Investment Company Act file number

811-22121

PIMCO Income Opportunity Fund

(Exact name of registrant as specified in charter)

1345 Avenue of the Americas, New York, NY

10105

(Address of principal executive offices)

(Zip code)

Lawrence G. Altadonna 1345 Avenue of the Americas, New York, NY 10105

(Name and address of agent for service)

Registrant's telephone number, including area code:

212-739-3371

Date of fiscal year end:

October 31, 2008

Date of reporting period:

January 31, 2008

PIMCO Income Opportunity Fund Schedule of Investments

January 31, 2008 (unaudited)

Principal

Amount

Credit Rating

(000)

(Moody’s/S&P)

Value*

U.S. GOVERNMENT AGENCY SECURITIES—63.6%

Fannie Mae,

$

574

4.343%, 12/1/33, FRN, MBS

Aaa/AAA

$

571,831

974

5.50%, 5/1/37, MBS

Aaa/AAA

987,612

26

5.50%, 7/1/37, MBS

Aaa/AAA

26,061

24,050

5.50%, 1/1/38, MBS

Aaa/AAA

24,379,226

15,000

5.50%, 12/1/99, TBA, MBS (e)

Aaa/AAA

15,175,785

9,674

6.00%, 10/1/37, MBS

Aaa/AAA

9,929,494

48,704

6.00%, 11/1/37, MBS (h)

Aaa/AAA

49,991,901

227

7.00%, 9/25/23, CMO

Aaa/AAA

243,240

3,584

7.00%, 8/1/36, MBS

Aaa/AAA

3,742,941

869

7.066%, 7/1/26, FRN, MBS

Aaa/AAA

882,851

992

8.50%, 6/25/30, CMO

Aaa/AAA

1,107,050

Freddie Mac,

200

4.00%, 4/15/19, CMO

Aaa/AAA

190,481

109

5.00%, 2/15/24, CMO

Aaa/AAA

110,722

681

5.622%, 6/1/36, FRN, MBS

Aaa/AAA

686,469

72

6.00%, 11/1/33, MBS

Aaa/AAA

74,191

42

6.00%, 4/1/37, MBS

Aaa/AAA

42,603

180

6.00%, 8/1/37, MBS

Aaa/AAA

184,422

49,171

6.00%, 8/1/37, MBS (h)

Aaa/AAA

50,429,121

11,791

6.00%, 10/1/37, MBS

Aaa/AAA

12,092,907

25,844

6.00%, 10/1/37, MBS (h)

Aaa/AAA

26,504,866

11,654

6.00%, 11/1/37, MBS

Aaa/AAA

11,952,003

604

6.084%, 1/1/37, FRN, MBS

Aaa/AAA

622,922

519

6.188%, 1/1/37, FRN, MBS

Aaa/AAA

531,585

51

6.50%, 6/15/32, CMO

Aaa/AAA

53,511

500

7.00%, 3/15/24, CMO

Aaa/AAA

538,988

500

7.00%, 6/15/29, CMO

Aaa/AAA

524,248

181

7.00%, 3/15/31, CMO

Aaa/AAA

186,384

452

7.00%, 3/15/32, CMO

Aaa/AAA

481,183

148

7.25%, 9/15/30, CMO

Aaa/AAA

149,340

Total U.S. Government Agency Securities (cost—$210,231,652)

212,393,938

SOVEREIGN DEBT OBLIGATIONS—20.8%

Brazil—7.8%

BRL 50,469

Brazil Notas do Tesouro Nacional, 10.00%, 1/1/12

NR/NR

26,216,504

Colombia—3.5%

COP 24,000,000

Republic of Columbia, 9.85%, 6/28/27

Ba2/BB+

11,640,155

Mexico—4.3%

MXN 160,000

Mexican Bonos, 7.25%, 12/15/16

Baa1/A+

14,435,156

Poland—1.9%

PLN 15,000

Poland Government Bond, 5.75%, 9/23/22

A2/A

6,223,964

South Africa—3.3%

ZAR 76,000

Republic of South Africa, 13.00%, 8/31/11

A2/A+

10,967,007

Total Sovereign Debt Obligations (cost—$70,382,583)

69,482,786

Principal

Amount

Credit Rating

(000)

(Moody’s/S&P)

Value*

CORPORATE BONDS & NOTES—16.8%

Airlines—0.5%

$

1,539

United Air Lines, Inc., 7.73%, 7/1/10, ABS

Ba3/BB+

$

1,539,263

Banking—3.5%

3,000

Bank of America Corp., 8.00%, 1/30/18, FRN (g)

Aa3/A+

3,121,608

3,000

Barclays Bank PLC, 6.05%, 12/4/17 (a)(d)

Aa2/AA-

3,101,379

RUB 80,000

Dali Capital S.A., 7.00%, 4/13/09

A1/BBB+

3,263,599

$

2,500

Rabobank Capital Funding Trust, 5.254%, 10/21/16, FRN (a)(d)(g)

Aa2/AA

2,298,995

11,785,581

Commercial Services—0.3%

1,000

President & Fellows of Harvard College, 5.625%, 10/1/38 (f)

Aaa/AAA

994,214

Computer Software—0.5%

2,000

First Data Corp., 9.875%, 9/24/15 (a)(b)(d)

B3/B-

1,772,500

Energy—1.5%

2,000

Kinder Morgan Finance Co., 5.70%, 1/5/16

Ba2/BB-

1,784,582

3,000

NGPL PipeCo LLC, 7.768%, 12/15/37 (a)(d)

Baa3/BBB-

3,143,673

4,928,255

Financial Services—4.8%

2,000

General Motors Acceptance Corp. LLC, 7.25%, 3/2/11

Ba3/BB+

1,810,134

RUB

165,000

GPB Eurobond Finance PLC, 7.25%, 2/22/10

A3/BBB-

6,758,649

€

2,000

Green Valley Ltd., 8.376%, 1/10/11, FRN (a)(b)(d)(f)

NR/BB+

2,983,112

$

2,000

LVB Acquisition Merger Sub., Inc., 10.00%, 10/15/17 (a)(d)

B3/B-

2,070,000

2,500

UBS Preferred Funding Trust V, 6.243%, 5/15/16, FRN (g)

Aa2/A+

2,413,495

16,035,390

Food & Beverage—1.5%

3,000

Archer-Daniels-Midland Co., 6.45%, 1/15/38

A2/A

3,128,184

2,000

Kraft Foods, Inc., 6.875%, 2/1/38

Baa2/BBB+

2,040,460

5,168,644

Healthcare & Hospitals—1.3%

4,000

HCA, Inc., 9.25%, 11/15/16

B2/BB-

4,205,000

Printing/Publishing—0.5%

2,000

RH Donnelley Corp., 8.875%, 1/15/16

B3/B

1,725,000

Telecommunications—1.8%

2,000

Citizens Communications Co., 9.00%, 8/15/31

Ba2/BB+

1,910,000

2,000

Nortel Networks Ltd., 10.125%, 7/15/13

B3/B-

2,005,000

2,000

Qwest Communications International, Inc., 7.50%, 2/15/14

Ba3/B+

1,990,000

5,905,000

Utilities—0.6%

2,000

AES Corp., 8.00%, 10/15/17 (a)(d)

B1/B

2,050,000

Total Corporate Bonds & Notes (cost—$55,675,061)

56,108,847

Principal

Amount

Credit Rating

(000)

(Moody’s/S&P)

Value*

MORTGAGE-BACKED SECURITIES—12.9%

$

3,000

Banc of America Commercial Mortgage, Inc., 5.889%, 7/10/44, CMO, VRN

NR/AAA

$

3,069,080

2,805

Bear Stearns Structured Products, Inc., 5.07%, 1/25/37, CMO, FRN (d)

NR/NR

2,728,935

2,500

GE Capital Commercial Mortgage Corp., 5.512%, 11/10/45, CMO, VRN

Aaa/AAA

2,561,251

Greenwich Capital Commercial Funding Corp., CMO,

3,000

5.224%, 4/10/37, VRN

Aaa/AAA

3,027,461

2,500

5.444%, 3/10/39

Aaa/AAA

2,469,885

902

GS Mortgage Securities Corp. II, 6.044%, 8/15/18, CMO (d)

Aaa/AAA

924,198

3,000

JPMorgan Chase Commercial Mortgage Securities Corp.,

5.42%, 1/15/49, CMO

Aaa/NR

2,947,983

2,000

LB-UBS Commercial Mortgage Trust, 5.43%, 2/15/40, CMO

NR/AAA

1,971,851

MASTR Adjustable Rate Mortgage Trust, CMO, FRN,

302

6.80%, 1/25/34

Aaa/AAA

294,261

153

7.448%, 12/25/33

Aaa/AAA

155,324

3,000

Merrill Lynch Countrywide Commercial Mortgage Trust,

5.172%, 12/12/49, CMO, VRN

Aaa/AAA

2,912,518

Morgan Stanley Capital I, CMO, VRN,

3,000

5.560%, 3/12/44

Aaa/AAA

2,967,927

3,000

5.731%, 7/12/44

NR/AAA

3,035,847

Salomon Brothers Mortgage Securities VII, Inc.,

2,868

6.50%, 2/25/29, CMO

NR/AAA

2,869,218

4,877

Structured Asset Securities Corp., 3.876%, 5/25/33, CMO, FRN

Aaa/AAA

4,675,668

Wachovia Bank Commercial Mortgage Trust, CMO,

3,000

5.572%, 10/15/48

Aaa/AAA

2,997,610

3,490

5.928%, 5/15/43, VRN

Aaa/NR

3,551,887

Total Mortgage-Backed Securities (cost—$43,319,639)

43,160,904

SENIOR LOANS (a)(c)—6.8%

Energy—0.5%

NRG Energy Holding,

588

6.48%, 11/4/12

541,423

918

6.58%, 11/4/12, Term B

845,408

355

6.58%, 2/1/13, Term B (b)

327,213

1,714,044

Financial Services—1.1%

First Data Corp.,

138

7.634%, 9/24/14 (b)

124,674

1,857

7.634%, 9/24/14, Term B

1,681,934

Nielson Finance, Term B,

1,246

7.146%, 8/8/13

1,155,143

749

7.243%, 8/9/13

694,066

3,655,817

Healthcare & Hospitals—1.9%

1,995

Biomet, Inc., 7.857%, 3/15/15, Term B

1,940,818

1,845

Community Health Systems, Inc., 7.331%, 7/2/14, Term B

1,707,632

2,992

HCA, Inc., 7.448%, 11/14/13, Term B

2,772,451

6,420,901

Principal

Amount

Credit Rating

(000)

(Moody’s/S&P)

Value*

Multi-Media—0.6%

$

1,995

CSC Holdings, Inc., 6.595%, 2/24/13, Term B

$

1,840,140

Paper/Paper Products—0.8%

Georgia-Pacific Corp., Term B,

230

6.58%, 12/20/12

212,648

291

6.831%, 12/20/12

269,175

2,472

6.896%, 12/20/12

2,287,986

2,769,809

Telecommunications—0.5%

Telesat Canada, Inc.,

472

7.84%, 10/22/14, Term B

448,228

1,107

7.96%, 10/22/14, Term B

1,049,850

10

8.00%, 10/22/14, Term DD (b)

9,961

264

8.09%, 10/22/14, Term B

250,012

1,758,051

Utilities—0.8%

2,992

Texas Competitive Electric Holdings Co. LLC, 8.396%, 10/10/14

2,759,561

Wholesale—0.6%

1,995

Roundy’s, Inc., 7.91%, 11/1/11, Term B

1,921,398

Total Senior Loans (cost—$23,693,469)

22,839,721

ASSET-BACKED SECURITIES—4.6%

3,056

Bear Stearns Second Lien Trust, 3.596% 12/25/36, FRN (b)(d)

Aaa/AAA

2,444,562

Ford Credit Auto Owner Trust,

975

4.36%, 6/15/10

Aaa/AAA

983,466

1,709

4.38%, 1/15/10

Aaa/AAA

1,716,981

Green Tree Financial Corp.,

555

6.11%, 9/1/23

NR/B-

566,763

678

6.33%, 11/1/29, VRN

Baa2/NR

685,111

321

6.48%, 12/1/30

NR/B-

326,123

741

7.14%, 3/15/28

Baa1/NR

764,287

2,294

7.40%, 6/15/27

A2/AA

2,425,902

425

7.65%, 10/15/27, VRN

Aa1/AAA

439,283

2,407

Popular ABS Mortgage Pass-Through Trust, 3.656%, 7/25/35, ABS, FRN

Aaa/AAA

2,106,540

3,154

Quest Trust, 4.28%, 6/25/34, FRN (d)

Aa2/AA

3,034,651

Total Asset-Backed Securities (cost—$15,332,107)

15,493,669

Principal

Amount

Credit Rating

(000)

(Moody’s/S&P)

Value*

MUNICIPAL BONDS—0.9%

West Virginia—0.9%

$3,200

Tobacco Settlement Finance Auth. Rev., 7.467%, 6/1/47, Ser. A
(cost—$3,066,316)

Baa3/BBB

$

3,156,704

SHORT-TERM INVESTMENTS—6.0%

Commercial Paper—5.9%

Financial Services—5.9%

4,300

Lloyds Bank PLC, 3.04%, 2/1/08

P-1/A-1+

4,300,000

7,800

Rabobank USA Financial Corp., 3.00%, 2/1/08

P-1/A-1+

7,800,000

7,600

UBS Finance, 3.07%, 4/23/08

P-1/A-1+

7,546,724

Total Commercial Paper (cost—$19,646,855)

19,646,724

Repurchase Agreement—0.1%

177

State Street Bank & Trust Co., dated 1/31/08, 2.65%, due 2/1/08, proceeds $177,013; collateralized by Fannie Mae, 6.00% due 5/15/11, valued at $181,706 including accrued interest (cost—$177,000)

177,000

Total Short-Term Investments (cost—$19,823,855)

19,823,724

Total Investments (cost—$441,524,682)—132.4%

442,460,293

Liabilities in excess of other assets—(32.4)%

(108,383,643

)

Net Assets—100%

$334,076,650

Notes to Schedule of Investments:

*

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to guidelines established by the Board  of Trustees or persons acting at their discretion pursuant to guidelines established by the Board of Trustees, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Fund’s investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The Fund’s investments in senior floating rate loans (“Senior Loans”), for which a secondary market exists will be valued at the mean of the last available bid and asked prices in the market for such Senior Loans, as provided by an independent pricing service. Other Senior Loans, are valued at fair-value pursuant to procedures approved by the Board of Trustees which include consideration and evaluation of: (1) the creditworthiness of the borrower and any intermediate participants; (2) the term of the Senior Loan; (3) recent prices in the market for similar loans, if any, (4) recent prices in the market for loans of similar quality, coupon rate, and period until next interest rate reset and maturity; and (5) general economic and market conditions affecting the fair value of the Senior Loan. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange. Securities purchase on a when-issued on delayed delivery basis are marked daily until settlement at the forward settlement value.  Short-term investments maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the Fund to value securities may differ from the value that would be realized if the securities were sold. The Fund’s net asset value is determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

(a)

Private Placement—Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $40,259,380, representing 12.1% of net assets.

(b)

Illiquid security.

(c)

These securities generally pay interest at rates which are periodically pre-determined by reference to a base lending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as the “LIBOR” or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted as the Fund is ordinarily contractually obligated to receive approval from the Agent bank and/or borrower prior to disposition. Remaining maturities of Senior Loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty.

(d)

144A 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 buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

(e)

When-issued or delayed-delivery security. To be settled/delivered after January 31, 2008.

(f)

Fair-valued security—Securities with an aggregate value of $3,977,326, representing 1.19% of net assets.

(g)

Maturity date shown is date of next call. The interest rate disclosed reflects the rate in effect on January 31, 2008.

(h)

All or partial amount segregated as collateral for reverse repurchase agreements.

Glossary:

ABS—Asset Backed Security

BRL—Brazilian Real

CMO—Collateralized Mortgage Obligation

COP—Colombian Peso

€—Euro

FRN—Floating Rate Note. The interest rate disclosed reflects the rate in effect on January 31, 2008.

LIBOR—London Inter-bank Offered Rate

MBS—Mortgage-Backed Securities

MXN—Mexican Peso

PLN—Polish Zloty

NR—Not Rated

RUB—Russian Ruble

TBA—To Be Announced

VRN—Variable Rate Note. Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on January 31, 2008.

ZAR—South African Rand

Other Investments:

(1) Credit default swap agreements outstanding at January 31, 2008:

Swap Counterparty/
Referenced Debt Issuer

Notional Amount
Payable on Default
(000)

Termination
Date

Payments
Received
by Fund

Unrealized
Appreciation
(Depreciation)

ABN AMRO Bank N. V.

Petroleos de Venezuela

$

1,500

12/20/17

6.40

%

$

(38,976

)

Barclays Bank

Gazprom

1,250

12/20/17

1.90

%

(46,183

)

Ukraine

5,500

12/20/17

3.09

%

(44,769

)

VTB Capital S.A.

1,250

12/20/17

2.34

%

(61,339

)

BNP Paribas

SLM

3,000

12/20/08

3.20

%

(15,543

)

Citibank N.A.

Commercial Mortgage-Backed Index

10,000

12/13/49

0.08

%

(154,856

)

Home Equity Index

5,000

8/25/37

0.09

%

169,950

Majapahit Holding

3,000

12/20/17

2.65

%

(133,299

)

Republic of Indonesia

3,000

12/20/17

2.14

%

(77,305

)

Credit Suisse First Boston

Home Equity Index

4,000

7/25/45

0.54

%

80,960

Home Equity Index

3,000

7/25/45

0.18

%

(7,860

)

TNK

1,500

12/20/17

3.15

%

(78,366

)

Deutsche Bank

Dow Jones CDX

10,000

12/20/12

0.56

%

(29,608

)

Home Equity Index

300

7/25/45

0.54

%

—

Home Equity Index

300

5/25/46

0.17

%

—

Home Equity Index

300

8/25/37

0.15

%

—

Goldman Sachs

LCDX

10,000

12/20/12

2.25

%

(365,907

)

JPMorgan Chase

Cemex SAB de C.V.

2,000

12/20/17

1.64

%

(158,705

)

Lehman Brothers

Dow Jones CDX

2,000

12/20/12

1.01

%

(34,403

)

Dow Jones CDX

6,500

12/20/12

1.02

%

(109,164

)

Dow Jones CDX

500

12/20/12

3.05

%

(39,022

)

Dow Jones CDX

1,000

12/20/12

3.08

%

(76,724

)

Merrill Lynch & Co.

Dow Jones CDX

10,000

12/20/12

1.443

%

(14,455

)

Morgan Stanley

Gazprom Capital

4,000

12/20/08

1.38

%

2,925

Home Equity Index

10,000

8/25/37

0.09

%

(335,088

)

$

(1,567,737

)

U.S.$ Value

U.S.$ Value

Unrealized

Origination Date

January 31, 2008

Appreciation

Sold:

€ 2,000,000 settling 2/26/08

$2,968,560

$2,959,155

$

9,405

Counterparty

Rate

Trade Date

Maturity Date

Principal & Interest

Par

Deutsche Bank

4.35%

1/10/08

2/12/08

$

13,034,558

$  13,000,000

Goldman Sachs

4.23%

1/14/08

2/12/08

40,084,600

40,000,000

Lehman Brothers

4.30%

1/14/08

2/12/08

32,068,800

32,000,000

$85,000,000

Counterparty

Description

Rate

Maturity Date

Par

Value

Deutsche Bank

Freddie Mac

6.00%

10/1/37

$

13,231,031

$13,569,545

Goldman Sachs

Fannie Mae

6.00%

11/1/37