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 811-10555
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PIMCO Corporate Income Fund
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
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(Address of principal executive offices) (Zip code)
Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, New York 10105
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3371
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Date of fiscal year end: October 31, 2005
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Date of reporting period: April 30, 2005
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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 SHAREHOLDERS
PIMCO CORPORATE INCOME FUND
SEMI-ANNUAL REPORT
APRIL 30, 2005
[PCN LISTED NYSE THE NEW YORK STOCK EXCHANGE LOGO]
CONTENTS
Letter to Shareholders 1
Performance Summary & Statistics 2
Schedule of Investments 3-11
Statement of Assets and Liabilities 12
Statement of Operations 13
Statement of Changes in Net Assets 14
Notes to Financial Statements 15-23
Financial Highlights 24
[ALLIANZ GLOBAL INVESTORS LOGO]
PIMCO CORPORATE INCOME FUND LETTER TO SHAREHOLDERS
June 20, 2005
Dear Shareholder:
We are pleased to provide you with the semi-annual report of the PIMCO Corporate
Income Fund (the "Fund") for the six months ended April 30, 2005.
Please refer to the following page for specific Fund information. If you have
any questions regarding the information provided, we encourage you to contact
your financial advisor or call the Fund's transfer agent at 1-800-331-1710. Also
note that a wide range of information and resources can be accessed through our
Web site, www.allianzinvestors.com.
Together with Allianz Global Investors Fund Management LLC (formerly, PA Fund
Management LLC), the Fund's investment manager and Pacific Investment Management
Co. LLC, the Fund's sub-adviser, we thank you for investing with us. We remain
dedicated to serving your investment needs.
Sincerely,
/s/ Robert E. Connor /s/ Brian S. Shlissel
Robert E. Connor Brian S. Shlissel
CHAIRMAN PRESIDENT & CHIEF EXECUTIVE OFFICER
1
PIMCO CORPORATE INCOME FUND PERFORMANCE SUMMARY & STATISTICS
April 30, 2005 (unaudited)
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
PCN U.S. dollar-denominated December 21, 2001
corporate debt obligations of
OBJECTIVE: varying maturities and other TOTAL NET ASSETS(1):
To provide high current income. corporate income-producing $829.9 million
Capital preservation and securities.
appreciation are PORTFOLIO MANAGER:
secondary Mark Kiesel
objectives.
TOTAL RETURN(2): MARKET PRICE NET ASSET VALUE ("NAV")
Six months (1.27)% 0.61%
1 year 15.35% 9.73%
3 years 10.47% 13.52%
Commencement of Operations (12/21/01) to 4/30/05 9.54% 12.03%
COMMON SHARE PRICE PERFORMANCE:
[CHART]
Commencement of Operations (12/21/01) to 4/30/05
NET ASSET VALUE MARKET PRICE
12/20/2001 $ 14.32 $ 15.05
12/21/2001 $ 14.30 $ 15.03
12/28/2001 $ 14.29 $ 15.05
1/4/2002 $ 14.33 $ 15.08
1/11/2002 $ 14.50 $ 15.05
1/18/2002 $ 14.48 $ 15.15
1/25/2002 $ 14.40 $ 15.00
2/1/2002 $ 14.40 $ 15.04
2/8/2002 $ 14.33 $ 15.03
2/15/2002 $ 14.21 $ 14.99
2/22/2002 $ 14.06 $ 14.88
3/1/2002 $ 14.05 $ 14.85
3/8/2002 $ 13.96 $ 15.00
3/15/2002 $ 13.81 $ 14.79
3/22/2002 $ 13.86 $ 14.44
3/29/2002 $ 13.89 $ 14.29
4/5/2002 $ 14.09 $ 14.72
4/12/2002 $ 14.03 $ 14.65
4/19/2002 $ 14.11 $ 14.65
4/26/2002 $ 14.13 $ 14.54
4/30/2002 $ 14.02 $ 14.77
5/3/2002 $ 14.01 $ 14.83
5/10/2002 $ 13.85 $ 14.92
5/17/2002 $ 13.71 $ 14.74
5/24/2002 $ 13.83 $ 14.77
5/31/2002 $ 13.95 $ 14.84
6/7/2002 $ 13.94 $ 14.88
6/14/2002 $ 13.85 $ 14.94
6/21/2002 $ 13.83 $ 14.63
6/28/2002 $ 13.20 $ 14.76
7/5/2002 $ 12.98 $ 14.54
7/12/2002 $ 13.05 $ 14.52
7/19/2002 $ 12.98 $ 14.39
7/26/2002 $ 12.10 $ 13.65
8/2/2002 $ 12.35 $ 13.75
8/9/2002 $ 12.23 $ 13.44
8/16/2002 $ 12.01 $ 13.79
8/23/2002 $ 12.54 $ 13.38
8/30/2002 $ 12.69 $ 13.55
9/6/2002 $ 12.72 $ 14.29
9/13/2002 $ 12.82 $ 14.50
9/20/2002 $ 12.75 $ 14.32
9/27/2002 $ 12.55 $ 14.05
9/30/2002 $ 12.54 $ 13.95
10/4/2002 $ 12.35 $ 14.23
10/11/2002 $ 11.84 $ 13.38
10/18/2002 $ 11.71 $ 12.73
10/25/2002 $ 11.86 $ 12.69
11/1/2002 $ 12.23 $ 13.30
11/8/2002 $ 12.71 $ 13.50
11/15/2002 $ 12.73 $ 13.85
11/22/2002 $ 13.02 $ 13.98
11/29/2002 $ 13.00 $ 13.99
12/6/2002 $ 13.09 $ 13.55
12/13/2002 $ 13.10 $ 13.62
12/20/2002 $ 13.40 $ 13.59
12/27/2002 $ 13.30 $ 13.70
1/3/2003 $ 13.29 $ 13.94
1/10/2003 $ 13.63 $ 14.44
1/17/2003 $ 13.58 $ 14.41
1/24/2003 $ 13.68 $ 14.88
1/31/2003 $ 13.64 $ 14.74
2/7/2003 $ 13.64 $ 14.64
2/14/2003 $ 13.40 $ 14.69
2/21/2003 $ 13.60 $ 14.60
2/28/2003 $ 13.79 $ 14.65
3/7/2003 $ 13.93 $ 14.73
3/14/2003 $ 13.82 $ 14.72
3/21/2003 $ 13.59 $ 14.37
3/28/2003 $ 13.91 $ 14.60
4/4/2003 $ 14.17 $ 14.81
4/11/2003 $ 14.12 $ 14.93
4/18/2003 $ 14.35 $ 14.88
4/25/2003 $ 14.65 $ 14.95
5/2/2003 $ 14.90 $ 15.14
5/9/2003 $ 15.06 $ 15.15
5/16/2003 $ 15.03 $ 15.14
5/23/2003 $ 15.14 $ 15.14
5/30/2003 $ 15.21 $ 15.30
6/6/2003 $ 15.39 $ 15.62
6/13/2003 $ 15.58 $ 15.75
6/20/2003 $ 15.48 $ 15.56
6/27/2003 $ 15.36 $ 15.71
7/7/2003 $ 15.32 $ 15.83
7/11/2003 $ 15.34 $ 15.45
7/18/2003 $ 15.18 $ 14.83
7/25/2003 $ 15.05 $ 15.12
8/1/2003 $ 14.51 $ 14.02
8/8/2003 $ 14.64 $ 14.55
8/15/2003 $ 14.30 $ 13.94
8/22/2003 $ 14.61 $ 14.03
8/29/2003 $ 14.71 $ 14.11
9/5/2003 $ 14.87 $ 14.44
9/12/2003 $ 14.92 $ 14.67
9/19/2003 $ 15.12 $ 14.84
9/26/2003 $ 15.23 $ 14.86
10/3/2003 $ 15.20 $ 15.16
10/10/2003 $ 15.19 $ 15.00
10/17/2003 $ 15.24 $ 15.05
10/24/2003 $ 15.36 $ 15.22
10/31/2003 $ 15.38 $ 15.43
11/7/2003 $ 15.32 $ 15.44
11/14/2003 $ 15.46 $ 15.35
11/21/2003 $ 15.51 $ 15.58
11/28/2003 $ 15.43 $ 15.65
12/5/2003 $ 15.68 $ 15.64
12/12/2003 $ 15.61 $ 15.78
12/19/2003 $ 15.75 $ 15.80
12/26/2003 $ 15.32 $ 15.60
1/2/2004 $ 15.27 $ 15.86
1/9/2004 $ 15.71 $ 16.05
1/16/2004 $ 15.65 $ 16.09
1/23/2004 $ 15.66 $ 16.10
1/30/2004 $ 15.47 $ 15.81
2/6/2004 $ 15.42 $ 15.73
2/13/2004 $ 15.46 $ 15.70
2/20/2004 $ 15.38 $ 15.46
2/27/2004 $ 15.47 $ 15.56
3/5/2004 $ 15.62 $ 15.54
3/12/2004 $ 15.52 $ 15.59
3/19/2004 $ 15.51 $ 15.64
3/26/2004 $ 15.47 $ 15.60
4/2/2004 $ 15.31 $ 15.45
4/9/2004 $ 15.33 $ 14.80
4/16/2004 $ 15.10 $ 14.13
4/23/2004 $ 15.03 $ 14.07
4/30/2004 $ 14.91 $ 13.81
5/7/2004 $ 14.56 $ 13.19
5/14/2004 $ 14.35 $ 13.31
5/21/2004 $ 14.41 $ 13.56
5/28/2004 $ 14.56 $ 14.15
6/4/2004 $ 14.48 $ 14.07
6/11/2004 $ 14.41 $ 13.70
6/18/2004 $ 14.50 $ 13.82
6/25/2004 $ 14.55 $ 13.71
7/2/2004 $ 14.75 $ 14.31
7/9/2004 $ 14.79 $ 14.43
7/16/2004 $ 14.88 $ 14.43
7/23/2004 $ 14.82 $ 14.28
7/30/2004 $ 14.84 $ 14.49
8/6/2004 $ 15.14 $ 14.69
8/13/2004 $ 15.07 $ 14.44
8/20/2004 $ 15.11 $ 14.68
8/27/2004 $ 15.17 $ 14.85
9/3/2004 $ 15.16 $ 15.08
9/10/2004 $ 15.23 $ 15.03
9/17/2004 $ 15.36 $ 15.37
9/24/2004 $ 15.44 $ 15.48
10/1/2004 $ 15.34 $ 15.14
10/8/2004 $ 15.48 $ 15.20
10/15/2004 $ 15.47 $ 15.11
10/22/2004 $ 15.55 $ 15.38
10/29/2004 $ 15.58 $ 15.46
11/5/2004 $ 15.55 $ 15.26
11/12/2004 $ 15.46 $ 15.24
11/19/2004 $ 15.50 $ 15.15
11/26/2004 $ 15.51 $ 15.40
12/3/2004 $ 15.52 $ 15.10
12/10/2004 $ 15.65 $ 15.36
12/17/2004 $ 15.56 $ 15.38
12/23/2004 $ 15.60 $ 15.39
12/31/2004 $ 15.34 $ 15.30
1/7/2005 $ 15.26 $ 15.38
1/14/2005 $ 15.18 $ 15.16
1/21/2005 $ 15.22 $ 15.29
1/28/2005 $ 15.30 $ 15.52
2/4/2005 $ 15.45 $ 15.69
2/11/2005 $ 15.36 $ 15.64
2/18/2005 $ 15.29 $ 15.37
2/25/2005 $ 15.29 $ 15.43
3/4/2005 $ 15.30 $ 15.59
3/11/2005 $ 14.99 $ 15.04
3/18/2005 $ 14.92 $ 14.57
3/24/2005 $ 14.69 $ 14.00
4/1/2005 $ 14.78 $ 14.28
4/8/2005 $ 14.81 $ 14.28
4/15/2005 $ 14.72 $ 14.11
4/22/2005 $ 14.80 $ 14.25
4/30/2005 $ 14.77 $ 14.37
MARKET PRICE/NAV:
Market Price $ 14.37
NAV $ 14.77
Discount to NAV 2.71%
Market Price Yield(3) 8.87%
[CHART]
MOODY'S RATINGS AS A % OF TOTAL INVESTMENTS
Aaa 3.8%
Aa 0.6%
A 7.7%
Baa 34.7%
Ba 25.9%
B 9.8%
Caa 1.9%
P1 6.0%
NR 9.6%
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
calculated by subtracting the value of an investment in the Fund at the
beginning of each specified period from the value at the end of the period and
dividing the remainder by the value of the investment at the beginning of the
period and expressing the result as a percentage. The calculation assumes that
all of the Fund's income dividends and capital gain distributions have been
reinvested at prices obtained under the dividend reinvestment plan. Total return
does not reflect broker commissions or sales charges. Total return for a period
of less than one year is not annualized. Total return for a period greater than
one year represents the average annual total return.
An investment in the Fund involves risk, including the loss of principal. Total
return, market price, market 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 April 30, 2005.
2
PIMCO CORPORATE INCOME FUND SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES - 72.8%
AIRLINES - 5.6%
$ 2,994 American Airlines, Inc., pass thru certificates,
6.98%, 4/1/11, Ser. 01-2 Baa2/BBB+ $ 3,058,396
Continental Airlines, Inc., pass thru certificates,
10,000 6.50%, 6/15/11, Ser. 01-1 Baa3/BBB+ 9,571,730
3,035 7.06%, 9/15/09, Ser. 99-2 Baa3/A- 3,089,357
2,500 7.49%, 10/2/10, Ser.00-2 Baa3/A 2,459,477
5,000 Delta Air Lines, Inc., 7.57%, 5/18/12 Ba1/BB 4,616,195
4,197 Northwest Airlines Corp., pass thru certificates,
7.58%, 3/1/19, Ser. 992A Baa2/A- 4,175,211
United Airlines, Inc., pass thru certificates,
3,389 2.02%, 3/2/49, Ser. 97A NR/NR 3,128,062
6,291 6.20%, 9/1/08, Ser. 01-1 NR/NR 5,817,519
4,887 7.19%, 4/1/11, Ser. 00-2 NR/NR 4,496,771
5,597 7.73%, 7/1/10, Ser. 00-1 NR/NR 5,084,073
700 10.36%, 11/13/12, Ser. 91C (a) (b) NR/NR 337,750
---------------
45,834,541
===============
AUTOMOTIVE - 1.6%
2,000 Auburn Hills Trust, 12.375%, 5/1/20 A3/BBB 2,981,606
5,000 Ford Motor Co., 9.98%, 2/15/47 Baa3/BB+ 4,668,435
5,000 General Motors Corp., 7.20%, 1/15/11 Baa3/BB 4,226,735
1,000 Hertz Corp., 7.625%, 6/1/12 Baa3/BBB- 1,006,552
---------------
12,883,328
===============
BANKING - 1.7%
5,000 Colonial Bank, 9.375%, 6/1/11 Ba1/BBB- 5,918,970
1,700 Fifth Third Capital Trust, 8.14%, 3/15/27, Ser A Aa3/NR 1,868,895
1,000 HSBC Capital Funding, 10.18%, 12/30/33,VRN A1/A- 1,578,574
1,000 Riggs Capital Trust, 8.625%, 12/31/26, Ser. A A3/BBB+ 1,115,000
1,750 Riggs National Corp., 9.65%, 6/15/09 A3/BBB+ 2,012,500
1,000 Royal Bank of Scotland Group, plc, 7.65%, 9/30/31, VRN A1/A 1,244,271
---------------
13,738,210
===============
COMPUTER SERVICES - 0.3%
Electronic Data Systems Corp.,
1,000 6.50%, 8/1/13, Ser. B Ba1/BBB- 1,022,373
1,500 7.125%, 10/15/09 Ba1/BBB- 1,611,987
---------------
2,634,360
===============
CONTAINERS - 0.4%
3,000 Ball Corp., 6.875%, 12/15/12 Ba2/BB 3,097,500
---------------
DIVERSIFIED MANUFACTURING - 2.2%
500 Dresser, Inc., 9.375%, 4/15/11 B2/B 525,000
4,000 Hutchison Whampoa International Ltd.,
6.25%-6.50%, 2/13/13-1/24/14 (c) A3/A- 4,238,202
1,030 Raychem Corp., 7.20%, 10/15/08 Baa3/BBB 1,146,732
10,000 Tyco International Group SA., 7.00%, 6/15/28 Baa3/BBB 11,765,440
---------------
17,675,374
===============
ENERGY - 1.0%
1,000 Edison Mission Energy, 7.73%, 6/15/09 B1/B 1,030,000
2,000 First Energy Corp., 7.375%, 11/15/31, Ser. C Baa3/BB+ 2,364,566
3
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
ENERGY (continued)
$ 899 GG1C Funding Corp., 5.13%, 1/15/14 (c) Baa3/BBB $ 890,379
1,000 Ohio Edison Co., 5.65%, 6/15/09 (c) Baa2/BB+ 1,039,101
2,719 Sithe Independence Funding Corp.,
9.00%, 12/30/13, Ser. A Ba2/B 3,012,791
---------------
8,336,837
===============
FINANCING - 9.3%
8,500 Beaver Valley Funding Corp., 9.00%, 6/1/17 Baa3/BB+ 10,194,169
1,000 BlueWater Finance Ltd., 10.25%, 2/15/12 B1/B 1,065,000
Cedar Brakes II LLC.,
523 8.50%, 2/15/14, Ser. B (c) Baa2/BBB- 616,857
4,663 9.875%, 9/1/13 (c) Baa2/BBB- 5,652,848
10,000 CIT Group Inc., 3.28%, 6/20/05 (d) A2/A 10,027,650
6,500 Ford Motor Credit Co., 5.80%-7.25%, 1/25/07-10/1/13 A3/BB+ 6,390,910
1,180 General Electric Capital Corp., 8.30%, 9/20/09 Aaa/AAA 1,357,750
General Motors Accecptance Corp.,
12,000 3.56%-3.92%, 4/18/05-5/18/05 (d) Baa2/BB 11,562,464
5,000 6.875%, 9/15/11 Baa2/BB 4,386,005
Household Finance Corp.,
500 3.65%, 7/12/05 (d) A1/A 503,823
5,265 7.20%-7.65%, 7/15/06-5/15/07 A1/A 5,498,215
1,300 Mizuho JGB Investment LLC, 9.87%, 6/30/08, VRN (c) Baa1/BBB 1,487,239
300 Mizuho Preferred Capital Co.,LLC, 8.79%, 6/30/08,
VRN (c) Baa1/BBB 334,774
2,000 Preferred Term Securities XIII, 3.58%,
6/24/05 (b) (c) (d) (e) Aaa/AAA 1,977,902
5,000 Sets Trust No. 2002-3, 8.85%,
4/2/07 (b) (c) (e) (f) NR/NR 5,239,752
10,000 TIERS Principal Protected Trust, 8.41%,
3/22/07 (b) (c) (e) (f) NR/NR 9,483,770
---------------
75,779,128
===============
FOOD & BEVERAGE - 1.8%
2,000 Anheuser Busch Cos., Inc., 5.00%, 3/1/19 A1/A+ 1,990,978
5,000 Delhaize America, Inc., 8.125%, 4/15/11 Ba1/BB+ 5,537,055
3,000 Ingles Markets, Inc., 8.875%, 12/1/11 B3/B 3,007,500
4,139 Kroger Co., 8.15%, 7/15/06, Baa2/BBB 4,325,888
---------------
14,861,421
===============
FOOD SERVICES - 0.9%
5,897 Tricon Global Restaurants, Inc., 8.875%, 4/15/11 Baa3/BBB- 7,129,614
---------------
HEALTHCARE & HOSPITIAL - 2.5%
6,470 Columbia/HCA Healthcare Corp.,
8.70%-9.00%, 2/10/10-12/15/14 Ba2/BB+ 7,541,537
7,000 HEALTHSOUTH Corp.,
7.00%-8.375%, 6/15/08-10/1/11 NR/NR 6,935,000
1,006 Manor Care, Inc., 8.00%, 3/1/08 Baa3/BBB 1,098,741
5,000 Tenet Healthcare Corp., 6.375%, 12/1/11 B3/B- 4,675,000
---------------
20,250,278
===============
HOTELS & GAMING - 4.3%
3,000 Caesars Entertainment, Inc.,
8.125%-8.875%, 9/15/08-5/15/11 Ba2/BB- 3,353,750
1,500 Host Marriot LP, 9.50%, 1/15/07, Ser. I, REIT Ba3/B+ 1,605,000
5,000 ITT Corp., 7.375%, 11/15/15 Ba1/BB+ 5,387,500
Mandalay Resort Group,
1,000 6.50%, 7/31/09 Ba2/BB 1,015,000
500 9.375%, 2/15/10 Ba3/B 550,000
9,000 MGM Mirage, Inc., 8.50%, 9/15/10 Ba2/BB 9,855,000
4
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
HOTELS & GAMING (continued)
$ 3,190 Mirage Resorts, Inc. 6.75%, 2/1/08 Ba2/BB $ 3,285,700
3,000 Park Place Entertainment Corp., 8.50%, 11/15/06 Ba1/BB+ 3,180,000
3,880 Starwood Hotels & Resorts,
7.375%-7.875%, 5/1/07-5/1/12 Ba1/BB+ 4,096,450
2,610 Times Square Hotel Trust, 8.53%, 8/1/26 (b) (c) (e) Baa3/BB+ 3,151,049
---------------
35,479,449
===============
INSURANCE - 0.5%
2,300 Dai-Ichi Mutual Life Co., 5.73%, 3/17/14 (c) NR/BBB+ 2,362,880
123 Prudential Financial Inc., 4.10%, 11/15/06 A3/A- 123,803
1,500 Residential Reinsurance Ltd., 7.86%,
6/1/05 (b) (c) (d) (e) Ba2/BB+ 1,460,232
---------------
3,946,915
===============
METALS & MINING - 0.4%
3,000 Noranda, Inc., 7.25%, 7/15/12 Baa3/BBB- 3,306,738
---------------
MULTI-MEDIA - 6.6%
8,000 AOL Time Warner Inc., 7.70%, 5/1/32 Baa1/BBB+ 9,889,592
British Sky Broadcasting Group,
5,105 6.875%-7.30%, 10/15/06-2/23/09 Baa2/BBB- 5,434,385
1,000 CF Cable TV, Inc., 9.125%, 7/15/07 Ba3/BB- 1,015,316
Comcast Corp.,
500 6.50%, 1/15/15 Baa2/BBB 551,452
2,250 10.625%, 7/15/12 Ba1/BBB- 2,915,255
925 Continental Cablevision, Inc., 9.00%, 9/1/08 Baa2/BBB 1,048,422
CSC Holding, Inc.,
5,000 7.25%-8.125%, 12/15/07-7/15/08 B1/BB- 5,115,000
6,625 7.625%-8.125%, 7/15/09-4/11/11, Ser. B B1/BB- 6,813,750
6,000 DirecTV Holdings Corp., 8.375%, 3/15/13 Ba2/BB- 6,525,000
1,950 Echostar DBS Corp., 9.125%, 1/15/09 Ba3/BB- 2,084,063
9,060 News America, Inc., 6.75%-7.43%, 10/1/26-1/9/38 Baa3/BBB- 10,505,664
1,750 Rogers Cablesystems Ltd., 7.25%,
12/15/11, Ser. B (Canadian) Ba3/BB+ 1,415,395
500 Time Warner, Inc., 9.125%, 1/15/13 Baa1/BBB+ 545,283
---------------
53,858,577
===============
OIL & GAS - 9.1%
1,000 AmeriGas Partners, L.P., 8.875%, 5/20/11, Ser. B NR/BB- 1,090,000
3,000 Columbia Energy Group Inc., 7.32%, 11/28/10 Baa2/BBB 3,058,101
Dynergy-Roseton Danskamme,
1,750 7.27%, 11/8/10, Ser. A Caa2/B 1,666,875
3,000 7.67%, 11/8/16, Ser. B Caa2/B 2,670,000
3,000 Forest Oil Corp., 8.00%, 6/15/08-12/15/11 Ba3/BB- 3,245,000
4,300 Gaz Capital SA., 8.625%, 4/28/34 Ba2/BB- 4,945,000
3,750 Hanover Equipment Trust, 8.50%, 9/1/08, Ser. A B2/B+ 3,918,750
4,000 Noram Energy Corp., 6.50%, 2/1/08 Ba1/BBB 4,205,412
Pemex Project Funding Master Trust,
5,750 8.00%-8.625%, 11/15/11-2/1/22 Baa1/BBB 6,476,425
3,500 9.50%, 9/15/27, (c) Baa1/BBB 4,368,000
934 Perforadora Centrale SA, 4.92%, 12/15/18 NR/NR 946,898
4,915 Pioneer Natural Resource Co.,
5.875%-6.50%, 1/15/08-7/15/16 Baa3/BBB- 4,924,573
1,300 Pogo Producing Co., 8.25%, 4/15/11, Ser. B Ba3/BB 1,387,750
1,200 Reliant Energy Resources Corp., 7.75%, 2/15/11 Ba1/BBB 1,362,412
300 SESI, LLC, 8.875%, 5/15/11 B1/BB- 322,500
250 Transcontinental Gas Pipe Corp., 8.875%, 7/15/12 Ser. B Ba2/B+ 292,500
2,000 USX Corp., 9.375%, 2/15/12 Baa1/BBB+ 2,520,196
5,000 Valero Energy Corp., 6.875%, 4/15/12 Baa3/BBB- 5,504,525
5
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
OIL & GAS (continued)
$ 5,000 Weatherford International, Inc.,
6.625%, 11/15/11, Ser. B Baa1/BBB+ $ 5,512,830
15,000 Williams Cos., Inc., 7.125%-8.75%, 9/1/11-3/15/32 B1/B+ 15,982,500
---------------
74,400,247
===============
PAPER/PAPER PRODUCTS - 1.3%
2,500 Boise Cascade Corp., 7.32%, 6/15/09 Ba1/BB 2,768,750
6,662 Donohue Forest Products, 7.625%, 5/15/07 Ba3/BB- 6,662,000
500 Georgia-Pacific Corp., 8.125%, 5/15/11 Ba3/BB+ 549,375
850 Norske Skogindustrier ASA, 6.125%, 10/15/15 (c) Baa3/BBB- 879,600
---------------
10,859,725
===============
PHARMECEUTICALS - 0.1%
1,000 Wyeth, 6.50%, 2/1/34 Baa1/A 1,127,340
---------------
TELECOMMUNICATION - 12.6%
14,867 AT&T Corp., 9.05%-9.75%, 11/15/11-11/15/31 Ba1/BB+ 18,338,174
5,000 BellSouth Capital Funding Corp., 7.875%, 2/15/30 A2/A 6,343,410
5,000 Citizens Communications Co., 9.25%, 5/15/11 Ba3/BB+ 5,437,500
3,000 Citizens Utilities Co., 7.60%, 6/1/06 Ba3/BB+ 3,105,000
10,000 Deutsche Telekom International, 8.50%, 6/15/10 Baa1/A- 11,609,760
10,000 France Telecom, 8.00%, 3/1/11 Baa1/A- 11,538,100
1,353 MCI Communications Corp., 6.91%-8.735%, 5/1/07-5/1/14 B2/B+ 1,412,310
5,000 Nextel Communications Inc.,
6.875%-7.375%, 10/31/13-8/1/15 Ba3/BB 5,305,000
1,250 PanAmSat Corp., 6.375%, 1/15/08 Ba3/BB+ 1,259,375
750 PCCW Capital II, Ltd., 6.00%, 7/15/13 (c) Baa2/BBB 787,370
12,860 Quest Capital Funding, Inc., 7.25%, 2/15/11 Caa2/B 11,574,000
9,000 Quest Communications International, Inc.,.
7.75%, 2/15/11 (c) B3/B 8,505,000
10,900 Sprint Capital Corp. (FON Group),
6.125%-6.875%, 11/15/08-11/15/28 Baa3/BBB- 11,731,286
5,469 Verizon Global Funding Corp., 7.25%, 12/1/10 A2/A+ 6,148,310
---------------
103,094,595
===============
UTILITIES - 9.0%
2,000 CMS Energy Corp., 8.90%, 7/15/08 B1/B+ 2,140,000
Consumers Energy, Inc.,
322 6.25%, 9/15/06 (c) Baa3/NR 332,536
500 6.375%, 2/1/08 (c) Baa3/BBB- 524,477
4,718 East Coast Power LLC,
6.74-7.07%, 3/31/08-3/13/12, Ser B Baa3/BBB- 4,930,149
2,000 Florida Gas Transmission Co., 7.00%, 7/17/12 (c) Baa2/BBB+ 2,216,784
4,730 FPL Energy Wind Funding, 6.88%, 6/27/17 (c) Ba2/BB- 4,842,338
2,500 Georgia Power Co., 2.99%, 5/17/05, Ser. U, (d) A2/A 2,503,870
4,800 Homer City Funding LLC. 8.14%, 10/1/19 Ba2/BB 5,148,000
7,650 IPALCO Enterprises, Inc.,
8.375%-8.625%, 11/14/08-11/14/11 Ba1/BB- 8,619,500
4,000 Midwest Generation LLC, 8.56%, 1/2/16, Ser B B1/B+ 4,380,000
2,000 Northern State Power Co., 8.00%, 8/28/12, Ser B A2/A- 2,411,856
2,000 Potomac Electric Power Co., 6.25%, 10/15/07 A3/A- 2,090,896
2,500 PPL Capital Funding Trust I, 7.29%, 5/18/06 Ba1/BB+ 2,573,667
10,790 PSEG Energy Holdings, Inc.,
8.50%-8.625%, 2/15/08-6/15/11 Ba3/BB- 11,503,450
5,000 PSEG Power LLC, 8.625%, 4/15/31 Baa1/BBB 6,820,025
500 Public Service Electric & Gas Co., 4.00%, 11/1/08 A3/A- 493,828
5,315 South Point Energy Center LLC, 8.40%, 5/30/12 (c) B3/B- 4,863,371
1,144 Southern California Edison Co., 8.00%, 2/15/07 A3/BBB+ 1,218,694
2,000 Texas Utilities Electric Co., 7.17%, 8/1/07 Baa3/BBB- 2,108,300
3,500 Tucson Electric Power Co., 7.50%, 8/1/08, Ser. B Baa3/BBB- 3,694,180
---------------
73,415,921
===============
6
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
WASTE DISPOSAL - 1.6%
$ 2,025 Allied Waste North America, Inc.,
8.50%, 12/1/08, Ser. B B2/NR $ 2,073,094
10,000 Waste Management, Inc., 7.10%-7.65%, 8/1/10-3/1/26 Baa3/BBB 11,353,890
---------------
13,426,984
===============
Total Corporate Bonds & Notes (cost-$577,615,914) 595,137,082
===============
SOVEREIGN DEBT OBLIGATIONS - 6.0%
BRAZIL - 1.6%
11,935 Federal Republic of Brazil,
8.00%-11.00%, 4/15/14-8/17/40 B1/BB- 13,234,531
---------------
GUATEMALA - 0.2%
1,500 Republic of Guatemala,
9.25%, 8/1/13 (c) Ba2/BB- 1,732,500
---------------
PANAMA - 1.1%
7,470 Republic of Panama,
9.375%-9.625%, 2/8/11-7/23/12 Ba1/BB 8,788,425
---------------
PERU - 1.4%
9,590 Republic of Peru,
9.125%-9.875%, 2/21/12-2/6/15 Ba3/BB 11,165,062
---------------
RUSSIA - 1.1%
8,662 Russian Federation,
5.00%-8.25%, 3/31/10-3/31/30 Baa3/BB+ 9,259,830
---------------
SOUTH AFRICA - 0.4%
2,720 Republic of South Africa,
7.375%-9.125%, 5/19/09-4/25/12 Baa1/BBB 3,144,500
---------------
UKRAINE REPUBLIC - 0.2%
1,000 Republic of Ukraine,
7.65%-11.00%, 3/15/07-6/11/13 B1/B+ 1,478,055
---------------
Total Sovereign Debt Obligations (cost-$47,004,230) 48,802,903
===============
MORTGAGE-BACKED SECURITIES - 2.3%
3,500 Chase Commercial Mortgage Securities Corp.,
6.89%, 12/15/19 NR/BB+ 3,502,425
5,575 GSMPS Mortgage Loan Trust, 7.50%, 6/19/27 (c) NR/NR 5,885,007
2,343 Lehman Brothers Floating Rate Commercial Mortgage Trust,
4.62%, 5/17/05 (c) (d) NR/AAA 2,345,985
Merrill Lynch Mortgage Investors, Inc.,
2,805 6.94%, 5/1/05 (d) Baa2/A- 3,177,663
2,000 7.23%, 5/1/05 (d) Baa1/BBB+ 2,180,674
2,117 Morgan Stanley Capital, Inc., 3.09%, 5/15/05 (c) (d) Aaa/AAA 2,121,044
---------------
Total Mortgage-Backed Securities (cost-$18,960,103) 19,212,798
===============
7
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS (g) - 1.4%
NEW JERSEY - 1.4%
$ 10,980 Tobacco Settlement Funding Corp.,
9.63%-10.88%, 6/1/24-6/1/32 (cost-$10,193,910) NR/AA $ 11,403,578
---------------
SENIOR LOANS (b) (h) (i) - 0.9%
CONTAINERS - 0.3%
Stone Container Corp.,
131 2.812%, 11/1/10, Term TL 133,219
1,044 4.6875%-4.938%, 11/1/10-11/1/11, Term B 1,061,999
322 4.875%-4.9375%, 11/1/10-11/1/11, Term C 326,769
788 Owens-Illinois Group, Inc., 5.73%, 4/1/08, Term B 804,394
---------------
2,326,381
===============
ENERGY - 0.1%
1,428 AES Corp., 5.25%-5.57%, 4/30/08-8/10/11, Term B 1,443,929
---------------
MULTI-MEDIA - 0.3%
2,500 Adelphia Century Cable, 7.25%, 6/30/09, Term B 2,479,018
---------------
PRINTING/PUBLISHING - 0.2%
1,505 Dex Media East LLC,4.52%-505, 5/8/09, Term B 1,529,278
---------------
Total Senior Loans (cost-$7,704,311) 7,778,606
===============
PREFERRED STOCK - 0.6%
SHARES
--------
FINANCING - 0.6%
Fresenius Medical Care Capital Trust II AG,
44 7.875%, 2/1/08-6/15/11 (cost-$4,680,021) Ba2/BB- 4,612,000
---------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.3%
PRINCIPAL
AMOUNT
(000)
---------
$ 2,399 Freddie Mac, 7.50%, 10/25/43, CMO (cost-$2,609,710) Aaa/AAA 2,587,691
---------------
ASSET-BACKED SECURITIES (d) - 0.1%
100 Ameriquest Mortgage Securities Inc., 3.43%, 5/25/05 Aaa/AAA 100,742
832 CS First Boston Mortgage Securities Corp.,
3.35%, 5/25/05 (c) Aaa/AAA 832,918
---------------
Total Asset-Backed Securities (cost-$932,855) 933,660
===============
SHORT-TERM INVESTMENTS - 15.8%
CORPORATE NOTES - 6.7%
FINANCING - 1.2%
6,000 General Motors Acceptance Corp., 4.39475%, 7/20/05 (d) Baa1/BBB- 5,987,838
654 Midland Funding II, 11.75%, 7/23/05, Ser. A Ba3/BB- 666,701
500 NiSource Financing Corp., 7.625%, 11/15/05 Baa3/BBB 510,277
2,750 STEERS-2002-26 Cox, 6.10%, 5/19/05 (b) (c) (d) (e) NR/NR 2,740,257
---------------
9,905,073
===============
8
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
FOOD SERVICES - 0.2%
$ 1,500 Heinz (H.J) Co., 6.19%, 12/1/05 (b) (c) A3/A $ 1,519,699
---------------
HOTELS & GAMING - 0.5%
1,471 Circus Circus Enterprise, 6.45%, 2/1/06 Ba2/BB+ 1,494,904
175 ITT Corp., 6.75%, 11/15/05 Ba1/BB+ 176,312
2,000 Park Place Entertainment Corp., 7.875%, 12/12/05 Ba2/BB- 2,042,500
---------------
3,713,716
===============
HEALTHCARE & HOSPITAL - 0.1%
1,000 Columbia/HCA Healthcare Corp., 6.91%, 6/15/05 Ba2/BB+ 1,003,526
---------------
MEDICAL PRODUCTS - 0.1%
1,000 Mallinckrodt Group, Inc. 6.75%, 9/15/05 Baa3/BBB 1,008,546
---------------
MULTI-MEDIA - 2.0%
6,625 Continental Cablevision, Inc., 8.875%, 9/15/05 Baa2/BBB 6,745,297
9,375 Lenfest Communications, Inc., 8.375%, 11/1/05 Baa2/BBB 9,568,809
---------------
16,314,106
===============
OIL & GAS - 1.3%
2,662 Atlantic Richfileld Co., 10.875%, 7/15/05 Aa1/AA+ 2,699,569
2,000 Oryx Energy Ltd.. 8.125%, 10/15/05 Ba3/BB+ 2,041,176
1,850 PG&E Gas Transmission Northwest Corp., 7.10%, 6/1/05 A2/A- 1,855,226
4,000 Reliant Energy Resources Corp, 8.125%, 7/15/05, Ser. B Ba1/BBB 4,037,772
---------------
10,633,743
===============
TELECOMMUNICATIONS - 0.3%
1,925 Deutsche Telekom International, 8.25%, 6/15/05 Baa1/A- 1,935,861
500 Telefonica Europe BV., 7.35%, 9/15/05 A3/A 506,925
---------------
2,442,786
===============
UTILITIES - 1.0%
2,000 Appalachian Power Co., 4.80%, 6/15/05, Ser. E Baa2/BBB 2,003,018
200 Connectiv, Inc., 5.30%, 6/1/05, Ser. B Baa2/BBB 200,243
1,000 GPU Inc., 7.70%, 12/1/05, Ser A Baa3/BB+ 1,019,957
4,500 Kansas Gas & Electric Co., 6.20%, 1/15/06 Baa3/BBB 4,564,467
500 Pacific Gas & Electric Corp., 3.82%, 7/5/05 (d) Baa1/BBB 501,232
---------------
8,288,917
===============
Total Corporate Notes (cost-$54,789,220) 54,830,112
===============
COMMERCIAL PAPER - 6.0%
BANKING - 1.9%
15,500 HBOS Treasury Services plc, 3.11%-3.10%, 7/28/05 P1/A1+ 15,380,340
---------------
FINANCE - 4.1%
13,000 CBA Finance Inc., 3.075%, 7/25/05 P1/A1+ 12,903,150
21,000 Rabobank US Finance Corp.., 3.075%, 7/26/05 P1/A1+ 20,841,660
---------------
33,744,810
===============
Total Commercial Paper (cost-$49,133,573) 49,125,150
===============
U.S. TREASURY BILLS (j) - 0.9%
7,660 2.54%-2.75%, 5/15/05-6/16/05 (cost-$7,636,068) Aaa/AAA 7,636,068
---------------
9
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE
-----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.5%
$ 3,800 Fannie Mae, 3.01%, 7/27/05 (cost-$3,772,358) Aaa/AAA $ 3,771,006
---------------
ASSET-BACKED SECURITIES (b) (c) (d) - 0.4%
3,000 Redwood Capital Ltd., 6.95%, 5/1/05 (cost-$3,000,000) Ba1/BB+ 3,001,320
---------------
REPURCHASE AGREEMENT - 1.3%
10,469 Agreement with State Street Bank & Trust Co.
dated 4/30/05, 2.40%, 5/2/05, proceeds:$10,471,094;
collateralized by Federal Home Loan Bank,
3.25% due 8/15/05, valued at $10,679,220 with
accrued interest. (cost-$10,469,000) 10,469,000
---------------
Total Short-Term Investments (cost-$128,800,219) 128,832,656
===============
PUT OPTIONS PURCHASED (k) - 0.0%
CONTRACTS
---------
773 Euro Dollar Futures, Chicago Mercantile Exchange,
strike price $95.25, expires 9/19/05 (premium paid-$7,730). 4,831
===============
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN (cost-$798,509,003) - 100.2% 819,305,805
===============
CALL OPTIONS WRITTEN (k) - (0.2)%
(7,450,000) News America Holdings, Strike price $100, expires
10/1/06 (1,014,236)
(30,000,000) Swap Option, 3 Month LIBOR, Strike rate 4.50%, expires
5/20/05 (137,640)
U.S. Treasury Notes 10 yr. Futures,
(383) strike price $112, expires 5/20/05 (131,656)
(681) strike price $113, expires 5/20/05 (85,125)
(144) strike price $114, expires 5/20/05 (6,750)
(300) strike price $104, expires 6/24/05 (51,563)
(243) strike price $111, expires 8/26/05 (383,484)
---------------
Total Call Options Written (premium received-$490,989) (1,810,454)
===============
PUT OPTIONS WRITTEN (k) - (0.0)%
(197) U.S. Treasury Bonds, strike price $108, expires
5/20/05 (3,078)
U.S. Treasury Notes 10 yr. Futures,
(1,417) strike price $107, expires 5/20/05 (22,141)
(1,125) strike price $108, expires 5/20/05 (35,156)
(300) strike price $108, expires 6/24/05 (32,812)
Swap Option, 3 Month LIBOR
(30,000,000) strike rate 4.50%, expires 5/25/05 (30)
(20,300,000) strike rate 4.90%, expires 5/20/05 (2,781)
(20,300,000) strike rate 5.25%, expires 5/20/05 (5,603)
---------------
Total Put Written (premium received-$1,218,764) (101,601)
===============
Total Options Written (premium received-$1,709,753) (1,912,055)
===============
TOTAL INVESTMENTS NET OF OPTIONS WRITTEN (cost-$796,799,250) - 100.0% $ 817,393,750
===============
10
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Security in default.
(b) Illiquid security
(c) 144A Security-security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, typically only to qualified institutional
investors.
(d) Floating Rate Security-maturity date shown is date of next reset rate change
and the interest rate disclosed reflects the rate in effect at April 30,
2005.
(e) Fair-valued security.
(f) Credit-linked trust certificate.
(g) Residual Interest/Tax Exempt Municipal Bonds-The interest rate shown bears
an inverse relationship to the interest rate on another security or the
value of an index.
(h) Private Placement. Restricted as to resale and does not have a readily
available market.
(i) 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 Offered Rate ("LIBOR")
or the prime rate offered by one or more major United States banks, or the
certificate of deposit rate. These securities are generally considered to be
restricted as the Fund is ordinarily contractually obligated to receive
approval from the Agent Bank and/or borrower prior to disposition.
(j) All or partial principal amount segregated as initial margin on futures
contracts.
(k) Non-income producing.
GLOSSARY:
CMO - Collateralized Mortgage Obligation
LIBOR - London Interbank Offered Rate
NR - Not Rated
REIT - Real Estate Investment Trust
VRN - Variable Rate Note - maturity date shown is date of the next rate
change and the interest rate disclosed reflects the rate in effect on
April 30, 2005.
11
PIMCO CORPORATE INCOME FUND STATEMENT OF ASSETS AND LIABILITIES
April 30, 2005 (unaudited)
ASSETS:
Investments, at value (cost-$798,509,003) $ 819,305,805
Cash 552,963
Unrealized appreciation on swaps 22,481,217
Interest receivable 14,112,779
Receivable for investments sold 6,166,461
Unrealized appreciation on forward foreign currency contracts 18,908
Prepaid expenses 45,490
---------------
Total Assets 862,683,623
===============
LIABILITIES:
Unrealized depreciation on swaps 23,905,037
Dividends payable to common and preferred shareholders 3,911,970
Premiums for swaps sold 2,199,318
Options written, at value (premium received-$1,709,753) 1,912,055
Variation margin payable 417,875
Investment management fee payable 375,104
Accrued expenses 91,175
---------------
Total Liabilities 32,812,534
---------------
PREFERRED SHARES ($25,000 NET ASSET AND LIQUIDATION VALUE PER SHARE APPLICABLE
TO AN AGGREGATE OF 12,000 SHARES ISSUED AND OUTSTANDING) 300,000,000
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 529,871,089
===============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock:
Par value ($0.00001 per share, applicable to 35,864,809 shares issued and
outstanding) $ 359
Paid-in-capital in excess of par 509,299,450
Dividends in excess of net investment income (2,993,101)
Accumulated net realized gain 5,097,320
Net unrealized appreciation of investments, futures contracts, options
written, swaps and foreign currency transactions 18,467,061
---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 529,871,089
---------------
NET ASSET VALUE PER COMMON SHARE $ 14.77
===============
12
PIMCO CORPORATE INCOME FUND STATEMENT OF OPERATIONS
For the six months ended April 30, 2005 (unaudited)
INVESTMENT INCOME:
Interest $ 25,970,851
Dividends 133,875
---------------
Total Investment Income 26,104,726
===============
EXPENSES:
Investment management fees 3,142,603
Auction agent fees and commissions 384,245
Custodian and accounting agent fees 122,872
Reports and notices to shareholders 72,016
Audit and tax services 64,582
Trustees' fees and expenses 23,325
Transfer agent fees 19,290
New York Stock Exchange listing fees 15,014
Legal fees 10,623
Insurance expense 8,742
Investor relations 5,671
Interest expense 4,806
Miscellaneous 8,978
---------------
Total expenses 3,882,767
---------------
Less: investment management fees waived (838,028)
custody credits earned on cash balances (3,269)
---------------
Net expenses 3,041,470
---------------
NET INVESTMENT INCOME 23,063,256
===============
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 6,514,990
Futures contracts 630,298
Options written (578,739)
Swaps (976,493)
Foreign currency transactions 536,074
Net change in unrealized appreciation/depreciation of:
Investments (20,183,318)
Futures contracts (1,631,974)
Options written 677,285
Swaps (822,743)
Foreign currency transactions 91,704
---------------
Net realized and unrealized loss on investments, futures contracts, options
written, swaps, and foreign currency transactions (15,742,916)
---------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 7,320,340
===============
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (3,230,733)
Net realized gains (471,455)
Total dividends and distributions on preferred shares (3,702,188
---------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS RESULTING FROM
INVESTMENT OPERATIONS $ 3,618,152
===============
13
PIMCO CORPORATE INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
SIX MONTHS
ENDED
APRIL 30, 2005 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2004
-------------- ----------------
INVESTMENT OPERATIONS:
Net investment income $ 23,063,256 $ 48,432,788
Net realized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 6,126,130 9,846,897
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency transactions (21,869,046) 15,093,070
-------------- ----------------
Net increase in net assets resulting from investment operations 7,320,340 73,372,755
============== ================
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (3,230,733) (3,423,698)
Net realized gains (471,455) (584,124)
-------------- ----------------
Total dividends and distributions on preferred shares (3,702,188) (4,007,822)
============== ================
Net increase in net assets applicable to common shareholders
resulting from investment operations 3,618,152 69,364,933
============== ================
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (22,820,871) (49,978,163)
Net realized gains (9,765,042) (12,044,100)
-------------- ----------------
Total dividends and distributions to common shareholders (32,585,913) (62,022,263)
============== ================
Reinvestment of dividends and distributions 2,324,112 4,717,803
-------------- ----------------
Total increase (decrease) in net assets applicable to common
shareholders (26,643,649) 12,060,473
============== ================
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 556,514,738 544,454,265
-------------- ----------------
End of period (including dividends in excess of
net investment income of $2,993,101 and $4,753, respectively) $ 529,871,089 $ 556,514,738
============== ================
COMMON SHARES ISSUED IN REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS: 152,697 303,847
-------------- ----------------
14
PIMCO CORPORATE INCOME FUND NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PIMCO Corporate Income Fund (the "Fund"), was organized as a Massachusetts
business trust on October 17, 2001. Prior to commencing operations on December
21, 2001, 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. Allianz Global Investors Fund Management LLC
(the "Investment Manager"), formerly, PA Fund Management LLC, serves as the
Fund's Investment Manager and is an indirect wholly-owned subsidiary of Allianz
Global Investors of America L.P. ("Allianz Global"). Allianz Global is an
indirect, majority-owned subsidiary of Allianz AG. The Fund has an unlimited
amount of $0.00001 par value common stock authorized.
The Fund seeks to achieve high current income with capital preservation and
appreciation as secondary objectives by investing at least 80% of its assets in
a diversified portfolio of U.S. dollar denominated corporate debt obligations of
varying maturities and other income producing securities.
The Fund has employed a strategy of selling options on U.S. Treasury futures and
other fixed income instruments. This strategy enables the Fund to capture
premiums when Pacific Investment Management Company LLC (the "Sub-Adviser")
believes future interest rate volatility is likely to be lower than the level of
volatility implied in the options contracts. In addition, the Fund has also
engaged in interest rate swaps as part of a strategy to enhance the Fund's
income while managing interest rate risk and credit risk.
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 been asserted.
However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(a) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market quotations
are readily available are stated at market value. Portfolio securities and other
financial instruments for which market quotations are not readily available or
if a development/event occurs that may significantly impact the value of the
security, may be fair-valued in good faith pursuant to guidelines established by
the Board of Trustees, including certain fixed income securities which may be
valued with reference to securities whose prices are more readily available. The
Fund's investments are valued daily by an independent pricing service, dealer
quotations, or are valued at the last sale price on the exchange that is the
primary market for such securities, or the last quoted bid price for those
securities for which the over-the-counter market is the primary market or for
listed securities in which there were no sales. Prices obtained from an
independent pricing service use information provided by market makers or
estimates of market values obtained from yield data relating to investments or
securities with similar characteristics. Certain fixed income securities
purchased on a when-issued or a delayed-delivery basis are marked to market
daily until settlement at the forward settlement value. 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 by the Sub-Adviser. Such procedures
by the Sub-Adviser 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, futures and options on futures are valued at the settlement price
determined by the relevant exchange. Short-term investments maturing in 60 days
or less are valued at amortized cost, if their original maturity was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if the
original term to maturity exceeded 60 days. The prices used by the Fund to value
securities may differ from the value that would be realized if the securities
were sold and the differences could be material to the financial statements. The
Fund's net asset value is determined daily at the close of regular trading
(normally, 4:00 p.m. Eastern time) on the New York Stock Exchange.
15
(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. Dividend income is
recorded on the ex-dividend date.
(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 considered either
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their income tax treatment; temporary differences do not require
reclassification. To the extent dividends and/or distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as dividends and/or distributions of paid-in capital in excess of par.
(e) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, the Fund is required to pledge to the broker an amount of cash or
securities equal to the minimum "initial margin" requirements of the exchange.
Pursuant to the contracts, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contracts.
Such receipts or payments are known as "variation margin" and are recorded by
the Fund as unrealized appreciation or depreciation. When the contracts are
closed, the Fund records a realized gain or loss equal to the difference between
the value of the contracts at the time they were opened and the value at the
time they were closed. Any unrealized appreciation or depreciation recorded is
simultaneously reversed. The use of futures transactions involves the risk of an
imperfect correlation in the movements in the price of futures contracts,
interest rates and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts.
(f) OPTION TRANSACTIONS
The Fund may purchase and write (sell) put and call options for hedging and/or
risk management purposes or as part of its investment strategy. The risk
associated with purchasing an option is that the Fund pays a premium whether or
not the option is exercised. Additionally, the Fund bears the risk of loss of
premium and change in market value should the counterparty not perform under the
contract. Put and call options purchased are accounted for in the same manner as
portfolio securities. The cost of securities acquired through the exercise of
call options is increased by the premiums paid. The proceeds from the securities
sold through the exercise of put options is decreased by the premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. These liabilities are reflected as options written in the
Statements of Assets and Liabilities. Premiums received from writing options
which expire unexercised are recorded on the expiration date as a realized gain.
The difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security. In
writing an option, the Fund bears the market risk of an unfavorable change in
the price of the security underlying the written option. Exercise of a written
option could result in the Fund purchasing a security at a price different from
the current market.
(g) INTEREST RATE/CREDIT DEFAULT SWAPS
The Fund enters into interest rate and credit default swap contracts ("swaps")
for investment purposes, to manage its interest rate and credit risk or to add
leverage.
16
As a seller in the credit default swap contract, the Fund would be required to
pay the notional amount or other agreed-upon value of a referenced debt
obligation to the counterparty in the event of a default by a third party, such
as a U.S. or foreign corporate issuer, on the referenced debt obligation. In
return, the Fund would receive from the counterparty a periodic stream of
payments over the term of the contract provided that no event of default has
occurred. If no default occurs, the Fund would keep the stream of payments and
would have no payment obligations. Such periodic payments are accrued daily and
recorded as realized gain (loss).
The Fund may also purchase credit default swap contracts in order to hedge
against the risk of default of debt securities held, in which case the Fund
would function as the counterparty referenced in the preceding paragraph. As a
purchaser of a credit default swap contract, the Fund would receive the notional
amount or other agreed upon value of a referenced debt obligation from the
counterparty in the event of default by a third party, such as a U.S. or foreign
corporate issuer on the referenced 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 recorded as realized gain (loss).
Interest rate swap agreements involve the exchange by the Fund with a
counterparty of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Net periodic payments received by the Fund are
included as part of net realized gain (loss) and/or change in net unrealized
appreciation/depreciation on the Statement of Operations.
Swaps are marked to market daily by the Fund's Sub-Adviser based upon quotations
from market makers and the change in value, if any, is recorded as unrealized
appreciation or depreciation on the Fund's Statement of Operations. For a credit
default swap sold by the Fund, payment of the agreed upon amount made by the
Fund in the event of default of the referenced debt obligation is recorded as
the cost of the referenced debt obligation purchased/received. For a credit
default swap purchased by the Fund, the agreed upon amount received by the Fund
in the event of default of the referenced debt obligation is recorded as
proceeds from sale/delivery of the referenced debt obligation and the resulting
gain or loss realized on the referenced debt obligation is recorded as such by
the Fund.
Entering into swaps involves, to varying degrees, elements of credit, market and
documentation risk in excess of the amounts recognized on the Statement of Asset
and Liabilities. Such risks involve the possibility that there will be no liquid
market for these agreements, that the counterparty to the agreements may default
on its obligation to perform or disagree as to the meaning of the contractual
terms in the agreements, and that there may be unfavorable changes in net
interest rates.
(h) FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts for the purpose of
hedging against foreign currency risk arising from the investment or anticipated
investment in securities denominated in foreign currencies. The Fund may also
enter into these contracts for purposes of increasing exposure to a foreign
currency or to shift exposure to foreign currency fluctuations from one country
to another. A forward foreign currency contract is an agreement between two
parties to buy and sell a currency at a set exchange rate on a future date. The
market value of a forward foreign currency contract fluctuates with changes in
forward currency exchange rates. All commitments are marked to market daily at
the applicable exchange rates and any resulting unrealized appreciation or
depreciation is recorded. Realized gains or losses are recorded at the time the
forward contract matures or by delivery of the currency. Risks may arise upon
entering these contracts from the potential inability of counterparties to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
(i) SENIOR LOANS
The Fund purchases assignments of Senior Loans originated, negotiated and
structured by a U.S. or foreign commercial bank, insurance company, finance
company or other financial institution (the "Agent") for a lending syndicate of
financial institutions ("Lender"). When purchasing an assignment, the Fund
succeeds all the rights and obligations under the loan agreement with the same
rights and obligaions as the assigning Lender. Assignments may, however, be
arranged through private negotiations between potential assignees and potential
assignors, and the rights and obligations acquired by the purchaser of an
assignment may differ from, and be more limited than, those held by the
assigning Lender.
17
(j) 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.
Similar to 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.
(k) REPURCHASE AGREEMENTS
The Fund enters 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.
(l) REVERSE REPURCHASE AGREEMENTS
In a reverse repurchase agreement, the Fund sells securities to a bank or
broker-dealer and agrees to repurchase the securities at a mutually agreed upon
date and price. Generally, the effect of such a transaction is that the Fund can
recover and reinvest all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement and
still be entitled to the returns associated with those portfolio securities.
Such transactions are advantageous if the interest cost to the Fund of the
reverse repurchase transaction is less than the return it obtains on investments
purchased with the cash. Unless the Fund covers its positions in reverse
repurchase agreements (by segregating liquid assets at least equal in amount to
the forward purchase commitment), its obligations under the agreements will be
subject to the Fund's limitations on borrowings. Reverse repurchase agreements
involve leverage risk and also the risk that the market value of the securities
that the Fund is obligated to repurchase under the agreement may decline below
the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of the proceeds of the agreement may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. During the six months period ended
April 30, 2005, the weighted average daily balance and weighted average interest
rate of reverse repurchase agreements outstanding were $2,808,000 and 2.37%,
respectively.
(m) CUSTODY CREDITS EARNED ON CASH BALANCES
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian and
accounting agent fees expenses. Had these cash balances been invested in income
producing securities, they would have generated income for the Fund.
2. INVESTMENT MANAGER AND SUB-ADVISER
The Fund has an Investment Management Agreement (the "Agreement") with the
Investment Manager. Subject to the supervision of the Fund's Board of Trustees,
the Investment Manager is responsible for managing, either directly or through
others selected by it, the Fund's investment activities, business affairs and
administrative matters. Pursuant to the Agreement, the Investment Manager
receives an annual fee, payable monthly, at an annual rate of 0.75% of the
Fund's average daily net assets, including net assets attributable to any
preferred shares that may be outstanding. In order to reduce Fund expenses, the
Investment Manager has contractually agreed to waive a portion of its investment
management fee at the annual rate of 0.20% of the Fund's average daily net
assets, including net assets attributable to any preferred shares that may be
outstanding, from the commencement of operations through December 31, 2006, and
for a declining amount thereafter through December 31, 2009.
The Investment Manager has retained its affiliate, the Sub-Adviser, to manage
the Fund's investments. Subject to the supervision of the Investment Manager,
the Sub-Adviser makes all the Fund's investment decisions. The Investment
18
Manager and not the Fund, pays a portion of the fees it receives to the
Sub-Adviser in return for its services, at the maximum annual rate of 0.42% of
the Fund's average daily net assets, including net assets attributable to any
preferred shares that may be outstanding. The Sub-Adviser has contractually
agreed to waive a portion of the fees it is entitled to receive from the
Investment Manager such that the Sub-Adviser will receive 0.30% of the Fund's
average daily net assets, including net assets attributable to any preferred
shares that may be outstanding, from the commencement of the Fund's operations
through December 31, 2006, and will receive an increasing amount thereafter. The
Investment Manager informed the Fund that it paid the Sub-Adviser $1,257,041 in
connection with its sub-advisory services for the six months period ended April
30, 2005.
3. INVESTMENTS IN SECURITIES
(a) For the six months ended April 30, 2005, purchases and sales of
investments, other than short-term securities, were $655,063,459 and
$702,112,537, respectively.
(b) Futures contracts outstanding at April 30, 2005:
NOTIONAL UNREALIZED
AMOUNT EXPIRATION APPRECIATION
TYPE (000) DATE DEPRECIATION
--------------------------------------------------------------------------------------------
Long: Eurodollar Futures, September 2005 $ 2,188 9/19/05 $ (1,760,938)
Eurodollar Futures, March 2006 2,000 3/13/06 (88,750)
U.S. Treasury Bonds, June 2005 300 6/21/05 712,500
U.S. Treasury 10 Year Notes, June 2005 335 6/21/05 245,599
U.S. Treasury 10 Year Notes, Septemeber 2005 74 9/21/05 169,969
============
$ (721,620)
============
(c) Options written for the six months ended April 30, 2005:
CONTRACTS PREMIUMS
-------------------------------------------------------------------------------------------
Options outstanding 10/31/04 132,450,000 $ 437,500
Options written 198,607,394 2,333,416
Options expired (81,300,294) (178,500)
Options terminated in clossing purchase transactions (141,702,310) (882,663)
------------ ------------
Options outstanding, 4/30/05 108,054,790 $ 1,709,753
============ ============
(d) Forward foreign currency contracts outstanding at April 30, 2005:
U.S.$ VALUE ON U.S.$ VALUE UNREALIZED
ORIGINATION DATE APRIL 30, 2005 APPRECIATION
-----------------------------------------------------------------------------------------------
PURCHASED:
Canadian Dollars, settling 6/9/05 $ 1,414,233 $ 1,395,325 $ 18,908
============
(e) Interest rate swap contracts oustanding at April 30, 2005:
RATE TYPE
----------------------------
NOTIONAL PAYMENTS PAYMENTS UNREALIZED
AMOUNT TERMINATION MADE BY RECEIVED BY APPRECIATION
SWAP COUNTERPARTY (000) DATE THE FUND THE FUND (DEPRECIATION)
-------------------------------------------------------------------------------------------------
Goldman Sachs & Co. $ 680,000 6/15/25 5.25% 3-month LIBOR $ (23,166,757)
Goldman Sachs & Co. 680,000 12/24/24 3 month LIBOR 5.13% 22,217,470
Lehman Brothers 7,450 10/1/06 7.43% 3-month LIBOR
plus 1.15% (262,686)
--------------
$ (1,211,973)
==============
----------
LIBOR--London Interbank Offered Rate
19
(f) Credit default swap contracts oustanding at April 30, 2005:
NOTIONAL
SWAP AMOUNT FIXED
COUNTERPARTY/ PAYABLE ON PAYMENTS UNREALIZED
REFERENCED DEBT DEFAULT TERMINATION RECEIVED APPRECIATION
OBLIGATION (000) DATE BY FUND (DEPRECIATION)
-----------------------------------------------------------------------------------------------------
Bank of America
DJ CDX $ 20,000 6/20/10 0.90% $ (88,652)
Ford Motor Co. 2,000 6/20/06 2.60% 2,081
Bear Stearns
Encana Corp. 3,000 9/20/09 0.53% 32,309
Ford Motor Co. 4,000 6/20/10 5.60% 187,476
General Motors Acceptance Corp. 5,000 6/20/07 4.65% (473)
Goldman Sachs & Co.
Ford Motor Co. 1,000 6/20/07 3.00% (8,292)
General Motors Corp 1,300 6/20/06 3.10% (26,439)
HSBC Bank USA
Ford Motor Co. 5,000 6/20/07 2.60% (61,770)
Ford Motor Co. 1,000 6/20/07 2.70% (11,728)
JP Morgan Chase & Co.
American International Group, Inc. 5,100 6/20/10 0.35% (14,859)
Ford Motor Co. 1,800 6/20/06 2.15% (9,716)
Ford Motor Co. 1,000 6/20/06 3.25% 8,431
Ford Motor Co. 10,000 6/20/07 3.10% (64,715)
General Motor Acceptance Corp. 500 6/20/06 2.75% (3,827)
General Motor Acceptance Corp. 8,000 6/20/06 2.63% (74,111)
Lehman Brothers
Ford Motor Co. 650 6/20/06 2.90% 2,898
Merrill Lynch
Ford Motor Corp 2,000 6/20/07 3.45% 6,707
Morgan Stanley
Ford Motor Co. 2,000 6/20/07 3.75% 19,130
Ford Motor Co. 1,000 6/20/07 3.40% 2,129
General Motor Acceptance Corp. 10,000 6/20/06 2.80% (68,889)
UBS AG
DJ CDX 10,000 6/20/10 0.90% (42,123)
Ford Motor Co. 1,000 6/20/07 3.35% 1,097
General Motors Acceptance Corp. 1,000 6/20/06 2.83% 1,489
--------------
$ (211,847)
==============
4. INCOME TAX INFORMATION
The cost basis of portfolio securities for federal income tax purposes is
$798,509,003. Aggregated gross unrealized appreciation for securities in which
there is an excess value over tax cost is $30,956,771, aggregate gross
unrealized depreciation for securities in which there is an excess of tax cost
over value is $10,159,969 unrealized appreciation for federal income tax
purposes is $20,796,802.
5. AUCTION PREFERRED SHARES
The Fund has issued 2,400 shares of Preferred Shares Series M, 2,400 shares of
Preferred Shares Series T, 2,400 shares of Preferred Shares Series W, 2,400
shares of Preferred Shares Series TH, and 2,400 shares of Preferred Shares
Series F each with a net asset and liquidation value of $25,000 per share plus
accrued dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually to Preferred Shares.
20
For the six months period ended April 30, 2005, the annualized dividend rate
ranged from:
HIGH LOW AT APRIL 30, 2005
----------------------------------------------------------------------------
Series M 3.26% 1.86% 3.04%
Series T 3.26% 1.25% 3.10%
Series W 3.33% 1.45% 3.10%
Series TH 3.30% 1.90% 3.13%
Series F 3.31% 1.90% 3.08%
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
6. SUBSEQUENT COMMON DIVIDEND DECLARATIONS
On May 2, 2005, a dividend of $0.10625 per share was declared to common
shareholders payable June 1, 2005 to shareholders of record on May 13, 2005.
On June 1, 2005, a dividend of $0.10625 per share was declared to common
shareholders payable July 1, 2005 to shareholders of record on June 10, 2005.
7. LEGAL PROCEEDINGS
On September 13, 2004, the Securities and Exchange Commission (the "Commission")
announced that the Investment Manager and certain of its affiliates (together
with the Investment Manager, the "Affiliates") had agreed to a settlement of
charges that they and certain of their officers had, among other things,
violated various antifraud provisions of the federal securities laws in
connection with an alleged market-timing arrangement involving trading of shares
of certain open-end investment companies ("open-end funds") advised or
distributed by these certain affiliates. In their settlement with the
Commission, the Affiliates consented to the entry of an order by the Commission
and, without admitting or denying the findings contained in the order, agreed to
implement certain compliance and governance changes and consented to
cease-and-desist orders and censures. In addition, the Affiliates agreed to pay
civil money penalties in the aggregate amount of $40 million and to pay
disgorgement in the amount of $10 million, for an aggregate payment of $50
million. In connection with the settlement, the Affiliates have been dismissed
from the related complaint the Commission filed on May 6, 2004 in the U.S.
District Court in the Southern District of New York. Neither the complaint nor
the order alleges any inappropriate activity took place with respect to the
Fund.
In a related action on June 1, 2004, the Attorney General of the State of
New Jersey ("NJAG") announced that it had entered into a settlement agreement
with Allianz Global and the Affiliates, in connection with a complaint filed by
the NJAG on February 17, 2004. The NJAG dismissed claims against the
Sub-Adviser, which had been part of the same complaint. In the settlement,
Allianz Global and other named affiliates neither admitted nor denied the
allegations or conclusions of law, but did agree to pay New Jersey a civil fine
of $15 million and $3 million for investigative costs and further potential
enforcement initiatives against unrelated parties. They also undertook to
implement certain governance changes. The complaint relating to the settlement
contained allegations arising out of the same matters that were the subject of
the Commission order regarding market-timing described above and does not allege
any inappropriate activity took place with respect to the Fund.
On September 15, 2004, the Commission announced that the Affiliates had agreed
to settle an enforcement action in connection with charges that they violated
various antifraud and other provisions of federal securities laws as a result
of, among other things, their failure to disclose to the board of trustees and
shareholders of various open-end funds advised or distributed by the Affiliates
material facts and conflicts of interest that arose from their use of brokerage
commissions on portfolio transactions to pay for so-called "shelf space"
arrangements with certain broker-dealers. In their settlement with the
Commission, the Affiliates consented to the entry of an order by the Commission
without admitting or denying the findings contained in the order. In connection
with the settlement, the Affiliates agreed to
21
undertake certain compliance and disclosure reforms and consented to
cease-and-desist orders and censures. In addition, the Affiliates agreed to pay
a civil money penalty of $5 million and to pay disgorgement of approximately
$6.6 million based upon the aggregate amount of brokerage commissions alleged to
have been paid by such open-end funds in connection with these shelf-space
arrangements (and related interest). In a related action, the California
Attorney General announced on September 15, 2004 that it had entered into an
agreement with an affiliate of the Investment Manager in resolution of an
investigation into matters that are similar to those discussed in the Commission
order. The settlement agreement resolves matters described in a complaint filed
contemporaneously by the California Attorney General in the Superior Court of
the State of California alleging, among other things, that this affiliate
violated certain antifraud provisions of California law by failing to disclose
matters related to the shelf-space arrangements described above. In the
settlement agreement, the affiliate did not admit to any liability but agreed to
pay $5 million in civil penalties and $4 million in recognition of the
California Attorney General's fees and costs associated with the investigation
and related matters. Neither the Commission order nor the California Attorney
General's complaint alleges any inappropriate activity took place with respect
to the Fund.
On April 11, 2005, the Attorney General of the State of West Virginia filed a
complaint in the Circuit Court of Marshall County, West Virginia (the "West
Virginia Complaint") against the Investment Manager and certain of its
Affiliates based on the same circumstances as those cited in the 2004
settlements with the Commission and NJAG involving alleged "market timing"
activities described above. The West Virginia Complaint alleges, among other
things, that the Investment Manager and certain of its Affiliates improperly
allowed broker-dealers, hedge funds and investment advisers to engage in
frequent trading of various open-end funds advised or distributed by the
Affiliates in violation of the open-end funds' stated restrictions on "market
timing." As of the date of this report, the West Virginia Complaint has not been
formally served upon the Investment Manager or the Affiliates. The West Virginia
Complaint also names numerous other defendants unaffiliated with the Affiliates
in separate claims alleging improper market timing and/or late trading of
open-end investment companies advised or distributed by such other defendants.
The West Virginia Complaint seeks injunctive relief, civil monetary penalties,
investigative costs and attorney's fees. The West Virginia Complaint does not
allege that any inappropriate activity took place with respect to the Fund.
Since February 2004, certain of the Affiliates and their employees have been
named as defendants in a total of 14 lawsuits filed in one of the following:
U.S. District Court in the Southern District of New York, the Central District
of California and the Districts of New Jersey and Connecticut. Ten of those
lawsuits concern "market timing," and they have been transferred to and
consolidated for pre-trial proceedings in the U.S. District Court for the
District of Maryland; the remaining four lawsuits concern "revenue sharing"
with brokers offering "shelf space" and have been consolidated into a single
action in the U.S. District Court for the District of Connecticut. The lawsuits
have been commenced as putative class actions on behalf of investors who
purchased, held or redeemed shares of affiliated funds during specified periods
or as derivative actions on behalf of the funds.
The lawsuits generally relate to the same facts that are the subject of the
regulatory proceedings discussed above. The lawsuits seek, among other things,
unspecified compensatory damages plus interest and, in some cases, punitive
damages, the rescission of investment advisory contracts, the return of fees
paid under those contracts and restitution. The Investment Manager believes that
other similar lawsuits may be filed in federal or state courts naming as
defendants the Investment Adviser, the Affiliates, Allianz Global, the Fund,
other open- and closed-end funds advised or distributed by the Investment
Manager and/or its affiliates, the boards of directors or trustees of those
funds, and/or other affiliates and their employees. Under Section 9(a) of the
1940 Act, if any of the various regulatory proceedings or lawsuits were to
result in a court injunction against the Investment Manager, Allianz Global/or
their affiliates, they and their affiliates would, in the absence of exemptive
relief granted by the Commission, be barred from serving as an investment
manager/sub-adviser or principal underwriter for any registered investment
company, including the Fund. In connection with an inquiry from the Commission
concerning the status of the New Jersey settlement described above under Section
9(a), the Investment Manager and certain of its affiliates (together, the
"Applicants") have sought exemptive relief from the Commission under Section
9(c) of the 1940 Act.
The Commission has granted the Applicants a temporary exemption from the
provisions of Section 9(a) with respect to the New Jersey settlement until the
earlier of (i) September 13, 2006 and (ii) the date on which the Commission
takes final action on their application for a permanent order. There is no
assurance that the Commission will issue a permanent order. If the West Virginia
Attorney General were to obtain a court injunction against the Investment
22
Manager or the Affiliates, the Investment Manager or the Affiliates would, in
turn, seek exemptive relief under Section 9(c) with respect to that matter,
although there is no assurance that such exemptive relief would be granted.
A putative class action lawsuit captioned CHARLES MUTCHKA ET AL. V. BRENT R.
HARRIS, ET AL., filed in January 2005 by and on behalf of individual
shareholders of certain open-end funds that hold equity securities and that are
sponsored by the Investment Manager and the Affiliates, is currently pending in
the federal district court for the Central District of California. The plaintiff
alleges that fund trustees, investment advisers and affiliates breached
fiduciary duties and duties of care by failing to ensure that the open-end funds
participated in securities class action settlements for which those funds were
eligible. The plaintiff has claimed as damages disgorgement of fees paid to the
investment advisers, compensatory damages and punitive damages.
The Investment Manager believes that the claims made in the lawsuit against the
Investment Manager and the Affiliates are baseless, and the Investment Manager
and the Affiliates intend to vigorously defend the lawsuit. As of the date
hereof, the Investment Manager believes a decision, if any, against the
defendants would have no material adverse effect on the Fund or the ability of
the Investment Manager or the Sub-Adviser to perform their duties under the
investment management or portfolio management agreements, as the case may be.
It is possible that these matters and/or other developments resulting from these
matters could lead to a decrease in the market price of the Fund's shares or
other adverse consequences to the Fund and its shareholders. However, the
Investment Manager and the Sub-Adviser believe that these matters are not likely
to have a material adverse effect on the Fund or on the Investment Manager's or
the Sub-Adviser's ability to perform their respective investment advisory
services related to the Fund.
The foregoing speaks only as of the date hereof. There may be additional
litigation or regulatory developments in connection with the matters discussed
above.
23
PIMCO CORPORATE INCOME FUND FINANCIAL HIGHLIGHTS
For a share of common stock outstanding throughout each period:
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED DECEMBER 21,
APRIL 30, 2005 ----------------------------------- 2001* THROUGH
(UNAUDITED) OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2002
-------------- ---------------- ---------------- ----------------
Net asset value, beginning of period $ 15.58 $ 15.38 $ 12.25 $ 14.33**
-------------- ---------------- --------------- ---------------
INVESTMENT OPERATIONS:
Net investment income 0.64 1.33 1.55(2) 1.12(1)(2)
Net realized and unrealized gain (loss) on
investments (0.44) 0.73 3.18(2) (2.00)(2)
-------------- ---------------- --------------- ---------------
Total from investment operations 0.20 2.06 4.73 (0.88)
============== ================ =============== ===============
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES
FROM:
Net investment income (0.09) (0.10) (0.11) (0.11)
Net realized gains (0.01) (0.01) - -
-------------- ---------------- --------------- ---------------
Total dividends and distributions on preferred
shares (0.10) (0.11) (0.11) (0.11)
============== ================ =============== ===============
Net increase (decrease) in net assets applicable
to common shares resulting from investment
operations 0.10 1.95 4.62 (0.99)
============== ================ =============== ===============
DIVIDENDS AND DISTRIBUTION TO COMMON SHAREHOLDERS
FROM:
Net investment income (0.64) (1.41) (1.38) (0.96)
Net realized gains (0.27) (0.34) (0.11) -
-------------- ---------------- --------------- ---------------
Total dividends and distributions to common
shareholders (0.91) (1.75) (1.49) (0.96)
============== ================ =============== ===============
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in
capital in excess of par - - - (0.03)(1)
Preferred shares offering costs/underwriting
discount charged to paid-in capital in excess
of par - - - (0.10)(1)
---------------
Total capital share transactions - - - (0.13)
===============
Net asset value, end of period $ 14.77 $ 15.58 $ 15.38 $ 12.25
Market price, end of period $ 14.37 $ 15.46 $ 15.43 $ 13.24
TOTAL INVESTMENT RETURN (3) (1.27)% 12.32% 29.29% (5.30)%
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end
of period (000) $ 529,871 $ 556,515 $ 544,454 $ 429,982
Ratio of expenses to average net assets (4)(5)(6) 1.13%(7) 1.12% 1.15% 1.07%(7)
Ratio of net investment income to average net
assets (4)(6) 8.53%(7) 8.95% 10.90%(2) 9.83%(2)(7)
Preferred shares asset coverage per share $ 69,141 $ 71,365 $ 70,367 $ 60,826
Portfolio turnover 89% 74% 63% 77%
* Commencement of operations.
** Initial public offering price of $15.00 per share less underwriting
discount of $0.675 per share.
(1) Calculated based on average daily shares outstanding.
(2) As a result of changes in generally accepted accounting principles, the
Fund has reclassified periodic payments made under interest rate swap
agreements, previously included within interest income, as a component of
realized gain (loss) in the Statement of Operations. For consistency,
similar reclassifications have been made to prior year amounts, resulting
in reductions to the ratio of net investment income to average net assets
of 0.09% and 0.16% and to net investment income per share of $0.02 and
$0.02 for the fiscal periods ending October 31, 2003 and October 31, 2002,
respectively.
(3) Total investment return is calculated assuming a purchase of shares of
common stock at the current market price on the first day and a sale of
shares of common stock at the current market price on the last day of each
period reported. Dividends and distributions are assumed, for purposes of
this calculation, to be reinvested at prices obtained under the Fund's
dividend reinvestment plan. Total investment return does not reflect
brokerage commissions or sales charges. Total investment return for a
period of less than one year is not annualized.
(4) Calculated on the basis of income and expenses applicable to both common
shares and preferred shares relative to the average net assets of common
shareholders.
(5) Inclusive of expenses offset by custody credits earned on cash balances at
the custodian bank. (See note 1(m) in Notes to Financial Statements).
(6) During the fiscal periods indicated above the Investment Manager waived a
portion of its investment management fee. If such waiver had not been in
effect, the ratio of expenses to average net assets and the ratio of net
investment income to average net assets would have been 1.44% (annualized)
and 8.22% (annualized), respectively, for the six months period ended April
30, 2005; 1.43% and 8.64%, respectively, for the year ended October 31,
2004, 1.47% and 10.58%, respectively for the year ended October 31, 2003
and 1.37% (annualized) and 9.53% (annualized), respectively, for the period
December 21, 2001 (commencement of operations) through October 31, 2002.
(7) Annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
TRUSTEES AND PRINCIPAL OFFICERS
Robert E. Connor
Chairman of the Board of Trustees
Paul Belica
Trustee
John J. Dalessandro II
Trustee
David C. Flattum
Trustee
Hans W. Kertess
Trustee
R. Peter Sullivan III
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Vice President
Mark Kiesel
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Thomas J. Fuccillo
Secretary
Youse Guia
Chief Compliance Officer
Jennifer A. Patula
Assistant Secretary
INVESTMENT MANAGER
Allianz Global Investors 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
CUSTODIAN & ACCOUNTING AGENT
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, MO 64105-1307
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624
This report, including the financial information herein, is transmitted to the
shareholders of PIMCO Corporate 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.
The financial information included herein is taken from the records of the Funds
without examination by an independent registered public accounting firm, who did
not express an opinion hereon.
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 Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "Commission") for the first and third quarter of
its fiscal year on Form N-Q. Form N-Q is available (i) on the Fund's website at
www.allianzinvestors.com (ii) on the Commission's website at www.sec.gov, and
(iii) at the Commission's Public reference Room which is located at the
Commission's headquarters' office at 450 5th Street N.W. Room 1200, Washington,
D.C. 20459, (202) 942-8090.
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities and information
about how the Fund voted proxies relating to portfolio securities held during
the twelve months ended June 30, 2004 is available (i) without charge, upon
request by calling the Fund's transfer agent at (800) 331-1710; (ii) on the
Fund's website at www.allianzinvestors.com; and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Information on the Fund is available at www.allianzinvestors.com or by calling
the Fund's transfer agent at 1-800-331-1710.
[ALLIANZ GLOBAL INVESTORS LOGO]
ITEM 2. CODE OF ETHICS
Not required in this filing
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT
Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of
the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not effective at time of filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES
TOTAL NUMBER
OF SHARES PURCHASED MAXIMUM NUMBER OF
TOTAL NUMBER AVERAGE AS PART OF PUBLICLY SHARES THAT MAY YET BE
OF SHARES PRICE PAID ANNOUNCED PLANS OR PURCHASED UNDER THE PLANS
PERIOD PURCHASED PER SHARE PROGRAMS OR PROGRAMS
------ --------- --------- -------- -----------
November 2004 N/A N/A N/A N/A
December 2004 N/A N/A N/A N/A
January 2005 N/A 15.18 88,277 N/A
February 2005 N/A 15.33 32,671 N/A
March 2005 N/A 15.22 31,749 N/A
April 2005 N/A N/A N/A N/A
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedures by which shareholders may
recommend nominees to the Fund's Board of Trustees since the Fund last provided
disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 12. EXHIBITS
(a) Exhibit 99.302 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.
(Registrant) PIMCO Corporate Income Fund
---------------------------
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date July 7, 2005
-----------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 7, 2005
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
------------------------
President and Chief Executive Officer
Date July 7, 2005
-----------------
By /s/ Lawrence G. Altadonna
----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 7, 2005
-----------------