[Federal Register Volume 79, Number 170 (Wednesday, September 3, 2014)]
[Notices]
[Pages 52385-52403]
[FR Doc No: 2014-20874]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72937; File No. SR-NYSEArca-2014-89]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of Shares
of Eight PIMCO Exchange-Traded Funds Under NYSE Arca Equities Rule
8.600

August 27, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on August 15, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): PIMCO
StocksPLUS[supreg] Absolute Return Exchange-Traded Fund, PIMCO Small
Cap StocksPLUS[supreg] AR Strategy Exchange-Traded Fund, PIMCO
Fundamental IndexPLUS[supreg] AR Exchange-Traded Fund, PIMCO Small
Company Fundamental IndexPLUS[supreg] AR Strategy Exchange-Traded Fund,
PIMCO EM Fundamental IndexPLUS[supreg] AR Strategy Exchange-Traded
Fund, PIMCO International Fundamental IndexPLUS[supreg] AR Strategy
Exchange-Traded Fund, PIMCO EM StocksPLUS[supreg] AR Strategy Exchange-
Traded Fund, and PIMCO International StocksPLUS[supreg] AR Strategy
Exchange-Traded Fund (Unhedged). The text of the proposed rule change
is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change

and discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600,\4\ which governs the
listing and trading of Managed Fund Shares: \5\ PIMCO
StocksPLUS[supreg] Absolute Return Exchange-Traded Fund (``StocksPLUS
AR Fund''), PIMCO Small Cap StocksPLUS[supreg] AR Strategy Exchange-
Traded Fund (``Small Cap StocksPLUS AR Fund''), PIMCO Fundamental
IndexPLUS[supreg] AR Exchange-Traded Fund (``Fundamental IndexPLUS
Fund''), PIMCO Small Company Fundamental IndexPLUS[supreg] AR Strategy
Exchange-Traded Fund (``Small Company Fundamental IndexPLUS Fund''),
PIMCO EM Fundamental IndexPLUS[supreg] AR Strategy Exchange-Traded Fund
(``EM Fundamental IndexPLUS Fund''), PIMCO International Fundamental
IndexPLUS[supreg] AR Strategy Exchange-Traded Fund (``International
Fundamental IndexPLUS Fund''), PIMCO EM StocksPLUS[supreg] AR Strategy
Exchange-Traded Fund (``EM StocksPLUS Fund''), and PIMCO International
StocksPLUS[supreg] AR Strategy Exchange-Traded Fund (Unhedged)
(``International StocksPLUS Fund''), each also referred to as a
``Fund'' and collectively referred to as the ``Funds.'' The Shares will
be offered by PIMCO ETF Trust (the ``Trust''), a statutory trust
organized under the laws of the State of Delaware and registered with
the Commission as an open-end management investment company.\6\
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    \4\ The Commission has previously approved the listing and
trading on the Exchange of other actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 60981
(November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-
2009-79) (order approving Exchange listing and trading of five fixed
income funds of the PIMCO ETF Trust); 66321 (February 3, 2012), 77
FR 6850 (February 9, 2012) (SR-NYSEArca-2011-95) (order approving
listing and trading of PIMCO Total Return Exchange Traded Fund);
66670 (March 28, 2012), 77 FR 20087 (April 3, 2012) (SR-NYSEArca-
2012-09) (order approving listing and trading of PIMCO Global
Advantage Inflation-Linked Bond Strategy Fund).
    \5\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
    \6\ The Trust is registered under the 1940 Act. On January 27,
2014, the Trust filed an amendment to its registration statement on
Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) (``1933
Act'') and the 1940 Act relating to the Funds (File Nos. 333-155395
and 811-22250) (the ``Registration Statement''). The description of
the operation of the Trust and the Funds herein is based, in part,
on the Registration Statement. In addition, the Commission has
issued an order granting certain exemptive relief to the Trust under
the 1940 Act. See Investment Company Act Release No. 28993 (November
10, 2009) (File No. 812-13571) (``Exemptive Order'').
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    The investment manager to the Funds will be Pacific Investment
Management Company LLC (``PIMCO'' or the ``Adviser''). Research
Affiliates, LLC (``Research Affiliates'' or the ``Sub-Adviser''), will
be the sub-adviser with respect to the Fundamental IndexPLUS Fund,
Small Company Fundamental IndexPLUS Fund, EM Fundamental IndexPLUS
Fund, and the International Fundamental IndexPLUS Fund. PIMCO
Investments LLC will serve as the distributor for the Funds
(``Distributor''). State Street Bank & Trust Co. will serve as the
custodian and transfer agent for the Funds (``Custodian'' or ``Transfer
Agent'').
    Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition,
Commentary .06 further requires that personnel who make decisions on
the open-end fund's portfolio composition must be subject to procedures
designed to prevent the use and dissemination of material nonpublic
information regarding the open-end fund's portfolio. The Adviser is not
registered as a broker-dealer, but is affiliated with a broker-dealer,
and will implement a ``fire wall'' with respect to such broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the Funds' portfolios. The Sub-Adviser is not
registered as a broker-dealer or affiliated with a broker-dealer. If
PIMCO elects to hire a sub-adviser for a Fund that is also affiliated
with a broker-dealer, such sub-adviser will implement a fire wall with
respect to such broker-dealer regarding access to information
concerning the composition and/or changes to that Fund's portfolio.
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    \7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violations, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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    In the event (a) the Adviser or Sub-Adviser becomes registered as a
broker-dealer or newly affiliated with a broker-dealer, or (b) any new
adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will implement a fire wall with
respect to its relevant personnel or its broker-dealer affiliate
regarding access to information concerning the composition and/or
changes to a portfolio, and will be subject to procedures designed to
prevent the use and dissemination of material non-public information
regarding such portfolio.
Characteristics of the Funds \8\
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    \8\ Many of the investment strategies of the Funds are
discretionary, which means that PIMCO can decide from time to time
whether to use them or not.
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    According to the Registration Statement, in selecting investments
for each Fund, PIMCO will develop an outlook for interest rates,
currency exchange rates and the economy, will analyze credit and call
risks, and will use other investment selection techniques. The
proportion of each Fund's assets committed to investment in securities
with particular characteristics (such as quality, sector, interest rate
or maturity) will vary 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.
    With respect to each Fund, in seeking to identify undervalued
currencies,

PIMCO may consider many factors, including, but not limited to, longer-
term analysis of relative interest rates, inflation rates, real
exchange rates, purchasing power parity, trade account balances and
current account balances, as well as other factors that influence
exchange rates such as flows, market technical trends and government
policies. With respect to fixed income investing, PIMCO will attempt to
identify areas of the bond market that are undervalued relative to the
rest of the market. PIMCO will identify these areas by grouping fixed
income investments into sectors such as money markets, governments,
corporates, mortgages, asset-backed and international. Sophisticated
proprietary software will then assist in evaluating sectors and pricing
specific investments. Once investment opportunities are identified,
PIMCO will shift assets among sectors depending upon changes in
relative valuations, credit spreads and other factors.
Fixed Income Instruments
    Among other investments described in more detail herein, each Fund
may invest in Fixed Income Instruments, which include:
     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; \9\
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    \9\ With respect to each Fund, while non-emerging markets
corporate debt securities (excluding commercial paper) generally
must have $100 million or more par amount outstanding and
significant par value traded to be considered as an eligible
investment for a Fund, at least 80% of issues of such securities
held by a Fund must have $100 million or more par amount outstanding
at the time of investment. See also note 25, infra, regarding
emerging market corporate debt securities.
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     mortgage-backed and other asset-backed securities; \10\
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    \10\ Mortgage-related and other asset-backed securities include
collateralized mortgage obligations (``CMOs''), commercial mortgage-
backed securities, mortgage dollar rolls, CMO residuals, stripped
mortgage-backed securities and other securities that directly or
indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. A to-be-announced
(``TBA'') transaction is a method of trading mortgage-backed
securities. In a TBA transaction, the buyer and seller agree upon
general trade parameters such as agency, settlement date, par amount
and price. The actual pools delivered generally are determined two
days prior to the settlement date.
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     inflation-indexed bonds issued both by governments and
corporations; \11\
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    \11\ Inflation-indexed bonds (other than municipal inflation-
indexed bonds and certain corporate inflation-indexed bonds) are
fixed income securities whose principal value is periodically
adjusted according to the rate of inflation (e.g., Treasury
Inflation Protected Securities (``TIPS'')). Municipal inflation-
indexed securities are municipal bonds that pay coupons based on a
fixed rate plus the Consumer Price Index for All Urban Consumers
(``CPI''). With regard to municipal inflation-indexed bonds and
certain corporate inflation-indexed bonds, the inflation adjustment
is reflected in the semi-annual coupon payment.
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     structured notes, including hybrid or ``indexed''
securities, and event-linked bonds,\12\ subject to a limitation of 20%
of a Fund's total assets invested in such instruments;
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    \12\ The Funds may obtain event-linked exposure by investing in
``event-linked bonds'' or ``event-linked swaps'' or by implementing
``event-linked strategies.'' Event-linked exposure results in gains
or losses that typically are contingent, or formulaically related to
defined trigger events. Examples of trigger events include
hurricanes, earthquakes, weather-related phenomena, or statistics
relating to such events. Some event-linked bonds are commonly
referred to as ``catastrophe bonds.'' If a trigger event occurs, a
Fund may lose a portion or its entire principal invested in the bond
or notional amount on a swap.
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     bank capital and trust preferred securities; \13\
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    \13\ There are two common types of bank capital: Tier I and Tier
II. Bank capital is generally, but not always, of investment grade
quality. Tier I securities are typically exchange-traded and often
take the form of trust preferred securities. Tier II securities are
commonly thought of as hybrids of debt and preferred stock. Tier II
securities are typically traded over-the-counter, are often
perpetual (with no maturity date), callable and, under certain
conditions, allow for the issuer bank to withhold payment of
interest until a later date. However, such deferred interest
payments generally earn interest.
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     loan participations and assignments,\14\ subject to a
limitation of 20% of a Fund's total assets invested in such
instruments;
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    \14\ 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.
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     delayed funding loans and revolving credit facilities;
     bank certificates of deposit, fixed time deposits and
bankers' acceptances;
     repurchase agreements on Fixed Income Instruments and
reverse repurchase agreements on Fixed Income Instruments; \15\
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    \15\ A repurchase agreement involves the Fund purchasing a
security from a bank or broker-dealer, which agrees to purchase the
security at the Fund's cost plus interest within a specified time.
Repurchase agreements maturing in more than seven days and which may
not be terminated within seven days at approximately the amount at
which the Fund has valued the agreements will be considered illiquid
securities. Reverse repurchase agreements, which involves the sale
of a security by the Fund and its agreement to repurchase the
instrument at a specified time and price, are subject to the Fund's
limitations on borrowings. The Fund will segregate or ``earmark''
assets determined to be liquid by PIMCO in accordance with
procedures established by the Board to cover its obligations under
reverse repurchase agreements.
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     debt securities issued by states or local governments and
their agencies, authorities and other government-sponsored enterprises
(``Municipal Bonds'');
     obligations of non-U.S. governments or their subdivisions,
agencies and government-sponsored enterprises; and
     obligations of international agencies or supranational
entities.
Use of Derivatives by the Funds
    Each Fund's investments in derivative instruments will be made in
accordance with the 1940 Act and consistent with a Fund's investment
objective and policies. With respect to each Fund, derivative
instruments will include the following: forwards; \16\ exchange-traded
and over-the-counter (``OTC'') options contracts; exchange-traded
futures contracts; exchange-traded and OTC swap agreements; exchange-
traded and OTC options on futures contracts; and OTC options on swap
agreements.\17\ 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. All investment guidelines and limitations stated
herein apply to a Fund's aggregate investment exposure to a particular
type of investment that is the subject of the guideline or limitation,
whether such exposure is obtained through direct holdings or through
derivative instruments.\18\
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    \16\ Forwards are contracts to purchase or sell securities for a
fixed price at a future date beyond normal settlement time (forward
commitments).
    \17\ In the future, in the event that there are exchange-traded
options on swaps, a Fund may invest in these instruments.
    \18\ Each Fund will seek, where possible, to use counterparties
whose financial status is such that the risk of default is reduced;
however, the risk of losses resulting from default is still
possible. PIMCO's Counterparty Risk Committee evaluates the
creditworthiness of counterparties on an ongoing basis. In addition
to information provided by credit agencies, PIMCO credit analysts
evaluate each approved counterparty using various methods of
analysis, including company visits, earnings updates, the broker-
dealer's reputation, PIMCO's past experience with the broker-dealer,
market levels for the counterparty's debt and equity, the
counterparty's liquidity and its share of market participation.
According to the Registration Statement, each Fund has adopted
procedures that are consistent with Section 18 of the 1940 Act and
related Commission guidance, which require that a fund's derivative
instruments be fully collateralized by liquid assets of the fund.
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    As described further below, each Fund will typically use derivative
instruments 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. A Fund may also use
derivative instruments to enhance

returns. To limit the potential risk associated with such transactions,
a Fund will segregate or ``earmark'' assets determined to be liquid by
PIMCO in accordance with procedures established by the Trust's Board of
Trustees (``Board'') and in accordance with the 1940 Act (or, as
permitted by applicable regulation, enter into certain offsetting
positions) to cover its obligations under derivative instruments. These
procedures have been adopted consistent with Section 18 of the 1940 Act
and related Commission guidance. In addition, each Fund will include
appropriate risk disclosure in its offering documents, including
leveraging risk. Leveraging risk is the risk that certain transactions
of a Fund, including a Fund's use of derivatives, may give rise to
leverage, causing the Fund to be more volatile than if it had not been
leveraged.\19\ Because the markets for certain securities, or the
securities themselves, may be unavailable or cost prohibitive as
compared to derivative instruments, suitable derivative transactions
may be an efficient alternative for a Fund to obtain the desired asset
exposure.
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    \19\ To mitigate leveraging risk, the Adviser will segregate or
``earmark'' liquid assets or otherwise cover the transactions that
may give rise to such risk.
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    The Adviser believes that derivatives can be an economically
attractive substitute for an underlying physical security that each
Fund would otherwise purchase. For example, a Fund could purchase
Treasury futures contracts instead of physical Treasuries or could sell
credit default protection on a corporate bond instead of buying a
physical bond. Economic benefits include potentially lower transaction
costs or attractive relative valuation of a derivative versus a
physical bond (e.g., differences in yields).
    The Adviser further believes that derivatives can be used as a more
liquid means of adjusting portfolio duration as well as targeting
specific areas of yield curve exposure, with potentially lower
transaction costs than the underlying securities (e.g., interest rate
swaps may have lower transaction costs than physical bonds). Similarly,
money market futures can be used to gain exposure to short-term
interest rates in order to express views on anticipated changes in
central bank policy rates. In addition, derivatives can be used to
protect client assets through selectively hedging downside (or ``tail
risks'') in each Fund.
    Each Fund also can use derivatives to increase or decrease credit
exposure. Index credit default swaps (CDX) can be used to gain exposure
to a basket of credit risk by ``selling protection'' against default or
other credit events, or to hedge broad market credit risk by ``buying
protection.'' Single name credit default swaps (CDS) can be used to
allow a Fund to increase or decrease exposure to specific issuers,
saving investor capital through lower trading costs. A Fund can use
total return swap contracts to obtain the total return of a reference
asset or index in exchange for paying a financing cost. A total return
swap may be much more efficient than buying underlying securities of an
index, potentially lowering transaction costs.\20\
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    \20\ The Adviser will evaluate the creditworthiness of swaps
counterparties on an ongoing basis. In addition to information
provided by credit agencies, the Adviser's analysts will evaluate
each approved counterparty using various methods of analysis, which
may include evaluation of the counterparty's liquidity in the event
of default, the broker-dealer's reputation, the Adviser's past
experience with the broker-dealer and disciplinary history and its
share of market participation.
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    The Adviser believes that the use of derivatives will allow each
Fund to selectively add diversifying sources of return from selling
options. Option purchases and sales can also be used to hedge specific
exposures in the portfolio, and can provide access to return streams
available to long-term investors such as the persistent difference
between implied and realized volatility. Option strategies can generate
income or improve execution prices (i.e., covered calls).
StocksPLUS AR Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return which exceeds the total return of its benchmark, the S&P 500
Index (the ``S&P 500'').\21\
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    \21\ The S&P 500 Index is composed of 500 selected common stocks
that represent approximately two-thirds of the total market value of
all U.S. common stocks.
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    The Fund will seek to achieve its investment objective by
investing, under normal circumstances,\22\ in S&P 500 derivatives
backed by a portfolio of Fixed Income Instruments that are managed
using an absolute return approach. In seeking total return exceeding
that of the S&P 500, or as part of the Fund's absolute return strategy
relative to fixed income investing, the Fund may invest in derivative
instruments, subject to applicable law and any other restrictions
described herein. S&P 500 derivatives may be purchased with a small
fraction of the assets that would be needed to purchase S&P 500
securities directly, so that the remainder of the Fund's assets may be
invested in Fixed Income Instruments.
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    \22\ With respect to each of the Funds, the term ``under normal
circumstances'' includes, but is not limited to, the absence of
extreme volatility or trading halts in the fixed income markets or
the financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as a systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
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    The Fund will typically seek to gain long exposure to the S&P 500
in an amount, under normal circumstances, approximately equal to the
Fund's net assets, by investing in S&P 500 derivatives. The value of
S&P 500 derivatives should closely track changes in the value of the
S&P 500. The Fund will normally use S&P 500 derivatives, instead of S&P
500 stocks, to attempt to equal or exceed the daily performance of the
S&P 500. Though the Fund will not normally invest directly in S&P 500
stocks, 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. The Fund may also invest in exchange-traded funds based
on the S&P 500, such as Standard & Poor's Depositary Receipts. The Fund
will seek to remain invested in S&P 500 derivatives or S&P 500 stocks
even when the S&P 500 is declining.
    Assets not invested in S&P 500 derivatives or S&P 500 stocks may be
invested in Fixed Income Instruments. PIMCO will actively manage the
Fixed Income Instruments held by the Fund with a view toward enhancing
the Fund's total return by using an absolute return approach. The
absolute return approach, which applies to the portion of the portfolio
not invested in S&P 500 derivatives or S&P 500 stocks, will allow the
Fund more discretion with respect to overall sector exposures, non-U.S.
exposures and credit quality, both as a function of the strategy's
investment guidelines and lack of a fixed income benchmark (i.e., the
Fund seeks total return which exceeds that of the S&P 500). The
absolute return approach will apply to the fixed income (but not the
equity index replicating) strategy of the Fund, subject to an overall
portfolio duration which will normally vary from (negative) 3 years to
positive 8 years based on PIMCO's forecast for interest rates.\23\
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    \23\ With respect to each Fund, duration is a measure 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.
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    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\24\
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    \24\ PIMCO will generally consider an instrument to be
economically tied to a non-U.S. country if the issuer is a foreign
government (or any political subdivision, agency, authority or
instrumentality of such government), or if the issuer is organized
under the laws of a non-U.S. country. In the case of certain money
market instruments, such instruments will be considered economically
tied to a non-U.S. country if either the issuer or the guarantor of
such money market instrument is organized under the laws of a non-
U.S. country. With respect to derivative instruments, PIMCO will
generally consider such instruments to be economically tied to non-
U.S. countries if the underlying assets are foreign currencies (or
baskets or indexes of such currencies), or instruments or securities
that are issued by foreign governments or issuers organized under
the laws of a non-U.S. country (or if the underlying assets are
certain money market instruments, if either the issuer or the
guarantor of such money market instruments is organized under the
laws of a non-U.S. country).

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    The Fund may invest in securities denominated in foreign currencies
and in U.S. dollar-denominated securities of foreign issuers, subject
to applicable limitations set forth herein. With respect to the Fund's
absolute return investments, the Fund will normally limit its foreign
currency exposure (from non-U.S. dollar-denominated securities or
currencies) to 20% of its total assets. With respect to the Fund's
absolute return investments, the Fund may invest up to 25% of its total
assets in securities and instruments that are economically tied to
emerging market countries.\25\
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    \25\ PIMCO will generally consider an instrument to be
economically tied to an emerging market country if the security's
``country of exposure'' is an emerging market country, as determined
by the criteria set forth in the Registration Statement.
Alternatively, such as when a ``country of exposure'' is not
available or when PIMCO believes the following tests more accurately
reflect which country the security is economically tied to, PIMCO
may consider an instrument to be economically tied to an emerging
market country if the issuer or guarantor is a government of an
emerging market country (or any political subdivision, agency,
authority or instrumentality of such government), if the issuer or
guarantor is organized under the laws of an emerging market country,
or if the currency of settlement of the security is a currency of an
emerging market country. With respect to derivative instruments,
PIMCO will generally consider such instruments to be economically
tied to emerging market countries if the underlying assets are
currencies of emerging market countries (or baskets or indices of
such currencies), or instruments or securities that are issued or
guaranteed by governments of emerging market countries or by
entities organized under the laws of emerging market countries.
PIMCO will have broad discretion to identify countries that it would
consider to qualify as emerging markets. In making investments in
emerging market securities, the Fund will emphasize those countries
with relatively low gross national product per capita and with the
potential for rapid economic growth. Emerging market countries are
generally located in Asia, Africa, the Middle East, Latin America
and Eastern Europe. PIMCO will select the 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, legal and political developments and
any other specific factors it believes to be relevant. While
emerging markets corporate debt securities (excluding commercial
paper) generally must have $200 million or more par amount
outstanding and significant par value traded to be considered as an
eligible investment for each of the Funds, at least 80% of issues of
such securities held by a Fund must have $200 million or more par
amount outstanding at the time of investment.
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    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis \26\ and invest in foreign currency
futures contracts and exchange-traded and OTC options contracts. 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.
---------------------------------------------------------------------------

    \26\ With respect to each of the Funds, 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, would reduce 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. Certain foreign currency transactions may
also be settled in cash rather than the actual delivery of the
relevant currency. The effect on the value of a Fund would be
similar to selling securities denominated in one currency and
purchasing securities denominated in another currency. A contract to
sell a foreign currency would limit any potential gain which might
be realized if the value of the hedged currency increases. A Fund
will limit its investments in currencies to those currencies with a
minimum average daily foreign exchange turnover of USD $1 billion as
determined by the Bank for International Settlements (``BIS'')
Triennial Central Bank Survey. As of the most recent BIS Triennial
Central Bank Survey, at least 52 separate currencies had minimum
average daily foreign exchange turnover of USD $1 billion. For a
list of eligible BIS currencies, see www.bis.org.
---------------------------------------------------------------------------

    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward commitment
basis and may engage in short sales.\27\
---------------------------------------------------------------------------

    \27\ Each of the Funds may make short sales of securities to:
(i) offset potential declines in long positions in similar
securities, (ii) to increase the flexibility of the Fund; (iii) for
investment return; and (iv) as part of a risk arbitrage strategy.
---------------------------------------------------------------------------

StocksPLUS AR Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.\28\
---------------------------------------------------------------------------

    \28\ 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. Equity-related investments may include
investments in small-capitalization (``small-cap''), mid-
capitalization (``mid-cap'') and large-capitalization (``large-
cap'') companies. With respect to each Fund, a small-cap company
will be defined as a company with a market capitalization of up to
$1.5 billion, a mid-cap company will be defined as a company with a
market capitalization of between $1.5 billion and $10 billion and a
large-cap company will be defined as a company with a market
capitalization above $10 billion. Not more than 10% of the net
assets of a Fund in the aggregate invested in exchange-traded equity
securities shall consist of equity securities, including stocks into
which a convertible security is converted, whose principal market is
not a member of the Intermarket Surveillance Group (``ISG'') or is a
market with which the Exchange does not have a comprehensive
surveillance sharing agreement. Furthermore, not more than 10% of
the net assets of a Fund in the aggregate invested in futures
contracts or exchange-traded options contracts shall consist of
futures contracts or exchange-traded options contracts whose
principal market is not a member of ISG or is a market with which
the Exchange does not have a comprehensive surveillance sharing
agreement.
---------------------------------------------------------------------------

    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities \29\ that are not Fixed Income Instruments
and (ii) floaters and inverse floaters that are not Fixed Income
Instruments.
---------------------------------------------------------------------------

    \29\ Variable and floating rate securities pay interest at rates
that adjust whenever a specified interest rate changes or that reset
on predetermined dates (such as the last day of a month or calendar
quarter).
---------------------------------------------------------------------------

    The Fund may also invest up to 20% of its total assets in trade
claims,\30\ privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets 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. The Fund
may invest up to 20% of its total assets in bank loans.
---------------------------------------------------------------------------

    \30\ The Fund may purchase trade claims and similar obligations
or claims against companies in bankruptcy proceedings. Trade claims
are non-securitized rights of payment arising from obligations that
typically arise when vendors and suppliers extend credit to a
company by offering payment terms for products and services. If the
company files for bankruptcy, payments on these trade claims stop
and the claims are subject to compromise along with the other debts
of the company. Trade claims may be purchased directly from the
creditor or through brokers.
---------------------------------------------------------------------------

    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments, which involve, like repurchase agreements on Fixed Income
Instruments mentioned above, the Fund purchasing a security from a bank
or broker-dealer that agrees to purchase the security at the Fund's
cost plus interest within a specified time. Repurchase agreements
maturing in more than seven days and which may not be terminated within
seven days at approximately the amount at which the

Fund has valued the agreements will be considered illiquid securities.
The Fund may also, with up to 20% of its total assets, enter into
reverse repurchase agreements on instruments other than Fixed Income
Instruments, subject to the Fund's limitations on borrowings.\31\ The
Fund will segregate or ``earmark'' assets determined to be liquid by
PIMCO in accordance with procedures established by the Board to cover
its obligations under reverse repurchase agreements.
---------------------------------------------------------------------------

    \31\ With respect to each Fund, a reverse repurchase agreement
involves the sale of a security by the Fund and its agreement to
repurchase the instrument at a specified time and price.
---------------------------------------------------------------------------

Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's Investors Service, Inc.
(``Moody's''), or equivalently rated by Standard & Poor's Ratings
Services (``S&P'') or Fitch, Inc. (``Fitch''), or, if unrated,
determined by PIMCO to be of comparable quality \32\ (except that
within such limitation, the Fund may invest in mortgage-related
securities rated below B).
---------------------------------------------------------------------------

    \32\ In determining whether a security is of comparable quality,
the Adviser will consider, for example, whether the issuer of the
security has issued other rated securities; whether the obligations
under the security are guaranteed by another entity and the rating
of such guarantor (if any); whether and (if applicable) how the
security is collateralized; other forms of credit enhancement (if
any); the security's maturity date; liquidity features (if any);
relevant cash flow(s); valuation features; other structural
analysis; macroeconomic analysis; and sector or industry analysis.
---------------------------------------------------------------------------

    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
Small Cap StocksPLUS AR Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return which exceeds the total return of its benchmark, the Russell
2000 Index (the ``Russell 2000'').\33\
---------------------------------------------------------------------------

    \33\ The Russell 2000 Index is composed of 2000 of the smallest
companies in the Russell 3000 Index, which represents approximately
10% of the total market capitalization of the Russell 3000 Index.
---------------------------------------------------------------------------

    The Fund will seek to achieve its investment objective by
investing, under normal circumstances,\34\ in Russell 2000 derivatives
backed by a portfolio of Fixed Income Instruments that are managed
using an absolute return approach. In seeking total return exceeding
that of the Russell 2000, or as part of the Fund's absolute return
strategy relative to fixed income investing, the Fund may invest in
derivative instruments, subject to applicable law and any other
restrictions described herein. Russell 2000 derivatives may be
purchased with a small fraction of the assets that would be needed to
purchase Russell 2000 securities directly, so that the remainder of the
Fund's assets may be invested in Fixed Income Instruments.
---------------------------------------------------------------------------

    \34\ See supra, note 22.
---------------------------------------------------------------------------

    The Fund will typically seek to gain long exposure to the Russell
2000 in an amount, under normal circumstances, approximately equal to
the Fund's net assets, by investing in Russell 2000 derivatives. The
value of Russell 2000 derivatives should closely track changes in the
value of the Russell 2000. The Fund will normally use Russell 2000
derivatives, instead of Russell 2000 stocks, to attempt to equal or
exceed the daily performance of the Russell 2000. Though the Fund will
not normally invest directly in Russell 2000 stocks, when Russell 2000
derivatives appear to be overvalued relative to the Russell 2000, the
Fund may invest all of its assets in a ``basket'' of Russell 2000
stocks. The Fund may also invest in exchange-traded funds based on the
Russell 2000. The Fund will seek to remain invested in Russell 2000
derivatives or Russell 2000 stocks even when the Russell 2000 is
declining.
    Assets not invested in Russell 2000 derivatives or Russell 2000
stocks may be invested in Fixed Income Instruments. PIMCO will actively
manage the Fixed Income Instruments held by the Fund with a view toward
enhancing the Fund's total return by using an absolute return approach.
The absolute return approach, which applies to the portion of the
portfolio not invested in Russell 2000 derivatives or Russell 2000
stocks, will allow the Fund more discretion with respect to overall
sector exposures, non-U.S. exposures and credit quality, both as a
function of the strategy's investment guidelines and lack of a fixed
income benchmark (i.e., the Fund seeks total return which exceeds that
of the Russell 2000). The absolute return approach will apply to the
fixed income component of the Fund, but will not apply to the equity
index replicating component of the Fund, subject to an overall
portfolio duration which will normally vary from (negative) 3 years to
positive 8 years based on PIMCO's forecast for interest rates.\35\
---------------------------------------------------------------------------

    \35\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\36\ The Fund may
invest, without limitation, in securities denominated in foreign
currencies and in U.S. dollar-denominated securities of foreign
issuers. With respect to the Fund's absolute return investments, the
Fund will normally limit its foreign currency exposure (from non-U.S.
dollar-denominated securities or currencies) to 20% of its total
assets. With respect to the Fund's absolute return investments, the
Fund may invest up to 25% of its total assets in securities and
instruments that are economically tied to emerging market
countries.\37\
---------------------------------------------------------------------------

    \36\ See supra, note 24.
    \37\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and exchange-traded and OTC options contracts. 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.
    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward commitment
basis and may engage in short sales.
Small Cap StocksPLUS AR Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims, privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets in Brady Bonds. The Fund may invest up to 20% of its
total assets in bank loans.

    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
Fundamental IndexPLUS Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return \38\ which exceeds the total return of its benchmark, the S&P
500. The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in derivatives based on a
Research Affiliates Fundamental Index (``RAFI''), the Enhanced
RAFI[supreg] US Large (``RAFI Large Company Index'') \39\ backed by a
portfolio of Fixed Income Instruments, which may be represented by
derivatives, that are managed using an absolute return approach. In
seeking total return exceeding that of the S&P 500, or as part of the
Fund's absolute return strategy relative to fixed income investing, the
Fund may invest in derivative instruments, subject to applicable law
and any other restrictions described herein.
---------------------------------------------------------------------------

    \38\ Total return may consist 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 Instruments generally would result from
decreases in market interest rates, foreign currency appreciation,
or improving credit fundamentals for a particular market sector or
security.
    \39\ The RAFI Large Company Index contains stocks of large U.S.
listed companies weighted by the Fundamental Index[supreg]
methodology with additional factors (such as, quality of earnings
and economic profitability). The Fundamental Index[supreg]
methodology is a patented indexing approach developed by Research
Affiliates. The methodology weights companies by fundamental
factors--including sales, cash flows, dividends and book value, with
additional screens for quality of earnings, financial distress and
other parameters--in an effort to enhance returns.
---------------------------------------------------------------------------

    The Fund will use RAFI Large Company Index derivatives in addition
to, or in place of, RAFI Large Company Index component securities, in
an attempt to equal or exceed the daily performance of the S&P 500. The
value of RAFI Large Company Index derivatives should closely track
changes in the value of the RAFI Large Company Index. Though the Fund
will not normally invest directly in RAFI Large Company Index stocks,
when RAFI Large Company Index derivatives appear to be overvalued
relative to RAFI Large Company Index stocks, the Fund may invest all of
its assets in a ``basket'' of RAFI Large Company Index stocks. The Fund
may also invest in exchange-traded funds. The Fund will seek to remain
invested in RAFI Large Company Index derivatives or RAFI Large Company
Index stocks even when the RAFI Large Company Index is declining.
    The Sub-Adviser will provide investment advisory services in
connection with the Fund's use of the RAFI Large Company Index by,
among other things, providing PIMCO (or counterparties designated by
PIMCO) with a model portfolio reflecting the composition of the RAFI
Large Company Index for purposes of developing RAFI Large Company Index
derivatives. The Fund will typically seek to gain exposure to the RAFI
Large Company Index by investing in total return swap agreements. In a
typical swap agreement, the Fund will receive the price appreciation
(or depreciation) on the RAFI Large Company Index from the counterparty
to the swap agreement in exchange for paying the counterparty an agreed
upon fee. Research Affiliates will facilitate the Fund's use of RAFI
Large Company Index derivatives by providing model portfolios of RAFI
Large Company Index securities to the Fund's swap counterparties, so
that the counterparties can provide total return swaps based on the
RAFI Large Company Index to the Fund. If such swap agreements are not
available, the Fund may invest in other derivative instruments,
``baskets'' of stocks, or RAFI Large Company Index component securities
to replicate the performance of the RAFI Large Company Index.
    The RAFI Large Company Index derivatives may be purchased with a
small fraction of the assets that would be needed to purchase the
equity securities directly, so that the remainder of the Fund's assets
may be invested in Fixed Income Instruments. PIMCO will actively manage
the Fixed Income Instruments held by the Fund with a view toward
enhancing the Fund's total return utilizing an absolute return
approach, which applies to the portion of the portfolio not invested in
RAFI Large Company Index derivatives or RAFI Large Company Index
stocks, subject to an overall portfolio duration which will normally
vary from (negative) 3 years to positive 8 years based on PIMCO's
forecast for interest rates.
    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\40\ The Fund may
invest in securities denominated in foreign (non-U.S.) currencies and
in U.S. dollar-denominated securities of foreign (non-U.S.) issuers,
subject to applicable limitations set forth herein. With respect to the
Fund's absolute return investments, the Fund will normally limit its
foreign currency exposure (from non-U.S. dollar-denominated securities
or currencies) to 20% of its total assets. With respect to the Fund's
absolute return investments, the Fund may invest up to 25% of its total
assets in securities and instruments that are economically tied to
emerging market countries.
---------------------------------------------------------------------------

    \40\ See supra, note 24.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis \41\ and invest in foreign currency
futures contracts and options contracts. 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.
---------------------------------------------------------------------------

    \41\ See supra, note 26.
---------------------------------------------------------------------------

    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward

commitment basis and may engage in short sales.
Fundamental IndexPLUS Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims, privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets in Brady Bonds. The Fund may invest up to 20% of its
total assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
Small Company Fundamental IndexPLUS Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return which exceeds the total return of its benchmark, the Russell
2000[supreg]. The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in derivatives based on the
Enhanced RAFI[supreg] US Small (``RAFI Small Company Index'') \42\
backed by a diversified portfolio of Fixed Income Instruments, which
may be represented by derivatives, that are managed using an absolute
return approach. In seeking total return exceeding that of the Russell
2000, or as part of the Fund's absolute return strategy relative to
fixed income investing, the Fund may invest in derivative instruments,
subject to applicable law and any other restrictions described herein.
---------------------------------------------------------------------------

    \42\ The RAFI Small Company Index contains stocks of small U.S.
listed companies weighted by the Fundamental Index [supreg]
methodology with additional factors (such as, quality of earnings
and economic profitability).
---------------------------------------------------------------------------

    The Fund will use RAFI Small Company Index derivatives in addition
to, or in place of, RAFI Small Company Index stocks, in an attempt to
equal or exceed the daily performance of the Russell 2000. The values
of RAFI Small Company Index derivatives should closely track changes in
the value of the RAFI Small Company Index. Though the Fund will not
normally invest directly in RAFI Small Company Index stocks, when RAFI
Small Company Index derivatives appear to be overvalued relative to
RAFI Small Company Index stocks, the Fund may invest all of its assets
in a ``basket'' of RAFI Small Company Index stocks. The Fund may also
invest in exchange-traded funds. The Fund will seek to remain invested
in RAFI Small Company Index derivatives or RAFI Small Company Index
stocks even when the RAFI Small Company Index is declining.
    Research Affiliates will provide investment advisory services in
connection with the Fund's use of the RAFI Small Company Index by,
among other things, providing PIMCO (or counterparties designated by
PIMCO), with a model portfolio reflecting the composition of the RAFI
Small Company Index for purposes of developing RAFI Small Company Index
derivatives. The Fund will typically seek to gain exposure to the RAFI
Small Company Index by investing in total return swap agreements. In a
typical swap agreement, the Fund will receive the price appreciation
(or depreciation) on the RAFI Small Company Index from the counterparty
to the swap agreement in exchange for paying the counterparty an agreed
upon fee. Research Affiliates will facilitate the Fund's use of RAFI
Small Company Index derivatives by providing a model portfolio of the
RAFI Small Company Index to the Fund's swap counterparties, who in turn
are able to provide total return swaps based on the RAFI Small Company
Index to the Fund. If such swap agreements are not available, the Fund
may invest in other derivative instruments, ``baskets'' of stocks, or
individual securities to replicate the performance of the RAFI Small
Company Index.
    According to the Registration Statement, the Fund may purchase RAFI
Small Company Index derivatives with a fraction of the assets that
would be needed to purchase the equity securities directly, so that the
remainder of the Fund's assets may be invested in Fixed Income
Instruments. PIMCO will actively manage the Fixed Income Instruments
held by the Fund with a view toward enhancing the Fund's total return
utilizing an absolute return approach, which applies to the portion of
the portfolio not invested in Russell 2000 derivatives or Russell 2000
stocks, subject to an overall portfolio duration which will normally
vary from (negative) 3 years to positive 8 years based on PIMCO's
forecast for interest rates.\43\
---------------------------------------------------------------------------

    \43\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\44\ The Fund may
invest in securities denominated in foreign (non-U.S.) currencies and
in U.S. dollar-denominated securities of foreign (non-U.S.) issuers,
subject to applicable limitations set forth herein. With respect to the
Fund's absolute return investments, the Fund will normally limit its
foreign currency exposure (from non-U.S. dollar-denominated securities
or currencies) to 20% of its total assets. With respect to the Fund's
absolute return investments, the Fund may invest up to 25% of its total
assets in securities and instruments that are economically tied to
emerging market countries.\45\
---------------------------------------------------------------------------

    \44\ See supra, note 24.
    \45\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and options contracts. 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.
    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.
Small Company Fundamental IndexPLUS Fund--Other (Non-Principal)
Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments. The Fund may also invest up to 20% of its total assets in
trade claims, privately placed and unregistered securities, and
exchange-traded and OTC-traded structured products, including credit-
linked securities and commodity-linked notes. The Fund may invest up to
20% of its total assets in Brady Bonds. The Fund may invest up to 20%
of its total assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
EM Fundamental IndexPLUS Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return which exceeds the total return of its benchmark, the Morgan
Stanley Capital International Emerging Markets Index (Net Dividends in
USD) (``MSCI EM Index'').\46\
---------------------------------------------------------------------------

    \46\ The MSCI EM Index is a free float-adjusted market
capitalization index that is designed to measure equity market
performance of 21 emerging markets.
---------------------------------------------------------------------------

    The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in derivatives based on the
Enhanced RAFI[supreg] Emerging Markets (``RAFI EM Index'') \47\ backed
by a diversified portfolio of Fixed Income Instruments, which may be
represented by derivatives, that are managed using an absolute return
approach. In seeking total return exceeding that of the MSCI EM Index,
or as part of the Fund's absolute return strategy relative to fixed
income investing, the Fund may invest in derivative instruments,
subject to applicable law and any other restrictions described herein.
---------------------------------------------------------------------------

    \47\ The RAFI EM Index contains emerging markets companies
weighted by the Fundamental Index [supreg] methodology with
additional factors (such as, quality of earnings and economic
profitability).
---------------------------------------------------------------------------

    The Fund will normally be expected to primarily use RAFI EM Index
derivatives, in place of, or in addition to, RAFI EM Index stocks, in
an attempt to equal or exceed the daily performance of the MSCI EM
Index. The value of RAFI EM Index derivatives should closely track
changes in the value of the RAFI EM Index. In addition to or instead of
RAFI EM Index swaps, the Fund may invest in other derivative
instruments, ``baskets'' of stocks, individual securities, and
exchange-traded funds to maintain emerging markets equity exposure. The
Fund may also invest in exchange-traded funds. The Fund will seek to
remain invested in RAFI EM Index derivatives or RAFI EM Index stocks
even when the RAFI EM Index is declining.
    Research Affiliates will provide investment advisory services in
connection with the Fund's use of the RAFI EM Index by, among other
things, providing PIMCO (or counterparties designated by PIMCO) with a
model portfolio reflecting the composition of RAFI EM Index for
purposes of developing RAFI EM Index derivatives. The Fund will
typically seek to gain exposure to the RAFI EM Index by investing in
total return swap agreements. In a typical swap agreement, the Fund
will receive the price appreciation (or depreciation) on the RAFI EM
Index from the counterparty to the swap agreement in exchange for
paying the counterparty an agreed upon fee. Research Affiliates will
facilitate the Fund's use of RAFI EM Index derivatives by providing
model portfolios of RAFI EM Index securities to the Fund's swap
counterparties, so that the counterparties can provide total return
swaps based on the RAFI EM Index to the Fund.
    RAFI EM Index derivatives may be purchased with a fraction of the
assets that would be needed to purchase RAFI EM Index equity securities
directly, so that the remainder of the assets may be invested in Fixed
Income Instruments. PIMCO will actively manage the Fixed Income
Instruments held by the Fund with a view toward enhancing the Fund's
total return by using an absolute return approach, which applies to the
portion of the portfolio not invested in RAFI EM Index derivatives or
RAFI EM Index stocks, subject to an overall portfolio duration which
will normally vary from (negative) 3 years to positive 8 years based on
PIMCO's forecast for interest rates.\48\
---------------------------------------------------------------------------

    \48\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\49\ The Fund may
invest, without limitation, in securities denominated in foreign
currencies and in U.S.-dollar denominated securities of foreign
issuers. With respect to the Fund's absolute return investments, the
Fund will normally limit its foreign currency exposure (from non-U.S.
dollar-denominated securities or currencies) to 20% of its total
assets. With respect to the Fund's absolute return investments, the
Fund may invest up to 25% of its total assets in securities and
instruments that are economically tied to emerging market
countries.\50\
---------------------------------------------------------------------------

    \49\ See supra, note 24.
    \50\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and exchange traded and OTC options contracts. 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.
    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward commitment
basis and may engage in short sales.
EM Fundamental IndexPLUS Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims, privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets in Brady Bonds. The Fund may invest up to 20% of its
total assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
International Fundamental IndexPLUS Fund--Principal Investments
    According to the Registration Statement, the International
Fundamental IndexPLUS Fund will seek total return which exceeds the
total return of its benchmark, the Morgan Stanley Capital International
Europe, Australasia, Far East Index (``MSCI EAFE Index'').
    The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in derivatives based on the
Enhanced RAFI[supreg] International Large (``RAFI Developed Index'')
\51\ backed by a diversified portfolio of Fixed Income Instruments,
which may be represented by derivatives, that are managed using an
absolute return approach. In seeking total return exceeding that of the
MSCI EAFE Index, or as part of the Fund's absolute return strategy
relative to fixed income investing, the Fund may invest in derivative
instruments, subject to applicable law and any other restrictions
described therein.
---------------------------------------------------------------------------

    \51\ The RAFI Developed Index contains stocks of large developed
markets ex-U.S. companies weighted by the Fundamental Index[supreg]
methodology with additional factors (such as, quality of earnings
and economic profitability).
---------------------------------------------------------------------------

    The Fund will use RAFI Developed Index derivatives to attempt to
equal or exceed the daily performance of the MSCI EAFE Index. The
values of RAFI Developed Index derivatives should closely track changes
in the value of the RAFI Developed Index. Though the Fund will not
normally invest directly in RAFI Developed Index stocks, when RAFI
Developed Index derivatives appear to be overvalued relative to the
RAFI Developed Index, the Fund may invest all of its assets in a
``basket'' of RAFI Developed Index stocks. The Fund may also invest in
exchange-traded funds. The Fund will seek to remain invested in RAFI
Developed Index derivatives even when the RAFI Developed Index is
declining.
    Research Affiliates will provide investment advisory services in
connection with the Fund's use of the RAFI Developed Index by, among
other things, providing PIMCO (or counterparties designated by PIMCO)
with a model portfolio reflecting the composition of the RAFI Developed
Index for purposes of developing RAFI Developed Index derivatives. The
Fund will typically seek to gain exposure to the RAFI Developed Index
by investing in total return swap agreements. In a typical swap
agreement, the Fund will receive the price appreciation (or
depreciation) on the RAFI Developed Index from the counterparty to the
swap agreement in exchange for paying the counterparty an agreed upon
fee. Research Affiliates will facilitate the Fund's use of RAFI
Developed Index derivatives by providing model portfolios of RAFI
Developed Index securities to the Fund's swap counterparties, so that
the counterparties can provide total return swaps based on the RAFI
Developed Index to the Fund. If such swap agreements are not available,
the Fund may invest in other derivative instruments, ``baskets'' of
stocks, or individual securities to replicate the performance of the
RAFI Developed Index.
    According to the Registration Statement, RAFI Developed Index
derivatives may be purchased with a fraction of the assets that would
be needed to purchase the RAFI Developed Index equity securities
directly, so that the remainder of the assets may be invested in Fixed
Income Instruments. PIMCO will actively manage the Fixed Income
Instruments held by the Fund with a view toward enhancing the Fund's
total return by using an absolute return approach, which applies to the
portion of the portfolio not invested in RAFI Developed Index
derivatives or RAFI Developed Index stocks, subject to an overall
portfolio duration which will normally vary from (negative) 3 years to
positive 8 years based on PIMCO's forecast for interest rates.\52\
---------------------------------------------------------------------------

    \52\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\53\ With respect to
the Fund's absolute return investments, the Fund may invest, without
limitation, in securities denominated in foreign currencies and in
U.S.-dollar denominated securities of foreign issuers. With respect to
the Fund's absolute return investments, the Fund will normally limit
its foreign currency exposure (from non-U.S. dollar-denominated
securities or currencies) to 20% of its total assets. With respect to
the Fund's absolute return investments, the Fund may invest up to 25%
of its total assets in securities

and instruments that are economically tied to emerging market
countries.\54\
---------------------------------------------------------------------------

    \53\ See supra, note 24.
    \54\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and options contracts. 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.
    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward commitment
basis and may engage in short sales.
International Fundamental IndexPLUS Fund--Other (Non-Principal)
Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims, privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets in Brady Bonds. The Fund may invest up to 20% of its
total assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
EM StocksPLUS Fund--Principal Investments
    According to the Registration Statement, the Fund will seek total
return which exceeds the total return of its benchmark, the MSCI EM
Index.
    The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in MSCI EM Index derivatives,
backed by a portfolio of Fixed Income Instruments that are managed
using an absolute return approach. In seeking total return exceeding
that of the MSCI EM Index, or as part of the Fund's absolute return
strategy relative to fixed income investing, the Fund may invest in
derivative instruments, subject to applicable law and any other
restrictions described herein.
    The Fund will typically seek to gain long exposure to the MSCI EM
Index in an amount, under normal circumstances, approximately equal to
the Fund's net assets, by investing in MSCI EM Index derivatives. The
value of the MSCI EM Index derivatives should closely track changes in
the value of the MSCI EM Index. The Fund will normally use MSCI EM
Index derivatives, instead of MSCI EM Index stocks, to attempt to equal
or exceed the daily performance of the MSCI EM Index. Though the Fund
will not normally invest directly in MSCI EM Index stocks, when MSCI EM
Index derivatives appear to be overvalued relative to the MSCI EM
Index, the Fund may invest all of its assets in a ``basket'' of MSCI EM
Index stocks. The Fund may also invest in exchange-traded funds based
on the MSCI EM Index. The Fund will seek to remain invested in MSCI EM
Index derivatives or MSCI EM Index stocks even when the MSCI EM Index
is declining.
    According to the Registration Statement, MSCI EM Index derivatives
may be purchased with a small fraction of the assets that would be
needed to purchase the MSCI EM Index equity securities directly, so
that the remainder of the assets may be invested in Fixed Income
Instruments. PIMCO will actively manage the Fixed Income Instruments
held by the Fund with a view toward enhancing the Fund's total return
by using an absolute return approach, which applies to the portion of
the portfolio not invested in MSCI EM Index derivatives or MSCI EM
Index stocks, subject to an overall portfolio duration which will
normally vary from (negative) 3 years to positive 8 years based on
PIMCO's forecast for interest rates.\55\
---------------------------------------------------------------------------

    \55\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\56\ The Fund may
invest in debt and equity securities denominated in foreign (non-U.S.)
currencies and in U.S.-dollar denominated securities of foreign (non-
U.S.) issuers, subject to applicable limitations set forth herein. With
respect to the Fund's absolute return investments, the Fund will
normally limit its foreign currency exposure (from non-U.S. dollar-
denominated securities or currencies) to 20% of its total assets. With
respect to the Fund's absolute return investments, the Fund may invest
up to 25% of its total assets in securities and instruments that are
economically tied to emerging market countries.\57\
---------------------------------------------------------------------------

    \56\ See supra, note 24.
    \57\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and options contracts. 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.
    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward

commitment basis and may engage in short sales.
EM StocksPLUS Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims, privately placed and unregistered securities, and exchange-
traded and OTC-traded structured products, including credit-linked
securities and commodity-linked notes. The Fund may invest up to 20% of
its total assets in Brady Bonds. The Fund may invest up to 20% of its
total assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
International StocksPLUS Fund--Principal Investments
    According to the Registration Statement, the International
StocksPLUS Fund will seek total return which exceeds the total return
of its benchmark, the MSCI EAFE Net Dividend Index, consistent with
prudent investment management.\58\
---------------------------------------------------------------------------

    \58\ The MSCI EAFE Net Dividend Index is an unmanaged index of
issuers in countries of Europe, Australia, and the Far East.
---------------------------------------------------------------------------

    The Fund will seek to achieve its investment objective by
investing, under normal circumstances, in non-U.S. equity derivatives,
backed by a portfolio of Fixed Income Instruments that are managed
using an absolute return approach. In seeking total return exceeding
that of the MSCI EAFE Net Dividend Index, or as part of the Fund's
absolute return strategy relative to fixed income investing, the Fund
may invest in derivative instruments, subject to applicable law and any
other restrictions described herein.
    The Fund typically will seek to gain long exposure to the MSCI EAFE
Net Dividend Index in an amount, under normal circumstances,
approximately equal to the Fund's net assets, by investing in non-U.S.
equity derivatives. The value of the equity derivatives should closely
track changes in the value of underlying securities or indices. The
Fund will normally use equity derivatives, instead of stocks, to
attempt to equal or exceed the daily performance of the MSCI EAFE Net
Dividend Index. Though the Fund will not normally invest directly in
stocks, when equity derivatives appear to be overvalued, the Fund may
invest some or all of its assets in stocks. The Fund may also invest in
exchange-traded funds. The Fund's equity exposure will not be hedged
into U.S. dollars. The Fund will seek to remain invested in equity
derivatives and/or stocks even when the MSCI EAFE Net Dividend Index is
declining. The Fund may invest in non-U.S. equities or non-U.S. equity
derivatives that do not comprise the MSCI EAFE Net Dividend Index.
    According to the Registration Statement, derivatives may be
purchased with a small 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 will actively
manage the Fixed Income Instruments held by the Fund with a view toward
enhancing the Fund's total return by using an absolute return approach,
which applies to the portion of the portfolio not invested in MSCI EAFE
Net Dividend Index derivatives or MSCI EAFE Net Dividend Index stocks,
subject to an overall portfolio duration which will normally vary from
(negative) 3 years to positive 8 years based on PIMCO's forecast for
interest rates.\59\
---------------------------------------------------------------------------

    \59\ See supra, note 23.
---------------------------------------------------------------------------

    The Fund may invest in securities and instruments that are
economically tied to foreign (non-U.S.) countries.\60\ The Fund may
invest in securities denominated in foreign currencies and in U.S.-
dollar denominated securities of foreign issuers, subject to applicable
limitations set forth herein. With respect to the Fund's absolute
return investments, the Fund will normally limit its foreign currency
exposure (from non-U.S. dollar-denominated securities or currencies) to
20% of its total assets. With respect to the Fund's absolute return
investments, the Fund may invest up to 25% of its total assets in
securities and instruments that are economically tied to emerging
market countries.\61\
---------------------------------------------------------------------------

    \60\ See supra, note 24.
    \61\ See supra, note 25.
---------------------------------------------------------------------------

    The Fund may engage in foreign currency transactions on a spot
(cash) basis and forward basis and invest in foreign currency futures
contracts and options contracts. 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.
    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. The Fund may purchase or sell
securities on a when-issued, delayed delivery or forward commitment
basis and may engage in short sales.
International StocksPLUS Fund--Other (Non-Principal) Investments
    With respect to the Fund's absolute return investments, the Fund
may invest up to 10% of its total assets in preferred stocks,
convertible securities and other equity-related securities.
    The Fund may invest up to 20% of its total assets in: (i) Variable
and floating rate securities that are not Fixed Income Instruments and
(ii) floaters and inverse floaters that are not Fixed Income
Instruments.
    The Fund may also invest up to 20% of its total assets in trade
claims,

privately placed and unregistered securities, and exchange-traded and
OTC-traded structured products, including credit-linked securities and
commodity-linked notes. The Fund may invest up to 20% of its total
assets in Brady Bonds. The Fund may invest up to 20% of its total
assets in bank loans.
    The Fund may, with up to 20% of its total assets, enter into
repurchase agreements on instruments other than Fixed Income
Instruments. Repurchase agreements maturing in more than seven days and
which may not be terminated within seven days at approximately the
amount at which the Fund has valued the agreements will be considered
illiquid securities. The Fund may also, with up to 20% of its total
assets, enter into reverse repurchase agreements on instruments other
than Fixed Income Instruments, subject to the Fund's limitations on
borrowings. The Fund will segregate or ``earmark'' assets determined to
be liquid by PIMCO in accordance with procedures established by the
Board to cover its obligations under reverse repurchase agreements.
Investment Limits Applicable to the Fund
    The Fund may invest up to 20% of its total assets in ``high yield
securities'' rated B or higher by Moody's, or equivalently rated by S&P
or Fitch, or, if unrated, determined by PIMCO to be of comparable
quality (except that within such limitation, the Fund may invest in
mortgage-related securities rated below B).
    The Fund may invest up to 20% of its assets in mortgage-related and
other asset-backed securities, although this 20% limitation does not
apply to securities issued or guaranteed by Federal agencies and/or
U.S. government sponsored instrumentalities.
Other Investment Limitations of the Funds
    According to the Registration Statement, each Fund may invest
without limit, for temporary or defensive purposes, in U.S. debt
securities, including taxable securities and short-term money market
securities, if PIMCO deems it appropriate to do so. If PIMCO believes
that economic or market conditions are unfavorable to investors, PIMCO
may temporarily invest up to 100% of a Fund's assets in certain
defensive strategies, including holding a substantial portion of a
Fund's assets in cash, cash equivalents or other highly rated short-
term securities, including securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
    Not more than 10% of the net assets of a Fund in the aggregate
invested in exchange-traded equity securities shall consist of equity
securities, including stocks into which a convertible security is
converted, whose principal market is not a member of the ISG or is a
market with which the Exchange does not have a comprehensive
surveillance sharing agreement. Furthermore, not more than 10% of the
net assets of a Fund in the aggregate invested in futures contracts or
exchange-traded options contracts shall consist of futures contracts or
exchange-traded options contracts whose principal market is not a
member of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
    For the purpose of achieving income, each Fund may lend its
portfolio securities to brokers, dealers, and other financial
institutions, provided that a number of conditions are satisfied,
including that the loan is fully collateralized. When a Fund lends
portfolio securities, its investment performance will continue to
reflect changes in the value of the securities loaned, and a Fund will
also receive a fee or interest on the collateral. Cash collateral
received by a Fund in securities lending transactions may be invested
in short-term liquid Fixed Income Instruments or in money market or
short-term mutual funds or similar investment vehicles, including
affiliated money market or short-term mutual funds.
    According to the Registration Statement, the Funds may invest in,
to the extent permitted by Section 12(d)(1)(A) of the 1940 Act, other
affiliated and unaffiliated funds, such as open-end or closed-end
management investment companies, including other exchange-traded funds,
provided that each of a Fund's investment in units or shares of
investment companies and other open-end collective investment vehicles
will not exceed 10% of that Fund's total assets. Each Fund may invest
its securities lending collateral in one or more money market funds to
the extent permitted by Rule 12d1-1 under the 1940 Act, including
series of PIMCO Funds, an affiliated open-end management investment
company managed by PIMCO.
Investment Restrictions
    Each Fund's investments, including investments in derivative
instruments, will be subject to all of the restrictions under the 1940
Act, including restrictions with respect to investments in illiquid
securities, that is, the limitation that a fund may hold up to an
aggregate amount of 15% of its net assets in illiquid securities
(calculated at the time of investment), including Rule 144A securities
deemed illiquid by the Adviser.\62\ Each Fund will monitor its
respective portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of a Fund's
net assets are held in illiquid securities. Illiquid securities include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\63\
---------------------------------------------------------------------------

    \62\ In reaching liquidity decisions, the Adviser may consider
the following factors: the frequency of trades and quotes for the
security; the number of dealers willing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
    \63\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the 1933 Act).
---------------------------------------------------------------------------

    Each Fund will be diversified within the meaning of the 1940
Act.\64\
---------------------------------------------------------------------------

    \64\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act (15 U.S.C. 80e).
---------------------------------------------------------------------------

    Each Fund intends to qualify annually and elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue
Code.\65\
---------------------------------------------------------------------------

    \65\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    No Fund will concentrate its investments in a particular industry,
as that term is used in the 1940 Act, and as interpreted, modified, or
otherwise permitted by regulatory authority having jurisdiction from
time to time.\66\
---------------------------------------------------------------------------

    \66\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------

    Each of the Funds' investments, including derivatives, will be
consistent

with that Fund's investment objective and a Fund's use of derivatives
may be used to enhance leverage. However, a Fund's investments will not
be used to seek performance that is the multiple or inverse multiple
(i.e., 2Xs and 3Xs) of the Fund's broad-based securities market index
(as defined in Form N-1A).\67\
---------------------------------------------------------------------------

    \67\ Each Fund's broad-based securities market index will be
identified in a future amendment to the Registration Statement
following a Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Net Asset Value and Derivatives Valuation Methodology for Purposes of
Determining Net Asset Value
    The NAV of each Fund's Shares will be determined by dividing the
total value of the Fund's portfolio investments and other assets, less
any liabilities, by the total number of Shares outstanding.
    Each Fund's Shares will be valued as of the close of regular
trading on the New York Stock Exchange (``NYSE'') normally 4:00 p.m.
Eastern time (``E.T.'') (the ``NYSE Close'') on each day NYSE Arca is
open (``Business Day''). Information that becomes known to each of 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
portfolio asset or the NAV determined earlier that day.
    For purposes of calculating NAV, portfolio securities and other
assets for which market quotes are readily available will be valued at
market value. Market value will generally be 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.
    Fixed Income Instruments, including those to be purchased under
firm commitment agreements/delayed delivery basis, will generally be
valued on the basis of quotes obtained from brokers and dealers or
independent pricing services. Foreign fixed income securities will
generally be valued on the basis of quotes obtained from brokers and
dealers or pricing services using data reflecting the earlier closing
of the principal markets for those assets. Short-term debt instruments
having a remaining maturity of 60 days or less are generally valued at
amortized cost, which approximates market value.
    As discussed in more detail below, derivatives will generally be
valued on the basis of quotes obtained from brokers and dealers or
pricing services using data reflecting the earlier closing of the
principal markets for those assets. Local closing prices will be used
for all instrument valuation purposes. Foreign currency-denominated
derivatives are generally valued using market inputs as of the
respective local region's market close.
    With respect to specific derivatives:
     Currency spot and forward rates from major market data
vendors \68\ will generally be determined as of the NYSE Close.
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    \68\ Major market data vendors may include, but are not limited
to: Thomson Reuters, JPMorgan Chase PricingDirect Inc., Markit Group
Limited, Bloomberg, Interactive Data Corporation or other major data
vendors.
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     Exchange traded futures will generally be valued at the
settlement price of the exchange.
     A total return swap on an index will be valued at the
publicly available index price. The index price, in turn, is determined
by the applicable index calculation agent, which generally values the
securities underlying the index at the last reported sale price.
     Equity total return swaps will generally be valued using
the actual underlying equity at local market closing, while bank loan
total return swaps are generally valued using the evaluated underlying
bank loan price minus the strike price of the loan.
     Exchange traded non-equity options, index options, and
options on futures will generally be valued at the official settlement
price determined by the relevant exchange, if available.
     OTC and exchange traded equity options will generally be
valued on a basis of quotes obtained from a quotation reporting system,
established market makers, or pricing services.
     OTC FX options will generally be valued by pricing
vendors.
     All other swaps such as interest rate swaps, inflation
swaps, swaptions, credit default swaps, CDX/CDS will generally be
valued by pricing services.
     Forwards will generally be valued in the same manner as
the underlying securities. Forward settling positions for which market
quotes are readily available will generally be valued at market value.
Typically, forwards on Fixed Income Instruments will be marked to
market daily.
    Exchange-traded equity securities will be valued at the official
closing price or the last trading price on the exchange or market on
which the security is primarily traded at the time of valuation. If no
sales or closing prices are reported during the day, equity securities
are generally valued at the mean of the last available bid and ask
quotation on the exchange or market on which the security is primarily
traded, or using other market information obtained from quotation
reporting systems, established market makers, or pricing services.
Investment company securities that are not exchange-traded will be
valued at NAV. Money market instruments, trade claims, privately placed
and unregistered securities, structured products and other types of
debt securities will generally be valued on the basis of independent
pricing services or quotes obtained from brokers and dealers.
    If a foreign security's value has materially changed after the
close of the security's primary exchange or principal market but before
the NYSE Close, the security will be valued at fair value based on
procedures established and approved by the Board. Foreign securities
that do not trade when the NYSE is open are also valued at fair value.
    Securities and other assets for which market quotes are not readily
available are valued at fair value as determined in good faith by the
Board or persons acting at their direction. The Board has adopted
methods for valuing securities and other assets in circumstances where
market quotes are not readily available, and has delegated to PIMCO the
responsibility for applying the valuation methods. In the event that
market quotes are not readily available, and the security or asset
cannot be valued pursuant to one of the valuation methods, the value of
the security or asset will be determined in good faith by the Valuation
Committee of the Board, generally based upon recommendations provided
by PIMCO.
    Market quotes are considered not readily available in circumstances
where there is an absence of current or reliable market-based data
(e.g., trade information, bid/ask information, broker quotes),
including where events occur after the close of the relevant market,
but prior to the NYSE Close, that materially affect the values of the
Fund's securities or assets. In addition, market quotes are considered
not readily available when, due to extraordinary circumstances, the
exchanges or markets on which the securities trade do not open for
trading for the entire day and no other market prices are available.
The Board has delegated to PIMCO the responsibility for monitoring
significant events that may materially affect the values of the Fund's
securities or assets and for determining whether the value of the
applicable securities or assets should be re-evaluated in light of such
significant events.
    When a Fund uses fair value pricing to determine its NAV,
securities will not be priced on the basis of quotes from the

primary market in which they are traded, but rather may be priced by
another method that the Board or persons acting at their direction
believe reflects fair value. Fair value pricing may require subjective
determinations about the value of a security. While the Trust's policy
is intended to result in a calculation of a Fund's NAV that fairly
reflects security values as of the time of pricing, the Trust cannot
ensure that fair values determined by the Board or persons acting at
their direction would accurately reflect the price that a Fund could
obtain for a security if it were to dispose of that security as of the
time of pricing (for instance, in a forced or distressed sale). The
prices used by a Fund may differ from the value that would be realized
if the securities were sold.
    For a Fund's 4:00 p.m. E.T. futures holdings, estimated prices from
Reuters will be used if any cumulative futures margin impact is greater
than $0.005 to the NAV due to futures movement after the fixed income
futures market closes (3:00 p.m. E.T.) and up to the NYSE Close
(generally 4:00 p.m. E.T.). Swaps traded on exchanges such as the
Chicago Mercantile Exchange (``CME'') or the Intercontinental Exchange
(``ICE-US'') will use the applicable exchange closing price where
available.
    Investments initially valued in currencies other than the U.S.
dollar are converted to the U.S. dollar 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 NYSE is closed. As a result,
to the extent that a Fund holds foreign (non-U.S.) securities, the NAV
of a Fund's shares may change when an investor cannot purchase, redeem
or exchange Shares.
Derivatives Valuation Methodology for Purposes of Determining Portfolio
Indicative Value
    On each Business Day, before commencement of trading in Fund Shares
on NYSE Arca, each Fund will disclose on its Web site the identities
and quantities of the portfolio instruments and other assets held by
the Fund that will form the basis for the Fund's calculation of NAV at
the end of the Business Day.
    In order to provide additional information regarding the intra-day
value of shares of the Fund, the NYSE Arca or a market data vendor will
disseminate every 15 seconds through the facilities of the Consolidated
Tape Association or other widely disseminated means an updated
Portfolio Indicative Value (``PIV'') for each Fund as calculated by an
information provider or market data vendor.
    A third party market data provider will calculate the PIV for each
Fund. For the purposes of determining the PIV, the third party market
data provider's valuation of derivatives is expected to be similar to
their valuation of all securities. The third party market data provider
may use market quotes if available or may fair value securities against
proxies (such as swap or yield curves).
    With respect to specific derivatives:
     Foreign currency derivatives may be valued intraday using
market quotes, or another proxy as determined to be appropriate by the
third party market data provider.
     Futures may be valued intraday using the relevant futures
exchange data, or another proxy as determined to be appropriate by the
third party market data provider.
     Interest rate swaps may be mapped to a swap curve and
valued intraday based on the swap curve, or another proxy as determined
to be appropriate by the third party market data provider.
     CDX/CDS may be valued using intraday data from market
vendors, or based on underlying asset price, or another proxy as
determined to be appropriate by the third party market data provider.
     Total return swaps may be valued intraday using the
underlying asset price, or another proxy as determined to be
appropriate by the third party market data provider.
     Exchange listed options may be valued intraday using the
relevant exchange data, or another proxy as determined to be
appropriate by the third party market data provider.
     OTC options may be valued intraday through option
valuation models (e.g., Black-Scholes) or using exchange traded options
as a proxy, or another proxy as determined to be appropriate by the
third party market data provider.
     A third party market data provider's valuation of forwards
will be similar to their valuation of the underlying securities, or
another proxy as determined to be appropriate by the third party market
data provider. The third party market data provider will generally use
market quotes if available. Where market quotes are not available, they
may fair value securities against proxies (such as swap or yield
curves). Each Fund's disclosure of forward positions will include
information that market participants can use to value these positions
intraday.
Disclosed Portfolio
    Each Fund's disclosure of derivative positions in the applicable
Disclosed Portfolio will include information that market participants
can use to value these positions intraday. On a daily basis, the Funds
will disclose on the Funds' Web site the following information
regarding each portfolio holding, as applicable to the type of holding:
Ticker symbol, CUSIP number or other identifier, if any; a description
of the holding (including the type of holding, such as the type of
swap); the identity of the security, commodity, index or other asset or
instrument underlying the holding, if any; for options, the option
strike price; quantity held (as measured by, for example, par value,
notional value or number of shares, contracts or units); maturity date,
if any; coupon rate, if any; effective date, if any; market value of
the holding; and the percentage weighting of the holding in a Fund's
portfolio.
Impact on Arbitrage Mechanism
    For each Fund, the Adviser believes there will be minimal, if any,
impact to the arbitrage mechanism as a result of the use of
derivatives. Market makers and participants should be able to value
derivatives as long as the positions are disclosed with relevant
information. The Adviser believes that the price at which Shares trade
will continue to be disciplined by arbitrage opportunities created by
the ability to purchase or redeem creation Shares at their NAV, which
should ensure that Shares will not trade at a material discount or
premium in relation to their NAV.
    The Adviser does not believe there will be any significant impacts
to the settlement or operational aspects of a Fund's arbitrage
mechanism due to the use of derivatives. Because derivatives generally
are not eligible for in-kind transfer, they will be substituted with a
``cash in lieu'' amount (as described below) when each Fund processes
purchases or redemptions of creation units in-kind.
Creations and Redemptions of Shares
    According to the Registration Statement, Shares of each of the
Funds that trade in the secondary market will be ``created'' at NAV
\69\ by ``Authorized

Participants'' only in block-size creation units (``Creation Units'')
of 100,000 Shares or multiples thereof.\70\ Each of the Funds will
offer and issue Shares at their NAV per Share generally in exchange for
a basket of debt securities held by that Fund (the ``Deposit
Securities'') together with a deposit of a specified cash payment (the
``Cash Component''), or in lieu of Deposit Securities, a Fund may
permit a ``cash-in-lieu'' amount for any reason at the Fund's sole
discretion. Alternatively, a Fund may issue Creation Units in exchange
for a specified all-cash payment (``Cash Deposit'') (together with
Deposit Securities and Cash Component, the ``Fund Deposit'').
Similarly, Shares can be redeemed only in Creation Units, generally in-
kind for a portfolio of debt securities held by the Funds and/or for a
specified amount of cash (collectively, ``Redemption Instruments'').
---------------------------------------------------------------------------

    \69\ The NAV of each Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of trading on the
New York Stock Exchange (``NYSE''), generally 4:00 p.m. E.T. (the
``NAV Calculation Time'') on any Business Day. NAV per Share is
calculated by dividing the Fund's net assets by the number of that
Fund's Shares outstanding. For more information regarding the
valuation of Fund investments in calculating a Fund's NAV, see the
Registration Statement.
    \70\ The term ``Authorized Participant'' refers to a
Participating Party (a broker-dealer or other participant in the
clearing process through the Continuous Net Settlement System of the
National Securities Clearing Corporation (``NSCC''); or a Depository
Trust Company (``DTC'') Participant who has executed a Participant
Agreement (an agreement with the Distributor and Transfer Agent with
respect to creations and redemptions of Creation Unit aggregations).
---------------------------------------------------------------------------

    On any given Business Day, purchases and redemptions of Creation
Units will be made in whole or in part on a cash basis if an Authorized
Participant deposits or receives (as applicable) cash in lieu of some
or all of the Fund Deposit or Redemption Instruments, respectively,
solely because such instruments are, in the case of the Fund Deposit,
not available in sufficient quantity.\71\ In determining whether a Fund
will be selling or redeeming Creation Units on a cash or in-kind basis,
the key consideration will be the benefit which would accrue to Fund
investors. In many cases, investors may benefit by the use of all cash
purchase orders because the Adviser would execute trades rather than
market makers, and the Adviser may be able to obtain better execution
in bond transactions due to its size, experience and potentially
stronger relationships in the fixed income markets.
---------------------------------------------------------------------------

    \71\ Such purchase or redemption transactions are ``custom
orders.'' On any given Business Day, if the Fund accepts a custom
order, the Adviser represents that the Fund will accept custom
orders from all other Authorized Participants on the same basis.
---------------------------------------------------------------------------

    Except when aggregated in Creation Units, Shares will not be
redeemable by the Funds. The prices at which creations and redemptions
occur are based on the next calculation of NAV after an order is
received. Requirements as to the timing and form of orders are
described in the Authorized Participant agreement. PIMCO will make
available on each Business Day via the National Securities Clearing
Corporation (``NSCC''), prior to the opening of business (subject to
amendments) on the Exchange (currently 9:30 a.m., E.T.), the identity
and the required amount of each Deposit Security and the amount of the
Cash Component (or Cash Deposit) to be included in the current ``Fund
Deposit'' \72\ (based on information at the end of the previous
Business Day). Shares can be redeemed only in Creation Units, generally
in-kind for a portfolio of securities held by a Fund and/or for a
specified amount of cash. Creations and redemptions must be made by an
Authorized Participant.
---------------------------------------------------------------------------

    \72\ The Deposit Securities and Cash Component or,
alternatively, the Cash Deposit, will constitute the Fund Deposit,
which will represent the investment amount for a Creation Unit of
each of the Funds.
---------------------------------------------------------------------------

    Additional information regarding the Trust, the Funds and the
Shares, including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes is included in the Registration Statement. All
terms relating to the Funds that are referred to but not defined in
this proposed rule change are defined in the Registration Statement.
Availability of Information
    The Trust's Web site (www.pimcoetfs.com), which is publicly
available prior to the public offering of Shares, will include a form
of the prospectus for each of the Funds that may be downloaded. The
Trust's Web site will include additional quantitative information
updated on a daily basis, including, for each of the Funds, (1) daily
trading volume, the prior Business Day's reported closing price, NAV
and mid-point of the bid/ask spread at the time of calculation of such