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
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PIMCO Floating Rate Income Fund
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(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
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(Address of principal executive offices) (Zip code)
Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, New York 10105
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3371
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Date of fiscal year end: July 31
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Date of reporting period: January 31
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORT TO SHAREHOLDER
SEMI-ANNUAL REPORT
1.31.04
PIMCO FLOATING RATE INCOME FUND
[PFL LISTED NYSE THE NEW YORK STOCK EXCHANGE LOGO]
CONTENTS
Letter to Shareholders 1
Performance Summary and Statistics 2
Schedule of Investments 3-13
Statement of Assets and Liabilities 14
Statement of Operations 15
Statement of Changes in Net Assets 16
Statement of Cash Flows 17
Notes to Financial Statements 18-23
Financial Highlights 24
[PIMCO ADVISORS LOGO]
PIMCO FLOATING RATE INCOME FUND LETTER TO SHAREHOLDERS
March 5, 2004
Dear Shareholder:
We are pleased to provide you with the initial financial report of the PIMCO
Floating Rate Income Fund (the "Fund") for the period August 29, 2003
(commencement of operations) through January 31, 2004.
Please refer to the following page for specific Fund information. If you have
any questions regarding the information provided, please contact your financial
advisor or call our shareholder services area at 1-800-331-1710. Please note
that a wide range of information and resources can be accessed through our Web
site, www.pimcoadvisors.com.
We at the Fund, together with PIMCO Advisors Fund Management LLC, the Fund's
investment manager, and Pacific Investment Management Company LLC, the Fund's
sub-adviser, thank you for investing with us. We remain dedicated to serving
your investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
Stephen Treadway Brian S. Shlissel
CHAIRMAN PRESIDENT, CHIEF EXECUTIVE OFFICER
PIMCO FLOATING RATE INCOME FUND PERFORMANCE SUMMARY AND STATISTICS
January 31, 2004 (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):
$555.7 million
PORTFOLIO MANAGERS:
Raymond G. Kennedy
David C. Hinman
Jason R. Rosiak
TOTAL RETURN(2): MARKET PRICE NAV
--------------------------------------------------------------------------------
Commencement of Operations (8/29/03) to 1/31/04 2.12% 1.93%
[CHART]
COMMON SHARE PRICE PERFORMANCE:
Commencement of Operations (8/29/03) to 1/31/04
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 $ 20.20
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
1/31/2004 $ 19.41 $ 20.10
MARKET PRICE / NET ASSET VALUE:
Market Price $ 20.10
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Net Asset Value ("NAV") $ 19.41
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Premium (Discount) to NAV 3.55%
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Market Price Yield(3) 4.61%
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(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the redeemable value at
the end of the period and dividing the remainder by the initial investment and
expressing the result as a percentage. The calculation assumes that all income
dividends have been reinvested at prices obtained under the Fund's dividend
reinvestment plan. Total investment return does not reflect broker commissions
or sales charges. Total return for a period of less than one year is not
annualized.
An investment in the Fund involves risk, including the loss of principal.
Investment return, price, yield and net asset value will fluctuate with changes
in market conditions. This data is provided for information only and is not
intended for trading purposes. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current monthly
per share dividend to common shareholders by the market price per common share
at January 31, 2004.
2
PIMCO FLOATING RATE INCOME FUND SCHEDULE OF INVESTMENTS
January 31, 2004 (unaudited)
PRINCIPAL
AMOUNT
(000) VALUE
SENIOR LOAN PARTICIPATIONS (a) (b) (c)--54.0%
ADVERTISING - 0.3%
$ 2,000 Lamar Advertising Co., 3.4375%, 6/30/10, Term B
(Morgan Stanley Senior Funding Inc.)
(acquired 10/1/03; cost-$2,005,000) $ 2,020,834
---------------
APPAREL & TEXTILES - 0.7%
4,000 Simmons & Co., 5.125%, 6/19/12, Term C
(Deutsche Bank AG) (acquired 12/10/03; cost-$4,000,000) 4,042,500
---------------
AUTOMOTIVE - 2.6%
218 Hayes Lemmerz International Inc., 4.90%, 6/30/09, Term B
(Citibank, N.A.) (acquired 12/8/03; cost-$221,206) 221,929
880 Hayes Lemmerz International Inc., 4.95%, 6/30/09, Term B
(Citibank, N.A.) (acquired 10/16/03-12/8/03; cost-$891,256) 896,220
440 Hayes Lemmerz International Inc., 4.96%, 6/30/09, Term B
(Citibank, N.A.) (acquired 10/16/03-12/8/03; cost-$442,409) 448,110
2,414 Hayes Lemmerz International Inc., 4.97%, 6/30/09, Term B
(Citibank, N.A.) (acquired 10/16/03-12/8/03; cost-$2,440,863) 2,456,647
1,990 Pacificare Systems Inc., 3.93%, 6/30/08, Term B
(JP Morgan Chase) (acquired 9/4/03; cost-$2,004,682) 2,013,631
1,397 Tenneco Automotive Inc., 4.37%, 12/30/10, Term B1
(Morgan Stanley Senior Funding Inc.)
(acquired 12/10/03-1/15/04; cost-$1,405,404) 1,415,754
3,103 Tenneco Automotive Inc., 4.44%, 12/30/10, Term B1
(Morgan Stanley Senior Funding Inc.)
(acquired 12/10/03-1/15/04; cost-$3,123,147) 3,155,173
1,000 TRW Automotive Inc., 3.1875%, 2/28/09, Term A 1
(JP Morgan Chase)
(acquired 1/8/04-1/15/04; cost-$997,529) 1,017,500
4,000 TRW Automotive Inc., 3.6875%, 2/28/11, Term D 1
(JP Morgan Chase) (acquired 1/8/04; cost-$4,024,290) 4,070,000
---------------
15,694,964
===============
BUSINESS SERVICES - 0.4%
2,500 Inmac Corp., 4.6113%, 10/10/10, Term B (Credit Suisse First Boston)
(acquired 1/20/04; cost-$2,500,000) 2,507,812
---------------
CHEMICALS - 3.0%
1,149 Cognis BV, 3.9625%, 11/11/09, Term B (JP Morgan Chase)
(acquired 1/23/04; cost-$1,155,679) 1,155,679
1,992 Cognis BV, 5.677%, 9/20/10, Term B (JP Morgan Chase)
(acquired 1/23/04; cost-$1,991,665) 2,002,619
2,997 Georgia Gulf Corp., 3.625%, 12/2/10, Term D
(JP Morgan Chase) (acquired 11/25/03; cost-$2,997,000) 3,023,224
1,805 Hercules Inc., 3.62%, 5/25/07, Term HPC
(Credit Suisse First Boston)
(acquired 10/22/03; cost-$1,822,326) 1,817,293
180 Hercules Inc., 3.67%, 5/25/07, Term HPC
(Credit Suisse First Boston) (acquired 10/22/03; cost-$182,234) 181,729
11 Kraton Polymers Group., 3.6875%, 12/2/09
(Goldman Sachs Credit Partners)
(acquired 12/11/03-1/7/04; cost-$11,207) 11,292
3
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
CHEMICALS (CONCLUDED)
$ 3,989 Kraton Polymers Group., 3.75%, 12/2/09
(Goldman Sachs Credit Partners)
(acquired 12/11/03-1/7/04; cost-$4,023,402) $ 4,053,708
5,500 Nalco Co., 3.60%, 11/1/10, Term B
(Citicorp North America, Inc.)
(acquired 10/31/03; cost-$5,500,000) 5,569,322
---------------
17,814,866
===============
CONSUMER PRODUCTS - 0.9%
1,835 Church & Dwight Co., 3.37%, 9/30/07, Term B
(JP Morgan Chase) (acquired 10/10/03; cost-$1,835,400) 1,859,490
1,138 Rayovac Corp., 4.85%, 10/1/09, Term B
(Bank of America) (acquired 9/26/03; cost-$1,145,501) 1,146,733
1,070 Rayovac Corp., 4.87%, 10/1/09, Term B
(Bank of America) (acquired 9/26/03; cost-$1,077,963) 1,078,578
1,049 Rayovac Corp., 4.93%, 10/1/09, Term B
(Bank of America) (acquired 9/26/03; cost-$1,054,300) 1,056,992
---------------
5,141,793
===============
CONTAINERS - 3.4%
2,850 Crown Cork & Seal Co., Inc., 4.17%, 8/26/08, Term B
(Citigroup Global Markets) (acquired 8/29/03; cost-$2,874,734) 2,889,188
3,624 Graphic Packaging International Corp., 3.92%, 8/8/10, Term B
(JP Morgan Chase) (acquired 8/29/03; cost-$3,643,748) 3,681,076
356 Graphic Packaging International Corp., 3.93%, 8/8/10, Term B
(JP Morgan Chase) (acquired 8/29/03; cost-$357,437) 361,111
4,235 Jefferson Stone Container Corp., 3.6875%, 6/30/09, Term B
(Deutsche Bank AG) (acquired 8/29/03-9/25/03; cost-$4,263,661) 4,272,507
718 Jefferson Stone Container Corp., 3.6875%, 6/30/09, Term C
(Deutsche Bank AG) (acquired 8/29/03-9/25/03; cost-$722,685) 723,904
4,250 Owens-Illinois Inc., 3.88%, 4/1/08
(DeutscheBank AG) (acquired 8/29/03-9/18/03; cost-$4,267,975) 4,291,616
3,975 Silgan Holdings Inc., 3.45%, 11/30/08 Term B
(Deutsche Bank AG) (acquired 11/14/03-1/7/04; cost-$3,993,687) 4,032,697
---------------
20,252,099
===============
DRUGS & MEDICAL PRODUCTS - 0.3%
164 Alpharma Inc., 4.35%, 10/5/08, Term B
(Bank of America) (acquired 1/30/04; cost-$164,368) 164,328
141 Alpharma Inc., 4.39%, 7/15/08, Term B
(Bank of America) (acquired 10/22/03; cost-$141,770) 141,735
520 Alpharma Inc., 4.43%, 7/15/08, Term B
(Bank of America) (acquired 10/22/03; cost-$522,619) 522,489
340 Alpharma Inc., 4.48%, 7/15/08, Term B
(Bank of America) (acquired 10/22/03; cost-$341,141) 341,049
453 Alpharma Inc., 4.52%, 7/15/08, Term B
(Bank of America) (acquired 10/22/03; cost-$454,850) 454,732
---------------
1,624,333
===============
ENERGY - 1.7%
2,000 Calpine Corp., 7.50%, 8/13/09,
(Goldman Sachs & Co.) (acquired 9/2/03; cost-$2,041,320) 2,141,250
1,042 NRG Energy Inc., 5.07%, 12/23/10,
(Credit Suisse First Boston) (acquired 12/19/03; cost-$1,036,527) (d) 1,040,426
4
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
ENERGY (CONCLUDED)
$ 1,860 NRG Energy Inc., 5.50%, 5/8/10,
(Credit Suisse First Boston) (acquired 12/19/03; cost-$1,860,417) $ 1,926,307
2,250 Parker Drilling Co., 5.36%, 10/10/07
(Lehman Brothers Co.) (acquired 10/8/03; cost-$2,257,028) 2,268,985
750 Parker Drilling Co., 5.42%, 10/10/07
(Lehman Brothers Co.) (acquired 10/8/03; cost-$729,169) 756,329
2,000 Pride International Inc., 3.655%, 1/15/09
(Credit Lyonnais) (acquired 12/16/03; cost-$2,000,000) (d) 1,999,506
---------------
10,132,803
===============
FINANCIAL SERVICES - 1.4%
1,000 Atlantic Broadcast, 4.37%, 4/1/09, Term B (Merrill Lynch)
(acquired 1/30/04; cost-$1,000,000) 1,000,000
2,000 Green Tree Financial Corp., 3.9125%, 12/15/10, Term B
(Bank of America) (acquired 12/1/03; cost-$2,000,000) 2,025,000
5,500 Nextel Finance Corp., 3.4375%, 12/15/10, Term E
(JP Morgan Chase) (acquired 12/5/03; cost-$5,493,246) 5,572,617
---------------
8,597,617
===============
FOOD & BEVERAGE - 0.9%
850 Constellation Brands, Inc. 3.125%, 11/30/08, Term B
(JP Morgan Chase) (acquired 11/3/03; cost-$850,000) 860,802
425 Constellation Brands, Inc. 3.1875%, 11/30/08, Term B
(JP Morgan Chase) (acquired 11/3/03; cost-$425,000) 430,401
850 Constellation Brands, Inc. 3.25%, 11/30/08, Term B
(JP Morgan Chase) (acquired 11/3/03; cost-$850,000) 860,802
3,000 Dr. Pepper/Seven Up Bottling Group, Inc. 3.61%, 12/19/10, Term B
(JP Morgan Chase) (acquired 12/18/03; cost-$3,000,000) 3,042,501
---------------
5,194,506
===============
FOOD SERVICES - 1.3%
2,869 Del Monte Foods Co., 4.87%, 12/20/10, Term B
(Bank of America) (acquired 8/29/03-10/1/03; cost-$2,898,049) 2,906,559
681 Del Monte Foods Co., 4.92%, 12/20/10, Term B
(Bank of America) (acquired 8/29/03-10/1/03; cost-$688,057) 690,081
4,000 Michaels Foods, Inc., 5.21375% 11/30/11, Term C
(Bank of America) (acquired 11/13/03-1/7/04; cost-$4,032,499) 4,097,500
---------------
7,694,140
===============
HEALTH & HOSPITALS - 2.5%
519 Beverly Enterprises Inc., 4.37%, 10/30/08, Term B
(Lehman Brothers Co.) (acquired 10/20/03; cost-$517,775) 518,519
1,476 Beverly Enterprises Inc., 4.42%, 10/30/08, Term B
(Lehman Brothers Co.) (acquired 10/20/03; cost-$1,472,517) 1,498,925
2,000 Community Health Systems Inc., 3.67%, 7/16/10, Term B
(Morgan Stanley & Co.) (acquired 9/4/03; cost-$2,008,376) 2,030,750
207 Davita, Inc. 3.37%, 6/23/09, Term B
(Credit Suisse First Boston) (acquired 12/2/03; cost-$208,505) 209,319
972 Davita, Inc. 3.38375%, 6/23/09, Term B
(Credit Suisse First Boston) (acquired 10/17/03-12/2/03; cost-$981,876) 983,314
5
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
HEALTH & HOSPITALS (CONCLUDED)
$ 546 Davita, Inc. 3.4125%, 6/23/09, Term B
(Credit Suisse First Boston) (acquired 10/17/03; cost-$551,320) $ 551,920
764 Davita, Inc. 3.4625%, 6/23/09, Term B
(Credit Suisse First Boston)
(acquired 10/17/03-12/2/03; cost-$771,230) 772,688
5,210 Davita, Inc. 3.66%, 6/23/09, Term B
(Credit Suisse First Boston)
(acquired 8/29/03-12/2/03; cost-$5,236,002) 5,268,898
764 Davita, Inc. 3.68%, 6/23/09, Term B
(Credit Suisse First Boston) (acquired 10/17/03-12/2/03; cost-$771,230) 772,688
2,036 Fresenius Medical Care AG, 3.39%, 2/21/10,
Term C (Bank of America) (acquired 1/28/04; cost-$2,071,132) 2,057,775
---------------
14,664,796
===============
HOTELS/GAMING - 1.9%
4,565 Extended Stay America, Inc., 4.85%, 1/15/08
(Morgan Stanley & Co.) (acquired 9/4/03-10/13/03; cost-$4,605,674) 4,638,243
3,250 MGM Mirage, Inc., 2.745%, 11/30/08
(Bank of America) (acquired 10/27/03; cost-$3,248,327) 3,239,844
3,250 MGM Mirage, Inc., 2.795%, 11/30/08
(Bank of America) (acquired 11/13/03; cost-$3,248,326) 3,239,844
---------------
11,117,931
===============
HOUSEHOLD PRODUCTS - 0.6%
1,000 Springer S.A., 3.8713%, 9/16/11, Term B2 (Barclays Capital)
(acquired 9/11/03; cost-$997,613) (d) 998,976
2,800 Springer S.A., 4.3713%, 9/16/12, Term C2 (Barclays Capital)
(acquired 9/11/03-9/25/03; cost-$2,801,976) (d) 2,804,693
---------------
3,803,669
===============
MACHINERY - 0.9%
5,000 Agco Corp., 5.00%, 6/15/09, Term B
(Rabobank Nederland)
(acquired 12/2/03-1/15/04; cost-$5,023,750) 5,090,625
---------------
MANUFACTURING - 1.9%
5,500 Cinram International, Inc. 4.85%, 10/10/09, Term B
(Citibank N.A.) (acquired 10/10/03-11/24/03; cost-$5,480,240) 5,521,483
4,000 Roper Industries, Inc., 3.15%, 12/26/08, Term B
(JP Morgan Chase)
(acquired 12/19/03-1/7/04; cost-$4,018,594) 4,052,500
1,633 SPX Corp., 3.4375%, 9/30/09, Term B
(JP Morgan Chase) (acquired 8/29/03; cost-$1,645,808) 1,646,380
---------------
11,220,363
===============
MISCELLANEOUS - 0.6%
2,500 American Tower Corp., 3.35%, 12/31/07, Term A
(Toronto Dominion) (acquired 1/28/04 cost-$2,531,250) 2,530,078
698 American Tower Corp., 3.38%, 6/30/07, Term A
(Toronto Dominion) (acquired 9/30/03; cost-$698,767) 701,307
9 American Tower Corp., 3.39%, 6/30/07, Term A
(Toronto Dominion) (acquired 9/30/03; cost-$9,851) 8,950
6
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
MISCELLANEOUS (CONCLUDED)
$ 357 American Tower Corp., 3.41%, 6/30/07, Term A
(Toronto Dominion) (acquired 9/30/03; cost-$357,509) $ 358,808
225 American Tower Corp., 3.42%, 6/30/07, Term A
(Toronto Dominion) (acquired 9/30/03; cost-$224,868) 225,685
---------------
3,824,828
===============
MULTI-MEDIA - 6.6%
3,000 Adelphia Communications Inc., 6.75%, 6/30/09, Term B
(Credit Suisse First Boston)
(acquired 9/30/03-10/14/03; cost-$2,683,010) 2,972,679
4,228 Canwest Media Inc., 3.93%, 11/15/08, Term D
(Scotia Capital) (acquired 9/2/03-12/5/03; cost-$4,241,057) 4,273,570
4,482 Charter Communications Holdings, LLC, 3.87%, 3/18/08, Term B
(Bank of Ameirca) (acquired 9/3/03-1/7/04; cost-$4,304,741) 4,423,751
1,554 DirectTV Holdings LLC, 3.87%, 3/6/10, Term B
(Deutsche Bank AG) (acquired 8/29/03; cost-$1,564,291) 1,573,230
2,446 DirectTV Holdings LLC, 3.92%, 3/6/10, Term B
(Deutsche Bank AG) (acquired 8/29/03; cost-$2,461,458) 2,475,522
2,000 Emmis Communications Corp., 3.375%, 2/28/09, Term A
(Toronto Dominion) (acquired 1/26/04; cost-$2,010,000) 2,008,928
7,000 Insight Midwest Holdings LLC., 3.9375%, 12/31/09, Term B
(JP Morgan Chase) (acquired 8/29/03-11/5/03; cost-$7,015,512) 7,047,033
5,000 MediaCom Broadband LLC, 3.68%, 9/30/10, Term B
(Morgan Stanley & Co.)
(acquired 9/4/03-10/1/03; cost-$5,010,230) 5,055,905
3,990 Primedia Inc., 3.9375%, 3/2/09, Term A & B
(JP Morgan Chase)
(acquired 9/2/03-1/7/04; cost-$3,905,258) 3,944,382
3,446 Time Warner Telecommunications Inc., 2.92%, 12/31/07, Term B
(Harold Stein Associates)
(acquired 10/23/03-1/29/04; cost-$3,394,799) 3,469,637
1,995 Time Warner Telecommunications Inc., 5.17%, 3/31/08, Term B
(Harold Stein Associates) (acquired 9/22/03; cost-$1,986,294) 2,008,678
278 Univision Communications, Inc. 2.42%, 7/18/06
(JP Morgan Chase)
(acquired 9/24/03; cost-$275,777) 276,794
---------------
39,530,109
===============
OFFICE EQUIPMENT - 1.0%
6,000 Xerox Corp., 3.42%, 9/30/08, Term B
(JP Morgan Chase)
(acquired 8/29/03-10/15/03; cost-$5,997,127) 6,070,314
---------------
OIL & GAS - 2.4%
4,000 Aquila, Inc., 8.00%, 5/15/06, Term Loan
(Credit Suisse First Boston) (acquired 8/29/03; cost-$4,023,192) 4,140,000
2,000 Citgo Petroleum Corp., 6.42%, 2/24/06, Term B
(Credit Suisse First Boston) (acquired 9/4/03; cost-$2,060,542) 2,080,000
2,250 El Paso Oil & Gas Nova Scotia, 4.60%, 12/31/06
(Morgan Stanley & Co.) (acquired 12/10/03; cost-$2,213,914) 2,245,781
2,750 El Paso Oil & Gas Nova Scotia, 4.62%, 12/31/06
(Morgan Stanley & Co.) (acquired 12/10/03; cost-$2,722,884) (d) 2,744,145
1,990 WH Energy Services, Inc., 4.17, 4/16/07, Term C
(Credit Suisse First Boston) (acquired 8/29/03; cost-$2,006,990) 2,009,900
7
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
OIL & GAS (CONCLUDED)
$ 973 WH Energy Services, Inc. 4.42, 6/1/06, Term C
(Credit Suisse First Boston) (acquired 8/29/03; cost-$977,218) $ 982,243
---------------
14,202,069
===============
PAPER PRODUCTS - 2.3%
4,483 Appleton Papers Inc., 3.60%, 12/18/08, Term D
(Bear Stearns) (acquired 12/17/03-1/27/04; cost-$4,527,715) 4,516,292
667 Buckeye Technologies Inc., 3.64%, 11/4/10, Term B
(Citibank N.A.) (acquired 10/31/03-11/24/03; cost-$671,751) 670,834
667 Buckeye Technologies Inc., 3.67063%, 11/4/10, Term B
(Citibank N.A.) (acquired 10/31/03-11/24/03; cost-$671,751) 670,833
2,150 Buckeye Technologies Inc., 3.6725%, 11/4/10, Term B
(Citibank N.A.) (acquired 10/31/03-11/24/03; cost-$2,154,098) 2,163,018
2,000 Buckeye Technologies Inc., 3.76%, 11/4/10, Term B
(Citibank N.A.) (acquired 10/31/03-11/24/03; cost-$2,008,376) 2,012,500
3 Buckeye Technologies Inc., 5.50%, 11/4/10, Term B
(Citibank N.A.) (acquired 11/24/03; cost-$3,354) 3,354
3,500 Georgia-Pacific Corp., 3.345%, 12/17/05, Term A
(Bank of America) (acquired 10/14/03-10/17/03; cost-$3,500,588) 3,508,438
---------------
13,545,269
===============
PIPELINES - 0.8%
4,476 Kinetics Concepts, 3.92%, 7/14/10, Term B
(Morgan Stanley Senior Funding. Inc.)
(acquired 9/4/03-10/1/03; cost-$4,504,376) 4,543,391
---------------
PRINTING/PUBLISHING - 1.1%
1,021 Readers Digest Association Inc., 3.9375%, 5/20/08, Term B
(JP Morgan Chase) (acquired 9/3/03; cost-$1,038,000) 1,026,161
2,712 Readers Digest Association Inc., 4.25%, 5/20/08, Term B
(JP Morgan Chase)
(acquired 9/2/03-9/3/03; cost-$2,700,790) 2,726,726
485 RH Donnelley Corp., 3.39%, 6/30/10, Term B
(Deutsche Bank AG) (acquired 8/29/03; cost-$494,487) 491,636
1,287 RH Donnelley Corp., 3.42%, 6/30/10, Term B
(Deutsche Bank AG) (acquired 8/29,03; cost-$1,312,174) 1,303,441
1,213 RH Donnelley Corp., 3.43%, 6/30/10, Term B
(Deutsche Bank AG) (acquired 8/29/03; cost-$1,236,927) 1,229,307
---------------
6,777,271
===============
RECREATION - 0.3%
2,000 Six Flags Theme Parks Inc., 3.62%, 6/30/09, Term B
(Lehman Commercial Paper Inc.)
(acquired 10/27/03; cost-$2,007,179) 2,009,376
---------------
TELECOMMUNICATIONS - 7.0%
5,464 Crown Castle International Corp., 4.66%, 9/30/10, Term B
(JP Morgan Chase)
(acquired 10/3/03-11/24/03; cost-$5,500,569) 5,579,957
807 Centennial Cellular Communications, 4.42%, 5/31/07, Term B
(Bank of America) (acquired 8/29/03; cost-$790,838) 810,317
8
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONTINUED)
$ 2,450 Centennial Cellular Communications, 4.45%, 5/31/07, Term B
(Bank of America) (acquired 8/29/03-11/24/03; cost-$2,436,803) $ 2,459,048
1,474 Centennial Cellular Communications, 4.68%, 11/30/07, Term C
(Bank of America) (acquired 8/29/03-11/24/03; cost-$1,461,012) 1,479,372
72 Centennial Cellular Communications, 4.70%, 11/30/07, Term C
(Bank of America) (acquired 8/29/03-11/24/03; cost-$71,225) 72,119
618 Centennial Cellular Communications, 4.71%, 11/30/07, Term C
(Bank of America) (acquired 8/29/03-11/24/03; cost-$612,459) 620,154
80 Centennial Cellular Communications,
Puerto Rico 4.45%, 5/31/07, Term B
(Bank of America) (acquired 8/29/03; cost-$78,179) 80,104
3,990 Cincinnati Bell Inc., 3.68% 11/30/08, Term D
(Bank of America) (acquired 11/07/03; cost-$3,990,000) 4,042,369
529 Dex Media East LLC, 3.60%, 5/28/09,
(JP Morgan Chase) (acquired 11/14/03; cost-$528,967) 561,552
65 Dex Media East LLC, 3.61%, 5/28/09,
(JP Morgan Chase) (acquired 11/7/03; cost-$65,044) 65,852
429 Dex Media East LLC, 3.67%, 5/28/09,
(JP Morgan Chase) (acquired 11/11/03-12/10/03; cost-$428,564) 433,888
1,909 Dex Media East LLC, 3.68%, 5/28/09,
(JP Morgan Chase) (acquired 11/7/03-11/24/03; cost-$1,908,896) 1,932,608
400 Dex Media West LLC, 3.85%, 9/10/10, Term B
(JP Morgan Chase) (acquired 9/5/03; cost-$400,000) 406,150
496 Dex Media West LLC, 3.87%, 9/10/10, Term B
(JP Morgan Chase) (acquired 9/5/03; cost-$496,296) 503,927
300 Dex Media West LLC, 3.89%, 9/10/10, Term B
(JP Morgan Chase) (acquired 9/5/03; cost-$300,000) 304,612
1,167 Dex Media West LLC, 3.92%, 9/10/10, Term B
(JP Morgan Chase) (acquired 10/14/03; cost-$1,166,667) 1,184,604
72 Dex Media West LLC, 3.93%, 9/10/10, Term B
(JP Morgan Chase) (acquired 9/5/03; cost-$72,222) 73,333
1,133 Dex Media West LLC, 3.94%, 9/10/10, Term B
(JP Morgan Chase) (acquired 10/14/03; cost-$1,133,333) 1,150,758
206 Dex Media West LLC, 3.99%, 9/10/10, Term B
(JP Morgan Chase) (acquired 9/5/03; cost-$205,556) 208,716
2,262 Dobson Cellular Systems, Inc. 4.37%, 3/15/10,
(Lehman Brothers Securities)
(acquired 10/10/03-12/2/03; cost-$2,284,635) 2,295,326
2,729 Dobson Cellular Systems, Inc. 4.43%, 3/15/10,
(Lehman Brothers Securities) (acquired 10/10/03; cost-$2,729,323) 2,769,625
2,500 Inmarsat Ventures PLC., 4.1113%, 10/10/11, Term C
(Credit Suisse First Boston) (acquired 1/20/04; cost-$2,500,000) 2,507,812
2,154 Panamsat Corp., 3.60%, 10/7/10
(Credit Suisse First Boston) (acquired 10/29//03; cost-$2,153,846) 2,187,948
4,000 Qwest Corp., 6.50%, 6/30/07, Term A
(Morgan Stanley & Co)
(acquired 9/2/03-9/12/03; cost-$4,072,891) 4,205,000
2,000 Qwest Corp., 6.95%, 6/30/10 Term A
(Morgan Stanley & Co) (acquired 10/1/03; cost-$2,004,753) 2,094,000
1,750 Rural Cellular, 4.88%, 10/3/08, Term B
(Toronto Dominion) (acquired 9/25/03-10/6/03; cost-$1,737,583) 1,766,720
9
PRINCIPAL
AMOUNT
(000) VALUE
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS (CONCLUDED)
$ 1,750 Rural Cellular 5.13%, 4/3/09, Term B
(Toronto Dominion) (acquired 9/25/03-10/6/03; cost-$1,737,572) $ 1,766,720
---------------
41,562,591
===============
TOBACCO - 0.5%
2,831 Commonwealth Brands, Inc. 5.1875%, 8/28/07
(DB Clearing Services) (acquired 9/25/03-10/22/03; cost-$2,841,233) 2,852,669
---------------
TRANSPORTATION - 0.9%
5,500 Bombardier Inc., 6.00%, 12/17/10-12/18/10
(Merrill Lynch Capital Corp.)
(acquired 12/15/03-1/29/04; cost-$5,533,475) 5,565,313
---------------
UTILITIES - 3.9%
2,357 AES Corp, 5.19%, 7/25/08 Term B
(Citigroup Global Markets) (acquired 8/29/03-9/30/03; cost-$2,358,140) 2,390,105
3,143 AES Corp, 5.32%, 7/29/08 Term B (Citigroup Global Markets)
(acquired 8/29/03-9/30/03; cost-$3,144,547) 3,186,807
34 DS Waters 3.875%, 11/15/09, Term B (JP Morgan Chase)
(acquired 11/5/03; cost-$33,750) 34,277
4,466 DS Waters 3.9375%, 11/15/09, Term B (JP Morgan Chase)
(acquired 11/5/03-1/8/04; cost-$4,517,769) 4,536,035
5,000 Mission Energy Holdings International Inc., 7.00%, 11/19/06,
Term B (Citibank, N.A.)
(acquired 9/4/03-10/1/03; cost-$5,010,230) 5,055,210
6,429 Reliant Resources Inc., 5.35%, 3/15/07 (JP Morgan Chase)
(acquired 12/4/03-1/22/04; cost-$6,303,720) 6,345,553
1,500 Tucson Electric Power, 6.64125%, 11/14/06, Term B
(Toronto Dominion) (acquired 9/4/03; cost-$1,510,669) 1,510,313
---------------
23,058,300
===============
WASTE DISPOSAL - 1.9%
10,443 Allied Waste North America, 3.92%, 4/30/10, Term B
(JP Morgan Chase)
(acquired 8/29/03-12/4/03; cost-$10,553,181) 10,614,364
882 Allied Waste North America, 3.93%, 4/30/10, Term B
(JP Morgan Chase)
(acquired 9/18/03-12/1/03; cost-$891,455) 896,083
---------------
11,510,447
===============
Total Senior Loan Participations (cost-$318,496,768) 321,667,598
===============
ASSET-BACKED SECURITES--0.5%
CREDIT RATING
(MOODY'S/S&P)
3,000 Nextcard Credit Card Master Note Trust, Class B
Ser 2000-1A 1.90%-2.00%, 12/15/06-4/16/07
(acquired 1/27/04; cost-$2,882,185) (a) (d) (e) (f) B3/B- 2,878,584
===============
CORPORATE BONDS & NOTES--8.5%
CHEMICALS - 0.2%
1,500 Arco Chemical Co., 9.375%, 12/15/05 B1/BB- 1,537,500
---------------
10
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
------------------------------------------------------------------------------------------------------------
ENERGY - 0.7%
$ 1,244 Calpine Corp., 6.87%, 7/15/07
(acquired 10/22/03; cost-$1,180,606) (a) (e) (f) NR/B $ 1,225,094
2,500 Dynegy Holdings, Inc., 7.67%, 7/15/08
(acquired 9/8/03; cost-$2,525,500) (a) (e) (f) B3/B- 2,731,250
---------------
3,956,344
===============
FINANCIAL SERVICES - 1.5%
3,000 Fiat Finance North America Inc., 3.25%, 1/9/07
(acquired 9/3/03; cost-$2,941,392) (a) (e) Ba3/NR 2,973,750
3,000 Redwood Capital II Ltd., 3.4625%, 1/9/06 (e) (f) (g) Baa3/BBB- 3,000,000
3,000 Redwood Capital II Ltd., 5.0125%, 1/9/06 (e) (f) (g) Ba1/BB+ 3,000,000
---------------
8,973,750
===============
HOTELS/GAMING - 0.8%
3,000 La Quinta Corp., 7.40%, 9/15/05 Ba3/BB- 3,146,250
1,430 MGM Mirage Inc., 6.625%, 2/1/05 Ba1/BB+ 1,487,200
---------------
4,633,450
===============
INSURANCE - 0.6%
1,500 Parametric Re Ltd., 5.52%, 11/19/07
(acquired 9/24/03; cost-$1,551,053) (a) (e) (f) (g) Ba2/NR 1,544,175
2,000 Residential Reinsurance Ltd., 6.12313%, 6/18/06
(acquired 9/24/03; cost-$2,030,118) (a) (d) (e) (g) Ba2/BB+ 2,035,000
---------------
3,579,175
===============
PAPER - 0.3%
2,000 Abitibi-Consolidated Inc., 8.30% 8/1/05 Ba1/BB+ 2,119,952
---------------
OIL & GAS - 0.5%
2,597 Pride International Inc., 9.375%, 5/1/07 Ba2/BB 2,681,670
---------------
SPECIAL PURPOSE ENTITY - 1.2%
3,000 Pioneer 2002 Ltd., 2002-3 6.42%, 6/15/06
(acquired 12/10/03; cost-$3,036,497) (a) (e) (f) (g) Ba3/BB+ 3,002,190
4,000 TRAC-X North America 7.375%, 3/25/09
(acquired 1/29/04; cost-$4,039,621) (a) (e) (h) B3/NR 4,082,500
---------------
7,084,690
===============
TELECOMMUNICATIONS - 1.8%
5,665 Echostar DBS Corp., 4.405%, 10/1/08
(acquired 9/18/03-11/7/03; cost-$5,687,067) (a) (e) (f) Ba3/BB- 5,905,762
5,000 Qwest Communications International Inc., 4.63%, 2/15/09
(acquired 1/31/04; cost-$5,000,000) (a) (e) (g) B3/CCC+ 5,000,000
---------------
10,905,762
===============
TOBACCO - 0.2%
1,000 Commonwealth Brands, Inc. 8.68%, 4/15/08
(acquired 9/19/03; cost-$1,042,029) (a) (e) (f) NR/B- 1,055,000
---------------
UTILITIES - 0.7%
4,000 Pacific Gas & Electric Co., 8.33%, 12/31/49
(acquired 11/25/03; cost-$4,044,473) (a) (e) Ba2/NR 4,025,000
---------------
Total Corporate Bonds & Notes (cost-$49,983,457) 50,552,293
===============
MORTGAGE-RELATED SECURITIES (a)--1.6%
2,006 Atlantic Global Fund CBO, 1.53%, 4/1/09 (e) (f) Ba1/NR 1,797,677
3,071 CHYPS CBO Ltd., 6.72%, 1/15/10 (e) (d) (g) NR/CC 2,241,618
11
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
------------------------------------------------------------------------------------------------------------
$ 1,041 Global Diversified CBO, 9.375%, 5/22/08 (e) B2/NR $ 650,719
2,952 Halyard CBO I Ltd., 1.66%, 3/24/10 (e) (f) Baa3/NR 2,752,374
1,056 Jade CBO Ltd., 7.67%, 10/24/11 (e) B2/NR 633,804
728 ML CBO, Ser. 1996-C-2 Ser.A, 1.62%, 11/7/06 (e) (f) (g) Caa1/CC 407,484
1,799 PPM America High Yield CBO Ltd., 2.07%, 6/1/11 (g) NR/NR 1,497,794
---------------
Total Mortgage-Related Securities (cost-$9,979,040) 9,981,470
===============
SOVEREIGN DEBT OBLIGATIONS (d)--2.7%
BRAZIL - 2.2%
14,477 Federal Republic of Brazil, 2.0625%, 4/15/09-4/15/12 B2/B+ 13,102,495
---------------
PANAMA - 0.5%
3,205 Republic of Panama, 2.00%, 7/17/14-7/17/16 Ba1/BB 2,991,777
---------------
Total Sovereign Debt Obligations (cost-$15,857,093) 16,094,272
===============
SHORT-TERM INVESTMENTS--32.7%
COMMERCIAL PAPER - 11.6%
BANKING - 6.6%
6,100 ANZ Delaware Inc., 1.08%, 2/26/04 NR/NR 6,095,425
11,000 Bank of America Inc., 1.10%, 3/15/04 NR/NR 11,000,000
11,000 Citibank New York N.A. 1.09%, 2/19/04 NR/NR 11,000,000
11,000 National Australia Funding 1.075%, 2/10/04 P1/A1+ 10,997,042
---------------
39,092,467
===============
CONGLOMERATES - 2.5%
15,000 General Electric Capital Corp., 1.10%, 3/15/04 P1/A1+ 14,980,295
---------------
FINANCING - 2.3%
9,500 HBOS Treasury Services plc, 1.10%, 2/25/04 NR/NR 9,493,033
3,900 UBS Finance, Inc. 1.03%, 4/8/04 Aa2/NR 3,892,317
---------------
13,385,350
===============
MISCELLANEOUS - 0.2%
1,400 Danske Corp. Ser. A., 1.085%, 3/8/04 NR/NR 1,398,480
---------------
Total Commercial Paper (cost-$68,858,213) 68,856,592
===============
CORPORATE NOTES - 6.2%
ELECTRONICS - 0.4%
2,500 CMS Energy Corp., 7.625%, 11/15/04 B3/B+ 2,568,800
---------------
ENGINEERING - 0.7%
3,900 ABB Finance Inc. 6.75%, 6/30/04 B1/BB- 3,940,076
---------------
MISCELLANEOUS - 1.0%
5,000 Gemstone Investors Ltd., 7.71%, 10/31/04
(acquired 9/3/03-10/20/03; cost-$4,972,801) (a) (e) Caa1/B- 5,087,500
1,000 Trinom Ltd. 9.17%, 6/18/04
(acquired 9/24/03; cost-$1,008,464) (a) (e) (g) NR/BB 1,009,370
---------------
6,096,870
===============
OFFICE EQUIPMENT - 0.5%
3,000 Xerox Capital Europe PLC., 5.875%, 5/15/04 B1/B+ 3,037,500
---------------
SPECIAL PURPOSE ENTITY - 0.5%
3,000 Concentric Ltd., 4.28%, 5/13/04 (e) (f) Ba1/BB+ 3,003,690
---------------
12
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.6%
$ 11,800 Qwest Capital Funding, 5.875%, 8/3/04
(acquired 10/3/03; cost-$11,986,263) (a) (e) Caa2/CCC+ $ 12,080,250
3,000 Qwest Corp., 7.20%, 11/1/04 Ba3/B- 3,082,800
---------------
15,163,050
===============
UTILITIES - 0.5%
2,500 Edison International, 6.875%, 9/15/04 Ba2/BB+ 2,571,875
600 Illinova Corp., 7.125%, 2/1/04 Caa2/CCC+ 600,000
---------------
3,171,875
===============
Total Corporate Notes (cost-$36,379,208) 36,981,861
===============
U.S. GOVERNMENT/AGENCY SECURITIES - 14.6%
FANNIE MAE - 3.7%
22,000 1.077%-1.137%, 2/25/04-3/3/04 Aaa/AAA 21,983,701
---------------
U.S. TREASURY BILLS - 10.9%
65,100 1.01%-1.03%, 4/15/04-6/3/04 Aaa/AAA 64,905,699
---------------
Total U.S. Government Agency Securities (cost-$86,901,474) 86,889,400
===============
REPURCHASE AGREEMENT - 0.3%
1,909 State Street Bank & Trust Co.
dated 1/30/04, 0.80%, due 2/2/04,
proceeds: $1,909,127; collateralized by Federal Home Loan Bank,
5/21/13, valued at $1,947,838 (cost-$1,909,000) 1,909,000
---------------
Total Short-Term Investments (cost-$194,047,895) 194,636,853
===============
TOTAL INVESTMENTS (cost-$591,246,438+) - 100.0% $ 595,811,070
===============
NOTES TO SCHEDULE OF INVESTMENTS:
+ The cost basis of portfolio securities for federal income tax purposes is
$591,246,438. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $4,924,288; aggregate
gross unrealized depreciation for securities in which there is an excess of
tax cost over value is $359,656; net unrealized appreciation for federal
income tax purposes is $4,564,632.
(a) Private Placement. Restricted as to resale and does not have a readily
available market; the aggregate cost and value of such securities is
$386,284,493 or 64.8% of investments.
(b) Participation interests were acquired through the financial institution
indicated parenthetically.
(c) These securities generally pay interest at rates which are periodically
re-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 Inter-Bank Offer 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) Fair-valued security
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, typically to qualified institutional investors. At January
31, 2004, these securities amounted to $72,122,791 or 12.1% of investments.
(f) Floating Rate Security. Interest rate shown is the rate in effect at
January 31, 2004.
(g) Illiquid Security
(h) Credit-linked trust certificate.
GLOSSARY:
CBO - Collateralized Bond Obligation
NR - Not Rated
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
PIMCO FLOATING RATE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES
January 31, 2004 (unaudited)
ASSETS:
Investments, at value (cost-$591,246,438) $ 595,811,070
----------------------------------------------------------------------- ---------------
Cash 829,364
----------------------------------------------------------------------- ---------------
Interest receivable 2,678,497
----------------------------------------------------------------------- ---------------
Receivable for investments sold 1,985,000
----------------------------------------------------------------------- ---------------
Unrealized appreciation on swaps 706,865
----------------------------------------------------------------------- ---------------
Premium for swaps purchased 567,500
----------------------------------------------------------------------- ---------------
Periodic payments receivable on swaps 385,920
----------------------------------------------------------------------- ---------------
Prepaid expenses 13,760
----------------------------------------------------------------------- ---------------
Total Assets 602,977,976
======================================================================= ===============
LIABILITIES:
Payable for investments purchased 44,425,672
----------------------------------------------------------------------- ---------------
Dividends payable to common and preferred shareholders 1,394,811
----------------------------------------------------------------------- ---------------
Deferred facility fees 459,066
----------------------------------------------------------------------- ---------------
Unrealized depreciation on unfunded loan commitments 412,707
----------------------------------------------------------------------- ---------------
Investment management fee payable 354,351
----------------------------------------------------------------------- ---------------
Unrealized depreciation on swaps 77,807
----------------------------------------------------------------------- ---------------
Unrealized depreciation on forward foreign currency contracts 63,818
----------------------------------------------------------------------- ---------------
Preferred offering costs payable 20,988
----------------------------------------------------------------------- ---------------
Accrued expenses 79,721
----------------------------------------------------------------------- ---------------
Total Liabilities 47,288,941
----------------------------------------------------------------------- ---------------
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 $ 345,689,035
======================================================================= ===============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock:
Par value ($0.00001 per share, applicable to 17,807,405 shares issued
and outstanding) $ 178
----------------------------------------------------------------------- ---------------
Paid-in-capital in excess of par 341,261,500
----------------------------------------------------------------------- ---------------
Dividends in excess of net investment income (1,810,551)
----------------------------------------------------------------------- ---------------
Net realized gain on investments 1,520,743
----------------------------------------------------------------------- ---------------
Net unrealized appreciation of investments, swaps and foreign currency
transactions 4,717,165
----------------------------------------------------------------------- ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 345,689,035
----------------------------------------------------------------------- ---------------
NET ASSET VALUE PER COMMON SHARE $ 19.41
======================================================================= ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
PIMCO FLOATING RATE INCOME FUND STATEMENT OF OPERATIONS
For the period August 29, 2003* through January 31, 2004 (unaudited)
INTEREST INCOME:
Interest $ 6,003,756
----------------------------------------------------------------------- ---------------
Facility and other fee income 35,896
----------------------------------------------------------------------- ---------------
6,039,652
----------------------------------------------------------------------- ---------------
EXPENSES:
Investment management fees 1,439,168
----------------------------------------------------------------------- ---------------
Auction agent fees and commissions 115,400
----------------------------------------------------------------------- ---------------
Custodian and accounting agent fees 34,320
----------------------------------------------------------------------- ---------------
Audit and tax services 30,420
----------------------------------------------------------------------- ---------------
Reports to shareholders 18,720
----------------------------------------------------------------------- ---------------
Transfer agent fees 12,792
----------------------------------------------------------------------- ---------------
Trustees' fees and expenses 11,700
----------------------------------------------------------------------- ---------------
New York Stock Exchange listing fees 10,931
----------------------------------------------------------------------- ---------------
Legal fees 9,360
----------------------------------------------------------------------- ---------------
Investor relations 3,120
----------------------------------------------------------------------- ---------------
Miscellaneous 9,417
----------------------------------------------------------------------- ---------------
Total expenses 1,695,348
----------------------------------------------------------------------- ---------------
NET INVESTMENT INCOME 4,344,304
======================================================================= ===============
REALIZED AND UNREALIZED GAIN:
Net realized gain on:
----------------------------------------------------------------------- ---------------
Investments 320,475
----------------------------------------------------------------------- ---------------
Swaps 1,200,268
----------------------------------------------------------------------- ---------------
Net unrealized appreciation of investments, swaps,
and foreign currency transactions 4,717,165
----------------------------------------------------------------------- ---------------
Net realized and unrealized gain on investments, swaps,
and foreign currency transactions 6,237,908
----------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 10,582,212
======================================================================= ===============
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (639,860)
----------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM INVESTMENT OPERATIONS $ 9,942,352
======================================================================= ===============
* Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
PIMCO FLOATING RATE INCOME FUND STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
FOR THE PERIOD
AUGUST 29, 2003*
THROUGH
JANUARY 31, 2004
(UNAUDITED)
----------------
INVESTMENT OPERATIONS:
Net investment income $ 4,344,304
--------------------------------------------------------------------------------------------- ----------------
Net realized gain on investments, swaps and foreign currency transactions 1,520,743
--------------------------------------------------------------------------------------------- ----------------
Net unrealized appreciation of investments, swaps, and foreign currency transactions 4,717,165
--------------------------------------------------------------------------------------------- ----------------
Net increase in net assets resulting from investment operations 10,582,212
============================================================================================= ================
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (639,860)
--------------------------------------------------------------------------------------------- ----------------
Net increase in net assets applicable to common shareholders resulting from
investment operations 9,942,352
--------------------------------------------------------------------------------------------- ----------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (5,514,995)
--------------------------------------------------------------------------------------------- ----------------
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 (1,210,000)
--------------------------------------------------------------------------------------------- ----------------
Reinvestment of dividends 1,009,177
--------------------------------------------------------------------------------------------- ----------------
Net increase in capital share transactions 341,161,677
--------------------------------------------------------------------------------------------- ----------------
Total increase in net assets applicable to common shareholders 345,589,034
============================================================================================= ================
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 100,001
--------------------------------------------------------------------------------------------- ----------------
End of period (including dividends in excess of net investment income of $1,810,551) $ 345,689,035
============================================================================================= ================
COMMON SHARES ISSUED AND REINVESTED:
Issued 17,750,000
--------------------------------------------------------------------------------------------- ----------------
Issued in reinvestment of dividends 52,237
--------------------------------------------------------------------------------------------- ----------------
NET INCREASE 17,802,237
============================================================================================= ================
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
PIMCO FLOATING RATE INCOME FUND STATEMENT OF CASH FLOWS
For the period August 29, 2003* through January 31, 2004 (unaudited)
CASH FLOWS USED FOR OPERATING ACTIVITIES:
Purchases of long-term investments $ (471,967,887)
------------------------------------------------------------------------------------ ---------------
Proceeds from sales of long-term investments 81,160,810
------------------------------------------------------------------------------------ ---------------
Interest and facility fee income received 3,795,269
------------------------------------------------------------------------------------ ---------------
Swap premium paid (567,500)
------------------------------------------------------------------------------------ ---------------
Realized net gain on swaps 814,348
------------------------------------------------------------------------------------ ---------------
Prepaid expenses (13,760)
------------------------------------------------------------------------------------ ---------------
Operating expenses paid (1,261,276)
------------------------------------------------------------------------------------ ---------------
Net increase in short-term investments (157,653,262)
------------------------------------------------------------------------------------ ---------------
NET CASH USED FOR OPERATING ACTIVITIES (545,693,258)
==================================================================================== ===============
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common shares sold 343,462,500
------------------------------------------------------------------------------------ ---------------
Issuance of preferred shares 210,000,000
------------------------------------------------------------------------------------ ---------------
Common and preferred shares offering costs and underwriting discount paid (3,289,012)
------------------------------------------------------------------------------------ ---------------
Cash dividends paid (excluding reinvestment of $1,009,177) (3,750,867)
------------------------------------------------------------------------------------ ---------------
NET CASH FROM FINANCING ACTIVITIES 546,422,621
==================================================================================== ===============
NET INCREASE IN CASH 729,363
------------------------------------------------------------------------------------ ---------------
CASH AT BEGINNING OF PERIOD 100,001
------------------------------------------------------------------------------------ ---------------
CASH AT END OF PERIOD $ 829,364
==================================================================================== ===============
RECONCILIATION OF NET INCREASE IN NET ASSETS FROM INVESTMENT OPERATIONS
TO NET CASH USED FOR OPERATING ACTIVITIES:
Net increase in net assets from operations $ 10,582,212
------------------------------------------------------------------------------------ ---------------
Increase in receivable for investments sold (1,985,000)
------------------------------------------------------------------------------------ ---------------
Increase in interest receivable (2,678,497)
------------------------------------------------------------------------------------ ---------------
Increase in periodic payments receivable on swaps (385,920)
------------------------------------------------------------------------------------ ---------------
Increase in premium for swaps purchased (567,500)
------------------------------------------------------------------------------------ ---------------
Increase in prepaid expenses (13,760)
------------------------------------------------------------------------------------ ---------------
Increase in payable to Investment Manager 354,351
------------------------------------------------------------------------------------ ---------------
Increase in net unrealized appreciation on swaps (629,058)
------------------------------------------------------------------------------------ ---------------
Increase in unrealized depreciation on forward foreign currency contracts 63,818
------------------------------------------------------------------------------------ ---------------
Increase in unrealized depreciation on unfunded loan commitments 412,707
------------------------------------------------------------------------------------ ---------------
Increase in accrued expenses 79,721
------------------------------------------------------------------------------------ ---------------
Increase in deferred facility fees 459,066
------------------------------------------------------------------------------------ ---------------
Increase in payable for investments purchased 44,425,672
------------------------------------------------------------------------------------ ---------------
Net increase in investments (595,811,070)
==================================================================================== ===============
NET CASH USED FOR OPERATING ACTIVITIES $ (545,693,258)
==================================================================================== ===============
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
PIMCO FLOATING RATE INCOME FUND NOTES TO FINANCIAL STATEMENTS
January 31, 2004 (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, and the sale and issuance of 5,168 shares of
beneficial interest at an aggregate purchase price of $100,001 to Allianz
Dresdner Asset Management of America L.P. ("ADAM"). PIMCO Advisors Fund
Management LLC (the "Investment Manager") serves as the Fund's Investment
Manager and is an indirect, wholly-owned subsidiary of ADAM. ADAM is an
indirect, majority-owned subsidiary of Allianz AG. The Fund has an unlimited
amount of $0.00001 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 Fund issued 16,250,000 shares of common stock, in its initial public
offering. An additional 1,500,000 shares were issued in connection with the
exercise of the underwriters' over-allotment option. These shares were all
issued at $20.00 per share before an underwriting discount of $0.65 per share.
Common offering costs of $710,000 (representing $0.04 per share) were offset
against the proceeds of the offering and have been charged to paid-in capital in
excess of par. The Investment Manager agreed to pay all offering costs (other
than the sales load) and organizational expenses exceeding $0.04 per share.
Because aggregate offering costs and organizational expenses exceeded $0.04 per
common share, all organizational expenses and offering costs in excess of $0.04
per common share were reimbursed by the Investment Manager. In addition, the
underwriters' commission and offering costs associated with the issuance of
Preferred Shares in the amounts of $2,100,000 and $500,000, respectively, have
been charged to paid-in capital in excess of par.
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
these estimates.
In the normal course of business the Fund enters into contracts that contain a
variety of representations which provide general indemnifications. The Fund's
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Fund that have not yet been asserted.
However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(a) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market quotations
are readily available are stated at market value. 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 at the mean of
the last available bid and asked prices in the market for such Senior Loans, as
provided by a Board-approved independent pricing service. Other Senior Loans are
valued at fair value by the Fund's Sub-Adviser, 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 approved by the Board of Trustees, 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. 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. 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. Securities for which market quotations are not
readily available or if a development/significant event occurs that
significantly impacts the value of a security may be fair valued, pursuant to
guidelines established by the Board of Trustees. The prices used by the Fund to
value securities may differ from the value that would be realized if the
securities were sold. The Fund's net asset value is
18
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 consent fees, origination fees and amendment 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.
(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.
(e) SENIOR LOAN PARTICIPATIONS
When the Fund purchases a loan participation, the Fund typically enters into a
contractual relationship with the lender or third party selling such
participations ("Selling Participant"), but not the borrower. As a result, the
Fund assumes the credit risk of the borrower, the Selling Participant and any
other persons interpositioned between the Fund and the borrower. The Fund may
not directly benefit from the collateral supporting the senior loan in which it
has purchased the loan participation.
(f) CREDIT DEFAULT SWAPS
The Fund enters into credit default swap contracts ("swaps") for investment
purposes, to manage its credit risk or to add leverage.
As a seller in the credit default swap contract, the Fund would be required to
pay the par or other agreed-upon value of a referenced debt obligation to the
counterparty in the event of a default by a third party, such as a U.S. or
foreign corporate issuer, on the referenced debt obligation. In return, the Fund
would receive from the counterparty a periodic stream of payments over the term
of the contract provided that no event of default has occurred. If no default
occurs, the Fund would keep the stream of payments and would have no payment
obligations.
The Fund may also purchase credit default swap contracts in order to hedge
against the risk of default of debt securities held, in which case the Fund
would function as the counterparty referenced in the preceding paragraph. As a
purchaser of a credit default swap contract, the Fund would receive the par or
other agreed upon value of a referenced debt obligation from the counterparty in
the event of default by a third party, such as a U.S. or foreign corporate
issuer on the referenced debt obligation. In return, the Fund would make
periodic payments to the counterparty over the term of the contract provided no
event of default has occurred. Such periodic payments are accrued daily and
charged to realized gains and losses.
Swaps are marked to market daily by the Fund's Investment Manager based upon
quotations from market makers and the change in value, if any, is recorded as
unrealized appreciation or depreciation in the Fund's Statement of Operations.
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.
19
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.
(g) FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts for the purpose of
hedging against foreign currency risk arising from the investment or anticipated
investment in securities denominated in foreign currencies. The Fund may also
enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another. A forward foreign currency contract is an agreement between two
parties to buy and sell a currency at a set exchange rate on a future date. The
market value of a forward foreign currency contract fluctuates with changes in
forward currency exchange rates. All commitments are marked to market daily at
the applicable exchange rates and any resulting unrealized gains and losses are
recorded. Realized gains or losses are recorded at the time the forward contract
matures or by delivery of the currency. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
(h) CREDIT-LINKED TRUST CERTIFICATES
Credit-linked trust certificates are investments in a limited purpose trust or
other vehicle formed under state law which, in turn, invests in a basket of
derivative instruments, such as credit default swaps, interest rate swaps and
other securities, in order to provide exposure to the high yield or another
fixed income market.
Like an investment in a bond, investments in these credit-linked trust
certificates represent the right to receive periodic income payments (in the
form of distributions) and payment of principal at the end of the term of the
certificate. However, these payments are conditioned on the trust's receipt of
payments from, and the trust's potential obligations to, the counterparties to
the derivative instruments and other securities in which the trust invests.
(i) REPURCHASE AGREEMENTS
The Fund may enter into transactions with its custodian bank or securities
brokerage firms approved by the Board of Trustees whereby it purchases
securities under agreements to resell at an agreed upon price and date
("repurchase agreements"). Such agreements are carried at the contract amount in
the financial statements. Collateral pledged (the securities received), which
consists primarily of U.S. government obligations and asset backed securities,
are held by 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.
2. INVESTMENT MANAGER AND SUB-ADVISER
The Fund has entered into an Investment Management Agreement (the "Agreement")
with the Investment Manager to serve as the Fund's 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
investment activities of the Fund and the Fund's business affairs and other
administrative matters. Pursuant to the Agreement, the Investment Manager will
receive an annual fee, payable monthly, at an annual rate of 0.75% 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 its
affiliate, Pacific Investment Management Company LLC (the "Sub-Adviser") to
manage the Fund's investments. Subject to the supervision of the Investment
Manager, the Sub-Adviser makes all investment decisions. The Investment Manager
(not the Fund) pays a portion of the fees it receives to the Sub-Adviser in
return for its services, at the maximum annual rate of 0.39% of the Fund's
average 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 $748,354 in connection with its
sub-advisory services for the period ended January 31, 2004.
20
3. INVESTMENTS IN SECURITIES
For the period ended January 31, 2004, purchases and sales of investments, other
than short-term securities, were $516,393,559 and $82,808,083, respectively.
(a) Credit default swap contracts outstanding at January 31, 2004 were as
follows:
NOTIONAL
SWAP AMOUNT FIXED
COUNTERPARTY/ PAYABLE ON PAYMENTS UNREALIZED
REFERENCED DEBT DEFAULT RECEIVED APPRECIATION/
OBLIGATION (000) TERMINATION DATE BY FUND (DEPRECIATION)
----------------------------------------------------------------------------------
Credit Suisse
SAMI $ 4,700 9/20/08 2.45% $ (580)
Credit Suisse
SAMI 10,000 9/20/08 2.45% 66,267
Credit Suisse
SAMI 7,000 9/20/08 2.45% 20,137
Goldman Sachs,
TRAC-X B 4,000 3/20/09 4.10% 0
JP Morgan Chase
TRAC-X B 12,500 3/20/09 4.10% 10,943
JP Morgan Chase
TRAC-X 100 19,000 3/20/09 3.50% (77,224)
JP Morgan Chase
EMDI 5,000 12/20/08 4.07% 27,616
JP Morgan Chase
EMDI 10,000 12/20/08 4.07% 315,231
Lehman Brothers
Triton Credit
One Month Libor Plus
2.75% 6/30/08 5,000 6/20/08 3.00% 45,338
Lehman Brothers
L-3Com Reval Credit
Libor + 200 bps
2/25/08 5,000 12/20/08 1.50% (3)
Merrill Lynch
Williams Credit
8.75%, 3/15/32 3,000 11/15/04 5.25% 76,074
Merrill Lynch
PSEG Energy Credit
7.75%, 4/16/07 3,500 12/4/06 2.95% 145,259
===========
$ 629,058
===========
(b) Forward foreign currency contracts outstanding at January 31, 2004 were:
U.S.$ VALUE U.S.$ VALUE UNREALIZED
PURCHASED ORIGINATION DATE JANUARY 31, 2004 DEPRECIATION
-----------------------------------------------------------------------------------
2,045,000 Euros settling 2/10/04 $ 2,603,553 $ 2,539,735 $ 63,818
========
(c) At January 31, 2004, the Fund had the following unfunded loan commitments
which could be extended at the option of the Borrower:
BORROWER UNFUNDED COMMITMENTS
--------------------------------------------------
Dex Media LLC $ 2,000,000
Houghton Mifflin Co. 2,750,000
Tenet Healthcare Corp. 5,000,000
-----------
$ 9,750,000
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 TR, each
with a net asset and liquidation value of $25,000 per share plus accrued
dividends.
21
Dividends are accumulated daily at an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually.
For the period ended January 31, 2004, the annualized dividend rate ranged from:
HIGH LOW AT JANUARY 31, 2004
-----------------------------------------------------------------------------------------
Series T 1.75% 1.12% 1.12%
Series W 1.75% 1.12% 1.12%
Series TH 1.75% 1.06% 1.06%
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 6, 2004, a dividend of $0.076943 per share was declared to common
shareholders payable March 5, 2004 to shareholders of record on February 20,
2004.
On March 5, 2004, a dividend of $0.07684 per share was declared to common
shareholders payable April 2, 2004 to shareholders of record on March 19, 2004.
6. SUBSEQUENT EVENT
On February 12, 2004, the staff of the Securities and Exchange Commission (the
"Commission") informed the Investment Manager that it intended to recommend that
the Commission bring civil and administrative actions against the Investment
Manager and one of its investment advisory affiliates seeking a permanent
injunction against violations of certain provisions of the federal securities
laws, disgorgement plus prejudgement interest and civil penalties in connection
with the Commission staff's investigation of "market timing" and related trading
activities in certain open-end investment companies advised by the Investment
Manager (the "Subject Funds").
On February 17, 2004, the Attorney General of New Jersey filed a complaint
alleging, among other things, that the Sub-Adviser and certain of its affiliates
had failed to disclose that they improperly allowed certain hedge funds to
engage in "market timing" in the Subject Funds and certain other mutual funds
advised by the Sub-Adviser. The complaint seeks injunctive relief, civil
monetary penalties, restitution and disgorgement of profits.
The proceedings described above do not allege that any inappropriate activity
took place in the Fund and the Fund is not named in the proceedings.
If the New Jersey Attorney General or the Commission were to obtain a court
injunction against the Investment Manager, the Sub-Adviser or certain of their
affiliates, the Investment Manager, the Sub-Adviser 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 such a case, the
Investment Manager and the Sub-Adviser would in turn seek exemptive relief from
the Commission, as contemplated by the Investment Company Act, although there is
no assurance that such exemptive relief would be granted. The Commission also
has the power by order to prohibit the Investment Manager and the Sub-Adviser
from serving as investment advisers and underwriters, although to date it has
not exercised such powers with respect to market timing arrangements involving
other mutual fund complexes.
Since February, 2004, the Investment Manager, the Sub-Adviser and certain of
their affiliates, open-end investment companies advised by the Investment
Manager or Sub-Adviser (the "Open-End Funds"), their boards of trustees and
other mutual funds advised by the Investment Manager or the Sub-Adviser have
been named as defendants in multiple 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. The lawsuits have been commenced as
putative class actions on behalf of investors who purchased, held or redeemed
shares of the specified funds during specified periods or as derivative actions
on behalf of the specified funds. The lawsuits generally relate to the same
facts that are the subject of the regulatory proceedings discussed above. The
lawsuits seek unspecified compensatory damages plus interest and, in some cases,
punitive damages, the rescission of investment advisory contracts, the return of
fees paid under those
22
contracts and restitution. The Fund has been named in two of the class action
lawsuits, one filed in the Southern District of New York and one filed in the
District of New Jersey.
In November 2003, the Commission settled an enforcement action against an
unaffiliated broker-dealer relating to the undisclosed receipt of fees from
certain mutual fund companies in return for preferred marketing of their funds
and announced that it would be investigating mutual funds and their distributors
generally with respect to compensation arrangements relating to the sale of
mutual fund shares. In that connection, the Investment Manager, the Sub-Adviser
and certain of their affiliates are under investigation by the Commission
relating to revenue-sharing arrangements and the use of brokerage commissions to
recognize brokers effecting sales of the Open-End Funds advised by the
Investment Manager or the Sub-Adviser. In addition, the Attorney General of the
State of California has publicly announced an investigation into the Open-End
Funds brokerage recognition and revenue-sharing arrangements.
The Investment Manager, the Sub-Adviser and their affiliates believe that
additional lawsuits may be filed in federal or state courts naming the
Investment Manager, the Sub-Adviser, the Subject Funds, the Open-End Funds, the
Fund, the Fund's Trustees and/or their affiliates.
Although it is not possible to predict what, if any, effect the foregoing will
have on the market for the Fund's shares, the Investment Manager and the
Sub-Adviser believe that these matters are not likely to have a material adverse
effect on the operations of the Fund or on the Investment Manager's, or
Sub-Adviser's ability to perform their respective investment advisory services
to the Fund.
23
PIMCO FLOATING RATE INCOME FUND FINANCIAL HIGHLIGHTS
For a share of common stock outstanding for the period August 29, 2003* through
January 31, 2004:
(unaudited)
Net asset value, beginning of period $ 19.35**
---------------------------------------------------------------------------------------- ---------------
INVESTMENT OPERATIONS:
Net investment income 0.25
---------------------------------------------------------------------------------------- ---------------
Net realized and unrealized gain on investments, swaps and foreign currency transactions 0.35
---------------------------------------------------------------------------------------- ---------------
Total from investment operations 0.60
---------------------------------------------------------------------------------------- ---------------
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (0.04)
---------------------------------------------------------------------------------------- ---------------
Net increase in net assets applicable to common shares resulting from
investment operations 0.56
---------------------------------------------------------------------------------------- ---------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME: (0.31)
---------------------------------------------------------------------------------------- ---------------
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 (0.15)
---------------------------------------------------------------------------------------- ---------------
Total capital share transactions (0.19)
---------------------------------------------------------------------------------------- ---------------
Net asset value, end of period $ 19.41
---------------------------------------------------------------------------------------- ---------------
Market price, end of period $ 20.10
---------------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENT RETURN (1) 2.12%
---------------------------------------------------------------------------------------- ---------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000) $ 345,689
---------------------------------------------------------------------------------------- ---------------
Ratio of expenses to average net assets (2)(3) 1.18%
---------------------------------------------------------------------------------------- ---------------
Ratio of net investment income to average net assets (2)(3) 3.01%
---------------------------------------------------------------------------------------- ---------------
Preferred shares asset coverage per share $ 66,150
---------------------------------------------------------------------------------------- ---------------
Portfolio turnover 32%
---------------------------------------------------------------------------------------- ---------------
* 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 the period reported. Dividends are assumed,
for purposes of this calculation, to be reinvested at prices obtained under
the Fund's dividend reinvestment plan. Total investment return does not
reflect brokerage commissions or sales charges. Total investment return for
a period of less than one year is not annualized.
(2) Calculated on the basis of income and expenses applicable to both common
and preferred shares relative to the average net assets of common
shareholders.
(3) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
24
TRUSTEES AND PRINCIPAL OFFICERS
Stephen Treadway
Trustee, Chairman, Chairman of the Board
Paul Belica
Trustee
Robert E. Connor
Trustee
John J. Dalessandro II
Trustee
Hans W. Kertess
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Vice President & Secretary
Raymond G. Kennedy
Vice President
David C. Hinman
Vice President
Jason R. Rosiak
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Jennifer A. Patula
Assistant Secretary
INVESTMENT MANAGER
PIMCO Advisors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02210-2624
This report, including the financial information herein, is transmitted to the
shareholders of PIMCO 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 each Fund
without examination by independent auditors, who did not express an opinion
hereon.
Information on the Fund is available at www.pimcoadvisors.com or by calling
1-800-331-1710
[PIMCO ADVISORS LOGO]
ITEM 2. CODE OF ETHICS 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. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not required in this filing.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES. Disclosure requirement not currently effective
ITEM 9. 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 Funds website at www.pimcofunds.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. The Registrant has
not yet held its first annual shareholders' meeting, so these procedures have
yet to be disclosed in response to the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A, and this is the first Form N-CSR filing made by the Registrant
after Item 9 was added to the Form. 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 recommmendation 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 10. 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 11. EXHIBITS
(a) Exhibit 99.Cert. - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PIMCO Floating Rate Income Fund
By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: April 7, 2004
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: April 7, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: April 7, 2004
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: April 7, 2004