UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21238
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PIMCO Corporate Opportunity Fund
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
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(Address of principal executive offices) (Zip code)
Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, New York 10105
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3371
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Date of fiscal year end: November 30
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Date of reporting period: November 30
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. SHAREHOLDER REPORT
ANNUAL REPORT
11.30.03
PIMCO CORPORATE OPPORTUNITY FUND
[PTY LISTED NYSE THE NEW YORK STOCK EXCHANGE LOGO]
CONTENTS
Letter to Shareholders 1
Performance Summary and Statistics 2
Schedule of Investments 3-9
Statement of Assets and Liabilities 10
Statement of Operations 11
Statement of Changes in Net Assets 12
Notes to Financial Statements 13-18
Financial Highlights 19
Report of Independent Auditors 20
Dividend Reinvestment Plan 21
Tax & Other Information, Proxy Voting
Policies and Procedures 22
Privacy Policy 23
Board of Trustees 24
[PIMCO ADVISORS LOGO]
PIMCO CORPORATE OPPORTUNITY FUND LETTER TO SHAREHOLDERS
January 8, 2004
Dear Shareholder:
We are pleased to provide you with the initial annual report of the PIMCO
Corporate Opportunity Fund (the "Fund") for the period December 27, 2002
(commencement of operations) through November 30, 2003.
Please refer to the following page for specific Fund information. If you have
any questions regarding the information provided, please contact your financial
advisor or call our shareholder services area at 1-800-331-1710. Please note
that a wide range of information and resources can be accessed through our Web
site, www.pimcoadvisors.com.
We at the Fund, together with PIMCO Advisors Fund Management LLC, the Fund's
investment manager, and Pacific Investment Management Co. LLC, the Fund's
sub-adviser, thank you for investing with us. We remain dedicated to serving
your investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
Stephen Treadway Brian S. Shlissel
CHAIRMAN PRESIDENT, CHIEF EXECUTIVE OFFICER
PIMCO CORPORATE OPPORTUNITY FUND PERFORMANCE SUMMARY AND STATISTICS
November 30, 2003 (unaudited)
SYMBOL:
PTY
OBJECTIVE:
Seeks maximum total return through a combination of current income and capital
appreciation.
PRIMARY INVESTMENTS:
U.S. dollar-denominated corporate debt obligations of varying maturities and
other corporate income-producing securities.
INCEPTION DATE:
December 27, 2002
TOTAL NET ASSETS(1):
$1,653.4 million
PORTFOLIO MANAGERS:
David Hinman
Mark Kiesel
TOTAL RETURN(2): MARKET PRICE NAV
-------------------------------------------------------------------------------
Commencement of Operations (12/27/02) to 11/30/03 22.50% 29.90%
[CHART]
COMMON SHARE PRICE PERFORMANCE:
Commencement of Operations (12/27/02) to 11/30/03
NAV MARKET PRICE
12/27/2002 $ 14.30 $ 15.01
1/3/2003 $ 14.35 $ 15.04
1/10/2003 $ 14.70 $ 15.30
1/17/2003 $ 14.62 $ 15.34
1/24/2003 $ 14.59 $ 15.19
1/31/2003 $ 14.63 $ 15.29
2/7/2003 $ 14.63 $ 15.40
2/14/2003 $ 14.49 $ 15.62
2/21/2003 $ 14.51 $ 15.44
2/28/2003 $ 14.59 $ 15.44
3/7/2003 $ 14.78 $ 15.72
3/14/2003 $ 14.75 $ 15.61
3/21/2003 $ 14.64 $ 15.37
3/28/2003 $ 14.94 $ 15.49
4/4/2003 $ 15.26 $ 15.80
4/11/2003 $ 15.23 $ 15.56
4/18/2003 $ 15.56 $ 15.84
4/25/2003 $ 16.00 $ 15.84
5/2/2003 $ 16.47 $ 16.36
5/9/2003 $ 16.57 $ 16.50
5/16/2003 $ 16.50 $ 16.43
5/23/2003 $ 16.61 $ 16.50
5/30/2003 $ 16.59 $ 16.61
6/6/2003 $ 16.88 $ 16.86
6/13/2003 $ 17.06 $ 17.09
6/20/2003 $ 17.01 $ 16.82
6/27/2003 $ 16.85 $ 16.79
7/3/2003 $ 16.83 $ 17.02
7/11/2003 $ 16.78 $ 16.63
7/18/2003 $ 16.64 $ 16.30
7/25/2003 $ 16.50 $ 16.13
8/1/2003 $ 15.84 $ 15.38
8/8/2003 $ 15.91 $ 15.86
8/15/2003 $ 15.47 $ 15.45
8/22/2003 $ 15.94 $ 15.61
8/29/2003 $ 16.08 $ 15.79
9/5/2003 $ 16.33 $ 16.13
9/12/2003 $ 16.33 $ 16.32
9/19/2003 $ 16.60 $ 16.36
9/26/2003 $ 16.68 $ 16.29
10/3/2003 $ 16.68 $ 16.35
10/10/2003 $ 16.65 $ 16.18
10/17/2003 $ 16.77 $ 16.27
10/24/2003 $ 16.84 $ 16.35
10/31/2003 $ 16.86 $ 16.58
11/7/2003 $ 16.83 $ 16.64
11/14/2003 $ 17.06 $ 16.65
11/21/2003 $ 17.11 $ 16.62
11/30/2003 $ 17.08 $ 16.88
MARKET PRICE / NET ASSET VALUE:
Market Price $ 16.88
Net Asset Value $ 17.08
Market Price Yield(3) 9.77%
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the redeemable value at
the end of the period and dividing the remainder by the initial investment and
expressing the result as a percentage. The calculation assumes that all income
dividends have been reinvested at prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect broker commissions
or sales charges. Total return for a period of less than one year is not
annualized.
An investment in the Fund involves risk, including the loss of principal.
Investment return, price, yield and net asset value will fluctuate with changes
in market conditions. This data is provided for information only and is not
intended for trading purposes. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current monthly
per share dividend to common shareholders by the market price per common share
at November 30, 2003.
2
PIMCO CORPORATE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS
November 30, 2003
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
LONG-TERM INVESTMENTS--89.7%
CORPORATE BONDS & NOTES - 77.0%
AIRLINES - 5.3%
Continental Airlines, Inc., pass thru certificates,
$ 4,656 6.703%, 6/15/21, Ser. 01-1 Baa3/A- $ 4,649,980
3,500 7.373%, 12/15/15, Ser. 01-1 Ba1/BBB 2,990,579
2,000 7.487%, 10/2/10, Ser. 00-2 Baa3/A 2,019,141
10,584 7.707%, 4/2/21, Ser. 00-2 Baa3/A- 10,684,969
Delta Airlines, Inc., pass thru certificates,
13,484 7.57%, 11/18/10, Ser. 00-1 Baa2/A 13,899,144
12,000 7.92%, 11/18/10, Ser. 00-1 Baa3/BBB 10,813,112
Northwest Airlines Corp., pass thru certificates,
1,681 6.81%, 2/1/20, Ser. 991A Baa3/BBB- 1,494,609
14,250 6.841%, 4/1/11, Ser. 01-1 Baa3/A 13,967,518
5,737 7.575%, 3/1/19, Ser. 992A Baa2/A+ 5,909,474
United Airlines, Inc., pass thru certificates,
15,411 7.186%, 4/1/11, Ser. 00-2 Ba3/BBB- 13,134,355
10,000 7.73%, 7/1/10, Ser. 00-1 Ba3/BBB- 8,212,338
---------------
87,775,219
===============
AUTOMOTIVE - 3.2%
4,000 Auburn Hills Trust, 12.375%, 5/1/20 A3/BBB 5,746,820
8,000 DaimlerChrysler Holdings Co., 1.94%, 9/26/05 (a) A3/BBB 8,005,144
21,000 Ford Motor Co., 7.45%-9.98%, 7/16/31-2/15/47 Baa1/BBB- 21,169,362
15,000 General Motors Corp., 8.375%-9.40%, 7/15/21-7/5/33 Baa1/BBB 18,288,364
---------------
53,209,690
===============
BANKING - 1.3%
1,000 HSBC Capital Funding LP., 4.61%, 12/13/49
(acquired 6/24/03; cost-$1,000,000) (b) (c) A2/A- 942,813
9,706 Riggs Capital Trust II, 8.875%, 3/15/27, Ser. C Ba2/B+ 9,851,590
3,500 Royal Bank of Canada 1.67%, 11/8/11 (a) Aa3/A+ 3,516,800
8,000 Sumitomo Mitsui Banking, 8.15%, 8/1/08 Baa1/NR 8,169,400
---------------
22,480,603
===============
CHEMICALS - 0.9%
3,000 Arco Chemical Co., 10.25%, 11/1/10 B1/BB- 3,030,000
8,445 Equistar Chemical L.P., 10.125%, 9/1/08 B2/BB- 8,993,925
1,045 Lyondell Chemical Co., 9.50%, 12/15/08 B1/BB- 1,065,900
2,000 Millennium America Inc., 9.25%, 6/15/08
(acquired 4/22/03; cost-$2,162,051) (b) (c) Na/BB- 2,155,000
---------------
15,244,825
===============
DIVERSIFIED MANUFACTURING - 3.0%
5,000 Hutchison Whampoa Int'l Ltd., 7.45%, 11/24/33
(acquired 11/19/03; cost-$4,988,702) (b) (c) A3/A- 4,965,177
39,785 Tyco International Group SA,
5.50%-7.00%, 11/19/08-6/15/28 Ba2/BBB- 44,885,810
---------------
49,850,987
===============
ELECTRONICS - 2.1%
2,000 CMS Energy Corp., 8.90%, 7/15/08 B3/B+ 2,125,000
29,630 Ipalco Enterprises, Inc., 7.375%-7.625%, 11/14/08-11/14/11 Ba1/BB- 32,518,925
---------------
34,643,925
===============
3
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
----------------------------------------------------------------------------------------------------------
ENERGY - 2.2%
$ 7,000 Noram Energy Resources Inc., 6.50%, 2/1/08 Ba1/BBB $ 7,477,456
10,000 Southern Natural Gas Co., 8.875%, 3/15/10 B1/B+ 11,075,000
3,100 Transcontinental Gas Pipe Corp., 7.00%, 8/15/11, Ser. B B1/B+ 3,355,750
15,000 Williams Cos., Inc., 7.875%, 9/1/21 B3/B+ 15,075,000
---------------
36,983,206
===============
FINANCIAL SERVICES - 5.6%
4,000 Beaver Valley Funding Corp., 8.625%, 6/1/07 Baa3/BBB- 4,341,836
2,500 CIT Group, Inc., 1.59125% 7/29/05 (a) A2/A 2,511,160
2,750 Fiat Finance Lux. Ltd., 3.25%, 1/9/07
(acquired 7/24/03; cost-$2,625,116) (b) (c) Ba3/NR 2,739,688
46,991 Finova Group, Inc., 7.50%, 11/15/09 NR/NR 26,314,960
5,000 Ford Motor Credit Co., 1.60%, 7/18/05 (a) A3/BBB- 4,934,350
1,000 Ford Motor Credit Co., 6.875%, 2/1/06 A3/BBB- 1,053,031
11,000 General Motors Acceptance Corp., 2.41%, 10/20/05 (a) A3/BBB 11,032,021
20,000 General Motors Acceptance Corp., 8.00%, 11/1/31 A3/BBB 21,196,980
9,200 Mizuho JGB Investment, 9.87%, 12/30/49
(acquired 1/14/03; cost-$8,960,520) (b) (c) Baa3/B+ 10,152,706
8,300 Mizuho Preferred Capital, 8.79%, 12/29/49
(acquired 1/10/03; cost-$7,413,173) (b) (c) Baa3/B+ 8,943,250
---------------
93,219,982
===============
FINANCING - 0.5%
7,500 Pemex Proj. Master Trust, 8.625%, 2/1/22 Baa1/BBB- 8,231,250
---------------
HEALTHCARE & HOSPITALS - 3.2%
36,000 Healthsouth Corp., 7.625%, 6/1/12 (d) Caa2/D 33,120,000
23,000 Tenet Healthcare Corp., 5.375%-6.875%, 11/15/06-11/15/31 Ba3/BBB- 21,002,500
---------------
54,122,500
===============
HOTELS/GAMING - 3.1%
13,500 Hilton Hotels Corp., 7.625%, 12/1/12 Ba1/BBB- 14,985,000
1,200 Mandalay Resort Group, 9.375%, 2/15/10 Ba3/BB- 1,386,000
4,875 Park Place Entertainment Corp., 9.375%, 2/15/07 Ba2/BB- 5,460,000
24,150 Starwood Hotels & Resorts, 7.375%-7.875%, 5/1/12-11/15/25 Ba1/BB+ 26,045,063
4,365 Times Square Hotels Trust, 8.528%, 8/1/26
(acquired 11/18/03; cost-$4,823,486) (b) (c) (f) Baa3/BB+ 4,212,334
---------------
52,088,397
===============
MISCELLANEOUS - 3.5%
5,000 AES Red Oak LLC., 9.20%, 11/30/29, Ser. B B2/BB- 5,231,250
8,882 Cedar Brakes II LLC., 9.875%, 9/1/13 Caa1/B 9,147,997
6,435 HYDI 8.00%, 6/20/08 (acquired 9/23/03;
cost-$6,493,325) (b) (c) (h) B2/NR 6,595,875
26,100 Morgan Stanley TRACERS, 5.878%, 3/1/07
(acquired 3/27/03; cost-$27,859,890) (b) (c) (h) A3/NR 27,906,590
8,600 Tokai PFD Capital Co., LLC., 9.98% 12/29/49
(acquired 1/9/03-4/25/03; cost-$7,938,473) (b) (c) Baa3/B+ 9,615,531
---------------
58,497,243
===============
MULTI-MEDIA - 7.9%
17,250 AOL Time Warner Inc., 6.875%-7.70%, 5/1/12-5/1/32 Baa1/BBB+ 19,648,743
7,500 Comcast Cable Communications, 6.75%, 1/30/11 Baa3/BBB 8,308,582
4
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
----------------------------------------------------------------------------------------------------------
MULTI-MEDIA (CONCLUDED)
$ 10,000 Comcast Cable Holdings, 8.375%, 3/15/13 Baa3/BBB $ 12,154,980
CSC Holdings Inc.,
32,240 7.25%-7.875%, 2/15/18-7/15/18 B1/BB- 32,285,713
4,500 8.125%, 8/5/09, Ser. B B1/BB- 4,702,500
16,050 News America Holdings, Inc., 7.43%, 10/1/26 Baa3/BBB- 18,347,397
20,000 Rogers Cable Inc., 8.75%, 5/1/32 Ba2/BBB- 22,900,000
13,000 Shaw Communications Inc., 7.20%-8.25%, 4/11/10-12/15/11 Ba2/BB+ 14,375,000
---------------
132,722,915
===============
OIL & GAS - 5.1%
Centerpoint Energy Resources Corp.,
23,000 7.75%, 2/15/11 Ba1/BBB 25,784,955
5,000 7.875%, 4/1/13 (acquired 3/18/03; cost-$5,000,000) (b) (c) Ba1/BBB 5,671,220
21,500 8.125%, 7/15/05, Ser. B Ba1/BBB 22,972,127
28,200 Coastal Corp., 7.42%-7.625%, 9/1/08-2/15/37 Caa1/B 22,107,000
5,000 Key Energy Services Inc., 14.00%, 1/15/09, Ser. B Ba3/B+ 5,425,000
2,650 Transocean Inc., 9.50%, 12/15/08 Baa2/A- 3,266,695
---------------
85,226,997
===============
PAPER - 5.0%
33,500 Abitibi-Consolidated Inc., 7.50%-8.50%, 4/1/28-8/1/29 Ba1/BB+ 31,420,584
Georgia-Pacific Corp.,
25,305 7.75%-9.875%, 11/1/21-11/15/29 Ba3/BB+ 25,867,388
12,000 8.125%, 6/15/23 Ba3/NR 11,850,000
11,500 8.875%, 2/1/10
(acquired 1/23/03-1/28/03; cost-$11,369,524) (b) (c) Ba2/BB+ 13,081,250
2,000 Smurfit Capital Funding plc, 7.50%, 11/20/25 Ba3/BB- 1,920,000
---------------
84,139,222
===============
RETAIL - 0.9%
13,000 JC Penney Co. Inc., 8.125%, 4/1/27 Ba3/BB+ 14,300,000
---------------
TELECOMMUNICATIONS - 15.3%
30,000 AT&T Corp., 8.00%, 11/15/31 Baa2/BBB 34,566,870
18,000 AT&T Wireless Svcs. Inc., 8.125%-8.75%, 5/1/12-3/1/31 Baa2/BBB 20,739,002
1,789 Calpoint Receivables Structured Trust 2001, 7.44%, 12/10/06
(acquired 10/14/03; cost-$1,762,930) (b) (c) Caa1/NR 1,797,772
6,000 Cincinnati Bell Inc., 6.33%, 12/30/05 Ba2/NR 6,165,000
Panamsat Corp.,
21,650 6.875%, 1/15/28 Ba2/BB- 21,352,313
20,000 8.50%, 2/1/12 Ba3/B- 21,850,000
23,670 Qwest Capital Funding, 7.00%-7.90%, 8/3/09-8/15/10 Caa2/CCC+ 22,869,112
Qwest Corp.,
3,000 7.25%, 9/15/25 Ba3/B- 2,962,500
6,150 8.875%, 3/15/12 (acquired 1/22/03; cost-$6,372,522) (b) (c) Ba3/B- 7,011,000
7,950 13.00%, 12/15/07
(acquired 5/14/03-5/15/03; cost-$8,661,856) (b) (c) NR/CCC+ 9,261,750
12,340 Rogers Cantel Inc., 9.75%, 6/1/16 Ba3/BB+ 14,622,900
74,100 Sprint Capital Corp. (FON Group),
6.375%-8.75% 5/1/09-3/15/32 Baa3/BBB- 79,407,998
24,000 WorldCom, Inc. 7.75%-8.25%, 5/15/06-3/23/25 (d) NR/NR 12,867,500
---------------
255,473,717
===============
5
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
----------------------------------------------------------------------------------------------------------
UTILITIES - 8.9%
$ 7,781 AES Corp., 10.00%, 7/15/05
(acquired 4/3/03; cost-$7,949,318) (b) (c) B2/BB $ 7,975,948
14,367 East Coast Power LLC. 6.737%-7.066%, 3/31/08-3/31/12, Ser. B Ba3/BB- 14,779,885
Midwest Generation LLC., pass thru certificates,
28,380 8.30%, 7/2/09, Ser. A B2/B 29,089,500
13,070 8.56%, 1/2/16, Ser. B B2/B 13,266,050
44,500 PSEG Energy Holdings, 8.50%-10.00%, 10/1/09-6/15/11 Ba3/BB- 46,920,625
22,354 South Point Energy Center LLC, 8.40%, 5/30/12
(acquired 12/30/02-3/17/03; cost-$16,956,832) (b) (c) B2/B 21,026,042
15,000 Western Energy Inc., 8.50%, 7/1/22 Ba1/BBB- 15,768,600
---------------
148,826,650
===============
Total Corporate Bonds & Notes (cost-$1,151,414,061) 1,287,037,328
===============
MORTGAGE-RELATED SECURITIES - 0.2%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.2%
3,329 PPM America High Yield CBO Ltd., 2.07%, 6/1/11 (a) (f)
(cost-$2,646,191) NR/NR 2,667,737
---------------
CONVERTIBLE NOTE - 0.0%
OIL & GAS - 0.0%
8 Amerada Hess Corp., 7.00%, 12/1/06 (cost-$400,000) NR/BB+ 403,600
---------------
SOVEREIGN DEBT OBLIGATIONS - 6.2%
BRAZIL - 2.8%
Federal Republic of Brazil,
16,400 2.00%, 4/15/06, Ser. EI-L (a) B2/B+ 16,195,000
30,550 8.00%-11.50%, 3/12/08-4/15/14 B2/B+ 30,955,827
---------------
47,150,827
---------------
COLOMBIA - 0.1%
1,000 Republic of Colombia, 10.00%, 1/23/12 Ba2/BB 1,062,500
---------------
MEXICO - 1.1%
16,000 United Mexican States, 6.375%-11.375%, 1/14/11-9/15/16 Baa2/BBB- 19,390,500
---------------
PANAMA - 0.9%
13,000 Republic of Panama, 9.375%-10.75%, 7/23/12-5/15/20 Ba1/BB 15,115,000
---------------
PERU - 1.0%
15,000 Republic of Peru, 9.125%, 2/21/12 Ba3/BB- 16,725,000
---------------
RUSSIA - 0.2%
3,250 Russian Federation, 5.00%, 3/1/30, Ser. REGS Baa3/BB 3,076,125
---------------
UKRAINE - 0.1%
1,653 Ukraine Government, 7.65%-11.00%, 3/15/07-6/11/13 B1/B 1,742,637
---------------
Total Sovereign Debt Obligations (cost-$90,928,175) 104,262,589
===============
6
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
----------------------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS (c) (e) (f) - 3.0%
FINANCE - 1.1%
$ 9,337 Nextel Finance Co., 4.75%, 6/30/08, Term B
(Credit Suisse First Boston)
(acquired 1/3/03-3/28/03; cost-$8,857,613) NR/NR $ 9,379,430
9,337 Nextel Finance Co., 5.00%, 12/31/08, Term C
(Credit Suisse First Boston)
(acquired 1/3/03-3/28/03; cost-$8,848,074) NR/NR 9,379,430
---------------
18,758,860
===============
MULTI-MEDIA - 0.9%
16,290 Charter Communications Holdings, LLC, 4.58%, 3/18/08, Term B
(Morgan Stanley Senior Funding, Inc. )
(acquired 1/3/03-1/21/03; cost-$14,249,586) NR/NR 15,761,411
---------------
OIL & GAS - 0.5%
8,190 Aquila, Inc. 8.75%, 4/15/06, Term 2
(Morgan Stanley Senior Funding, Inc.)
(acquired 4/1/03-4/14/03; cost-$8,156,697) NR/NR 8,425,952
---------------
TELECOMMUNICATIONS - 0.2%
2,985 Crown Castle International Corp., 4.15%, 3/15/08, Term B
(Goldman Sachs Credit Partners)
(acquired 1/21/03; cost-$2,883,968) NR/NR 3,018,208
---------------
UTILITIES - 0.3%
5,000 AES Corp., 5.13%-5.32% 7/29/08, Term B
(Bank of America) (acquired 7/28/03; cost-$4,981,256) NR/NR 5,057,145
---------------
Total Loan Participations (cost-$47,977,194) 51,021,576
===============
U.S. GOVERNMENT AGENCY SECURITIES - 3.3%
FANNIE MAE-2.4%
4,065 5.5%, 4/1/16-3/1/18 NR/NR 4,191,568
35,000 5.5%-6.00%, 12/31/18-12/31/33(j) NR/NR 35,987,500
---------------
40,179,068
===============
FREDDIE MAC - 0.2%
3,000 5.50%, 12/31/33 (j) NR/NR 3,090,469
---------------
SMALL BUSINESS ADMINISTRATION - 0.7%
9,823 5.24%-6.03%, 2/1/12-8/1/23 NR/NR 10,017,361
1,819 6.44%, 6/1/21, Ser. 20-F NR/NR 1,969,340
---------------
11,986,701
===============
Total U.S. Government Agency Securities (cost-$55,042,772) 55,256,238
===============
Total Long-Term Investments (cost-$1,348,408,393) 1,500,649,068
===============
SHORT-TERM INVESTMENTS--10.3%
CORPORATE NOTES - 9.7%
BANKING - 0.3%
5,800 Royal Bank of Scotland plc., 1.08%, 1/27/04 NR/NR 5,790,082
---------------
7
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P)* VALUE**
DIVERSIFIED MANUFACTURING - 0.9%
$ 12,000 Tyco International Group SA., 4.375%, 11/19/04 Ba2/BBB- $ 14,348,441
---------------
ELECTRONICS - 4.3%
69,930 Pinnacle Partners, 8.83%, 8/15/04
(acquired 1/3/03-11/7/03; cost-$68,809,881) (b) (c) Ba2/BB+ 72,415,200
---------------
ENERGY - 1.9%
30,750 Williams Cos., Inc., 9.25%, 3/15/04 B3/B+ 31,518,750
---------------
FINANCE - 0.6%
5,000 Bombardier Capital Inc., 7.50%, 8/15/04
(acquired 3/28/03-4/23/03; cost-$4,830,926) (b) (c) Baa3/BBB- 5,200,000
5,000 Ford Motor Credit Co., 3.03563%, 10/25/04 (a) A3/BBB- 5,042,090
---------------
10,242,090
===============
MISCELLANEOUS - 1.2%
2,200 Danske Corp. Ser. A., 1.065%, 1/20/04 NR/NR 2,196,746
10,000 Gemstone Investors Ltd., 7.71%, 10/31/04
(acquired 12/30/02; cost-$8,765,837) (b) (c) Caa1/B 10,062,500
7,100 Nestle Capital Corp., 1.06%, 2/9/04 NR/NR 7,084,238
---------------
19,343,484
===============
TELECOMMUNICATIONS - 0.5%
10,000 WorldCom, Inc. 7.50%, 8/20/04 (d) WR/NR 8,125,000
---------------
Total Short-Term Corporate Notes (cost-$152,093,577) 161,783,047
===============
U.S. GOVERNMENT AGENCY DISCOUNT NOTES - 0.3%
FREDDIE MAC - 0.3%
4,600 1.10%, 4/1/04 (cost-$4,582,852) NR/NR 4,581,917
---------------
U.S. TREASURY BILLS (g) - 0.0%
330 1.015%, 12/18/03 (cost-$329,871) Aaa/AAA 329,871
---------------
REPURCHASE AGREEMENT - 0.3%
4,875 State Street Bank & Trust Co.,
dated 11/28/03, 0.80%, due 12/1/03,
proceeds $4,875,325: collateralized by Federal Farm Credit Bank,
8/15/05, valued at $4,974,253 (cost-$4,875,000) 4,875,000
---------------
Total Short-Term Investments (cost-$161,881,300) 171,569,835
===============
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN (cost-1,510,289,693) - 100.1% 1,672,218,903
===============
CALL OPTIONS WRITTEN (i)--(0.1)%
CONTRACTS
---------
16,050 News America Holdings, strike price $100, expires 10/1/06
(premium received $0) (999,353)
---------------
TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN (cost-$1,510,289,693) - 100.0% $ 1,671,219,550
===============
8
NOTES TO SCHEDULE OF INVESTMENTS:
* Unaudited
** Long-term debt securities are valued by an independent pricing service
authorized by the Board of Trustees.
(a) Floating Rate Security. Interest rate shown is the rate in effect on
November 30, 2003.
(b) Security exempt from registration, under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, typically to qualified institutional investors. At November
30, 2003, these securities amounted to $231,731,646 or 13.9% of investments.
(c) Private Placement. Restricted as to resale and may not have a readily
available market; the aggregate cost and value of such securities is
$282,753,222 or 16.9% of investments.
(d) Security in default.
(e) Participation interests were acquired through the financial institution
indicated parenthetically.
(f) Illiquid security.
(g) All or partial principal amount segregated as initial margin on futures
contracts.
(h) Credit-linked trust certificate
(i) Non-income producing security
(j) When issued or delayed-delivery security. To be delivered/settled after
November 30, 2003
+ The cost basis of portfolio securities for federal income tax purposes is
$1,510,292,743. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $164,616,384; aggregate
gross unrealized depreciation for securites in which there is an excess of
tax cost over value is $2,690,224; net unrealized appreciation for federal
income tax purposes is $161,926,160. The cost basis for financial statement
purposes and federal income tax purposes differ due to the treatment of wash
sales.
GLOSSARY:
HYDI - JP Morgan High Yield Debt Index
NR - Not Rated
TRACERS - Traded Custody Receipts
WR - Withdrawn Rating
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
9
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF ASSETS AND LIABILITIES
November 30, 2003
ASSETS:
Investments, at value (cost-$1,510,289,693) $ 1,672,218,903
------------------
Cash (including foreign currency of $1,947,888 with a cost of $1,923,323) 1,948,072
------------------
Interest receivable 30,296,287
------------------
Receivable for investments sold 2,261,287
------------------
Interest receivable from swaps 238,744
------------------
Unrealized appreciation on swaps 128,407
------------------
Prepaid expenses 19,506
------------------
Total Assets 1,707,111,206
==================
LIABILITIES:
Payable for investments purchased 38,840,781
------------------
Dividends payable to common and preferred shareholders 8,851,376
------------------
Net unrealized depreciation on forward foreign currency contracts 2,147,039
------------------
Unrealized depreciation on swaps 1,487,161
------------------
Options written, at value (premium received $0) 999,353
------------------
Investment management fee payable 812,086
------------------
Interest payable from swaps 202,065
------------------
Payable for variation margin on futures contracts 110,000
------------------
Accrued expenses 233,630
------------------
Total Liabilities 53,683,491
------------------
PREFERRED SHARES ($0.00001 PAR VALUE AND $25,000 NET ASSET AND LIQUIDATION VALUE PER
SHARE APPLICABLE TO AN AGGREGATE OF 22,600 SHARES ISSUED AND OUTSTANDING) 565,000,000
------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 1,088,427,715
==================
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock:
Par value ($0.00001 per share, applicable to 63,730,209 shares issued and outstanding) $ 637
------------------
Paid-in-capital in excess of par 905,801,933
------------------
Undistributed net investment income 8,157,119
------------------
Net realized gain on investments, futures contracts, options written, swaps
and foreign currency transactions 17,333,338
------------------
Net unrealized appreciation of investments, futures contracts, options written, swaps
and foreign currency transactions 157,134,688
------------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 1,088,427,715
------------------
NET ASSET VALUE PER COMMON SHARE $ 17.08
==================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
10
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF OPERATIONS
For the period December 27, 2002* through November 30, 2003
INTEREST INCOME:
Interest $ 113,333,029
------------------
EXPENSES:
Investment management fees 8,160,061
------------------
Auction agent fees and commissions 1,097,561
------------------
Custodian and accounting agent fees 314,393
------------------
Reports to shareholders 71,764
------------------
Audit and tax services 50,889
------------------
New York Stock Exchange listing fees 44,548
------------------
Trustees' fees and expenses 42,765
------------------
Investor relations 32,538
------------------
Legal fees 29,013
------------------
Transfer agent fees 25,379
------------------
Insurance expense 20,698
------------------
Organizational expense 15,000
------------------
Excise tax expense 6,230
------------------
Miscellaneous 17,385
------------------
Total expenses 9,928,224
------------------
Less: custody credits earned on cash balances (38,213)
------------------
Net expenses 9,890,011
------------------
NET INVESTMENT INCOME $ 103,443,018
==================
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 21,206,621
------------------
Futures contracts (4,858,889)
------------------
Options written 1,481,026
------------------
Swaps 71,105
------------------
Foreign currency transactions (3,131,053)
------------------
Net unrealized appreciation of investments, futures contracts, options written, swaps
and foreign currency transactions 157,134,688
------------------
Net realized and unrealized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 171,903,498
------------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS $ 275,346,516
==================
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (5,272,280)
------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM INVESTMENT OPERATIONS $ 270,074,236
==================
* Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
11
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
FOR THE PERIOD
DECEMBER 27, 2002*
THROUGH
NOVEMBER 30, 2003
------------------
INVESTMENT OPERATIONS:
Net investment income $ 103,443,018
------------------
Net realized gain on investments, futures contracts, options written, swaps and
foreign currency transactions 14,768,810
------------------
Net unrealized appreciation of investments, futures contracts, options written,
swaps and foreign currency transactions 157,134,688
------------------
Net increase in net assets resulting from investment operations 275,346,516
==================
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (5,272,280)
------------------
Net increase in net assets applicable to common shareholders resulting from
investment operations 270,074,236
------------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (87,470,321)
------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock 905,769,750
------------------
Preferred shares underwriting discount charged to paid-in capital
in excess of par (5,650,000)
------------------
Common stock and preferred shares offering costs charged to
paid-in capital in excess of par (2,096,436)
------------------
Reinvestment of dividends 7,700,483
------------------
Net increase in capital share transactions 905,723,797
------------------
Total increase in net assets applicable to common shareholders 1,088,327,712
==================
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 100,003
------------------
End of period (including undistributed net investment income
of $8,157,119) $ 1,088,427,715
==================
COMMON SHARES ISSUED AND REINVESTED:
Issued 63,230,000
------------------
Issued in reinvestment of dividends 493,228
------------------
NET INCREASE 63,723,228
==================
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
12
PIMCO CORPORATE OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS
November 30, 2003
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PIMCO Corporate Opportunity Fund (the "Fund"), was organized as a Massachusetts
business trust on September 13, 2002. Prior to commencing operations on December
27, 2002, the Fund had no operations other than matters relating to its
organization and registration as a diversified, closed-end management investment
company registered under the Investment Company Act of 1940 and the rules and
regulations thereunder, as amended, and the sale and issuance of 6,981 shares of
beneficial interest at an aggregate purchase price of $100,003 to Allianz
Dresdner Asset Management of America L.P. ("ADAM"). PIMCO Advisors Fund
Management LLC (the "Investment Manager"), serves as the Fund's Investment
Manager and is an indirect wholly-owned subsidiary of ADAM. ADAM is an indirect,
majority-owned subsidiary of Allianz AG. The Fund has an unlimited amount of
$0.0001 par value common stock authorized.
The Fund seeks to maximize total return through a combination of current income
and capital appreciation in a diversified portfolio of U.S. dollar denominated
corporate debt obligations of varying maturities and other income producing
securities.
The Fund issued 55,500,000 shares of common stock, in its initial public
offering. An additional 7,730,000 shares were issued in connection with the
exercise of the underwriters' over-allotment option. These shares were all
issued at $15.00 per share before an underwriting discount of $0.675 per share.
Common offering costs of $1,541,506 (representing $0.024 per share) were offset
against the proceeds of the offering and have been charged to paid-in capital in
excess of par. The Investment Manager agreed to pay all offering costs (other
than the sales load) and organizational expenses exceeding $0.03 per share.
Since aggregate offering costs and organizational expenses were less than $0.03
per common share, organizational expenses of $15,000 were expensed in the
current period. In addition, the underwriters' commission and offering costs
associated with the issuance of Preferred Shares in the amounts of $5,650,000
and $554,930, respectively, have been charged to paid-in capital in excess of
par.
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates.
In the normal course of business the Fund enters into contracts that contain a
variety of representations which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Fund that have not yet been asserted.
However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(a) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market quotations
are readily available are stated at market value. Debt securities are valued
daily by an independent pricing service approved by the Board of Trustees.
Prices may be obtained from independent pricing services which use information
provided by market makers or estimates of market values obtained from yield data
relating to investments or securities with similar characteristics. The value of
the Fund's investments is determined at the close of regular trading (normally,
4:00 p.m., Eastern Time) on the New York Stock Exchange ("NYSE") on each day the
NYSE is open or if no sales are reported, as is the case for most securities
traded over-the-counter, the mean between representative bid and asked
quotations obtained from a quotation reporting system or from established market
makers. Fixed income securities, including those to be purchased under firm
commitment agreements, are normally valued on the basis of quotes obtained from
brokers and dealers or pricing services. Short-term investments maturing in 60
days or less are valued at amortized cost, which approximates market value.
Certain fixed income securities for which daily market quotations are not
readily available may be valued, pursuant to guidelines established by the Board
of Trustees, with reference to fixed income securities whose prices are more
readily obtainable. The prices used by the Fund to value securities may differ
from the value that would be realized if the securities were sold.
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Securities
purchased or sold on a when-issued or delayed delivery basis may be settled a
month or more after trade date. Realized gains and losses on investments are
determined on the identified cost basis. Interest income is recorded on an
accrual basis. Discounts or premiums on debt securities purchased are accreted
or amortized to interest income over the lives of the respective securities
using the effective interest method.
(c) FEDERAL INCOME TAXES
The Fund intends to distribute all of its taxable income and to comply with the
other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no provision for U.S.
federal income taxes is required. In addition, by distributing substantially all
of its ordinary income and long-term capital gains, if any, during each calendar
year the Fund intends not to be subject to U.S. federal excise tax. Under
13
certain circumstances, however, the Fund may determine to retain a portion of
its taxable income, if such retention is deemed to be in the interest of the
Fund and its shareholders. In such a circumstance, the Fund may be subject to a
4% excise tax.
(d) DIVIDENDS AND DISTRIBUTIONS -- COMMON STOCK
The Fund declares dividends from net investment income monthly to common
shareholders. Distributions of net realized capital gains, if any, are paid at
least annually. The Fund records dividends and distributions to its shareholders
on the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book-tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their income tax treatment; temporary differences do not require
reclassification. To the extent dividends and/or distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as dividends and/or distributions of paid-in capital in excess of par.
(e) CREDIT DEFAULT/INTEREST RATE SWAPS
The Fund enters into interest rate and credit default swap contracts ("swaps")
for investment purposes, to manage its interest rate and credit risk or to add
leverage.
As a seller in the credit default swap contract, the Fund would be required to
pay the par or other agreed-upon value of a referenced debt obligation to the
counterparty in the event of a default by a third party, such as a U.S. or
foreign corporate issuer, on the referenced debt obligation. In return, the Fund
would receive from the counterparty a periodic stream of payments over the term
of the contract provided that no event of default has occurred. If no default
occurs, the Fund would keep the stream of payments and would have no payment
obligations. Such periodic payments are accrued daily and recorded as interest
income.
The Fund may also purchase credit default swap contracts in order to hedge
against the risk of default of debt securities held, in which case the Fund
would function as the counterparty referenced in the preceding paragraph. As a
purchaser of a credit default swap contract, the Fund would receive the par or
other agreed upon value of a referenced debt obligation from the counterparty in
the event of default by a third party, such as a U.S. or foreign corporate
issuer on the referenced debt obligation. In return, the Fund would make
periodic payments to the counterparty over the term of the contract provided no
event of default has occurred. Such periodic payments are accrued daily and
charged to interest income.
Interest rate swap agreements involve the exchange by the Fund with a
counterparty of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Net payments of interest on interest rate swap
agreements are recorded daily as interest income.
Swaps are marked to market daily by the Fund's Investment Manager based upon
quotations from market makers and the change in value, if any, is recorded as
unrealized appreciation or depreciation in the Fund's Statement of Operations.
Payments received or made, if any, upon termination or maturity of the interest
rate swaps, net of any basis in the interest rate swaps, is recorded as a
realized gain or loss in the Statement of Operations. For a credit default swap
sold by the Fund, payment of the agreed upon amount made by the Fund in the
event of default of the referenced debt obligation is recorded as the cost of
the referenced debt obligation purchased/received. For a credit default swap
purchased by the Fund, the agreed upon amount received by the Fund in the event
of default of the referenced debt obligation is recorded as proceeds from
sale/delivery of the referenced debt obligation and the resulting gain or loss
realized on the referenced debt obligation is recorded as such by the Fund.
Entering into swaps involves, to varying degrees, elements of credit, market and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements may
default on its obligation to perform or disagree as to the meaning of the
contractual terms in the agreements, and that there may be unfavorable changes
in net interest rates.
(f) REPURCHASE AGREEMENTS
The Fund may enter into transactions with its custodian bank or securities
brokerage firms approved by the Board of Trustees whereby it purchases
securities under agreements to resell at an agreed upon price and date
("repurchase agreements"). Such agreements are carried at the contract amount in
the financial statements. Collateral pledged (the securities received), which
consists primarily of U.S. government obligations and asset backed securities,
are held by
14
the custodian bank until maturity of the repurchase agreement. Provisions of the
repurchase agreements and the procedures adopted by the Fund require that the
market value of the collateral, including accrued interest thereon, is
sufficient in the event of default by the counterparty. If the counterparty
defaults and the value of the collateral declines or if the counterparty enters
an insolvency proceeding, realization of the collateral by the Fund may be
delayed or limited.
(g) FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts for the purpose of
hedging against foreign currency risk arising from the investment or anticipated
investment in securities denominated in foreign currencies. The Fund may also
enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another. A forward foreign currency contract is an agreement between two
parties to buy and sell a currency at a set exchange rate on a future date. The
market value of a forward foreign currency contract fluctuates with changes in
forward currency exchange rates. All commitments are marked to market daily at
the applicable exchange rates and any resulting unrealized gains and losses are
recorded. Realized gains or losses are recorded at the time the forward contract
matures or by delivery of the currency. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
(h) OPTION TRANSACTIONS
For hedging purposes, the Fund may purchase and write (sell) put and call
options. The risk associated with purchasing an option is that the Fund pays a
premium whether or not the option is exercised. Additionally, the Fund bears the
risk of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is increased by the premiums paid. The proceeds
from the securities sold through the exercise of put options is decreased by the
premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded on the expiration date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security. In
writing an option, the Fund bears the market risk of an unfavorable change in
the price of the security underlying the written option. Exercise of an written
option could result in the Fund purchasing a security at a price different from
the current market.
(i) LOAN PARTICIPATIONS
The Fund may invest in loan participations. When the Fund purchases a loan
participation, the Fund typically enters into a contractual relationship with
the lender or third party selling such participations ("Selling Participant"),
but not the borrower. As a result, the Fund assumes the credit risk of the
borrower, the Selling Participant and any other persons interpositioned between
the Fund and the borrower. The Fund may not directly benefit from the collateral
supporting the senior loan in which it has purchased the loan participation.
(j) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, the Fund is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contracts, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments are known as "variation margin" and are recorded by
the Fund as unrealized appreciation or depreciation. When the contracts are
closed, the Fund records a realized gain or loss equal to the difference between
the value of the contracts at the time they were opened and the value at the
time they were closed. Any unrealized appreciation or depreciation recorded is
simultaneously reversed. The use of futures transactions involves the risk of
15
an imperfect correlation in the movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts.
(k) CREDIT-LINKED TRUST CERTIFICATES
Credit-linked trust certificates are investments in a limited purpose trust or
other vehicle formed under state law which, in turn, invests in a basket of
derivative instruments, such as credit default swaps, interest rate swaps and
other securities, in order to provide exposure to the high yield or another
fixed income market.
Like an investment in a bond, investments in these credit-linked trust
certificates represent the right to receive periodic income payments (in the
form of distributions) and payment of principal at the end of the term of the
certificate. However, these payments are conditioned on the trust's receipt of
payments from, and the trust's potential obligations to, the counterparties to
the derivative instruments and other securities in which the trust invests.
(l) WHEN-ISSUED/DELAYED-DELIVERY TRANSACTIONS
The Fund may purchase or sell securities on a when-issued or delayed-delivery
basis. These transactions involve a commitment to purchase or sell securities
for a predetermined price or yield, with payment and delivery taking place
beyond the customary settlement period. When delayed-delivery purchases are
outstanding, the Fund will set aside and maintain until the settlement date in a
designated account, liquid assets in an amount sufficient to meet the purchase
price. When purchasing a security on a delayed-delivery basis, the Fund assumes
the rights and risks of ownership of the security, including the risk of price
and yield fluctuations, and takes such fluctuations into account when
determining its net asset value. The Fund may dispose of or renegotiate a
delayed-delivery transaction after it is entered into, and may sell when-issued
securities before they are delivered, which may result in a realized gain or
loss. When the Fund sells a security on a delayed-delivery basis, the Fund does
not participate in future gains and losses with respect to the security.
(m) REVERSE REPURCHASE AGREEMENTS
The Fund engages in reverse repurchase agreements in order to add leverage to
the Fund's portfolio. In a reverse repurchase agreement, the Fund sells
securities to a bank or broker-dealer and agrees to repurchase the securities at
a mutually agreed upon date and price. Generally, the effect of such a
transaction is that the Fund can recover and reinvest all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement and still be entitled to the returns associated with those
portfolio securities. Such transactions are advantageous if the interest cost to
the Fund of the reverse repurchase transaction is less than the return it
obtains on investments purchased with the cash. Unless the Fund covers its
positions in reverse repurchase agreements (by segregating liquid assets at
least equal in amount to the forward purchase commitment), its obligations under
the agreements will be subject to the Fund's limitations on borrowings. Reverse
repurchase agreements involve leverage risk and also the risk that the market
value of the securities that the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement files for bankruptcy or becomes
insolvent, the Fund's use of the proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver, whether
to enforce the Fund's obligation to repurchase the securities.
(n) CUSTODY CREDITS ON CASH BALANCES
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian
expenses. Had these cash balances been invested in income producing securities,
they would have generated income for the Fund.
2. INVESTMENT MANAGER AND SUB-ADVISER
The Fund has entered into an Investment Management Agreement (the "Agreement")
with the Investment Manager to serve as Investment Manager of the Fund. Subject
to the supervision of the Fund's Board of Trustees, the Investment Manager is
responsible for managing, either directly or through others selected by it, the
investment activities of the Fund and the Fund's business affairs and other
administrative matters. Pursuant to the Agreement, the Investment Manager will
receive an annual fee, payable monthly, at an annual rate of 0.60% of the Fund's
average daily net assets (inclusive of net assets attributable to any preferred
shares that may be outstanding.)
The Investment Manager has retained its affiliate, Pacific Investment Management
Company LLC (the "Sub-Adviser"), to manage the Fund's investments. Subject to
the supervision of the Investment Manager, the Sub-Adviser makes all
16
investment decisions with respect to the Fund's assets. The Investment Manager
(not the Fund) pays a portion of the fees it receives to the Sub-Adviser in
return for its services, at the maximum annual rate of 0.39% of the Fund's
average daily net assets (inclusive of net assets attributable to any preferred
shares that may be outstanding) for the period from commencement of operations
through December 31, 2007 and at the maximum annual rate of 0.55% of average
daily net assets (inclusive of net assets attributable to any preferred shares
that may be outstanding) thereafter while the Agreement remains in effect,
provided that the fee will be reduced to 0.325% during the first five years of
operations and 0.45% thereafter while the Agreement remains in effect. The
Investment Manager informed the Fund that it paid the Sub-Adviser $5,304,040 in
connection with its sub-advisory services for the period ended November 30,
2003.
3. INVESTMENTS IN SECURITIES
For the period ended November 30, 2003, purchases and sales of investments,
other than short-term securities, were $1,811,927,909 and $357,716,014,
respectively.
(a) Futures contracts outstanding at November 30, 2003 were as follows:
# OF EXPIRATION UNREALIZED
TYPE CONTRACTS DATE DEPRECIATION
------------------------------------------------------------------------------------------------
Long: Financial Future Euro-Bond 10 Year EUX 400 12/13/04 $ 320,000
----------
(b) Credit default swap contracts outstanding at November 30, 2003 were as
follows:
NOTIONAL
SWAP AMOUNT FIXED
COUNTERPARTY/ PAYABLE ON PAYMENTS
REFERENCED DEBT DEFAULT RECEIVED UNREALIZED
OBLIGATION (000) TERMINATION DATE BY FUND APPRECIATION
-------------------------------------------------------------------------------------------------
Bear Stearns
Bombardier
6.125%, 6/29/2006 $ 5,000 9/20/2004 2.70% $ 39,000
Credit Suisse
Echostar Credit
5.75%, 10/1/2008 5,000 12/20/2004 1.40% 411
Goldman Sachs
Amerada Hess Credit
7.375%, 10/1/2009 5,000 12/20/2004 0.65% 2,318
Lehman Brothers
Electronic Data Systems Credit
6.00%, 8/1/2013 3,000 12/20/2004 1.90% 3,678
Morgan Stanley & Co.
Bombardier
6.75%, 5/1/12 10,000 9/20/2004 2.75% 83,000
-----------
$ 128,407
===========
(c) Interest rate swap contracts outstanding at November 30, 2003 was:
RATE TYPE
------------------------------------------
NOTIONAL
SWAP AMOUNT TERMINATION PAYMENTS MADE BY PAYMENTS RECEIVED BY UNREALIZED
COUNTERPARTY (000) DATE THE PORTFOLIO THE PORTFOLIO DEPRECIATION
---------------------------------------------------------------------------------------------------------
3 month
Lehman Brothers $ 16,050 10/1/2006 7.43% LIBOR plus 1.15% $ 1,487,161
-----------
(d) Forward foreign currency contracts outstanding at November 30, 2003 were:
U.S.$ VALUE U.S.$ VALUE UNREALIZED
SOLD: ORIGINATION DATE NOVEMBER 30, 2003 DEPRECIATION
---------------------------------------------------------------------------------------------------------
$36,182,000 Euros settling 12/5/03 $ 43,612,244 $ 45,759,283 $ 2,147,039
===========
17
(e) Transactions in options written for the period ended November 30, 2003 were:
CONTRACTS
(000) PREMIUMS
--------------------------------------------------------------------------------
Options outstanding, December 27, 2002 - -
Options written 16,053 $ 2,549,903
Options expired (2) (1,481,026)
Options terminated in closing purchase transactions (1) (1,068,877)
------- ------------
Options outstanding, November 30, 2003 16,050 $ 0
------- ------------
4. INCOME TAX INFORMATION
The tax character of dividends paid for the period December 27, 2002
(commencement of operations) through November 30, 2003 of $92,742,601 was
comprised entirely of ordinary income.
At November 30, 2003, the tax character of distributable earnings of $31,877,844
was comprised entirely of ordinary income.
5. AUCTION PREFERRED SHARES
The Fund has issued 4,520 shares of Preferred Shares Series M, 4,520 shares of
Preferred Shares Series T, 4,520 shares of Preferred Shares Series W, 4,520
shares of Preferred Shares Series TH, and 4,520 shares of Preferred Shares
Series F each with a net asset and liquidation value of $25,000 per share plus
accrued dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually.
For the period ended November 30, 2003, the annualized dividend rate ranged
from:
HIGH LOW AT NOVEMBER 30, 2003
-------------------------------------------------------------------------------------
Series M 1.375% 1.00% 1.18%
Series T 1.375% 1.069% 1.18%
Series W 1.375% 1.06% 1.20%
Series TH 1.375% 1.059% 1.20%
Series F 1.375% 1.07% 1.20%
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
6. SUBSEQUENT COMMON DIVIDEND AND DISTRIBUTION DECLARATIONS
On December 1, 2003, a dividend of $0.1375 per share was declared to common
shareholders payable December 31, 2003 to shareholders of record on December 12,
2003.
On December 19, 2003, a special income dividend and short-term capital gain
distribution of $0.08 and $0.267 per share, respectively was declared to common
shareholders. Both the special income dividend and short-term capital gain
distribution was payable January 16, 2004 to shareholders of record on December
29, 2003.
On January 2, 2004, a dividend of $0.1375 per share was declared to common
shareholders payable February 2, 2004 to shareholders of record on January 16,
2004.
18
PIMCO CORPORATE OPPORTUNITY FUND FINANCIAL HIGHLIGHTS
For a share of common stock outstanding for the period December 27, 2002*
through November 30, 2003:
Net asset value, beginning of period $ 14.33**
-------------
INVESTMENT OPERATIONS:
Net investment income 1.62
-------------
Net realized and unrealized gain on investments, futures contracts,
options written, swaps and foreign currency transactions 2.71
-------------
Total from investment operations 4.33
-------------
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (0.08)
-------------
Net increase in net assets applicable to common shares resulting from
investment operations 4.25
-------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME: (1.38)
-------------
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in capital in excess of par (0.02)
-------------
Preferred shares offering costs/underwriting discount charged to paid-in capital
in excess of par (0.10)
-------------
Total capital share transactions (0.12)
-------------
Net asset value, end of period $ 17.08
-------------
Market price, end of period $ 16.88
-------------
TOTAL INVESTMENT RETURN (1) 22.50%
-------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000) $ 1,088,428
-------------
Ratio of expenses to average net assets (2)(3)(4) 1.07%
-------------
Ratio of net investment income to average net assets (2)(4) 11.13%
-------------
Preferred shares asset coverage per share $ 73,145
-------------
Portfolio turnover 26%
-------------
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting
discount of $0.675 per share.
(1) Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of the period reported. Dividends are assumed,
for purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Total investment return does not
reflect brokerage commissions or sales charges. Total investment return for
a period of less than one year is not annualized.
(2) Calculated on the basis of income and expenses applicable to both common
and preferred shares relative to the average net assets of common
shareholders.
(3) Inclusive of expenses offset by custody credits earned on cash balances at
the custodian bank. (See note 1(n) in Notes to Financial Statements).
(4) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
19
PIMCO CORPORATE OPPORTUNITY FUND REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF
PIMCO CORPORATE OPPORTUNITY FUND
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets applicable to common shareholders and the financial
highlights present fairly, in all material respects, the financial position of
PIMCO Corporate Opportunity Fund (the "Fund") at November 30, 2003, and the
results of its operations, the changes in its net assets applicable to common
shareholders and the financial highlights for the period December 27, 2002
(commencement of operations) through November 30, 2003, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at November 30, 2003 by correspondence with the
custodian and brokers, provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
January 16, 2004
20
PIMCO CORPORATE OPPORTUNITY FUND DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Pursuant to the Fund's Dividend Reinvestment Plan (the "Plan"), all Common
Shareholders whose shares are registered in their own names will have all
dividends, including any capital gain dividends, reinvested automatically in
additional Common Shares by PFPC Inc., as agent for the Common Shareholders (the
"Plan Agent"), unless the shareholder elects to receive cash. An election to
receive cash may be revoked or reinstated at the option of the shareholder. In
the case of record shareholders such as banks, brokers or other nominees that
hold Common Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Common Shares certified from
time to time by the record shareholder as representing the total amount
registered in such shareholder's name and held for the account of beneficial
owners who are to participate in the Plan. Shareholders whose shares are held in
the name of a bank, broker or nominee should contact the bank, broker or nominee
for details. All distributions to investors who elect not to participate in the
Plan (or whose broker or nominee elects not to participate on the investor's
behalf), will be paid cash by check mailed, in the case of direct shareholder,
to the record holder by PFPC Inc., as the Fund's dividend disbursement agent.
Unless you (or your broker or nominee) elect not to participate in the Plan, the
number of Common Shares you will receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value on the payment
date, the Fund will issue new shares at the greater of (i) the net asset
value per Common Share on the payment date or (ii) 95% of the market price
per Common Share on the payment date; or
(2) If Common Shares are trading below net asset value (minus estimated
brokerage commissions that would be incurred upon the purchase of Common
Shares on the open market) on the payment date, the Plan Agent will receive
the dividend or distribution in cash and will purchase Common Shares in the
open market, on the New York Stock Exchange or elsewhere, for the
participants' accounts. It is possible that the market price for the Common
Shares may increase before the Plan Agent has completed its purchases.
Therefore, the average purchase price per share paid by the Plan Agent may
exceed the market price on the payment date, resulting in the purchase of
fewer shares than if the dividend or distribution had been paid in Common
Shares issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open market
on or shortly after the payment date, but in no event later than the
ex-dividend date for the next distribution. Interest will not be paid on
any uninvested cash payments.
You may withdraw from the Plan at any time by giving notice to the Plan Agent.
If you withdraw or the Plan is terminated, you will receive a certificate for
each whole share in your account under the Plan and you will receive a cash
payment for any fraction of a share in your account. If you wish, the Plan Agent
will sell your shares and send you the proceeds, minus brokerage commissions.
The Plan Agent maintains all shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. The Plan Agent will also furnish each person who
buys Common Shares with written instructions detailing the procedures for
electing not to participate in the Plan and to instead receive distributions in
cash. Common Shares in your account will be held by the Plan Agent in
non-certificated form. Any proxy you receive will include all Common Shares you
have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvested dividends and distributions are taxed in the same
manner as cash dividends and distributions.
The Fund and the Plan Agent reserve the right to amend or terminate the Plan.
There is no direct service charge to participants in the Plan; however, the Fund
reserves the right to amend the Plan to include a service charge payable by the
participants. Additional information about the Plan may be obtained from the
Fund's transfer agent, PFPC Inc., P.O.Box 43027, Providence, RI 02940-3027,
telephone number 1-800-331-1710.
21
PIMCO CORPORATE OPPORTUNITY FUND TAX & OTHER INFORMATION, PROXY VOTING POLICIES
AND PROCEDURES
TAX INFORMATION (UNAUDITED):
Subchapter M of the Internal Revenue Code of 1986, as amended, requires the Fund
to advise shareholders within 60 days of the Fund's tax year-end (November 30,
2003) as to the federal tax status of dividends and distributions received by
shareholders during such tax year. Per share dividends for the tax year ended
November 30, 2003 were as follows:
Dividends to common shareholders from ordinary income $ 1.373
Dividends to preferred shareholders from ordinary income $ 233.287
Since the Fund's tax year is not the calendar year, another notification will be
sent with respect to calendar year 2003. In January 2004, shareholders will be
advised on IRS Form 1099 DIV as to the federal tax status of the dividends and
distributions received during calendar 2003. The amount that will be reported,
will be the amount to use on your 2003 federal income tax return and may differ
from the amount which must be reported in connection with the Fund's tax year
ended November 30, 2003. Shareholders are advised to consult with their tax
advisers as to the federal, state and local tax status of the income received
from the Fund.
OTHER INFORMATION:
Since December 27, 2002, (commencement of operations) there have been no: (i)
material changes in the Fund's investment objectives or policies; (ii) changes
to the Fund's charter or by-laws; (iii) material changes in the principal risk
factors associated with investment in the Fund; or (iv) change in the persons
primarily responsible for the day-to-day management of the Fund's portfolio.
PROXY VOTING POLICIES AND PROCEDURES:
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 331-1710 (ii) on the
Fund's website at www.pimcoadvisors.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
22
PIMCO CORPORATE OPPORTUNITY FUND PRIVACY POLICY
OUR COMMITMENT TO YOU
We consider customer privacy to be a fundamental aspect of our relationship with
clients. We are committed to maintaining the confidentiality, integrity, and
security of our current, prospective and former clients' personal information.
We have developed policies designed to protect this confidentiality, while
allowing client needs to be served.
OBTAINING PERSONAL INFORMATION
In the course of providing you with products and services, we may obtain
non-public personal information about you. This information may come from
sources such as account applications and other forms, from other written,
electronic or verbal correspondence, from your transactions, from your brokerage
or financial advisory firm, financial adviser or consultant, and/or from
information captured on our internet web sites.
RESPECTING YOUR PRIVACY
We do not disclose any personal or account information provided by you or
gathered by us to non-affiliated third parties, except as required or permitted
by law. As is common in the industry, non-affiliated companies may from time to
time be used to provide certain services, such as preparing and mailing
prospectuses, reports, account statements and other information, conducting
research on client satisfaction, and gathering shareholder proxies. We may also
retain non-affiliated companies to market our products and enter in joint
marketing agreements with other companies. These companies may have access to
your personal and account information, but are permitted to use the information
solely to provide the specific service or as otherwise permitted by law. We may
also provide your personal and account information to your brokerage or
financial advisory firm and/or to your financial adviser or consultant.
SHARING INFORMATION WITH THIRD PARTIES
We do reserve the right to disclose or report personal information to
non-affiliated third parties in limited circumstances where we believe in good
faith that disclosure is required under law, to cooperate with regulators or law
enforcement authorities, to protect our rights or property, or upon reasonable
request by any mutual fund in which you have chosen to invest. In addition, we
may disclose information about you or your accounts to a non-affiliated third
party at your request or if you consent in writing to the disclosure.
SHARING INFORMATION WITH AFFILIATES
We may share client information with our affiliates in connection with servicing
your account or to provide you with information about products and services that
we believe may be of interest to you. The information we share may include, for
example, your participation in our mutual funds or other investment programs,
your ownership of certain types of accounts (such as IRAs), or other data about
your accounts. Our affiliates, in turn, are not permitted to share your
information with non-affiliated entities, except as required or permitted by
law.
IMPLEMENTATION OF PROCEDURES
We take seriously the obligation to safeguard your non-public personal
information. We have implemented procedures designed to restrict access to your
non-public personal information to our personnel who need to know that
information to provide products or services to you. To guard your non-public
personal information, physical, electronic, and procedural safeguards are in
place.
23
PIMCO CORPORATE OPPORTUNITY FUND BOARD OF TRUSTEES
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------
PAUL BELICA Director/Trustee of seventeen open and closed-end management
1345 Avenue of the Americas investment companies affiliated with Allianz Dresdner Asset
New York, NY 10105 Management of America L.P.; Manager, Stratigos Fund, L.L.C.,
Age: 82 Whistler Fund, L.L.C., Xanthos Fund, L.L.C., and Wynstone Fund,
TRUSTEE SINCE: 2002 L.L.C.; Director, Student Loan Finance Corp., Education Loans, Inc.,
TERM OF OFFICE: EXPECTED TO STAND FOR Goal Funding, Inc. Surety Loan Funding, Inc.; Formerly Advisor
RE-ELECTION AT 2006 ANNUAL MEETING OF Salomon Smith Barney, Inc.; Director, The Central European Value
SHAREHOLDERS. Fund, Inc.; Deck House Inc.
TRUSTEE/DIRECTOR OF 18 FUNDS IN FUND
COMPLEX
TRUSTEE/DIRECTOR OF 7 FUNDS OUTSIDE OF FUND
COMPLEX
ROBERT E. CONNOR Director/Trustee of seventeen open and closed-end management
1345 Avenue of the Americas investment companies affiliated with Allianz Dresdner Asset
New York, NY 10105 Management of America L.P.; Corporate Affairs Consultant;
Age: 69 Formerly, Senior Vice President, Corporate Office, Smith Barney Inc.
TRUSTEE SINCE: 2002
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2004 ANNUAL MEETING OF
SHAREHOLDERS.
TRUSTEE/DIRECTOR OF 18 FUNDS IN FUND
COMPLEX
TRUSTEE/DIRECTOR OF NO FUNDS OUTSIDE OF FUND
COMPLEX
JOHN J. DALESSANDRO II President and Director, J.J. Dalessandro II Ltd, registered broker-
1345 Avenue of the Americas dealer and member of the New York Stock Exchange; Trustee of fifteen
New York, NY 10105 closed-end management investment companies affiliated with
Age: 66 Allianz Dresdner Asset Management of America L.P.
TRUSTEE SINCE: 2002
TRUSTEE OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2005 ANNUAL MEETING OF
SHAREHOLDERS.
TRUSTEE OF 15 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
HANS W. KERTESS President, H Kertess & Co.; Trustee of fourteen closed-end
1345 Avenue of the Americas management investment companies affiliated with Allianz Dresdner
New York, NY 10105 Asset Management of America L.P. Formerly, Managing Director,
Age: 64 Royal Bank of Canada Capital Markets.
TRUSTEE SINCE: 2003
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2004 ANNUAL MEETING OF
SHAREHOLDERS.
TRUSTEE OF 14 FUNDS IN FUND COMPLEX;
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
24
TRUSTEES AND PRINCIPAL OFFICERS
Stephen Treadway
Chairman
Paul Belica
Trustee
Robert E. Connor
Trustee
John J. Dalessandro II
Trustee
Hans W. Kertess
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Vice President & Secretary
David C. Hinman
Vice President
Mark R. Kiesel
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
INVESTMENT MANAGER
PIMCO Advisors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02210-2624
This report, including the financial information herein, is transmitted to the
shareholders of PIMCO Corporate Opportunity Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
Daily information on the Fund is available at www.pimcoadvisors.com or by
calling 1-800-331-1710
[PIMCO ADVISORS LOGO]
ITEM 2. CODE OF ETHICS As of the end of the period covered by this report, the
registrant has adopted a code of ethics (the "Section 406 Standards for
Investment Companies -- Ethical Standards for Principal Executive and Financial
Officers") that applies to the registrant's Principal Executive Officer and
Principal Financial Officer; the registrant's Principal Financial Officer also
serves as the Principal Accounting Officer. The registrant undertakes to provide
a copy of such code of ethics to any person upon request, without charge, by
calling 1-800-331-1710.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT The registrant's Board has determined
that Mr. Paul Belica, a member of the Board's Audit Oversight Committee is an
"audit committee financial expert," and that he is "independent," for purposes
of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Disclosure requirement not
currently effective
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES The registrant has delegated the voting of
proxies relating to its voting securities to its sub-adviser, Pacific Investment
Management Company LLC (the "Sub-Adviser"). The Proxy Voting Policies and
Procedures of the Sub-Adviser are included as an Exhibit hereto. The
registrant undertakes to provide a copy of such proxy voting policies and
procedures to any person upon request, without charge, at
www.pimcoadvisors.com or by calling 1-800-331-1710.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-2(c) under the Investment Company Act
of 1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a) Exhibit 99.a - Code of Ethics
(b) Exhibit 99.b - Proxy Voting Policies and Procedures
(c) Exhibit 99.Cert. - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(d) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) PIMCO CORPORATE OPPORTUNITY FUND
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date February 5, 2004
---------------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer, Principal Financial & Accounting Officer
Date February 5, 2004
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date February 5, 2004
---------------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer, Principal Financial & Accounting Officer
Date February 5, 2004
---------------------