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 811-21374
---------------------------------------------
PIMCO Floating Rate Income 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
----------------------------
Date of fiscal year end: July 31, 2005
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Date of reporting period: January 31, 2005
----------------
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. Report to Shareholder
SEMI-ANNUAL REPORT
1.31.05
PIMCO FLOATING RATE INCOME FUND
[PFL LISTED NYSE LOGO]
THE NOW YORK STOCK EXCHANGE
CONTENTS
Letter to Shareholders 1
Performance Summary & Statistics 2
Schedule of Investments 3-11
Statement of Assets and Liabilities 12
Statement of Operations 13
Statement of Changes in Net Assets 14
Statement of Cash Flows 15
Notes to Financial Statements 16-24
Financial Highlights 25
Annual Shareholder Meeting Results 26
[PIMCO ADVISORS LOGO]
PIMCO FLOATING RATE INCOME FUND LETTER TO SHAREHOLDERS
March 16, 2005
Dear Shareholder:
We are pleased to provide you with the semi-annual report of the PIMCO Floating
Rate Income Fund (the "Fund") for the six months ended January 31, 2005.
Please refer to the following page for specific Fund information. If you have
any questions regarding the information provided, we encourage you to contact
your financial advisor or call the Fund's transfer agent at 1-800-331-1710.
Furthermore, a wide range of information and resources can be accessed through
our Web site, www.pimcoadvisors.com.
Together with PA Fund Management LLC, the Fund's investment manager, and Pacific
Investment Management Company LLC, the Fund's sub-adviser, we thank you for
investing with us. We remain dedicated to serving your investment needs.
Sincerely,
/s/ Robert E. Connor /s/ Brian S. Shlissel
Robert E. Connor Brian S. Shlissel
CHAIRMAN PRESIDENT & CHIEF EXECUTIVE OFFICER
PIMCO FLOATING RATE INCOME FUND PERFORMANCE SUMMARY & STATISTICS
January 31, 2005 (unaudited)
SYMBOL:
PFL
OBJECTIVE:
Seeks high current income, consistent with the preservation of capital.
PRIMARY INVESTMENTS:
Floating rate debt instruments, substantial portion of which will be senior
floating rate loans.
INCEPTION DATE:
August 29, 2003
TOTAL NET ASSETS(1):
$564.3 million
PORTFOLIO MANAGERS:
Raymond G. Kennedy
Jason R. Rosiak
NET ASSET
VALUE
TOTAL RETURN(2): MARKET PRICE ("NAV")
-------------------------------------------------------------------------------------
Six months ended 1/31/05 7.65% 5.30%
1 Year 12.32% 7.73%
Commencement of Operations (8/29/03) to 1/31/05 10.09% 6.77%
COMMON SHARE MARKET PRICE/NAV PERFORMANCE:
Commencement of Operations (8/29/03) to 1/31/05
[CHART]
NAV MARKET PRICE
8/29/2003 $ 19.31 $ 20.00
9/5/2003 $ 19.29 $ 20.01
9/12/2003 $ 19.31 $ 20.15
9/19/2003 $ 19.33 $ 20.29
9/26/2003 $ 19.34 $ 20.04
10/3/2003 $ 19.37 $ 20.01
10/10/2003 $ 19.42 $ 20.03
10/17/2003 $ 19.44 $ 20.02
10/24/2003 $ 19.45 $ 20.22
10/31/2003 $ 19.41 $ 20.03
11/7/2003 $ 19.30 $ 20.16
11/14/2003 $ 19.24 $ 20.10
11/21/2003 $ 19.25 $ 20.08
11/28/2003 $ 19.27 $ 19.98
12/5/2003 $ 19.36 $ 19.62
12/12/2003 $ 19.30 $ 19.40
12/19/2003 $ 19.35 $ 19.42
12/26/2003 $ 19.38 $ 19.58
1/2/2004 $ 19.42 $ 19.84
1/9/2004 $ 19.51 $ 19.61
1/16/2004 $ 19.42 $ 19.76
1/23/2004 $ 19.48 $ 19.75
1/30/2004 $ 19.41 $ 20.10
2/6/2004 $ 19.36 $ 20.18
2/13/2004 $ 19.50 $ 20.05
2/20/2004 $ 19.33 $ 20.15
2/27/2004 $ 19.29 $ 19.95
3/5/2004 $ 19.36 $ 19.97
3/12/2004 $ 19.37 $ 20.02
3/19/2004 $ 19.30 $ 20.15
3/26/2004 $ 19.29 $ 19.88
4/2/2004 $ 19.33 $ 20.00
4/8/2004 $ 19.45 $ 20.05
4/16/2004 $ 19.32 $ 19.98
4/23/2004 $ 19.32 $ 20.04
4/30/2004 $ 19.30 $ 20.20
5/7/2004 $ 19.17 $ 20.17
5/14/2004 $ 19.10 $ 20.20
5/21/2004 $ 19.08 $ 20.13
5/28/2004 $ 19.19 $ 20.20
6/4/2004 $ 19.20 $ 20.17
6/11/2004 $ 19.27 $ 20.35
6/18/2004 $ 19.26 $ 20.29
6/25/2004 $ 19.36 $ 20.60
7/2/2004 $ 19.41 $ 20.50
7/9/2004 $ 19.44 $ 20.60
7/16/2004 $ 19.40 $ 20.62
7/23/2004 $ 19.40 $ 20.46
7/23/2004 $ 19.4 $ 20.4600
7/30/2004 $ 19.37 $ 20.4700
8/6/2004 $ 19.41 $ 20.8700
8/13/2004 $ 19.37 $ 20.7900
8/20/2004 $ 19.33 $ 20.8700
8/27/2004 $ 19.4 $ 21.0100
9/3/2004 $ 19.41 $ 21.0600
9/10/2004 $ 19.48 $ 21.1800
9/17/2004 $ 19.44 $ 20.4100
9/24/2004 $ 19.42 $ 20.8100
10/1/2004 $ 19.47 $ 20.9600
10/8/2004 $ 19.56 $ 20.7700
10/15/2004 $ 19.5 $ 20.5600
10/22/2004 $ 19.52 $ 20.6100
10/29/2004 $ 19.66 $ 20.9200
11/5/2004 $ 19.79 $ 21.1000
11/12/2004 $ 19.81 $ 21.6500
11/19/2004 $ 19.77 $ 21.1300
11/26/2004 $ 19.8 $ 21.4500
12/3/2004 $ 19.84 $ 20.7600
12/10/2004 $ 19.87 $ 20.6100
12/17/2004 $ 19.81 $ 20.5000
12/23/2004 $ 19.86 $ 20.7500
12/31/2004 $ 19.76 $ 21.1600
1/7/2005 $ 19.76 $ 21.3600
1/14/2005 $ 19.73 $ 21.7000
1/21/2005 $ 19.62 $ 21.4200
1/28/2005 $ 19.7 $ 21.2800
1/31/2005 $ 19.71 $ 21.30
MARKET PRICE/NET ASSET VALUE:
Market Price $ 21.30
Net Asset Value $ 19.71
Premium to NAV 8.07%
Market Price Yield(3) 5.53%
[CHART]
MOODY'S RATINGS AS A % OF TOTAL INVESTMENTS
AAA 6.5%
A 0.3%
Baa 1.3%
Ba 23.2%
B 36.4%
Caa 5.2%
Ca 0.0%
NR 27.1%
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
calculated by subtracting the value of an investment in the Fund at the
beginning of each specified period from the value at the end of the period and
dividing the remainder by the value of the investment at the beginning of the
period and expressing the result as a percentage. The calculation assumes that
all income dividends and capital gain distributions have been reinvested at
prices obtained under the Fund's dividend reinvestment plan. 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 more than one
year represents the average annual total return.
An investment in the Fund involves risk, including the loss of principal. Total
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 January 31, 2005.
2
PIMCO FLOATING RATE INCOME FUND SCHEDULE OF INVESTMENTS
January 31, 2005 (unaudited)
PRINCIPAL
AMOUNT
(000) VALUE
--------------------------------------------------------------------------------------------------------------------------------
SENIOR LOANS (a) (b) (c)--57.9%
AEROSPACE - 0.3%
$ 1,950 K & F Industries Inc., 4.92%-6.75%, 11/18/12, Term B $ 1,983,719
---------------
APPAREL & TEXTILES - 1.4%
2,692 Arteva DBA Kosa, 5.3125%, 4/30/11, Term B1 2,741,996
1,214 Kosa Canada Co., 5.3125%, 4/30/11, Term B2 1,234,845
4,000 Simmons & Co., 7.00%, 6/19/12, Term C 4,093,332
---------------
8,070,173
===============
AUTOMOTIVE - 4.0%
2,255 Federal-Mogul Corp., 0.00%, 12/8/11, Term B (d) 2,268,292
245 Federal-Mogul Corp., 0.00%, 12/8/11, Term LC (d) 246,783
3,762 Hayes Lemmerz International Inc., 5.33%-6.00%, 6/30/09, Term B 3,832,623
2,000 Imperial Plastech Inc., 6.26%, 2/15/10, Term C 2,007,500
2,500 Pacificare Systems Inc., 4.0625%-4.25%, 12/17/08, Term B 2,511,458
1,397 Tenneco Automotive Inc., 5.40%, 12/30/10, Term B1 1,423,900
3,072 Tenneco Automotive Inc., 5.56875%, 12/30/10, Term B 3,132,581
3,500 TRW Automotive Inc., 4.375%, 12/17/11, Term B 3,510,937
4,256 Volkswagon ADR, 5.17%, 4/7/11, Term B 4,333,978
---------------
23,268,052
===============
CHEMICALS - 3.7%
2,500 Brenntag AG, 4.73%, 2/27/12 Term B2 2,524,750
3,500 Celanese AG, 0.00%, 1/11/11-4/11/11 (d) 3,565,625
998 Celanese AG, 4.81%, 6/8/11, Term B 1,001,241
1,992 Cognis BV, 5.0933%, 3/31/13, Term C1 2,006,054
1,149 Cognis BV, 5.44%, 3/31/12, Term B1 1,155,047
1,985 Hercules Inc., 3.96625%-4.31%, 10/8/10, Term B 2,008,262
1,660 Huntsman International LLC, 5.00%, 12/30/10, Term B 1,685,890
2,948 Kraton Polymers Group, 4.625%-5.5625%, 12/2/09 2,975,282
4,578 Nalco Co., 4.52%-4.92%, 11/1/10, Term B 4,646,946
---------------
21,569,097
===============
COMPUTER SOFTWARE - 0.2%
995 UGS Solutions Inc., 4.83%, 5/26/11, Term B 1,010,547
---------------
CONSUMER PRODUCTS - 1.4%
2,000 Jarden Corp., 6.25%, 1/21/12, Term B 2,020,714
3,059 Rayovac Corp., 4.78%-4.94%, 10/1/09, Term B 3,094,248
3,000 Revlon Inc., 8.42%-8.84%, 7/9/10-7/31/10 3,122,499
---------------
8,237,461
===============
CONTAINERS - 4.2%
5,500 Graham Packaging Co., 5.00%-5.125%, 9/15/11, Term B 5,582,010
1,500 Graham Packaging Co., 6.8125%, 3/15/12 1,542,563
3,650 Graphic Packaging International Corp., 5.06%-5.44%, 8/9/10, Term C 3,716,354
1,496 Intertape Polymer Group, Inc., 4.69%-4.96%, 7/28/11, Term B 1,515,888
1,331 Owens-Illinois Inc., 5.23%, 4/1/08 1,355,089
1,981 Solo Cup Co., 4.96875%-5.09%, 2/27/11, Term B 2,019,069
742 Stone Container Corp., 2.20625%, 11/1/10 754,089
5,932 Stone Container Corp., 4.4375%-4.6875%, 11/1/10-11/1/11, Term B 6,026,931
1,825 Stone Container Corp., 4.4375%-4.50%, 11/1/10-11/1/11, Term C 1,854,317
---------------
24,366,310
===============
DIVERSIFIED MANUFACTURING - 0.7%
3,654 Invensys plc, 6.0913%, 9/30/09, Term B1 4,023,515
---------------
3
PRINCIPAL
AMOUNT
(000) VALUE
--------------------------------------------------------------------------------------------------------------------------------
DRUGS & MEDICAL PRODUCTS - 0.9%
$ 740 Warner Chilcott plc, 0.00%, 1/4/12 (d) $ 746,382
4,260 Warner Chilcott plc, 0.00%, 1/18/12, Term B (d) 4,296,742
---------------
5,043,124
===============
ENERGY - 2.7%
1,980 Calpine Corp., 8.5775%, 8/13/09 2,129,737
2,488 Dynegy, Inc., 6.398%, 5/10/10 2,534,141
1,638 Foundation Coal Holdings Inc., 4.56%-4.78%, 7/30/11, Term B 1,663,487
4,585 Headwaters Inc., 5.75%-8.17%, 4/30/11, Term B 4,650,540
333 Headwaters Inc., 7.90%, 9/1/12, Term C 347,361
1,969 NRG Energy Inc., 0.00%, 12/24/11 (d) 1,981,547
2,531 NRG Energy Inc., 0.00%, 12/24/11, Term B (d) 2,547,703
---------------
15,854,516
===============
ENTERTAINMENT - 1.0%
1,496 Loews Cineplex Entertainment, 4.44%-4.8144%, 7/8/11-7/22/11 1,518,344
4,466 Warner Music Group Inc., 4.31875%-5.11%, 2/27/11, Term B 4,527,196
---------------
6,045,540
===============
FINANCIAL SERVICES - 0.9%
1,000 Atlantic Boradcast, Inc., 5.69%, 7/30/11, Term B 1,020,208
1,500 Nextel Finance Corp., 4.9375%, 3/15/11, Term C 1,522,098
2,430 Refco Group Ltd., 5.27%, 7/30/11, Term B 2,459,464
---------------
5,001,770
===============
FOOD & BEVERAGE - 0.8%
4,470 Constellation Brands, Inc. 4.83%-5.06%, 9/18/11, Term B 4,545,431
---------------
FOOD SERVICES - 1.1%
2,437 Del Monte Foods Co., 4.96%, 12/20/10, Term B 2,451,964
4,000 Michaels Foods, Inc., 6.59% 11/30/11, Term C 4,115,000
---------------
6,566,964
===============
FUNERAL SERVICES - 0.1%
669 Alderwoods Group Inc., 3.73%-4.51%, 9/17/08, Term B 679,209
---------------
HEALTH & HOSPITALS - 2.4%
3,990 Ardent Health Inc., 4.80%, 8/15/11, Term B 4,023,668
1,975 Beverly Enterprises Inc., 4.73%-5.42%, 10/30/08, Term B 2,004,625
8,372 Davita, Inc., 3.874%-4.66%, 6/23/09, Term B1 8,403,322
---------------
14,431,615
===============
HOTELS/GAMING - 1.5%
2,333 Aladdin Gaming, 0.00%, 8/31/10 (j) 2,310,000
998 Argosy Gaming Co., 4.31%, 6/30/11, Term B 1,004,670
3,333 Host Marriott Corp., 0.00%, 9/10/08, Term A Revolver (d) (e) 3,061,363
1,667 Host Marriott Corp., 0.00%, 9/10/08, Term B Revolver (d) (e) 1,530,681
864 Las Vegas Sands, Inc. 4.90%, 8/15/11, Term B 878,930
133 Wynn Resorts Ltd., 4.575%, 12/14/11, Term B 134,687
---------------
8,920,331
===============
HOUSEHOLD PRODUCTS - 0.7%
1,000 Springer S.A., 5.5261%, 9/16/11, Term B2 1,004,354
2,800 Springer S.A., 6.0261%, 9/16/12, Term C2 (e) 2,826,600
---------------
3,830,954
===============
4
PRINCIPAL
AMOUNT
(000) VALUE
--------------------------------------------------------------------------------------------------------------------------------
LEASING - 0.3%
$ 333 United Rentals, Inc., 2.40%, 2/15/11, Term LC $ 337,731
1,651 United Rentals, Inc., 4.81%, 2/15/11, Term B 1,676,248
---------------
2,013,979
===============
MACHINERY - 0.6%
2,295 Agco Corp., 4.47%-4.55%, 1/31/06, Term B 2,337,021
1,022 Flowserve Corp., 4.8125%-5.4375%, 6/30/09, Term C 1,041,343
---------------
3,378,364
===============
MANUAFACTURING - 0.1%
788 SPX Corp., 4.625%, 9/30/09, Term B1 793,551
---------------
MEASURING INSTRUMENTS - 0.7%
4,000 Dresser Inc., 5.84%, 2/18/10 4,050,000
---------------
METALS & MINING - 0.5%
3,000 Novelis Inc., 4.125%, 12/30/11, Term B 3,027,084
---------------
MULTI-MEDIA - 5.4%
2,831 Canwest Media Inc., 4.70%, 8/15/09, Term E 2,871,393
2,000 Charter Communications Holdings, LLC, 5.13%, 4/26/10, Term A 1,986,876
6,439 Charter Communications Holdings, LLC, 5.89%-5.98%, 4/27/11, Term B 6,427,013
3,304 DirectTV Holdings LLC, 4.45%-4.48%, 3/6/10, Term B-2 3,353,642
1,000 DirectTV Holdings LLC, 4.75%, 3/6/10, Term B-1 1,015,125
6,930 Insight Midwest Holdings LLC., 5.4375%, 12/31/09, Term B 7,045,663
2,985 MediaCom Broadband LLC, 4.89%-5.29%, 9/30/10, Term B 3,018,661
3,000 Olympus Cable Holdings LLC, 0.00%, 9/30/10, Term B (d) 2,983,359
1,625 Primedia Inc., 5.375%, 6/30/09, Term B 1,610,053
1,493 Primedia Inc., 6.8725%, 11/10/09, Term C 1,515,510
---------------
31,827,295
===============
OFFICE EQUIPMENT - 2.2%
5,700 Boise Cascade Inc., 4.6875%, 10/29/11, Term B 5,781,641
5,300 Boise Cascade Inc., 4.84375%, 10/29/11, Term C 5,312,646
2,000 Xerox Corp., 4.33%, 9/30/08, Term B 2,021,406
---------------
13,115,693
===============
PAPER PRODUCTS - 0.8%
2,488 Appleton Papers Inc., 4.33%-4.79%, 6/9/10-6/11/10 2,517,039
2,052 Buckeye Technologies Inc., 4.45%-5.05%, 11/4/10, Term B 2,087,774
---------------
4,604,813
===============
PIPELINES - 0.6%
3,260 Kinetics Concepts, Inc., 4.31%, 7/14/10, Term B 3,286,820
---------------
PRINTING/PUBLISHING - 1.0%
1,440 RH Donnelley Corp., 4.09%-4.13%, 12/31/09, Term A3 1,450,981
3,690 RH Donnelley Corp., 4.13%-4.69%, 6/30/11, 3,729,660
409 RH Donnelley Corp., 4.26%, 6/30/11, Term D4 414,061
136 RH Donnelley Corp., 4.30%, 6/30/11, Term D1 138,020
136 RH Donnelley Corp., 4.31%, 6/30/11, Term D3 138,020
---------------
5,870,742
===============
REAL ESTATE - 0.9%
1,000 General Growth Properties Inc., 4.64%, 11/12/07, Term A 994,036
4,000 General Growth Properties Inc., 4.64%, 11/12/08, Term A 4,032,084
---------------
5,026,120
===============
5
PRINCIPAL
AMOUNT
(000) VALUE
--------------------------------------------------------------------------------------------------------------------------------
RECREATION - 0.3%
$ 1,801 Six Flags Theme Parks Inc., 4.90%, 6/30/09, Term B $ 1,833,363
---------------
RETAIL - 0.3%
1,995 Jean Coutu Group Inc., 4.4375%, 7/30/11 2,026,796
---------------
SEMI-CONDUCTORS - 0.5%
3,000 On Semiconductor Corp., 5.5625%, 12/3/11, Term G 3,018,750
---------------
SPECIAL PURPOSE ENTITY - 0.3%
1,871 Global Cash Access LLC, 5.17%, 3/15/10, Term B 1,902,730
---------------
TELECOMMUNICATIONS - 6.6%
5,000 Advert Direct Sol., 4.48%, 11/19/11, Term B 5,050,000
3,970 Centennial Cellular Communications Corp.,
4.92%-5.38%, 1/20/11-6/18/11, Term B 4,005,666
3,268 Cincinnati Bell Inc., 4.98%-5.08% 6/30/08-11/30/08, Term D 3,301,116
1,665 Dex Media East LLC, 3.39%-4.23%, 11/8/08, Term A 1,684,937
3,271 Dex Media West LLC, 4.10%-4.25%, 9/9/10, Term B 3,315,467
2,483 Dex Media East LLC, 4.14%-4.25%, 5/8/09, Term B 2,516,184
1,136 Dex Media West LLC, 4.35%-4.91%, 9/9/09, Term A 1,150,312
2,292 Inmarsat Ventures PLC., 5.50235%, 10/10/10, Term B 2,312,503
2,298 Inmarsat Ventures PLC., 6.00235%, 10/10/11, Term C 2,317,955
2,000 New Skies Satellite NV, 5.25%-5.438%, 5/10/10, Term B 2,021,666
2,565 Panamsat Corp., 5.00%, 8/20/09, Term A1 2,576,033
1,231 Panamsat Corp., 5.00%, 8/20/09, Term A2 1,236,536
1,995 Valor Telecommunications, 5.92%-5.98%, 9/23/09-11/10/11, Term B 2,006,014
4,975 Western Wireless Corp., 5.40%-5.71%, 5/30/11, Term B 5,016,457
---------------
38,510,846
===============
TOBACCO - 0.3%
1,908 Commonwealth Brands, Inc. 5.875%, 8/28/07, Term B 1,933,913
---------------
TRANSPORTATION - 0.4%
2,335 Bombardier Inc., 4.97%, 12/17/10-12/18/10, Term B 2,372,094
---------------
UTILITIES - 5.5%
1,571 AES Corp., 4.25%-4.44%, 4/30/08-8/10/11, Term B 1,598,602
3,414 Allegheny Energy Inc., 4.76%-4.91%, 3/8/11, Term B 3,482,104
4,500 El Paso Corp., 4.9575%, 11/22/09, Term LC 4,543,241
7,470 El Paso Corp., 5.1875%, 11/23/09, Term B 7,555,591
3,736 Midwest Generation LLC, 5.38%-5.81438%, 4/27/11, Term B 3,793,933
9,000 Reliant Resources Inc., 4.895%-5.0675%, 12/22/10 9,071,514
2,000 Tucson Electric Power Corp., 2.45%, 3/30/09, Term B 2,018,750
---------------
32,063,735
===============
WASTE DISPOSAL - 1.9%
11,114 Allied Waste North America, 4.95%-5.24%, 1/15/10-4/30/10, Term B 11,291,676
---------------
WHOLESALE - 0.7%
4,149 Roundy's Inc., 3.92%-4.49%, 6/6/09, Term B1 4,199,988
---------------
Total Senior Loans (cost-$336,212,073) 339,596,680
===============
CREDIT RATING
(MOODY'S/S&P)
------------------
CORPORATE BONDS & NOTES--24.0%
AIR-CONDITIONING - 0.5%
3,000 Goodman Global Holdings, 5.76%, 6/15/12 (f) (g) B3/B- 3,090,000
---------------
6
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
--------------------------------------------------------------------------------------------------------------------------------
AIRLINES - 0.6%
$ 1,219 Delta Air Lines, Inc., pass thru certificates,
7.379%, 5/18/10 Ba1/BBB- $ 1,172,312
JetBlue Airways Corp., pass thru certificates,
1,750 5.39%, 11/15/08 (f) Ba1/NR 1,753,229
700 6.74%, 3/15/08 (f) Ba1/BB+ 720,569
---------------
3,646,110
===============
AUTOMOTIVE - 0.4%
2,000 Dura Operating Corp., 8.625%, 4/15/12, Ser. B B2/B 2,065,000
---------------
BUILDING/CONSTRUCTION - 0.1%
500 North American Energy Partners Inc., 8.75%, 12/1/11 B3/B- 466,250
---------------
ENERGY - 2.2%
1,231 Calpine Corp., 8.41%, 7/15/07 (f) (g) NR/B 1,101,969
2,000 CMS Energy Corp., 7.75%, 8/1/10 B1/B+ 2,167,500
2,500 Dynegy Holdings, Inc., 9.16%, 7/15/08 (f) (g) B3/B- 2,718,750
4,000 NRG Energy Inc., 8.00%, 12/15/13 (g) B1/B 4,330,000
2,500 PPL Capital Fund Trust I, 7.29%, 5/18/06 Ba1/BB+ 2,603,777
---------------
12,921,996
===============
FINANCING - 0.8%
5,000 General Motors Acceptance Corp.,
3.185%-4.56%, 5/18/06-12/1/14, (f) Baa1/BBB- 4,862,802
---------------
FORESTRY - 0.4%
2,000 GP Canada Finance Co., 7.20%, 12/15/06 (g) Ba3/BB+ 2,095,000
---------------
HOSPITALS - 0.3%
2,000 HCA Inc., 5.50%, 12/1/09 Ba2/BB+ 2,001,804
---------------
HOTELS/GAMING - 1.1%
1,000 Boyd Gaming Corp., 7.75%, 12/15/12 B1/B+ 1,080,000
1,250 La Qunita Corp., 7.00%, 8/15/07 Ba3/BB- 1,304,687
2,000 Mandalay Resort Group, 7.625%, 7/15/13 Ba3/BB- 2,190,000
2,000 Starwood Hotels Resorts, 7.375%, 5/1/07 Ba1/BB+ 2,137,500
---------------
6,712,187
===============
INSURANCE - 0.6%
1,500 Parametric Re Ltd., 6.84%, 11/19/07 (b) (f) (g) Ba2/NR 1,567,725
2,000 Residential Reinsurance Ltd., 7.35%, 6/8/06 (b) (f) Ba2/BB+ 1,950,610
---------------
3,518,335
===============
MANUFACTURING - 0.2%
1,000 Superior Essex Inc., 9.00%, 4/15/12 (g) B3/B 1,040,000
---------------
MULTI-MEDIA - 4.0%
5,000 Cablevision Systems Corp., 6.669%, 4/1/09 (f) (g) B3/B+ 5,450,000
2,000 Cablevision Systems Corp., 8.00%, 4/15/12 (g) B3/B+ 2,170,000
4,000 CCO Holdings LLC, 6.615%, 12/15/10 (f) (g) B3/CCC- 3,980,000
1,000 CCO Holdings LLC, 8.75%, 11/15/13 B3/CCC- 1,020,000
4,000 Charter Communications Holdings Inc., 10.25%, 9/15/10 Caa1/CCC- 4,180,000
5,665 Echostar DBS Corp., 5.81%, 10/1/08 (f) (g) Ba3/BB- 5,877,438
1,000 Primedia Inc., 7.67%, 5/15/10 (f) (g) B3/B 1,060,000
---------------
23,737,438
===============
PAPER - 0.9%
2,000 Abitibi-Consolidated Inc., 5.25% 6/20/08 Ba3/BB- 1,960,000
7
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
--------------------------------------------------------------------------------------------------------------------------------
PAPER (continued)
$ 3,000 Boise Cascade LLC, 5.535%, 10/15/12 (f) (g) B1/B+ $ 3,097,500
---------------
5,057,500
===============
RETAIL - 0.4%
2,000 Toys "R" Us Inc., 7.63%, 8/1/11 Ba2/BB 2,085,000
---------------
SEMI-CONDUCTORS - 0.9%
2,000 Freescale Semiconductor Inc., 5.41%, 7/15/09 (f) Ba2/BB+ 2,085,000
3,000 Magnachip Semiconductor Inc., 5.76%, 12/15/11 (f) (g) Ba3e/B+ 3,108,750
---------------
5,193,750
===============
SPECIAL PURPOSE ENTITY - 1.7%
4,000 Borden US Finance Corp., 7.41%, 7/15/10 (f) (g) B3/B- 4,160,000
293 Merrill Lynch CBO, 2.66%, 11/7/06, Ser. A (e) (f) (g) Ca/CC 92,419
3,000 Pioneer 2002 Ltd., 7.74%, 6/15/06 (b) (e) (f) (g) Ba3/BB+ 3,054,719
2,500 Univeral City Florida Holdings, 7.20%, 5/1/10 (f) (g) B3/B- 2,612,500
---------------
9,919,638
===============
TELECOMMUNICATIONS - 8.1%
2,000 Cincinnati Bell Inc., 8.375%, 1/15/14 B3/B- 2,040,000
3,000 Dobson Cellular Systems, Inc., 6.96%, 11/1/11 (f) (g) 3,172,500
2,500 Intelsat Bermuda Ltd., 7.79%, 1/15/12 (f) (g) B1/B+ 2,587,500
2,500 New Skies Satellites NV, 7.44%, 11/1/11 (f) (g) B3/B- 2,618,750
2,000 Qwest Capital Funding Corp., 7.90%, 8/15/10 Caa2/B 1,975,000
12,000 Qwest Communications International Inc., 5.79%, 2/15/09 (f) (g) B3/B 12,240,000
10,000 Qwest Services Corp., 13.50%, 12/15/10 (g) Caa1/B 11,925,000
3,500 Rogers Wireless Inc., 5.53%, 12/15/10 (f) (g) Ba3/BB 3,701,250
2,000 Rural Cellular Corp., 6.99%, 3/15/10 (f) B2/B- 2,115,000
2,000 Rural Cellular Corp., 8.25%, 3/15/12 B2/B- 2,150,000
3,000 Time Warner Telecommunications Inc., 6.29%, 2/15/11 (f) B1/B 3,082,500
---------------
47,607,500
===============
TOBACCO - 0.8%
1,000 Commonwealth Brands, Inc. 9.71%, 4/15/08 (f) (g) NR/NR 1,042,500
2,500 Dimon Corp., 7.75%, 6/1/13 B1/BB 2,712,500
1,500 North Atlantic Trading Co., 9.25%, 3/1/12 B3/B- 1,185,000
---------------
4,940,000
===============
Total Corporate Bonds & Notes (cost-$137,246,318) 140,960,310
===============
ASSET-BACKED SECURITIES--7.2%
2,575 Ameriquest Mortgage Securities Inc.,
2.62%-2.65%, 4/25/34-8/25/34 (f) Aaa/AAA 2,576,874
2,659 Amortizing Residential Collateral Trust, 3.01%, 12/25/32 (f) B2/B- 2,674,283
1,640 CDC Mortgage Capital Trust, 2.88%, 10/25/33 (f) Aaa/AAA 1,645,839
1,910 Centex Home Equity Loan Trust, 2.82%, 3/25/33 (f) Aaa/AAA 1,911,874
1,895 Chec Loan Trust, 2.65%, 7/25/34 (f) Aaa/AAA 1,896,768
493 Citifinancial Mortgage Securities Inc., 2.83%, 1/25/33 (f) Aaa/AAA 493,909
3,607 Countrywide Asset-Backed Certificates, 2.71%, 7/25/21 (f) NR/AAA 3,609,799
3,268 Credit-Suisse First Boston Mortgage Securities Corp.,
2.88%-2.90%, 7/25/32-8/25/32 (f) Aaa/AAA 3,278,629
1,625 FC CBO, 3.007%, 6/3/09, Ser. 1A (f) (g) Ba2/BB- 1,598,158
397 First Franklin Mortgage Loan Corp., 2.65%, 7/25/33 (f) NR/AAA 397,392
2,280 GSAMP Trust, 2.82%, 3/25/34 (f) Aaa/AAA 2,281,800
8
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
--------------------------------------------------------------------------------------------------------------------------------
$ 2,421 Isles CBO, 2.975%, 10/27/10, Ser. 1 (e) (f) (g) Ba2/NR $ 2,131,845
1,056 Jade CBO Ltd., 7.67%, 10/24/11 (e) (g) B2/NR 832,621
2,237 Long Beach Mortgage Loan Trust,
2.85%-2.93%, 3/25/33-6/25/33 (f) Aaa/AAA 2,240,606
3,849 Mellon Residential Funding Corp., 2.83%, 11/15/31 (f) Aaa/AAA 3,850,976
1,657 Nelnet Student Loan Trust, 2.017%, 4/25/11 (f) Aaa/AAA 1,657,209
5,955 Park Place Securities Inc., 2.68%-2.73%, 10/25/34 (f) Aaa/AAA 5,956,874
3,339 Terwin Mortgage Trust, 2.66%, 9/25/34 (f) (g) Aaa/AAA 3,337,058
---------------
Total Asset-Backed Securities (cost-$42,216,968) 42,372,514
===============
SOVEREIGN DEBT OBLIGATIONS (f)--3.0%
BRAZIL - 3.0%
12,512 Federal Republic of Brazil, 3.125%-11.00%, 4/15/09 B2/B+ 12,138,188
5,000 Federal Republic of Brazil, 11.00%, 8/17/40 B1/BB- 5,793,750
---------------
Total Sovereign Debt Obligations (cost-$17,151,708) 17,931,938
===============
PREFERRED STOCK (a) (f) (g)--0.7%
Shares
FINANCING - 0.2%
16,100 Fannie Mae, 7.00%, 12/31/07 Aa3/AA- 913,675
---------------
SPECIAL PURPOSE ENTITY - 0.5%
30 Richmond County Cap. Corp., 5.32%, 7/15/08 (b) NR/NR 3,000,000
---------------
Total Preferred Stock (cost-$3,873,307) 3,913,675
===============
SHORT-TERM INVESTMENTS--7.2%
ASSET-BACKED SECURITIES - 1.0%
$ 3,000 Redwood Capital II Ltd., 4.86%, 1/9/06 (b) (f) (g) Baa3/BBB- 3,011,490
3,000 Redwood Capital II Ltd., 6.41%, 1/9/06 (b) (f) (g) Ba1/BB+ 3,003,240
---------------
Total Asset-Backed Securities (cost-$6,000,000) 6,014,730
===============
COMMERCIAL PAPER - 1.1%
FINANCING - 1.1%
6,400 UBS Finance, Inc., 2.47%, 2/1/05 (cost-$6,400,000) P-1/A1+ 6,400,000
---------------
CORPORATE NOTES - 1.6%
CHEMICALS - 0.3%
1,500 Arco Chemical Co., 9.375%, 12/15/05 B1/B+ 1,569,375
---------------
FINANCING - 0.3%
1,500 Ford Motor Credit Corp., 7.60%, 8/1/05 A3/BBB- 1,528,821
---------------
HOTELS/GAMING - 0.7%
3,000 La Quinta Corp., 7.40%, 9/15/05 Ba3/BB- 3,056,250
1,430 MGM Mirage Inc., 6.625%, 2/1/05 Ba1/BB+ 1,430,000
---------------
4,486,250
===============
9
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
--------------------------------------------------------------------------------------------------------------------------------
PAPER - 0.3%
$ 2,000 Abitibi-Consolidated Inc., 8.30% 8/1/05 Ba3/BB- $ 2,045,000
---------------
Total Short-Term Corporate Notes (cost-$9,556,409) 9,629,446
===============
U.S. TREASURY BILLS (h) - 0.7%
3,965 2.127%-2.455%, 3/3/05-5/5/05 (cost-$3,939,760) Aaa/AAA 3,939,751
---------------
REPURCHASE AGREEMENTS - 2.8%
12,258 State Street Bank & Trust Co.
dated 1/31/05, 1.90%, due 2/1/05,
proceeds:$12,258,647; collateralized by Federal Home
Loan Mortgage, 3.875%, 2/15/05, valued at
$12,504,528 with accrued interest 12,258,000
4,000 Lehman Brothers, dated 1/31/05, 2.38%, due 2/1/05,
proceeds:$4,000,264; collateralized by
U.S. Treasury Bonds, 7.125%, 2/15/23,
valued at $4,093,540 with accrued interest 4,000,000
---------------
Total Repurchase Agreements-(cost-$16,258,000) 16,258,000
===============
Total Short-Term Investments (cost-$42,154,169) 42,241,927
===============
PUT OPTIONS PURCHASED (i)--0.0%
Contracts
Eurodollar Futures,
480 strike price $94.00, expires 9/19/05 3,000
20 strike price $94.25, expires 9/19/05 125
60 strike price $94.50, expires 9/19/05 375
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade,
286 strike price $107, expires 2/18/05 4,469
---------------
Total Put Options Purchased (cost-$11,141) 7,969
===============
TOTAL INVESTMENTS BEFORE OPTIONS WRITTEN (cost-$578,865,684) - 100.0% 587,025,013
===============
CALL OPTIONS WRITTEN (i) - 0.0%
(8,500,000) Swap Option 3 Month LIBOR,
strike rate @ 4.15%, expires 2/3/05 (1,768)
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade:
(195) strike price $113, expires 2/18/05 (45,703)
(215) strike price $114, expires 5/20/05 (70,547)
---------------
Total Call Options Written (premiums received-$121,837) (118,018)
===============
PUT OPTIONS WRITTEN (i)--0.0%
(8,500,000) Swap Option 3 Month LIBOR,
Strike rate @ 4.60%, expires 2/3/05 (34)
U.S. Treasury Bond Futures, Chicago Board of Trade:
(130) strike price $108, expires 5/20/05 (52,813)
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade:
(131) strike price $107, expires 5/20/05 (24,562)
(234) strike price $109, expires 2/18/05 (3,656)
---------------
Total Put Options Written (premiums received-$203,400) (81,065)
===============
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost-$578,540,447) - 100.0% $ 586,825,930
===============
10
(a) Private Placement. Restricted as to resale and may not have a readily
available market.
(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 London Interbank Offered Rate
("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.
(d) Unsettled security, coupon rate undetermined at January 31, 2005.
(e) Fair-valued security.
(f) Floating Rate Security. Interest rate shown is the rate in effect at
January 31, 2005.
(g) 144A Security--Security 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
investors.
(h) All or partial principal amount segregated as initial margin on futures
contracts.
(i) Non-income producing.
GLOSSARY:
ADR - American Depositary Receipt
CBO - Collateralized Bond Obligation
LIBOR - London Interbank Offered Rate
NR - Not Rated
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
PIMCO FLOATING RATE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES
January 31, 2005 (unaudited)
ASSETS:
Investments, at value (cost-$578,865,684) $ 587,025,013
Cash (including foreign currency of $5,385 with a cost of $5,410) 1,971,391
Receivable for investments sold/paydowns 10,405,148
Unrealized appreciation on swaps 5,749,784
Interest receivable 4,193,762
Premium for swaps purchased 80,500
Unrealized appreciation on unfunded loan commitments 27,139
Prepaid expenses 17,549
------------------------------------------------------------------------------------- ---------------
Total Assets 609,470,286
===================================================================================== ===============
LIABILITIES:
Payable for investments purchased 36,074,167
Unrealized depreciation on swaps 4,241,040
Premium for swaps sold 2,048,402
Dividends payable to common and preferred shareholders 1,831,808
Investment management fee payable 359,561
Options written, at value (premium received $325,237) 199,083
Deferred facility fees 145,399
Payable for variation margin on futures contracts 65,531
Unrealized depreciation on forward foreign currency contracts 53,098
Accrued expenses 107,797
------------------------------------------------------------------------------------- ---------------
Total Liabilities 45,125,886
------------------------------------------------------------------------------------- ---------------
PREFERRED SHARES ($0.00001 PAR VALUE AND $25,000 NET ASSET AND LIQUIDATION VALUE PER
SHARE APPLICABLE TO AN AGGREGATE OF 8,400 SHARES ISSUED AND OUTSTANDING) 210,000,000
------------------------------------------------------------------------------------- ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 354,344,400
===================================================================================== ===============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock:
Par value ($0.00001 per share, applicable to 17,981,553 shares issued and outstanding) $ 180
Paid-in-capital in excess of par 344,708,949
Dividends in excess of net investment income (1,592,593)
Accumulated net realized gain 2,226,849
Net unrealized appreciation of investments, swaps, futures contracts, options written,
unfunded loan committments and foreign currency transactions 9,001,015
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 354,344,400
------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE PER COMMON SHARE $ 19.71
===================================================================================== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
PIMCO FLOATING RATE INCOME FUND STATEMENT OF OPERATIONS
For the six months ended January 31, 2005 (unaudited)
INTEREST INCOME:
Interest $ 12,784,174
Facility and other fee income 767,462
Dividends 76,885
---------------
13,628,521
---------------
EXPENSES:
Investment management fees 2,123,265
Auction agent fees and commissions 271,646
Custodian and accounting agent fees 103,438
Reports to shareholders 53,056
Audit and tax services 46,020
Trustees' fees and expenses 17,528
New York Stock Exchange listing fees 16,832
Transfer agent fees 14,740
Legal fees 10,120
Investor relations 5,316
Miscellaneous 13,965
------------------------------------------------------------------------------------- ---------------
Total expenses 2,675,926
------------------------------------------------------------------------------------- ---------------
Less: custody credits earned on cash balances (8,338)
------------------------------------------------------------------------------------- ---------------
Net expenses 2,667,588
------------------------------------------------------------------------------------- ---------------
NET INVESTMENT INCOME 10,960,933
===================================================================================== ===============
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments (77,237)
Futures contracts 262,117
Options written 106,058
Swaps 1,897,948
Foreign currency transactions 257,643
Net change in unrealized appreciation/depreciation of:
Investments 5,050,277
Futures contacts (319,040)
Options written 126,154
Swaps 1,657,655
Unfunded loan commitments 178,104
Foreign currency transactions 104,682
Net realized and unrealized gain on investments, futures contracts, options written,
swaps, unfunded loan committments and foreign currency transactions 9,244,361
------------------------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 20,205,294
===================================================================================== ===============
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (2,094,660)
------------------------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM INVESTMENT OPERATIONS $ 18,110,634
===================================================================================== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
PIMCO FLOATING RATE INCOME FUND STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
SIX MONTHS FOR THE PERIOD
ENDED AUGUST 29, 2003*
JANUARY 31, 2005 THROUGH
(unaudited) JULY 31, 2004
---------------- ----------------
INVESTMENT OPERATIONS:
Net investment income $ 10,960,933 $ 12,771,659
Net realized gain on investments, swaps, futures contracts, options written
and foreign currency transactions 2,446,529 4,700,924
Net unrealized appreciation of investments, swaps, futures contracts, options
written, unfunded loan commitments and foreign currency transactions 6,797,832 2,203,183
------------------------------------------------------------------------------------ --------------- ---------------
Net increase in net assets resulting from investment operations 20,205,294 19,675,766
==================================================================================== =============== ===============
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (2,094,660) (1,959,556)
Net increase in net assets applicable to common shareholders
resulting from investment operations 18,110,634 17,716,210
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (9,791,077) (13,914,018)
Net realized gains (2,486,478) --
------------------------------------------------------------------------------------ --------------- ---------------
Total dividends and distributions to common shareholders (12,277,555) (13,914,018)
==================================================================================== =============== ===============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock -- 343,462,500
Preferred shares underwriting discount charged to paid-in capital
in excess of par -- (2,100,000)
Common stock and preferred shares offering costs charged to
paid-in capital in excess of par -- (1,193,503)
Reinvestment of dividends and distributions 1,762,362 2,677,769
Net increase in capital share transactions 1,762,362 342,846,766
------------------------------------------------------------------------------------ --------------- ---------------
Total increase in net assets applicable to common shareholders 7,595,441 346,648,958
==================================================================================== =============== ===============
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 346,748,959 100,001
------------------------------------------------------------------------------------ --------------- ---------------
End of period (including dividends in excess of net investment
income of $1,592,593 and $667,789, respectively) $ 354,344,400 $ 346,748,959
==================================================================================== =============== ===============
COMMON SHARES ISSUED AND REINVESTED:
Issued -- 17,750,000
Issued in reinvestment of dividends and distributions 87,779 138,606
------------------------------------------------------------------------------------ --------------- ---------------
NET INCREASE 87,779 17,888,606
==================================================================================== =============== ===============
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
PIMCO FLOATING RATE INCOME FUND STATEMENT OF CASH FLOWS
For the six months ended January 31, 2005 (unaudited)
CASH FLOWS USED FOR OPERATING ACTIVITIES:
Purchases of long-term investments $ (461,356,919)
Proceeds from sales of long-term investments 401,312,949
Interest, dividends and facility and other fee income received 12,033,497
Decrease in swap premium paid 844,500
Increase in swap premium sold 1,888,644
Realized net gain on swaps 2,185,558
Decrease in prepaid expenses 14,905
Operating expenses paid (2,700,710)
Decrease in variation margin paid 128,339
Realized net gain (loss) on foreign currency transactions 297,315
Net decrease in short-term investments 55,078,160
------------------------------------------------------------------------------------ ---------------
NET CASH USED FOR OPERATING ACTIVITIES 9,726,238
==================================================================================== ===============
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (excluding reinvestment of $1,762,362) (12,291,635)
------------------------------------------------------------------------------------ ---------------
NET CASH FROM FINANCING ACTIVITIES (12,291,635)
==================================================================================== ===============
NET DECREASE IN CASH (2,565,397)
CASH AT BEGINNING OF PERIOD 4,536,788
------------------------------------------------------------------------------------ ---------------
CASH AT END OF PERIOD 1,971,391
==================================================================================== ===============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS
TO NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets resulting from investment operations 20,205,294
Decrease in receivable for investments sold 2,597,681
Increase in interest receivable (1,005,936)
Decrease in periodic payments receivable on swaps 287,610
Decrease in premium for swaps purchased 844,500
Increase in premium for swaps sold 1,514,394
Increase in premium of options written 325,237
Decrease in prepaid expenses 14,905
Increase in payable to Investment Manager 4,649
Decrease in net unrealized depreciation on swaps (1,657,655)
Decrease in unrealized depreciation on forward foreign currency contracts (64,985)
Decrease in unrealized depreciation on unfunded loan commitments (178,104)
Decrease in variation margin on futures contracts 185,262
Decrease in receivable from swap counterparty 374,250
Increase in unrealized appreciation on option written (126,154)
Decrease in accrued expenses (37,773)
Decrease in deferred facility fees (208,526)
Increase in payable for investments purchased 7,349,288
------------------------------------------------------------------------------------ ---------------
Net increase in investments (20,697,699)
==================================================================================== ===============
NET CASH USED FOR OPERATING ACTIVITIES $ 9,726,238
==================================================================================== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
PIMCO FLOATING RATE INCOME FUND NOTES TO FINANCIAL STATEMENTS
January 31, 2005 (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PIMCO Floating Rate Income Fund (the "Fund") was organized as a Massachusetts
business trust on June 19, 2003. Prior to commencing operations on August 29,
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 thereunder, as amended. PA Fund Management LLC (the "Investment
Manager") serves as the Fund's 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
AG. The Fund has an unlimited amount of $0.00001 par value common stock
authorized.
The Fund's investment objective is to seek high current income, consistent with
the preservation of capital by investing primarily in floating rate debt
instruments, a substantial portion of which will be senior floating rate loans.
The ability of the issuers of the Fund's investments to meet their obligations
may be affected by economic developments in a specific industry.
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. Portfolio securities and other
financial instruments for which market quotations are not readily available or
if a development/event occurs that may impact the value of the security or
financial instrument, may be fair-valued in good faith pursuant to procedures
established by the Board of Trustees. The Fund's investments in senior floating
rate loans ("Senior Loans") are valued in accordance with guidelines established
by the Board of Trustees. Under the Fund's guidelines, Senior Loans for which a
secondary market exists will be valued by an independent pricing service. Other
Senior Loans are valued at fair value by Pacific Investment Management Company
LLC (the Sub-Adviser), an affiliate of the Investment Manager, pursuant to
procedures approved by the Board of Trustees. Such procedures 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. Other portfolio securities and financial
instruments are valued by an independent pricing service, dealer quotations, or
are valued at the last sale price on the exchange that is the primary market for
such securities, or the last quoted bid 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. The independent pricing service uses information provided
by market makers or estimates of market values obtained from yield data relating
to investments or securities with similar characteristics. Exchange traded
options, futures and options on futures are valued at the settlement price
determined by the relevant exchange. Short-term investments maturing in 60 days
or less are valued at amortized cost, if their original 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 difference could be material to the financial statements. The
Fund's net asset value is determined weekly on the last business day of the week
at the close of regular trading (normally, 4:00 p.m., Eastern Time) on the New
York Stock Exchange.
(b) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on 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 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.
16
(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.
(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.
Net investment income differs for financial statement and tax purposes primarily
due to $1,653,753 earned from swaps.
(e) FOREIGN CURRENCY TRANSLATION
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) 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 ("Lenders"). 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.
(g) 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 a 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 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 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
17
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 recorded
to realized gains (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 net realized gain/(loss) on the Statement of Operations.
Swaps are marked to market daily by the Fund's Sub-Adviser 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. 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.
(h) 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 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.
(i) OPTION TRANSACTIONS
The Fund may purchase and write (sell) put and call options for hedging and/or
risk management purposes. 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 a 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 an written
option could result in the Fund purchasing a security at a price different from
the current market price.
18
(j) 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 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.
(k) 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.
(l) 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 fees. 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. 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 Fund's investment activities business affairs
and other administrative matters. Pursuant to the Agreement, the Investment
Manager receives an annual fee, payable monthly, at an annual rate of 0.75% of
the Fund's average weekly total managed assets. Total managed assets refer to
the total assets of the Fund (including assets attributable to any Preferred
Shares or other forms of leverage that may be outstanding minus accrued
liabilities (other than liabilities representing leverage).
The Investment Manager has retained the Sub-Adviser to manage the Fund's
investments. Subject to the supervision of the Investment Manager, the
Sub-Adviser makes all the Fund's investment decisions. The Investment Manager
and 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 weekly total managed assets for the period from commencement of
operations through August 31, 2008. Commencing September 1, 2008, the Investment
Manager will pay the Sub-Adviser a monthly fee at the annual rate of 0.55% of
the Fund's average weekly total managed assets. The Investment Manager informed
the Fund that it paid the Sub-Adviser $1,104,098 in connection with its
sub-advisory services for the six months ended January 31, 2005.
19
3. INVESTMENTS IN SECURITIES
For the six months ended January 31, 2005, purchases and sales of investments,
other than short-term securities, were $343,890,322 and $208,378,710,
respectively.
(a) Credit default swap contracts outstanding at January 31, 2005:
NOTIONAL
SWAP AMOUNT
COUNTERPARTY/ PAYABLE ON PAYMENTS UNREALIZED
REFERENCED DEBT DEFAULT TERMINATION RECEIVED APPRECIATION
OBLIGATION (000) DATE BY FUND (DEPRECIATION)
-------------------------------------------------------------------------------------------
Bank of America
AES Corp. $ 1,000 12/20/2007 1.50% $ 2,501
Allied Waste 600 9/29/2009 2.75% 16,233
Bombardier 3,000 12/20/2005 6.75% (23,057)
MCI 875 9/20/2007 4.57% 72,048
Williams 875 9/20/2009 2.05% 29,807
Bear Stearns
Georgia-Pacific 700 9/20/2009 1.24% 10,921
Host Marriott 700 9/20/2009 1.95% 13,409
MCI 5,000 9/20/2005 1.75% 45,364
MGM 1,500 9/20/2009 1.92% 39,646
Nextel 1,500 12/20/2007 0.95% 27,313
Royal Carribean 1,500 9/20/2007 1.50% 33,699
Citibank
Allied Waste 1,500 9/20/2007 2.18% 25,444
Crown Cork 1,500 9/20/2007 2.38% 47,056
Host Marriott 900 9/20/2007 1.90% 21,138
Owens Illinois 3,000 9/20/2007 2.05% 50,693
Starwood 1,500 9/20/2007 1.20% 18,180
Williams 1,500 12/20/2006 1.15% 16,273
Credit Suisse
AES 900 9/20/2009 3.85% 61,032
Allied Waste 875 9/20/2009 2.46% 13,481
Delhaize 875 9/20/2009 1.40% 28,961
Intelsat Bermuda 3,000 3/20/2010 3.21% 1,605
SAMI 6,480 9/20/2008 2.45% 133,906
SAMI 2,460 9/20/2008 2.45% 41,610
SAMI 4,700 9/20/2008 2.45% 65,398
Goldman Sachs
Echostar 1,000 12/20/2005 0.85% 1,742
HCA Inc. 1,000 12/20/2007 0.75% (6,473)
Starwood 1,000 12/20/2007 1.10% 9,118
TRW Automotive 875 9/20/2009 2.15% 17,953
JP Morgan Chase
Aes Corp. 1,500 9/20/2007 2.15% 31,645
Echostar 1,000 12/20/2007 1.10% (3,432)
Electronic Data 1,000 12/20/2007 1.30% 23,288
DowJones CDX 5,000 12/20/2009 3.75% 104,822
DowJones CDX 15,000 12/20/2009 2.60% 317,326
JC Penney 2,000 12/20/2007 0.65% 12,652
Nextel 1,000 12/20/2007 0.95% 18,209
Tenet Healthcare 5,000 12/20/2007 3.20% (88,785)
Tenet Healthcare 5,000 12/20/2009 4.15% 79,681
20
NOTIONAL
SWAP AMOUNT
COUNTERPARTY/ PAYABLE ON PAYMENTS UNREALIZED
REFERENCED DEBT DEFAULT TERMINATION RECEIVED APPRECIATION
OBLIGATION (000) DATE BY FUND (DEPRECIATION)
-------------------------------------------------------------------------------------------
Lehman Brothers
Extendicare $ 2,000 9/20/2009 2.10% $ 52,477
Extendicare 600 9/20/2009 2.10% 15,744
General Motors Corp. 4,000 12/20/2005 0.92% 2,395
L-3Com Reval 5,000 12/20/2008 1.50% 39,455
Dynegy-LIBOR Revolver 3,000 12/20/2009 3.05% 45,587
Six Flags Theme Parks Revolver 1,000 3/20/2010 2.70% 13,290
Triton PCS, Inc. 5,000 5/20/2008 3.00% 25,000
Merrill Lynch
PSEG Energy 3,500 12/4/2006 2.95% 107,632
SPX 900 9/20/2009 2.25% (2,897)
Williams 700 9/20/2009 1.71% 13,646
Morgan Stanley
Georgia Pacific 900 9/20/2009 1.63% 29,167
UBS
Dow Jones 15,000 12/20/2009 3.75% 399,151
------------
$ 2,051,054
============
(b) Interest rate swap contracts outstanding at January 31, 2005:
NOTIONAL PAYMENTS PAYMENTS UNREALIZED
SWAP AMOUNT TERMINATION MADE RECEIVED APPRECIATION
COUNTERPARTY (000) DATE BY FUND BY FUND (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
Bank of America $ 2,400 6/15/2015 5.00% 3 Month LIBOR-BBA $ (20,992)
Bank of America 3,400 6/15/2015 5.00% 3 Month LIBOR-BBA (28,636)
Bank of America 115,000 1/7/2025 5.13% 3 Month LIBOR-BBA 3,574,086
Bank of America 115,000 6/15/2025 3 Month LIBOR-BBA 5.25% (3,633,780)
Barclay's Bank 10,500 6/15/2025 6.00% 3 Month LIBOR-BBA (311,550)
Goldman Sachs 2,000 6/15/2015 5.00% 3 Month LIBOR-BBA (12,953)
Goldman Sachs 1,650 6/15/2015 5.00% 3 Month LIBOR-BBA (17,008)
Lehman Brothers 3,900 6/15/2015 5.00% 3 Month LIBOR-BBA (21,725)
Morgan Stanley 6,000 6/15/2015 5.00% 3 Month LIBOR-BBA (37,100)
Morgan Stanley 2,400 6/15/2015 5.00% 3 Month LIBOR-BBA (20,008)
Morgan Stanley 1,200 6/15/2015 5.00% 3 Month LIBOR-BBA (12,644)
---------------
$ (542,310)
===============
LIBOR - London Interbank Offerred Rate
(c) Futures contracts outstanding at January 31, 2005:
NOTIONAL
AMOUNT EXPIRATION UNREALIZED
TYPE (000) DATE DEPRECIATION
--------------------------------------------------------------------------------------------
Long: Eurodollar Futures September 2005 $ 1,100 9/19/2005 $ 594,471
Eurodollar Futures December 2005 300 12/19/2005 162,000
U.S. Treasury 10 Year Note 286 3/21/2005 10,757
------------
$ 767,228
============
21
(d) Options written during the six months ended January 31, 2005:
CONTRACTS PREMIUMS
---------------------------------------------------------------------------------------------
Options outstanding, July 31, 2004 -- $ --
Options written 17,001,334 450,988
Options terminated in closing purchase transactions (429) (125,751)
---------- ----------
Options outstanding, January 31, 2005 17,000,905 $ 325,237
---------- ----------
(e) Forward foreign currency contracts outstanding at January 31, 2005:
U.S. $ VALUE U.S. $ VALUE UNREALIZED
PURCHASED: ORIGINATION DATE JANUARY 31, 2005 DEPRECIATION
------------------------------------------ ------------------------------------------------
569,894,000 Japenese Yen settling 3/10/05 $ 5,570,811 $ 5,523,982 $ 46,829
312,000 Euro Dollars settling 2/10/05 413,027 406,758 6,269
============
$ 53,098
============
(f) At January 31, 2005, the Fund had the following unfunded loan commitments
which could be extended at the option of the borrower:
BORROWER UNFUNDED COMMITMENTS
-----------------------------------------------------------
Las Vegas Sands Term B $ 138,778
Wynn Resorts 1,893,439
------------
$ 2,032,217
------------
4. AUCTION PREFERRED SHARES
The Fund has issued 2,800 shares of Preferred Shares Series T, 2,800 shares of
Preferred Shares Series W and 2,800 shares of Preferred Shares Series Th, each
with a net asset and liquidation value of $25,000 per share plus accrued
dividends.
Dividends and distributions of net realized capital gains if any, are
accumulated daily at an annual rate set through auction procedures.
For the six months ended January 31, 2005, the annualized dividend rate ranged
from:
HIGH LOW AT JANUARY 31, 2005
---------------------------------------------------------------------------------------
Series T 2.61% 1.55% 2.30%
Series W 2.66% 1.20% 2.35%
Series TH 2.65% 1.60% 2.35%
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.
5. SUBSEQUENT COMMON DIVIDEND DECLARATIONS
On February 4, 2005, a dividend of $0.100482 per share was declared to common
shareholders payable March 4, 2005 to shareholders of record on February 18,
2005.
On March 4, 2005, a dividend of $0.105323 per share was declared to common
shareholders payable April 1, 2005 to shareholders of record on March 18, 2005.
6. LEGAL PROCEEDINGS
On September 13, 2004, the Securities and Exchange Commission (the "Commission")
announced that the Investment Manager and certain of its affiliates had agreed
to a settlement of charges that they and certain of their officers had,
22
among other things, violated various antifraud provisions of the federal
securities laws in connection with an alleged market-timing arrangement
involving trading of shares of various open-end investment companies ("open-end"
funds) advised or distributed by the Investment Manager and certain of its
affiliates. In their settlement with the Commission, the Investment Manager and
their affiliates consented to the entry of an order by the Commission and,
without admitting or denying the findings contained in the order, agreed to
implement certain compliance and governance changes and consented to
cease-and-desist orders and censures. In addition, the Investment Manager and
its affiliates agreed to pay civil money penalties in the aggregate amount $40
million and to pay disgorgement in the amount of $10 million, for an aggregate
payment of $50 million. In connection with the settlement, the Investment
Manager and its affiliates have been dismissed from the related complaint the
Commission filed on May 6, 2004 in the U.S. District Court in the Southern
District of New York. Neither the complaint nor the order alleges any
inappropriate activity took place with respect to the Fund.
In a related action on June 1, 2004, the Attorney General of the State of New
Jersey announced that it had entered into a settlement agreement with Allianz
Global and certain other affiliates of the Investment Manager, in connection
with a complaint filed by the New Jersey Attorney General ("NJAG") on February
17, 2004. The NJAG dismissed claims against the Sub-Adviser, which had been part
of the same complaint. In the settlement, Allianz Global and other named
affiliates neither admitted nor denied the allegations or conclusions of law,
but did agree to pay New Jersey a civil fine of $15 million and $3 million for
investigative costs and further potential enforcement initiatives against
unrelated parties. They also undertook to implement certain governance changes.
The complaint relating to the settlement contained allegations arising out of
the same matters that were subject of the Commission order regarding market
timing described above.
On September 15, 2004, the Commission announced that the Investment Manager and
certain of its affiliates agreed to settle an enforcement action in connection
with charges that they violated various antifraud and other provisions of
federal securities laws as a result of, among other things, their failure to
disclose to the board of trustees and shareholders of various open-end funds
advised or distributed by the Investment Manager and its affiliates material
facts and conflicts of interest that arose from their use of brokerage
commissions on portfolio transactions to pay for so-called "shelf space"
arrangements with certain broker-dealers. In the settlement, the Investment
Manager and its affiliates consented to the entry of an order by the Commission
without admitting or denying the findings contained in the order. In connection
with the settlement, the Investment Manager and its affiliates agreed to
undertake certain compliance and disclosure reforms and consented to
cease-and-desist orders and censures. In addition, the Manager and these
affiliates agreed to jointly pay a civil money penalty of $5 million and to pay
disgorgement of $6.6 million based upon the amount of brokerage commissions
alleged to have been paid by such open-end funds in connection with these
arrangements (and related interest). In a related action, the California
Attorney General announced on September 15, 2004 that it had entered an
agreement with an affiliate of the Investment Manager in resolution of an
investigation into matters that are similar to those discussed in the
Commission's order. The settlement agreement resolves matters described in the
complaint filed by the California Attorney General in the Superior Court of the
State of California alleging, among other things, that this affiliate violated
certain antifraud provisions of California law by failing to disclose matters
related to the shelf-space arrangements described above. In the settlement
agreement, the affiliate did not admit to any liability but agreed to pay $5
million in civil penalties and $4 million in recognition of the California
Attorney General's fees and costs associated with the investigation and related
matters. Neither the Commission's order nor the California Attorney General's
complaint alleges any inappropriate activity took place with respect to the
Fund.
Since February 2004, the Investment Manager, the Sub-Adviser and certain of
their affiliates have been named as defendants in 14 lawsuits filed in U.S.
District Court in the Southern District of New York, the Central District of
California and the Districts of New Jersey and Connecticut. Ten of those
lawsuits concern "market timing," and they have been transferred to and
consolidated for pre-trial proceedings in the U.S. District Court for the
District of Maryland; the remaining four lawsuits concern "revenue sharing" with
brokers offering "shelf space" and have been consolidated into a single action
in the U.S. District Court for the District of Connecticut. The lawsuits have
been commenced as putative class actions on behalf of investors who purchased,
held or redeemed shares of affiliated funds during specified periods or as
derivative actions on behalf of the funds. The lawsuits generally relate to the
same facts that are the subject of the regulatory proceedings discussed above.
The lawsuits seek, among other things, unspecified compensatory damages plus
interest and, in some cases, punitive damages, the rescission of investment
advisory contracts, the return of fees paid under those contracts and
restitution. The Investment Manager and the Sub-Adviser believe that other
similar lawsuits may be filed in U.S. federal or state courts naming as
defendants the Investment Manager, the Sub-Adviser, Allianz Global, the Fund,
other open- and closed-end funds advised or distributed by the Investment
Manager, the SubAdviser and/or their affiliates, the boards of trustees of those
funds, and/or other affiliates and their employees.
23
Under Section 9(a) of the Investment Company Act of 1940, if any of the various
regulatory proceedings or lawsuits were to result in a court injunction against
the Investment Manager, the Sub-Adviser, Allianz Global and/or their affiliates,
they and their affiliates would, in the absence of exemptive relief granted by
the Commission, be barred from serving as an investment adviser/sub-adviser or
principal underwriter for any registered investment company, including the Fund.
In connection with an inquiry from the Commission concerning the status of the
New Jersey settlement described above under Section 9(a), the Investment
Manager, the Sub-Adviser, and certain of their affiliates (together, the
"Applicants") have sought exemptive relief from the Commission under Section
9(c) of the Investment Company Act of 1940. The Commission has granted the
Applicants a temporary exemption from the provisions of Section 9(a) with
respect to the New Jersey settlement until the earlier of (i) September 13, 2006
and (ii) the date on which the Commission takes final action on their
application for a permanent order. There is no assurance that the Commission
will issue a permanent order.
It is possible that these matters and/or other developments resulting from these
matters could lead to a decrease in the market price of the Fund's shares or
other adverse consequences to the Fund and its shareholders. However, the
Investment Manager and the Sub-Adviser believe that these matters are not likely
to have a material adverse effect on the Fund or on the Investment Manager's or
the Sub-Adviser's ability to perform its respective investment advisory services
relating to the Fund.
7. CORPORATE CHANGES
On September 14, 2004, David C. Flattum was appointed to the Board of Trustees
and Youse Guia was named as the Fund's Chief Compliance Officer. On October 5,
2004, the Board of Trustees elected Robert E. Connor as Chairman. On December
14, 2004, Thomas J. Fuccillo was appointed as the Fund's Secretary.
24
PIMCO FLOATING RATE INCOME FUND FINANCIAL HIGHLIGHTS
For a share of common stock outstanding throughout each period
SIX MONTHS FOR THE PERIOD
ENDED AUGUST 29, 2003*
JANUARY 31, 2005 THROUGH
(unaudited) JULY 31, 2004
------------------ ----------------
Net asset value, beginning of period $ 19.38 $ 19.35**
------------------------------------------------------------------------------ ----------------- ----------------
INVESTMENT OPERATIONS:
Net investment income 0.61 0.71
Net realized and unrealized gain on investments, swaps and
foreign currency transactions 0.52 0.39
------------------------------------------------------------------------------ ----------------- ----------------
Total from investment operations 1.13 1.10
------------------------------------------------------------------------------ ----------------- ----------------
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (0.12) (0.11)
------------------------------------------------------------------------------ ----------------- ----------------
Net increase in net assets applicable to common shares resulting from
investment operations 1.01 0.99
------------------------------------------------------------------------------ ----------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (0.54) (0.78)
Net realized gains (0.14) -
------------------------------------------------------------------------------ ----------------- ----------------
Total dividends and distributions to common shareholders (0.68) 0.78)
------------------------------------------------------------------------------ ----------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in capital in excess of par - (0.04)
Preferred shares offering costs/underwriting discount charged to paid-in
capital in excess of par - (0.14)
------------------------------------------------------------------------------ ----------------- ----------------
Total capital share transactions - (0.18)
------------------------------------------------------------------------------ ----------------- ----------------
Net asset value, end of period $19.71 $19.38
Market price, end of period $21.30 $20.47
------------------------------------------------------------------------------ ----------------- ----------------
TOTAL INVESTMENT RETURN (1) 7.65% 6.55%
------------------------------------------------------------------------------ ----------------- ----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000) $354,344 $346,749
Ratio of expenses to average net assets (2)(3)(4) 1.51% 1.36%
Ratio of net investment income to average net assets (2)(4) 6.18% 4.04%
Preferred shares asset coverage per share $67,170 $66,274
Portfolio turnover 39% 94%
* Commencement of operations.
** Initial public offering price of $20.00 per share less underwriting
discount of $0.65 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 each period reported. Dividends and
distributions 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(l) in Notes to Financial Statements).
(4) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
25
PIMCO FLOATING RATE FUND ANNUAL SHAREHOLDER MEETING RESULTS (unaudited)
The Fund held its annual meeting of shareholders on November 16, 2004.
Common/Preferred shareholders voted to re-elect Hans W. Kertess as a Class I
Trustee to serve until 2007 and R. Peter Sullivan III and David C. Flattum as
Class III Trustees to serve until 2006. Preferred shareholders voted to re-elect
Robert E. Connor as a Class I Trustee to serve until 2007.
The resulting vote count is indicated below:
WITHHOLD
AFFIRMATIVE AUTHORITY
------------------------------------------------------------------------------------------------------------------------
Election of R. Peter Sullivan III 12,181,327 139,669
Election of Hans W. Kertess 12,179,845 141,151
Election of Robert E. Connor* 3,132 8
Election of David C. Flattum 12,183,567 137,429
Paul Belica and John J. Dalessandro* continue to serve as Trustees of the Fund.
----------
* Preferred Stock Trustee
26
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TRUSTEES AND PRINCIPAL OFFICERS
Robert E. Connor
Chairman of the Board of Trustees
Paul Belica
Trustee
John J. Dalessandro II
Trustee
David C. Flattum
Trustee
Hans W. Kertess
Trustee
R. Peter Sullivan III
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Vice President
Raymond G. Kennedy
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Thomas J. Fuccillo
Secretary
Youse Guia
Chief Compliance Officer
Jennifer A. Patula
Assistant Secretary
INVESTMENT MANAGER
PA 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 REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624
This report, including the financial information herein, is transmitted to the
shareholders of PIMCO Floating Rate Income 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.
The financial information included herein is taken from the records of the Fund
without examination by an independent registered public accounting firm, who did
not express an opinion hereon.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "Commission") for the first and third quarter of
its fiscal year on Form N-Q. Form N-Q is available (i) on the Fund's website at
www.pimcoadvisors.com (ii) on the Commission's website at www.sec.gov, and (iii)
at the Commission's Public Reference Room which is located at the Commission's
headquarters' office at 450 5th Street N.W. Room 1200, Washington, D.C. 20459,
(202) 942-8090.
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities and information
about how the Fund voted proxies relating to portfolio securities held during
the twelve months ended June 30, 2004 is available (i) without charge, upon
request, by calling the Fund's transfer agent 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.
Information on the Fund is available at www.pimcoadvisors.com or by calling the
Fund's transfer agent at 1-800-331-1710.
[PIMCO ADVISORS LOGO]
ITEM 2. CODE OF ETHICS
Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in this filing
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
Not required in this filing
ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of
the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not effective at the time of this filing
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES.
TOTAL NUMBER
OF SHARES PURCHASED MAXIMUM NUMBER OF
TOTAL NUMBER AVERAGE AS PART OF PUBLICLY SHARES THAT MAY YET BE
OF SHARES PRICE PAID ANNOUNCED PLANS OR PURCHASED UNDER THE PLANS
PERIOD PURCHASED PER SHARE PROGRAMS OR PROGRAMS
------ --------- --------- -------- -----------
August 2004 N/A 19.83 12,139.18 N/A
September 2004 N/A 20.01 12,637.88 N/A
October 2004 N/A 19.91 12,093.65 N/A
November 2004 N/A 20.05 11,927.52 N/A
December 2004 N/A 19.84 11,629.96 N/A
December 2004 N/A 20.10 11,300.22 N/A
January 2005 N/A 20.62 16,050.11 N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In January 2004, the Registrant's Board of Trustees adopted a Nominating
Committee Charter governing the affairs of the Nominating Committee of the
Board, which is posted on the PIMCO Advisors website at www.pimcoadvisors.com.
Appendix B to the Nominating Committee Charter includes "Procedures for
Shareholders to Submit Nominee Candidates," which sets forth the procedures by
which shareholders may recommend nominees to the Registrant's Board of Trustees.
Among other requirements, the procedures provide that the recommending
shareholder must submit any recommendation in writing to the Registrant to the
attention of the Registrant's Secretary, at the address of the principal
executive offices of the Registrant and that such submission must be received at
such offices not less than 45 days
nor more than 75 days prior to the date of the Board or shareholder meeting at
which the nominee would be elected. Any recommendation must include certain
biographical and other information regarding the candidate and the recommending
shareholder, and must include a written and signed consent of the candidate to
be named as a nominee and to serve as a Trustee if elected. The foregoing
description of the requirements is only a summary and is qualified in its
entirety by reference to Appendix B of the Nominating Committee Charter.
ITEM 11. 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 12. EXHIBITS
(a)(1) Exhibit 99.CERT - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906CERT - 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.
PIMCO Floating Rate Income Fund
By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: April 5, 2005
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: April 5, 2005
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
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: April 5, 2005
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: April 5, 2005