreign
        Year             Performer                                        U.S.
        ----             ---------                                        ----
        1986              +13.1%            Japan                         +15.7%
        1987              +12.8             UK                             +1.9
        1988              +15.0             France                         +7.0
        1989              +10.0             Canada                        +14.4
        1990              +11.0             Australia                      +8.6
        1991              +20.0             Australia                     +15.3
        1992              +10.5             UK                             +7.2
        1993              +20.0             Italy                         +11.0
        1994               -0.9             Japan                          -3.4
        1995              +21.0             Netherlands                   +18.3
        1996              +18.8             Spain                          +2.7
        1997              +13.5             UK                             +9.6
        1998              +17.4             UK                             +8.7
        1999              +10.4             Japan                          -2.4
        2000              +14.0             Australia                     +13.5

     Source: Salomon Brothers World Government Bond Index 1986-2000.

     The Trust may use, in its advertisements and other information, data
concerning the projected cost of a college education in future years based on
1996/1997 costs of college and an assumed rate of increase for such costs. For
example, the table below sets forth the projected cost of four years of college
at a public college and a private college assuming a steady increase in both
cases of 3% per year. In presenting this information, the Trust is making no
prediction regarding what will be the actual growth rate in the cost of a
college education, which may be greater or less than 3% per year and may vary
significantly from year to year. The Trust makes no representation that an
investment in any of the Funds will grow at or above the rate of growth of the
cost of a college education.

Potential College Cost Table


       Start               Public             Private              Start              Public             Private
        Year               College            College              Year              College             College
        ----               -------            -------              ----              -------             -------
        1997               $13,015            $57,165              2005              $16,487             $72,415
        1998               $13,406            $58,880              2006              $16,982             $74,587
        1999               $13,808            $60,646              2007              $17,491             $76,825
        2000               $14,222            $62,466              2008              $18,016             $79,130
        2001               $14,649            $64,340              2009              $18,557             $81,504
        2002               $15,088            $66,270              2010              $19,113             $83,949
        2003               $15,541            $68,258              2011              $19,687             $86,467
        2004               $16,007            $70,306              2012              $20,278             $89,061

Costs assume a steady increase in the annual cost of college of 3% per year from
a 1996-97 base year amount. Actual rates of increase may be more or less than 3%
and may vary.

                                     - 79 -


     In its advertisements and other materials, the Trust may compare the
returns over periods of time of investments in stocks, bonds and treasury bills
to each other and to the general rate of inflation. For example, the average
annual return of each during the 25 years from 1975 to 2000 was:

          *Stocks:                  16.1%
           Bonds:                    9.8%
           T-Bills:                  6.8%
           Inflation:                4.8%

     *Returns of unmanaged indexes do not reflect past or future performance of
any of the Funds of PIMCO Funds: Pacific Investment Management Series. Stocks
are represented by Ibbotson's Large Company Total Return Index. Bonds are
represented by Ibbotson's Long-term Corporate Bond Index. T-bills are
represented by Ibbotson's Treasury Bill Index and Inflation is represented by
the Cost of Living Index. These are all unmanaged indices, which can not be
invested in directly. While Treasury bills are insured and offer a fixed rate of
return, both the principal and yield of investment securities will fluctuate
with changes in market conditions. Source: Ibbotson, Roger G., and Rex A.
Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI), 1989, updated in Stocks,
Bonds, Bills and Inflation 2001 Yearbook, Ibbotson Associates, Chicago. All
rights reserved.

     The Trust may also compare the relative historic returns and range of
returns for an investment in each of common stocks, bonds and treasury bills to
a portfolio that blends all three investments. For example, over the 20 years
from 1980-2000, the average annual return of stocks comprising the Ibbotson's
Large Company Stock Total Return Index ranged from -4.9% to 37.4% while the
annual return of a hypothetical portfolio comprised 40% of such common stocks,
40% of bonds comprising the Ibbotson's Long-term Corporate bond Index and 20% of
Treasury bills comprising the Ibbotson's Treasury Bill Index (a "mixed
portfolio") would have ranged from -1.0% to 28.2% over the same period. The
average annual returns of each investment for each of the years from 1980
through 2000 is set forth in the following table.


                                                                                                           Mixed
Year                         Stocks              Bonds              T-Bills           Inflation          Portfolio
----                         ------              -----              -------           ---------          ---------
1980                          32.42%            -2.76%             11.24%             12.40%               14.11%
1981                          -4.91%            -1.24%             14.71%              8.94%                0.48%
1982                          21.41%            42.56%             10.54%              3.87%               27.70%
1983                          22.51%             6.26%              8.80%              3.80%               13.27%
1984                           6.27%            16.86%              9.85%              3.95%               11.22%
1985                          32.16%            30.97%              7.72%              3.77%               26.44%
1986                          18.47%            19.85%              6.16%              1.13%               16.56%
1987                           5.23%            -0.27%              5.47%              4.41%                3.08%
1988                          16.81%            10.70%              6.35%              4.42%               12.27%
1989                          31.49%            16.23%              8.37%              4.65%               20.76%
1990                          -3.17%             6.78%              7.81%              6.11%                3.01%
1991                          30.55%            19.89%              5.60%              3.06%               21.30%
1992                           7.67%             9.39%              3.51%              2.90%                7.53%
1993                           9.99%            13.19%              2.90%              2.75%                9.85%
1994                           1.31%            -5.76%              3.90%              2.67%               -1.00%
1995                          37.43%            27.20%              5.60%              2.54%               26.97%
1996                          23.07%             1.40%              5.21%              3.32%               10.83%
1997                          33.36%            12.95%              5.26%              1.70%               19.58%
1998                          28.58%            10.76%              4.86%              1.61%               16.71%
1999                          21.04%            -7.45%              4.68%              2.68%                6.37%
2000                          -9.11%            12.87%              5.89%              3.39%                2.68%

*Returns of unmanaged indexes do not reflect past or future performance of any
of the Funds of PIMCO Funds: Pacific Investment Management Series. Stocks are
represented by Ibbotson's Large Company Stock Total Return Index. Bonds are
represented by Ibbotson's Long-term Corporate Bond Index. T'bills are
represented by Ibbotson's Treasury Bill Index and Inflation is represented by
the Cost of Living Index. These are all unmanaged indices, which

                                     - 80 -


can not be invested in directly. While Treasury bills are insured and offer a
fixed rate of return, both the principal and yield of investment securities will
fluctuate with changes in market conditions. Source: Ibbotson, Roger G., and Rex
A. Sinquefiled, Stocks, Bonds, Bill and Inflation (SBBI), 1989, updated in
Stocks, Bonds, Bills and Inflation 2001 Yearbook, Ibbotson Associates, Chicago.
All rights reserved.

     The Trust may use in its advertisement and other materials examples
designed to demonstrate the effect of compounding when an investment is
maintained over several or many years. For example, the following table shows
the annual and total contributions necessary to accumulate $200,000 of savings
(assuming a fixed rate of return) over various periods of time:


Investment                Annual                Total                   Total
  Period               Contribution          Contribution               Saved
  ------               ------------          ------------               -----
30 Years                 $1,979                $59,370                 $200,000
25 Years                 $2,955                $73,875                 $200,000
20 Years                 $4,559                $91,180                 $200,000
15 Years                 $7,438               $111,570                 $200,000
10 Years                $13,529               $135,290                 $200,000

This hypothetical example assumes a fixed 7% return compounded annually and a
guaranteed return of principal. The example is intended to show the benefits of
a long-term, regular investment program, and is in no way representative of any
past or future performance of a PIMCO Fund. There can be no guarantee that you
will be able to find an investment that would provide such a return at the times
you invest and an investor in any of the PIMCO Funds should be aware that
certain of the PIMCO Funds have experienced periods of negative growth in the
past and may again in the future.

     The Trust may set forth in its advertisements and other materials
information regarding the relative reliance in recent years on personal savings
for retirement income versus reliance on Social Security benefits and company
sponsored retirement plans. For example, the following table offers such
information for 1997:

                         % of Income for Individuals
                      Aged 65 Years and Older in 1997*
                      --------------------------------
                               Social Security
Year                          and Pension Plans                  Other
----                          -----------------                  -----
1997                                 43%                          57%


     * For individuals with an annual income of at least $51,000. Other includes
personal savings, earnings and other undisclosed sources of income. Source:
Social Security Administration.

     Articles or reports which include information relating to performance,
rankings and other characteristics of the Funds may appear in various national
publications and services including, but not limited to: The Wall Street
Journal, Barron's, Pensions and Investments, Forbes, Smart Money, Mutual Fund
Magazine, The New York Times, Kiplinger's Personal Finance, Fortune, Money
Magazine, Morningstar's Mutual Fund Values, CDA Investment Technologies and The
Donoghue Organization. Some or all of these publications or reports may publish
their own rankings or performance reviews of mutual funds, including the Funds,
and may provide information relating to PIMCO, including descriptions of assets
under management and client base, and opinions of the author(s) regarding the
skills of personnel and employees of PIMCO who have portfolio management
responsibility. From time to time, the Trust may include references to or
reprints of such publications or reports in its advertisements and other
information relating to the Funds.

                                     - 81 -


     From time to time, the Trust may set forth in its advertisements and other
materials information about the growth of a certain dollar-amount invested in
one or more of the Funds over a specified period of time and may use charts and
graphs to display that growth.

     From time to time, the Trust may set forth in its advertisements and other
materials the names of and additional information regarding investment analysts
employed by PIMCO who assist with portfolio management and research activities
on behalf of the Funds. The following lists various analysts associated with
PIMCO: Jane Howe, Mark Hudoff, Doris Nakamura and Ray Kennedy.

     Ibbotson Associates ("Ibbotson") has analyzed the risk and returns of the
Funds and relevant benchmark market indexes in a variety of market conditions.
Based on its independent research and analysis, Ibbotson has developed model
portfolios of the Funds and series of PIMCO Funds: Multi-Manager Series ("MMS")
which indicate how, in Ibbotson's opinion, a hypothetical investor with a 5+
year investment horizon might allocate his or her assets among the Funds and
series of MMS. Ibbotson bases its model portfolios on five levels of investor
risk tolerance which it developed and defines as ranging from "Very
Conservative" (low volatility; emphasis on capital preservation, with some
growth potential) to "Very Aggressive" (high volatility; emphasis on long-term
growth potential). However, neither Ibbotson nor the Trust offers Ibbotson's
model portfolios as investments. Moreover, neither the Trust, PIMCO nor Ibbotson
represent or guarantee that investors who allocate their assets according to
Ibbotson's models will achieve their desired investment results.

Voting Rights

     Under the Declaration of Trust, the Trust is not required to hold annual
meetings of Trust shareholders to elect Trustees or for other purposes. It is
not anticipated that the Trust will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Trust will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the Board
if, at any time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove a person serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting for
the purpose of considering the removal of a person serving as Trustee if
requested in writing to do so by the holders of not less than ten percent of the
outstanding shares of the Trust. In the event that such a request was made, the
Trust has represented that it would assist with any necessary shareholder
communications. Shareholders of a class of shares have different voting rights
with respect to matters that affect only that class.

     The Trust's shares do not have cumulative voting rights, so that the holder
of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees. To avoid potential conflicts of interest, the Strategic
Balanced Fund will vote shares of each Underlying Fund which it owns in
proportion to the votes of all other shareholders in the Underlying Fund.

                                     - 82 -


As of March 4, 2002 the following persons owned of record or beneficially 5% or
more of the noted class of shares of the Funds:


                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Money Market Fund
-----------------

Institutional Class
Val- HI                                                                                 41,545,742.480            29.58%
5430 LBJ Fwy Suite 1700
Dallas TX 75240

Northern Trust Custodian FBO                                                            26,010,407.290            18.52%
Saint John's Hospital and Health Center Fdn
Captial Campaign
PO Box 92956
Chicago IL 60675-2956

Charles Schwab & Co Inc                                                                 13,653,564.270             9.72%          **
Special Custody Account for the
Exclusive Benefit of our Customers
Attn: Mutual Funds Dept
101 Montgomery St
San Francisco CA 94104-4122

Wells Fargo Bank MN NA FBO                                                              9,731,899.840              6.93%
Marin Community Foundation
PO Box 1533
Minneapolis MN 55480-1533

First Union National Bank FBO                                                           7,534,565.420              5.36%
NDTA Taxable
123 S. Broad St #PA 4903
Philadelphia PA 19109-1029

Administrative Class
Security Trust FBO Cooperative of                                                       3,401,805.075             23.55%
Puget Sound 403B Group Custodian Account
2390 E. Camelback Rd Suite 240
Phoenix AZ 85016-3434

Wells Fargo Investments LLC                                                             2,797,767.690             19.37%
608 2nd Ave S Fl 8
Minneapolis MN 55402-1916

Maltrust & Co C/O                                                                       2,046,526.640             14.17%          **
Eastern Bank & Trust

                                     - 83 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
225 Essex St
Salem MA 01970-3728

Wells Fargo Investments LLC                                                             1,625,329.340             11.25%
608 2nd Ave S Fl 8
Minneapolis MN 55402-1916


Short-Term Fund
---------------

Institutional Class
Charles Schwab & Co Inc                                                                17,010,084.306             15.70%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery Street
San Francisco CA 94104-4122

Northern Trust Co TTEE FBO Whirlpool                                                    9,423,552.894              8.70%
PO Box 92956
Chicago IL 60675

Denison University                                                                      5,802,016.283              5.35%
PO Box F
Granville OH 43023-0734

Administrative Class
National Financial Services Corp                                                       14,054,483.921             76.00%          **
For the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

CIBC World Markets Corp                                                                 2,005,909.337             10.85%
PO Box 3484
Church Street Station
New York NY 10008-3484

Class A
MLPF&S for the Sole Benefit of its Customers                                            9,499,965.189             11.81%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Donaldson Lufkin Jenrette                                                               8,054,218.742             10.02%          **
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998


                                     - 84 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class B
MLPF&S for the Sole Benefit of its Customers                                             166,747.936              14.78%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Donaldson Lufkin Jenrette                                                                 72,776.002               6.45%          **
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998

Janney Montgomery Scott LLC                                                               57,326.975               5.08%
Jodi Marie Grasso as Benf
1801 Market Street
Philidelphia, PA 19103-1675

Class C
MLPF&S for the Sole Benefit of its Customers                                           6,802,099.230              29.69%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                              3,511,494.314              51.52%          **
Special Custoday Accounts FBO Customers
101 Montgomery Street
San Francisco, CA 94104-4122

National Investors Services Corp                                                         390,352.533               5.72%          **
for Exclusive Benefit of our Customers
55 Water St 32nd Floor
New York, NY 10041-3299

Low Duration Fund
-----------------

Institutional Class
Charles Schwab & Co Inc                                                               57,864,478.145              13.85%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery Street
San Francisco CA 94104-4122

MLTC of America FBO Dupont                                                            40,584,738.134               9.71%
Savings & Investment Plan
300 Davidson Ave
Somerset NJ 08873-4175


                                      - 85 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Administrative Class
DLJ                                                                                    79,550,185.624             30.91%          **
One Pershing Plaza
Jersey City NJ 07399-0001

FIIOC as agent for                                                                      5,905,414.609             22.94%          **
Certain Employee Benefits Trans
100 Magellan Way KW1C
Covington KY 41015-1987

National Financial Services Corp                                                        3,668,700.448             14.25%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

BNY Western Trust Co TTEE FBO                                                           2,523,398.441              9.80%
McClatchy Newspapers Restated
Def Comp & Investment Plan
550 Kearny St #600
San Francisco CA 94108-2599

UMBSC & Co TTEE FBO                                                                     1,485,665.469              5.77%
Sonnenschein Nath & Rosenthal
PO Box 419260
Kansas City MO 64141-6260

Class A
MLPF&S for the Sole Benefit of its Customers                                           13,229,409.187             17.43%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its Customers                                            4,406,378.624             23.68%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                           10,148,897.655             26.10%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               4,951,393.673             48.48%          **
Special Custody Accounts FBO Customers
101 Montgomery Street

                                      - 86 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
San Francisco, CA 94104-4122

Low Duration Fund II
-------------------

Institutional Class
Marshall & Ilsley Trust Co                                                              5,338,961.308             14.64%
FBO SRP Nuc Decomm Tr
C/O Marshall & Ilsley Trust Co
1000 N Water St
Milwaukee WI 53202-6648

University of Illinois Foundation                                                       3,709,980.512             10.17%
Pooled Short Term Funds
Harker Hall 1305 W Green St
Urbana IL 61801

Mac & Co                                                                                2,801,265.418              7.68%          **
Mutual Fund Operations
PO Box 3198
Pittsburgh PA 15230-3198

Winchester Medical Center                                                               2,465,100.526              6.76%
PO Box 1334
1840 Amherst St
Winchester VA 22601-2808

Charles Schwab & Co Inc                                                                 2,346,480.617              6.44%          **
Special Custody Account for the
Exclusive Benefit of our Customers
100 Montgomery St
San Francisco CA 94104-4122

Bank of Oklahoma NA C/F                                                                 2,229,907.868              6.12%
Integris Retirement Pension Plan
9520 N May Ave Suite 200
Oklahoma City OK 73120-2711

Administrative Class
National Financial Services Corp                                                          11,661.747              88.86%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

DLJ                                                                                       1,461.925               11.14%
One Pershing Plaza
Jersey City NJ 07399-0001

                                      - 87 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Low Duration Fund III
---------------------

Institutional Class
Northern Trust Co Cust FBO                                                  *          2,036,763.411              35.67%
St. Mary's
PO Box 92956
Chicago IL 60675-2956

LaSalle National Bank Custodian FBO                                                    1,073,507.746              18.80%
Loyola Academy Endowment Fund
135 S. LaSalle St
PO Box 1443
Chicago IL 60690-1443

Sisters of St Joseph                                                                   1,049,573.413              18.38%
3427 Gull Rd
PO Box 13
Nazareth MI 49074-0013

National Jewish Medical & Research Center                                                591,832.504              10.36%
1400 Jackson St
Denver CO 80206-2762

Key Trust Co TTEE FBO                                                                    450,076.693               7.88%
Congregation of Sisters of St. Agnes
PO Box 94871
Cleveland OH 44101-4871

Administrative Class
Pacific Investment Management Company                                                      1,174.522              71.44%
888 San Clemente Dr Suite 100
Newport Beach CA 92660

National Investors Services Corp                                                             469.567              28.56%          **
for Exclusive Benefit of our Customers
55 Water Street 32nd Fl
New York NY 10041-0028

GNMA Fund
---------

Institutional Class
Charles Schwab & Co Inc Special Custody Account                                        1,761,072.005              48.53%          **
for the Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122


                                     - 88 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
National Financial Services Corp for                                                     933,174.112              25.72%          **
Exclusive Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908

William C Powers                                                                         334,348.459               9.21%
2012 The Strand
Manhattan Beach CA 90266-4559

DLJ - Pershing Division                                                                  291,781.987               8.04%
PO Box 2052
Jersey City NJ 07303-2052

Class A
Wells Fargo Investments LLC                                                              818,421.728              30.74%
608 Second Avenue South 8th Floor
Minneapolis, MN 55402

Wells Fargo Investments LLC                                                              512,045.736              19.23%
608 Second Avenue South 8th Floor
Minneapolis, MN 55402

Class B
MLPF&S for the Sole Benefit of its  Customers                                            136,602.359              13.17%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its  Customers                                             95,650.168               6.87%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

CIBC World Markets Corp.                                                                  88,937.415               6.39%
P.O. Box 3484
Church Street Station
New York, NY 10008-3484

Class D
NFSC FEBO                                                                                 25,539.611              28.74%
John M. Henneman
171 Sherwoo Drive
Reading, PA 19606

NFSC FEBO                                                                                 17,455.582              19.64%
Roger Blake Young


                                     - 89 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Mindy Lyn Young
5301 Jessamine St
Bellaire, TX 77401

NFS/FMTC IRA                                                                              9,450.298               10.63%
FBO Janet F Hill
561 E 2100 N Rd.
Edinburg, IL 62531

Leslie Genninger                                                                          5,633.124                6.34%
Gilbert & Lynn Genniger POAS
11145 Lands End Chase
Port St Lucie, FL 34986

Petersen Rev Living Trust                                                                 4,703.505                5.29%
Robert E. Petersen TTEE
8604 Vineyard Creek CT
San Jose, CA 95135

Pennsylvania College of Technology                                                        4,665.937                5.25%
Attn: Controller's Office
Dif 107
One College Avenue
Williamsport, PA 17701

Waynesboro Construction Co. Inc.                                                          4,665.937                5.25%
William G Adams TTEE
P.O. Box 229
Waynesboro, PA 17268


Moderate Duration Fund
----------------------

Institutional Class
Circle Trust Co-SV                                                                      8,152,535.488             10.80%          **
1 Station Pl Metro Center Suite 30
Stamford CT 06902

BNY Clearing Services LLC                                                               6,998,122.152              9.27%
111 East Kilbourn Ave
Milwaukee WI 53202-6633

BNY Clearing Services LLC                                                               5,652,970.511              7.49%
111 East Kilbourn Ave
Milwaukee WI 53202-6633

Mac & Co                                                                                4,972,161.702              6.58%          **

                                     - 90 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Mutual Fund Operations
PO Box 3198
Pittsburgh PA 15230-3198

National Financial Serives Corp for                                                     4,609,836.641              6.10%          **
Exclusive Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908


Total Return Fund
-----------------

Institutional Class
Charles Schwab & Co Inc                                                                289,914,254.836             8.66%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Administrative Class
CIIOC as agent for Certain Employee Benefit Trans                                      153,644,944.282            18.50%
100 Magellan Way KW1C
Covington KY 41015-1987

Nikko Cordial Securities Inc                                                           137,566,247.000            16.57%
Tokyo Dia Bldg No 5
Shinkawa 1-Chome 28-34
Chuo-Ku Tokyo Japan 104-8271

National Financial Serives Corp for                                                     87,142,947.234            10.49%          **
Exclusive Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908

Manufacturer Life Ins Co (USA)                                                          61,293,033.243             7.38%
US SRS Seg Funds/Accounting
200 Bloor St East
Toronto ON
Canada M4W 1E5

Class A
MLPF&S for the sole Benefit of its Customers                                           156,893,317.510            36.40%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484


                                     - 91 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class B
MLPF&S for the sole Benefit of its  customers                                           41,091,207.495            26.31%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the sole Benefit of its  customers                                           44,381,940.296            24.82%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               38,849,083.083            67.12%          **
Special Custody Accounts
Fbo Customers
101 Montgomery St
San Francisco, CA 94104-4122


Total Return Fund II
--------------------

Institutional Class
Catholic Archbishop of Chicago                                                          11,044,276.836             6.49%
155 East Superior St
Chicago IL 60611-2911

Mac & Co                                                                                9,973,711.886              5.86%          **
Mutual Fund Operations
PO Box 3198
Pittsburgh PA 15230-3198

Charles Schwab & Co Inc                                                                 9,711,045.359              5.71%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Administrative Class
Structural Iron Workers Local 1                                                         2,358,821.659             22.52%
Annuity Plan - Investors Bank & Trust Trading Account
7700 Industrial Dr
Forest Park IL 60130-2520

National Financial Serives Corp for                                                     1,161,181.598             11.08%          **
Exclusive Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908

                                     - 92 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Mellon Bank as Agent/Omnibus                                                             954,860.363               9.12%          **
135 Santilli Highway
Everett MA 02149-1906

T Rowe Price Trust Co FBO Western Digital                                                931,941.203               8.90%
PO Box 17215
Baltimore MD 21297-1215

American Express Trust Company                                                           764,118.887               7.29%          **
for the Benefit of American Express Trust RSP
PO Box 534
Minneapolis MN 55440-0534


Total Return Fund III
---------------------

Institutional Class
The Roman Catholic Archbishop of Los Angeles                                            13,595,660.179            14.79%
3424 Wilshire Blvd
Los Angeles CA 90010-2241

BNY Clearing Services LLC                                                               6,230,187.828              6.78%          **
Wendel & Co
111 East Kilbourn Ave
Milwaukee WI 53202-6633

Administrative Class
DBTCO RS                                                                                  45,447.100              44.20%
Trust Operations
PO Box 747

Dubuque IA 52004-0747

National Financial Services Corp                                                          24,871.425              24.19%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Circle Trust Company Custodian                                                            19,478.782              18.95%
for Blanco Tackabery Combs &
Maramoros PA Profit Sharing Plan
Metro Center
1 Station Pl
Stamford CT 06902-6800

Security Trust Company as TTEE                                                            9,249.749                9.00%

                                     - 93 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
FBO Keller & Heckman Employee
401K Plan & Trust
2390 E Camelback Rd Suite 240
Phoenix AZ 85016-3434


Total Return Mortgage Fund
--------------------------

Institutional Class
Charles Schwab & Co Inc                                                                 1,690,801.883             84.98%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

National Financial Services Corp                                                         134,669.908               6.77%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Administrative Class
Apostles of the Sacred Heart of Jesus                                                    557,020.822              69.15%
265 Benham St
Hamden CT 06514-2801

MLPF&S for the Sole Benefit of its  Customers                                            149,005.912              23.02%          **
4800 Deer lake Dr. E. FL 3
Jacksonville, FL 32246-6484

Apostles of the Sacred Heart of Jesus - Manor                                            157,629.573              19.57%
265 Benham St
Hamden CT 06514-2801

Istituto Delle Apostole Del Sacro Cuore                                                   90,496.425              11.23%
C/O Apostles of the Sacred Heart of Jesus
265 Benham St
Hamden CT 06514-2801

Class B
MLPF&S for the Sole Benefit of its  Customers                                            149,513.439              28.95%          **
4800 Deer Lake Dr. E. FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its  Customers                                            117,755.589              13.83%          **
4800 Deer Lake Dr. E. FL 3


                                     - 94 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               1,186,936.600             46.14%          **
Special Custody Accounts FBO Customers
101 Montgomery Street
San Francisco, CA 94104-4122


Investment Grade Corporate Bond Fund
------------------------------------

Institutional Class
PIMCO Advisors LP                                                           *            601,230.277              100.00%         **
888 San Celmente Dr Suite 100
Newport Beach CA 92660


High Yield Fund
---------------

Institutional Class
Charles Schwab & Co Inc                                                                 49,496,760.653            25.47%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Mac & Co                                                                                11,219,319.345             5.77%          **
Mutual Fund Operations
PO Box 3198 RM 151-510
Pittsburgh PA 15230-3198

Prudential Insurance Company of America                                                 10,905,346.919             5.61%
Two Gateway Center
100 Mulberry St NJ 04-05-99 5th Gl
Newark NJ 07102

Administrative Class
National Financial Services Corp                                                        58,481,601.711            85.12%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty St
New York NY 10281-1003

FIIOC as Agent for                                                                      5,384,529.466              7.84%          **
Certain Employee Benefits Trans
100 Magellan Way KW1C
Covington KY 41015-1987

                                     - 95 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class A
MLPF&S for the Sole Benefit of its Customers                                            7,483,184.321             14.59%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its Customers                                            10,401,864.800            22.49%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                            8,897,102.116             16.39%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               9,066,852.905             77.63%          **
Special Custody Accounts FBO Customers
101 Montgomery St.
San Francisco, CA 94104

Salomon Smith Barney                                                                     788,074.582               6.75%
333 West 34th St
New York, NY 10001


Long-Term US Government Fund
----------------------------

Institutional Class
FIIOC as Agent for                                                                      6,033,256.528             23.96%          **
Certain Employee Benefits Trans
100 Magellan Way KW1C
Covington KY 41015-1987

Northern Trust Company FBO                                                              3,653,121.932             14.51%
Allianz DC Plan - Master Trust
PO Box 92956
Chicago IL 60675-2956

Mea-Messa-Medna-Mea Financial Services                                                  3,296,920.871             13.09%
Staff Ret Plan & Trust
1216 Kendale Blvd
East Lansing MI 48823-2008

Chicago Symphony Orchestra                                                              2,633,426.895             10.46%
220 South Michigan Ave

                                     - 96 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Chicago IL 60604-2596

Charles Schwab & Co Inc                                                                 1,759,876.551              6.99%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

PFPC FBO LPL Supermarket Program                                                        1,742,990.562              6.92%          **
211 S Gulph Rd
King of Prussia PA 19406-3101

Administrative Class
FIIOC as Agent for Certain Employee Benefits Trans                                      4,004,542.930             59.96%          **
100 Magellan Way KW1C
Covington KY 41015-1987

Keybank NA TTEE for                                                                      743,504.354              11.13%
Key Corp 401K Savings Plan
4900 Tiedeman Rd
Brooklyn OH 44144-2338

State Street Bank & Trust Co TTEE                                                        727,968.580              10.90%
FBO Southern California Edison
Stock Savings Plus Plan
PO Box 351
Boston MA 02101-0351

National Financial Services Corp                                                         590,187.687               8.84%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Class A
MLPF&S for the Sole Benefit of its  Customers                                            780,677.538               6.97%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its Customers                                           1,495,705.701             21.87%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484


                                     - 97 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class C
MLPF&S for the Sole Benefit of its Customers                                             1,177,819.119            27.38%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484


Real Return Fund
----------------

Institutional Class
Charles Schwab & Co Inc                                                                 49,486,390.055            42.89%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

National Financial Services Corp                                                        11,091,027.877             9.61%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Administrative Class
National Financial Services Corp                                                        21,863,787.977            97.38%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Class A
MLPF&S for the Sole Benefit of its  Customers                                            5,229,826.769            10.96%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its  Customers                                            8,485,302.885            25.08%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                            11,547,765.688            25.05%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               18,524,614.366            48.34%          **
Special Custody Accounts FBO Customers
101 Montgomery St.


                                     - 98 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
San Francisco, CA 94104-4122


Real Return Fund II
-------------------

Institutional Class
Reliance Trust Co FBO Clayton County                                                    1,600,000.000             100.00%
PO Box 48449
Atlanta GA 30362-1449


Real Return Asset Fund
----------------------

Institutional Class
Brent R Harris and Elizabeth E Harris Jt WROS                                           1,142,771.333             52.51%
1 Crest Road East
Rolling Hills CA 90274-5224

The Thomas and Stacey Siebel Foundation                                                  530,222.694              24.37%
2201 Bridgepointe Pkwy
San Mateo CA 94404-5009

Charles Schwab & Co Inc                                                                  503,093.870              23.12%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122


Short-Duration Municipal Income Fund
------------------------------------

Institutional Class
Charles Schwab & Co Inc                                                     *           1,136,785.830             51.12%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

National Financial Services Corp                                                         263,787.432              11.86%          **
for the Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street
New York NY 10281-1003

Michael E Stanek & Lizbeth Anne Stanek JT TEN                                            245,686.592              11.05%
4 Altree Ct
Atherton CA 94027-2224

                                     - 99 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Martin R Reid Jr TTEE FBO                                                                195,857.654               8.81%
Martine R Reid Jr Trust UAS 12/2/99
10801 E Happy Valley Rd #44
Scottsdale AZ 85255-8171

PFPC FBO LPL Supermarket Program                                                         191,274.368               8.60%          **
211 S Gulph Rd
King of Prussia PA 19406-3101

John L. Johnson                                                                          118,892.078               5.35%
3131 Maple Ave #13C
Dallas TX 75201-1206

Class D
PIMCO Advisors LP                                                                         1,083.226               100.00%
888 San Clemente Dr. Ste 100
Newport Beach, CA 92660


Municipal Bond Fund
-------------------

Institutional Class
Charles Schwab & Co Inc                                                                 1,556,654.849             41.63%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Frederick Henry Prince 1932 Trust                                                        794,711.962              21.25%
10 S Wacker Dr Suite 2575
Chicago IL 60606-7407

Portland General Holdings Inc Voluntary                                                  245,076.470               6.55%
Employees' Beneficiary Assoc Fund 2
121 SW Salmon St 1WTC-04
Portland OR 97204-2901

Administrative Class
Jay A Pellegrini, SR                                                                      79,297.400              15.67%
9 Larkspur Ln
Covington LA 70433-4428

Sandra D Patrick Trust DTD 11/25/1992                                                     25,624.753               5.06%
Lucille Patrick Brown TTEE
10461 E Grandeur Dr
Baton Rouge LA 70815-4890


                                    - 100 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class D
Charles Schwab & Co. Inc.                                                                371,104.876              65.37%          **
Special Custody Accounts FBO Customers
101 Montgomery St.
San Francisco, CA 94104-4122

Donald Lufkin Jenrette                                                                    52,548.714               9.26%          **
Securtities Coporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052

Kenneth J. Ackerman                                                                       44,209.664               7.79%
1 Woodedge Ln
Glen Head, NJ 11545


California Intermediate Municipal Bond Fund
-------------------------------------------

Institutional Class
Charles Schwab & Co Inc                                                     *           3,014,592.934             36.34%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

James F Muzzy & Pamela B Muzzy                                                           622,466.471               7.50%
TTEE U/A 01/10/89 Muzzy Family Trust
2546 Riviera Drive
Laguna Beach CA 92651-1029

Brent R Harris and Elizabeth E Harris JT WROS                                            593,439.316               7.15%
1 Crest Road East
Rolling Hills CA 90274-5224

William S and Nancy E Thomson Revocable Trust                                            593,283.042               7.15%
2431 Riviera Dr
Laguna Beach CA 92651-1013

Bear Stearns Securities Corp                                                             471,392.452               5.68%
1 Metrotech Ctr N
Brooklyn NY 11201-3870

Administrative Class
Bear Stearns Securities Corp                                                             113,265.776              71.65%
1 Metrotech Ctr N
Brooklyn NY 11201-3870


                                    - 101 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Bear Stearns Securities Corp                                                              11,327.140               7.17%
1 Metrotech Ctr N
Brooklyn NY 11201-3870

Bear Stearns Securities Corp                                                              11,299.291               7.15%
1 Metrotech Ctr N
Brooklyn NY 11201-3870

Bear Stearns Securities Corp                                                              11,288.028               7.14%
1 Metrotech Ctr N
Brooklyn NY 11201-3870

Bear Stearns Securities Corp                                                              10,899.248               6.89%
1 Metrotech Ctr N
Brooklyn NY 11201-3870

Class A
Salomon Smith Barney Inc.                                                                246,982.007              11.67%
333 West 34th St. 3rd Floor
New York, NY 10001

Wells Fargo Investments LLC                                                              106,046.050               5.01%
608 Second Avenue South 8th FL
Minneapolis, MN 55402

MLPF&S For the Sole Benefit of its  Customers                                            272,613.920              12.88%          **
4800 Deer Lake Sr. E Fl 3
Jacksonville, FL 32246-6484

Compass Nominees LTD.                                                                    107,159.610               5.06%
C/O Bank of Bermuda
6 Front St.
hamilton Bermuda HMII

First Clearing Corporation                                                               170,110.029               8.04%
L Lee Bosley Family Limited Partnership
9100 Wilshire Blvd.
East Tower Penthouse

Class D
Charles Schwab & Co. Inc.                                                                108,936.327              98.33%          **
Special Custody Accounts FBO Customers
101 Montgomery St.
San Francisco, CA 94104-4122

California Municipal Bond Fund
------------------------------

                                    - 102 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Institutional Class
James F Muzzy & Pamela B Muzzy                                              *            521,174.246              55.46%
TTEE U/A 01/10/89 Muzzy Family Trust
2546 Riviera Drive
Laguna Beach CA 92651-1029

The Chris and Sheri Dialynas Family Living Trust                                         174,719.020              18.59%
37 Vernon
Newport Coast CA 92657-0102

William S and Nancy E Thompson Revocable Trust                                           116,479.352              12.39%
2431 Riviera Dr
Laguna Beach CA 92651-1013

Morris Exploration Fund                                                                   99,871.498              10.63%
2500 Sand Hill Rd Suite 240
Menlo Park CA 94025-7063

Class A
US Clearing Corp                                                                         486,251.492              70.57%
26 Broadway
New York, NY 10004

Emily Magee Andres TTEE                                                                   49,436.389               7.17%
Andres Family Trust
2956 E Del Mar Blvd #232
Pasadena, CA 91107

MLPF&S for the Sole Benefit of its  Customers                                             64,885.922               9.42%          **
4800 Deer Lake Sr. E Fl 3
Jacksonville, FL 32246-6484

Class D
PIMCO Advisors LP                                                                         1,107.369               100.00%
888 San Clemente Dr. Ste 100
Newport Beach, CA 92660


New York Municipal Bond Fund
----------------------------

Institutional Class
PIMCO Advisors LP                                                           *            230,725.399              72.91%
888 San Clemente Drive
Newport Beach CA 92660
Balsa & Co C/O Chase Manhattan Bank                                                       32,527.881              10.28%          **
16HCB 040
PO Box 2558


                                     - 103 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Houston TX 77252-2558

Lazard Freres and Co LLC                                                                  31,139.789               9.84%
Peter Shawn
30 Rockefeller Plz FL 60
New York NY 10112-0002

National Investor Services Corp for the                                                   22,050.787               6.97%          **
Exclusive Benefit of our Customers
55 Water St 32nd Floor
New York NY 10041-0028

Class A                                                                                   32,623.000              13.68%          **
LPL Financial Services
9785 Towne Centre Drive
San Diego, CA 92121-1968

PaineWebber for the Benefit of Richard E Arden                                            19,880.716               8.33%
Mary Arden
2225 Pearsall Ave.
Bronx, NY 10469

Ruth M Hill                                                                               71,444.631              29.95%
350 Stafford Way
Rochester, NY 10469

Donaldson Lufkin Jenrette                                                                  51,400.445              21.55%         **
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303

Class D
PIMCO Advisors LP                                                                         1,173.405               18.60%
888 San Clemente Dr. STE 100
Newport Beach, CA 92660

National Investors Services Corp                                                          5,155.569               81.74%          **
Attn: Ms. Sandra Stewart
55 Water St. 32ND Floor
New York, NY 10041-3299

Global Bond Fund
----------------

Institutional Class
Blue Cross Blue Shield of Massachusetts Inc                                 *           9,920,093.369             27.66%
Managed Care Landmark Center Treasury 01/07
401 Park Dr

                                     - 104 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Boston MA 02215-3325

Blue Cross Blue Shield of Massachusetts Inc Indemnity                                   5,365,264.732             14.96%
Landmark Center Treasury 01/07
401 Park Dr
Boston MA 02215-3325

Regents of the University of Minnesota                                                  4,707,964.453             13.13%
1300 S 2nd St Rm 205D
Minneapolis MN 5545-1075

The American University in Cairo                                                        2,298,433.811              6.41%
AUC Endowment
420 5th Ave
New York NY 10018-2729

Administrative Class
Fidelity Management Trust Co as TTEE for                                                 340,692.737              49.23%
Stevedoring Services of America
82 Devonshire St #ZIM
Boston MA 02109-3605

FIIOC as agent for Certain Employee Benefits Trans                                       334,761.233              48.37%          **
100 Magellan Way KW1C
Covington KY 41015-1987

Global Bond Fund II
-------------------

Institutional Class
Weil Gotshal & Manges                                                       *           2,336,702.533             35.90%
Partners Pension Trust
C/O the Citibank Private Bank
120 Broadway, 2nd Fl/Zone 2
New York NY 10271-0002

Mac & Co                                                                                1,437,623.778             22.09%
PO Box 3198
Pittsburgh PA 15230-3198

Mac & Co                                                                                1,357,662.711             20.86%
PO Box 3198
Pittsburgh PA 15230-3198

Weil Gotshal & Manges                                                                    673,701.961              10.35%
Employees Pension Trust
C/O the Citibank Private Bank
120 Broadway, 2nd Fl/Zone 2

                                     - 105 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
New York NY 10271-0002

American University in Cairo                                                             342,653.484               5.26%
AUC US AID Endowment
420 5th Ave
New York NY 10018-2729

Class A
MLPF&S for the Sole Benefit of its Customers                                              34,031.663               5.80%          **
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246

Legg Mason Wood Walker Inc.                                                               73,154.662              12.48%
P.O. Box 1476
Baltimore, MD 21202

Class B
MLPF&S for the Sole Benefit of its Customers                                              98,194.764              14.14%          **
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246

Class C
MLPF&S for the Sole Benefit of its Customers                                              63,161.460               8.13%          **
4800 Deer Lake Dr. E Fl 3
Jacksonville, FL 32246

Donaldson Lufkin Jenrette                                                                 50,639.798               6.52%          **
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998


Foreign Bond Fund
-----------------

Institutional Class
Charles Schwab & Co. Inc.                                                   *           25,742,473.889            52.48%          **
Special Custody Accounts FBO Customers
101 Montgomery St.
San Francisco, CA 94104-4122

PFPC FBO LPL Supermarket Program                                                        2,749,632.492              5.61%          **
211 S Gulph Rd
King of Prussia PA 19406-3101

Administrative Class
National Financial Services Corp for the                                                1,249,907.912             61.50%          **
Exclusive Benefit of our Customers
1 World Financial Center
200 Liberty Street

                                     - 106 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
New York NY 10281-1003

IMS & Co                                                                                 228,067.278              11.22%          **
for the Exclusive Benefit of our Customers
PO Box 3865
Englewood CO 80155-3865

Class A
Wedford Clearing Services Corp. FBO                                                      603,584.347               5.82%
Techneglas Inc.
Hurly Retirement Plan DTD
Columbus, OH 43207

Class B
MLPF&S for the Sole Benefit of it's customers                                            179,970.413               5.48%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co. Inc.                                                               3,863,378.596             80.14%          **
Special Custody Accounts FBO Customers
101 Montgomery St.
San Francisco, CA 94104-4122


Emerging Markets Bond Fund
--------------------------

Institutional Class
Charles Schwab & Co Inc                                                                 4,412,037.748             25.22%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

IBM Retirement Plan Long Duration II                                                    2,627,733.172             15.02%
C/O Chase Manhattan Bank
Global Securities Services
3 Chase Metrotech Center 7th Fl
Crooklyn NY 11245-0001

FTC & CO                                                                                2,005,783.917             11.47%
House Account
PO Box 173736

                                     - 107 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Denver CO 80217-3736

Bankers Trust Company C/O BT                                                            1,693,232.288              9.68%
Services Tennessee Inc
Sentara Healthcare Account
648 Grassmere Business Park Rd
Advisor Services Group 2nd Floor
Nashville TN 37211

National Financial Services Corp for Exclusive                                          1,051,389.934              6.01%          **
Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908

State Street Bank & Trust Co                                                             898,122.686               5.13%
Hallmark Master Trust
Master Trust Services Division
PO Box 1992
Boston MA 02105-1992

Administrative Class
Centurion Trust Company                                                                  820,500.071              54.57%          **
FBO Omnibus/Centurion Cap Mgmt
2425 Camelback Road Suite 530
Phoenix AZ 85016

National Investors Services Corp for                                                     680,637.011              45.27%          **
Exclusive Benefit of our Customers
55 Water Street 2nd Fl
New York NY 10041-0028

Class A
MLPF&S for the Sole Benefit of its Customers                                             279,772.430              24.90%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its Customers                                             165,337.097              19.15%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                             102,746.323              13.40%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484


                                    - 108 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Class D
NFSC FEBO                                                                                164,835.855               7.65%
Varisur C.A. De Panama S.A.
P.O. Box 52488
Houston, TX 77052

Charles Schwab & Co Inc                                                                  974,622.408              45.21%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122


Strategic Balanced Fund
-----------------------

Institutional Class
Carpenters Health & Security Trust of Western WA                                        1,530,924.025             44.53%
PO Box 1929
Seattle WA 98111-1929

California Water Service Co                                                              615,642.504              17.91%
Dominquez Pension Plan
1720 N 1st St
San Jose CA 95112-4598

BNY Western Trust Co TTEE Pacific Life Ins Co                                            493,935.087              14.37%
Retirement Incentive Savings Plan
700 S Flower Street 2nd Floor
Los Angeles CA 90017-4101

The Northern Trust Company TTEE FBO Ameron 401K                                          371,604.798              10.81%
PO Box 92956
Chicago IL 60675-2956

Wells Fargo Bank MN NA FBO                                                               297,193.160               8.64%
Music Center Retirement Plan
PO Box 1533
Minneapolis MN 55480-1533

Administrative Class
Delaware Management Trust C/F                                                             90,150.398              61.44%
United Food Workers 401K
1818 Market St
Philadelphia PA 19103-3638

Wells Fargo Bank MN NA FBO                                                                37,808.332              25.77%
Affiliated Medical Centers PSP

                                     - 109 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
PO Box 1533
Minneapolis MN 55480-1533

Wells Fargo Bank MN NA FBO                                                                18,775.719              12.80%
Affiliated Med Center Pension Plan
PO Box 1533
Minneapolis MN 55480-1533

Class A
Janney Montgomery Scott LLC                                                               21,558.005               5.37%
1801 Market Street
Philadelphia, PA 19103

Prudential Securities Inc. FBO                                                            40,944.528              10.21%
P.O. Box 15040
New Brunswick, NJ 08906

Class B
MLPF&S for the Sole Benefit of its Customers                                             121,443.983              15.66%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484




Class C
MLPF&S for the Sole Benefit of its Customers                                             503,433.519              33.64%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co Inc                                                                  132,058.194              95.72%          **
Special Custody Account for the
Exclusive Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122


Convertible Fund
----------------

Institutional Class
Charles Schwab & Co Inc                                                                  151,509.921              10.72%
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Bankers Trust CO FBO                                                                     139,756.540               9.89%

                                     - 110 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Lockheed Martin Master Ret Trust
648 Grassmere Business Park Rd
Nashville TN 37211

Northern Trust Co FBO                                                                    102,965.368                7.28%
Andrew W. Mellon Foundation
PO Box 92956
Chicago IL 60675-2956

Kamehameha Activities Association                                                         89,908.217                6.36%
1 Wall Street 25th Floor
Investor Management Services Group
New York NY 10286-0001

Administrative Class
PIMCO Advisors LP                                                                            762.432              100.00%
888 San Clemente Drive Suite 100
Newport Beach CA 92660-6367

Class A
Dean Witter for the Benefit of                                                           106,349.898               24.50%
American Osteopathic Association
P.O. Box 250
Church Street Station
New York, NY 10008-0250




Dean Witter for the Benefit of                                                            21,982.925                5.06%
The Entwistle Company
P.O. Box 250
Church Street Station
New York, NY 10008-0250

Class B
MLPF&S for the Sole Benefit of its Customers                                             157,227.686               28.26%         **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                             140,290.342               14.67%         **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
PIMCO Advisors LP                                                                            711.297              100.00%
888 San Clemente Dr. Ste 100

                                     - 111 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Newport Beach, CA 92660


European Convertible Fund
-------------------------

Institutional Class
PIMCO Advisors LP                                                           *            529,500.183              100.00%
888 San Clemente Drive Suite 100
Newport Beach CA 92660-6367


StocksPLUS Fund
---------------

Institutional Class
Charles Schwab & Co Inc                                                                 4,232,923.410             10.55%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Strategic Balanced Portfolio                                                            4,050,317.292             10.09%
PIMCO Advisors LP
888 San Clemente Drive Suite 100
Newport Beach CA 92660-6367

Citibank NA TTEE FBO Safeway                                                            3,528,017.490              8.79%
Multiple Employer Retirement Plan
5918 Stoneridge Mall Rd
Pleasanton CA 94588-3229

Firstar Tr Co Agent                                                                     2,786,627.814              6.94%
Firstar Des Moines TTEE
Iowa Methodist Medical Ctr
PO Box 1787
Milwaukee WI 53201-1787

Pacific Mutual Life Insurance Co                                                        2,224,844.073              5.54%
Employee's Retirement Plan Trust
700 Newport Center Drive
Newport Beach CA 92660-6397

National Financial Services                                                             2,069,254.148              5.16%          **
Corp for Exclusive Benefit of our Customers
PO Box 3908
Church Street Station
New York NY 10008-3908


                                    - 112 -



                                                                                     Shares Beneficially        Percent of
                                                                                            Owned                  Class
                                                                                   ---------------------------------------------
Administrative Class
The Colorado County Officials and Employees                                             3,912,568.557             84.25%
Retirement Association
4949 S. Syracuse St Suite 400
Denver CO 80237-2747

Transamerica Life Insurance & Annuity Company (TI)                                        316,175.216              6.81%
PO Box 30368
Los Angeles CA 90030-0368

Class A
MLPF&S for the Sole Benefit of its Customers                                            2,490,391.821             22.25%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class B
MLPF&S for the Sole Benefit of its Customers                                            3,297,637.070             16.03%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class C
MLPF&S for the Sole Benefit of its Customers                                            1,679,630.176              8.85%          **
4800 Deer Lake Dr. E FL 3
Jacksonville, FL 32246-6484

Class D
Charles Schwab & Co Inc                                                                   152,377.510             75.85%          **
Special Custody Account for the Exclusive
Benefit of our Customers
101 Montgomery St
San Francisco CA 94104-4122

Strafe & Co. FAO                                                                           17,568.523              8.74%
Edwin & Wilma Parker LLC Custody
P.O. Box 160
Westerville, OH 43086-0160


*    Entity owned 25% or more of the outstanding shares of beneficial
     interest of the Fund, and therefore may be presumed to "control" the Funds,
     as that term is defined in the 1940 Act.

**   Shares are believed to be held only as nominee.

                                    - 113 -


The Reorganization of the PIMCO Money Market and Total Return II Funds

     On November 1, 1995, the Money Market Fund and the PIMCO Managed Bond and
Income Fund, two former series of PIMCO Funds: Equity Advisors Series, were
reorganized as series of the Trust, and were renamed Money Market Fund and Total
Return Fund II, respectively. All information presented for these Funds prior to
this date represents their operational history as series of PIMCO Funds: Equity
Advisors Series. In connection with the Reorganization, the Funds changed their
fiscal year end from October 31 to March 31.

The Reorganization of the PIMCO Global Bond Fund II

     On January 17, 1997, the Global Income Fund, a former series of PIMCO
Advisors Funds, was reorganized as a series of the Trust, and was renamed the
Global Bond Fund II. All information presented for this Fund prior to that date
represents its operational history as a series of PIMCO Advisors Funds. In
connection with the Reorganization, the Fund changed its fiscal year end from
September 30 to March 31.

Code of Ethics

     The Trust and PIMCO have each adopted a Code of Ethics pursuant to the
requirements of the 1940 Act. These Codes of Ethics permit personnel subject to
the Codes to invest in securities, including securities that may be purchased or
held by the Funds.

Custodian, Transfer Agent and Dividend Disbursing Agent

     State Street Bank and Trust Company ("State Street"), 801 Pennsylvania,
Kansas City, Missouri 64105 serves as custodian for assets of all Funds. Under
the custody agreement, State Street may hold the foreign securities at its
principal office at 225 Franklin Street, Boston. Massachusetts 02110, and at
State Street's branches, and subject to approval by the Board of Trustees, at a
foreign branch of a qualified U.S. bank, with an eligible foreign subcustodian,
or with an eligible foreign securities depository.

     Pursuant to rules adopted under the 1940 Act, the Trust may maintain
foreign securities and cash in the custody of certain eligible foreign banks and
securities depositories. Selection of these foreign custodial institutions is
made by the Board of Trustees following a consideration of a number of factors,
including (but not limited to) the reliability and financial stability of the
institution; the ability of the institution to perform capably custodial
services for the Trust; the reputation of the institution in its national
market; the political and economic stability of the country in which the
institution is located; and further risks of potential nationalization or
expropriation of Trust assets. The Board of Trustees reviews annually the
continuance of foreign custodial arrangements for the Trust. No assurance can be
given that the Trustees' appraisal of the risks in connection with foreign
custodial arrangements will always be correct or that expropriation,
nationalization, freezes, or confiscation of assets that would impact assets of
the Funds will not occur, and shareholders bear the risk of losses arising from
these or other events.

     National Financial Data Services, 330 W. 9th Street, 4th Floor, Kansas
City, Missouri serves as transfer agent and dividend disbursing agent for the
Institutional Class, Administrative Class, J Class and K Class shares of the
Funds. PFPC Inc., P.O. Box 9688, Providence, Rhode Island 02940-9688 serves as
transfer agent and dividend disbursing agent for the Class A, Class B, Class C
and Class D shares of the Funds.

Independent Accountants

     PricewaterhouseCoopers LLP, 203 North LaSalle Street, Chicago, IL 60601,
serves as independent public accountants for all Funds. PricewaterhouseCoopers
LLP provides audit services, tax return review and assistance and consultation
in connection with review of SEC filings. Prior to November 1, 1995, Deloitte &
Touche LLP served as independent accountants for the Money Market and Total
Return II Funds. See "The Reorganization of the PIMCO Money Market and Total
Return II Funds" for additional information.

                                    - 114 -


Counsel

     Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C. 20006,
passes upon certain legal matters in connection with the shares offered by the
Trust, and also act as counsel to the Trust.

Registration Statement

     This Statement of Additional Information and the Prospectuses do not
contain all of the information included in the Trust's registration statement
filed with the SEC under the 1933 Act with respect to the securities offered
hereby, certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The registration statement, including the exhibits filed
therewith, may be examined at the offices of the SEC in Washington, D.C.

     Statements contained herein and in the Prospectuses as to the contents of
any contract or other documents referred to are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.

Financial Statements

     Financial statements for the Trust as of March 31, 2001 for its fiscal year
then ended, including notes thereto, and the reports of PricewaterhouseCoopers
LLP thereon dated May 23, 2001, are incorporated by reference from the Trust's
2001 Annual Reports. Further, unaudited financial statements for the Trust, as
of September 30, 2001, including notes thereto, are incorporated by reference
from the Trust's September 30, 2001 Semi-Annual Reports. A copy of the Reports
delivered with this Statement of Additional Information should be retained for
future reference.

                                    - 115 -



PIMCO Funds Shareholders' Guide
  for Class A, B and C Shares


April 1, 2002

This Guide relates to the mutual funds (each, a "Fund") that are series of PIMCO
Funds: Multi-Manager Series (the "MMS Trust") and PIMCO Funds: Pacific
Investment Management Series (the "PIMS Trust" and, together with the MMS Trust,
the "Trusts"). Class A, B and C shares of the MMS Trust and the PIMS Trust are
offered through separate prospectuses (each as from time to time revised or
supplemented, a "Retail Prospectus"). The information in this Guide is subject
to change without notice at the option of the Trusts, the Advisers or the
Distributor.

This Guide contains detailed information about Fund purchase, redemption and
exchange options and procedures and other information about the Funds. This
Guide is not a prospectus, and should be used in conjunction with the applicable
Retail Prospectus. This Guide, and the information disclosed herein, is
incorporated by reference in, and considered part of, the Statement of
Additional Information corresponding to each Retail Prospectus.

PIMCO Funds Distributors LLC distributes the Funds' shares. You can call PIMCO
Funds Distributors LLC at 1-800-426-0107 to find out more about the Funds and
other funds in the PIMCO Funds family. You can also visit our Web site at
www.pimcofunds.com.



TABLE OF CONTENTS

How to Buy Shares........................................................SG-3
Alternative Purchase Arrangements........................................SG-9
Exchange Privilege.......................................................SG-26
How to Redeem............................................................SG-28



                                      SG-2



How to Buy Shares

     Class A, Class B and Class C shares of each Fund are continuously offered
through the Trusts' principal underwriter, PIMCO Funds Distributors LLC (the
"Distributor") and through other firms which have dealer agreements with the
Distributor ("participating brokers") or which have agreed to act as introducing
brokers for the Distributor ("introducing brokers"). The Distributor is an
indirect wholly owned subsidiary of Allianz Dresdner Asset Management of America
L.P. ("ADAM of America"), the investment adviser to the Funds that are series of
the MMS Trust, and an affiliate of Pacific Investment Management Company LLC
("Pacific Investment Management Company"), the investment adviser to the Funds
that are series of the PIMS Trust. ADAM of America and Pacific Investment
Management Company are each referred to herein as an "Adviser."

     There are two ways to purchase Class A, Class B or Class C shares: either
(i) through your dealer or broker which has a dealer agreement with the
Distributor or (ii) directly by mailing a PIMCO Funds account application (an
"account application") with payment, as described below under the heading Direct
Investment, to the Distributor (if no dealer is named in the account
application, the Distributor may act as dealer). Class B shares of the Short
Duration Municipal Income Fund, Class B and Class C shares of the California
Intermediate Municipal Bond, California Municipal Bond and New York Municipal
Bond Funds and except as described in the Retail Prospectus, Class A, Class B
and Class C shares of the Renaissance Fund are not offered as of the date of
this Guide; however, investment opportunities in these Funds may be available in
the future. This Guide will be revised or supplemented when these Funds are
first offered.

     Shares may be purchased at a price equal to their net asset value per share
next determined after receipt of an order, plus a sales charge which may be
imposed either (i) at the time of the purchase in the case of Class A shares (or
Class C shares of certain Funds) (the "initial sales charge alternative"), (ii)
on a contingent deferred basis in the case of Class B shares (the "deferred
sales charge alternative") or (iii) by the deduction of an ongoing asset based
sales charge in the case of Class C shares (the "asset based sales charge
alternative"). In certain circumstances, Class A and Class C shares are also
subject to a Contingent Deferred Sales Charge ("CDSC"). See "Alternative
Purchase Arrangements." Purchase payments for Class B and Class C shares are
fully invested at the net asset value next determined after acceptance of the
trade (except for Class C shares of those Funds that charge an initial sales
charge). Purchase payments for Class A shares and certain Funds' Class C shares,
less the applicable sales charge, are invested at the net asset value next
determined after acceptance of the trade.

     All purchase orders received by the Distributor prior to the close of
regular trading (normally 4:00 p.m., Eastern time) on the New York Stock
Exchange on a regular business day are processed at that day's offering price.
However, orders received by the Distributor from dealers or brokers after the
offering price is determined that day will receive such offering price if the
orders were received by the dealer or broker from its customer prior to such
determination and were transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 p.m., Eastern time) or, in the
case of certain retirement plans, received by the

                                      SG-3



Distributor prior to 9:30 a.m., Eastern time on the next business day. Purchase
orders received on other than a regular business day will be executed on the
next succeeding regular business day. The Distributor, in its sole discretion,
may accept or reject any order for purchase of Fund shares. The sale of shares
will be suspended on any day on which the New York Stock Exchange is closed and,
if permitted by the rules of the Securities and Exchange Commission, when
trading on the New York Stock Exchange is restricted or during an emergency
which makes it impracticable for the Funds to dispose of their securities or to
determine fairly the value of their net assets, or during any other period as
permitted by the Securities and Exchange Commission for the protection of
investors.

     Except for purchases through the PIMCO Funds Auto-Invest plan, the PIMCO
Funds Auto-Exchange plan, investments pursuant to the Uniform Gifts to Minors
Act, tax-qualified and wrap programs referred to below under "Tax-Qualified
Retirement Plans" and Alternative Purchase Arrangements--Sales at Net Asset
Value," and purchases by certain registered representatives as described below
under "Registered Representatives' Investments," the minimum initial investment
in Class A, Class B or Class C shares of any Fund is $2,500, and the minimum
additional investment is $100 per Fund. For information about dealer commissions
and other payments to dealers, see "Alternative Purchase Arrangements" below.
Persons selling Fund shares may receive different compensation for selling Class
A, Class B or Class C shares. Normally, Fund shares purchased through
participating brokers are held in the investor's account with that broker. No
share certificates will be issued unless specifically requested in writing by an
investor or broker-dealer.

Direct Investment

     Investors who wish to invest in Class A, Class B or Class C shares of a
Fund directly, rather than through a participating broker, may do so by opening
an account with the Distributor. To open an account, an investor should complete
the account application. All shareholders who open direct accounts with the
Distributor will receive from the Distributor individual confirmations of each
purchase, redemption, dividend reinvestment, exchange or transfer of Fund
shares, including the total number of Fund shares owned as of the confirmation
date, except that purchases which result from the reinvestment of daily-accrued
dividends and/or distributions will be confirmed once each calendar quarter. See
"Distributions" in the applicable Retail Prospectus. Information regarding
direct investment or any other features or plans offered by the Trusts may be
obtained by calling the Distributor at 1-800-426-0107 or by calling your broker.

                                      SG-4



Purchase by Mail

     Investors who wish to invest directly may send a check payable to PIMCO
Funds Distributors LLC, along with a completed application form to:

     PIMCO Funds Distributors LLC
     P.O. Box 9688
     Providence, RI  02940-0926

     Purchases are accepted subject to collection of checks at full value and
conversion into federal funds. Payment by a check drawn on any member of the
Federal Reserve System can normally be converted into federal funds within two
business days after receipt of the check. Checks drawn on a non-member bank may
take up to 15 days to convert into federal funds. In all cases, the purchase
price is based on the net asset value next determined after the purchase order
and check are accepted, even though the check may not yet have been converted
into federal funds.

Subsequent Purchases of Shares

     Subsequent purchases of Class A, Class B or Class C shares can be made as
indicated above by mailing a check with a letter describing the investment or
with the additional investment portion of a confirmation statement. Except for
subsequent purchases through the PIMCO Funds Auto-Invest plan, the PIMCO Funds
Auto-Exchange plan, tax-qualified programs and PIMCO Funds Fund Link referred to
below, and except during periods when an Automatic Withdrawal Plan is in effect,
the minimum subsequent purchase is $100 in any Fund. All payments should be made
payable to PIMCO Funds Distributors LLC and should clearly indicate the
shareholder's account number. Checks should be mailed to the address above under
"Purchase by Mail."

Tax-Qualified Retirement Plans

     The Distributor makes available retirement plan services and documents for
Individual Retirement Accounts (IRAs), including Roth IRAs, for which Boston
Safe Deposit & Trust Company serves as trustee and for IRA Accounts established
with Form 5305-SIMPLE under the Internal Revenue Code of 1986, as amended (the
"Code"). These accounts include Simplified Employee Pension Plan (SEP), Salary
Reduction Simplified Employee Pension Plan (SAR/SEP) IRA and SIMPLE IRA accounts
and prototype documents. In addition, prototype documents are available for
establishing 403(b)(7) custodial accounts with Boston Safe Deposit & Trust
Company as custodian. This type of plan is available to employees of certain
non-profit organizations.

     The minimum initial investment for all tax-qualified plans (except for
employer-sponsored plans, SIMPLE IRAs, SEPs and SAR/SEPs) is $1,000 per Fund and
the minimum subsequent investment is $100. The minimum initial investment for
employer-sponsored plans,

                                      SG-5



SIMPLE IRAs, SEPs and SAR/SEPs and the minimum subsequent investment per Fund
for all such plans is $50.

PIMCO Funds Auto-Invest

     The PIMCO Funds Auto-Invest plan provides for periodic investments into the
shareholder's account with the Trust by means of automatic transfers of a
designated amount from the shareholder's bank account. The minimum investment
for eligibility in the PIMCO Funds Auto-Invest plan is $1,000 per Fund.
Investments may be made monthly or quarterly, and may be in any amount subject
to a minimum of $50 per month for each Fund in which shares are purchased
through the plan. Further information regarding the PIMCO Funds Auto-Invest plan
is available from the Distributor or participating brokers. You may enroll by
completing the appropriate section on the account application, or you may obtain
an Auto-Invest application by calling the Distributor or your broker.

Registered Representatives' Investments

     Current registered representatives and other full-time employees of
participating brokers or such persons' spouses or trusts or custodial accounts
for their minor children may purchase Class A shares at net asset value without
a sales charge. The minimum initial investment in each case is $500 per Fund and
the minimum subsequent investment is $50.

PIMCO Funds Auto-Exchange

     The PIMCO Funds Auto-Exchange plan establishes regular, periodic exchanges
from one Fund account to another Fund account. The plan provides for regular
investments into a shareholder's account in a specific Fund by means of
automatic exchanges of a designated amount from another Fund account of the same
class of shares and with identical account registration.

     Exchanges may be made monthly or quarterly, and may be in any amount
subject to a minimum of $1,000 to open a new Fund account and of $50 for any
existing Fund account for which shares are purchased through the plan.

     Further information regarding the PIMCO Funds Auto-Exchange plan is
available from the Distributor at 1-800-426-0107 or participating brokers. You
may enroll by completing an application which may be obtained from the
Distributor or by telephone request at 1-800-426-0107. For more information on
exchanges, see "Exchange Privilege."

PIMCO Funds Fund Link

     PIMCO Funds Fund Link ("Fund Link") connects your Fund account(s) with a
bank account. Fund Link may be used for subsequent purchases and for redemptions
and other transactions described under "How to Redeem." Purchase transactions
are effected by electronic funds transfers from the shareholder's account at a
U.S. bank or other financial institution that is

                                      SG-6



an Automated Clearing House ("ACH") member. Investors may use Fund Link to make
subsequent purchases of shares in any amount greater than $50. To initiate such
purchases, call 1-800-426-0107. All such calls will be recorded. Fund Link is
normally established within 45 days of receipt of a Fund Link application by
PFPC, Inc. (the "Transfer Agent"), the Funds' transfer agent for Class A, B and
C shares. The minimum investment by Fund Link is $50 per Fund. Shares will be
purchased on the regular business day the Distributor receives the funds through
the ACH system, provided the funds are received before the close of regular
trading on the New York Stock Exchange. If the funds are received after the
close of regular trading, the shares will be purchased on the next regular
business day.

     Fund Link privileges must be requested on the account application. To
establish Fund Link on an existing account, complete a Fund Link application,
which is available from the Distributor or your broker, with signatures
guaranteed from all shareholders of record for the account. See "Signature
Guarantee" below. Such privileges apply to each shareholder of record for the
account unless and until the Distributor receives written instructions from a
shareholder of record canceling such privileges. Changes of bank account
information must be made by completing a new Fund Link application signed by all
owners of record of the account, with all signatures guaranteed. The
Distributor, the Transfer Agent and the Fund may rely on any telephone
instructions believed to be genuine and will not be responsible to shareholders
for any damage, loss or expenses arising out of such instructions. The Fund
reserves the right to amend, suspend or discontinue Fund Link privileges at any
time without prior notice. Fund Link does not apply to shares held in broker
"street name" accounts.

Signature Guarantee

     When a signature guarantee is called for, a "medallion" signature guarantee
will be required. A medallion signature guarantee may be obtained from a
domestic bank or trust company, broker, dealer, clearing agency, savings
association or other financial institution which is participating in a medallion
program recognized by the Securities Transfer Association. The three recognized
medallion programs are the Securities Transfer Agents Medallion Program (STAMP),
Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc.
Medallion Signature Program (NYSE MSP). Signature guarantees from financial
institutions which are not participating in one of these programs will not be
accepted. Please note that financial institutions participating in a recognized
medallion program may still be ineligible to provide a signature guarantee for
transactions of greater than a specified dollar amount.

     The Distributor reserves the right to modify its signature guarantee
standards at any time. The Funds may change the signature guarantee requirements
from time to time upon notice to shareholders, which may, but is not required
to, be given by means of a new or supplemented Retail Prospectus or a new or
supplemented Guide. Shareholders should contact the Distributor for additional
details regarding the Funds' signature guarantee requirements.

                                      SG-7



Account Registration Changes

     Changes in registration or account privileges may be made in writing to the
Transfer Agent. Signature guarantees may be required. See "Signature Guarantee"
above. All correspondence must include the account number and must be sent to:

     PIMCO Funds Distributors LLC
     P.O. Box 9688
     Providence, RI  02940-0926

Small Account Fee

     Because of the disproportionately high costs of servicing accounts with low
balances, a fee at an annual rate of $16 (paid to the applicable Fund's
administrator) will automatically be deducted from direct Fund accounts with
balances falling below a minimum level. The valuation of Fund accounts and the
deduction are expected to take place during the last five business days of each
calendar quarter. The fee will be deducted in quarterly installments from Fund
accounts with balances below $2,500, except for Uniform Gift to Minors, IRA,
Roth IRA and Auto-Invest accounts, for which the minimum balance is $1,000. The
fee also applies to employer-sponsored retirement plan accounts, Money Purchase
and/or Profit Sharing plans, 401(k) plans, 403(b)(7) custodial accounts, SIMPLE
IRAs, SEPs and SAR/SEPs. (A separate custodial fee may apply to IRAs, Roth IRAs
and other retirement accounts.) No fee will be charged on any Fund account of a
shareholder if the aggregate value of all of the shareholder's Fund accounts is
at least $50,000. Any applicable small account fee will be deducted
automatically from your below-minimum Fund account in quarterly installments and
paid to the Administrator. Each Fund account will normally be valued, and any
deduction taken, during the last five business days of each calendar quarter. No
small account fee will be charged to employee and employee-related accounts of
ADAM of America and/or, in the discretion of ADAM of America, its affiliates.

Minimum Account Size

     Due to the relatively high cost to the Funds of maintaining small accounts,
shareholders are asked to maintain an account balance in each Fund in which the
shareholder invests of at least the amount necessary to open the type of account
involved. If a shareholder's balance for any Fund is below such minimum for
three months or longer, the applicable Fund's administrator shall have the right
(except in the case of employer-sponsored retirement accounts) to close that
Fund account after giving the shareholder 60 days in which to increase his or
her balance. The shareholder's Fund account will not be liquidated if the
reduction in size is due solely to market decline in the value of the
shareholder's Fund shares or if the aggregate value of the shareholder's
accounts in PIMCO Funds exceeds $50,000.

Alternative Purchase Arrangements


                                      SG-8


     The Funds offer investors Class A, Class B and Class C shares in the
applicable Retail Prospectus. Class A, Class B and Class C shares bear sales
charges in different forms and amounts and bear different levels of expenses, as
described below. Through separate prospectuses, certain of the Funds currently
offer up to three additional classes of shares in the United States: Class D,
Institutional Class and Administrative Class shares. Class D shares are offered
through financial intermediaries. Institutional Class shares are offered to
pension and profit sharing plans, employee benefit trusts, endowments,
foundations, corporations and other high net worth individuals. Administrative
Class shares are offered primarily through employee benefit plan alliances,
broker-dealers and other intermediaries. Class D, Institutional Class and
Administrative Class shares are sold without a sales charge and have different
expenses than Class A, Class B and Class C shares. As a result of lower sales
charges and/or operating expenses, Class D, Institutional Class and
Administrative Class shares are generally expected to achieve higher investment
returns than Class A, Class B or Class C shares. Certain Funds also offer up to
two additional classes of shares that are offered only to non-U.S. investors
outside the United States: Class J and Class K shares. To obtain more
information about the other classes of shares, please call the applicable Trust
at 1-800-927-4648 (for Institutional Class, Administrative Class, Class J and
Class K shares) or the Distributor at 1-888-87-PIMCO (for Class D shares).

     The alternative purchase arrangements described in this Guide are designed
to enable a retail investor to choose the method of purchasing Fund shares that
is most beneficial to the investor based on all factors to be considered,
including the amount and intended length of the investment, the particular Fund
and whether the investor intends to exchange shares for shares of other Funds.
Generally, when making an investment decision, investors should consider the
anticipated life of an intended investment in the Funds, the size of the
investment, the accumulated distribution and servicing fees plus CDSCs on Class
B or Class C shares, the initial sales charge plus accumulated servicing fees on
Class A shares and certain Class C shares (plus a CDSC in certain
circumstances), the possibility that the anticipated higher return on Class A
shares due to the lower ongoing charges will offset the initial sales charge
paid on such shares, the automatic conversion of Class B shares into Class A
shares and the difference in the CDSCs applicable to Class A, Class B and Class
C shares.

Class A. The initial sales charge alternative (Class A) might be preferred by
investors purchasing shares of sufficient aggregate value to qualify for
reductions in the initial sales charge applicable to such shares. Similar
reductions are not available on the contingent deferred sales charge alternative
(Class B) or the asset based sales charge alternative (Class C). Class A shares
are subject to a servicing fee but are not subject to a distribution fee and,
accordingly, such shares are expected to pay correspondingly higher dividends on
a per share basis. However, because initial sales charges are deducted at the
time of purchase, not all of the purchase payment for Class A shares is invested
initially. Class B and Class C shares might be preferable to investors who wish
to have all purchase payments invested initially, although remaining subject to
higher distribution and servicing fees and, for certain periods, being subject
to a CDSC. An investor who qualifies for an elimination of the Class A initial
sales charge should also consider whether he or she anticipates redeeming shares
in a time period which will subject such shares to a CDSC

                                      SG-9



as described below. See "Initial Sales Charge Alternative--Class A Shares--Class
A Deferred Sales Charge" below.

Class B. Class B shares might be preferred by investors who intend to invest in
the Funds for longer periods and who do not intend to purchase shares of
sufficient aggregate value to qualify for sales charge reductions applicable to
Class A shares. Both Class B and Class C shares can be purchased at net asset
value without an initial sales charge (although Class C shares of certain Funds
are subject to a 1% initial sales charge). However, unlike Class C shares, Class
B shares convert into Class A shares after they have been held for a period of
time. Class B shares purchased on or before December 31, 2001 convert into Class
A shares after the shares have been held for seven years. Class B shares
purchased after December 31, 2001 convert into Class A shares after the shares
have been held for eight years. After the conversion takes place, the shares
will no longer be subject to a CDSC, and will be subject to the servicing fees
charged for Class A shares, which are lower than the distribution and servicing
fees charged on either Class B or Class C shares. See "Deferred Sales Charge
Alternative--Class B Shares" below. Class B shares are not available for
purchase by employer sponsored retirement plans.

Class C. Class C shares might be preferred by investors who intend to purchase
shares which are not of sufficient aggregate value to qualify for Class A sales
charges of 1% or less and who wish to have all purchase payments invested
initially (except for purchases of Class C shares of the Global Innovation, RCM
Emerging Markets, RCM Europe, RCM Global Equity, RCM Global Healthcare, RCM
Global Small-Cap, RCM Global Technology and RCM International Growth Equity
Funds , which, beginning during the first quarter of 2002, will be subject to a
1% initial sales charge). Class C shares are preferable to Class B shares for
investors who intend to maintain their investment for intermediate periods and
therefore may also be preferable for investors who are unsure of the intended
length of their investment. Unlike Class B shares, Class C shares are not
subject to a CDSC after they have been held for one year (eighteen months for
Class C shares that are subject to the 1% sales charge mentioned above) and are
subject to only a 1% CDSC during the first year (or eighteen months). However,
because Class C shares do not convert into Class A shares, Class B shares are
preferable to Class C shares for investors who intend to maintain their
investment in the Funds for long periods. See "Asset Based Sales Charge
Alternative--Class C Shares" below.

     For administrative convenience, Class C shares that are subject to the 1%
initial sales charge referred to above are sometimes referred to as "Class CII"
shares. The Distributor may enter into agreements with brokers and dealers
whereby, among other things, such brokers and dealers would not impose an
initial sales charge on Class CII shares, which would otherwise be subject to
such initial sales charge. Such agreements would also provide that such shares
would be subject to a CDSC for one year only, not the eighteen month period
otherwise applicable to Class CII shares.

     In determining which class of shares to purchase, an investor should always
consider whether any waiver or reduction of a sales charge or a CDSC is
available. See generally "Initial Sales Charge Alternative--Class A Shares" and
"Waiver of Contingent Deferred Sales Charges" below.

                                      SG-10



     The maximum single purchase of Class B shares of a Fund is $249,999. The
maximum single purchase of Class C shares (including those with the 1% initial
sales charge referred to above) of a Fund is $999,999. The Funds may refuse any
order to purchase shares.

     For a description of the Distribution and Servicing Plans and distribution
and servicing fees payable thereunder with respect to Class A, Class B and Class
C shares, see "Distributor and Distribution and Servicing Plans" below.

Waiver of Contingent Deferred Sales Charges. The CDSC applicable to Class A and
Class C (including Class CII) shares is currently waived for (i) any partial or
complete redemption in connection with (a) required minimum distributions to IRA
account owners or beneficiaries who are age 70 1/2 or older or (b) distributions
to participants in employer-sponsored retirement plans upon attaining age 59 1/2
or on account of death or disability; (ii) any partial or complete redemption in
connection with a qualifying loan or hardship withdrawal from an employer
sponsored retirement plan; (iii) any complete redemption in connection with a
distribution from a qualified employer retirement plan in connection with
termination of employment or termination of the employer's plan and the transfer
to another employer's plan or to an IRA (with the exception of a Roth IRA); (iv)
any partial or complete redemption following death or disability (as defined in
the Internal Revenue Code) of a shareholder (including one who owns the shares
as joint tenant with his or her spouse) from an account in which the deceased or
disabled is named, provided the redemption is requested within one year of the
death or initial determination of disability; (v) any redemption resulting from
a return of an excess contribution to a qualified employer retirement plan or an
IRA (with the exception of a Roth IRA); (vi) up to 10% per year of the value of
a Fund account which (a) has the value of at least $10,000 at the start of such
year and (b) is subject to an Automatic Withdrawal Plan; (vii) redemptions by
Trustees, officers and employees of either Trust, and by directors, officers and
employees of the Distributor, ADAM of America or Pacific Investment Management
Company; (viii) redemptions effected pursuant to a Fund's right to involuntarily
redeem a shareholder's Fund account if the aggregate net asset value of shares
held in such shareholder's account is less than a minimum account size specified
in such Fund's prospectus; (ix) involuntary redemptions caused by operation of
law; (x) redemptions of shares of any Fund that is combined with another Fund,
investment company, or personal holding company by virtue of a merger,
acquisition or other similar reorganization transaction; (xi) redemptions by a
shareholder who is a participant making periodic purchases of not less than $50
through certain employer sponsored savings plans that are clients of a
broker-dealer with which the Distributor has an agreement with respect to such
purchases; (xii) redemptions effected by trustees or other fiduciaries who have
purchased shares for employer-sponsored plans, the trustee, administrator,
fiduciary, broker, trust company or registered investment adviser for which has
an agreement with the Distributor with respect to such purchases; (xiii)
redemptions in connection with IRA accounts established with Form 5305-SIMPLE
under the Code for which the Trust is the designated financial institution;
(xiv) a redemption by a holder of Class A shares who purchased $1,000,000
($250,000 in the case of the California Intermediate Municipal Bond, California
Municipal Bond, Low Duration, New York Municipal Bond and Short-Term Funds) or
more of Class A shares (and therefore did not pay a sales charge) where the
participating broker or dealer involved in the sale of such shares waived

                                      SG-11



the commission it would normally receive from the Distributor pursuant to an
agreement with the Distributor; (xv) a redemption by a holder of Class A or
Class C (including Class CII) shares where the participating broker or dealer
involved in the purchase of such shares waived all payments it normally would
receive from the Distributor at the time of purchase (i.e., commissions or
reallowances of initial sales charges and advancements of service and
distribution fees); or (xvi) a redemption by a holder of Class A or Class C
(including Class CII) shares where, by agreement with the Distributor, the
participating broker or dealer involved in the purchase of such shares waived a
portion of any payment it normally would receive from the Distributor at the
time of purchase (or otherwise agreed to a variation from the normal payment
schedule) in connection with such purchase.

     The CDSC applicable to Class B shares is currently waived for any partial
or complete redemption in each of the following cases: (a) in connection with
required minimum distributions to IRA account owners or to plan participants or
beneficiaries who are age 70 1/2 or older; (b) involuntary redemptions caused by
operation of law; (c) redemption of shares of any Fund that is combined with
another Fund, investment company, or personal holding company by virtue of a
merger, acquisition or other similar reorganization transaction; (d) following
death or disability (as defined in the Code) of a shareholder (including one who
owns the shares as joint tenant with his or her spouse) from an account in which
the deceased or disabled is named, provided the redemption is requested within
one year of the death or initial determination of disability; (e) up to 10% per
year of the value of a Fund account which (i) has a value of at least $10,000 at
the start of such year and (ii) is subject to an Automatic Withdrawal Plan (See
"How to Redeem--Automatic Withdrawal Plan"); and (f) redemptions effected
pursuant to a Fund's right to involuntarily redeem a shareholder's Fund account
if the aggregate net asset value of shares held in the account is less than a
minimum account size specified in the Fund's prospectus.

     The Distributor may require documentation prior to waiver of the CDSC for
any class, including distribution letters, certification by plan administrators,
applicable tax forms, death certificates, physicians' certificates, etc.

Exempt Transactions; No Initial Sales Charges, CDSCs or Payments to Brokers

     Investors will not pay any initial sales charges and will not be subject to
CDSCs, and brokers and dealers will not receive any commissions or reallowances
of initial sales charges or advancements of service and distribution fees, on
the transactions described below (which are sometimes referred to as "Exempt
Transactions"):

     .    A redemption by a holder of Class A or Class C (including Class CII)
          shares where the participating broker or dealer involved in the
          purchase of such shares waived all payments it normally would receive
          from the Distributor at the time of purchase (e.g., commissions and/or
          reallowances of initial sales charges and advancements of service and
          distribution fees).

                                      SG-12



     .    A redemption by a holder of Class A or Class C (including Class CII)
          shares where, by agreement with the Distributor, the participating
          broker or dealer involved in the purchase of such shares waived a
          portion of any payment it normally would receive from the Distributor
          at the time of purchase (or otherwise agreed to a variation from the
          normal payment schedule) in connection with such purchase.

     .    Transactions described under clause (A) of Note 4 to the tables in the
          subsection "Initial Sales Charge Alternative--Class A Shares."

Initial Sales Charge Alternative--Class A Shares

     Class A shares are sold at a public offering price equal to their net asset
value per share plus a sales charge, as set forth below. As indicated below
under "Class A Deferred Sales Charge," certain investors that purchase
$1,000,000 ($250,000 in the case of the California Intermediate Municipal Bond,
California Municipal Bond, Low Duration, New York Municipal Bond and Short-Term
Funds) or more of any Fund's Class A shares (and thus pay no initial sales
charge) may be subject to a CDSC of up to 1% if they redeem such shares during
the first 18 months after their purchase.

                     Initial Sales Charge -- Class A Shares

Asset Allocation, Capital Appreciation, Equity Income, Global Innovation,
Growth, Growth & Income, Innovation, Mid-Cap, Opportunity, RCM Biotechnology,
RCM Emerging Markets, RCM Europe, RCM Global Equity, RCM Global Healthcare, RCM
Global Small-Cap, RCM Global Technology, RCM International Growth Equity, RCM
Large-Cap Growth, RCM Mid-Cap, RCM Tax-Managed Growth, Renaissance, Select
Growth, Small-Cap Value, Target, Tax-Efficient Equity and Value Funds.

------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   5.82%                        5.50%                       4.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              4.71%                        4.50%                       4.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - 249,999             3.63%                        3.50%                       3.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000 - $499,999            2.56%                        2.50%                       2.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$500,000 - $999,999            2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$1,000,000 +                   0.00%(1)                     0.00%(1)                    0.00%(2)
------------------------------ ---------------------------- --------------------------- ----------------------------



                                      SG-13



Convertible, Emerging Markets Bond, European Convertible, Foreign Bond, Global
Bond II, GNMA, High Yield, Long-Term U.S. Government, Strategic Balanced, Total
Return and Total Return Mortgage Funds

------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   4.71%                        4.50%                       4.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              4.17%                        4.00%                       3.50%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - $249,999            3.63%                        3.50%                       3.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000 - $499,999            2.56%                        2.50%                       2.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$500,000 - $999,999            2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$1,000,000+                    0.00%(1)                     0.00%(1)                    0.00%(3)
------------------------------ ---------------------------- --------------------------- ----------------------------

Municipal Bond, Real Return and StocksPLUS Funds
------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   3.09%                        3.00%                       2.50%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              2.56%                        2.50%                       2.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - $249,999            2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000 - $499,999            1.52%                        1.50%                       1.25%
------------------------------ ---------------------------- --------------------------- ----------------------------
$500,000 - $999,999            1.27%                        1.25%                       1.00%
------------------------------ ---------------------------- --------------------------- ----------------------------
$1,000,000+                    0.00%(1)                     0.00%(1)                    0.00%(3)
------------------------------ ---------------------------- --------------------------- ----------------------------

Short Duration Municipal Income and Short-Term Funds

------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              1.78%                        1.75%                       1.50%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - $249,999            1.52%                        1.50%                       1.25%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000+                      0.00%(1)                     0.00%(1)                    0.00%(4)
------------------------------ ---------------------------- --------------------------- ----------------------------


                                      SG-14

California Intermediate Municipal Bond, California Municipal Bond
and New York Municipal Bond Funds

------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   3.09%                        3.00%                       2.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - $249,999            1.01%                        1.00%                       0.90%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000+                      0.00%(1)                     0.00%(1)                    0.00%(4)
------------------------------ ---------------------------- --------------------------- ----------------------------

Low Duration Fund

------------------------------ ---------------------------- --------------------------- ----------------------------
Amount of Purchase             Sales Charge as % of Net     Sales Charge as % of        Discount or Commission to
                               Amount Invested              Public Offering Price       dealers as % of Public
                                                                                        Offering Price**
------------------------------ ---------------------------- --------------------------- ----------------------------
$0 - $49,999                   3.09%                        3.00%                       2.50%
------------------------------ ---------------------------- --------------------------- ----------------------------
$50,000 - $99,999              2.04%                        2.00%                       1.75%
------------------------------ ---------------------------- --------------------------- ----------------------------
$100,000 - $249,999            1.01%                        1.00%                       0.90%
------------------------------ ---------------------------- --------------------------- ----------------------------
$250,000+                      0.00%(1)                     0.00%(1)                    0.00%(4)
------------------------------ ---------------------------- --------------------------- ----------------------------

**   From time to time, these discounts and commissions may be increased
     pursuant to special arrangements between the Distributor and certain
     participating brokers.

1.   As shown, investors that purchase more than $1,000,000 of any Fund's Class
     A shares ($250,000 in the case of the California Intermediate Municipal
     Bond, California Municipal Bond, Low Duration, New York Municipal Bond,
     Short Duration Municipal Income and Short-Term Funds) will not pay any
     initial sales charge on such purchase. However, except with regard to
     purchases of Class A shares of the Money Market Fund and certain purchases
     of Class A shares of the California Intermediate Municipal Bond, California
     Municipal Bond, Low Duration, New York Municipal Bond and Short-Term Funds
     described in Note 4 below, purchasers of $1,000,000 ($250,000 in the case
     of the California Intermediate Municipal Bond, California Municipal Bond,
     Low Duration, New York Municipal Bond, Short Duration Municipal Income and
     Short-Term Funds) or more of Class A shares (other than those purchasers
     described below under "Sales at Net Asset Value" where no commission is
     paid) will be subject to a CDSC of up to 1% (0.50% in the case of the
     California Intermediate Municipal Bond, California Municipal Bond, New York
     Municipal Bond, Short Duration Municipal Income and Short-Term Funds and
     0.75% in the case of the Low Duration Fund) if such shares are redeemed
     during the first 18 months after such shares are purchased unless such
     purchaser is eligible for a waiver of the CDSC as described under "Waiver
     of Contingent Deferred Sales Charges" above. See "Class A Deferred Sales
     Charge" below.

2.   The Distributor will pay a commission to dealers who sell amounts of
     $1,000,000 or more of Class A shares and may pay a commission to dealers
     who sell Class A shares at net asset value to certain employer-sponsored
     plans as outlined in "Sales at Net Asset Value" below of each of these
     Funds, in each case according to the following schedule: 0.75% of the first
     $2,000,000, 0.50% of amounts from $2,000,001 to $5,000,000, and 0.25% of
     amounts over $5,000,000.

3.   The Distributor will pay a commission to dealers who sell amounts of
     $1,000,000 or more of Class A shares and may pay a commission to dealers
     who sell Class A shares at net asset value to certain employer-sponsored
     plans as outlined in "Sales at Net Asset Value" below of each of these
     Funds except for the Money Market Fund (for which no payment is made), in
     each case according to the following schedule: 0.50% of the first
     $2,000,000 and 0.25% of amounts over $2,000,000.

4.   (A) The Distributor will pay a commission to dealers who sell $250,000 or
     more of Class A shares of the California Intermediate Municipal Bond,
     California Municipal Bond, Low Duration, New York Municipal Bond and
     Short-Term Funds at the annual rate of 0.15% (0.35% in the case of the Low
     Duration Fund) of the net asset value of such Class A shares as in effect
     from time to time; such commission shall be paid in installments covering
     the 18 month period commencing with the date of sale. Such installments
     shall be paid after the end of calendar quarters in accordance with the
     Distributor's practice, which may change from time to time. Investors
     purchasing Class A shares of such Funds through such dealers will not be
     subject to the Class A CDSC on such shares. (B) Alternatively, dealers may
     elect (through an agreement with the Distributor) to receive a commission
     at the time of sale on purchases of $250,000 or more of these Funds of
     0.25% of the public offering price (for purchases of the California
     Intermediate Municipal Bond, California Municipal Bond, New York Municipal
     Bond and Short-Term Funds) or 0.50% of the public offering price (for
     purchases of the Low Duration Fund). Investors who purchase through dealers
     that elect the commission schedule described in this clause (B) will be
     subject to the Class A CDSC. (C) In addition to the commissions described
     in (A) and (B) above, dealers may

                                      SG-15



     be entitled to receive an annual servicing fee of 0.25% of the net asset
     value of such shares for so long as such shares are outstanding, as
     described below under "Participating Brokers."

     Each Fund receives the entire net asset value of its Class A shares
purchased by investors (i.e., the gross purchase price minus the applicable
sales charge). The Distributor receives the sales charge shown above less any
applicable discount or commission "reallowed" to participating brokers in the
amounts indicated in the table above. The Distributor may, however, elect to
reallow the entire sales charge to participating brokers for all sales with
respect to which orders are placed with the Distributor for any particular Fund
during a particular period. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to 0.50% of the purchase price on sales of Class A shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.
From time to time, the Distributor, its parent and/or its affiliates may make
additional payments to one or more participating brokers based upon factors such
as the level of sales or the length of time clients' assets have remained in the
Trust.

     Shares issued pursuant to the automatic reinvestment of income dividends or
capital gains distributions are issued at net asset value and are not subject to
any sales charges.

     Under the circumstances described below, investors may be entitled to pay
reduced sales charges for Class A shares.

     These discounts and commissions may be increased pursuant to special
arrangements from time to time agreed upon between the Distributor and certain
participating brokers.

Combined Purchase Privilege. Investors may qualify for a reduced sales charge on
Class A shares by combining purchases of the Class A shares of one or more Funds
which offer Class A shares (together, "eligible PIMCO Funds") into a "single
purchase," if the resulting purchase totals at least $50,000. The term single
purchase refers to:

     (i)   a single purchase by an individual, or concurrent purchases, which in
           the aggregate are at least equal to the prescribed amounts, by an
           individual, his or her spouse and their children under the age of 21
           years purchasing Class A shares of the eligible PIMCO Funds for his,
           her or their own account;

     (ii)  single purchase by a trustee or other fiduciary purchasing shares for
           a single trust, estate or fiduciary account although more than one
           beneficiary is involved; or

     (iii) a single purchase for the employee benefit plans of a single
           employer.

     For further information, call the Distributor at 1-800-426-0107 or your
broker.

                                      SG-16



Cumulative Quantity Discount (Right of Accumulation). A purchase of additional
Class A shares of any eligible PIMCO Fund may qualify for a Cumulative Quantity
Discount at the rate applicable to the discount bracket obtained by adding:

     (i)   the investor's current purchase;

     (ii)  the value (at the close of business on the day of the current
           purchase) of all Class A shares of any eligible PIMCO Fund held by
           the investor computed at the maximum offering price; and

     (iii) the value of all shares described in paragraph (ii) owned by another
           shareholder eligible to be combined with the investor's purchase into
           a "single purchase" as defined above under "Combined Purchase
           Privilege."

     For example, if a shareholder owned Class A shares of the Growth & Income
     Fund worth $25,000 at the current maximum offering price and wished to
     purchase Class A shares of the Growth Fund worth an additional $30,000, the
     sales charge for the $30,000 purchase would be at the 4.50% rate applicable
     to a single $55,000 purchase of shares of the Growth Fund, rather than the
     5.50% rate.

Letter of Intent. An investor may also obtain a reduced sales charge on
purchases of Class A shares by means of a written Letter of Intent, which
expresses an intention to invest not less than $50,000 within a period of 13
months in Class A shares of any eligible PIMCO Fund(s) other than the Money
Market Fund. Each purchase of shares under a Letter of Intent will be made at
the public offering price or prices applicable at the time of such purchase to a
single transaction of the dollar amount indicated in the Letter. At the
investor's option, a Letter of Intent may include purchases of Class A shares of
any eligible PIMCO Fund (other than the Money Market Fund) made not more than 90
days prior to the date the Letter of Intent is signed; however, the 13-month
period during which the Letter is in effect will begin on the date of the
earliest purchase to be included and the sales charge on any purchases prior to
the Letter will not be adjusted.

     Investors qualifying for the Combined Purchase Privilege described above
may purchase shares of the eligible PIMCO Funds under a single Letter of Intent.
For example, if at the time you sign a Letter of Intent to invest at least
$100,000 in Class A shares of any Fund (other than the Money Market Fund), you
and your spouse each purchase Class A shares of the Growth Fund worth $30,000
(for a total of $60,000), it will only be necessary to invest a total of $40,000
during the following 13 months in Class A shares of any of the Funds (other than
the Money Market Fund) to qualify for the 3.50% sales charge on the total amount
being invested (the sales charge applicable to an investment of $100,000 in any
of the Funds other than the California Intermediate Municipal Bond, California
Municipal Bond, Low Duration, Money Market, Municipal Bond, New York Municipal
Bond, Real Return, Short Duration Municipal Income, Short-Term and StocksPLUS
Funds).

                                      SG-17



     A Letter of Intent is not a binding obligation to purchase the full amount
indicated. The minimum initial investment under a Letter of Intent is 5% of such
amount. Shares purchased with the first 5% of such amount will be held in escrow
(while remaining registered in your name) to secure payment of the higher sales
charge applicable to the shares actually purchased in the event the full
intended amount is not purchased. If the full amount indicated is not purchased,
a sufficient amount of such escrowed shares will be involuntarily redeemed to
pay the additional sales charge applicable to the amount actually purchased, if
necessary. Dividends on escrowed shares, whether paid in cash or reinvested in
additional eligible PIMCO Fund shares, are not subject to escrow. When the full
amount indicated has been purchased, the escrow will be released.

     If you wish to enter into a Letter of Intent in conjunction with your
initial investment in Class A shares of a Fund, you should complete the
appropriate portion of the account application. If you are a current Class A
shareholder desiring to do so you may obtain a form of Letter of Intent by
contacting the Distributor at 1-800-426-0107 or any broker participating in this
program.

Reinstatement Privilege. A Class A shareholder who has caused any or all of his
shares (other than the Money Market Fund shares that were not acquired by
exchanging Class A shares of another Fund) to be redeemed may reinvest all or
any portion of the redemption proceeds in Class A shares of any eligible PIMCO
Fund at net asset value without any sales charge, provided that such
reinvestment is made within 120 calendar days after the redemption or repurchase
date. Shares are sold to a reinvesting shareholder at the net asset value next
determined. See "How Net Asset Value is Determined" in the applicable Retail
Prospectus. A reinstatement pursuant to this privilege will not cancel the
redemption transaction and, consequently, any gain or loss so realized may be
recognized for federal tax purposes except that no loss may be recognized to the
extent that the proceeds are reinvested in shares of the same Fund within 30
days. The reinstatement privilege may be utilized by a shareholder only once,
irrespective of the number of shares redeemed, except that the privilege may be
utilized without limit in connection with transactions whose sole purpose is to
transfer a shareholder's interest in a Fund to his Individual Retirement Account
or other qualified retirement plan account. An investor may exercise the
reinstatement privilege by written request sent to the Distributor or to the
investor's broker.

Sales at Net Asset Value. Each Fund may sell its Class A shares at net asset
value without a sales charge to (a) current or retired officers, trustees,
directors or employees of either Trust, ADAM of America, Pacific Investment
Management Company or the Distributor, other affiliates of ADAM of America at
the discretion of ADAM of America, Pacific Investment Management Company or the
Distributor, a parent, brother or sister of any such officer, trustee, director
or employee or a spouse or child of any of the foregoing persons, or any trust,
profit sharing or pension plan for the benefit of any such person and to any
other person if the Distributor anticipates that there will be minimal sales
expenses associated with the sale, (b) current registered representatives and
other full-time employees of participating brokers or such persons' spouses or
for trust or custodial accounts for their minor children, (c) trustees or other
fiduciaries purchasing shares for certain plans sponsored by employers,
professional organizations or associations or charitable organizations, the
trustee, administrator, fiduciary, broker, trust

                                      SG-18



company or registered investment adviser for which has an agreement with the
Distributor, ADAM of America or Pacific Investment Management Company with
respect to such purchases (including provisions related to minimum levels of
investment in the Trust), and to participants in such plans and their spouses
purchasing for their account(s) or IRAs (with the exception of Roth IRAs), (d)
participants investing through accounts known as "wrap accounts" established
with brokers or dealers approved by the Distributor where such brokers or
dealers are paid a single, inclusive fee for brokerage and investment management
services, (e) client accounts of broker-dealers or registered investment
advisers affiliated with such broker-dealers with which the Distributor, ADAM of
America or Pacific Investment Management Company has an agreement for the use of
a Fund in particular investment products or programs, (f) accounts for which the
company that serves as trustee or custodian either (i) is affiliated with the
Trust or the Fund's Adviser or (ii) has a specific agreement to that effect with
the Distributor, (g) investors who are investing the proceeds from a redemption
of shares of another open-end investment company (mutual fund) on which the
investor paid an initial or back-end sales charge, commission or contingent
deferred sales charge, but only to the extent of such proceeds and only if such
investment is made within 60 days of such redemption and (h) investors who
purchase shares in "Exempt Transactions," as described under "Exempt
Transactions; No Initial Sales Charges, CDSCs or Payments to Brokers" above. The
Distributor will only pay service fees and will not pay any initial commission
or other fees to dealers upon the sale of Class A shares to the purchasers
described in this paragraph except the Distributor will pay initial commissions
to any dealer for sales to purchasers described under (c) in this paragraph
provided such dealer has a written agreement with the Distributor specifically
providing for the payment of such initial commissions.

Notification of Distributor. An investor or participating broker must notify the
Distributor whenever a quantity discount or reduced sales charge is applicable
to a purchase and must provide the Distributor with sufficient information at
the time of purchase to verify that each purchase qualifies for the privilege or
discount. Upon such notification, the investor will receive the lowest
applicable sales charge. The quantity discounts and commission schedules
described above may be modified or terminated at any time.

Class A Deferred Sales Charge. For purchases of Class A shares of all Funds
(except the California Intermediate Municipal Bond, California Municipal Bond,
Low Duration, Money Market, New York Municipal Bond, Short Duration Municipal
Income and Short-Term Funds), investors who purchase $1,000,000 ($250,000 in the
case of the California Intermediate Municipal Bond, California Municipal Bond,
Low Duration, New York Municipal Bond, Short Duration Municipal Income and
Short-Term Funds) or more of Class A shares (and, thus, purchase such shares
without any initial sales charge) may be subject to a 1% CDSC if such shares are
redeemed within 18 months of their purchase. Certain purchases of Class A shares
of the California Intermediate Municipal Bond, California Municipal Bond, Low
Duration, New York Municipal Bond, Short Duration Municipal Income and
Short-Term Funds described above under "Initial Sales Charge--Class A Shares"
will be subject to a CDSC of 0.75% (for the Low Duration Fund) or 0.50% (for the
California Intermediate Municipal Bond, California Municipal Bond, New York
Municipal Bond, Short Duration Municipal Income and Short-Term Funds) if such
shares are redeemed within 18 months after their purchase. The CDSCs described
in this

                                      SG-19



paragraph are sometimes referred to as the "Class A CDSC." Shares of certain
Funds purchased prior to October 1, 2001 are subject to different Class A CDSC
rates. The Class A CDSC does not apply to investors purchasing any Fund's Class
A shares if such investors are otherwise eligible to purchase Class A shares
without any sales charge because they are described under "Sales at Net Asset
Value" above.

     For purchases subject to the Class A CDSC, a CDSC will apply for any
redemption of such Class A shares that occurs within 18 months of their
purchase. No CDSC will be imposed if the shares redeemed have been acquired
through the reinvestment of dividends or capital gains distributions or if the
amount redeemed is derived from increases in the value of the account above the
amount of purchase payments subject to the CDSC. In determining whether a CDSC
is payable, it is assumed that Class A shares acquired through the reinvestment
of dividends and distributions are redeemed first, and thereafter that Class A
shares that have been held by an investor for the longest period of time are
redeemed first.

     The Class A CDSC does not apply to Class A shares of the Money Market Fund
or to certain purchases of Class A shares of the California Intermediate
Municipal Bond, California Municipal Bond, Low Duration, New York Municipal
Bond, Short Duration Municipal Income and Short-Term Funds described above under
"Initial Sales Charge--Class A Shares." However, if Class A shares of these
Funds are purchased in a transaction that, for any other Fund, would be subject
to the CDSC (i.e., a purchase of $1,000,000 or more) and are subsequently
exchanged for Class A shares of any other Fund, a Class A CDSC will apply to the
shares of the Fund(s) acquired by exchange for a period of 18 months from the
date of the exchange.

     The Class A CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements--Waiver of
Contingent Deferred Sales Charges." For more information about the Class A CDSC,
call the Distributor at 1-800-426-0107.

     The manner of calculating the CDSC on Class A shares purchased after
December 31, 2001 will change at the same time and in the same manner as the
change to the Class B CDSC calculation described below under "Changes to CDSC
Calculation."

Participating Brokers. Investment dealers and other financial intermediaries
provide varying arrangements for their clients to purchase and redeem Fund
shares. Some may establish higher minimum investment requirements than set forth
above. Firms may arrange with their clients for other investment or
administrative services and may independently establish and charge transaction
fees and/or other additional amounts to their clients for such services, which
charges would reduce clients' return. Firms also may hold Fund shares in nominee
or street name as agent for and on behalf of their customers. In such instances,
the Trust's transfer agent will have no information with respect to or control
over accounts of specific shareholders. Such shareholders may obtain access to
their accounts and information about their accounts only from their broker. In
addition, certain privileges with respect to the purchase and redemption of
shares or the reinvestment of dividends may not be available through such firms.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing including,

                                      SG-20



without limitation, transfers of registration and dividend payee changes; and
may perform functions such as generation of confirmation statements and
disbursement of cash dividends. This Guide and the Retail Prospectuses should be
read in connection with such firms' material regarding their fees and services.

     For Class A shares outstanding for one year or more, the Distributor may
also pay participating brokers annual servicing fees of 0.25% of the net asset
value of such shares.

Deferred Sales Charge Alternative--Class B Shares

     Class B shares are sold at their current net asset value without any
initial sales charge. The full amount of an investor's purchase payment will be
invested in shares of the Fund(s) selected. A CDSC will be imposed on Class B
shares if an investor redeems an amount which causes the current value of the
investor's account for a Fund to fall below the total dollar amount of purchase
payments subject to the CDSC, except that no CDSC is imposed if the shares
redeemed have been acquired through the reinvestment of dividends or capital
gains distributions or if the amount redeemed is derived from increases in the
value of the account above the amount of purchase payments subject to the CDSC.
The method of calculating the CDSC on Class B shares purchased after December
31, 2001, is expected to change. For a description of this change, see "Changes
to CDSC Calculation" below.

     Class B shares of the Short-Term Fund and the Money Market Fund are not
offered for initial purchase but may be obtained through exchanges of Class B
shares of other Funds. See "Exchange Privilege" below. Class B shares are not
available for purchase by employer sponsored retirement plans.

     Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the CDSC according to the following
schedule:

     Years Since Purchase                        Percentage Contingent
     Payment was Made                            Deferred Sales Charge
     ----------------                            ---------------------
     First                                                 5
     Second                                                4
     Third                                                 3
     Fourth                                                3
     Fifth                                                 2
     Sixth                                                 1
     Seventh and thereafter                                0*

     *    After the seventh year, Class B shares purchased on or before December
          31, 2001 convert into Class A shares as described below. Class B
          shares purchased after December 31, 2001 convert into Class A shares
          after the eighth year.

                                      SG-21



     In determining whether a CDSC is payable, it is assumed that the purchase
payment from which a redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been fully effected.

     The following example will illustrate the current operation of the Class B
CDSC:

          Assume that an individual opens a Fund account and makes a purchase
     payment of $10,000 for Class B shares of a Fund and that six months later
     the value of the investor's account for that Fund has grown through
     investment performance and reinvestment of distributions to $11,000. The
     investor then may redeem up to $1,000 from that Fund account ($11,000 minus
     $10,000) without incurring a CDSC. If the investor should redeem $3,000
     from that Fund account, a CDSC would be imposed on $2,000 of the redemption
     (the amount by which the investor's account for the Fund was reduced below
     the amount of the purchase payment). At the rate of 5%, the Class B CDSC
     would be $100.

     In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class B shares in the
shareholder's account for the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed on a redemption of
Class B shares is paid to the Distributor.

     Class B shares are subject to higher distribution fees than Class A shares
for a fixed period after their purchase, after which they automatically convert
to Class A shares and are no longer subject to such higher distribution fees.
Class B shares of each Fund automatically convert into Class A shares after they
have been held for seven years (eight years for Class B shares purchased after
December 31, 2001).

     For sales of Class B shares made and services rendered to Class B
shareholders, the Distributor intends to make payments to participating brokers,
at the time a shareholder purchases Class B shares, of 4.00% of the purchase
amount for each of the Funds. For Class B shares outstanding for one year or
more, the Distributor may also pay participating brokers annual servicing fees
of 0.25% of the net asset value of such shares. During such periods as may from
time to time be designated by the Distributor, the Distributor will pay selected
participating brokers an additional amount of up to .50% of the purchase price
on sales of Class B shares of all or selected Funds purchased to each
participating broker which obtains purchase orders in amounts exceeding
thresholds established from time to time by the Distributor.

     The Class B CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements --Waiver of
Contingent Deferred Sales Charges." For more information about the Class B CDSC,
call the Distributor at 1-800-426-0107.

Changes to CDSC Calculation. The Trust expects that the manner of calculating
the CDSC on Class B and Class C shares (and where applicable, Class A shares)
purchased after December 31, 2001, will change from that described above. The
Trust will provide shareholders with at least

                                      SG-22



60 days' notice prior to implementing the change. When the Trust implements the
change, the CDSC on all shares purchased after December 31, 2001, will be
subject to the change, not only shares purchased after the date of such notice.
It is expected that the change will be implemented no later than January 1,
2008.

     Under the new calculation method, the following rules will apply:

     .    Shares acquired through the reinvestment of dividends or capital gains
          distributions will be redeemed first and will not be subject to any
          CDSC.

     .    For the redemption of all other shares, the CDSC will be based on
          either the shareholder's original purchase price or the then current
          net asset value of the shares being sold, whichever is lower.

     .    CDSCs will be deducted from the proceeds of the shareholder's
          redemption, not from amounts remaining in the shareholder's account.

     .    In determining whether a CDSC is payable, it is assumed that the
          purchase payment from which the redemption is made is the earliest
          purchase for shares of such class remaining in the shareholder's
          account from which a redemption or exchange has not already been
          effected.

The following example illustrates the operation of the Class B CDSC using this
anticipated change in methodology:

          Assume that an individual opens an account and makes a purchase
          payment of $10,000 for 1,000 Class B shares of a Fund (at $10 per
          share) and that six months later the value of the investor's account
          for that Fund has grown through investment performance to $11,000 ($11
          per share). If the investor should redeem $2,200 (200 shares), a CDSC
          would be applied against $2,000 of the redemption (the purchase price
          of the shares redeemed, because the purchase price is lower than the
          current net asset value of such shares ($2,200)). At the rate of 5%,
          the Class B CDSC would be $100.

In determining whether an amount is available for redemption without incurring a
CDSC, the purchase payments made for all shares of a particular class of a Fund
in the shareholder's account are aggregated, and the current value of all such
shares is aggregated.

Except as otherwise disclosed herein or in the appropriate Prospectus(es),
shares that are received in an exchange will be subject to a CDSC to the same
extent as the shares exchanged. Class C shares received in exchange for Class C
shares with a different CDSC period will have the same CDSC period as the shares
exchanged.

Conversion of Class B Shares Purchased Through Reinvestment of Distributions.
For purposes of determining the date on which Class B shares convert into Class
A shares, a Class B share purchased through the reinvestment of dividends or
capital gains distributions (a "Distributed Share") will be considered to have
been purchased on the purchase date (or deemed purchase date) of the Class B
share through which such Distributed Share was issued.

                                      SG-23



Asset Based Sales Charge Alternative--Class C Shares

     Class C shares are sold at their current net asset value without any
initial sales charge, except that, beginning during the first quarter of 2002,
Class C shares of the Global Innovation, RCM Emerging Markets, RCM Europe, RCM
Global Equity, RCM Global Healthcare, RCM Global Small-Cap, RCM Global
Technology and RCM International Growth Equity Funds (as noted previously, for
administrative convenience, sometimes referred to as "Class CII" shares) will be
subject to a 1% initial sales charge. A CDSC is imposed on Class C shares if an
investor redeems an amount which causes the current value of the investor's
account for a Fund to fall below the total dollar amount of purchase payments
subject to the CDSC, except that no CDSC is imposed if the shares redeemed have
been acquired through the reinvestment of dividends or capital gains
distributions or if the amount redeemed is derived from increases in the value
of the account above the amount of purchase payments subject to the CDSC. All of
an investor's purchase payments are invested in shares of the Fund(s) selected.

     Whether a CDSC is imposed and the amount of the CDSC will depend on the
number of years since the investor made a purchase payment from which an amount
is being redeemed. Purchases are subject to the CDSC according to the following
schedule:

     Years Since Purchase                        Percentage Contingent
     Payment was Made                            Deferred Sales Charge
     ----------------                            ---------------------

     First*                                                1
     Thereafter                                            0

     *    Class CII shares are subject to the Class C CDSC for the first
          eighteen months after purchase.

     In determining whether a CDSC is payable, it is assumed that the purchase
payment from which the redemption is made is the earliest purchase payment from
which a redemption or exchange has not already been effected.

     The following example will illustrate the operation of the Class C CDSC:

     Assume that an individual opens a Fund account and makes a purchase payment
of $10,000 for Class C shares of a Fund and that six months later the value of
the investor's account for that Fund has grown through investment performance
and reinvestment of distributions to $11,000. The investor then may redeem up to
$1,000 from that Fund account ($11,000 minus $10,000) without incurring a CDSC.
If the investor should redeem $3,000 from that Fund account, a CDSC would be
imposed on $2,000 of the redemption (the amount by which the investor's account
for the Fund was reduced below the amount of the purchase payment). At the rate
of 1%, the Class C CDSC would be $20.

     In determining whether an amount is available for redemption without
incurring a CDSC, the purchase payments made for all Class C shares in the
shareholder's account for the particular Fund are aggregated, and the current
value of all such shares is aggregated. Any CDSC imposed

                                      SG-24



on a redemption of Class C shares is paid to the Distributor. Unlike Class B
shares, Class C shares do not automatically convert to any other class of shares
of the Funds.

     The manner of calculating the CDSC on Class C shares purchased after
December 31, 2001 will change at the same time and in the same manner as the
change to the Class B CDSC described above under "Changes to CDSC Calculation."

     Except as described below, for sales of Class C shares made and services
rendered to Class C shareholders, the Distributor expects to make payments to
participating brokers, at the time the shareholder purchases Class C shares, of
1.00% (representing .75% distribution fees and .25% servicing fees) of the
purchase amount for all Funds, except the Low Duration, Money Market, Municipal
Bond, Real Return, Short Duration Municipal Income, Short-Term and StocksPLUS
Funds. For the Low Duration, Municipal Bond, Real Return and StocksPLUS Funds,
the Distributor expects to make payments of .75% (representing .50% distribution
fees and .25% service fees); for the Short Duration Municipal Income and
Short-Term Funds, the Distributor expects to make payments of .55% (representing
 .30% distribution fees and .25% service fees); and for the Money Market Fund,
the Distributor expects to make no payment. For sales of Class C shares made to
participants making periodic purchases of not less than $50 through certain
employer sponsored savings plans which are clients of a broker-dealer with which
the Distributor has an agreement with respect to such purchases, no payments are
made at the time of purchase. During such periods as may from time to time be
designated by the Distributor, the Distributor will pay an additional amount of
up to .50% of the purchase price on sales of Class C shares of all or selected
Funds purchased to each participating broker which obtains purchase orders in
amounts exceeding thresholds established from time to time by the Distributor.

     In addition, for sales of Class C shares made and services rendered to
Class C shareholders, the Distributor expects to make annual payments to
participating brokers as follows:
----------------------------------------------------------------------------------------------------------------------
           Fund                                 Annual                          Annual                       Total
                                                Service Fee*                    Distribution Fee*
----------------------------------------------------------------------------------------------------------------------
Low Duration,  Real                             0.25%                           0.45%                        0.70%
Return, Municipal Bond and
Stock PLUS Funds
----------------------------------------------------------------------------------------------------------------------
Short-Term and Short                            0.25%                           0.25%                        0.50%
Duration Municipal Income
Funds
----------------------------------------------------------------------------------------------------------------------
Money Market Fund                               0.10%                           0.00%                        0.10%
----------------------------------------------------------------------------------------------------------------------
Funds with Class CII shares**                   0.25%                           0.75%                        1.00%
----------------------------------------------------------------------------------------------------------------------
All other Funds                                 0.25%                           0.65%                        0.90%
----------------------------------------------------------------------------------------------------------------------

     * Paid with respect to shares outstanding for one year or more so long as
such shares remain outstanding, and calculated as a percentage of the net asset
value of such shares.

     ** For Class C shares of these Funds sold without an initial sales charge,
the Distributor will make payments to brokers at the rates set forth under "All
other Funds."

                                      SG-25



     The Class C CDSC is currently waived in connection with certain redemptions
as described above under "Alternative Purchase Arrangements--Waiver of
Contingent Deferred Sales Charges." For more information about the Class C CDSC,
contact the Distributor at 1-800-426-0107.

     As noted above, Class CII shares are subject to a 1% initial sales charge.
The Distributor receives the total amount of the Class C initial sales charge,
but may elect to reallow all or a portion of the sales charge to participating
brokers. In addition, the Distributor may enter into agreements with brokers and
dealers whereby, among other things, such brokers and dealers would not impose
an initial sales charge on Class CII shares, which would otherwise be subject to
such initial sales charge. Such agreements would also provide that such shares
would be subject to a CDSC for one year only, not the eighteen month period
otherwise applicable to Class CII shares.

     The sales charges discussed in this section are subject to change by means
of a new or supplemented Prospectus or Shareholders' Guide. Unless otherwise
noted, a change to a sales charge will not apply to shares purchased prior to
the effective date of the change.

     Exchange Privilege

     Except with respect to exchanges for shares of Funds for which sales may be
suspended to new investors or as provided in the applicable Retail Prospectus or
in this Guide, a shareholder may exchange Class A, Class B and Class C shares of
any Fund for the same Class of shares of any other Fund in an account with
identical registration on the basis of their respective net asset values (except
that a sales charge will apply on exchanges of Class A shares of the Money
Market Fund on which no sales charge was paid at the time of purchase.) Class A
shares of the Money Market Fund may be exchanged for Class A shares of any other
Fund, but the usual sales charges applicable to investments in such other Fund
apply on shares for which no sales charge was paid at the time of purchase.
There are currently no exchange fees or charges. All exchanges are subject to
the $2,500 minimum initial purchase requirement for each Fund, except with
respect to tax-qualified programs and exchanges effected through the PIMCO Funds
Auto-Exchange plan. An exchange will constitute a taxable sale for federal
income tax purposes.

     Investors who maintain their account with the Distributor may exchange
shares by a written exchange request sent to PIMCO Funds Distributors LLC, P.O.
Box 9688, Providence, RI 02940-0926 or, unless the investor has specifically
declined telephone exchange privileges on the account application or elected in
writing not to utilize telephone exchanges, by a telephone request to the
Distributor at 1-800-426-0107. Each Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and may be
liable for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions. Exchange forms are available from the Distributor at
1-800-426-0107 and may be used if there will be no change in the registered name
or address of the shareholder.

                                      SG-26



Changes in registration information or account privileges may be made in writing
to the Transfer Agent, PFPC, Inc., P.O. Box 9688, Providence, RI 02940-0926, or
by use of forms which are available from the Distributor. A signature guarantee
is required. See "How to Buy Shares--Signature Guarantee." Telephone exchanges
may be made between 9:00 a.m., Eastern time and the close of regular trading
(normally 4:00 p.m., Eastern time) on the New York Stock Exchange on any day the
Exchange is open (generally weekdays other than normal holidays).

     The Trusts reserve the right to refuse exchange purchases if, in the
judgment of an Adviser or a Fund's sub-adviser, such purchase or other activity
would adversely affect a Fund and its shareholders. In particular, a pattern of
transactions characteristic of "market-timing" strategies may be deemed by an
Adviser to be detrimental to a Trust or a particular Fund. Currently, each Trust
limits the number of "round trip" exchanges an investor may make. An investor
makes a "round trip" exchange when the investor purchases shares of a particular
Fund, subsequently exchanges those shares for shares of a different PIMCO Fund,
and then exchanges back into the originally purchased Fund. The Trusts have the
right to refuse any exchange for any investor who completes (by making the
exchange back into the shares of the originally purchased Fund) more than six
round trip exchanges in any twelve-month period. Although the Trusts have no
current intention of terminating or modifying the exchange privilege other than
as set forth in the preceding sentence, each reserves the right to do so at any
time. Except as otherwise permitted by the Securities and Exchange Commission,
each Trust will give 60 days' advance notice to shareholders of any termination
or material modification of the exchange privilege. For further information
about exchange privileges, contact your participating broker or call the
Distributor at 1-800-426-0107.

     With respect to Class B and Class C shares, or Class A shares subject to a
CDSC, if less than all of an investment is exchanged out of a Fund, any portion
of the investment attributable to capital appreciation and/or reinvested
dividends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in the Fund
from which the exchange was made.

     With respect to shares purchased after December 31, 2001, effective as of
the change in the manner by which the Class A, Class B and Class C CDSCs are
calculated (as described above under "Changes to CDSC Calculation"), if less
than all of an investor's shares subject to a CDSC are exchanged out of a Fund,
any portion of the investment in such class of shares attributable to reinvested
dividends or capital gains distributions will be exchanged first, and thereafter
any portions exchanged will be from the earliest investment made in such class
of shares of the Fund from which the exchange was made.

     Shareholders should take into account the effect of any exchange on the
applicability of any CDSC that may be imposed upon any subsequent redemption.

     Investors may also select the PIMCO Funds Auto-Exchange plan which
establishes automatic periodic exchanges. For further information on automatic
exchanges see "How to Buy Shares--PIMCO Funds Auto-Exchange" above.

                                      SG-27



     How to Redeem

     Class A, Class B or Class C shares may be redeemed through a participating
broker, by telephone, by submitting a written redemption request directly to the
Transfer Agent (for non-broker accounts) or through an Automatic Withdrawal Plan
or PIMCO Funds Fund Link.

     A CDSC may apply to a redemption of Class A, Class B or Class C shares. See
"Alternative Purchase Arrangements" above. Shares are redeemed at their net
asset value next determined after a redemption request has been received as
described below, less any applicable CDSC. There is no charge by the Distributor
(other than an applicable CDSC) with respect to a redemption; however, a
participating broker who processes a redemption for an investor may charge
customary commissions for its services (which may vary). Dealers and other
financial services firms are obligated to transmit orders promptly. Requests for
redemption received by dealers or other firms prior to the close of regular
trading (normally 4:00 p.m., Eastern time) on the New York Stock Exchange on a
regular business day and received by the Distributor prior to the close of the
Distributor's business day will be confirmed at the net asset value effective at
the closing of the Exchange on that day, less any applicable CDSC.

     Other than an applicable CDSC, a shareholder will not pay any special fees
or charges to the Trust or the Distributor when the shareholder sells his or her
shares. However, if a shareholder sells his or her shares through their broker,
dealer or other financial intermediary, that firm may charge the shareholder a
commission or other fee for processing the shareholder's redemption request.

     Redemptions of Fund shares may be suspended when trading on the New York
Stock Exchange is restricted or during an emergency which makes it impracticable
for the Funds to dispose of their securities or to determine fairly the value of
their net assets, or during any other period as permitted by the Securities and
Exchange Commission for the protection of investors. Under these and other
unusual circumstances, the Trust may suspend redemptions or postpone payments
for more than seven days, as permitted by law.

Direct Redemption

     A shareholder's original account application permits the shareholder to
redeem by written request and by telephone (unless the shareholder specifically
elects not to utilize telephone redemptions) and to elect one or more of the
additional redemption procedures described below. A shareholder may change the
instructions indicated on his original account application, or may request
additional redemption options, only by transmitting a written direction to the
Transfer Agent. Requests to institute or change any of the additional redemption
procedures will require a signature guarantee.

     Redemption proceeds will normally be mailed to the redeeming shareholder
within seven days or, in the case of wire transfer or Fund Link redemptions,
sent to the designated bank account within one business day. Fund Link
redemptions may be received by the bank on the second or third business day. In
cases where shares have recently been purchased by personal

                                      SG-28



check, redemption proceeds may be withheld until the check has been collected,
which may take up to 15 days. To avoid such withholding, investors should
purchase shares by certified or bank check or by wire transfer.

Written Requests

     To redeem shares in writing (whether or not represented by certificates), a
shareholder must send the following items to the Transfer Agent, PFPC, Inc.,
P.O. Box 9688, Providence, RI 02940-0926:

(1)  a written request for redemption signed by all registered owners exactly as
     the account is registered on the Transfer Agent's records, including
     fiduciary titles, if any, and specifying the account number and the dollar
     amount or number of shares to be redeemed;

(2)  for certain redemptions described below, a guarantee of all signatures on
     the written request or on the share certificate or accompanying stock
     power, if required, as described under "How to Buy Shares--Signature
     Guarantee";

(3)  any share certificates issued for any of the shares to be redeemed (see
     "Certificated Shares" below); and

(4)  any additional documents which may be required by the Transfer Agent for
     redemption by corporations, partnerships or other organizations, executors,
     administrators, trustees, custodians or guardians, or if the redemption is
     requested by anyone other than the shareholder(s) of record.

     Transfers of shares are subject to the same requirements. A signature
guarantee is not required for a redemption requested by and payable to all
shareholders of record for the account that is to be sent to the address of
record for that account. To avoid delay in redemption or transfer, shareholders
having any questions about these requirements should contact the Transfer Agent
in writing or call the Distributor at 1-800-426-0107 before submitting a
request. Redemption or transfer requests will not be honored until all required
documents have been completed by the shareholder and received by the Transfer
Agent. This redemption option does not apply to shares held in broker "street
name" accounts. Shareholders whose shares are held in broker "street name"
accounts must redeem through their broker.

     If the proceeds of the redemption (i) are to be paid to a person other than
the record owner, (ii) are to be sent to an address other than the address of
the account on the Transfer Agent's records or (iii) are to be paid to a
corporation, partnership, trust or fiduciary, the signature(s) on the redemption
request and on the certificates, if any, or stock power must be guaranteed as
described above, except that the Distributor may waive the signature guarantee
requirement for redemptions up to $2,500 by a trustee of a qualified retirement
plan, the administrator for which has an agreement with the Distributor.

                                      SG-29



Telephone Redemptions

     Each Trust accepts telephone requests for redemption of uncertificated
shares, except for investors who have specifically declined telephone redemption
privileges on the account application or elected in writing not to utilize
telephone redemptions. The proceeds of a telephone redemption will be sent to
the record shareholder at his record address. Changes in account information
must be made in a written authorization with a signature guarantee. See "How to
Buy Shares--Signature Guarantee." Telephone redemptions will not be accepted
during the 30-day period following any change in an account's record address.
This redemption option does not apply to shares held in broker "street name"
accounts. Shareholders whose shares are held in broker "street name" accounts
must redeem through their broker.

     By completing an account application, an investor agrees that the
applicable Trust, the Distributor and the Transfer Agent shall not be liable for
any loss incurred by the investor by reason of the Trust accepting unauthorized
telephone redemption requests for his account if the Trust reasonably believes
the instructions to be genuine. Thus, shareholders risk possible losses in the
event of a telephone redemption not authorized by them. Each Trust may accept
telephone redemption instructions from any person identifying himself as the
owner of an account or the owner's broker where the owner has not declined in
writing to utilize this service. Each Trust will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, and may be
liable for any losses due to unauthorized or fraudulent instructions if it fails
to employ such procedures. Each Trust will require a form of personal
identification prior to acting on a caller's telephone instructions, will
provide written confirmations of such transactions and will record telephone
instructions.

     A shareholder making a telephone redemption should call the Distributor at
1-800-426-0107 and state (i) the name of the shareholder as it appears on the
Transfer Agent's records, (ii) his account number with the Trust, (iii) the
amount to be withdrawn and (iv) the name of the person requesting the
redemption. Usually the proceeds are sent to the investor on the next Trust
business day after the redemption is effected, provided the redemption request
is received prior to the close of regular trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange that day. If the redemption request is
received after the close of the New York Stock Exchange, the redemption is
effected on the following Trust business day at that day's net asset value and
the proceeds are usually sent to the investor on the second following Trust
business day. Each Trust reserves the right to terminate or modify the telephone
redemption service at any time. During times of severe disruptions in the
securities markets, the volume of calls may make it difficult to redeem by
telephone, in which case a shareholder may wish to send a written request for
redemption as described under "Written Requests" above. Telephone communications
may be recorded by the Distributor or the Transfer Agent.

Fund Link Redemptions

                                      SG-30



     If a shareholder has established Fund Link, the shareholder may redeem
shares by telephone and have the redemption proceeds sent to a designated
account at a financial institution. Fund Link is normally established within 45
days of receipt of a Fund Link application by the Transfer Agent. To use Fund
Link for redemptions, call the Distributor at 1-800-426-0107. Subject to the
limitations set forth above under "Telephone Redemptions," the Distributor, a
Trust and the Transfer Agent may rely on instructions by any registered owner
believed to be genuine and will not be responsible to any shareholder for any
loss, damage or expense arising out of such instructions. Requests received by
the Transfer Agent prior to the close of regular trading (normally 4:00 p.m.,
Eastern time) on the New York Stock Exchange on a business day will be processed
at the net asset value on that day and the proceeds (less any CDSC) will
normally be sent to the designated bank account on the following business day
and received by the bank on the second or third business day. If the redemption
request is received after the close of regular trading on the New York Stock
Exchange, the redemption is effected on the following business day. Shares
purchased by check may not be redeemed through Fund Link until such shares have
been owned (i.e., paid for) for at least 15 days. Fund Link may not be used to
redeem shares held in certificated form.

     Changes in bank account information must be made by completing a new Fund
Link application, signed by all owners of record of the account, with all
signatures guaranteed. See "How to Buy Shares--Signature Guarantee." See "How to
Buy Shares--PIMCO Funds Fund Link" for information on establishing the Fund Link
privilege. Either Trust may terminate the Fund Link program at any time without
notice to its shareholders. This redemption option does not apply to shares held
in broker "street name" accounts. Shareholders whose shares are held in broker
"street name" accounts must redeem through their broker.

PIMCO Funds Automated Telephone System

     PIMCO Funds Automated Telephone System ("ATS") is an automated telephone
system that enables shareholders to perform a number of account transactions
automatically using a touch-tone telephone. ATS may be used on
already-established Fund accounts after the shareholder obtains a Personal
Identification Number (PIN) by calling the special ATS number: 1-800-223-2413.

Purchasing Shares. A shareholder may purchase shares by telephone by calling
1-800-223-2413. A shareholder must have established ATS privileges to link the
shareholder's bank account with the Fund to pay for these purchases.

Exchanging Shares. With the PIMCO Funds Exchange Privilege, a shareholder can
exchange shares automatically by telephone from the shareholder's Fund Link
Account to another PIMCO Funds account the shareholder has already established
by calling 1-800-223-2413. Please refer to "Exchange Privilege" for details.

Redemptions. A shareholder may redeem shares by telephone automatically by
calling 1-800-223-2413 and the Fund will send the proceeds directly to the
shareholder's Fund bank account. Please refer to "How to Redeem" for details.

                                      SG-31



Expedited Wire Transfer Redemptions

     If a shareholder has given authorization for expedited wire redemption,
shares can be redeemed and the proceeds sent by federal wire transfer to a
single previously designated bank account. Requests received by a Trust prior to
the close of the New York Stock Exchange will result in shares being redeemed
that day at the next determined net asset value (less any CDSC). Normally the
proceeds will be sent to the designated bank account the following business day.
The bank must be a member of the Federal Reserve wire system. Delivery of the
proceeds of a wire redemption request may be delayed by the applicable Trust for
up to 7 days if the Distributor deems it appropriate under then current market
conditions. Once authorization is on file with a Trust, such Trust will honor
requests by any person identifying himself as the owner of an account or the
owner's broker by telephone at 1-800-426-0107 or by written instructions. A
Trust cannot be responsible for the efficiency of the Federal Reserve wire
system or the shareholder's bank. Neither Trust currently charges for wire
transfers. The shareholder is responsible for any charges imposed by the
shareholder's bank. The minimum amount that may be wired is $2,500. Each Trust
reserves the right to change this minimum or to terminate the wire redemption
privilege. Shares purchased by check may not be redeemed by wire transfer until
such shares have been owned (i.e., paid for) for at least 15 days. Expedited
wire transfer redemptions may be authorized by completing a form available from
the Distributor. Wire redemptions may not be used to redeem shares in
certificated form. To change the name of the single bank account designated to
receive wire redemption proceeds, it is necessary to send a written request with
signatures guaranteed to PIMCO Funds Distributors LLC, P.O. Box 9688,
Providence, RI 02940-0926. See "How to Buy Shares--Signature Guarantee." This
redemption option does not apply to shares held in broker "street name"
accounts. Shareholders whose shares are held in broker "street name" accounts
must redeem through their broker.

Certificated Shares

     To redeem shares for which certificates have been issued, the certificates
must be mailed to or deposited with the applicable Trust, duly endorsed or
accompanied by a duly endorsed stock power or by a written request for
redemption. Signatures must be guaranteed as described under "How to Buy
Shares--Signature Guarantee." Further documentation may be requested from
institutions or fiduciary accounts, such as corporations, custodians (e.g.,
under the Uniform Gifts to Minors Act), executors, administrators, trustees or
guardians ("institutional account owners"). The redemption request and stock
power must be signed exactly as the account is registered, including indication
of any special capacity of the registered owner.

Automatic Withdrawal Plan

     An investor who owns or buys shares of a Fund having a net asset value of
$10,000 or more may open an Automatic Withdrawal Plan and have a designated sum
of money (not less than $100 per Fund) paid monthly (or quarterly) to the
investor or another person. Such a plan may be established by completing the
appropriate section of the account application or by obtaining an Automatic
Withdrawal Plan application from the Distributor or your broker. If an

                                      SG-32



     Automatic Withdrawal Plan is set up after the account is established
providing for payment to a person other than the record shareholder or to an
address other than the address of record, a signature guarantee is required. See
"How to Buy Shares--Signature Guarantee." In the case of Uniform Gifts to Minors
or Uniform Transfers to Minors accounts, the application must state that the
proceeds will be for the beneficial interest of the minor. Class A, Class B and
Class C shares of any Fund are deposited in a plan account and all distributions
are reinvested in additional shares of the particular class of the Fund at net
asset value. Shares in a plan account are then redeemed at net asset value (less
any applicable CDSC) to make each withdrawal payment. Any applicable CDSC may be
waived for certain redemptions under an Automatic Withdrawal Plan. See
"Alternative Purchase Arrangements--Waiver of Contingent Deferred Sales
Charges."

     Redemptions for the purpose of withdrawals are ordinarily made on the
business day selected by the investor at that day's closing net asset value.
Checks are normally mailed on the following business day. If the date selected
by the investor falls on a weekend or holiday, the Transfer Agent will normally
process the redemption on the preceding business day. Payment will be made to
any person the investor designates; however, if the shares are registered in the
name of a trustee or other fiduciary, payment will be made only to the
fiduciary, except in the case of a profit-sharing or pension plan where payment
will be made to the designee. As withdrawal payments may include a return of
principal, they cannot be considered a guaranteed annuity or actual yield of
income to the investor. The redemption of shares in connection with an Automatic
Withdrawal Plan may result in a gain or loss for tax purposes. Continued
withdrawals in excess of income will reduce and possibly exhaust invested
principal, especially in the event of a market decline. The maintenance of an
Automatic Withdrawal Plan concurrently with purchases of additional shares of
the Fund would be disadvantageous to the investor because of the CDSC that may
become payable on such withdrawals in the case of Class A, Class B or Class C
shares and because of the initial sales charge in the case of Class A and Class
C shares. For this reason, the minimum investment accepted for a Fund while an
Automatic Withdrawal Plan is in effect for that Fund is $1,000, and an investor
may not maintain a plan for the accumulation of shares of the Fund (other than
through reinvestment of distributions) and an Automatic Withdrawal Plan at the
same time. The Trust or the Distributor may terminate or change the terms of the
Automatic Withdrawal Plan at any time.

     Because the Automatic Withdrawal Plan may involve invasion of capital,
investors should consider carefully with their own financial advisers whether
the plan and the specified amounts to be withdrawn are appropriate in their
circumstances. The Trust and the Distributor make no recommendations or
representations in this regard.

Redemptions In Kind

     Each Trust agrees to redeem shares of its Funds solely in cash up to the
lesser of $250,000 or 1% of the Fund's net assets during any 90-day period for
any one shareholder. In consideration of the best interests of the remaining
shareholders, each Trust reserves the right to pay any redemption proceeds
exceeding this amount in whole or in part by a distribution in kind of
securities held by a Fund in lieu of cash. Except for Funds with a tax-efficient
management

                                      SG-33



strategy, it is highly unlikely that shares would ever be redeemed in kind. When
shares are redeemed in kind, the redeeming shareholder should expect to incur
transaction costs upon the disposition of the securities received in the
distribution.

                                      SG-34



PIMCO Funds

PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT  06902-6896
1-800-426-0107


                                      SG-35