Since it was first introduced in 2002, PIMCO All Asset Fund has lived up to expectations, providing solid after-inflation returns with low correlation to - and lower volatility than - mainstream stocks and bonds. While the Fund remains ahead of its primary benchmark in 2006, returns have been somewhat muted. These results, however, are true-to-character for this decidedly unconventional fund. Read on to learn why we believe PIMCO All Asset deserves a place in many investors' portfolios for years to come.

Designed to Be Different
PIMCO created the All Asset Strategy to meet a combination of investment needs that, in its estimation, were not being met by other investment vehicles in the marketplace. The two main ones are:

1. To protect purchasing power by generating strong long-term real (after-inflation) returns; and
2. To improve the diversification of a traditional stock and bond portfolio by tapping into the broadest possible range of asset classes.

On-Target Overall Results
More than four years after inception, the Fund has delivered on these goals. PIMCO All Asset has outpaced inflation by more than 8% since inception (at NAV). The Fund has also demonstrated a low correlation to stock and bond returns and low relative volatility, as shown in the table below.

PIMCO All Asset Fund vs. Mainstream Assets
For the period since the Fund's inception on July 31, 2002 to December 31, 2006

Performance quoted represents past performance. Past performance is no guarantee of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month-end, click here. The since inception return for the Fund presented above does not reflect the maximum sales charge of 3.75%. If it did, the return shown would have been lower. Please see the chart below for complete performance results. A redemption fee of 2% may apply to shares that are redeemed or exchanged within 30 days of acquisition. Redemption fees are paid to and retained by the Fund and are not sales charges.

Stocks and Bonds are represented by the S&P 500 Index and the Lehman Brothers Long-Term Treasury Index, respectively.

A Look at Recent Performance
So far this year, the Fund has outpaced its primary benchmark, the Lehman Brothers U.S. TIPS 1-10 Year Index, returning 6.18% vs. 3.16% for the Index as of November 30, 2006. While the Fund has not exceeded its secondary benchmark -- CPI+5% -- that isn't surprising according to portfolio manager Rob Arnott. “We realize there will be years when we don’t beat inflation by 5%,” says Arnott. He adds that this shouldn’t present a concern for the portfolio’s target clients: investors who want to protect purchasing power over a long-term investment horizon. “The way to deliver CPI plus 5% is to sharply exceed it when markets provide the opportunity, and not give it back when markets are vulnerable,” Arnott explains. Since its launch, the Fund has more than delivered on this desired end result.

Since the Fund is designed to have a low correlation to mainstream assets, it's also important to weigh the Fund’s performance in relation to them. In fact, the Fund has outpaced the broad bond market so far in 2006 (as of 11/30/06), but has underperformed stocks. As Arnott explains, these results reflect the Fund's conservative bias: “We have a defensive posture in the All Asset Fund-low allocations to equities and other high volatility asset classes.” That means during times when higher-risk asset classes perform strongly, All Asset will tend to generate more modest returns.

Positive Outlook
Looking ahead, PIMCO believes there are a number of factors that may work in the Fund’s favor over the coming months:

• Yields on longer-dated TIPS are at attractive levels, providing an opportunity for the Fund to lock in attractive real rates.
• Areas outside of mainstream stocks and bonds continue to offer attractive return potential, including developing local markets debt.
• Bond-based alpha strategies may do well in the near term due to increased total return (capital gain) potential from intermediate bonds.

Performance quoted represents past performance. Past performance is no guarantee of future results. Investment return and the principal value of an investment will fluctuate. Shares may be worth more or less than original cost when redeemed. Current performance may be lower or higher than performance shown. For performance current to the most recent month-end, click here. The MOP returns take into account the 3.75% maximum initial sales charge. A redemption fee of 2% may apply to shares that are redeemed or exchanged within 30 days of acquisition. Redemption fees are paid to and retained by the Fund and are not sales charges.