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 |
811-21311 |
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PIMCO High Income Fund |
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(Exact name of registrant as specified in charter) |
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1345 Avenue of the Americas, New York, NY |
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10105 |
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(Address of principal executive offices) |
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(Zip code) |
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Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, NY 10105 |
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(Name and address of agent for service) |
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Registrants telephone number, including area code: |
212-739-3371 |
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Date of fiscal year end: |
March 31, 2007 |
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Date of reporting period: |
September 30, 2007 |
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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. § 3507.
Item 1. REPORT TO SHAREHOLDERS
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Contents |
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Letter to Shareholders |
1 |
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Fund Insights/Performance & Statistics |
2 |
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Schedule of Investments |
3-10 |
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Statement of Assets and Liabilities |
11 |
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Statement of Operations |
12 |
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Statement of Changes in Net Assets |
13 |
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Notes to Financial Statements |
14-23 |
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Financial Highlights |
24 |
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Matters Relating to the Trustees Consideration |
25-27 |
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PIMCO High Income Fund Letter to Shareholders
November 1, 2007
Dear Shareholder:
We are pleased to provide you with the semi-annual report for PIMCO High Income Fund (the Fund) for the six-months ended September 30, 2007.
During the six-month period, instability in subprime mortgages contributed to significant risk aversion among bond investors. As a result, higher-income U.S. bonds underperformed the broad bond market. The Merrill Lynch High Yield Master II Index returned 0.66% for the period, compared with the Lehman Brothers Aggregate Bond Indexs return of 2.31%.
For performance and specific information on the Fund please refer to the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds shareholder servicing agent at (800) 331-1710. In addition, a wide range of information and resources is available on our Web site, www.allianzinvestors.com/closedendfunds.
Together with Allianz Global Investors Fund Management LLC, the Funds investment manager, and Pacific Investment Management Company LLC, the Funds sub-adviser, we thank you for investing with us.
We remain dedicated to serving your financial needs.
Sincerely,
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Hans W. Kertess |
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Brian S. Shlissel |
Chairman |
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President & Chief Executive Officer |
9.30.07 | PIMCO High Income Fund Semi-Annual Report 1
PIMCO High Income Fund Fund Insights/Performance & Statistics
September 30, 2007 (unaudited)
For the fiscal six-month period ended September 30, 2007, the Fund returned (0.95)% on net asset value (NAV) and (4.01)% on market price.
Security selection in the consumer cyclical sector hindered Fund performance, where auto loans underperformed auto manufacturers and the broader consumer cyclical sector.
Minimal exposure to the lodging sector was negative for Fund performance, as the sector saw a strong rebound for most of 2007, following lows last year.
Exposure to high yield bank loans, which came under considerable pressure in the latter half of the period and underperformed bonds, detracted from performance.
The Fund used interest rates swaps to adjust duration and target specific areas of yield-curve exposure during the period. Credit default swaps were used either as a substitute for purchasing corporate bonds or as a means of hedging corporate bond exposure.
A relatively strong emphasis on the healthcare sector, which outperformed the overall high yield market, was a significant contributor to Fund performance during the reporting period.
As the fallout in the subprime mortgage sector and falling home prices weighed heavily on home construction and real estate bonds, avoiding both industry categories benefited Fund performance.
A larger-than-market weighting in utility bonds added to returns, as the sector outperformed the high yield market, on the whole, in excess of 100 basis points.
Tactically adding exposure to local currency and dollar-denominated emerging market sovereigns, which outperformed the high yield market, added to the Funds returns.
Total Return(1): |
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Market Price |
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Net Asset Value (NAV) |
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6 months |
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(4.01) |
% |
(0.95) |
% |
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1 year |
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3.09 |
% |
8.69 |
% |
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3 year |
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11.98 |
% |
9.15 |
% |
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Commencement of Operations (4/30/03) to 9/30/07 |
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10.89 |
% |
11.38 |
% |
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Common Share Market Price/NAV Performance: |
Market Price/NAV: |
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Commencement of Operations (4/30/03) to 9/30/07 |
Market Price |
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$14.57 |
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NAV |
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$14.31 |
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NAV |
Premium to NAV |
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1.82% |
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Market Price |
Market Price Yield(2) |
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10.04% |
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Moodys Rating |
(as a % of total investments) |
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(1) Past performance is no guarantee of future results. Total return is determined by subtracting the initial investment from the 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 and capital gain distributions have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.
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.
(2) Market Price Yield is determined by dividing the annualized fiscal year to date (six-months ended September 30, 2007) dividends to common shareholders by the market price per common share at September 30, 2007.
2 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited)
Principal |
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Credit
Rating |
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Value |
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CORPORATE BONDS & NOTES 89.1% |
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Airlines 1.1% |
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$ |
8,760 |
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American Airlines, Inc., pass thru certificates, 8.608%, 10/1/12 |
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Baa3/BB+ |
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$ |
8,881,703 |
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Continental Airlines, Inc., pass thru certificates, |
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13,004 |
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6.92%, 4/2/13, 97-5A 9 (a) (b) (f) |
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NR/NR |
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13,140,835 |
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4,105 |
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7.373%, 6/15/17, Ser. 01-1 |
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Ba1/BB+ |
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3,971,365 |
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1,880 |
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8.307%, 10/2/19, Ser. 00-2 |
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Ba2/BB- |
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1,878,815 |
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195 |
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United Air Lines, Inc., pass thru certificates, |
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6.602%, 3/1/15, Ser. 01-1 |
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Ba2/BBB |
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195,109 |
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28,067,827 |
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Automotive 4.8% |
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19,525 |
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ArvinMeritor, Inc., 8.75%, 3/1/12 |
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B2/B+ |
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20,013,125 |
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Ford Motor Co., |
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23,250 |
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7.45%, 7/16/31 |
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Caa1/CCC+ |
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18,367,500 |
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3,000 |
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9.215%, 9/15/21 |
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Caa1/CCC+ |
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2,610,000 |
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General Motors Corp., |
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4,000 |
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8.10%, 6/15/24 |
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Caa1/B- |
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3,480,000 |
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11,200 |
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8.25%, 7/15/23 |
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Caa1/B- |
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9,856,000 |
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3,000 |
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8.80%, 3/1/21 |
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Caa1/B- |
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2,767,500 |
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20,000 |
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9.40%, 7/15/21 |
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Caa1/B- |
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19,100,000 |
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Goodyear Tire & Rubber Co., |
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8,596 |
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9.00%, 7/1/15 |
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Ba3/B |
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9,219,210 |
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7,000 |
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11.00%, 3/1/11 |
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Ba3/B+ |
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7,533,750 |
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Tenneco Automotive, Inc., |
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14,000 |
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8.625%, 11/15/14 |
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B3/B |
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14,175,000 |
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14,025 |
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10.25%, 7/15/13, Ser. B |
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B1/BB- |
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15,111,937 |
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122,234,022 |
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Building/Construction 0.7% |
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11,000 |
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Ahern Rentals, Inc., 9.25%, 8/15/13 |
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B3/B+ |
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10,642,500 |
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2,775 |
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Edcon Ltd., 7.98%, 6/15/14 (d) |
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NR/NR |
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3,680,078 |
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2,000 |
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Grohe Holding GmbH, 8.625%, 10/1/14 |
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B3/CCC+ |
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2,645,198 |
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16,967,776 |
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Chemicals 2.3% |
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ARCO Chemical Co., |
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$ |
3,808 |
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9.80%, 2/1/20 |
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B1/B+ |
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3,788,960 |
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2,000 |
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10.25%, 11/1/10 |
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B1/B+ |
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2,150,000 |
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21,925 |
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Ineos Group Holdings PLC, 8.50%, 2/15/16 (d) |
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B3/B- |
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21,102,813 |
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Lyondell Chemical Co., |
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4,150 |
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8.00%, 9/15/14 |
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B1/B+ |
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4,585,750 |
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3,825 |
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8.25%, 9/15/16 |
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B1/B+ |
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4,331,812 |
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15,300 |
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Nalco Co., 8.875%, 11/15/13 |
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B3/B- |
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16,141,500 |
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6,500 |
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Rockwood Specialties Group, Inc., 7.50%, 11/15/14 |
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B3/B- |
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6,516,250 |
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58,617,085 |
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Commercial Products 1.1% |
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22,200 |
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Hertz Corp., 8.875%, 1/1/14 |
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B1/B |
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22,977,000 |
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5,000 |
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Reynolds American, Inc., 7.75%, 6/1/18 |
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Ba1/BBB |
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5,349,535 |
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28,326,535 |
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Computer Services 1.5% |
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SunGard Data Systems, Inc., |
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20,556 |
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9.125%, 8/15/13 |
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Caa1/B- |
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21,481,020 |
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17,000 |
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10.25%, 8/15/15 |
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Caa1/B- |
|
17,850,000 |
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|||
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|
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|
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39,331,020 |
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9.30.07 | PIMCO High Income Fund Semi-Annual Report 3
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
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Credit
Rating |
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Value |
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Consumer Products 0.7% |
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|
|||||
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Buhrmann U.S., Inc., |
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|
|
|
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$ |
500 |
|
7.875%, 3/1/15 |
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B2/B |
|
$ |
470,000 |
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|
6,875 |
|
8.25%, 7/1/14 |
|
B2/B |
|
6,531,250 |
|
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12,400 |
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NPC International, Inc., 9.50%, 5/1/14 |
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Caa1/B- |
|
11,346,000 |
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|
|
|
|
|
|
18,347,250 |
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Containers & Packaging 2.0% |
|
|
|
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|
|||||
7,500 |
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Berry Plastics Holding Corp., 8.875%, 9/15/14 |
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B3/B |
|
7,706,250 |
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Jefferson Smurfit Corp., |
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|
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|
|||
14,200 |
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7.50%, 6/1/13 |
|
B3/CCC+ |
|
13,809,500 |
|
|||
13,263 |
|
8.25%, 10/1/12 |
|
B3/CCC+ |
|
13,362,473 |
|
|||
|
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Smurfit-Stone Container, |
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|
|
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|
|||
6,475 |
|
8.00%, 3/15/17 |
|
B3/CCC+ |
|
6,394,062 |
|
|||
9,000 |
|
8.375%, 7/1/12 |
|
B3/CCC+ |
|
9,045,000 |
|
|||
|
|
|
|
|
|
50,317,285 |
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Diversified Manufacturing 0.5% |
|
|
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13,000 |
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Sally Holdings LLC, 9.25%, 11/15/14 |
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CCC+/CCC+ |
|
13,195,000 |
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Electronics 1.7% |
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|||||
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Sanmina-SCI Corp., |
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|
|||
14,750 |
|
8.125%, 3/1/16 |
|
B2/B- |
|
12,832,500 |
|
|||
4,000 |
|
8.444%, 6/15/10, FRN (d) |
|
Ba3/B+ |
|
3,980,000 |
|
|||
19,625 |
|
Sensata Technologies BV, 8.00%, 5/1/14 |
|
B3/B- |
|
19,232,500 |
|
|||
6,400 |
|
Solectron Global Finance Ltd., 8.00%, 3/15/16 |
|
Ba2/B |
|
6,960,000 |
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|||
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|
43,005,000 |
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Energy 0.3% |
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|||||
7,000 |
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Reliant Energy, Inc., 7.875%, 6/15/17 |
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B3/B- |
|
7,078,750 |
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Financial Services 13.1% |
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|
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|
|||||
29,928 |
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AES Ironwood LLC, 8.857%, 11/30/25 |
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B1/B+ |
|
32,771,392 |
|
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7,803 |
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AES Red Oak LLC, 8.54%, 11/30/19, Ser. A |
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B1/B+ |
|
8,349,726 |
|
|||
700 |
|
Ajax Re Ltd., 11.944%, 5/8/09, FRN (b) (d) |
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NR/BB |
|
702,800 |
|
|||
5,000 |
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Buffalo Thunder Development Authority, 9.375%, 12/15/14 (d) |
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B2/B |
|
4,725,000 |
|
|||
7,700 |
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Chukchansi Economic Development Authority, |
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|||
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|
8.00%, 11/15/13 (d) |
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B2/BB- |
|
7,815,500 |
|
|||
9,977 |
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Consolidated Communications Holdings, 9.75%, 4/1/12 |
|
B3/B |
|
10,126,655 |
|
|||
|
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Ford Motor Credit Co., |
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|
|
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|
|||
8,100 |
|
7.80%, 6/1/12 |
|
B1/B |
|
7,712,860 |
|
|||
99,950 |
|
8.00%, 12/15/16 |
|
B1/B |
|
93,651,251 |
|
|||
10,000 |
|
8.11%, 1/13/12, FRN |
|
B1/B |
|
9,457,520 |
|
|||
18,400 |
|
General Motors Acceptance Corp., 8.00%, 11/1/31 |
|
Ba1/BB+ |
|
18,099,381 |
|
|||
15,800 |
|
Hexion U.S. Finance Corp., 9.75%, 11/15/14 |
|
B3/B |
|
17,459,000 |
|
|||
|
|
JET Equipment Trust (d) (e) (f), |
|
|
|
|
|
|||
129 |
|
7.63%, 8/15/12, Ser. 95-B |
|
NR/NR |
|
66,358 |
|
|||
263 |
|
10.00%, 6/15/12, Ser. 94-A |
|
NR/NR |
|
252,295 |
|
|||
18,445 |
|
KRATON Polymers LLC, 8.125%, 1/15/14 |
|
B3/CCC+ |
|
17,983,875 |
|
|||
|
|
LVB Acquisition Merger Sub., Inc. (d), |
|
|
|
|
|
|||
7,825 |
|
10.00%, 10/15/17 |
|
NR/B- |
|
7,864,125 |
|
|||
10,375 |
|
10.375%, 10/15/17 |
|
NR/B- |
|
10,076,719 |
|
|||
14,050 |
|
11.625%, 10/15/17 |
|
NR/B- |
|
13,698,750 |
|
|||
£ |
2,929 |
|
Royal Bank of Scotland PLC, 9.370%, 4/6/11, FRN (f) |
|
NR/NR |
|
5,809,813 |
|
||
$ |
9,480 |
|
Targeted Return Index Securities Trust, 7.140%, 5/1/16 (d) (g) |
|
B1/B+ |
|
9,305,672 |
|
||
19,203 |
|
Universal City Development Partners Ltd., 11.75%, 4/1/10 |
|
B1/B- |
|
20,115,142 |
|
|||
8,030 |
|
Universal City Florida Holding Co., 8.375%, 5/1/10 |
|
B3/B- |
|
8,130,375 |
|
|||
|
|
|
|
|
|
|
|
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4 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
||
|
|
|
|
|
|
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|
|||
Financial Services (continued) |
|
|
|
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|
|||||
|
|
UPC Holding BV, |
|
|
|
|
|
|||
|
1,200 |
|
7.75%, 1/15/14 |
|
B3/CCC+ |
|
$ |
1,680,981 |
|
|
|
10,200 |
|
8.625%, 1/15/14 |
|
B3/CCC+ |
|
14,868,572 |
|
||
|
|
Yankee Acquisition Corp., Ser. B, |
|
|
|
|
|
|||
$ |
10,000 |
|
8.50%, 2/15/15 |
|
B3/CCC+ |
|
9,750,000 |
|
||
8,600 |
|
9.75%, 2/15/17 |
|
Caa1/CCC+ |
|
8,170,000 |
|
|||
|
|
|
|
|
|
338,643,762 |
|
|||
Food 2.1% |
|
|
|
|
|
|||||
1 |
|
Dole Foods Co., Inc., 8.875%, 3/15/11 |
|
Caa1/B- |
|
797 |
|
|||
24,925 |
|
Ingles Markets, Inc., 8.875%, 12/1/11 |
|
B3/B |
|
25,548,125 |
|
|||
28,000 |
|
Pilgrims Pride Corp., 8.375%, 5/1/17 |
|
B2/B |
|
28,700,000 |
|
|||
|
|
|
|
|
|
54,248,922 |
|
|||
Food Services 0.7% |
|
|
|
|
|
|||||
16,850 |
|
ARAMARK Corp., 8.50%, 2/1/15 |
|
B3/B- |
|
17,271,250 |
|
|||
Healthcare & Hospitals 7.6% |
|
|
|
|
|
|||||
30,125 |
|
Community Health Systems, Inc., 8.875%, 7/15/15 (d) |
|
B3/B- |
|
31,104,063 |
|
|||
|
|
HCA, Inc., |
|
|
|
|
|
|||
20,031 |
|
7.19%, 11/15/15 |
|
Caa1/B- |
|
17,419,939 |
|
|||
15,224 |
|
7.50%, 12/15/23 |
|
Caa1/B- |
|
12,498,097 |
|
|||
4,130 |
|
7.58%, 9/15/25 |
|
Caa1/B- |
|
3,386,274 |
|
|||
5,550 |
|
7.69%, 6/15/25 |
|
Caa1/B- |
|
4,586,148 |
|
|||
3,550 |
|
8.36%, 4/15/24 |
|
Caa1/B- |
|
3,104,386 |
|
|||
22,052 |
|
9.00%, 12/15/14 |
|
Caa1/B- |
|
21,559,314 |
|
|||
13,000 |
|
9.25%, 11/15/16 (d) |
|
B2/BB- |
|
13,845,000 |
|
|||
23,450 |
|
9.625%, 11/15/16 (d) |
|
B2/BB- |
|
25,091,500 |
|
|||
4,950 |
|
ReAble Therapeutics Finance LLC, 11.75%, 11/15/14 |
|
Caa1/CCC+ |
|
4,727,250 |
|
|||
19,990 |
|
Rotech Healthcare, Inc., 9.50%, 4/1/12 |
|
Caa3/CCC |
|
13,893,050 |
|
|||
|
|
Tenet Healthcare Corp., |
|
|
|
|
|
|||
15,206 |
|
7.375%, 2/1/13 |
|
Caa1/CCC+ |
|
12,963,115 |
|
|||
9,300 |
|
9.25%, 2/1/15 |
|
Caa1/CCC+ |
|
8,253,750 |
|
|||
25,925 |
|
9.875%, 7/1/14 |
|
Caa1/CCC+ |
|
23,851,000 |
|
|||
|
|
|
|
|
|
196,282,886 |
|
|||
Hotels/Gaming 1.0% |
|
|
|
|
|
|||||
5,000 |
|
Herbst Gaming, Inc., 8.125%, 6/1/12 |
|
B3/B- |
|
4,506,250 |
|
|||
19,279 |
|
Mandalay Resort Group, 9.375%, 2/15/10 |
|
B1/B+ |
|
20,291,147 |
|
|||
|
|
|
|
|
|
24,797,397 |
|
|||
Machinery 0.1% |
|
|
|
|
|
|||||
2,600 |
|
Chart Industries, Inc., 9.125%, 10/15/15 |
|
B3/B- |
|
2,704,000 |
|
|||
Manufacturing 0.1% |
|
|
|
|
|
|||||
1,705 |
|
Bombardier, Inc., 8.00%, 11/15/14 (d) |
|
Ba2/BB |
|
1,794,512 |
|
|||
Metals & Mining 0.7% |
|
|
|
|
|
|||||
|
|
Freeport-McMoRan Copper & Gold, Inc., |
|
|
|
|
|
|||
3,575 |
|
8.25%, 4/1/15 |
|
Ba3/BB |
|
3,869,938 |
|
|||
11,725 |
|
8.375%, 4/1/17 |
|
Ba3/BB |
|
12,838,875 |
|
|||
881 |
|
Novelis, Inc., 7.25%, 2/15/15 |
|
B3/B |
|
854,570 |
|
|||
|
|
|
|
|
|
17,563,383 |
|
|||
Miscellaneous 2.9% |
|
|
|
|
|
|||||
74,570 |
|
Dow Jones CDX U.S. High Yield, |
|
|
|
|
|
|||
|
|
8.375%, 12/29/11, Ser. 7-T1 (d) (g) (i) |
|
B3/NR |
|
75,502,125 |
|
|||
|
|
|
|
|
|
|
|
|||
9.30.07 | PIMCO High Income Fund Semi-Annual Report 5
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
||
|
|
|
|
|
|
|
|
|||
Multi-Media 5.5% |
|
|
|
|
|
|||||
$ |
3,000 |
|
Cablemas S.A. de C.V., 9.375%, 11/15/15 (d) |
|
B1/BB- |
|
$ |
3,240,000 |
|
|
5,600 |
|
Cablevision Systems Corp., 8.00%, 4/15/12, Ser. B |
|
B3/B+ |
|
5,460,000 |
|
|||
681 |
|
CanWest MediaWorks, Inc., 8.00%, 9/15/12 |
|
CCC+/CCC+ |
|
670,785 |
|
|||
7,700 |
|
CanWest MediaWorks L.P., 9.25%, 8/1/15 (d) |
|
NR/CCC+ |
|
7,815,500 |
|
|||
5,925 |
|
CCH I Holdings LLC, 9.92%, 4/1/14 |
|
Caa3/CCC |
|
5,125,125 |
|
|||
42,850 |
|
CCO Holdings LLC, 8.75%, 11/15/13 |
|
Caa1/CCC |
|
43,278,500 |
|
|||
10,000 |
|
Charter Communications Holdings I LLC, 11.00%, 10/1/15 |
|
Caa2/CCC |
|
10,175,000 |
|
|||
11,325 |
|
Charter Communications Operating LLC, 8.375%, 4/30/14 (d) |
|
B2/B+ |
|
11,438,250 |
|
|||
|
|
CSC Holdings, Inc., |
|
|
|
|
|
|||
4,650 |
|
6.75%, 4/15/12 |
|
B2/B+ |
|
4,498,875 |
|
|||
6,300 |
|
7.625%, 7/15/18 |
|
B2/B+ |
|
6,048,000 |
|
|||
4,485 |
|
7.875%, 2/15/18 |
|
B2/B+ |
|
4,372,875 |
|
|||
2,000 |
|
8.125%, 7/15/09, Ser. B |
|
B2/B+ |
|
2,040,000 |
|
|||
|
6,045 |
|
Lighthouse International Co. S.A., 8.00%, 4/30/14 (d) |
|
B2/B |
|
8,951,515 |
|
||
$ |
7,000 |
|
Nielsen Finance LLC, 10.00%, 8/1/14 |
|
CCC+/CCC+ |
|
7,437,500 |
|
||
9,250 |
|
Rogers Cable, Inc., 8.75%, 5/1/32 |
|
Baa3/BBB- |
|
10,935,017 |
|
|||
307 |
|
Sinclair Broadcast Group, Inc., 8.00%, 3/15/12 |
|
Ba3/B |
|
315,442 |
|
|||
|
3,735 |
|
Telenet Communications NV, 9.00%, 12/15/13 (d) |
|
B3/B- |
|
5,789,784 |
|
||
$ |
4,750 |
|
Unity Media GmbH, 10.375%, 2/15/15 (d) |
|
Caa2/CCC+ |
|
4,868,750 |
|
||
|
|
|
|
|
|
142,460,918 |
|
|||
Oil & Gas 7.8% |
|
|
|
|
|
|||||
|
|
Dynegy Holdings, Inc., |
|
|
|
|
|
|||
3,147 |
|
7.50%, 6/1/15 (d) |
|
B2/B- |
|
3,052,590 |
|
|||
18,000 |
|
8.375%, 5/1/16 |
|
B2/B- |
|
18,180,000 |
|
|||
15,250 |
|
Dynergy-Roseton Danskammer, Inc., |
|
|
|
|
|
|||
|
|
pass thru certificates, |
|
|
|
|
|
|||
|
|
7.67%, 11/8/16, Ser. B |
|
Ba3/B |
|
15,326,250 |
|
|||
|
|
El Paso Corp., |
|
|
|
|
|
|||
29,150 |
|
7.80%, 8/1/31 |
|
Ba3/BB- |
|
29,741,279 |
|
|||
27,850 |
|
8.05%, 10/15/30 |
|
Ba3/BB- |
|
28,763,591 |
|
|||
3,000 |
|
Enbridge Energy Partners L.P., 8.05%, 10/1/37, VRN |
|
Baa3/BB+ |
|
3,054,861 |
|
|||
|
|
Ferrellgas L.P., |
|
|
|
|
|
|||
14,325 |
|
8.75%, 6/15/12 |
|
B2/B- |
|
14,754,750 |
|
|||
20,000 |
|
8.87%, 8/1/09 (a) (b) (f) |
|
NR/NR |
|
21,110,881 |
|
|||
7,000 |
|
OPTI Canada, Inc., 8.25%, 12/15/14 (d) |
|
B1/BB+ |
|
7,087,500 |
|
|||
17,125 |
|
SemGroup L.P., 8.75%, 11/15/15 (d) |
|
B1/NR |
|
16,825,312 |
|
|||
5,500 |
|
W&T Offshore, Inc., 8.25%, 6/15/14 (d) |
|
B3/B- |
|
5,321,250 |
|
|||
34,726 |
|
Williams Cos., Inc., 7.875%, 9/1/21 |
|
Ba2/BB |
|
37,938,155 |
|
|||
|
|
|
|
|
|
201,156,419 |
|
|||
Paper/Paper Products 3.9% |
|
|
|
|
|
|||||
|
|
Abitibi-Consolidated, Inc., |
|
|
|
|
|
|||
6,500 |
|
8.375%, 4/1/15 |
|
B3/B |
|
4,761,250 |
|
|||
13,025 |
|
8.55%, 8/1/10 |
|
B3/B |
|
10,810,750 |
|
|||
8,750 |
|
Bowater Canada Finance, 7.95%, 11/15/11 |
|
B3/B |
|
7,240,625 |
|
|||
2,200 |
|
Bowater, Inc., 9.375%, 12/15/21 |
|
B3/B |
|
1,666,500 |
|
|||
8,750 |
|
Cascades, Inc., 7.25%, 2/15/13 |
|
Ba3/BB- |
|
8,618,750 |
|
|||
|
|
Georgia-Pacific Corp., |
|
|
|
|
|
|||
27,775 |
|
8.00%, 1/15/24 |
|
B2/B |
|
27,219,500 |
|
|||
16,585 |
|
8.875%, 5/15/31 |
|
B2/B |
|
16,709,388 |
|
|||
|
|
Verso Paper Holdings LLC, Ser. B, |
|
|
|
|
|
|||
11,800 |
|
9.125%, 8/1/14 |
|
B2/B+ |
|
12,213,000 |
|
|||
10,000 |
|
11.375%, 8/1/16 |
|
B3/CCC+ |
|
10,575,000 |
|
|||
|
|
|
|
|
|
99,814,763 |
|
|||
|
|
|
|
|
|
|
|
|||
6 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
||
|
|
|
|
|
|
|
|
|||
Printing/Publishing 3.0% |
|
|
|
|
|
|||||
$ |
17,631 |
|
Dex Media West LLC, 9.875%, 8/15/13, Ser. B |
|
B1/B |
|
$ |
18,843,131 |
|
|
1,000 |
|
Hollinger, Inc., 11.875%, 3/1/11 (d) (e) (f) |
|
B3/NR |
|
957,957 |
|
|||
12,500 |
|
Idearc, Inc., 8.00%, 11/15/16 |
|
B2/B+ |
|
12,531,250 |
|
|||
34,600 |
|
RH Donnelley Corp., 8.875%, 1/15/16, Ser. A-3 |
|
B3/B |
|
35,421,750 |
|
|||
2,246 |
|
RH Donnelley, Inc., 10.875%, 12/15/12 |
|
B2/B |
|
2,397,605 |
|
|||
6,100 |
|
TL Acquisitions, Inc., 10.50%, 1/15/15 (d) |
|
Caa1/CCC+ |
|
6,054,250 |
|
|||
|
|
|
|
|
|
76,205,943 |
|
|||
Real Estate 0.3% |
|
|
|
|
|
|||||
7,390 |
|
Delhaize America, Inc., 9.00%, 4/15/31 |
|
Baa3/BB+ |
|
8,840,487 |
|
|||
Retail 1.1% |
|
|
|
|
|
|||||
29,975 |
|
Bon-Ton Stores, Inc., 10.25%, 3/15/14 |
|
B3/B- |
|
28,176,500 |
|
|||
Semi-Conductors 1.6% |
|
|
|
|
|
|||||
|
|
Freescale Semiconductor, Inc., |
|
|
|
|
|
|||
33,675 |
|
8.875%, 12/15/14 |
|
B1/B |
|
32,664,750 |
|
|||
2,300 |
|
9.125%, 12/15/14 |
|
B1/B |
|
2,139,000 |
|
|||
6,950 |
|
10.125%, 12/15/16 |
|
B2/B |
|
6,498,250 |
|
|||
|
|
|
|
|
|
41,302,000 |
|
|||
Telecommunications 17.3% |
|
|
|
|
|
|||||
2,317 |
|
American Cellular Corp., 10.00%, 8/1/11, Ser. B |
|
B3/CCC |
|
2,432,850 |
|
|||
14,555 |
|
Centennial Communications Corp., 8.125%, 2/1/14 |
|
B2/CCC+ |
|
14,882,487 |
|
|||
31,800 |
|
Cincinnati Bell, Inc., 8.375%, 1/15/14 |
|
B2/B- |
|
31,879,500 |
|
|||
15,500 |
|
Citizens Communications Co., 9.00%, 8/15/31 |
|
Ba2/BB+ |
|
15,810,000 |
|
|||
16,550 |
|
Cricket Communications, Inc., 9.375%, 11/1/14 |
|
Caa1/CCC |
|
16,881,000 |
|
|||
|
|
Digicel Group Ltd. (d), |
|
|
|
|
|
|||
24,800 |
|
8.875%, 1/15/15 |
|
Caa2/CC |
|
23,374,000 |
|
|||
8,718 |
|
9.125%, 1/15/15 |
|
Caa2/CC |
|
8,129,518 |
|
|||
|
|
Hawaiian Telcom Communications, Inc., Ser. B, |
|
|
|
|
|
|||
12,225 |
|
9.75%, 5/1/13 |
|
Caa1/CCC |
|
12,561,188 |
|
|||
1,250 |
|
10.86%, 5/1/13, FRN |
|
Caa1/CCC |
|
1,271,875 |
|
|||
|
|
Intelsat Bermuda Ltd., |
|
|
|
|
|
|||
20,000 |
|
9.25%, 6/15/16 |
|
B2/B |
|
20,850,000 |
|
|||
13,000 |
|
11.25%, 6/15/16 |
|
Caa1/B |
|
13,991,250 |
|
|||
18,250 |
|
Intelsat Subsidiary Holding Co., Ltd., 8.625%, 1/15/15 |
|
B2/B |
|
18,706,250 |
|
|||
25,500 |
|
MetroPCS Wireless, Inc., 9.25%, 11/1/14 (d) |
|
Caa1/CCC |
|
26,137,500 |
|
|||
|
|
Nordic Telephone Co. Holdings ApS, |
|
|
|
|
|
|||
|
2,300 |
|
8.25%, 5/1/16 (d) |
|
B2/B |
|
3,442,668 |
|
||
|
5,000 |
|
8.25%, 5/1/16 |
|
B2/B |
|
7,484,061 |
|
||
$ |
8,600 |
|
8.875%, 5/1/16 (d) |
|
B2/B |
|
9,116,000 |
|
||
|
|
Nortel Networks Ltd. (d), |
|
|
|
|
|
|||
15,500 |
|
10.125%, 7/15/13 |
|
B3/B- |
|
16,023,125 |
|
|||
18,875 |
|
10.75%, 7/15/16 |
|
B3/B- |
|
19,818,750 |
|
|||
14,625 |
|
PanAmSat Corp., 6.875%, 1/15/28 |
|
Ba2/BB |
|
12,796,875 |
|
|||
37,000 |
|
Qwest Capital Funding, Inc., 7.90%, 8/15/10 |
|
B1/B+ |
|
38,017,500 |
|
|||
|
|
Qwest Communications International, Inc., |
|
|
|
|
|
|||
13,525 |
|
7.50%, 2/15/14 |
|
Ba3/B+ |
|
13,761,688 |
|
|||
15,325 |
|
7.50%, 2/15/14, Ser. B |
|
Ba3/B+ |
|
15,593,188 |
|
|||
10,450 |
|
Qwest Corp., 8.875%, 3/15/12 |
|
Ba1/BBB- |
|
11,455,812 |
|
|||
18,020 |
|
Rural Cellular Corp., 9.875%, 2/1/10 |
|
B3/CCC |
|
18,921,000 |
|
|||
12,400 |
|
Superior Essex Communications LLC, 9.00%, 4/15/12 |
|
B3/B+ |
|
12,307,000 |
|
|||
4,500 |
|
TelCordia Technologies, Inc., 9.11%, 7/15/12, FRN (d) |
|
B2/B |
|
4,218,750 |
|
|||
24,975 |
|
Time Warner Telecom Holdings, Inc., 9.25%, 2/15/14 |
|
B3/CCC+ |
|
26,036,438 |
|
|||
|
|
|
|
|
|
|
|
|||
9.30.07 | PIMCO High Income Fund Semi-Annual Report 7
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
||
|
|
|
|
|
|
|
|
|||
Telecommunications (continued) |
|
|
|
|
|
|||||
|
|
West Corp., |
|
|
|
|
|
|||
$ |
1,250 |
|
9.50%, 10/15/14 (d) |
|
Caa1/B- |
|
$ |
1,296,875 |
|
|
6,500 |
|
11.00%, 10/15/16 |
|
Caa1/B- |
|
6,857,500 |
|
|||
13,000 |
|
Wind Acquisition Finance S.A., 10.75%, 12/1/15 (d) |
|
B2/B- |
|
14,462,500 |
|
|||
5,000 |
|
Windstream Corp., 8.625%, 8/1/16 |
|
Ba3/BB- |
|
5,356,250 |
|
|||
|
|
|
|
|
|
443,873,398 |
|
|||
Transportation 0.1% |
|
|
|
|
|
|||||
2,400 |
|
Grupo Transportacion Ferroviaria Mexicana S.A. de C.V., |
|
|
|
|
|
|||
|
|
9.375%, 5/1/12 |
|
B2/B- |
|
2,526,000 |
|
|||
Utilities 3.5% |
|
|
|
|
|
|||||
15,175 |
|
AES Corp., 8.75%, 5/15/13 (d) |
|
Ba3/BB- |
|
15,952,719 |
|
|||
2,000 |
|
Empresa Energetica de Sergipe and Sociedade Anonima de |
|
|
|
|
|
|||
|
|
Eletrificaao da Paraiba, 10.50%, 7/19/13 (d) |
|
NR/B+ |
|
2,264,641 |
|
|||
19,450 |
|
Legrand Holding S.A., 8.50%, 2/15/25 |
|
Baa3/BBB |
|
22,853,750 |
|
|||
19,534 |
|
Midwest Generation LLC, pass thru certificates, |
|
|
|
|
|
|||
|
|
8.56%, 1/2/16, Ser. B |
|
Ba2/BB+ |
|
20,901,729 |
|
|||
21,500 |
|
PSE&G Energy Holdings LLC, 8.50%, 6/15/11 |
|
Ba3/BB- |
|
22,736,852 |
|
|||
6,554 |
|
South Point Energy Center LLC, 8.40%, 5/30/12 (b) (d) (e) (g) |
|
NR/D |
|
6,488,036 |
|
|||
|
|
|
|
|
|
91,197,727 |
|
|||
Total Corporate Bonds & Notes (cost-$2,273,102,494) |
|
|
|
2,289,849,942 |
|
|||||
|
|
|
|
|
|
|
|
|||
SENIOR LOANS (a) (c) 2.9% |
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
Chemicals 0.1% |
|
|
|
|
|
|||||
|
|
INEOS Group Ltd., Term A, |
|
|
|
|
|
|||
1,561 |
|
7.580%, 10/7/12 |
|
|
|
1,521,264 |
|
|||
93 |
|
7.591%, 10/7/12 |
|
|
|
92,257 |
|
|||
|
|
|
|
|
|
1,613,521 |
|
|||
Commercial Products 0.3% |
|
|
|
|
|
|||||
7,000 |
|
Berry Plastics, 12.72%, 6/15/14 (b) |
|
|
|
6,842,500 |
|
|||
Entertainment 0.6% |
|
|
|
|
|
|||||
|
|
Tribune Co., |
|
|
|
|
|
|||
3,033 |
|
7.86%, 5/30/09, Term X |
|
|
|
2,980,250 |
|
|||
13,550 |
|
8.244%, 5/30/14, Term B |
|
|
|
12,366,259 |
|
|||
|
|
|
|
|
|
15,346,509 |
|
|||
Financial Services 0.5% |
|
|
|
|
|
|||||
13,600 |
|
Chrysler Financial Corp., 9.36%, 8/3/12 |
|
|
|
13,601,550 |
|
|||
Healthcare & Hospitals 0.2% |
|
|
|
|
|
|||||
|
|
HealthSouth Corp., |
|
|
|
|
|
|||
43 |
|
7.63%, 2/2/13 |
|
|
|
42,021 |
|
|||
5,309 |
|
7.85%, 2/2/13 |
|
|
|
5,173,614 |
|
|||
|
|
|
|
|
|
5,215,635 |
|
|||
Recreation 0.4% |
|
|
|
|
|
|||||
|
|
Amadeus Global Travel (b), |
|
|
|
|
|
|||
|
835 |
|
6.752%, 4/8/12, Term A |
|
|
|
1,125,235 |
|
||
$ |
1,250 |
|
7.636%, 4/8/13, Term B2 |
|
|
|
1,200,651 |
|
||
1,250 |
|
7.886%, 4/8/14, Term C2 |
|
|
|
1,205,860 |
|
|||
7,000 |
|
Travelport, 7.35%, 8/23/13, Term DD |
|
|
|
6,827,919 |
|
|||
|
|
|
|
|
|
10,359,665 |
|
|||
|
|
|
|
|
|
|
|
|||
8 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
||
|
|
|
|
|
|
|
|
|||
Telecommunications 0.4% |
|
|
|
|
|
|||||
|
|
Integra Telecom, Inc., Term T, |
|
|
|
|
|
|||
$ |
1,210 |
|
9.379%, 8/31/13 |
|
|
|
$ |
1,234,286 |
|
|
2,790 |
|
9.379%, 8/31/13 (b) |
|
|
|
2,817,815 |
|
|||
|
|
Nordic Telephone Co. Holdings ApS, |
|
|
|
|
|
|||
|
1,434 |
|
6.33%, 11/30/13, Term B |
|
|
|
2,002,489 |
|
||
|
1,485 |
|
6.58%, 11/30/14, Term C |
|
|
|
2,085,165 |
|
||
$ |
2,000 |
|
NTL Investment, 7.36%, 1/6/13, Term B |
|
|
|
1,939,220 |
|
||
|
|
|
|
|
|
10,078,975 |
|
|||
Utilities 0.2% |
|
|
|
|
|
|||||
6,000 |
|
Sandridge Energy, Inc., 8.625%, 4/1/15, Term CD (b) |
|
|
|
5,940,000 |
|
|||
Wholesale 0.2% |
|
|
|
|
|
|||||
|
|
Roundys, Inc., Term B, |
|
|
|
|
|
|||
4,913 |
|
8.46%, 11/1/11 |
|
|
|
4,869,887 |
|
|||
12 |
|
8.56%, 10/27/11 (b) |
|
|
|
12,267 |
|
|||
|
|
|
|
|
|
4,882,154 |
|
|||
Total Senior Loans (cost-$74,093,180) |
|
|
|
73,880,509 |
|
|||||
|
|
|
|
|
|
|||||
MUNICIPAL BONDS & NOTES 0.6% |
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
California 0.6% |
|
|
|
|
|
|||||
|
|
Los Angeles Community Redev. Agcy. Rev., Ser. H, |
|
|
|
|
|
|||
725 |
|
9.00%, 9/1/12 |
|
NR/NR |
|
744,162 |
|
|||
1,160 |
|
9.75%, 9/1/17 |
|
NR/NR |
|
1,220,506 |
|
|||
1,375 |
|
9.75%, 9/1/22 |
|
NR/NR |
|
1,445,606 |
|
|||
2,170 |
|
9.75%, 9/1/27 |
|
NR/NR |
|
2,277,003 |
|
|||
3,480 |
|
9.75%, 9/1/32 |
|
NR/NR |
|
3,645,927 |
|
|||
|
|
San Diego Redev. Agcy., Tax Allocation, |
|
|
|
|
|
|||
1,785 |
|
6.59%, 11/1/13 |
|
Baa3/NR |
|
1,796,388 |
|
|||
1,435 |
|
7.49%, 11/1/18 |
|
Baa3/NR |
|
1,492,902 |
|
|||
1,885 |
|
7.74%, 11/1/21 |
|
Baa3/NR |
|
1,962,379 |
|
|||
Total Municipal Bonds & Notes (cost-$14,345,558) |
|
|
|
14,584,873 |
|
|||||
|
|
|
|
|
|
|
|
|||
ASSET-BACKED SECURITIES 0.0% |
|
|
|
|
|
|||||
688 |
|
Reliant Energy Mid-Atlantic Power Holdings LLC, |
|
|
|
|
|
|||
|
|
9.237%, 7/2/17, Ser. B (cost-$724,964) |
|
Ba2/B+ |
|
739,620 |
|
|||
|
|
|
|
|
|
|
|
|||
PREFERRED STOCK 1.0% |
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||
Shares |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
Financial Services 1.0% |
|
|
|
|
|
|||||
24,700 |
|
Fresenius Medical Care Capital Trust II, 7.875%, UNIT |
|
B1/B+ |
|
24,823,500 |
|
|||
Telecommunications 0.0% |
|
|
|
|
|
|||||
155,565 |
|
Superior Essex Holding Corp., 9.50%, 1/1/01, Ser. A |
|
NR/NR |
|
124,452 |
|
|||
Total Preferred Stock (cost-$26,157,273) |
|
|
|
24,947,952 |
|
|||||
|
|
|
|
|
|
|||||
9.30.07 | PIMCO High Income Fund Semi-Annual Report 9
PIMCO High Income Fund Schedule of Investments
September 30, 2007 (unaudited) (continued)
Principal |
|
|
|
|
Credit
Rating |
|
Value |
|
|||||
SHORT-TERM INVESTMENTS 6.4% |
|
|
|
|
|
||||||||
|
|
|
|
|
|
||||||||
U.S. Government Agency Securities 3.1% |
|
|
|
|
|
||||||||
$ |
80,000 |
|
Federal Home Loan Bank, 4.00%, 10/1/07 (cost-$80,000,000) |
|
Aaa/AAA |
|
$ |
80,000,000 |
|
||||
U.S. Treasury Bills (h) 2.4% |
|
|
|
|
|
||||||||
63,250 |
|
3.775%-4.62%, 11/29/07-12/13/07 (cost-$62,786,355) |
|
|
|
62,666,515 |
|
||||||
Corporate Notes 0.4% |
|
|
|
|
|
||||||||
Chemicals 0.4% |
|
|
|
|
|
||||||||
9,127 |
|
Equistar Chemicals L.P., 10.125%, 9/1/08 (cost-$9,384,749) |
|
B1/BB- |
|
9,469,263 |
|
||||||
Repurchase Agreement 0.5% |
|
|
|
|
|
||||||||
13,924 |
|
State Street Bank & Trust Co., dated 9/28/07, 4.40%, 10/1/07, proceeds $13,929,105; collateralized by Farmer Mac Discount note, 4.451%, due 12/28/07, valued at $14,203,394 including accrued interest (cost-$13,924,000) |
|
|
|
13,924,000 |
|
||||||
Total Short-Term Investments (cost-$166,095,104) |
|
|
|
166,059,778 |
|
||||||||
Total Investments |
|
|
|
|
|
||||||||
(cost-$2,554,518,573) 100.0% |
|
|
|
$ |
2,570,062,674 |
|
|||||||
|
|
|
|
|
|
|
|||||||
Notes to Schedule of Investments: |
|||||||||||||
(a) |
Private Placement. Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $108,132,225, representing 4.21% of total investments. |
||||||||||||
(b) |
Illiquid security. |
||||||||||||
(c) |
These securities generally pay interest at rates which are periodically pre-determined by reference to a base lending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as the LIBOR or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted as the Fund is ordinarily contractually obligated to receive approval from the Agent bank and/or borrower prior to disposition. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty. |
||||||||||||
(d) |
144A SecuritySecurity exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid. |
||||||||||||
(e) |
Security in default. |
||||||||||||
(f) |
Fair-valued security. Securities with an aggregate value of $41,338,139, representing 1.61% of total investments, have been fair-valued. |
||||||||||||
(g) |
Credit-linked trust certificate. |
||||||||||||
(h) |
All or partial amount segregated as collateral for futures contracts and/or swaps. |
||||||||||||
(i) |
All or partial amount segregated as collateral for reverse repurchase agreements. |
||||||||||||
Glossary: |
|||||||||||||
£ |
- |
British Pound Sterling |
|||||||||||
|
- |
Euro |
|||||||||||
FRN |
- |
Floating Rate Note. The interest rate disclosed reflects the rate in effect on September 30, 2007. |
|||||||||||
LIBOR |
- |
London Inter-Bank Offered Rate |
|||||||||||
NR |
- |
Not Rated |
|||||||||||
UNIT |
- |
More than one class of securities traded together. |
|||||||||||
VRN |
- |
Variable Rate Note. The interest rate disclosed reflects the rate in effect on September 30, 2007. |
|||||||||||
|
|
|
|||||||||||
10 PIMCO High Income Fund Semi-Annual Report | 9.30.07 | See accompanying Notes to Financial Statements
PIMCO High Income Fund Statement of Assets and Liabilities
September 30, 2007 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
Investments, at value (cost-$2,554,518,573) |
|
$ |
2,570,062,674 |
|
Cash (including foreign currency of $2,664,514 with a cost of $2,583,697) |
|
2,665,437 |
|
|
Premium for swaps purchased |
|
150,833,281 |
|
|
Interest receivable |
|
54,566,071 |
|
|
Unrealized appreciation on swaps |
|
31,610,793 |
|
|
Receivable for investments sold |
|
26,302,707 |
|
|
Unrealized appreciation of forward foreign currency contracts |
|
1,184,504 |
|
|
Receivable for terminated swaps |
|
267,169 |
|
|
Unrealized appreciation on unfunded loan commitments |
|
123,885 |
|
|
Prepaid expenses |
|
61,973 |
|
|
Total Assets |
|
2,837,678,494 |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Unrealized depreciation on swaps |
|
156,115,070 |
|
|
Payable for reverse repurchase agreements |
|
39,690,000 |
|
|
Payable for investments purchased |
|
31,382,651 |
|
|
Premium for swaps sold |
|
29,267,697 |
|
|
Dividends payable to common and preferred shareholders |
|
14,881,356 |
|
|
Unrealized depreciation of forward foreign currency contracts |
|
2,686,434 |
|
|
Investment management fees payable |
|
1,448,140 |
|
|
Payable for terminated swaps |
|
925,675 |
|
|
Interest payable on reverse repurchase agreements |
|
59,425 |
|
|
Accrued expenses |
|
557,958 |
|
|
Total Liabilities |
|
277,014,406 |
|
|
Preferred Shares ($25,000 net asset and liquidation value per share applicable to an aggregate of 36,000 shares issued and outstanding) |
|
900,000,000 |
|
|
Net Assets Applicable to Common Shareholders |
|
$ |
1,660,664,088 |
|
|
|
|
|
|
Composition of Net Assets Applicable to Common Shareholders: |
|
|
|
|
Common Stock: |
|
|
|
|
Par value ($0.00001 per share, applicable to 116,037,687 shares issued and outstanding) |
|
$ |
1,160 |
|
Paid-in-capital in excess of par |
|
1,651,947,048 |
|
|
Dividends in excess of net investment income |
|
(15,585,682 |
) |
|
Accumulated net realized gain |
|
134,511,672 |
|
|
Net unrealized depreciation of investments, swaps, unfunded loan commitments and foreign currency transactions |
|
(110,210,110 |
) |
|
Net Assets Applicable to Common Shareholders |
|
$ |
1,660,664,088 |
|
Net Asset Value Per Common Share |
|
$14.31 |
|
See accompanying Notes to Financial Statements | 9.30.07 | PIMCO High Income Fund Semi-Annual Report 11
PIMCO High Income Fund Statement of Operations
For the six months ended September 30, 2007 (unaudited)
|
|
|
|
|
|
|
|
|
|
Investment Income: |
|
|
|
|
Interest |
|
$ |
110,026,678 |
|
Facility and other fee income |
|
4,073,698 |
|
|
Dividends |
|
979,952 |
|
|
Total Investment Income |
|
115,080,328 |
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
Investment management fees |
|
9,064,207 |
|
|
Interest expense on reverse repurchase agreements |
|
2,624,921 |
|
|
Auction agent fees and commissions |
|
1,135,406 |
|
|
Custodian and accounting agent fees |
|
352,114 |
|
|
Shareholder communications |
|
142,374 |
|
|
Trustees fees and expenses |
|
96,736 |
|
|
Audit and tax services |
|
54,900 |
|
|
New York Stock Exchange listing fees |
|
53,969 |
|
|
Legal fees |
|
37,881 |
|
|
Insurance expense |
|
22,067 |
|
|
Transfer agent fees |
|
20,130 |
|
|
Miscellaneous |
|
25,614 |
|
|
Total expenses |
|
13,630,319 |
|
|
Less: custody credits earned on cash balances |
|
(89,875 |
) |
|
Net expenses |
|
13,540,444 |
|
|
|
|
|
|
|
Net Investment Income |
|
101,539,884 |
|
|
|
|
|
|
|
Realized and Change in Unrealized Gain (Loss): |
|
|
|
|
Net realized gain (loss) on: |
|
|
|
|
Investments |
|
11,863,018 |
|
|
Futures contracts |
|
(2,656,292 |
) |
|
Swaps |
|
132,695,409 |
|
|
Foreign currency transactions |
|
(1,267,105 |
) |
|
Net change in unrealized
appreciation/depreciation of: |
|
(98,531,483 |
) |
|
Futures contracts |
|
1,150,844 |
|
|
Swaps |
|
(137,070,705 |
) |
|
Unfunded loan commitments |
|
123,885 |
|
|
Foreign currency transactions |
|
(1,216,694 |
) |
|
Net realized and change in unrealized loss on investments, futures contracts, swaps, unfunded loan commitments and foreign currency transactions |
|
(94,909,123 |
) |
|
Net Increase in Net Assets Resulting from Investment Operations |
|
6,630,761 |
|
|
|
|
|
|
|
Dividends and Distributions on Preferred Shares from Net investment income |
|
(24,100,634 |
) |
|
Net Decrease in Net Assets Applicable to Common Shareholders Resulting from Investment Operations |
|
$ |
(17,469,873 |
) |
12 PIMCO High Income Fund Semi-Annual Report | 9.30.07 | See accompanying Notes to Financial Statements
PIMCO High Income Fund Statement of Changes in Net Assets
Applicable to Common Shareholders
|
|
|
|
|
|
|
|
|
|
Six
Months |
|
|
Year
ended |
|
|
Investment Operations: |
|
|
|
|
|
|
|
Net investment income |
|
$ 101,539,884 |
|
|
$ |
193,219,352 |
|
Net realized gain on investments, futures contracts, swaps and foreign currency transactions |
|
140,635,030 |
|
|
17,630,470 |
|
|
Net change in unrealized appreciation/depreciation of investments, futures contracts, swaps, unfunded loan commitments and foreign currency transactions |
|
(235,544,153 |
) |
|
59,953,003 |
|
|
Net increase in net assets resulting from investment operations |
|
6,630,761 |
|
|
270,802,825 |
|
|
Dividends and Distributions on Preferred Shares from: |
|
|
|
|
|
|
|
Net investment income |
|
(24,100,634 |
) |
|
(41,072,292 |
) |
|
Net realized gains |
|
|
|
|
(3,925,740 |
) |
|
Total dividends and distributions to preferred shareholders |
|
(24,100,634 |
) |
|
(44,998,032 |
) |
|
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations |
|
(17,469,873 |
) |
|
225,804,793 |
|
|
Dividends and Distributions to Common Shareholders from: |
|
|
|
|
|
|
|
Net investment income |
|
(84,712,687 |
) |
|
(168,270,342 |
) |
|
Net realized gains |
|
|
|
|
(37,751,236 |
) |
|
Total dividends and distributions to common shareholders |
|
(84,712,687 |
) |
|
(206,021,578 |
) |
|
Capital Share Transactions: |
|
|
|
|
|
|
|
Reinvestment of dividends and distributions |
|
6,573,846 |
|
|
16,386,960 |
|
|
Total increase (decrease) in net assets applicable to common shareholders |
|
(95,608,714 |
) |
|
36,170,175 |
|
|
|
|
|
|
|
|
|
|
Net Assets Applicable to Common Shareholders: |
|
|
|
|
|
|
|
Beginning of period |
|
1,756,272,802 |
|
|
1,720,102,627 |
|
|
End of period (including dividends in excess of net investment income of $(15,585,682) and $(8,312,245), respectively) |
|
$1,660,664,088 |
|
|
$ |
1,756,272,802 |
|
|
|
|
|
|
|
|
|
Common Shares Issued in Reinvestment of Dividends and Distributions: |
|
448,120 |
|
|
1,094,235 |
|
See accompanying Notes to Financial Statements | 9.30.07 | PIMCO High Income Fund Semi-Annual Report 13
PIMCO High Income Fund Notes to Financial Statements
September 30, 2007 (unaudited)
1. Organization and Significant Accounting Policies
PIMCO High Income Fund (the Fund), was organized as a Massachusetts business trust on February 18, 2003. Prior to commencing operations on April 30, 2003, 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 there under, as amended. Allianz Global Investors Fund Management LLC (the Investment Manager) serves as the Funds Investment Manager and is an indirect wholly-owned subsidiary of Allianz Global Investors of America L.P. (Allianz Global). Allianz Global is an indirect, majority-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. The Fund has an unlimited amount of $0.00001 par value common stock authorized.
The Funds primary investment objective is to seek high current income. Capital appreciation is a secondary objective. The Fund attempts to achieve these objectives by investing in a diversified portfolio of U.S. dollar-denominated debt obligations and other income-producing securities that are primarily rated below investment grade.
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 Funds 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.
In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (the Interpretation). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. Fund management has determined that its evaluation of the Interpretation has resulted in no impact to the Funds financial statements at September 30, 2007.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Fund is in the process of reviewing the Standard against its current valuation policies to determine future applicability.
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. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Funds investments, including over-the-counter options, are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The Funds investments in senior floating rate loans (Senior Loans) for which a secondary market exists will be valued at the mean of the last available bid and asked prices in the market for such Senior Loans, as provided by an independent pricing service. Other Senior Loans are valued at fair value pursuant to procedures approved by the Funds Board of Trustees, which include consideration and evaluation of: (1) the creditworthiness of the borrower and any intermediate participants; (2) the term of the Senior Loan; (3) recent prices in the market for similar loans, if any; (4) recent prices in the market for loans of similar quality, coupon rate, and period until next interest rate reset and maturity; and (5) general economic and market conditions affecting the fair value of the Senior Loan. Exchange traded options,
14 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Notes to Financial Statements
September 30, 2007 (unaudited)
1. Organization and Significant Accounting Policies (continued)
futures and options on futures are valued at the settlement price determined by the relevant exchange. Securities purchased on a when-issued or delayed delivery basis are marked to market daily until settlement at the forward settlement value. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. The Funds net asset value is determined daily as of 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 for business.
(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued or delayed-delivery basis may be settled a month or more after the 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. Facility fees and other fees (such as origination fees) received by the Fund are amortized as income over the expected term of the senior loan. Commitment fees received by the Fund relating to unfunded purchase commitments are deferred and amortized to facility fee income over the period of the commitment.
(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.
(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 considered either 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) Foreign Currency Translation
The Funds accounting records are maintained in U.S. dollars as follows: (1) the foreign currency market value of investments and other assets and liabilities denominated in foreign currency are translated at the prevailing exchange rate at the end of the period; and (2) purchases and sales, income and expenses are translated at the prevailing exchange rate on the respective dates of such transactions. The resulting net foreign currency gain or loss is included in the Statement of Operations.
The Fund does not generally isolate that portion of the results of operations arising as a result of changes in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of securities. Accordingly, such foreign currency gain (loss) is included in net realized and unrealized gain (loss) on investments. However, the Fund does isolate the effect of fluctuations in foreign currency exchange rates when determining the gain or loss upon the sale or maturity of foreign currency denominated debt obligations pursuant to U.S. federal income tax regulations; such amount is categorized as foreign currency gain or loss for both financial reporting and income tax reporting purposes.
(f) 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
9.30.07 | PIMCO High Income Fund Semi-Annual Report 15
PIMCO High Income Fund Notes to Financial Statements
September 30, 2007 (unaudited)
1. Organization and Significant Accounting Policies (continued)
appreciation or depreciation recorded is simultaneously reversed. The use of futures transactions involves the risk of 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.
(g) Option Transactions
The Fund may purchase and write (sell) put and call options, for hedging purposes, risk management purposes or as a part of its investment strategy. 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 and is subsequently marked to market to reflect the current market value of the option written. These liabilities are reflected as options written in the Statement of Assets and Liabilities. 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 a written option could result in the Fund purchasing a security at a price different from the current market value.
(h) Interest Rate/Credit Default 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 notional amount 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 realized gain (loss).
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 notional amount 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 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 recorded as realized gain (loss).
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 periodic payments received by the Fund are included as part of realized gain (loss) and or change in unrealized appreciation/depreciation on the Statement of Operations.
Swaps are marked to market daily based upon quotations from brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Funds 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
16 PIMCO High Income Fund Semi-Annual Report | 9.30.07
PIMCO High Income Fund Notes to Financial Statements
September 30, 2007 (unaudited)
1. Organization and Significant Accounting Policies (continued)
or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in net interest rates.
(i) Senior Loans
The Fund purchases assignments of Senior Loans originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution (the Agent) for a lending syndicate of financial institutions (the Lender). When purchasing an assignment, the Fund succeeds all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender.
(j) Forward Foreign Currency Contracts
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 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. 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 appreciation or depreciation is 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.
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.
Similar to an investment in a bond, investments in 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 trusts receipt of payments from, and the trusts potential obligations to, the counterparties to the derivative instruments and other securities in which the trust invests.
(l) Repurchase Agreements
The Fund enters into transactions with its custodian bank or securities brokerage firms 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 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.
(m) Reverse Repurchase Agreements
The Fund enters into reverse repurchase agreements. 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 returns 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 Funds 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 Funds use of the proceeds of the agreement may be restricted pending determination by the other party, or its trustee or receiver, whether to enforce the Funds obligation to repurchase the securities.
9.30.07 | PIMCO High Income Fund Semi-Annual Report 17
PIMCO High Income Fund Notes to Financial Statements
September 30, 2007 (unaudited)
1. Organization and Significant Accounting Policies (continued)
(n) When-Issued/Delayed-Delivery Transactions
The Fund may purchase or sell securities on a when-issued or delayed-delivery basis. The 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 a security on a delayed-delivery basis is sold, the Fund does not participate in future gains and losses with respect to the security.
(o) 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 and accounting agent expenses. Had these cash balances been invested in income producing securities, they would have generated income for the Fund.
2. Investment Manager/Sub-Adviser
The Fund has entered into an Investment Management Agreement (the Agreement) with the Investment Manager. Subject to the supervision of the Funds Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the Funds investment activities, business affairs and administrative matters. Pursuant to the Agreement, the Investment Manager receives an annual fee, payable monthly, at an annual rate of 0.70% of the Funds average daily net assets, including 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 Funds investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds investment decisions. The Investment Manager and not the Fund pays a portion of the fees it receives as Investment Manager to the Sub-Adviser in return for its services.
3. Investment in Securities
For the six months ended September 30, 2007, purchases and sales of investments, other than short-term securities and U.S. government obligations, were $428,585,685 and $295,722,084, respectively.
(a) Credit default swaps contracts outstanding at September 30, 2007:
Swap |
|
Notional |
|
Termination |
|
Payments |
|
Unrealized |
|
||||
Bank of America |
|
|
|
|
|
|
|
|
|
||||
AES |
|
$ 1,000 |
|
|
12/20/07 |
|
|
1.50 |
% |
|
$ 3,205 |
|
|
Dow Jones CDX |
|
900 |
|
|
6/20/12 |
|
|
2.75 |
% |
|
69,461 |
|
|
Williams Cos. |
|
2,000 |
|
|
12/20/07 |
|
|
1.25 |
% |
|
5,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barclays Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Republic of Brazil |
|
15,000 |
|
|
2/20/12 |
|
|
0.90 |
% |
|
175,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bear Stearns |
|
|
|
|
|
|
|
|
|
|
|
|
|
CSC Holdings |
|
3,000 |
|
|
12/20/07 |
|
|
2.15 |
% |
|
12,442 |
|
|
Dow Jones CDX |
|
12,325 |
|
|
12/20/12 |
|
|
3.75 |
% |
|
22,339 |