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

811-21601

 

PIMCO Floating Rate Strategy Fund

(Exact name of registrant as specified in charter)

 

1345 Avenue of the Americas, New York, New York

 

10105

(Address of principal executive offices)

 

(Zip code)

 

Brian S. Shlissel - 1345 Avenue of the Americas, New York, New York 10105

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

212-739-3371

 

 

Date of fiscal year end:

July 31, 2006

 

 

Date of reporting period:

July 31, 2006

 

 

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.




ITEM 1. REPORT TO SHAREHOLDERS




ITEM 1. REPORT TO SHAREHOLDERS

 

PIMCO Floating Rate Income Fund

PIMCO Floating Rate Strategy Fund

 

 

 

Annual Report

 

July 31, 2006

 

 

 

 

Contents

 

 

 

 

 

Letter to Shareholders

1

 

 

 

 

Performance & Statistics

2-3

 

 

 

 

Schedules of Investments

4-30

 

 

 

 

 

 

Statements of Assets and Liabilities

31

 

 

 

 

 

Statements of Operations

32

 

 

 

 

Statements of Changes in Net Assets

33

 

 

 

 

Statements of Cash Flows

34

 

 

 

 

Notes to Financial Statements

 35-47

 

 

 

 

 

 

Financial Highlights

48-49

 

 

 

 

 

 

Report of Independent Registered Public
Accounting Firm

50

 

 

 

 

 

 

Matters Relating to the Trustees Consideration of the
Investment Management & Portfolio Management
Agreements

51-53

 

 

 

 

 

 

Tax Information

54

 

 

 

 

 

 

Privacy Policy/Proxy Voting Policies & Procedures

55

 

 

 

 

 

 

Dividend Reinvestment Plan

56

 

 

 

 

 

 

Board of Trustees

57-58

 

 

 

 

 

 

Principal Officers

59

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds Letter to Shareholders

 

 

 

September 14, 2006

 

Dear Shareholder:

 

We are pleased to provide you with the annual report for PIMCO Floating Rate Income Fund and PIMCO Floating Rate Strategy Fund (collectively the “Funds”) for the fiscal periods ended July 31, 2006. In December 2005, PIMCO Floating Rate Strategy Fund changed its fiscal year-end from August 31 to July 31. Accordingly, the financial statements for this fund cover the 11-month period from September 1, 2005 through July 31, 2006.

 

During the period, the Federal Reserve raised short-term interest rates eight times for a total increase of 2.00%. Within this rising interest rate environment, the three-month London Interbank Offered Rate (“LIBOR”) increased by more than 1.75%, ending the reporting period at 5.47%. The trend was positive for floating-rate securities, which typically pay interest at a spread over LIBOR. As a result, the Funds increased their dividends to shareholders during the period.

 

Please refer to the following pages for specific information on the Funds. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 331-1710. In addition, a wide range of information and resources are available on our Web site at www.allianzinvestors.com/closedendfunds.

 

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC, the Funds’ sub-adviser, we thank you for investing with us.

 

We remain dedicated to serving your investment needs.

 

Sincerely,

 

 

 

 

 

Robert E. Connor

 

Brian S. Shlissel

 

 

 

Chairman

 

President & Chief Executive Officer

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 1

 


 

PIMCO Floating Rate Income Fund Performance & Statistics

July 31, 2006 (unaudited)

 

*                 PIMCO Floating Rate Income Fund returned 6.92% and 16.53% based on net asset value and market price, respectively during the fiscal twelve months ended July, 31, 2006. This performance outpaced the 6.29% return of the average Lipper Loan Participation fund, according to Lipper’s monthly Closed-End Fund Analysis.

*                 Security selection and specific industry weightings were key contributors to the Fund’s positive performance during the reporting period.

*                 Of particular note were weightings in the automotive and telecom sectors, which outpaced the leveraged loan market during the reporting period and, as a result, were positive contributors to performance.

*                 Allocation to the cable/pay TV sector, as well as more modest allocations to the technology and financial sectors, boosted performance toward the end of the period.

*                 The Fund’s bias toward the middle to upper credit quality tiers of the below-investment grade universe proved a drag on performance as investors, in search of higher yields, turned to the lower tier of below-investment-grade bonds. A relatively large weighting in the chemical sector also proved a drag on performance toward the end of the reporting period.

*                 A modest tactical allocation to the non-traditional emerging markets sector, while positive for the earlier part of the reporting period, later proved a drag on performance as emerging markets did not keep pace with the leveraged loan market.

 

Total Return(1):

 

Market Price

 

Net Asset Value (“NAV”)

 

1 Year

 

16.53

%

 

6.92

%

 

 

Commencement of Operations (8/29/03) to 7/31/06

 

6.92

%

 

6.47

%

 

 

 

Common Share Market Price/NAV Performance:

 

Market Price/NAV:

 

 

Commencement of Operations (8/29/03) to 7/31/06

 

Market Price

$20.02

 

 Market Price

 

NAV

$19.14

 

 NAV

 

Premium to NAV

4.60%

 

 

 

Market Price Yield(2) 

8.67%

 

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends and capital gain distributions have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.

 

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is equal to the total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend to common shareholders by the market price per common share at July 31, 2006.

 

2 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Performance & Statistics

July 31, 2006 (unaudited)

 

*                 PIMCO Floating Rate Strategy Fund returned 6.54% at net asset value (NAV) and 11.77% at market price for the 11 months ended July 31, 2006. This performance outpaced the 5.63% return of the average Lipper Loan Participation fund, according to Lipper’s monthly Closed-End Fund Analysis.

*                 Floating rate security selection and specific industry weightings were key contributors to the Fund’s positive performance over the reporting period.

*                 Of particular note were the Fund’s weightings in the automotive and telecom sectors, which outpaced the leveraged loan market during the reporting period and, as a result, were positive contributors to Fund performance.

*                 An allocation to the cable/pay TV sector, as well as more modest allocations to the technology and financial sectors, also boosted returns toward the end of the period.

*                 The Fund’s bias toward the middle to upper credit quality tiers of the below-investment grade universe proved a drag on performance as investors, in search of higher yields, turned to the lower tier of below-investment-grade bonds.

*                 A modest tactical allocation to the non-traditional emerging markets sector, while positive for the earlier part of the reporting period, later proved a drag on performance as emerging markets did not keep pace with the leverage loan market.

 

Total Return(1):

 

Market Price

 

Net Asset Value (“NAV”)

 

11 months

 

11.77

%

 

6.54

%

 

 

Commencement of Operations (10/29/04) to 7/31/06

 

3.86

%

 

6.18

%

 

 

 

Common Share Market Price/NAV Performance:

 

Market Price/NAV:

 

 

Commencement of Operations (10/29/04) to 7/31/06

 

Market Price

$18.87

 

 Market Price

 

NAV

$18.76

 

 NAV

 

Premium to NAV

0.59%

 

 

 

Market Price Yield(2) 

8.93%

 

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by subtracting the value of an investment in the Fund at the beginning of each specified period from the value at the end of the period and dividing the remainder by the value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends and capital gain distributions have been reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.

 

An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is equal to the total assets applicable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend to common shareholders by the market price per common share at July 31, 2006.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 3


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006

Principal
Amount
(000)

 

 

 

Value

 

SENIOR LOANS (a) (b) (c) – 70.5%

 

 

 

 

 

 

 

 Aerospace – 0.6%

 

 

 

$

1,788

 

K & F Industries, Inc., 7.40%, 11/18/12, Term C

 

$

1,790,573

 

1,500

 

Transdigm Group, Inc., 7.449%, 6/23/13, Term B

 

1,505,391

 

 

 

 

 

3,295,964

 

 

 

 

 

 

 

 Airlines – 0.5%

 

 

 

 

 

United Airlines, Inc.,

 

 

 

2,625

 

8.625%, 2/1/12, Term B (g)

 

2,671,972

 

375

 

9.188%, 1/9/11, Term DD

 

379,727

 

 

 

 

 

3,051,699

 

 

 

 

 

 

 

 Apparel & Textiles – 0.3%

 

 

 

 

 

Simmons Co., Term D,

 

 

 

945

 

7.125%, 12/19/11

 

949,106

 

147

 

7.688%, 12/19/11

 

147,148

 

110

 

7.75%, 12/19/11

 

110,661

 

136

 

7.812%, 12/19/11

 

135,812

 

366

 

7.875%, 12/19/11

 

367,871

 

55

 

9.50%, 12/19/11

 

55,181

 

 

 

 

 

1,765,779

 

 

 

 

 

 

 

 Automotive – 1.0%

 

 

 

 

 

Hayes Lemmerz International, Inc., Term B,

 

 

 

292

 

8.46%, 6/3/09

 

296,512

 

449

 

8.57%, 6/3/09

 

455,006

 

476

 

8.64%, 6/3/09

 

482,149

 

174

 

9.01%, 6/3/09

 

175,936

 

299

 

9.05%, 6/3/09

 

303,337

 

286

 

9.06%, 6/3/09

 

289,687

 

 

 

Hertz Corp.,

 

 

 

223

 

5.324%, 12/21/12

 

224,004

 

825

 

7.41%, 12/21/12, Term B

 

830,069

 

812

 

7.58%, 12/21/12, Term B

 

817,324

 

1,010

 

7.60%, 12/21/12, Term B

 

1,016,501

 

123

 

7.69%, 12/21/12, Term B

 

123,901

 

 

 

Lear Corp.,

 

 

 

300

 

7.93%, 3/23/12

 

298,344

 

700

 

7.999%, 3/23/12

 

696,135

 

 

 

 

 

6,008,905

 

 

 

 

 

 

 

 Automotive Products – 3.9%

 

 

 

 

 

Cooper Standard Automotive, Inc.,

 

 

 

2,269

 

8.00%, 12/23/11, Term B

 

2,280,632

 

3,651

 

8.00%, 12/23/11, Term C

 

3,668,842

 

2,408

 

Delphi Corp., 13.75%, 6/14/11, Term B2

 

2,501,674

 

 

 

Goodyear Tire & Rubber Co.,

 

 

 

4,000

 

7.954%, 4/30/10

 

4,022,916

 

1,000

 

8.704%, 4/30/10

 

1,002,054

 

2,674

 

Polypore, Inc., 8.40%, 11/12/11, Term B

 

2,700,786

 

 

 

Tenneco Automotive, Inc.,

 

 

 

1,796

 

7.19%, 12/12/10, Term B

 

1,809,218

 

789

 

7.346%, 12/12/10, Term B1

 

794,757

 

3,447

 

TRW Automotive, Inc., 7.188%, 6/30/12, Term B

 

3,445,825

 

 

 

 

 

22,226,704

 

 

 

 

 

 

 

 

4 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Banking – 0.4%

 

 

 

 

 

Aster Co., Ltd. (g),

 

 

 

$

1,092

 

7.999%, 9/19/13, Term B1

 

$

1,101,710

 

1,132

 

8.499%, 9/19/14, Term C1

 

1,146,095

 

 

 

 

 

2,247,805

 

 

 

 

 

 

 

 Building/Construction – 2.0%

 

 

 

 

 

Masonite International Corp., Term B,

 

 

 

3,426

 

7.49%, 4/6/13

 

3,364,667

 

31

 

7.499%, 4/6/13

 

30,172

 

4,871

 

Nortek, Inc., 7.35%, 8/27/11

 

4,863,799

 

2,976

 

UGS Corp., 7.485%, 3/31/12, Term B

 

2,978,912

 

 

 

 

 

11,237,550

 

 

 

 

 

 

 

 Chemicals – 5.8%

 

 

 

 

 

Basell NV,

 

 

 

255

 

5.324%, 9/15/13, Term B

 

329,242

 

113

 

5.324%, 9/15/13, Term B6

 

145,443

 

371

 

5.419%, 9/15/13, Term B

 

479,653

 

476

 

5.419%, 9/15/13, Term B1

 

614,673

 

432

 

5.419%, 9/15/13, Term B5

 

557,542

 

255

 

5.824%, 9/15/14, Term C4

 

330,665

 

113

 

5.824%, 9/15/14, Term C6

 

146,071

 

319

 

5.919%, 9/15/14, Term C

 

413,372

 

528

 

5.919%, 9/15/14, Term C4

 

683,684

 

432

 

5.919%, 9/15/14, Term C5

 

559,952

 

$

2,782

 

Celanese AG, 7.499%, 4/6/11, Term B

 

2,789,968

 

 

 

Cognis B.V.,

 

 

 

1,149

 

8.17%, 5/12/12, Term B1

 

1,157,045

 

1,992

 

8.67%, 5/12/13, Term C1

 

2,012,599

 

1,597

 

Cognis Deutschland GMBH, 5.346%, 5/12/11, Term A

 

2,040,426

 

 

 

Hercules, Inc., Term B,

 

 

 

$

80

 

6.999%, 10/8/10

 

80,220

 

1,875

 

7.01%, 10/8/10

 

1,880,156

 

1,021

 

Huntsman International LLC, 7.15%, 8/16/12

 

1,017,075

 

 

 

INEOS Group Ltd.,

 

 

 

5,000

 

7.339%, 10/7/12, Term A4

 

5,025,000

 

750

 

7.339%, 10/7/13, Term B2

 

754,939

 

750

 

7.839%, 10/7/14, Term C2

 

758,326

 

2,992

 

KRATON Polymers Group LLC, 7.438%, 5/11/13

 

2,992,500

 

 

 

Nalco Co., Term B,

 

 

 

1,271

 

6.48%, 11/1/10

 

1,270,942

 

1,440

 

7.10%, 11/1/10

 

1,440,400

 

1,825

 

7.23%, 11/4/10

 

1,825,687

 

3,906

 

VWR International, Inc., 7.77%, 4/7/11, Term B

 

3,920,219

 

 

 

 

 

33,225,799

 

 

 

 

 

 

 

 Commercial Products – 1.2%

 

 

 

 

 

iPayment, Inc.,

 

 

 

194

 

7.61%, 12/27/12

 

194,175

 

803

 

7.75%, 12/27/12

 

803,325

 

 

 

Rexel S.A.,

 

 

 

1,000

 

7.75%, 3/16/13, Term B1

 

1,013,344

 

1,000

 

8.25%, 3/16/14, Term C1

 

1,017,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 5

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Commercial Products (continued)

 

 

 

 

 

Sigmakalon,

 

 

 

985

 

5.491%, 6/30/12, Term A

 

$

1,257,075

 

365

 

5.991%, 9/19/12, Term B1

 

470,161

 

635

 

5.991%, 9/19/12, Term B2

 

817,953

 

940

 

6.491%, 9/19/13, Term C1

 

1,216,092

 

60

 

6.491%, 9/19/13, Term C2

 

77,623

 

 

 

 

 

6,867,592

 

 

 

 

 

 

 

 Computer Services – 1.1%

 

 

 

$

3,004

 

PanAmSat Corp., 5.00%, 6/30/11, Term A (e)

 

3,000,117

 

3,465

 

Sunguard Data Systems, Inc., 7.66%, 2/11/13

 

3,484,490

 

 

 

 

 

6,484,607

 

 

 

 

 

 

 

 Computer Software – 0.7%

 

 

 

3,000

 

Infor Global Solutions, 5.00%, 8/1/12 (e)

 

3,004,218

 

 

 

Spectrum Brands Corp., Term B,

 

 

 

458

 

8.17%, 2/6/12

 

458,588

 

136

 

8.24%, 2/7/12

 

136,381

 

116

 

8.27%, 2/6/12

 

115,921

 

115

 

8.44%, 2/7/12

 

114,647

 

 

 

 

 

3,829,755

 

 

 

 

 

 

 

 Consumer Products – 1.9%

 

 

 

 

 

Eastman Kodak Co., Term B,

 

 

 

167

 

7.18%, 10/18/12

 

166,762

 

462

 

7.439%, 10/18/12

 

461,931

 

333

 

7.699%, 10/18/12

 

333,524

 

1,021

 

7.75%, 10/18/12

 

1,021,873

 

1,000

 

Education Management Corp., 8.063%, 5/23/13, Term B

 

1,006,406

 

3,656

 

Jarden Corp., 7.499%, 1/24/12, Term B1

 

3,658,360

 

 

 

National Mentor, Inc., Term B,

 

 

 

56

 

7.84%, 6/30/13

 

56,175

 

944

 

7.85%, 6/30/13

 

946,950

 

 

 

Rayovac Corp., Term B,

 

 

 

200

 

7.61%, 2/6/12

 

199,972

 

166

 

8.08%, 2/7/12

 

166,026

 

321

 

8.17%, 2/7/12

 

321,012

 

1,260

 

8.51%, 2/7/12

 

1,261,116

 

 

 

Sealy Mattress Co., Term D,

 

 

 

531

 

6.981%, 4/14/13

 

531,886

 

708

 

7.083%, 4/1/13

 

709,182

 

177

 

7.144%, 4/1/13

 

177,295

 

106

 

7.19%, 4/14/13

 

106,377

 

35

 

9.00%, 4/14/13

 

35,459

 

 

 

 

 

11,160,306

 

 Containers & Packaging – 4.8%

 

 

 

 

 

Graham Packaging Co., Term B,

 

 

 

1,517

 

7.563%, 10/7/11

 

1,523,246

 

1,734

 

7.75%, 10/7/11

 

1,741,261

 

2,166

 

7.876%, 10/7/11

 

2,174,435

 

 

 

Graphic Packaging Corp., Term C,

 

 

 

693

 

7.62%, 8/9/10

 

699,870

 

284

 

7.75%, 8/9/10

 

286,310

 

79

 

7.88%, 8/9/10

 

79,531

 

 

 

 

 

 

 

 

6 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Containers & Packaging (continued)

 

 

 

$

2,080

 

8.01%, 8/8/10

 

$

2,099,610

 

359

 

8.14%, 8/9/10

 

362,660

 

3,950

 

Horizon Lines LLC, 7.75%, 7/7/11

 

3,976,776

 

 

 

Intertape Polymer Group, Inc., Term B,

 

 

 

1,286

 

7.55%, 7/28/11

 

1,295,361

 

187

 

7.76%, 7/28/11

 

188,828

 

 

 

JSG Packaging,

 

 

 

1,000

 

7.882%, 1/12/13, Term B

 

1,005,764

 

1,000

 

8.382%, 1/12/14, Term C

 

1,005,764

 

 

 

Smurfit-Stone Container,

 

 

 

742

 

5.291%, 11/1/10

 

746,584

 

1,825

 

7.50%, 11/1/11, Term B

 

1,835,861

 

1,217

 

7.50%, 11/1/11, Term C

 

1,223,908

 

581

 

7.625%, 11/1/11, Term C

 

584,416

 

547

 

7.625%, 11/1/11, Term C-1

 

550,397

 

588

 

7.625%, 11/1/11, Term B

 

591,531

 

1,430

 

7.688%, 11/1/11, Term B

 

1,438,091

 

 

 

Solo Cup Co., Term B,

 

 

 

1,578

 

7.61%, 2/27/11

 

1,586,219

 

10

 

7.93%, 2/27/11

 

10,093

 

2,339

 

7.999%, 2/27/11

 

2,350,213

 

 

 

 

 

27,356,729

 

 

 

 

 

 

 

 Diversified Manufacturing – 0.2%

 

 

 

 

 

Invensys PLC (e),

 

 

 

479

 

5.00%, 7/17/13, Term Y1

 

480,651

 

521

 

5.00%, 7/17/13, Term Z1

 

521,849

 

 

 

 

 

1,002,500

 

 

 

 

 

 

 

 Drugs & Medical Products – 0.9%

 

 

 

 

 

Warner Chilcott PLC,

 

 

 

7

 

4.729%, 1/18/12, Term B

 

6,718

 

3

 

7.479%, 1/18/12, Term C

 

2,707

 

1

 

7.479%, 1/18/12, Term D

 

1,251

 

308

 

7.53%, 1/18/12

 

309,008

 

307

 

7.61%, 1/4/12

 

307,527

 

1,271

 

7.61%, 1/18/12, Term B

 

1,274,306

 

1,064

 

7.61%, 1/18/12, Term C

 

1,066,560

 

492

 

7.61%, 1/18/12, Term D

 

492,721

 

123

 

7.63%, 1/18/12 (g)

 

123,874

 

1,369

 

7.63%, 1/18/12, Term B

 

1,372,566

 

 

 

 

 

4,957,238

 

 

 

 

 

 

 

 Energy – 3.3%

 

 

 

1,782

 

Alon USA Energy, Inc., 5.00%, 6/8/13 (e)

 

1,788,887

 

 

 

Covanta Energy Corp.,

 

 

 

780

 

5.14%, 6/24/12

 

784,878

 

61

 

7.644%, 6/30/12, Term B

 

61,318

 

498

 

7.71%, 6/30/12, Term B

 

501,126

 

975

 

10.96%, 5/12/13, Term DHC

 

993,141

 

 

 

Edison Midwest, Term B,

 

 

 

1,074

 

7.24%, 4/27/11

 

1,076,483

 

1,477

 

7.25%, 4/27/11

 

1,479,831

 

1,173

 

7.31%, 4/27/11

 

1,175,766

 

4,810

 

Headwaters, Inc., Term B, 7.50%, 4/30/11

 

4,819,391

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 7

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Energy (continued)

 

 

 

 

 

NRG Energy, Inc.,

 

 

 

$

557

 

6.979%, 2/1/13

 

$

559,223

 

2,437

 

7.231%, 2/1/13, Term B

 

2,446,675

 

 

 

Targa Resources, Inc.,

 

 

 

290

 

4.854%, 10/31/11

 

291,178

 

629

 

7.23%, 10/31/12, Term B

 

630,885

 

375

 

7.47%, 10/31/12, Term B

 

376,105

 

1,500

 

7.477%, 10/31/07

 

1,504,419

 

3

 

7.749%, 10/31/12, Term B

 

3,033

 

194

 

7.75%, 10/31/12, Term B

 

194,119

 

 

 

 

 

18,686,458

 

 

 

 

 

 

 

 Entertainment – 2.0%

 

 

 

1,990

 

AMC Entertainment, Inc., 7.525%, 1/5/13

 

1,998,593

 

5,287

 

MGM Studios, 7.749%, 4/8/12, Term B

 

5,301,897

 

 

 

Warner Music Group, Inc., Term B,

 

 

 

194

 

7.205%, 2/28/11

 

194,299

 

1,872

 

7.227%, 2/28/11

 

1,878,389

 

196

 

7.309%, 2/28/11

 

196,261

 

1,208

 

7.32%, 2/28/11

 

1,212,572

 

920

 

7.511%, 2/28/11

 

923,308

 

 

 

 

 

11,705,319

 

 

 

 

 

 

 

 Financial Services – 0.6%

 

 

 

3,248

 

Global Cash Access LLC, 7.15%, 3/10/10, Term B

 

3,265,748

 

 

 

 

 

 

 

 Food Services – 2.0%

 

 

 

 

 

Arby’s Restaurant Group, Inc., Term B,

 

 

 

2,768

 

7.735%, 7/25/12

 

2,769,522

 

911

 

7.749%, 7/25/12

 

911,652

 

1,492

 

Bolthouse Farms, Inc., 7.813%, 11/17/12, Term B

 

1,504,627

 

 

 

Dominos, Inc., Term B,

 

 

 

441

 

6.875%, 6/25/10

 

442,135

 

2,075

 

7.00%, 6/25/10

 

2,078,098

 

 

 

Michael Foods, Inc., Term B,

 

 

 

296

 

7.032%, 11/21/10

 

297,222

 

10

 

7.370%, 11/21/10

 

10,031

 

10

 

7.511%, 11/21/10

 

10,031

 

3,684

 

7.553%, 11/21/10

 

3,695,215

 

 

 

 

 

11,718,533

 

 

 

 

 

 

 

 Funeral Services – 0.1%

 

 

 

 

 

Alderwoods Group, Inc., Term B,

 

 

 

119

 

7.37%, 8/21/06

 

118,909

 

145

 

7.394%, 8/25/06

 

145,655

 

148

 

7.40%, 8/23/06

 

148,219

 

 

 

 

 

412,783

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Healthcare & Hospitals – 3.6%

 

 

 

$

3,950

 

Community Health Systems, Inc., 6.97%, 8/19/11, Term B

 

$

3,955,302

 

 

 

DaVita, Inc.,

 

 

 

305

 

7.11%, 5/16/12

 

305,501

 

965

 

7.125%, 5/16/12

 

968,437

 

365

 

7.19%, 5/16/12

 

366,601

 

228

 

7.21%, 5/16/12

 

229,125

 

4,172

 

7.51%, 5/16/12

 

4,185,357

 

667

 

7.69%, 5/16/12

 

668,664

 

305

 

7.69%, 10/5/12

 

305,500

 

6,000

 

HealthSouth Corp., 8.52%, 2/2/13

 

5,996,664

 

 

 

Psychiatric Solutions, Inc.,

 

 

 

2,000

 

6.91%, 7/7/12, Term B

 

2,001,250

 

1,985

 

Renal Advantage, Inc., 7.84%, 10/6/12, Term B

 

2,002,369

 

 

 

 

 

20,984,770

 

 

 

 

 

 

 

 Hotels/Gaming – 2.7%

 

 

 

 

 

Aladdin Gaming, Inc.,

 

 

 

2,286

 

8.508%, 8/31/10, Term A

 

2,213,485

 

52

 

9.508%, 8/31/10, Term B

 

50,636

 

 

 

MotorCity Casino, Term B,

 

 

 

770

 

7.214%, 7/13/12

 

768,502

 

308

 

7.236%, 7/13/12

 

307,401

 

2,888

 

7.49%, 7/13/12

 

2,881,883

 

 

 

Penn National Gaming, Inc., Term B,

 

 

 

364

 

6.91%, 10/3/12

 

364,954

 

413

 

7.02%, 10/3/12

 

414,223

 

1,164

 

7.24%, 10/3/12

 

1,167,855

 

45

 

7.25%, 10/3/12

 

45,163

 

1,980

 

Resorts International, Inc., 9.50%, 4/26/12, Term B

 

1,995,856

 

1,000

 

Venetian Casino, 7.25%, 2/22/12, Term B

 

1,000,078

 

4,000

 

Wynn Resorts Ltd., 7.545%, 12/14/11, Term B

 

4,007,500

 

 

 

 

 

15,217,536

 

 

 

 

 

 

 

 Household Products – 0.7%

 

 

 

 

 

Springer S.A. (g),

 

 

 

1,000

 

7.994%, 9/16/11, Term B2

 

1,014,210

 

2,800

 

8.071%, 9/16/12, Term C2

 

2,839,787

 

 

 

 

 

3,853,997

 

 

 

 

 

 

 

 Leasing – 0.3%

 

 

 

 

 

United Rentals, Inc.,

 

 

 

333

 

5.010%, 2/14/11, Term LC

 

333,588

 

1,626

 

7.35%, 2/14/11, Term B

 

1,630,410

 

 

 

 

 

1,963,998

 

 

 

 

 

 

 

 Machinery – 0.5%

 

 

 

2,258

 

Agco Corp., 7.249%, 6/15/09, Term B

 

2,264,973

 

 

 

Mueller Industries, Inc., Term B,

 

 

 

119

 

7.36%, 9/28/12

 

119,792

 

126

 

7.477%, 9/28/12

 

126,500

 

381

 

7.735%, 9/28/12

 

383,333

 

65

 

7.749%, 9/28/12

 

65,881

 

67

 

7.868%, 9/28/12

 

67,083

 

 

 

 

 

3,027,562

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 9

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Manufacturing – 1.2%

 

 

 

$

1,942

 

Berry Plastics Corp., 7.15%, 12/2/11

 

$

1,942,023

 

3,000

 

Bombardier, Inc., 8.24%, 6/28/13, Term B

 

2,998,125

 

1,259

 

Lucite International, 5.00%, 5/26/13, Term B (e)

 

1,269,793

 

 

 

 

 

6,209,941

 

 

 

 

 

 

 

 Measuring Instruments – 0.9%

 

 

 

 

 

Dresser Rand,

 

 

 

308

 

6.778%, 10/29/11, Term B

 

310,197

 

330

 

6.964%, 10/29/11, Term B

 

332,524

 

256

 

7.11%, 10/29/11, Term B

 

258,498

 

256

 

7.618%, 10/29/11, Term B

 

258,498

 

 

 

Dresser Unsecured Term Loan

 

 

 

4,000

 

8.65%, 3/1/10, Term C3

 

4,055,832

 

 

 

 

 

5,215,549

 

 

 

 

 

 

 

 Metals & Mining – 0.3%

 

 

 

 

 

Novelis, Inc.,

 

 

 

673

 

6.88%, 1/7/12, Term B2

 

677,442

 

1,169

 

7.38%, 1/7/12, Term B

 

1,176,610

 

 

 

 

 

1,854,052

 

 

 

 

 

 

 

 Multi-Media – 7.2%

 

 

 

2,000

 

American Media Operations, Inc., 8.12%, 1/30/13

 

2,018,250

 

997

 

Atlantic Broadband, Inc., 7.99%, 8/4/12, Term B

 

1,006,228

 

1,278

 

Cablevision, 6.988%, 3/29/13, Term B

 

1,272,099

 

 

 

Cablevision Systems Corp., Term B,

 

 

 

857

 

6.88%, 3/29/13

 

853,042

 

857

 

7.258%, 3/29/13

 

853,042

 

5,500

 

Cebridge Connections, Inc., 7.739%, 11/6/13

 

5,471,026

 

10,500

 

Charter Communications Holdings LLC, 8.125%, 4/25/13, Term B

 

10,528,182

 

2,992

 

DirectTV Holdings LLC, 6.90%, 4/13/13, Term B

 

2,993,482

 

2,876

 

Insight Midwest Holdings LLC, 7.438%, 12/31/09, Term C

 

2,881,925

 

3,000

 

NTL Investment, 1/6/13, Term B (e)

 

3,014,532

 

2,970

 

Primedia, 7.875%, 9/30/13, Term B

 

2,932,504

 

3,950

 

Telcordia Technologies, Inc., 7.727%, 9/9/12, Term B

 

3,816,688

 

 

 

Young Broadcasting, Inc., Term B,

 

 

 

1,001

 

7.688%, 5/2/12

 

997,968

 

2,963

 

7.75%, 11/3/12

 

2,953,985

 

 

 

 

 

41,592,953

 

 

 

 

 

 

 

 Oil & Gas – 1.6%

 

 

 

6,000

 

El Paso Corp., 6/15/09 (f)

 

5,974,998

 

1,500

 

Kinetic Concepts, Inc., 7.25%, 8/11/10, Term B

 

1,508,912

 

 

 

Vetco International,

 

 

 

750

 

8.25%, 1/16/12, Term B

 

755,234

 

750

 

8.75%, 1/16/13, Term C

 

757,344

 

 

 

 

 

8,996,488

 

 

 

 

 

 Paper/Paper Products – 2.7%

 

 

 

 

 

Appleton Papers, Inc.,

 

 

 

1,011

 

7.44%, 6/11/10

 

1,015,579

 

1,085

 

7.68%, 8/31/10

 

1,089,409

 

 

 

Boise Cascade Holdings LLC, Term D,

 

 

 

1,286

 

7.125%, 10/28/11

 

1,289,220

 

1,071

 

7.25%, 10/28/11

 

1,074,350

 

 

 

 

 

 

10 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Paper/Paper Products (continued)

 

 

 

 

 

Buckeye Technologies, Inc., Term B,

 

 

 

$

411

 

6.89%, 11/4/10

 

$

411,402

 

136

 

7.01%, 11/4/10

 

136,215

 

144

 

7.04%, 4/15/10

 

143,991

 

162

 

7.07%, 11/4/10

 

161,990

 

411

 

7.17%, 11/4/10

 

411,402

 

350

 

7.26%, 11/4/10

 

349,692

 

87

 

7.50%, 11/4/10

 

87,423

 

41

 

9.25%, 4/15/10

 

41,140

 

 

 

Georgia-Pacific Corp.,

 

 

 

2,476

 

7.30%, 12/20/12, Term B

 

2,476,282

 

155

 

7.485%, 12/23/12, Term B

 

154,768

 

603

 

7.499%, 12/23/12, Term B

 

605,702

 

5,750

 

8.30%, 12/23/13, Term C

 

5,806,729

 

 

 

 

 

15,255,294

 

 

 

 

 

 

 

 Printing/Publishing – 1.9%

 

 

 

 

 

Dex Media East LLC, Term B,

 

 

 

568

 

6.66%, 5/8/09

 

564,988

 

243

 

6.69%, 5/8/09

 

241,878

 

1,157

 

6.80%, 5/8/09

 

1,151,579

 

223

 

7.00%, 5/8/09

 

221,820

 

 

 

Dex Media West LLC, Term B-2,

 

 

 

182

 

6.67%, 3/9/10

 

181,461

 

989

 

6.72%, 3/9/10

 

984,419

 

500

 

6.80%, 3/9/10

 

497,756

 

333

 

6.88%, 3/9/10

 

331,910

 

490

 

6.90%, 3/9/10

 

487,986

 

167

 

6.95%, 3/9/10

 

166,314

 

54

 

7.00%, 3/9/10

 

54,248

 

 

 

RH Donnelly Corp., Term D (g),

 

 

 

404

 

6.72%, 6/30/11

 

405,264

 

538

 

6.74%, 6/30/11

 

540,352

 

673

 

6.83%, 6/30/11

 

675,440

 

135

 

6.88%, 6/30/11

 

134,792

 

404

 

6.90%, 6/30/11

 

405,264

 

269

 

6.92%, 6/30/11

 

270,176

 

404

 

6.95%, 6/30/11

 

405,264

 

846

 

7.00%, 6/30/11

 

849,428

 

135

 

7.01%, 6/30/11

 

135,088

 

 

 

Seat Pagine Gialle SpA,

 

 

 

1,000

 

3.001%, 5/25/12, Term A (e)

 

1,279,194

 

693

 

3.001%, 6/8/13, Term B

 

893,020

 

 

 

 

 

10,877,641

 

 

 

 

 

 

 

 Recreation – 2.4%

 

 

 

 

 

Amadeus Global Travel,

 

 

 

1,000

 

5.813%, 4/8/13, Term B

 

1,293,304

 

1,000

 

6.313%, 4/8/14, Term C

 

1,298,269

 

$

1,573

 

8.249%, 4/8/13, Term B

 

1,589,013

 

177

 

8.249%, 4/8/13, Term B2

 

179,308

 

1,573

 

8.749%, 4/8/14, Term C

 

1,595,893

 

177

 

8.749%, 4/8/14, Term C2

 

180,084

 

4,000

 

Cedar Fair L.P., 5.00%, 6/13/12 (e)

 

4,015,832

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 11

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Recreation (continued)

 

 

 

 

 

Six Flags Theme Parks, Inc., Term B,

 

 

 

$

669

 

8.16%, 6/30/09

 

$

675,173

 

1,106

 

8.48%, 6/30/09

 

1,116,450

 

 

 

Worldspan L.P., Term B,

 

 

 

1,604

 

7.938%, 2/11/10

 

1,596,380

 

77

 

8.00%, 2/11/10

 

76,739

 

62

 

8.063%, 2/11/10

 

61,391

 

116

 

8.188%, 2/11/10

 

115,108

 

270

 

8.25%, 2/11/10

 

267,485

 

 

 

 

 

14,060,429

 

 

 

 

 

 

 

 Retail – 0.9%

 

 

 

 

 

Jean Coutu Group, Inc.

 

 

 

1,804

 

8.00%, 7/30/11

 

1,809,014

 

2,000

 

8.00%, 7/30/11 (e)

 

2,005,796

 

1,500

 

Neiman Marcus Group, Inc., 7.77%, 4/6/13

 

1,513,938

 

 

 

 

 

5,328,748

 

 

 

 

 

 

 

 Semi-Conductors – 0.5%

 

 

 

2,955

 

On Semiconductor Corp., 7.75%, 12/3/11, Term G

 

2,955,608

 

 

 

 

 

 

 

 Telecommunications – 3.8%

 

 

 

 

 

Centennial Cellular Communications Corp.,

 

 

 

3,668

 

7.749%, 2/9/11

 

3,684,017

 

 

 

Consolidated Communications, Inc., Term B,

 

 

 

1,150

 

7.40%, 9/18/11

 

1,146,553

 

3,294

 

7.45%, 10/14/11

 

3,283,310

 

2,000

 

Crown Castle International, 7.65%, 6/1/14, Term B

 

2,011,250

 

 

 

Hawaiian Telcom Communications, Inc.,

 

 

 

500

 

7.75%, 4/30/12, Term A

 

499,687

 

1,996

 

7.75%, 10/31/12, Term B

 

2,006,958

 

 

 

Mediacom Broadband LLC, Term D,

 

 

 

1,818

 

6.90%, 2/28/14

 

1,810,653

 

1,364

 

7.002%, 2/28/14

 

1,357,990

 

1,818

 

7.37%, 2/28/14

 

1,810,653

 

 

 

Nordic Telephone Co. Holdings ApS (e),

 

 

 

1,700

 

5.536%, 11/30/14, Term B

 

2,193,048

 

1,700

 

6.036%, 11/30/14, Term C

 

2,201,183

 

 

 

Valor Telecommunications Enterprises LLC,

 

 

 

$

26

 

7.249%, 2/15/12, Term B

 

26,507

 

 

 

 

 

22,031,809

 

 

 

 

 

 

 

 Transportation – 0.5%

 

 

 

3,000

 

Fleetpride Corp., 8.586%, 6/6/13, Term B

 

3,005,625

 

 

 

 

 

 

 

 Utilities – 1.1%

 

 

 

 

 

AES Corp., Term B,

 

 

 

786

 

6.75%, 4/30/08

 

788,783

 

786

 

7.50%, 8/10/11

 

788,783

 

 

 

Reliant Energy, Inc.,

 

 

 

2,968

 

7.655%, 4/30/10, Term B

 

2,972,806

 

1,625

 

7.775%, 4/30/10

 

1,626,713

 

 

 

 

 

6,177,085

 

 

 

 

 

 

 

 

 

 

12 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Waste Disposal – 1.2%

 

 

 

 

 

Allied Waste North America, Inc.,

 

 

 

$

1,983

 

5.042%, 1/15/12

 

$

1,975,331

 

841

 

6.72%, 1/15/12

 

837,910

 

2,463

 

7.20%, 1/15/12

 

2,454,252

 

1,802

 

7.27%, 1/15/12

 

1,795,794

 

 

 

 

 

7,063,287

 

 

 

 

 

 

 

 Wholesale – 0.7%

 

 

 

 

 

Roundy’s, Inc., Term B,

 

 

 

2,000

 

8.17%, 10/27/11

 

2,020,834

 

1,980

 

8.29%, 10/27/11

 

2,000,626

 

 

 

 

 

4,021,460

 

 

 

 

 

 

 

 Wire & Cable Products – 2.5%

 

 

 

 

 

Pirelli Cable S.A.,

 

 

 

1,000

 

5.566%, 7/28/13, Term B

 

1,281,574

 

1,000

 

6.066%, 6/23/14, Term C

 

1,295,292

 

1,500

 

9.888%, 6/23/12, Term 2

 

1,942,938

 

 

 

UPC Broadband Holding B.V.,

 

 

 

2,250

 

5.507%, 3/31/13, Term J1

 

2,867,119

 

2,250

 

5.509%, 12/31/13, Term K1

 

2,870,404

 

$

2,000

 

7.64%, 3/31/13, Term J2

 

1,998,142

 

2,000

 

7.64%, 12/31/13, Term K2

 

1,998,142

 

 

 

 

 

14,253,611

 

Total Senior Loans (cost-$402,724,619)

 

404,455,216

 

 

 

 

 

 CORPORATE BONDS & NOTES – 21.4%

 

 

 

 

 

 

 

Credit Rating

 

 

 

 

 

 

 

(Moody’s/S&P)*

 

 

 

 

 

 

 

 

 

 

 

 Airlines – 0.5%

 

 

 

 

 

939

 

Delta Air Lines, Inc., 7.379%, 5/18/10, Ser. 00-1

 

Ba2/BB

 

943,635

 

 

 

JetBlue Airways Corp., FRN,

 

 

 

 

 

1,425

 

8.27%, 5/15/10, Ser. 04-2

 

Ba3/BB

 

1,425,816

 

495

 

9.579%, 9/15/09, Ser. 04-1

 

Ba3/BB

 

498,152

 

 

 

 

 

 

 

2,867,603

 

 

 

 

 

 

 

 

 

 Computer Services – 0.4%

 

 

 

 

 

2,000

 

Sungard Data Systems, Inc., 9.431%, 8/15/13, FRN

 

B-/B3

 

2,090,000

 

 

 

 

 

 

 

 

 

 Financial Services – 5.7%

 

 

 

 

 

1,500

 

Chukchansi Economic Dev. Auth., 8.78%, 11/15/12, FRN (d)

 

B2/BB-

 

1,533,750

 

1,400

 

Corsair Netherlands B.V., 11.359%, 3/3/16, FRN (g)

 

NR/NR

 

1,410,801

 

10,000

 

Ford Motor Credit Co., 8.149%, 11/2/07, FRN

 

Ba2/BB-

 

10,016,270

 

7,000

 

General Motors Acceptance Corp., 7.431%, 12/1/14, FRN

 

Ba1/BB

 

6,893,810

 

3,000

 

Hellas Telecommunications Luxembourg V, 6.59%, 10/15/12, FRN

 

NR/NR

 

3,938,518

 

$

4,000

 

Hexion US Finance Corp., 10.257%, 7/15/10, FRN

 

B3/B

 

4,100,000

 

 

 

Universal City Florida Holding Co.,

 

 

 

 

 

2,000

 

8.375%, 5/1/10

 

B3/B-

 

2,030,000

 

2,500

 

9.899%, 5/1/10, FRN

 

B3/B-

 

2,581,250

 

 

 

 

 

 

 

32,504,399

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 13

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

 

 

 

 

 

 Healthcare & Hospitals – 0.4%

 

 

 

 

 

$

2,000

 

HCA, Inc., 5.50%, 12/1/09

 

Ba2/BB+

 

$

1,970,000

 

1,500

 

Rotech Healthcare, Inc., 9.50%, 4/1/12

 

B3/CCC

 

1,192,500

 

 

 

 

 

 

 

3,162,500

 

 

 

 

 

 

 

 

 

 Hotels/Gaming – 0.3%

 

 

 

 

 

2,000

 

Mandalay Resort Group, 7.625%, 7/15/13

 

Ba3/B+

 

1,980,000

 

 

 

 

 

 

 

 

 

 Insurance – 0.3%

 

 

 

 

 

1,500

 

Parametric Re Ltd., 9.57%, 5/19/08, FRN (d)

 

Ba2/NR

 

1,518,195

 

 

 

 

 

 

 

 

 

 Multi-Media – 4.4%

 

 

 

 

 

 

 

Cablevision Systems Corp., Ser. B,

 

 

 

 

 

2,000

 

8.00%, 4/15/12

 

B3/B+

 

1,990,000

 

5,000

 

9.62%, 4/1/09, FRN

 

B3/B+

 

5,350,000

 

 

 

CCO Holdings LLC,

 

 

 

 

 

1,000

 

8.75%, 11/15/13

 

B3/CCC-

 

997,500

 

4,000

 

9.454%, 12/15/10, FRN

 

B3/CCC-

 

4,150,000

 

4,000

 

Charter Communications Holdings II LLC, 10.25%, 9/15/10

 

Caa1/CCC-

 

4,060,000

 

1,800

 

DirecTV Holdings LLC, 8.375%, 3/15/13

 

Ba2/BB-

 

1,894,500

 

5,665

 

EchoStar DBS Corp., 8.758%, 10/1/08, FRN

 

Ba3/BB-

 

5,757,056

 

1,000

 

Paxson Communications Corp., 11.757%, 1/15/13, FRN (d)

 

B3/CCC-

 

1,017,500

 

 

 

 

 

 

 

25,216,556

 

 

 

 

 

 

 

 

 

 Paper/Paper Products – 1.5%

 

 

 

 

 

 

 

Abitibi-Consolidated, Inc.,

 

 

 

 

 

2,000

 

5.25%, 6/20/08

 

B1/B+

 

1,900,000

 

1,000

 

8.829%, 6/15/11, FRN

 

B1/B+

 

977,500

 

3,000

 

Boise Cascade LLC, 8.382%, 10/15/12, FRN

 

B1/B+

 

3,015,000

 

1,000

 

Bowater, Inc., 8.329%, 3/15/10, FRN

 

B1/B+

 

1,012,500

 

1,500

 

Verso Paper Holdings LLC, 8/1/14, FRN (b)(d)(e)(f)

 

B1/B+

 

1,516,875

 

 

 

 

 

 

 

8,421,875

 

 

 

 

 

 

 

 

 

 Telecommunications – 7.7%

 

 

 

 

 

4,000

 

Cincinnati Bell, Inc., 8.375%, 1/15/14

 

B3/B-

 

3,940,000

 

2,500

 

Hawaiian Telcom Communications Inc., 10.789%, 5/1/13,

 

 

 

 

 

 

 

Ser. B, FRN

 

CCC+/B3

 

2,543,750

 

 

 

Intelsat Subsidiary Holding Co., Ltd., FRN,

 

 

 

 

 

2,500

 

10.484%, 1/15/12

 

B2/B+

 

2,550,000

 

3,000

 

11.64%, 6/15/13 (d)

 

B/CAA1

 

3,078,750

 

2,500

 

New Skies Satellites NV, 10.414%, 11/1/11, FRN

 

B1/B-

 

2,593,750

 

2,950

 

Nordic Telephone Co. Holdings ApS, 8.352%, 5/1/16, FRN (d)

 

NR/NR

 

3,934,051

 

$

2,700

 

Nortel Networks Ltd., 9.73%, 7/15/11, FRN (d)

 

B-/B3

 

2,727,000

 

2,000

 

Qwest Capital Funding, Inc., 7.90%, 8/15/10

 

B3/B

 

2,025,000

 

12,000

 

Qwest Communications International, Inc., 8.67%, 2/15/09, FRN

 

B2/B

 

12,285,000

 

3,500

 

Rogers Wireless, Inc., 8.454%, 12/15/10, FRN

 

Ba2/BB

 

3,605,000

 

2,000

 

Rural Cellular Corp., 8.25%, 3/15/12

 

B2/B

 

2,075,000

 

3,000

 

Time Warner Telecom Holdings, Inc., 9.17%, 2/15/11, FRN

 

B2/CCC+

 

3,052,500

 

 

 

 

 

 

 

44,409,801

 

 

 

 

 

 

 

 

 

 Wire & Cable Products – 0.2%

 

 

 

 

 

1,000

 

Superior Essex Communications Group, 9.00%, 4/15/12

 

B3/B

 

1,020,000

 

Total Corporate Bonds & Notes (cost-$120,922,591)

 

 

 

123,190,929

 

 

 

 

 

 

 

 MORTGAGE-BACKED SECURITIES – 0.4%

 

 

 

 

 

2,317

 

Mellon Residential Funding Corp.,

 

 

 

 

 

 

 

5.719%, 11/15/31, CMO, FRN (cost-$2,316,970)

 

Aaa/AAA

 

2,320,738

 

 

 

 

 

 

 

 

14 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 ASSET-BACKED SECURITIES – 0.4%

 

 

 

 

 

 

 

Credit Suisse First Boston Mortgage Securities Corp., FRN,

 

 

 

 

 

$

474

 

5.735%, 7/25/32

 

Aaa/AAA

 

$

474,427

 

539

 

5.755%, 8/25/32

 

Aaa/AAA

 

539,907

 

1,026

 

GSAMP Trust, 5.675%, 3/25/34, FRN

 

Aaa/AAA

 

1,028,791

 

222

 

Jade CBO Ltd., 7.67%, 10/24/11 (d)(g)

 

B2/NR

 

169,102

 

Total Asset-Backed Securities (cost-$2,208,054)

 

 

 

2,212,227

 

 

 

 

 

 

 

 PREFERRED STOCK (b) (d) – 0.5%

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Financial Services – 0.5%

 

 

 

 

 

30

 

Richmond Cnty. Capital Corp., 8.70%, FRN (cost-$3,068,307)

 

NR/NR

 

3,018,750

 

 

 

 

 

 

 

 

 

 SHORT-TERM INVESTMENTS – 6.8%

 

 

 

 

 

Principal
Amount

 

 

 

 

 

 

 

   (000)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Commercial Paper (g) – 2.3%

 

 

 

 

 

 Banking – 0.4%

 

 

 

 

 

$

2,600

 

Barclays U.S. Funding, 5.385%, 10/26/06

 

NR/NR

 

2,566,564

 

 

 

 

 

 

 

 

 

 Financial Services – 1.9%

 

 

 

 

 

2,000

 

General Electric Capital Corp., 5.35%, 10/26/06

 

NR/NR

 

1,974,280

 

8,900

 

UBS Finance, Inc., 5.355%, 10/24/06

 

NR/NR

 

8,788,216

 

 

 

 

 

 

 

10,762,496

 

Total Commercial Paper (cost-$13,329,787)

 

 

 

13,329,060

 

 

 

 

 

 

 

 Corporate Notes – 1.1%

 

 

 

 

 

 

 

 

 

 

 

 Financial Services – 0.7%

 

 

 

 

 

4,000

 

General Motors Acceptance Corp., 6.457%, 7/16/07, FRN

 

Ba1/BB

 

3,975,756

 

 

 

 

 

 

 

 

 

 Forestry – 0.3%

 

 

 

 

 

2,000

 

GP Canada Finance Co., 7.20%, 12/15/06 (d)

 

B2/B

 

2,030,000

 

 

 

 

 

 

 

 

 

 Telecommunications – 0.1%

 

 

 

 

 

500

 

Qwest Capital Funding, Inc., 7.75%, 8/15/06

 

B3/B

 

500,000

 

Total Corporate Notes (cost-$6,372,370)

 

 

 

6,505,756

 

 

 

 

 

 

 

 U.S. Treasury Bills (i) – 0.4%

 

 

 

 

 

2,180

 

4.69%-4.82%, 8/31/06-9/14/06 (cost-$2,168,176)

 

 

 

2,168,176

 

 

 

 

 

 

 

 

 

 Repurchase Agreements – 3.0%

 

 

 

 

 

5,000

 

Lehman Brothers Holdings,

 

 

 

 

 

 

 

dated 7/31/06, 5.23%, due 8/1/06,

 

 

 

 

 

 

 

proceeds $5,000,726; collateralized by

 

 

 

 

 

 

 

U.S. Treasury Note, 5.125%, 6/30/08, valued at

 

 

 

 

 

 

 

$5,105,356 including accrued interest

 

 

 

5,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 15

 


 

PIMCO Floating Rate Income Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Repurchase Agreements (continued)

 

 

 

$

12,020

 

State Street Bank & Trust Co.,

 

 

 

 

 

dated 7/31/06, 4.90%, due 8/1/06,

 

 

 

 

 

proceeds $12,021,636; collateralized by

 

 

 

 

 

Fannie Mae, 5.00%, 1/15/07, valued at

 

 

 

 

 

$12,263,504 including accrued interest

 

$

12,020,000

 

Total Repurchase Agreements (cost-$17,020,000)

 

17,020,000

 

Total Short-Term Investments (cost-$38,890,333)

 

39,022,992

 

 

 

 

 

 

 

 OPTIONS PURCHASED (j) – 0.0%

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

 

 

 Call Options – 0.0%

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

930

 

strike price $112, expires 8/25/06

 

14,531

 

1,472

 

strike price $113, expires 8/25/06

 

23,000

 

 

 

U.S. Treasury Notes 5 yr. Futures, Chicago Board of Trade,

 

 

 

250

 

strike price $108, expires 8/25/06

 

3,906

 

 

 

 

 

41,437

 

 

 

 

 

 Put Options – 0.0%

 

 

 

 

 

Eurodollar Futures, Chicago Mercantile Exchange,

 

 

 

324

 

strike price $90.50, expires 9/17/07

 

2,025

 

60

 

strike price $91.50, expires 6/18/07

 

375

 

335

 

strike price $91.75, expires 3/19/07

 

2,094

 

53

 

strike price $92.50, expires 12/18/06

 

331

 

136

 

strike price $92.75, expires 12/18/06

 

850

 

613

 

strike price $93, expires 12/18/06

 

3,831

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

420

 

strike price $98, expires 8/25/06

 

6,563

 

 

 

 

 

16,069

 

Total Options Purchased (cost-$76,265)

 

57,506

 

Total Investments before options written (cost-$570,207,139) – 100.0%

 

574,278,358

 

 

 

 

 

 

 

 OPTIONS WRITTEN (j) – (0.0)%

 

 

 

 

 

 

 

 

 

 Call Options – (0.0)%

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

630

 

strike price $107, expires 8/25/06

 

(68,906

)

1,258

 

strike price $108, expires 8/25/06

 

(39,313

)

 

 

 

 

(108,219

)

 

 

 

 

 

 

 Put Options – (0.0)%

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

420

 

strike price $103, expires 8/25/06

 

(6,562

)

Total Options Written (premiums received-$692,100)

 

(114,781

)

Total Investments net of options written (cost-$569,515,039) – 100.0%

 

$

574,163,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 SENIOR LOANS (a)(b)(c) – 71.9%

 

 

 

 

 

 

 

 

 

 Aerospace – 1.1%

 

 

 

$

6,357

 

K & F Industries, Inc., 7.40%, 11/18/12, Term C

 

$

6,367,548

 

 

 

Standard Aero Holdings, Inc., Term B,

 

 

 

525

 

7.60%, 8/24/12

 

525,019

 

1,574

 

7.60%, 8/30/12

 

1,575,058

 

3,148

 

7.682%, 8/24/12

 

3,150,115

 

3,000

 

Transdigm, Inc., 7.449%, 6/23/13, Term B

 

3,010,782

 

 

 

 

 

14,628,522

 

 

 

 

 

 

 

 Airlines – 0.5%

 

 

 

 

 

United Airlines, Inc.,

 

 

 

5,250

 

8.625%, 2/1/12, Term B (g)

 

5,343,945

 

750

 

9.188%, 1/9/11, Term DD

 

759,453

 

 

 

 

 

6,103,398

 

 

 

 

 

 

 

 Apparel & Textiles – 0.2%

 

 

 

 

 

Simmons Co., Term D,

 

 

 

1,388

 

7.125%, 12/19/11

 

1,394,399

 

215

 

7.688%, 12/19/11

 

216,186

 

161

 

7.75%, 12/19/11

 

161,495

 

199

 

7.812%, 12/19/11

 

200,616

 

538

 

7.875%, 12/19/11

 

540,465

 

81

 

9.50%, 12/19/11

 

81,070

 

 

 

 

 

2,594,231

 

 

 

 

 

 

 

 Automotive – 0.9%

 

 

 

2,000

 

Dura Operating Corp., 9.109%, 4/28/11

 

2,015,000

 

 

 

Hertz Corp.,

 

 

 

556

 

5.324%, 12/21/12

 

558,948

 

1,901

 

7.41%, 12/21/12, Term B

 

1,912,637

 

1,872

 

7.58%, 12/21/12, Term B

 

1,883,270

 

2,363

 

7.60%, 12/21/12, Term B

 

2,377,833

 

284

 

7.69%, 12/21/12, Term B

 

285,490

 

 

 

Lear Corp.,

 

 

 

900

 

7.93%, 3/23/12

 

895,031

 

2,100

 

7.999%, 3/23/12

 

2,088,406

 

 

 

 

 

12,016,615

 

 

 

 

 

 

 

 Automotive Products – 4.7%

 

 

 

8,722

 

Affinia Group, 8.50%, 11/30/11, Term B

 

8,752,634

 

 

 

Cooper Standard Automotive, Inc.,

 

 

 

3,952

 

8.00%, 12/23/11, Term B

 

3,971,755

 

6,358

 

8.00%, 12/23/11, Term C

 

6,389,345

 

 

 

Delphi Corp.,

 

 

 

1,500

 

8.188%, 10/8/07

 

1,516,875

 

6,743

 

13.75%, 6/14/11, Term B2

 

7,004,688

 

6,000

 

Fed Mogul Corp., 7.50%, 11/23/06, Term B

 

6,022,500

 

 

 

Goodyear Tire & Rubber Co.,

 

 

 

10,500

 

7.954%, 4/30/10

 

10,560,155

 

2,000

 

8.704%, 4/30/10

 

2,004,108

 

6,175

 

Polypore, Inc., 8.40%, 11/12/11, Term B

 

6,236,503

 

 

 

Tenneco Automotive, Inc.,

 

 

 

2,610

 

7.19%, 12/12/10, Term B

 

2,629,966

 

1,141

 

7.346%, 12/12/10, Term B1

 

1,149,837

 

5,910

 

TRW Automotive, Inc., 6.75%, 10/31/10, Term E

 

5,901,135

 

 

 

 

 

62,139,501

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 17

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Banking – 0.6%

 

 

 

 

 

Aster Co., Ltd. (g),

 

 

 

2,800

 

5.563%, 9/19/13, Term B

 

$

3,599,400

 

$

2,137

 

7.999%, 9/19/13, Term B1

 

2,155,518

 

2,214

 

8.499%, 9/19/14, Term C1

 

2,242,357

 

 

 

 

 

7,997,275

 

 

 

 

 

 

 

 Building/Construction – 1.9%

 

 

 

 

 

Masonite International Corp., Term B,

 

 

 

9,787

 

7.49%, 4/6/13

 

9,613,334

 

88

 

7.499%, 4/6/13

 

86,207

 

9,334

 

Nortek, Inc., 7.35%, 8/27/11

 

9,320,627

 

6,171

 

UGS Corp., 7.485%, 3/31/12, Term B

 

6,177,296

 

 

 

 

 

25,197,464

 

 

 

 

 

 

 

 Chemicals – 6.3%

 

 

 

 

 

Basell NV,

 

 

 

364

 

5.324%, 9/15/13, Term B

 

470,345

 

937

 

5.324%, 9/15/13, Term B4

 

1,210,174

 

355

 

5.324%, 9/15/13, Term B6

 

458,483

 

556

 

5.419%, 9/15/13, Term B

 

718,096

 

951

 

5.419%, 9/15/13, Term B1

 

1,228,166

 

186

 

5.419%, 9/15/13, Term B4

 

240,633

 

807

 

5.419%, 9/15/13, Term B5

 

1,042,957

 

1,819

 

5.824%, 9/15/14, Term C4

 

2,360,619

 

161

 

5.824%, 9/15/14, Term C6

 

208,674

 

1,174

 

5.919%, 9/15/14, Term C

 

1,522,918

 

672

 

5.919%, 9/15/14, Term C4

 

870,938

 

831

 

5.919%, 9/15/14, Term C5

 

1,077,845

 

2,000

 

Brenntag AG, 12/23/13, Term B5 (e)

 

2,565,061

 

$

9,630

 

Celanese AG, 7.499%, 4/6/11, Term B

 

9,659,180

 

4,833

 

Chart Industries, 7.188%, 10/14/12, Term B

 

4,840,888

 

 

 

Cognis B.V., Term B1

 

 

 

1,000

 

8.17%, 5/12/12

 

978,002

 

3,000

 

8.17%, 5/12/12 (e)

 

3,048,750

 

2,794

 

Cognis Deutschland GMBH, 5.346%, 5/12/11, Term A

 

3,570,745

 

 

 

Hercules, Inc., Term B,

 

 

 

$

56

 

6.999%, 10/8/10

 

56,094

 

1,311

 

7.01%, 10/8/10

 

1,314,696

 

4,825

 

Huntsman International LLC, 7.15%, 8/16/12

 

4,807,989

 

 

 

INEOS Holdings Ltd.,

 

 

 

5,000

 

7.339%, 10/7/12, Term A4

 

5,025,000

 

2,000

 

7.339%, 10/7/13, Term B2

 

2,013,172

 

2,000

 

7.839%, 10/7/14, Term C2

 

2,022,204

 

 

 

Innophos, Inc., Term B,

 

 

 

1,616

 

7.60%, 8/13/10

 

1,620,405

 

1,818

 

7.75%, 8/13/10

 

1,822,727

 

5,486

 

KRATON Polymers Group LLC, 7.438%, 5/11/13

 

5,486,250

 

7,865

 

Lyondell-CITGO Refining L.P., 7.499%, 5/21/07, Term B

 

7,884,247

 

 

 

Nalco Co., Term B,

 

 

 

2,442

 

6.48%, 11/1/10

 

2,443,072

 

2,768

 

7.10%, 11/1/10

 

2,768,815

 

3,508

 

7.23%, 11/4/10

 

3,509,432

 

2,963

 

PQ Corp. Holdings, Inc., 7.50%, 2/11/12, Term B

 

2,968,671

 

2,520

 

VWR International, Inc., 7.77%, 4/7/11, Term B

 

2,529,174

 

 

 

 

 

82,344,422

 

 

 

 

 

 

18 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Commercial Products – 1.5%

 

 

 

 

 

Alliance Laundry Holdings LLC, Term B,

 

 

 

$

1,978

 

7.40%, 1/27/12

 

$

1,991,765

 

1,511

 

7.40%, 1/27/12 (e)

 

1,511,530

 

 

 

iPayment, Inc.,

 

 

 

388

 

7.61%, 12/27/12

 

388,349

 

1,607

 

7.75%, 12/27/12

 

1,606,650

 

 

 

Rexel S.A.,

 

 

 

3,500

 

7.75%, 3/16/13, Term B1

 

3,546,704

 

3,500

 

8.25%, 3/16/14, Term C1

 

3,562,454

 

 

 

Sigmakalon,

 

 

 

985

 

5.491%, 6/30/12, Term A

 

1,257,076

 

913

 

5.991%, 9/19/12, Term B1

 

1,175,418

 

1,587

 

5.991%, 9/19/12, Term B2

 

2,044,867

 

2,349

 

6.491%, 9/19/13, Term C1

 

3,038,796

 

151

 

6.491%, 9/19/13, Term C2

 

195,491

 

 

 

 

 

20,319,100

 

 

 

 

 

 

 

 Computer Services – 1.3%

 

 

 

$

5,603

 

PamAmSat Corp., 5.00%, 6/30/11, Term A (e)

 

5,595,915

 

11,880

 

Sunguard Data Systems, Inc., 7.66%, 2/11/13

 

11,946,825

 

 

 

 

 

17,542,740

 

 

 

 

 

 

 

 Computer Software – 0.6%

 

 

 

6,000

 

Infor Global Solutions, 5.00%, 8/1/12 (e)

 

6,008,436

 

 

 

Spectrum Brands Corp., Term B,

 

 

 

1,298

 

8.17%, 2/6/12

 

1,300,098

 

386

 

8.24%, 2/7/12

 

386,642

 

328

 

8.27%, 2/6/12

 

328,636

 

325

 

8.44%, 2/7/12

 

325,024

 

 

 

 

 

8,348,836

 

 

 

 

 

 

 

 Consumer Products – 2.0%

 

 

 

 

 

Eastman Kodak Co., Term B,

 

 

 

690

 

7.18%, 10/18/12

 

690,376

 

1,911

 

7.439%, 10/18/12

 

1,912,340

 

1,380

 

7.699%, 10/18/12

 

1,380,751

 

4,228

 

7.75%, 10/18/12

 

4,230,431

 

3,000

 

Education Management Corp., 8.063%, 5/23/13, Term B

 

3,019,218

 

9,486

 

Jarden Corp., 7.499%, 1/24/12, Term B1

 

9,492,292

 

 

 

Rayovac Corp., Term B,

 

 

 

566

 

7.61%, 2/6/12

 

566,921

 

470

 

8.08%, 2/7/12

 

470,684

 

909

 

8.17%, 2/7/12

 

910,069

 

3,571

 

8.51%, 2/7/12

 

3,575,270

 

 

 

 

 

26,248,352

 

 

 

 

 

 

 

 Containers & Packaging – 3.7%

 

 

 

 

 

Graham Packaging Co., Term B,

 

 

 

2,760

 

7.563%, 10/7/11

 

2,770,581

 

3,155

 

7.75%, 10/7/11

 

3,167,120

 

3,939

 

7.875%, 10/7/11

 

3,955,004

 

7,322

 

Horizon Lines LLC, 7.75%, 7/7/11

 

7,371,961

 

 

 

Intertape Polymer Group, Inc., Term B,

 

 

 

2,993

 

7.55%, 7/28/11

 

3,013,834

 

436

 

7.76%, 7/28/11

 

439,334

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 19

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Containers & Packaging (continued)

 

 

 

 

 

JSG Packaging,

 

 

 

75

 

5.413%, 1/12/13, Term B

 

$

96,341

 

154

 

5.463%, 1/12/13, Term B (g)

 

198,725

 

89

 

5.466%, 1/12/13, Term B

 

114,049

 

113

 

5.562%, 1/12/13, Term B

 

144,512

 

295

 

5.562%, 11/29/13, Term B

 

378,817

 

274

 

5.741%, 11/29/13, Term B (g)

 

352,684

 

154

 

5.963%, 1/12/14, Term C (g)

 

198,725

 

89

 

5.966%, 1/12/14, Term C

 

114,049

 

113

 

6.062%, 1/12/14, Term C

 

144,512

 

295

 

6.062%, 11/29/14, Term C

 

378,817

 

75

 

6.09%, 1/12/14, Term C

 

96,341

 

274

 

6.241%, 11/29/14, Term C (g)

 

352,684

 

$

2,250

 

7.882%, 1/12/13, Term B

 

2,262,969

 

2,250

 

8.382%, 1/12/13, Term C

 

2,262,969

 

 

 

Smurfit-Stone Container,

 

 

 

1,528

 

5.291%, 11/1/10

 

1,536,833

 

2,792

 

7.50%, 11/1/11, Term B

 

2,807,820

 

2,505

 

7.50%, 11/1/11, Term C

 

2,519,849

 

1,196

 

7.625%, 11/1/11, Term C

 

1,203,227

 

846

 

7.625%, 11/1/11, Term C-1

 

850,614

 

900

 

7.625%, 11/1/11, Term B

 

904,686

 

2,187

 

7.688%, 11/1/11, Term B

 

2,199,416

 

 

 

Solo Cup Co., Term B,

 

 

 

3

 

5.42%, 2/27/11

 

2,538

 

3,653

 

7.61%, 2/27/11

 

3,670,903

 

23

 

7.93%, 2/27/11

 

23,359

 

5,412

 

7.999%, 2/27/11

 

5,438,974

 

 

 

 

 

48,972,247

 

 

 

 

 

 

 

 Diversified Manufacturing – 0.3%

 

 

 

 

 

Invensys PLC (e),

 

 

 

958

 

5.00%, 7/17/13, Term Y1

 

961,301

 

1,041

 

5.00%, 7/17/13, Term Z1

 

1,043,699

 

 

 

Linpac Mouldings Ltd.,

 

 

 

1,277

 

8.749%, 4/16/12, Term C1

 

1,298,697

 

1,016

 

8.249%, 4/16/12, Term B1

 

1,027,764

 

 

 

 

 

4,331,461

 

 

 

 

 

 

 

 Drugs & Medical Products – 0.6%

 

 

 

 

 

Warner Chilcott PLC,

 

 

 

11

 

4.729%, 1/18/12, Term B

 

10,703

 

4

 

7.479%, 1/18/12, Term C

 

4,313

 

2

 

7.479%, 1/18/12, Term D

 

1,992

 

704

 

7.53%, 1/18/12

 

705,934

 

701

 

7.61%, 1/4/12

 

702,550

 

2,025

 

7.61%, 1/18/12, Term B

 

2,030,151

 

1,695

 

7.61%, 1/18/12, Term C

 

1,699,183

 

783

 

7.61%, 1/18/12, Term D

 

784,975

 

281

 

7.63%, 1/18/12 (g)

 

282,992

 

2,181

 

7.63%, 1/18/12, Term B

 

2,186,694

 

 

 

 

 

8,409,487

 

 

 

 

 

 

 

 

 

 

20 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Electronics – 0.1%

 

 

 

 

 

Sensata Technologies, Inc.,

 

 

 

$

11

 

7.148%, 4/27/13

 

$

10,482

 

2

 

7.198%, 4/27/13

 

2,490

 

987

 

7.24%, 4/27/13

 

982,832

 

 

 

 

 

995,804

 

 

 

 

 

 

 

 Energy – 3.1%

 

 

 

5,356

 

Alon USA Energy, Inc. 5.00%, 6/8/13 (e)

 

5,366,665

 

 

 

Covanta Energy Corp.,

 

 

 

1,000

 

4.75%, 6/30/12

 

1,005,625

 

1,041

 

5.14%, 6/24/12

 

1,046,504

 

81

 

7.644%, 6/30/12, Term B

 

81,758

 

664

 

7.71%, 6/30/12, Term B

 

668,169

 

1,950

 

10.96%, 5/12/13, Term DHC

 

1,986,281

 

 

 

Edison Midwest, Term B,

 

 

 

1,747

 

7.24%, 4/27/11

 

1,751,078

 

2,376

 

7.25%, 4/27/11

 

2,381,398

 

1,908

 

7.31%, 4/27/11

 

1,912,578

 

 

 

Headwaters, Inc., Term B,

 

 

 

11,096

 

7.33%, 4/30/11

 

11,116,567

 

 

 

NRG Energy, Inc.,

 

 

 

557

 

6.979%, 2/1/13

 

559,223

 

2,437

 

7.231%, 2/1/13, Term B

 

2,446,675

 

 

 

Targa Resources, Inc.,

 

 

 

581

 

4.854%, 10/31/11

 

582,356

 

1,258

 

7.23%, 10/31/12, Term B

 

1,261,771

 

750

 

7.47%, 10/31/12, Term B

 

752,209

 

3,000

 

7.477%, 10/31/07

 

3,008,838

 

6

 

7.749%, 10/31/12, Term B

 

6,066

 

387

 

7.75%, 10/31/12, Term B

 

388,237

 

1,000

 

Weather Investments SARL, 4.955%, 6/17/12, Term A (e)(g)

 

1,280,773

 

 

 

Wind Acquisition Finance S.A. (e),

 

 

 

1,000

 

5.634%, 6/17/13, Term B

 

1,277,745

 

1,000

 

6.134%, 6/17/14, Term C

 

1,284,126

 

 

 

 

 

40,164,642

 

 

 

 

 

 

 

 Entertainment – 1.8%

 

 

 

$

2,487

 

AMC Entertainment, Inc., 7.525%, 1/5/13

 

2,498,241

 

12,967

 

MGM Studios, 7.749%, 4/8/12, Term B

 

13,004,652

 

 

 

Warner Music Group, Inc., Term B,

 

 

 

347

 

7.205%, 2/28/11

 

348,307

 

3,356

 

7.227%, 2/28/11

 

3,367,268

 

351

 

7.309%, 2/28/11

 

351,826

 

2,166

 

7.32%, 2/28/11

 

2,173,702

 

1,649

 

7.511%, 2/28/11

 

1,655,156

 

 

 

 

 

23,399,152

 

 

 

 

 

 

 

 Financial Services – 0.4%

 

 

 

5,199

 

Global Cash Access LLC, 7.15%, 3/10/10, Term B

 

5,226,757

 

 

 

 

 

 

 

 Food Services – 1.7%

 

 

 

 

 

Arby’s Restaurant Group, Inc., Term B,

 

 

 

7,938

 

7.735%, 7/25/12

 

7,943,204

 

2,613

 

7.749%, 7/25/12

 

2,613,713

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 21

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Food Services (continued)

 

 

 

 

 

Dominos, Inc., Term B,

 

 

 

$

1,294

 

6.875%, 6/25/10

 

$

1,295,886

 

6,081

 

7.00%, 6/25/10

 

6,090,848

 

 

 

Michael Foods, Inc., Term B,

 

 

 

286

 

7.032%, 11/21/10

 

287,248

 

10

 

7.370%, 11/21/10

 

9,694

 

10

 

7.511%, 11/21/10

 

9,695

 

3,560

 

7.553%, 11/21/10

 

3,571,213

 

 

 

 

 

21,821,501

 

 

 

 

 

 

 

 Funeral Services – 0.4%

 

 

 

 

 

Alderwoods Group, Inc., Term B,

 

 

 

1,497

 

7.37%, 8/21/06

 

1,499,085

 

1,834

 

7.394%, 8/25/06

 

1,836,286

 

1,866

 

7.40%, 8/23/06

 

1,868,605

 

 

 

 

 

5,203,976

 

 

 

 

 

 

 

 Healthcare & Hospitals – 3.3%

 

 

 

 

 

DaVita, Inc.

 

 

 

739

 

7.11%, 5/16/12

 

741,070

 

2,342

 

7.125%, 5/16/12

 

2,349,191

 

886

 

7.19%, 5/16/12

 

889,283

 

554

 

7.21%, 5/16/12

 

555,802

 

10,120

 

7.51%, 5/16/12

 

10,152,654

 

1,617

 

7.69%, 5/16/12

 

1,622,016

 

739

 

7.69%, 10/5/12

 

741,070

 

11,000

 

HealthSouth Corp., 8.52%, 2/2/13

 

10,993,884

 

5,462

 

Psychiatric Solutions, Inc., 6.91%, 7/7/12, Term B

 

5,464,952

 

9,925

 

Renal Advantage, Inc., 7.84%, 10/6/12, Term B

 

10,011,844

 

 

 

 

 

43,521,766

 

 

 

 

 

 

 

 Hotels/Gaming – 3.5%

 

 

 

 

 

Aladdin Gaming, Inc.,

 

 

 

4,572

 

8.508%, 8/31/10, Term A

 

4,426,970

 

105

 

9.508%, 8/31/10, Term B

 

101,272

 

8,401

 

Choctaw Resort Development Enterprise, Inc.,

 

 

 

 

 

7.749%, 11/4/11, Term B

 

8,459,063

 

 

 

MotorCity Casino, Term B,

 

 

 

1,732

 

7.214%, 7/13/12

 

1,728,589

 

693

 

7.236%, 7/13/12

 

691,436

 

6,496

 

7.49%, 7/13/12

 

6,482,209

 

 

 

Penn National Gaming, Inc., Term B,

 

 

 

1,091

 

6.91%, 10/3/12

 

1,094,864

 

1,238

 

7.02%, 10/3/12

 

1,242,670

 

3,491

 

7.24%, 10/3/12

 

3,503,564

 

135

 

7.25%, 10/3/12

 

135,489

 

4,277

 

Resorts International, Inc., 9.50%, 4/26/12, Term B

 

4,310,735

 

3,393

 

Venetian Casino, 7.25%, 2/22/12, Term B

 

3,393,427

 

10,000

 

Wynn Resorts Ltd., 7.545%, 12/14/11, Term B

 

10,018,750

 

 

 

 

 

45,589,038

 

 

 

 

 

 

 

 Machinery – 0.7%

 

 

 

5,570

 

Agco Corp., 7.249%, 6/15/09, Term B

 

5,587,092

 

 

22 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Machinery (continued)

 

 

 

 

 

Mueller Industries, Inc., Term B,

 

 

 

$

476

 

7.36%, 9/28/12

 

$

479,167

 

503

 

7.477%, 9/28/12

 

506,000

 

1,524

 

7.735%, 9/28/12

 

1,533,333

 

262

 

7.749%, 9/28/12

 

263,525

 

267

 

7.868%, 9/28/12

 

268,333

 

 

 

 

 

8,637,450

 

 

 

 

 

 

 

 Manufacturing – 1.8%

 

 

 

4,342

 

Berry Plastics Corp., 7.15%, 12/2/11

 

4,342,695

 

7,000

 

Bombardier, Inc., 8.24%, 6/28/13, Term B

 

6,995,625

 

2,221

 

Lucite International, 5.00%, 5/26/13, Term B (e)

 

2,240,811

 

 

 

NACCO Materials Handling Group, Inc., Term B,

 

 

 

1,156

 

7.17%, 3/24/13

 

1,152,667

 

622

 

7.28%, 3/24/13

 

620,667

 

222

 

7.349%, 3/24/13

 

221,667

 

7,791

 

Xerium Technologies, Inc., 7.749%, 5/18/12, Term B

 

7,766,750

 

 

 

 

 

23,340,882

 

 

 

 

 

 

 

 Measuring Instruments – 0.2%

 

 

 

 

 

Dresser Rand, Term B,

 

 

 

814

 

6.778%, 10/29/11

 

820,373

 

872

 

6.964%, 10/29/11

 

879,421

 

678

 

7.11%, 10/29/11

 

683,644

 

678

 

7.618%, 10/29/11

 

683,644

 

 

 

 

 

3,067,082

 

 

 

 

 

 

 

 Metals & Mining – 0.5%

 

 

 

 

 

Novelis, Inc.,

 

 

 

2,411

 

6.88%, 1/7/12, Term B2

 

2,427,501

 

4,187

 

7.38%, 1/7/12, Term B

 

4,216,185

 

 

 

 

 

6,643,686

 

 

 

 

 

 

 

 Multi-Media – 7.6%

 

 

 

6,470

 

American Media Operations, Inc., 8.12%, 1/30/13 (e)

 

6,529,039

 

1,247

 

Atlantic Broadband, Inc., 7.99%, 8/4/12, Term B

 

1,257,785

 

2,982

 

Cablevision, 6.988%, 3/29/13, Term B

 

2,968,232

 

 

 

Cablevision Systems Corp., Term B

 

 

 

2,000

 

6.88%, 3/29/13

 

1,990,432

 

2,000

 

7.258%, 3/29/13

 

1,990,432

 

12,500

 

Cebridge Connections, Inc., 7.739%, 11/6/13

 

12,434,150

 

25,000

 

Charter Communications Holdings LLC, 8.125%, 4/25/13, Term B

 

25,067,104

 

 

 

Cumulus Media, Inc., Term B,

 

 

 

971

 

7.25%, 5/5/13

 

971,884

 

1,000

 

7.375%, 5/5/13

 

1,000,469

 

6,821

 

Insight Midwest Holdings LLC, 7.438%, 12/31/09, Term C

 

6,836,423

 

6,000

 

NTL Investment, 1/6/13, Term B (e)

 

6,029,064

 

9,405

 

Primedia, 7.875%, 9/30/13, Term B

 

9,286,262

 

3,911

 

Source Media, Inc., 7.68%, 11/8/11, Term B

 

3,918,064

 

10,867

 

Telcordia Technologies, Inc., 7.727%, 9/9/12, Term B

 

10,500,674

 

 

 

Young Broadcasting, Inc., Term B,

 

 

 

2,377

 

7.688%, 5/2/12

 

2,370,129

 

7,036

 

7.75%, 11/3/12

 

7,015,581

 

 

 

 

 

100,165,724

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 23

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Oil & Gas – 1.6%

 

 

 

 

 

El Paso Corp.,

 

 

 

$

12,000

 

6/15/09 (f)

 

$

11,949,996

 

5,865

 

6.375%, 2/1/09 (d)

 

5,806,350

 

2,660

 

Kinetic Concepts, Inc., 7.25%, 8/11/10, Term B

 

2,676,179

 

 

 

Vetco International,

 

 

 

625

 

8.25%, 1/16/12, Term B

 

629,362

 

625

 

8.75%, 1/16/13, Term C

 

631,120

 

 

 

 

 

21,693,007

 

 

 

 

 

 

 

 Paper/Paper Products – 1.6%

 

 

 

 

 

Appleton Papers, Inc.,

 

 

 

813

 

7.44%, 6/11/10

 

816,544

 

872

 

7.68%, 6/9/10

 

875,907

 

 

 

Boise Cascade Holdings LLC, Term D,

 

 

 

431

 

7.125%, 10/28/11

 

431,705

 

359

 

7.25%, 10/28/11

 

359,754

 

 

 

Georgia-Pacific Corp.,

 

 

 

4,839

 

7.30%, 12/20/12, Term B

 

4,839,229

 

302

 

7.485%, 12/23/12, Term B

 

302,452

 

1,178

 

7.499%, 12/23/12, Term B

 

1,183,683

 

11,650

 

8.30%, 12/23/13, Term C

 

11,764,939

 

 

 

 

 

20,574,213

 

 

 

 

 

 

 

 Printing/Publishing – 1.4%

 

 

 

 

 

RH Donnelly Corp., Term D (g),

 

 

 

1,271

 

6.72%, 6/30/11

 

1,276,017

 

1,695

 

6.74%, 6/30/11

 

1,701,355

 

2,119

 

6.83%, 6/30/11

 

2,126,694

 

424

 

6.88%, 6/30/11

 

424,407

 

1,271

 

6.90%, 6/30/11

 

1,276,017

 

848

 

6.92%, 6/30/11

 

850,678

 

1,271

 

6.95%, 6/30/11

 

1,276,017

 

2,665

 

7.00%, 6/30/11

 

2,674,714

 

424

 

7.01%, 6/30/11

 

425,339

 

4,474

 

Seat Pagine Gialle SpA, 3.001%, 6/8/12, Term A

 

5,723,487

 

 

 

 

 

17,754,725

 

 

 

 

 

 

 

 Real Estate – 0.1%

 

 

 

$

839

 

Gables Residential Trust, 7.10%, 9/30/06

 

840,426

 

 

 

 

 

 

 

 Recreation – 2.4%

 

 

 

 

 

Amadeus Global Travel,

 

 

 

3,450

 

5.813%, 4/8/13, Term B

 

4,461,898

 

3,450

 

6.313%, 4/8/14, Term C

 

4,479,029

 

$

1,336

 

8.249%, 4/8/13, Term B

 

1,349,936

 

414

 

8.249%, 4/8/13, Term B2

 

418,385

 

1,336

 

8.749%, 4/8/14, Term C

 

1,355,781

 

414

 

8.749%, 4/8/14, Term C2

 

420,196

 

8,000

 

Cedar Fair L.P., 5.00%, 6/13/12 (e)

 

8,031,664

 

 

 

Six Flags Theme Parks, Inc., Term B,

 

 

 

1,483

 

8.16%, 6/30/09

 

1,496,982

 

2,452

 

8.48%, 6/30/09

 

2,475,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Recreation (continued)

 

 

 

 

 

Worldspan L.P., Term B,

 

 

 

$

5,463

 

7.938%, 2/11/10

 

$

5,435,429

 

263

 

8.00%, 2/11/10

 

261,349

 

210

 

8.063%, 2/11/10

 

209,079

 

394

 

8.188%, 2/11/10

 

392,024

 

919

 

8.25%, 2/11/10

 

915,357

 

 

 

 

 

31,702,482

 

 

 

 

 

 

 

 Retail – 0.9%

 

 

 

8,131

 

Jean Coutu Group, Inc., 8.00%, 7/30/11

 

8,154,166

 

3,133

 

Neiman Marcus Group, Inc., 7.77%, 4/6/13

 

3,162,022

 

 

 

 

 

11,316,188

 

 

 

 

 

 

 

 Semi-Conductors – 0.4%

 

 

 

4,925

 

On Semiconductor Corp., 7.75%, 12/3/11, Term G

 

4,926,013

 

 

 

 

 

 

 

 Telecommunications – 4.7%

 

 

 

2,295

 

Alliance Atlantis Communications, Inc., 6.999%, 10/19/11

 

2,293,907

 

 

 

Centennial Cellular Communications Corp.,

 

 

 

8,269

 

7.749%, 2/9/11

 

8,307,564

 

 

 

Consolidated Communications, Inc., Term B,

 

 

 

1,753

 

7.40%, 9/18/11

 

1,747,200

 

5,019

 

7.45%, 10/14/11

 

5,003,347

 

5,000

 

Crown Castle International, 7.65%, 6/1/14, Term B

 

5,028,125

 

 

 

Hawaiian Telcom Communications, Inc.,

 

 

 

500

 

7.75%, 4/30/12, Term A

 

499,688

 

2,993

 

7.75%, 10/31/12, Term B

 

3,010,437

 

 

 

Mediacom Broadband LLC,

 

 

 

1,635

 

6.62%, 3/31/10, Term A

 

1,618,368

 

2,909

 

6.90%, 2/28/14, Term D

 

2,897,044

 

2,182

 

7.002%, 2/28/14, Term D

 

2,172,783

 

2,909

 

7.37%, 2/28/14, Term D

 

2,897,044

 

 

 

Nordic Telephone Co. Holdings ApS,

 

 

 

2,550

 

5.536%, 11/30/14, Term B

 

3,281,675

 

1,500

 

5.536%, 11/30/14, Term B (e)

 

1,942,938

 

2,550

 

6.036%, 11/30/14, Term C

 

3,301,057

 

1,500

 

6.036%, 11/30/14, Term C (e)

 

1,942,938

 

 

 

Qwest Corp.,

 

 

 

$

8,500

 

6.95%, 6/30/10, Term B

 

8,455,732

 

7,400

 

12.00%, 6/30/07, Term A

 

7,532,275

 

 

 

 

 

61,932,122

 

 

 

 

 

 

 

 Transportation – 0.5%

 

 

 

6,000

 

Fleetpride Corp., 8.586%, 6/6/13, Term B

 

6,011,250

 

 

 

 

 

 

 

 Utilities – 2.3%

 

 

 

 

 

AES Corp., Term B,

 

 

 

3,720

 

5.69%, 8/10/11

 

3,734,244

 

3,720

 

7.50%, 8/10/11

 

3,734,244

 

5,940

 

Midwest Generation LLC, 7.748%, 12/31/11, Term B

 

5,971,927

 

 

 

Reliant Energy, Inc.,

 

 

 

12,902

 

7.655%, 4/30/10, Term B

 

12,925,350

 

3,701

 

7.775%, 4/30/10

 

3,705,290

 

 

 

 

 

30,071,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 25

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 Waste Disposal – 1.2%

 

 

 

 

 

Allied Waste North America, Inc.,

 

 

 

$

4,545

 

5.042%, 1/15/12

 

$

4,528,657

 

1,928

 

6.72%, 1/15/12

 

1,921,018

 

5,647

 

7.20%, 1/15/12

 

5,626,690

 

4,132

 

7.27%, 1/15/12

 

4,117,090

 

 

 

 

 

16,193,455

 

 

 

 

 

 

 

 Wholesale – 0.8%

 

 

 

 

 

Roundy’s, Inc., Term B,

 

 

 

5,000

 

8.17%, 10/27/11

 

5,052,085

 

4,950

 

8.29%, 10/27/11

 

5,001,564

 

 

 

 

 

10,053,649

 

 

 

 

 

 

 

 Wire & Cable Products – 2.7%

 

 

 

 

 

Pirelli Cable S.A.,

 

 

 

2,500

 

5.566%, 7/28/13, Term B

 

3,203,934

 

2,500

 

6.066%, 6/23/14, Term C

 

3,238,230

 

1,500

 

9.888%, 6/23/12

 

1,942,938

 

 

 

UPC Broadband Holding B.V.,

 

 

 

4,000

 

5.507%, 3/31/13, Term J1

 

5,097,412

 

4,000

 

5.509%, 12/31/13, Term K1

 

5,102,941

 

$

8,500

 

7.64%, 3/31/13, Term J2

 

8,492,103

 

8,500

 

7.64%, 12/31/13, Term K2

 

8,492,104

 

 

 

 

 

35,569,662

 

Total Senior Loans (cost-$942,322,899)

 

943,609,358

 

 

 

 

 

 CORPORATE BONDS & NOTES – 18.1%

 

 

 

 

 

 

 

 

 

 

 

Credit Rating

 

 

 

 

 

 

 

(Moody’s/S&P)*

 

 

 

 

 

 

 

 

 

 

 

 Airlines – 0.4%

 

 

 

 

 

 

 

JetBlue Airways Corp., FRN,

 

 

 

 

 

3,257

 

8.27%, 5/15/10, Ser. 04-2

 

Ba3/BB

 

3,259,008

 

1,627

 

9.579%, 9/15/09, Ser. 04-1

 

Ba3/BB

 

1,636,784

 

 

 

 

 

 

 

4,895,792

 

 

 

 

 

 

 

 

 

 Chemicals – 0.4%

 

 

 

 

 

5,750

 

Hexion US Finance Corp., 10.257%, 7/15/10, FRN

 

B3/B

 

5,893,750

 

 

 

 

 

 

 

 

 

 Computer Services – 0.5%

 

 

 

 

 

 

 

SunGard Data Systems, Inc.,

 

 

 

 

 

2,000

 

9.125%, 8/15/13

 

B-/B3

 

2,052,500

 

4,000

 

9.431%, 8/15/13, FRN

 

B-/B3

 

4,180,000

 

 

 

 

 

 

 

6,232,500

 

 

 

 

 

 

 

 

 

 Energy – 0.0%

 

 

 

 

 

250

 

Transcontinental Gas Pipe Line Corp., 6.787%, 4/15/08, FRN (d)

 

Ba2/BB-

 

251,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)*

 

Value

 

 

 

 

 

 

 

 

 

 Financial Services – 3.4%

 

 

 

 

 

$

3,500

 

Chukchansi Economic Dev. Auth., 8.78%, 11/15/12, FRN (d)

 

B2/BB-

 

$

3,578,750

 

3,200

 

Corsair Netherlands B.V., 11.359%, 3/3/16, FRN (g)

 

NR/NR

 

3,224,689

 

 

 

Ford Motor Credit Co., FRN,

 

 

 

 

 

10,000

 

7.077%, 1/15/10

 

Ba2/BB-

 

9,188,640

 

14,000

 

8.149%, 11/2/07

 

Ba2/BB-

 

14,022,778

 

5,000

 

General Motors Acceptance Corp., 7.431%, 12/1/14, FRN

 

Ba1/BB

 

4,924,150

 

6,000

 

Hellas Telecommunications Luxembourg V, 6.59%, 10/15/12, FRN

 

NR/NR

 

7,877,035

 

$

295

 

Simsbury CLO Ltd., 5.669%, 9/24/11, FRN (d)(g)

 

Aaa/AAA

 

294,998

 

2,000

 

Universal City Florida Holding Co., 8.375%, 5/1/10

 

B3/B-

 

2,030,000

 

 

 

 

 

 

 

45,141,040

 

 

 

 

 

 

 

 

 

 Healthcare & Hospitals – 0.2%

 

 

 

 

 

4,000

 

Rotech Healthcare, Inc., 9.50%, 4/1/12

 

B3/CCC

 

3,180,000

 

 

 

 

 

 

 

 

 

 Multi-Media – 3.0%

 

 

 

 

 

16,000

 

Cablevision Systems Corp., 9.62%, 4/1/09, Ser. B, FRN

 

B3/B+

 

17,120,000

 

 

 

CCO Holdings LLC,

 

 

 

 

 

2,000

 

8.75%, 11/15/13

 

B3/CCC-

 

1,995,000

 

6,000

 

9.454%, 12/15/10, FRN

 

B3/CCC-

 

6,225,000

 

8,000

 

Charter Communications Holdings II LLC, 10.25%, 9/15/10

 

Caa1/CCC-

 

8,120,000

 

3,200

 

DirecTV Holdings LLC, 8.375%, 3/15/13

 

Ba2/BB-

 

3,368,000

 

2,000

 

Paxson Communications Corp., 11.757%, 1/15/13, FRN (d)

 

B3/CCC-

 

2,035,000

 

 

 

 

 

 

 

38,863,000

 

 

 

 

 

 

 

 

 

 Oil & Gas – 0.7%

 

 

 

 

 

9,500

 

El Paso Corp., 7.375%, 12/15/12

 

Caa1/B-

 

9,523,750

 

 

 

 

 

 

 

 

 

 Paper/Paper Products – 1.5%

 

 

 

 

 

5,000

 

Abitibi-Consolidated Finance L.P., 7.875%, 8/1/09

 

B1/B+

 

4,850,000

 

8,000

 

Abitibi-Consolidated, Inc., 8.829%, 6/15/11, FRN

 

B1/B+

 

7,820,000

 

4,000

 

Bowater, Inc., 8.329%, 3/15/10, FRN

 

B1/B+

 

4,050,000

 

3,500

 

Verso Paper Holdings LLC, 8/1/14, FRN (b)(d)(e)(f)

 

B+/B1

 

3,539,375

 

 

 

 

 

 

 

20,259,375

 

 

 

 

 

 

 

 

 

 Special Purpose Entity – 0.4%

 

 

 

 

 

100

 

Dow Jones CDX US High Yield,

 

 

 

 

 

 

 

8.625%, 6/29/11,Ser. 6-T1 (d)(h)

 

B3/NR

 

98,688

 

4,500

 

Universal City Florida Holding Co., 9.899%, 5/1/10, FRN

 

B3/B-

 

4,646,250

 

 

 

 

 

 

 

4,744,938

 

 

 

 

 

 

 

 

 

 Telecommunications – 7.6%

 

 

 

 

 

2,000

 

Cincinnati Bell, Inc., 8.375%, 1/15/14

 

B3/B-

 

1,970,000

 

8,499

 

Echostar DBS Corp., 8.758%, 10/1/08, FRN

 

Ba3/BB-

 

8,637,109

 

8,750

 

Hawaiian Telcom Communications, Inc.,

 

 

 

 

 

 

 

10.789%, 5/1/13, Ser. B, FRN

 

CCC+/B3

 

8,903,125

 

 

 

Intelsat Subsidiary Holding Co., Ltd., FRN,

 

 

 

 

 

5,425

 

10.484%, 1/15/12

 

B2/B+

 

5,533,500

 

6,000

 

11.64%, 6/15/13 (d)

 

B/CAA1

 

6,157,500

 

2,000

 

New Skies Satellites NV, 10.414%, 11/1/11, FRN

 

B1/B-

 

2,075,000

 

6,350

 

Nordic Telephone Co. Holdings ApS, 8.352%, 5/1/16, FRN (d)

 

NR/NR

 

8,468,212

 

$

6,150

 

Nortel Networks Ltd., 9.73%, 7/15/11, FRN (d)

 

B-/B3

 

6,211,500

 

5,000

 

Qwest Capital Funding, Inc., 7.90%, 8/15/10

 

B3/B

 

5,062,500

 

25,650

 

Qwest Communications International, Inc., 8.67%, 2/15/09, FRN

 

B2/B

 

26,259,187

 

6,000

 

Qwest Corp., 8.579%, 6/15/13, FRN

 

Ba3/BB

 

6,450,000

 

7,750

 

Rogers Wireless, Inc., 8.454%, 12/15/10, FRN

 

Ba2/BB

 

7,982,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 27


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Credit Rating
(Moody’s/S&P)

*

Value

 

 

 

 

 

 

 

 

 

Telecommunications (continued)

 

 

 

 

 

$

5,820

 

Time Warner Telecom Holdings, Inc., 9.17%, 2/15/11, FRN

 

B2/CCC+

 

$

5,921,850

 

 

 

 

 

 

 

99,631,983

 

Total Corporate Bonds & Notes (cost-$235,954,771)

 

 

 

238,617,690

 

 

 

 

 

 

 

 

 

ASSET-BACKED SECURITIES – 0.5%

 

 

 

 

 

1,658

 

Bear Stearns Asset Backed Securities, Inc., 5.555%, 12/25/42, FRN

 

Aaa/AAA

 

1,659,713

 

2,496

 

CIT Group Home Equity Loan Trust, 5.655%, 6/25/33, FRN

 

Aaa/AAA

 

2,503,367

 

1,888

 

Salomon Brothers Mortgage Securities VII, 5.685%, 3/25/32, FRN

 

NR/AAA

 

1,894,333

 

Total Asset-Backed Securities (cost-$6,039,211)

 

 

 

6,057,413

 

 

 

 

 

 

 

MORTGAGE-BACKED SECURITIES – 0.1%

 

 

 

 

 

854

 

Master Adjustable Rate Mortgage Trust, 3.786%, 11/21/34, CMO, FRN (cost-$855,093)

 

Aaa/AAA

 

850,683

 

 

 

 

 

 

 

 

 

SHORT-TERM INVESTMENTS – 9.4%

 

 

 

 

 

 

 

 

 

 

 

Corporate Notes – 2.8%

 

 

 

 

 

 

 

 

 

 

 

Financial Services – 2.1%

 

 

 

 

 

8,000

 

Ford Motor Credit Co., 6.374%, 3/21/07, FRN

 

Ba2/BB-

 

7,983,832

 

 

 

General Motors Acceptance Corp.,

 

 

 

 

 

4,000

 

6.125%, 9/15/06

 

Ba1/BB

 

3,998,468

 

16,000

 

6.457%, 7/16/07, FRN

 

Ba1/BB

 

15,903,024

 

 

 

 

 

 

 

27,885,324

 

 

 

 

 

 

 

Oil & Gas – 0.2%

 

 

 

 

 

2,500

 

Gazprom AG, 9.125%, 4/25/07

 

NR/BB+

 

2,564,000

 

 

 

 

 

 

 

 

 

Telecommunications – 0.1%

 

 

 

 

 

1,214

 

Calpoint Receivable Structured Trust, 7.44%, 12/10/06 (d)

 

B3/NR

 

1,223,426

 

 

 

 

 

 

 

 

 

Utilities – 0.4%

 

 

 

 

 

5,000

 

NorthWestern Corp., 7.30%, 12/1/06 (d)

 

Ba1/BBB-

 

5,043,750

 

Total Corporate Notes (cost-$36,187,837)

 

 

 

36,716,500

 

 

 

 

 

 

 

 

 

Commercial Paper – 2.1%

 

 

 

 

 

 

 

 

 

 

 

Banking – 0.5%

 

 

 

 

 

3,900

 

Societe Generale North America, Inc., 5.375%, 10/11/06 (g)

 

NR/NR

 

3,858,504

 

3,000

 

Total Finance, 5.29%, 8/1/06

 

NR/NR

 

3,000,000

 

 

 

 

 

 

 

6,858,504

 

 

 

 

 

 

 

Financial Services – 1.6%

 

 

 

 

 

 

 

 

 

 

 

20,500

 

UBS Finance LLC, 5.375%, 10/26/06 (g)

 

NR/NR

 

20,236,370

 

Total Commercial Paper (cost-$27,095,432)

 

 

 

27,094,874

 

 

 

 

 

 

 

U.S. Treasury Bills (i) – 0.7%

 

 

 

 

 

9,865

 

4.70%-4.85%, 8/31/06-9/14/06 (cost-$9,811,934)

 

 

 

9,811,934

 

 

28 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Strategy Fund Schedule of Investments

July 31, 2006 (continued)

Principal
Amount
(000)

 

 

 

Value

 

 

 

 

 

 

 

Repurchase Agreements – 3.8%

 

 

 

$

14,000

 

Lehman Brothers Holdings, dated 7/31/06, 5.23%, due 8/1/06, proceeds $14,002,034; collateralized by U.S. Treasury Note, 5.125%, 6/30/08, valued at $14,294,113 including accrued interest

 

$

14,000,000

 

36,293

 

State Street Bank & Trust Co., dated 7/31/06, 4.90%, due 8/1/06, proceeds $36,297,940; collateralized by Fannie Mae, 2.625%, 11/15/06, valued at $37,022,472 including accrued interest

 

36,293,000

 

Total Repurchase Agreements (cost-$50,293,000)

 

50,293,000

 

Total Short-Term Investments (cost-$123,388,203)

 

123,916,308

 

 

 

 

 

OPTIONS PURCHASED (j) – 0.0%

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

 

 

Call Options — 0.0%

 

 

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

2,055

 

strike price $112, expires 8/25/06

 

32,109

 

3,049

 

strike price $113, expires 8/25/06

 

47,641

 

 

 

U.S. Treasury Notes 5 yr. Futures, Chicago Board of Trade,

 

 

 

550

 

strike price $108, expires 8/25/06

 

8,594

 

 

 

 

 

88,344

 

 

 

 

 

 

 

Put Options — 0.0%

 

 

 

 

 

Eurodollar Futures, Chicago Mercantile Exchange,

 

 

 

460

 

strike price $91.75, expires 3/19/07

 

2,875

 

508

 

strike price $92.50, expires 12/18/06

 

3,175

 

1,063

 

strike price $92.75, expires 12/18/06

 

6,644

 

1,472

 

strike price $93, expires 12/18/06

 

9,200

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

956

 

strike price $98, expires 8/25/06

 

14,937

 

 

 

 

 

36,831

 

Total Options Purchased (cost-$173,886)

 

125,175

 

Total Investments before options written (cost-$1,308,734,063) – 100.0%

 

1,313,176,627

 

 

 

 

 

OPTIONS WRITTEN (j) – (0.0)%

 

 

 

 

 

 

 

Call Options – (0.0)%

 

 

 

 

 

Swap Option 3 month LIBOR, Over the Counter,

 

 

 

8,600,000

 

fixed rate 4.60%, expires 1/2/07 (g)

 

(1,187)

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

1,370

 

strike price $107, expires 8/25/06

 

(149,844)

 

2,673

 

strike price $108, expires 8/25/06

 

(83,531)

 

 

 

 

 

(234,562)

 

Put Options – (0.0)%

 

 

 

 

 

Swap Option 3 month LIBOR, Over the Counter,

 

 

 

8,600,000

 

fixed rate 5.90%, expires 1/2/07 (g)

 

(42,957)

 

 

 

U.S. Treasury Notes 10 yr. Futures, Chicago Board of Trade,

 

 

 

956

 

strike price $103, expires 8/25/06

 

(14,937)

 

 

 

 

 

(57,894)

 

Total Options Written (premiums received-$1,637,161)

 

(292,456)

 

Total Investments net of options written (cost-$1,307,096,902) – 100.0%

 

$

1,313,884,171

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 29

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Schedules of Investments

July 31, 2006 (continued)

 

 

Notes to the Schedules of Investments:

(a)

Private Placement. Restricted as to resale and may not have a readily available market.

(b)

Illiquid security. Securities with an aggregate value of $409,928,670, which represent 71.38% of total investments, are deemed illiquid in the PIMCO Floating Rate Income Fund. Securities with an aggregate value of $949,618,046, which represent 72.31% of total investments, are deemed illiquid in the PIMCO Floating Rate Strategy Fund.

(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 July 31, 2006.

(f)

Unsettled security, coupon rate undetermined at July 31, 2006.

(g)

Fair-valued security. Securities with an aggregate value of $27,627,679, which represent 4.81% of total investments, have been fair valued in the PIMCO Floating Rate Income Fund. Securities with an aggregate value of $55,609,458, which represent 4.23% of total investments, have been fair valued in the PIMCO Floating Rate Strategy Fund.

(h)

Credit-linked trust certificate.

(i)

All or partial amount segregated as collateral for futures contracts and transactions in options written.

(j)

Non-income producing.

 

 

 

 

Glossary

*

 

Unaudited

-

Euros

CMO

-

Collateralized Mortgage Obligation

FRN

-

Floating Rate Note. The interest rate disclosed reflects the rate in effect on July 31, 2006.

LIBOR

-

London Inter-Bank Offered Rate

NR

-

Not Rated

UNIT

-

More than one class of securities traded together.

 

 

 

 

30 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06 | See accompanying Notes to Financial Statements.

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Statements of Assets and Liabilities

July 31, 2006

 

 


Floating Rate
Income

 


Floating Rate
Strategy

 

Assets:

 

 

 

 

 

 

Investments, at value (cost-$570,207,139 and $1,308,734,063, respectively)

 

$574,278,358

 

 

$1,313,176,627

 

Cash (including foreign currency of $5,800,518 and $10,672,333 with a cost of $5,798,549 and $10,649,623, respectively)

 

8,580,408

 

 

10,935,829

 

Interest receivable

 

5,127,887

 

 

10,868,839

 

Premium for swaps purchased

 

4,079,375

 

 

8,058,834

 

Unrealized appreciation on swaps

 

3,280,875

 

 

9,027,260

 

Receivable for investments sold

 

2,965,554

 

 

11,538,343

 

Unrealized appreciation on unfunded loan commitments

 

219,167

 

 

386,707

 

Unrealized appreciation on forward foreign currency contracts

 

41,436

 

 

65,330

 

Receivable for terminated swaps

 

 

 

132,776

 

Prepaid expenses

 

17,783

 

 

30,000

 

Total Assets

 

598,590,843

 

 

1,364,220,545

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Payable for investments purchased

 

32,228,765

 

 

70,532,495

 

Unrealized depreciation on swaps

 

4,372,772

 

 

19,670,749

 

Dividends payable to common and preferred shareholders

 

2,756,902

 

 

6,167,126

 

Premium for swaps sold

 

1,745,154

 

 

1,883,091

 

Unrealized depreciation on forward foreign currency contracts

 

699,096

 

 

1,736,637

 

Investment management fees payable

 

353,580

 

 

803,772

 

Deferred facility fees

 

334,323

 

 

471,368

 

Options written, at value (premiums received-$692,100 and $1,637,161, respectively)

 

114,781

 

 

292,456

 

Payable for variation margin on futures contracts

 

27,781

 

 

58,938

 

Accrued expenses

 

208,062

 

 

232,982

 

Total Liabilities

 

42,841,216

 

 

101,849,614

 

Preferred shares ($0.00001 par value, $25,000 net asset and liquidation value per share applicable to an aggregate of 8,400 and 19,200 shares issued and outstanding, respectively)

 

210,000,000

 

 

480,000,000

 

Net Assets Applicable to Common Shareholders

 

$345,749,627

 

 

$782,370,931

 

 

 

 

 

 

 

 

Composition of Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

Common Stock:

 

 

 

 

 

 

Par value ($0.00001 per share)

 

$181

 

 

$417

 

Paid-in-capital in excess of par

 

346,380,558

 

 

789,945,378

 

Dividends in excess of net investment income

 

(1,265,004

)

 

(4,989,691

)

Accumulated net realized gain (loss)

 

(1,289,232

)

 

7,511,100

 

Net unrealized appreciation (depreciation) of investments, futures contracts, options written, swaps, unfunded loan commitments and foreign currency transactions

 

1,923,124

 

 

(10,096,273

)

Net Assets Applicable to Common Shareholders

 

$345,749,627

 

 

$782,370,931

 

Common Shares Issued and Outstanding

 

18,066,771

 

 

41,713,152

 

Net Asset Value Per Common Share

 

$19.14

 

 

$18.76

 

 

See accompanying Notes to Financial Statements. | 7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 31

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Statements of Operations

 

 


Floating Rate
Income

 


Floating Rate Strategy

 

 

 

For the year ended
July 31, 2006

 

For the period
September 1, 2005
through
July 31, 2006**

 

For the period
October 29, 2004*
through
August 31, 2005

 

Investment Income:

 

 

 

 

 

 

 

 

 

Interest

 

$37,792,560

 

 

$76,764,161

 

 

$44,936,441

 

Facility and other fee income

 

1,744,035

 

 

1,855,438

 

 

63,542

 

Dividends

 

245,872

 

 

27,650

 

 

38,536

 

Total Investment Income

 

39,782,467

 

 

78,647,249

 

 

45,038,519

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Investment management fees

 

4,188,622

 

 

8,673,491

 

 

7,337,506

 

Auction agent fees and commissions

 

539,498

 

 

1,123,024

 

 

823,888

 

Custodian and accounting agent fees

 

201,482

 

 

247,333

 

 

290,036

 

Audit and tax services

 

180,930

 

 

187,119

 

 

126,034

 

Shareholder communications

 

75,640

 

 

130,133

 

 

73,261

 

Transfer agent fees

 

36,880

 

 

31,847

 

 

20,512

 

Trustees’ fees and expenses

 

33,350

 

 

55,929

 

 

30,183

 

New York Stock Exchange listing fees

 

21,618

 

 

35,805

 

 

34,801

 

Insurance expense

 

15,533

 

 

29,399

 

 

2,992

 

Investor relations

 

11,550

 

 

14,855

 

 

8,804

 

Legal fees

 

11,255

 

 

24,312

 

 

20,112

 

Organizational expenses

 

 

 

 

 

25,000

 

Miscellaneous

 

23,505

 

 

9,019

 

 

4,085

 

Total expenses

 

5,339,863

 

 

10,562,266

 

 

8,797,214

 

Less: custody credits earned on cash balances

 

(94,762

)

 

(143,550

)

 

(106,382

)

Net expenses

 

5,245,101

 

 

10,418,716

 

 

8,690,832

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

34,537,366

 

 

68,228,533

 

 

36,347,687

 

Realized and Change in Unrealized Gain (Loss):

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

Investments

 

1,139,713

 

 

(1,796,351

)

 

3,001,896

 

Futures contracts

 

(1,590,303

 

 

(1,004,777

)

 

171,838

 

Options written

 

1,822,393

)

 

3,509,268

 

 

106,997

 

Swaps

 

8,673,561

 

 

27,977,882

 

 

(8,330,935

)

Foreign currency transactions

 

(2,072,835

 

 

(900,434

)

 

560,222

 

Net change in unrealized appreciation/depreciation of: Investments

 

(2,094,070

)

 

(1,376,430

)

 

5,818,994

 

Futures contracts

 

(696,939

)

 

(3,981,995

)

 

 

Options written

 

177,469

 

 

623,282

 

 

721,423

 

Swaps

 

(7,409,088

)

 

(21,689,710

)

 

11,046,221

 

Unfunded loan commitments

 

78,691

 

 

251,045

 

 

135,662

 

Foreign currency transactions

 

(673,734

)

 

(1,281,797

)

 

(362,968

)

Net realized and change in unrealized gain (loss) on investments, futures contracts, options written, swaps, unfunded loan commitments and foreign currency transactions

 

(2,645,142

)

 

329,983

 

 

12,869,350

 

Net Increase in Net Assets Resulting from Investment Operations

 

31,892,224

 

 

68,558,516

 

 

49,217,037

 

Dividends on Preferred Shares from
Net Investment Income

 

(8,739,121

)

 

(18,962,668

)

 

(9,877,326

)

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Investment Operations

 

$23,153,103

 

 

$49,595,848

 

 

$39,339,711

 

 

*                 Commencement of operations

**          Represents the eleven months ended July 31, 2006. Fiscal year-end was changed to July 31 from August 31.

 

32 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06 | See accompanying Notes to Financial Statements.

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Statements of Changes in Net Assets Applicable to Common Shareholders

 

 


Floating Rate Income

 


Floating Rate Strategy

 

 

 

Year ended
July 31, 2006

 

Year ended
July 31, 2005

 

For the Period
September 1, 2005
through
July 31, 2006**

 

For the Period
October 29, 2004*
through
August 31, 2005

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

34,537,366

 

 

$

24,363,961

 

 

$

68,228,533

 

 

$

36,347,687

 

Net realized gain (loss) on investments, futures contracts, options written, swaps and foreign currency transactions

 

7,972,529

 

 

(3,293,145

)

 

27,785,588

 

 

(4,489,982

)

Net change in unrealized appreciation/depreciation of investments, futures contracts, options written, swaps, unfunded loan commitments and foreign currency transactions

 

(10,617,671

)

 

10,337,612

 

 

(27,455,605

)

 

17,359,332

 

Net increase in net assets resulting from investment operations

 

31,892,224

 

 

31,408,428

 

 

68,558,516

 

 

49,217,037

 

Dividends on Preferred Shares from Net Investment Income

 

(8,739,121

)

 

(5,230,747

)

 

(18,962,668

)

 

(9,877,326

)

Net increase in net assets applicable to common shareholders resulting from investment operations

 

23,153,103

 

 

26,177,681

 

 

49,595,848

 

 

39,339,711

 

Dividends and Distributions to Common Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(29,409,709

)

 

(21,339,798

)

 

(58,781,100

)

 

(37,754,323

)

Net realized gains

 

(528,103

)

 

(2,486,478

)

 

 

 

 

Total dividends and distributions to common shareholders

 

(29,937,812

)

 

(23,826,276

)

 

(58,781,100

)

 

(37,754,323

)

Capital Share Transactions:

 

 

 

 

 

 

 

 

 

 

 

 

Net proceeds from the sale of common stock

 

 

 

 

 

 

 

788,830,000

 

Preferred shares underwriting discount charged to paid-in capital in excess of par

 

 

 

 

 

 

 

(4,800,000

)

Common stock and preferred shares offering costs charged to paid-in capital in excess of par

 

 

 

 

 

 

 

(1,912,898

)

Reinvestment of dividends and distributions

 

826,247

 

 

2,607,725

 

 

2,462,222

 

 

5,291,463

 

Net increase from capital transactions

 

826,247

 

 

2,607,725

 

 

2,462,222

 

 

787,408,565

 

Total increase (decrease) in net assets applicable to common shareholders

 

(5,958,462

)

 

4,959,130

 

 

(6,723,030

)

 

788,993,953

 

Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

351,708,089

 

 

346,748,959

 

 

789,093,961

 

 

100,008

 

End of period (including undistributed (dividends in excess of) investment income $(1,265,004) and $1,217,139; $(4,989,691) and $(4,497,636); respectively)

 

$345,749,627

 

 

$351,708,089

 

 

$782,370,931

 

 

$789,093,961

 

Common Shares Issued and Reinvested:

 

 

 

 

 

 

 

 

 

 

 

 

Issued

 

 

 

 

 

 

 

41,300,000

 

Issued in reinvestment of dividends and distributions

 

42,759

 

 

130,238

 

 

130,268

 

 

277,648

 

Net Increase

 

42,759

 

 

130,238

 

 

130,268

 

 

41,577,648

 

 

*                 Commencement of operations

**          Represents the eleven months ended July 31, 2006. Fiscal year-end was changed to July 31 from August 31.

 

See accompanying Notes to Financial Statements. | 7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 33

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Statements of Cash Flows

 

 


Floating Rate
Income

 


Floating Rate Strategy

 

 

 

For the year ended
July 31, 2006

 

For the period
September 1, 2005
through
July 31, 2006**

 

For the period
October 29, 2004*
through
August 31, 2005

 

Cash Flows provided by Operating Activities:

 

 

 

 

 

 

 

 

 

Purchases of long-term investments

 

$(359,683,350

)

 

$(810,972,174

)

 

$(1,573,151,878

)

Proceeds from sales of long-term investments

 

355,873,084

 

 

762,351,376

 

 

473,591,817

 

Interest, dividends and facility and other fee income received

 

38,033,808

 

 

76,518,349

 

 

33,949,727

 

Net cash provided by options written

 

2,683,283

 

 

4,493,617

 

 

6,838,956

 

Net cash provided by (used for) swap transactions

 

167,477

 

 

(3,247,997

)

 

16,586,425

 

Increase (decrease) in prepaid expenses

 

(2,954

)

 

24,805

 

 

 

Operating expenses paid

 

(5,220,242

)

 

(10,414,951

)

 

(7,712,648

)

Net cash provided by (used for) futures transactions

 

(2,350,461

)

 

(4,927,834

)

 

171,838

 

Net realized gain (loss) on foreign currency transactions

 

(2,070,867

)

 

(877,727

)

 

560,222

 

Net decrease (increase) in short-term investments

 

18,283,091

 

 

74,145,786

 

 

(177,754,384

)

Net cash provided by (used for) operating activities

 

45,712,869

 

 

87,093,250

 

 

(1,226,919,925

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

 

Cash dividends paid (excluding reinvestment of dividends and distributions of $826,247, $2,462,222 and $5,291,463, respectively)

 

(37,850,686

)

 

(75,281,546

)

 

(37,670,269

)

Increase in dividends payable

 

659,925

 

 

1,497,209

 

 

 

Proceeds from common shares sold

 

 

 

 

 

788,830,000

 

Issuance of preferred shares

 

 

 

 

 

480,000,000

 

Common and preferred shares offering costs and underwriting discount paid

 

 

 

 

 

(6,712,898

)

Net cash provided by (used for) financing activities

 

(37,190,761

)

 

(73,784,337

)

 

1,224,446,833

 

Net increase (decrease) in cash

 

8,522,108

 

 

13,308,913

 

 

(2,473,092

)

Cash at beginning of period

 

58,300

 

 

(2,373,084

)

 

100,008

 

Cash at end of period

 

8,580,408

 

 

10,935,829

 

 

(2,373,084

)

Reconciliation of Net Increase (Decrease) in Net Assets from Investment Operations to Net Cash provided by Operating Activities:

 

 

 

 

 

 

 

 

 

Net increase in net assets resulting from investment operations

 

31,892,224

 

 

68,558,516

 

 

49,217,037

 

Increase (decrease) in receivable for investments sold

 

1,242,113

 

 

1,453,663

 

 

(12,992,006

)

Increase in interest receivable

 

(969,404

)

 

(1,053,971

)

 

(9,814,868

)

Increase in premium for swaps purchased

 

(4,054,875

)

 

(7,894,355

)

 

(297,255

)

Increase (decrease) in premium for swaps sold

 

(4,451,209

)

 

(23,331,524

)

 

25,214,615

 

Increase in premium for options written

 

892

 

 

224,239

 

 

1,412,922

 

Decrease in receivable for premium on options written

 

204,061

 

 

 

 

 

Increase (decrease) in prepaid expenses

 

(2,954

)

 

24,805

 

 

(54,805

)

Increase (decrease) in Investment Manager fees payable

 

(3,003

)

 

(5,376

)

 

809,148

 

Increase in net unrealized appreciation (depreciation) on swaps

 

7,409,088

 

 

21,689,710

 

 

(11,046,221

)

Increase in net unrealized depreciation on forward foreign currency contracts

 

639,877

 

 

1,496,198

 

 

175,109

 

Increase in net unrealized appreciation on unfunded loan commitments

 

(78,691

)

 

(251,045

)

 

(135,662

)

Increase (decrease) in variation margin on futures contracts

 

(63,219

)

 

58,938

 

 

 

Decrease in net unrealized appreciation on options written

 

(177,469

)

 

(623,282

)

 

(721,423

)

Increase in accrued expenses

 

27,862

 

 

9,141

 

 

223,841

 

Increase in deferred facility fees

 

35,842

 

 

235,667

 

 

235,701

 

Increase (decrease) in payable for investments purchased

 

5,041,792

 

 

(2,049,369

)

 

72,581,864

 

Net increase (decrease) in investments

 

9,019,942

 

 

28,551,295

 

 

(1,341,727,922

)

Net cash provided by (used for) operating activities

 

$45,712,869

 

 

$87,093,250

 

 

$(1,226,919,925

)

 

*                 Commencement of operations

**          Represents the eleven months ended July 31, 2006. Fiscal year-end was changed to July 31 from August 31.

 

34 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06 | See accompanying Notes to Financial Statements.


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

1. Organization and Significant Accounting Policies

PIMCO Floating Rate Income Fund (“Floating Rate Income”) and PIMCO Floating Rate Strategy Fund (“Floating Rate Strategy”), collectively referred to as the “Funds”, were organized as Massachusetts business trusts on June 19, 2003 and June 30, 2004, respectively.

 

In December 2005, PIMCO Floating Rate Strategy Fund changed its fiscal year-end from August 31 to July 31. Accordingly, the financial statements of the Fund included in this report cover the eleven-month period from September 1, 2005 to July 31, 2006.

 

Prior to commencing operations on August 29, 2003 and October 29, 2004, respectively, Floating Rate Income and Floating Rate Strategy had no operations other than matters relating to their organization and registration as diversified, closed-end management investment companies 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”), serves as the Funds’ Investment Manager and is an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P. (“Allianz Global”). Allianz Global is an indirect, majority-owned subsidiary of Allianz AG, a publicly traded insurance and financial services company. The Funds have an unlimited amount of $0.00001 par value common stock authorized.

 

Floating Rate Strategy issued 37,000,000 shares of common stock in its initial public offering. An additional 4,300,000 shares were issued in connection with the underwriter’s over-allotment option. These shares were all issued at $20.00 per share before an underwriting discount of $0.90 per share. Common offering costs of $1,339,026 (representing $0.032 per share) were offset against the proceeds of the offering and over-allotment option and have been charged to paid-in capital in excess of par. The Investment Manager agreed to pay all common share offering costs (other than the sales load) and organizational expenses of approximately $25,000 exceeding $0.04 per common share. In addition, the underwriters’ commission and offering costs associated with the issuance of Preferred Shares in the amounts of $4,800,000 and $573,872, respectively, have been charged to paid-in capital in excess of par.

 

The Funds’ investment objective is to seek high current income, consistent with the preservation of capital by investing primarily in floating rate debt instruments, a substantial portion of which will be senior loans. The ability of the issuers of the Funds’ investments to meet their obligations may be affected by economic developments in a specific industry.

 

The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.

 

In July 2006, the Financial Accounting Standards Board issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The Funds’ management has recently begun to evaluate the application of the Interpretation, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds’ financial statements.

 

In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet been asserted. However, the Funds expect the risk of any loss to be remote.

 

The following is a summary of significant accounting policies followed by the Funds:

 

(a) Valuation of Investments

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Funds’ investments are valued on the last business day of each week using prices supplied by an independent pricing service or dealer quotations, using the

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 35

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

1. Organization and Significant Accounting Policies (continued)

 

last sale price on the exchange that is the primary market for such securities, or the 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. The independent pricing service uses information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The Funds’ investments in senior floating rate loans (“Senior Loans”) for which a secondary market exists will be valued at the mean of the last available bid and asked prices in the market for such Senior Loans, as provided by an independent pricing service. Other Senior Loans are valued at fair-value by Pacific Investment Management Company LLC (the “Sub-Adviser”) under procedures adopted by the Funds’ Board of Trustees, which include consideration and evaluation of: (1) the creditworthiness of the borrower and any intermediate participants; (2) the term of the Senior Loan; (3) recent prices in the market for similar loans, if any; (4) recent prices in the market for loans of similar quality, coupon rate, and period until next interest rate reset and maturity; and (5) general economic and market conditions affecting the fair-value of the Senior Loan. Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement value. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. The Funds’ net asset value is determined weekly on the last business day of the week as of close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

 

(b) Investment Transactions and Investment Income

Investment transactions are accounted for on trade date. Securities purchased and sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Facility and other fee income (such as origination fees) received by the Funds are amortized as income over the expected term of the loan. Commitment fees received by the Funds relating to unfunded purchase commitments are deferred and amortized to facility fee income over the period of the commitment.

 

(c) Federal Income Taxes

The Funds intend to distribute all of their taxable income and to comply with the other requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.

 

(d) Dividends and Distributions — Common Stock

The Funds declare dividends from net investment income monthly to common shareholders. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record 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 federal income tax treatment; temporary differences do not require reclassification. For the periods ended July 31, 2006, the Floating Rate Income and Floating Rate Strategy Funds had permanent differences attributable to the differing treatment of foreign currency transactions, swap payments, paydowns, amendments fees and consent fees. The adjustment to Floating Rate Income Fund was to decrease dividends in excess of net investment income and increase accumulated net realized loss by $1,129,321. The adjustment to Floating Rate Strategy Fund was to decrease dividends in excess of net investment income and decrease accumulated net realized gain by $9,023,180.

 

(e) Foreign Currency Translation

The Funds’ accounting records are maintained in U.S. dollars as follows: (1) the foreign currency market value of investments and other assets and liabilities denominated in foreign currency are translated at the prevailing exchange rate at the end of the period; and (2) purchases and sales, income and expenses are translated at the prevailing

 

36 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

1. Organization and Significant Accounting Policies (continued)

 

exchange rate on the respective dates of such transactions. The resulting net foreign currency gain or loss is included in the Statements of Operations.

 

The Funds do not generally isolate that portion of the results of operations arising as a result of changes in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of securities. Accordingly, such foreign currency gain (loss) is included in net realized and unrealized gain (loss) on investments. However, the Funds do isolate the effect of fluctuations in foreign currency exchange rates when determining the gain or loss upon the sale or maturity of foreign currency denominated debt obligations pursuant to U.S. federal income tax regulations; such amount is categorized as foreign currency gain or loss for both financial reporting and income tax reporting purposes.

 

(f) Senior Loans

The Funds purchase assignments of Senior Loans originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution (the “Agent”) for a lending syndicate of financial institutions (the “Lender”). When purchasing an assignment, the Funds succeed all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender.

 

(g) Option Transactions

The Funds may purchase and write (sell) put and call options for hedging purposes, risk management purposes or as a part of its investment strategy. The risk associated with purchasing an option is that the Funds pay a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from the securities sold through the exercise of put options is decreased by the premiums paid.

 

When an option is written, the premium received is recorded as an asset with an equal liability and is subsequently marked to market to reflect the current market value of the option written. These liabilities are reflected as options written in the 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 written by the Funds 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 written by the Funds is exercised, the premium reduces the cost basis of the security. In writing an option, the Funds bear 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 Funds purchasing a security at a price different from its current market value.

 

(h) Interest Rate/Credit Default Swaps

The Funds may enter into interest rate and credit default swap contracts (“swaps”) for investment purposes, to manage its interest rate and credit risk or to add leverage.

 

As a seller in the credit default swap contract, the Funds 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 Funds 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 Funds 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 Funds may also purchase credit default swap contracts in order to hedge against the risk of default of debt securities held, in which case the Funds would function as the counterparty referenced in the preceding paragraph. As a purchaser of a credit default swap contract, the Funds 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

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 37

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

1. Organization and Significant Accounting Policies (continued)

 

foreign corporate issuer on the referenced debt obligation. In return, the Funds 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 Funds 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 (paid) by the Funds are included as part of realized gain (loss) and net periodic payments accrued, but not yet received (paid) are included in change in the unrealized appreciation/depreciation on the Statements of Operations.

 

Swaps are marked to market daily based upon quotations from brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Funds’ Statements of Operations. For a credit default swap sold by the Funds, payment of the agreed upon amount made by the Funds 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 Funds, the agreed upon amount received by the Funds 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 Funds.

 

Entering into swaps involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in net interest rates.

 

(i) 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 Funds are 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 Funds agree 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 Funds as unrealized appreciation or depreciation. When the contracts are closed, the Funds record 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.

 

(j) Forward Foreign Currency Contracts

A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. The Funds 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 Funds may also enter these contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The market value of a forward foreign currency contract fluctuates with changes in forward currency exchange rates. All commitments are marked to market daily at the applicable exchange rates and any resulting unrealized appreciation or depreciation is recorded. Realized gains or losses are recorded at the time the forward contract matures or by delivery of the currency. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.

 

(k) 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 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.

 

38 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

1. Organization and Significant Accounting Policies (continued)

 

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.

 

(l) Repurchase Agreements

The Funds may enter into transactions with its custodian bank or securities brokerage firms whereby it purchases securities under agreements to resell at an agreed upon price and date (“repurchase agreements”). Such agreements are carried at the contract amount in the financial statements. Collateral pledged (the securities received), which consists primarily of U.S. government obligations and asset-backed securities, are held by the custodian bank until maturity of the repurchase agreement. Provisions of the repurchase agreements and the procedures adopted by the Funds 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 Funds may be delayed or limited.

 

(m) When-Issued/Delayed-Delivery Transactions

The Funds may purchase or sell securities on a when-issued or delayed-delivery basis. The transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Funds will set aside and maintain until the settlement date in a designated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed-delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and take such fluctuations into account when determining its net asset value. The Funds may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a realized gain or loss. When a security on a delayed-delivery basis is sold, the Funds do not participate in future gains and losses with respect to the security.

 

(n) Custody Credits on Cash Balances

The Funds benefit from an expense offset arrangement with its custodian bank whereby uninvested cash balances earn credits which reduce monthly custodian and accounting agent expenses. Had these cash balances been invested in income producing securities, they would have generated income for the Funds.

 

2. Investment Manager/Sub-Adviser

The Funds have an Investment Management Agreement (the “Agreement”) with the Investment Manager. Subject to the supervision of the Funds’ Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the Funds’ investment activities, business affairs and administrative matters. Pursuant to the Agreement, the Investment Manager receives an annual fee, payable monthly, at an annual rate of 0.75% of each Funds’ average weekly total managed assets. Total managed assets refer to the total assets of each Fund (including assets attributable to any Preferred Shares or other forms of leverage that may be outstanding minus accrued liabilities (other than liabilities representing leverage)).

 

The Investment Manager has retained its affiliate, the Sub-Adviser, to manage the Funds’ investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. The Investment Manager, and not the Funds, pays a portion of the fees it receives to the Sub-Adviser in return for its services, at the maximum annual rate of 0.39% of Floating Rate Income’s and Floating Rate Strategy’s average weekly total managed assets, inclusive of net assets attributable to any preferred shares that may be outstanding, for the period from commencement of operations through August 31, 2008 and October 31, 2008, respectively. Commencing September 1, 2008 for Floating Rate Income and November 1, 2008 for Floating Rate Strategy, the Investment Manager will pay the Sub-Adviser a monthly fee at the annual rate of 0.55% of each Fund’s average weekly total managed assets, inclusive of net assets attributable to any preferred shares that may be outstanding.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 39


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities

For the fiscal periods ended July 31, 2006, purchases and sales of investments, other than short-term securities and U.S. government obligations, were:

 

 

 

Floating Rate
Income

 

Floating Rate
Strategy

 

Purchases

 

$363,122,997

 

 

$807,985,160

 

 

Sales

 

348,448,908

 

 

730,997,486

 

 

 

(a) Futures contracts outstanding at July 31, 2006:

 

Floating Rate Income:

Type

 

Notional
Amount
(000)

 

Expiration
Date

 

Unrealized
Depreciation

 

Long: Financial Future Euro—90 day

 

$2,303

 

 

12/18/06

 

 

 

$

(851,788

)

 

Short: U.S. Treasury Notes 5 yr. Futures

 

250

 

 

9/29/06

 

 

 

 

(66,406

)

 

U.S. Treasury Notes 10 yr. Futures

 

514

 

 

9/20/06

 

 

 

 

(242,875

)

 

 

 

 

 

 

 

 

 

 

$

(1,161,069

)

 

 

Floating Rate Strategy:

Type

 

Notional
Amount
(000)

 

Expiration
Date

 

Unrealized
Depreciation

 

Long: Financial Future Euro—90 day

 

$6,258

 

 

12/18/06

 

 

 

$

(3,368,877

)

 

Short: U.S. Treasury Notes 5 yr. Futures

 

550

 

 

9/29/06

 

 

 

 

(146,094

)

 

U.S. Treasury Notes 10 yr. Futures

 

1,061

 

 

9/20/06

 

 

 

 

(467,024

)

 

 

 

 

 

 

 

 

 

 

$

(3,981,995

)

 

 

(b) Transactions in options written for the fiscal periods ended July 31, 2006:

 

Floating Rate Income:

 

 

Contracts/Notional

Premiums

Options outstanding, July 31, 2005

 

 

2,203

 

 

$

691,208

 

Options written

 

 

3,409,030

 

 

 

2,479,222

 

Options terminated in closing purchase transactions

 

 

(3,408,925

)

 

 

(2,478,330

)

Options outstanding, July 31, 2006

 

 

2,308

 

 

$

692,100

 

 

 

 

 

 

 

Floating Rate Strategy:

 

 

Contracts/Notional

Premiums

Options outstanding, August 31, 2005

 

 

9,204,560

 

 

$

1,412,922

 

Options written

 

 

24,915,867

 

 

 

4,493,617

 

Options terminated in closing purchase transactions

 

 

(16,915,428

)

 

 

(4,269,378

)

Options outstanding, July 31, 2006

 

 

17,204,999

 

 

$

1,637,161

 

 

40 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities (continued)

 

(c) Credit default swaps contracts outstanding at July 31, 2006:

 

Floating Rate Income:

Swap
Counterparty/
Referenced Debt
Issuer

 

Notional
Amount
Payable on
Default
(000)

 

Termination
Date

 

Fixed
Payments
Received (Paid)
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Bank of America

 

 

 

 

 

 

 

 

 

Abitibi-Consolidated

 

$  2,000

 

 

6/20/08

 

 

2.95

%

 

$    8,227

 

 

AES

 

1,000

 

 

12/20/07

 

 

1.50

%

 

11,808

 

 

Allied Waste North American

 

600

 

 

9/20/09

 

 

2.75

%

 

12,614

 

 

Bombardier

 

1,400

 

 

6/20/10

 

 

3.80

%

 

68,685

 

 

Williams Cos.

 

875

 

 

9/20/09

 

 

2.05

%

 

29,499

 

 

Bear Stearns

 

 

 

 

 

 

 

 

 

 

 

 

 

Abitibi-Consolidated

 

2,500

 

 

6/20/07

 

 

1.65

%

 

(839

)

 

Georgia-Pacific

 

700

 

 

9/20/09

 

 

1.24

%

 

(10,595

)

 

Host Marriot

 

700

 

 

9/20/09

 

 

1.95

%

 

23,907

 

 

MGM Mirage

 

1,500

 

 

9/20/09

 

 

1.92

%

 

27,760

 

 

Citigroup

 

 

 

 

 

 

 

 

 

 

 

 

 

AES

 

5,000

 

 

6/20/08

 

 

1.17

%

 

21,294

 

 

Allied Waste North America

 

1,500

 

 

9/20/07

 

 

2.18

%

 

28,957

 

 

Crown European Holdings

 

1,500

 

 

9/20/07

 

 

2.38

%

 

29,761

 

 

Host Marriott

 

900

 

 

9/20/07

 

 

1.90

%

 

16,295

 

 

Owens Brockway Glass Container

 

3,000

 

 

9/20/07

 

 

2.05

%

 

23,472

 

 

Starwood Hotels & Resorts Worldwide

 

1,500

 

 

9/20/07

 

 

1.20

%

 

18,634

 

 

Credit Suisse First Boston

 

 

 

 

 

 

 

 

 

 

 

 

 

AES

 

900

 

 

9/20/09

 

 

3.85

%

 

62,322

 

 

Allied Waste North America

 

875

 

 

9/20/09

 

 

2.46

%

 

10,940

 

 

Delhaize America

 

875

 

 

9/20/09

 

 

1.40

%

 

23,176

 

 

Intelsat Bermuda

 

3,000

 

 

3/20/10

 

 

3.21

%

 

(94,047

)

 

Samis

 

3,080

 

 

9/20/08

 

 

2.45

%

 

29,217

 

 

Deutsche Bank AG

 

 

 

 

 

 

 

 

 

 

 

 

 

Russian Federation

 

3,000

 

 

6/20/07

 

 

0.44

%

 

4,382

 

 

Goldman Sachs

 

 

 

 

 

 

 

 

 

 

 

 

 

Dow Jones CDX High Yield

 

20,000

 

 

6/20/11

 

 

3.45

%

 

196,546

 

 

HCA

 

1,000

 

 

12/20/07

 

 

0.75

%

 

(5,678

)

 

Starwood Hotels & Resorts Worldwide

 

1,000

 

 

12/20/07

 

 

1.10

%

 

12,600

 

 

TRW Automotive

 

875

 

 

9/20/09

 

 

2.15

%

 

33,032

 

 

J. P. Morgan Chase

 

 

 

 

 

 

 

 

 

 

 

 

 

AES

 

1,500

 

 

9/20/07

 

 

2.15

%

 

28,637

 

 

Electronic Data System

 

1,000

 

 

12/20/07

 

 

1.30

%

 

16,177

 

 

Nortel Network

 

1,300

 

 

9/20/07

 

 

1.43

%

 

1,627

 

 

Tenet Healthcare

 

5,000

 

 

12/20/07

 

 

(3.20

)%

 

(112,831

)

 

Tenet Healthcare

 

5,000

 

 

12/20/09

 

 

4.15

%

 

110,601

 

 

Lehman Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

Abitibi-Consolidated

 

1,000

 

 

9/20/06

 

 

1.00

%

 

281

 

 

Dow Jones CDX High Yield

 

25,000

 

 

6/20/11

 

 

3.45

%

 

89,433

 

 

Extendicare Health Services

 

2,600

 

 

9/20/09

 

 

2.10

%

 

26,738

 

 

L-3 Communications Group

 

5,000

 

 

12/20/08

 

 

1.50

%

 

110,505

 

 

Six Flags Theme Parks

 

1,000

 

 

3/20/10

 

 

2.70

%

 

(76,258

)

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 41

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities (continued)

 

Swap
Counterparty/
Referenced Debt
Issuer

 

Notional
Amount
Payable on
Default
(000)

 

Termination
Date

 

Fixed
Payments
Received (Paid)
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Merrill Lynch

 

 

 

 

 

 

 

 

 

PSEG Energy

 

$  3,500

 

 

12/4/06

 

 

2.95

%

 

 

$

48,322

 

 

SPX Corp.

 

900

 

 

9/20/09

 

 

2.25

%

 

 

 

29,264

 

 

Williams Cos.

 

700

 

 

9/20/09

 

 

1.71

%

 

 

 

16,549

 

 

Morgan Stanley Dean Witter

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Georgia-Pacific

 

900

 

 

9/20/09

 

 

1.63

%

 

 

 

(3,327

)

 

GMAC

 

1,000

 

 

9/20/06

 

 

1.70

%

 

 

 

3,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

870,969

 

 

 

Floating Rate Strategy:

Swap
Counterparty/
Referenced Debt
Issuer

 

Notional
Amount
Payable on
Default
(000)

 

Termination
Date

 

Fixed
Payments
Received (Paid)
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Bank of America

 

 

 

 

 

 

 

 

 

Abitibi-Consolidated

 

$  5,000

 

 

6/20/08

 

 

2.95

%

 

 

$

20,568

 

 

Bombardier

 

3,500

 

 

6/20/10

 

 

3.80

%

 

 

 

171,712

 

 

CMS Energy

 

5,000

 

 

12/20/09

 

 

2.15

%

 

 

 

166,576

 

 

Royal Caribbean Cruises

 

5,000

 

 

12/20/09

 

 

1.12

%

 

 

 

46,629

 

 

Williams Cos.

 

5,000

 

 

12/20/09

 

 

1.65

%

 

 

 

103,707

 

 

Bear Stearns

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Abitibi-Consolidated

 

2,500

 

 

6/20/07

 

 

1.65

%

 

 

 

(839

)

 

Allied Waste North America

 

1,500

 

 

12/20/07

 

 

1.85

%

 

 

 

22,342

 

 

ArvinMeritor

 

1,500

 

 

12/20/07

 

 

1.14

%

 

 

 

(8,648

)

 

Dura Automotive Systems

 

4,500

 

 

12/20/09

 

 

4.15

%

 

 

 

(841,636

)

 

Dynergy Holdings

 

1,500

 

 

12/20/09

 

 

2.35

%

 

 

 

13,765

 

 

MGM Mirage

 

5,000

 

 

12/20/09

 

 

1.54

%

 

 

 

22,653

 

 

Stone Container

 

1,500

 

 

12/20/09

 

 

1.76

%

 

 

 

(60,985

)

 

Stone Container

 

5,000

 

 

12/20/09

 

 

1.87

%

 

 

 

(186,416

)

 

Citigroup

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AES

 

10,000

 

 

6/20/08

 

 

1.17

%

 

 

 

42,588

 

 

Host Marriott

 

5,000

 

 

12/20/09

 

 

1.70

%

 

 

 

134,618

 

 

Reliant Energy

 

5,000

 

 

12/20/09

 

 

3.20

%

 

 

 

92,014

 

 

Credit Suisse First Boston

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equistar Chemicals

 

5,000

 

 

12/20/09

 

 

2.25

%

 

 

 

59,584

 

 

Intelsat Bermuda

 

7,000

 

 

3/20/10

 

 

3.21

%

 

 

 

(219,443

)

 

ITRAXX Europe Crossover

 

€  7,400

 

 

6/20/11

 

 

2.90

%

 

 

 

67,494

 

 

Samis

 

$  3,600

 

 

12/20/09

 

 

2.15

%

 

 

 

5,482

 

 

Samis

 

1,400

 

 

9/20/08

 

 

2.45

%

 

 

 

10,221

 

 

Deutsche Bank

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Russian Federation

 

7,000

 

 

6/20/07

 

 

0.44

%

 

 

 

10,224

 

 

Goldman Sachs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dow Jones CDX High Yield

 

80,000

 

 

6/20/11

 

 

3.45

%

 

 

 

736,184

 

 

J.P. Morgan Chase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nortel Network

 

3,100

 

 

9/20/07

 

 

1.43

%

 

 

 

3,879

 

 

NRG Energy

 

5,000

 

 

12/20/09

 

 

2.20

%

 

 

 

12,736

 

 

 

42 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities (continued)

 

Floating Rate Strategy (continued):

Swap
Counterparty/
Referenced Debt
Issuer

 

Notional
Amount
Payable on
Default
(000)

 

Termination
Date

 

Fixed
Payments
Received (Paid)
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Lehman Securities

 

 

 

 

 

 

 

 

 

Boyd Gaming

 

$  5,000

 

 

12/20/09

 

 

1.65

%

 

 

$

146,607

 

 

Hayes Lemmerz International

 

5,000

 

 

12/20/09

 

 

2.50

%

 

 

 

33,370

 

 

HCA

 

5,000

 

 

12/20/09

 

 

1.55

%

 

 

 

(191,470

)

 

PanAmSat

 

3,000

 

 

12/20/09

 

 

3.00

%

 

 

 

70,935

 

 

Six Flags Theme Parks

 

4,000

 

 

3/20/10

 

 

2.70

%

 

 

 

(305,032

)

 

Starwood Hotels & Resorts Worldwide

 

5,000

 

 

12/20/09

 

 

1.15

%

 

 

 

89,229

 

 

Station Casinos

 

5,000

 

 

12/20/09

 

 

1.45

%

 

 

 

11,051

 

 

Stone Container

 

3,000

 

 

12/20/09

 

 

1.85

%

 

 

 

(113,688

)

 

TRW Automotive

 

5,000

 

 

12/20/09

 

 

2.05

%

 

 

 

164,422

 

 

Merrill Lynch

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AES

 

3,000

 

 

12/20/09

 

 

2.60

%

 

 

 

94,558

 

 

ArvinMeritor

 

4,500

 

 

12/20/09

 

 

2.25

%

 

 

 

(86,853

)

 

Chesapeake Energy

 

5,000

 

 

12/20/09

 

 

1.30

%

 

 

 

46,158

 

 

CMS Energy

 

1,500

 

 

12/20/09

 

 

1.85

%

 

 

 

35,766

 

 

Delhaize America

 

5,000

 

 

12/20/09

 

 

1.07

%

 

 

 

78,866

 

 

Naftogaz Ukrainy

 

3,000

 

 

4/20/09

 

 

3.30

%

 

 

 

(81,917

)

 

Toys “R” Us

 

5,000

 

 

12/20/09

 

 

3.20

%

 

 

 

(332,904

)

 

UBS Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GMAC

 

6,000

 

 

9/20/06

 

 

5.05

%

 

 

 

71,732

 

 

Wachovia Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ford Motor Credit

 

5,000

 

 

12/20/09

 

 

2.14

%

 

 

 

(723,693

)

 

GMAC

 

5,000

 

 

12/20/09

 

 

2.26

%

 

 

 

(577,584

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,145,438

)

 

 

(d) Interest rate swap agreements outstanding at July 31, 2006:

 

Floating Rate Income:

 

 

 

 

 

 

Rate Type

 

 

 

Swap Counterparty

 

Notional
Amount
(000)

 


Termination
Date

 

Payments
made
by Fund

 

Payments
received
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Barclays Bank

 

$575,000

 

 

6/21/25

 

5.70%

 

3 month LIBOR

 

 

$(2,040,387

)

 

Barclays Bank

 

575,000

 

 

6/21/25

 

3 month LIBOR

 

5.70%

 

 

 

1,324,021

 

 

Lehman Securities

 

18,500

 

 

12/20/16

 

5.00%

 

3 month LIBOR

 

 

 

(19,793

)

 

Lehman Securities

 

144,100

 

 

12/15/07

 

3 month LIBOR

 

5.00%

 

 

 

(125,324

)

 

UBS Securities

 

118,000

 

 

6/21/25

 

5.70%

 

3 month LIBOR

 

 

 

(1,883,693

)

 

UBS Securities

 

115,000

 

 

6/21/25

 

3 month LIBOR

 

5.70%

 

 

 

782,310

 

 

 

 

 

 

 

 

 

 

 

 

 

$(1,962,866

)

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 43

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities (continued)

 

Floating Rate Strategy:

 

 

 

 

 

 

Rate Type

 

 

 

Swap Counterparty

 

Notional
Amount
(000)

 


Termination
Date

 

Payments
made
by Fund

 

Payments
received
by Fund

 

Unrealized
Appreciation
(Depreciation)

 

Barclays Bank

 

$265,000

 

 

6/21/25

 

5.70%

 

3 month LIBOR

 

 

 

$   (940,353

)

 

Barclays Bank

 

265,000

 

 

6/21/25

 

3 month LIBOR

 

5.70%

 

 

 

610,201

 

 

Lehman Securities

 

30,300

 

 

12/20/16

 

5.00%

 

3 month LIBOR

 

 

 

(32,418

)

 

Lehman Securities

 

235,100

 

 

12/15/07

 

3 month LIBOR

 

5.00%

 

 

 

(204,466

)

 

Lehman Securities

 

630,000

 

 

12/18/24

 

5.77%

 

3 month LIBOR

 

 

 

(10,584,756

)

 

Lehman Securities

 

613,000

 

 

12/18/24

 

3 month LIBOR

 

5.70%

 

 

 

4,096,701

 

 

UBS Securities

 

261,700

 

 

6/21/25

 

5.70%

 

3 month LIBOR

 

 

 

(4,177,648

)

 

UBS Securities

 

255,000

 

 

6/21/25

 

3 month LIBOR

 

5.70%

 

 

 

1,734,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$(9,498,051

)

 

 


LIBOR—London Interbank Offered Rate

 

Floating Rate Income and Floating Rate Strategy received $750,000 and $1,250,000 par value, respectively, in U.S. Treasury Bills as collateral for swap contracts.

 

(e) Forward foreign currency contracts outstanding at July 31, 2006:

 

Floating Rate Income:

 

 

U.S. $ Value on
Origination Date

 

U.S. $ Value
July 31, 2006

 

Unrealized
Appreciation
(Depreciation)

 

 

 

 

 

 

 

 

 

 

Purchased:

 

 

 

 

 

 

 

 

 

 

 

 

€2,019,000 settling 8/31/06

 

$  2,540,825

 

 

$  2,582,261

 

 

 

$  41,436

 

 

¥391,000,000 settling 8/15/06

 

3,459,611

 

 

3,424,638

 

 

 

(34,973

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold:

 

 

 

 

 

 

 

 

 

 

 

 

€29,092,000 settling 8/31/06

 

36,544,840

 

 

37,208,084

 

 

 

(663,244

)

 

€1,425,000 settling 9/29/06

 

1,824,670

 

 

1,825,549

 

 

 

(879

)

 

 

 

 

 

 

 

 

 

 

$(657,660

)

 

 

Floating Rate Strategy:

 

 

U.S. $ Value on
Origination Date

 

U.S. $ Value
July 31, 2006

 

Unrealized
Appreciation
(Depreciation)

 

 

 

 

 

 

 

 

 

 

Purchased:

 

 

 

 

 

 

 

 

 

 

 

 

€2,795,000 settling 8/31/06

 

$  3,509,419

 

 

$  3,574,749

 

 

 

$      65,330

 

 

¥885,500,000 settling 8/15/06

 

7,835,001

 

 

7,755,797

 

 

 

(79,204

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold:

 

 

 

 

 

 

 

 

 

 

 

 

€69,841,000 settling 8/31/06

 

87,671,547

 

 

89,325,236

 

 

 

(1,653,689

)

 

€6,068,000 settling 9/29/06

 

7,769,892

 

 

7,773,636

 

 

 

(3,744

)

 

 

 

 

 

 

 

 

 

 

$(1,671,307

)

 

 

44 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

3. Investments in Securities (continued)

 

(f) At July 31, 2006, the Funds had the following unfunded loan commitments which could be extended at the option of the borrower:

 

Borrower

 

Floating Rate
Income

 

Floating Rate
Strategy

 

Alon USA Energy

 

 

$   223,613

 

 

 

$     670,835

 

 

Eastman Kodak

 

 

2,501,433

 

 

 

5,002,865

 

 

Hawaiian Telecom

 

 

499,687

 

 

 

499,688

 

 

Host Marriott L.P. Revolver A

 

 

3,314,347

 

 

 

3,314,347

 

 

Host Marriott L.P. Revolver B

 

 

1,650,000

 

 

 

1,650,000

 

 

Lucite International

 

 

445,082

 

 

 

785,439

 

 

 

 

 

$8,634,162

 

 

 

$11,923,174

 

 

 

4. Income Tax Information

The tax character of dividends paid was:

 

Floating Rate Income:

 

 

 

Year ended
July 31, 2006

 

Year ended
July 31, 2005

 

Ordinary Income

 

$38,676,933

 

$29,057,023

 

 

At July 31, 2006, the tax character of distributable earnings of $4,897,135 was comprised of $4,833,140 of ordinary income and $63,995 of long-term capital gains.

 

In accordance with U.S. Treasury regulations, Floating Rate Income elected to defer realized capital losses of $6,805,117 and realized currency losses of $1,361,870 arising after October 31, 2005. Such losses are treated for tax purposes as arising on August 1, 2006.

 

The tax character of dividends paid was:

 

Floating Rate Strategy:

 

 

 

Eleven Months ended
July 31, 2006

 

October 29, 2004
(commencement of operations)
through August 31, 2005

 

Ordinary Income

 

$77,743,768

 

$47,631,649

 

 

At July 31, 2006, the tax character of distributable earnings of $19,538,281 was comprised of $18,992,011 of ordinary income and $546,270 of long-term capital gains.

 

In accordance with U.S. Treasury regulations, Floating Rate Strategy elected to defer realized capital losses of $15,869,824 and realized currency losses of $3,644,804 arising after October 31, 2005. Such losses are treated for tax purposes as arising on August 1, 2006.

 

For the Funds, the difference between book and tax appreciation/depreciation is primarily attributable to wash sales and certain fees received from loans.

 

The cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at July 31, 2006 were:

 

 

 

Cost of
Investments

 

Gross
Unrealized
Appreciation

 

Gross
Unrealized
Depreciation

 

Net
Unrealized
Appreciation

 

Floating Rate Income

 

$  570,321,193

 

 

$5,403,908

 

 

$1,446,743

 

 

$3,957,165

 

 

Floating Rate Strategy

 

1,309,660,705

 

 

8,539,390

 

 

5,023,468

 

 

3,515,922

 

 

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 45

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

5. Auction Preferred Shares

Floating Rate Income has issued 2,800 shares of Preferred Shares Series T, 2,800 shares of Preferred Shares Series W, 2,800 shares of Preferred Shares Series TH, each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

 

Floating Rate Strategy has issued 3,840 shares of Preferred Shares Series M, 3,840 shares of Preferred Shares Series T, 3,840 shares of Preferred Shares Series W, 3,840 shares of Preferred Shares Series TH, and 3,840 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 (typically re-set every seven days) through auction procedures. Distributions of net realized capital gains, if any, are paid annually.

 

For the period ended July 31, 2006, the annualized dividend rates ranged from:

 

 

 

High

 

Low

 

At July 31, 2006

 

Floating Rate Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series T

 

5.00%

 

3.00%

 

4.85%

 

Series W

 

5.26%

 

3.20%

 

5.05%

 

Series TH

 

5.36%

 

3.24%

 

5.15%

 

 

 

 

 

 

 

 

 

Floating Rate Strategy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series M

 

5.16%

 

3.46%

 

4.99%

 

Series T

 

5.21%

 

3.47%

 

5.09%

 

Series W

 

5.26%

 

3.48%

 

5.14%

 

Series TH

 

5.36%

 

3.37%

 

5.15%

 

Series F

 

5.36%

 

3.40%

 

5.07%

 

 

The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds 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 together 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 August 4, 2006, the following dividends were declared to common shareholders payable September 1, 2006 to shareholders of record on August 14, 2006:

 

Floating Rate Income

 

$0.14464 per common share

Floating Rate Strategy

 

$0.14048 per common share

 

On September 1, 2006, the following dividends were declared to common shareholders payable October 6, 2006 to shareholders of record on September 11, 2006:

 

Floating Rate Income

 

$0.14773 per common share

Floating Rate Strategy

 

$0.14356 per common share

 

7. Legal Proceedings

In June and September 2004, the Investment Manager, certain of its affiliates (including Allianz Global Investors Distributors LLC and PEA Capital LLC) and Allianz Global, agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (the “Commission”), the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. Two settlements (with the Commission and New Jersey) related to an alleged “market timing” arrangement in certain open-end funds sub-advised by PEA Capital LLC. Two settlements (with the Commission and California) related to the alleged use of cash and fund portfolio commissions to finance “shelf-space” arrangements with broker-dealers for open-end funds. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims related to market timing and $20.6 million to settle

 

46 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Notes to Financial Statements

July 31, 2006

 

7. Legal Proceedings (continued)

 

the claims related to shelf space. The settling parties also agreed to make certain corporate governance changes. None of the settlements alleges that any inappropriate activity took place with respect to the Funds.

 

Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in fifteen lawsuits filed in various jurisdictions. Eleven of those lawsuits concern market timing and have been transferred to and consolidated for pre-trial proceedings in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland; the other four lawsuits concern revenue sharing and have been consolidated into a single action in the U.S. District Court for the District of Connecticut. The lawsuits generally relate to the same allegations 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, restitution, and waiver of or return of certain sales charges paid by open-end fund shareholders.

 

The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Funds or on their ability to perform their respective investment advisory activities relating to the Funds.

 

The foregoing speaks only as of the date hereof.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 47


 

PIMCO Floating Rate Income Fund Financial Highlights

For a share of common stock outstanding throughout each period:

 

 

 

 

 

 

 

 

 

 

Year ended
July 31, 2006

 

Year ended
July 31, 2005

 

For the period
August 29, 2003*
through
July 31, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$19.51

 

 

$19.38

 

 

$19.35

**

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

1.91

 

 

1.36

 

 

0.71

 

 

Net realized and change in unrealized gain (loss) on
investments, futures contracts, options written,

swaps, unfunded loan commitments and
foreign currency transactions

 

 

(0.14

)

 

0.39

 

 

0.39

 

 

Total from investment operations

 

 

1.77

 

 

1.75

 

 

1.10

 

 

Dividends on Preferred
Shares from Net Investment Income

 

 

(0.48

)

 

(0.29

)

 

(0.11

)

 

Net increase in net assets applicable to
common shareholders resulting from

investment operations

 

 

1.29

 

 

1.46

 

 

0.99

 

 

Dividends and Distributions to Common
Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

(1.63

)

 

(1.19

)

 

(0.78

)

 

Net realized gains

 

 

(0.03

)

 

(0.14

)

 

 

 

Total dividends and distributions to
common shareholders

 

 

(1.66

)

 

(1.33

)

 

(0.78

)

 

Capital Share Transactions:

 

 

 

 

 

 

 

 

 

 

 

Common stock offering costs charged to
paid-in capital in excess of par

 

 

 

 

 

 

(0.04

)

 

Preferred shares offering costs/underwriting
discounts charged to paid-in capital in

excess of par

 

 

 

 

 

 

(0.14

)

 

Total capital share transactions

 

 

 

 

 

 

(0.18

)

 

Net asset value, end of period

 

 

$19.14

 

 

$19.51

 

 

$19.38

 

 

Market price, end of period

 

 

$20.02

 

 

$18.75

 

 

$20.47

 

 

Total Investment Return (1)

 

 

16.53

%

 

(2.05

)%

 

6.55

%

 

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

Net assets applicable to common
shareholders, end of period (000)

 

 

$345,750

 

 

$351,708

 

 

$346,749

 

 

Ratio of expenses to average net assets (2)(3)

 

 

1.53

%

 

1.52

%

 

1.36

%(4)

 

Ratio of net investment income to
average net assets (2)

 

 

9.91

%

 

6.93

%

 

4.04

%(4)

 

Preferred shares asset coverage per share

 

 

$66,133

 

 

$66,856

 

 

$66,274

 

 

Portfolio turnover

 

 

64

%

 

83

%

 

94

%

 

 

*

Commencement of operations.

**

Initial public offering price of $20.00 per share less underwriting discount of $0.65 per share.

(1)

Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share 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.

(2)

Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.

(3)

Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See note 1(n) in Notes to Financial Statements).

(4)

Annualized.

 

48 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06 | See accompanying Notes to Financial Statements.

 


 

PIMCO Floating Rate Strategy Fund Financial Highlights

For a share of common stock outstanding throughout each period:

 

 

 

 

 

 

 

 

Eleven Months
ended
July 31, 2006†

 

For the Period
October 29, 2004*
through
August 31, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

Net asset value, beginning of period

 

 

$18.98

 

 

$19.10

**

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

1.64

 

 

0.88

 

 

Net realized and change in unrealized gain on investments,
futures contracts, options written, swaps, unfunded loan
commitments and foreign currency transactions

 

 

 

 

0.31

 

 

Total from investment operations

 

 

1.64

 

 

1.19

 

 

Dividends on Preferred Shares from Net Investment Income

 

 

(0.45

)

 

(0.24

)

 

Net increase in net assets applicable to common shareholders
resulting from investment operations

 

 

1.19

 

 

0.95

 

 

Dividends to Common Shareholders from Net Investment Income

 

 

(1.41

)

 

(0.91

)

 

Capital Share Transactions:

 

 

 

 

 

 

 

 

Common stock offering costs charged to paid-in capital in excess of par

 

 

 

 

(0.03

)

 

Preferred shares offering costs/underwriting discounts charged to
paid-in capital in excess of par

 

 

 

 

(0.13

)

 

Total capital share transactions

 

 

 

 

(0.16

)

 

Net asset value, end of period

 

 

$18.76

 

 

$18.98

 

 

Market price, end of period

 

 

$18.87

 

 

$18.21

 

 

Total Investment Return (1)

 

 

11.77

%

 

(4.39

)%

 

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

Net assets applicable to common shareholders, end of period (000)

 

 

$782,371

 

 

$789,094

 

 

Ratio of expenses to average net assets (2)(3)

 

 

1.47

%(4)

 

1.35

%(4)

 

Ratio of net investment income to average net assets (2)

 

 

9.51

%(4)

 

5.57

%(4)

 

Preferred shares asset coverage per share

 

 

$65,722

 

 

$66,084

 

 

Portfolio turnover

 

 

60

%

 

47

%

 

 

*

Commencement of operations.

**

Initial public offering price of $20.00 per share less underwriting discount of $0.90 per share.

Fiscal year-end changed from August 31 to July 31.

(1)

Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share 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.

(2)

Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.

(3)

Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See note 1(n) in Notes to Financial Statements).

(4)

Annualized.

 

See accompanying Notes to Financial Statements. | 7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 49

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Report of Independent Registered Public Accounting Firm

 

To the Shareholders and the Board of Trustees of:
PIMCO Floating Rate Income Fund
PIMCO Floating Rate Strategy Fund

 

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations, of changes in net assets applicable to common shareholders and of cash flows and the financial highlights present fairly, in all material respects, the financial position of PIMCO Floating Rate Income Fund and PIMCO Floating Rate Strategy Fund (collectively hereafter referred to as the “Funds”) at July 31, 2006, the results of each of their operations, changes in net assets applicable to common shareholders, cash flows and financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2006 by correspondence with the custodian, brokers and agent banks, provide a reasonable basis for our opinion.

 

 

PricewaterhouseCoopers LLP
New York, New York
September 25, 2006

 

50 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Matters Relating to the Trustees Consideration of the Investment Management and
Portfolio Management Agreements
(unaudited)

 

The Investment Company Act of 1940 requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested (“Independent”) Trustees, voting separately, approve the Funds’ Management Agreements (the “Advisory Agreements”) with the Investment Manager and Portfolio Management Agreements (the “Sub-Advisory Agreements”, and together with the Advisory Agreements, the “Agreements”) between the Investment Manager and the Sub-Adviser. The Trustees met on June 20 and 21, 2006 (the “contract review meeting”) for the specific purpose of considering whether to approve the Advisory Agreements and the Sub-Advisory Agreements. The Independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting (the “Meeting”).

 

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Board of Trustees, including a majority of the Independent Trustees, concluded that the Fund’s Advisory Agreements and the Sub-Advisory Agreements should be approved for a one-year period commencing July 1, 2006.

 

In connection with their deliberations regarding the continuation of the Agreements, the Trustees, including the Independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services performed by the Investment Manager and the Sub-Adviser under the Agreements.

 

In connection with their contract review meeting, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. on the total return investment performance (based on net assets) of the Funds for various time periods and the investment performance of a group of funds with substantially similar investment classifications/objectives, (ii) information provided by Lipper Inc. on the Funds’ management fees and other expenses and the management fees and other expenses of comparable funds identified by Lipper Inc., (iii) information regarding the investment performance and management fees of comparable portfolios of other clients of the Sub-Adviser, including institutional separate account and other clients, (iv) an estimate of the profitability to the Investment Manager from its relationship with the Funds for the twelve months ended March 31, 2006, (v) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Funds, such as portfolio management, compliance monitoring and portfolio trading practices, and (vi) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Funds.

 

The Trustees’ conclusions as to the continuation Agreements were based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors.

 

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s abilities to provide high quality investment management and other services to the Funds. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Funds; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and the Sub-Adviser; and the level of skill required to manage the Funds. In addition, the Trustees reviewed the quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Funds; the nature and quality of certain administrative services the Investment Manager is responsible for providing to the Funds; and conditions that might affect the Investment Manager’s or the Sub-Adviser’s ability to provide high quality services to the Funds in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Funds given their investment objectives and policies, and that the Investment Manager and the Sub-Adviser would be able to continue to meet any reasonably foreseeable obligations under the Agreements.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 51

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Matters Relating to the Trustees Consideration of the Investment Management and
Portfolio Management Agreements
(unaudited) (continued)

 

Based on information provided by Lipper Inc., the Trustees also reviewed each Fund’s total return investment performance as well as the performance of comparable funds identified by Lipper Inc. In the course of their deliberations, the Trustees took into account information provided by the Investment Manager in connection with the Meeting, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding each the Fund’s performance.

 

In assessing the reasonableness of each Fund’s fees under the Agreements, the Trustees considered, among other information, the Fund’s management fee and the total expense ratio as a percentage of average net assets attributable to common shares and the management fee and total expense ratios of comparable funds identified by Lipper Inc.

 

For each of the Funds, the Trustees specifically took note of how each Fund compared to its Lipper Inc. peers as to performance and management fee expenses. The Trustees noted that while the Funds are not charged a separate administration fee, it was not clear whether the peer funds in the Lipper Inc. categories were charged such a fee by their investment managers. Thus, the Trustees, at the recommendation of the Investment Manager, considered the total expenses of the Funds comparatively to the total expenses of the peer funds, recognizing that the fees for management and administrative services would be subsumed within the total expense ratio.

 

The Trustees noted that Floating Rate Income outperformed its peer median and average group for the one-year period ended April 30, 2006. The Trustees also noted that Floating Rate Income’s expense ratio, including the effect of preferred shares was significantly below the average and median for its peer group and, excluding the effect of preferred shares, was slightly above the median but below the average for its peer group.

 

The Trustees noted that Floating Rate Strategy outperformed its peer median and average group for the one-year period ended April 30, 2006. The Trustees also noted that Floating Rate Strategy’s expense ratio, was significantly below the average and median for its peer group.

 

After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with the Investment Manager’s and the Sub-Adviser’s responses and efforts relating to investment performance and the comparative positioning of each Fund with respect to the management fee paid to the Investment Manager.

 

The Trustees also considered the management fees charged by the Sub-Adviser to other clients, including institutional separate accounts with investment strategies similar to those of the Funds. Regarding the institutional separate accounts, they noted that the management fees paid by the Funds are generally higher than the fees paid by these clients of the Sub-Adviser, but were advised that the administrative burden for the Investment Manager and the Sub-Adviser with respect to the Funds are also relatively higher, due in part to the more extensive regulatory regime to which the Funds are subject in comparison to institutional separate accounts. The Trustees noted that the management fees paid by the Funds are generally higher than the fees paid by the open-end funds but were advised that there are additional portfolio management challenge in managing the Funds, such as the use of leverage and meeting a regular dividend.

 

The Trustees also took into account that the Funds have preferred shares outstanding, which increases the amount of fees received by the Investment Manager and the Sub-Adviser under the Agreements (because the fees are calculated based on the Fund’s total managed assets, including assets attributable to preferred shares and other forms of leverage outstanding). In this regard, the Trustees took into account that the Investment Manager and the Sub-Adviser have a financial incentive for the Funds to continue to have preferred shares outstanding, which may create a conflict of interest between the Investment Manager and the Sub-Adviser, on one hand, and the Fund’s common shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and the Sub-Adviser indicating that each Fund’s use of leverage through preferred shares continues to be appropriate and in the interests of the Fund’s common shareholders.

 

52 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Matters Relating to the Trustees Consideration of the Investment Management and
Portfolio Management Agreements
(unaudited) (continued)

 

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability of the Investment Manager from its relationship with each Fund and determined that such profitability was not excessive.

 

The Trustees also took into account that, as closed-end investment companies, the Funds do not currently intend to raise additional assets, so the assets of the Funds will grow (if at all) only through the investment performance of each Fund. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

 

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and the Sub-Adviser, such as reputational value derived from serving as Investment Manager and Sub-Adviser to the Funds.

 

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services being provided by the Investment Manager and Sub-Adviser to the Funds.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 53

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Tax Information
(unaudited)

 

Pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003, Floating Rate Income and Floating Rate Strategy designate qualified dividend income of $245,872 and $27,650, respectively, or the maximum allowable amount.

 

There was no ordinary dividends paid by Floating Rate Income and Floating Rate Strategy during the fiscal periods ended July 31, 2006 which qualified for the Dividends Received Deduction to corporate shareholders.

 

Since the Funds’ tax year is not the calendar year, another notification will be sent with respect to calendar year 2006. In January 2007, shareholders will be advised on IRS Form 1099 DIV as to the federal tax status of dividends and distributions received during calendar 2006. The amount that will be reported, will be the amount to use on your 2006 federal income tax return and may differ from the amount which must be reported in connection with the Funds’ tax year ended July 31, 2006. Shareholders are advised to consult their tax advisers as to the federal, state and local tax status of the dividend income received from the Funds.

 

Subsequent Event – Appointment of Trustee

 

On September 12, 2006, each Fund’s Board of Trustees appointed William B. Ogden IV as a Class I trustee.

 

54 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Privacy Policy/Proxy Voting Policies & Procedures
(unaudited)

 

Privacy Policy:

Our Commitment to You

We consider customer privacy to be a fundamental aspect of our relationship with clients. We are committed to maintaining the confidentiality, integrity, and security of our current, prospective and former clients’ personal information. We have developed policies designed to protect this confidentiality, while allowing client needs to be served.

 

Obtaining Personal Information

In the course of providing you with products and services, we may obtain non-public personal information about you. This information may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from your transactions, from your brokerage or financial advisory firm, financial adviser or consultant, and/or from information captured on our internet web sites.

 

Respecting Your Privacy

We do not disclose any personal or account information provided by you or gathered by us to non-affiliated third parties, except as required or permitted by law. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, conducting research on client satisfaction, and gathering shareholder proxies. We may also retain non-affiliated companies to market our products and enter in joint marketing agreements with other companies. These companies may have access to your personal and account information, but are permitted to use the information solely to provide the specific service or as otherwise permitted by law. We may also provide your personal and account information to your brokerage or financial advisory firm and/or to your financial adviser or consultant.

 

Sharing Information with Third Parties

We do reserve the right to disclose or report personal information to non-affiliated third parties in limited circumstances where we believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to protect our rights or property, or upon reasonable request by any mutual fund in which you have chosen to invest. In addition, the fund may disclose information about a shareholder’s accounts to a non-affiliated third party with the consent or upon the request of the shareholder.

 

Sharing Information with Affiliates

We may share client information with our affiliates in connection with servicing your account or to provide you with information about products and services that we believe may be of interest to you. The information we share may include, for example, your participation in our mutual funds or other investment programs, your ownership of certain types of accounts (such as IRAs), or other data about your accounts. Our affiliates, in turn, are not permitted to share your information with non-affiliated entities, except as required or permitted by law.

 

Procedures to Safeguard Private Information

The Funds take seriously the obligation to safeguard shareholder non-public personal information. In addition to this policy, the Funds have also implemented procedures that are designed to restrict access to a shareholder’s non-public personal information only to internal personnel who need to know that information in order to provide products or services to such shareholders. In order to guard a shareholder’s non-public personal information, physical, electronic and procedural safeguards are in place.

 

 

Proxy Voting Policies & Procedures:

A description of the policies and procedures that the Funds have adopted to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities held during the twelve months ended June 30, 2006 is available (i) without charge, upon request, by calling the Funds’ shareholder servicing agent at (800) 331-1710; (ii) on the Funds’ website at www.allianzinvestors.com; and (iii) on the Securities and Exchange Commission’s website at www.sec.gov.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 55

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Dividend Reinvestment Plan
(unaudited)

 

Pursuant to the Funds’ Dividend Reinvestment Plan (the “Plan”), all Common Shareholders whose shares are registered in their own names will have all dividends, including any capital gain dividends, reinvested automatically in additional Common Shares by PFPC Inc., as agent for the Common Shareholders (the “Plan Agent”), unless the shareholder elects to receive cash. An election to receive cash may be revoked or reinstated at the option of the shareholder. In the case of record shareholders such as banks, brokers or other nominees that hold Common Shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of Common Shares certified from time to time by the record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. Shareholders whose shares are held in the name of a bank, broker or nominee should contact the bank, broker or nominee for details. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf), will be paid cash by check mailed, in the case of direct shareholder, to the record holder by PFPC Inc., as the Funds’ dividend disbursement agent.

 

Unless a shareholder (or their broker or nominee) elects not to participate in the Plan, the number of Common Shares you will receive will be determined as follows:

 

(1)     If on the payment date the net asset value of the Common Shares is equal to or less than the market price per Common Share plus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market, the Fund will issue new shares at the greater of (i) the net asset value per Common Share on the payment date or (ii) 95% of the market price per Common Share on the payment date; or

 

(2)     If on the payment date the net asset value of the Common Shares is greater than the market price per Common Share plus estimated brokerage commissions that would be incurred upon the purchase of Common Shares on the open market, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the New York Stock Exchange or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price on the payment date, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market on or shortly after the payment date, but in no event later than the ex-dividend date for the next distribution. Interest will not be paid on any uninvested cash payments.

 

Shareholders may withdraw from the Plan at any time by giving notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.

 

The Plan Agent maintains all shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. The Plan Agent will also furnish each person who buys Common Shares with written instructions detailing the procedures for electing not to participate in the Plan and to instead receive distributions in cash. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.

 

There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.

 

Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions.

 

The Funds and the Plan Agent reserve the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, the Funds reserve the right to amend the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained from the Funds’ shareholder servicing agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027, telephone number (800) 331-1710.

 

56 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Board of Trustees (unaudited)

 

Name, Date of Birth, Position(s) Held with Fund,
Length of Service, Other Trusteeships/Directorships
Held by Trustee; Number of Portfolios in Fund
Complex/Outside Fund Complexes Currently
Overseen by Trustee

 

Principal Occupation(s) During Past 5 Years:

The address of each trustee is 1345 Avenue of the Americas, New York, NY 10105

 

 

 

 

 

Robert E. Connor
Date of Birth: 9/17/34
Chairman of the Board of Trustees since: 2004
Trustee since: 2003 (Floating Rate Income)/2004
     (Floating Rate Strategy)
Term of office: Expected to stand for re-election at
     2007(Floating Rate Income)/2008 (Floating Rate
     Strategy) annual meeting of shareholders.
Trustee/Director of 24 funds in Fund Complex
Trustee/Director of no funds outside of Fund Complex

 

Corporate Affairs Consultant; Formerly, Senior Vice President, Corporate Office, Smith Barney Inc.

 

 

 

Paul Belica
Date of Birth: 9/27/21
Trustee since: 2003 (Floating Rate Income)/2005
     (Floating Rate Strategy)
Term of Office: Expected to stand for re-election at
     2008 annual meeting of shareholders
Director/Trustee of 24 funds in Fund Complex
Director/Trustee of no funds outside of Fund Complex

 

Retired. Formerly Director, Student Loan Finance Corp., Education Loans, Inc., Goal Funding, Inc., Goal Funding II, Inc. and Surety Loan Fund, Inc.; Formerly, Manager of Stratigos Fund LLC, Whistler Fund LLC, Xanthus Fund LLC & Wynstone Fund LLC.

 

 

 

John J. Dalessandro II
Date of Birth: 7/26/37
Trustee since: 2003 (Floating Rate Income)/2004
     (Floating Rate Strategy)
Term of office: Expected to stand for re-election at
     2008 (Floating Rate Income)/2006 (Floating Rate
     Strategy) annual meeting of shareholders.
Trustee of 24 funds in Fund Complex
Trustee of no funds outside of Fund complex

 

Retired. Formerly, President and Director, J.J. Dalessandro II Ltd., registered broker-dealer and member of the New York Stock Exchange.

 

 

 

David C. Flattum†
Date of Birth: 8/27/64
Trustee since: 2004 (Floating Rate Income)/2005
     (Floating Rate Strategy)
Term of office: Expected to stand for election at
     2006 (Floating Rate Income)/2007 (Floating Rate
     Strategy) annual meeting of shareholders.
Trustee of 57 funds in Fund Complex
Trustee of no funds outside of Fund Complex

 

Managing Director, Chief Operating Officer, General Counsel and member of Management Board, Allianz Global Investors of America L.P.; Member of Management board, Allianz Global Investors Fund Management LLC; Formerly, Head of Corporate Functions of Allianz Global Investors of America L.P.; Formerly, Partner, Latham & Watkins LLP (1998-2001).

 

 

 

Hans W. Kertess
Date of Birth: 7/12/39
Trustee since: 2003 (Floating Rate Income)/2004
     (Floating Rate Strategy)
Term of office: Expected to stand for re-election at
     2007 annual meeting of shareholders.
Trustee of 24 funds in Fund Complex;
Trustee of no funds outside of Fund Complex

 

President, H. Kertess & Co. (a financial advisory company); Formerly, Managing Director, Royal Bank of Canada Capital Markets.

 

 

 

William B. Ogden, IV
Date of Birth: 1/11/45
Trustee since: 2006
Term of office: Expected to stand for election at
     2006 (Floating Rate Income)/ 2006 (Floating Rate
     Strategy) annual meeting of shareholders.
Trustee of 24 funds in Fund Complex
Trustee of no funds outside of Fund Complex

 

Asset Management Industry Consultant; Formerly, Managing Director, Investment Banking Division of Citigroup Global Markets Inc.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 57

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Board of Trustees (continued) (unaudited)

 

Name, Age, Position(s) Held with Fund, Length
of Service, Other Trusteeships/Directorships
Held by Trustee; Number of Portfolios in Fund
Complex/Outside Fund Complexes Currently
Overseen by Trustee

 

Principal Occupation(s) During Past 5 Years:

The address of each trustee is 1345 Avenue of the Americas, New York, NY 10105

 

 

 

 

 

R. Peter Sullivan III
Date of Birth: 9/4/41
Trustee since: 2004 (Floating Rate Income)/2005
     (Floating Rate Strategy)
Term of office: Expected to stand for re-election at
     2006 annual meeting of shareholders.
Trustee of 24 funds in Fund Complex
Trustee of no funds outside of Fund Complex

 

Retired. Formerly, Managing Partner, Bear Wagner Specialists LLC, specialist firm on the New York Stock Exchange


    Mr. Flattum is an “interested person” of the Funds due to his affiliation with Allianz Global Investors of America L.P. (“AGI”) and the Investment Manager. In addition to Mr. Flattum’s positions with affiliated persons of the Funds set forth in the table above, he holds the following positions with affiliated persons: Managing Director, Chief Operating Officer, General Counsel & member of Management Board, AGI; Member of Management Board AGIFM; Director, PIMCO Global Advisors (Resources) Limited; Managing Director, Allianz Dresdner Asset Management U.S. Equities LLC, Allianz Hedge Fund Partners Holdings L.P., Allianz PacLife Partners LLC, PA Holdings LLC; Director and Chief Executive Officer, Oppenheimer Group, Inc.

 

Further information about Funds’ Trustees is available in the Statement of Additional Information, dated August 26, 2003 and October 26, 2004 for PIMCO Floating Rate Income Fund and PIMCO Floating Rate Strategy Fund, respectively, which can be obtained upon request, without charge, by calling the Funds’ shareholder servicing agent at (800) 331-1710.

 

58 PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report | 7.31.06

 


 

PIMCO Floating Rate Income/PIMCO Floating Rate Strategy Funds
Principal Officers
(unaudited)

 

Name, Date of Birth, Position(s) Held with Fund.

 

Principal Occupation(s) During Past 5 Years:

Brian S. Shlissel
Date of Birth: 11/14/64
President & Chief Executive Officer since: 2003/2004
     (Floating Rate Income/ Floating Rate Strategy)

 

Executive Vice President, Allianz Global Investors Fund Management LLC; President and Chief Executive Officer of 32 funds in the Fund Complex; Treasurer; Principal Financial and Accounting Officer of 33 funds in the Fund Complex; Trustee of 8 funds in the Fund Complex.

 

 

 

Lawrence G. Altadonna
Date of Birth: 3/10/66
Treasurer, Principal/Financial
     and Accounting Officer since: 2003/2004
     (Floating Rate Income/Floating Rate Strategy)

 

Senior Vice President, Allianz Global Investors Fund Management LLC; Treasurer, Principal Financial and Accounting officer of 24 funds in the Fund Complex; Treasurer of 8 funds in the Fund Complex; Assistant Treasurer of 33 funds in the Fund Complex.

 

 

 

Thomas J. Fuccillo
Date of Birth: 3/22/68
Vice President, Secretary &
     Chief Legal Officer since: 2004/2004
     (Floating Rate Income/Floating Rate Strategy)

 

Senior Vice President, Senior Counsel, Allianz Global Investors of America L.P., Vice President, Secretary and Chief Legal Officer of 32 funds in the .Fund Complex. Formerly, Vice President and Associate General Counsel, Neuberger Berman LLC (1991-2004).

 

 

 

Youse E. Guia
Date of Birth: 9/3/72
Chief Compliance Officer since: 2004/2004
     (Floating Rate Income/Floating Rate Strategy)

 

Senior Vice President, Group Compliance Manager, Allianz Global Investors of America L.P., Chief Compliance Officer of 65 funds in the Fund Complex. Formerly, Vice President, Group Compliance Manager, Allianz Global Investors of America L.P. (2002-2004), Audit Manager, Pricewaterhouse Coopers LLP (1996-2002).

 

Officers hold office at the pleasure of the Board and until their successors are appointed and qualified or until their earlier resignation or removal.

 

7.31.06 | PIMCO Floating Rate Income & PIMCO Floating Rate Strategy Funds Annual Report 59

 


 

(This Page Intentionally Left Blank)

 


 

Trustees and Principal Officers

Robert E. Connor
Trustee, Chairman of the Board of Trustees

Paul Belica
Trustee

John J. Dalessandro II
Trustee

David C. Flattum
Trustee

Hans W. Kertess
Trustee

William B. Ogden, IV
Trustee

R. Peter Sullivan III
Trustee

Brian S. Shlissel
President & Chief Executive Officer

Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer

Thomas J. Fuccillo
Vice President, Secretary & Chief Legal Officer

Youse E. Guia
Chief Compliance Officer

 

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 Floating Rate Income Fund and PIMCO Floating Rate Strategy Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.

 

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Funds may purchase shares of its common stock in the open market.

 

The Funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarter of its fiscal year on Form N-Q. The Funds’ Form N-Qs are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.

 

On December 20, 2005, each Fund submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the Funds’ principal executive officer certified that he was not aware, as of the date, of any violation by the Funds of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, each Fund’s principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, the Funds’ disclosure controls and procedures and internal control over financial reporting, as applicable.

 

Information on the Funds is available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 331-1710.


ITEM 2. CODE OF ETHICS

(a)          As of the end of the period covered by this report, the registrant has adopted a code of ethics (the “Section 406 Standards for Investment Companies — Ethical Standards for Principal Executive and Financial Officers”) that applies to the registrant’s Principal Executive Officer and Principal Financial Officer; the registrant’s Principal Financial Officer also serves as the Principal Accounting Officer. The registrant undertakes to provide a copy of such code of ethics to any person upon request, without charge, by calling 1-800-331-1710.  The Investment Managers code of ethics are included as an Exhibit 99.CODE ETH hereto.

(b)         During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above.

(c)          During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

The registrant’s Board has determined that Mr. Paul Belica, a member of the Board’s Audit Oversight Committee is an “audit committee financial expert,” and that he is “independent,” for purposes of this Item.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

a)              Audit fees. The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $137,500 in 2005 and $107,500 in 2006.

b)             Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the principal accountant that are reasonably related to the performance of the audit registrant’s financial statements and are not reported under paragraph (e) of this Item were $15,000 in 2005 and $16,000 in 2006. These services consist of accounting consultations, agreed upon procedure reports (inclusive of annual review of basic maintenance testing associated with the Preferred Shares), attestation reports and comfort letters.

c)              Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance,




tax service and tax planning (“Tax Services”) were $11,000 in 2005 and $11,500 in 2006. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns.

d)             All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant.

e)              1. Audit Committee Pre-Approval Policies and Procedures. The Registrant’s Audit Committee has established policies and procedures for pre-approval of all audit and permissible non-audit services by the Auditor for the Registrant, as well as the Auditor’s engagements related directly to the operations and financial reporting of the Registrant. The Registrant’s policy is stated below.

PIMCO Floating Rate Strategy Fund (THE “FUND”)

AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE INDEPENDENT ACCOUNTANTS

The Fund’s Audit Oversight Committee (“Committee”) is charged with the oversight of the Fund’s financial reporting policies and practices and their internal controls. As part of this responsibility, the Committee must pre-approve any independent accounting firm’s engagement to render audit and/or permissible non-audit services, as required by law. In evaluating a proposed engagement by the independent accountants, the Committee will assess the effect that the engagement might reasonably be expected to have on the accountant’s independence. The Committee’s evaluation will be based on:

a review of the nature of the professional services expected to provided,

the fees to be charged in connection with the services expected to be provided,

a review of the safeguards put into place by the accounting firm to safeguard independence, and

periodic meetings with the accounting firm.

POLICY FOR AUDIT AND NON-AUDIT SERVICES TO BE PROVIDED TO THE FUND

On an annual basis, the Fund’s Committee will review and pre-approve the scope of the audits of the Fund and proposed audit fees and permitted non-audit (including audit-related) services that may be performed by the Fund’s independent accountants. At least annually, the Committee will receive a report of all audit and non-audit services that were rendered in the previous calendar year pursuant to this Policy. In addition to the Committee’s




pre-approval of services pursuant to this Policy, the engagement of the independent accounting firm for any permitted non-audit service provided to the Fund will also require the separate written pre-approval of the President of the Fund, who will confirm, independently, that the accounting firm’s engagement will not adversely affect the firm’s independence. All non-audit services performed by the independent accounting firm will be disclosed, as required, in filings with the Securities and Exchange Commission.

AUDIT SERVICES

The categories of audit services and related fees to be reviewed and pre-approved annually by the Committee are:

Annual Fund financial statement audits

Seed audits (related to new product filings, as required)

SEC and regulatory filings and consents

Semiannual financial statement reviews

AUDIT-RELATED SERVICES

The following categories of audit-related services are considered to be consistent with the role of the Fund’s independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:

Accounting consultations

Fund merger support services

Agreed upon procedure reports (inclusive of quarterly review of Basic Maintenance testing associated with issuance of Preferred Shares and semiannual report review)

Other attestation reports

Comfort letters

Other internal control reports

Individual audit-related services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chair (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

TAX SERVICES

The following categories of tax services are considered to be consistent with the role of the Funds’ independent accountants and services falling under one of these categories will be pre-approved by the Committee on an annual basis if the Committee deems those services to be consistent with the accounting firm’s independence:




Tax compliance services related to the filing or amendment of the following:

Federal, state and local income tax compliance; and, sales and use tax compliance

Timely RIC qualification reviews

Tax distribution analysis and planning

Tax authority examination services

Tax appeals support services

Accounting methods studies

Fund merger support service

Other tax consulting services and related projects

Individual tax services that fall within one of these categories and are not presented to the Committee as part of the annual pre-approval process described above, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

PROSCRIBED SERVICES

The Fund’s independent accountants will not render services in the following categories of non-audit services:

Bookkeeping or other services related to the accounting records or financial statements of the Funds

Financial information systems design and implementation

Appraisal or valuation services, fairness opinions, or contribution-in-kind reports

Actuarial services

Internal audit outsourcing services

Management functions or human resources

Broker or dealer, investment adviser or investment banking services

Legal services and expert services unrelated to the audit

Any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible

PRE-APPROVAL OF NON-AUDIT SERVICES PROVIDED TO OTHER ENTITIES WITHIN THE FUND COMPLEX

The Committee will pre-approve annually any permitted non-audit services to be provided to Allianz Global Investors Fund Management LLC (Formerly, PA Fund Management LLC) or any other investment manager to the Funds (but not including any sub-adviser whose role is primarily portfolio management and is sub-contracted by the investment manager) (the “Investment Manager”) and any entity




controlling, controlled by, or under common control with the Investment Manager that provides ongoing services to the Fund (including affiliated sub-advisers to the Fund), provided, in each case, that the engagement relates directly to the operations and financial reporting of the Fund (such entities, including the Investment Manager, shall be referred to herein as the “Accounting Affiliates”). Individual projects that are not presented to the Committee as part of the annual pre-approval process, may be pre-approved, if deemed consistent with the accounting firm’s independence, by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this responsibility has been delegated) so long as the estimated fee for those services does not exceed $100,000. Any such pre-approval shall be reported to the full Committee at its next regularly scheduled meeting.

Although the Committee will not pre-approve all services provided to the Investment Manager and its affiliates, the Committee will receive an annual report from the Fund’s independent accounting firm showing the aggregate fees for all services provided to the Investment Manager and its affiliates.

DE MINIMUS EXCEPTION TO REQUIREMENT OF PRE-APPROVAL OF NON-AUDIT SERVICES

With respect to the provision of permitted non-audit services to a Fund or Accounting Affiliates, the pre-approval requirement is waived if:

(1)          The aggregate amount of all such permitted non-audit services provided constitutes no more than (i) with respect to such services provided to the Fund, five percent (5%) of the total amount of revenues paid by the Fund to its independent accountant during the fiscal year in which the services are provided, and (ii) with respect to such services provided to Accounting Affiliates, five percent (5%) of the total amount of revenues paid to the Fund’s independent accountant by the Fund and the Accounting Affiliates during the fiscal year in which the services are provided;

(2)          Such services were not recognized by the Fund at the time of the engagement for such services to be non-audit services; and

(3)          Such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by the Committee Chairman (or any other Committee member who is a disinterested trustee under the Investment Company Act to whom this Committee Chairman or other delegate shall be reported to the full Committee at its next regularly scheduled meeting.

e) 2. No services were approved pursuant to the procedures contained in paragraph (C) (7) (i)   (C) of Rule 2-01 of Registration S-X.




f) Not applicable

g) Non-audit fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to the Adviser, for the 2005 Reporting Period was $2,992,953 and the 2006 Reporting Period was $1,856,854.

h) Auditor Independence. The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Adviser which were not pre-approved is compatible with maintaining the Auditor’s independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT

The Fund has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The audit committee of the Fund is comprised of Robert E. Connor, Paul Belica, John J. Dalessandro II, Hans W. Kertess, R. Peter Sullivan III and William B. Ogden IV.

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.

PIMCO Floating Rate Strategy Fund

(the “Trust”)

PROXY VOTING POLICY

1.                                       It is the policy of the Trust that proxies should be voted in the interest of its shareholders, as determined by those who are in the best position to make this determination.  The Trust believes that the firms and/or persons purchasing and selling securities for the Trust and analyzing the performance of the Trust’s securities are in the best position and have the information necessary to vote proxies in the best interests of the Trust and its shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the Trust, on the other.  Accordingly, the Trust’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the Trust.

2.                                       The Trust delegates the responsibility for voting proxies to Allianz Global Investors Fund Management LLC (“AGIFM”), which will in turn delegate such responsibility to the sub-adviser of the Trust.  AGIFM’s Proxy Voting Policy Summary is attached as Appendix A hereto.  Summary of the detailed proxy voting policies of the Trust’s current sub-adviser is set forth in Appendix B attached hereto.  Such summaries may be revised from time to time to reflect changes to the sub-advisers’ detailed proxy voting policies.

3.                                       The party voting the proxies (i.e., the sub-adviser or portfolio manager) shall vote such proxies in accordance with such party’s proxy voting policies and, to the extent consistent with such policies, may rely on information and/or recommendations supplied by others.

4.                                       AGIFM and the sub-adviser of a Trust with proxy voting authority shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the applicable Board of the Trust promptly after the adoption or amendment of any such policies.

5.                                       The party voting the proxy shall: (i) maintain such records and provide such voting information as is required for the Trust’s regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by the Board or the Trust’s Chief Compliance Officer.




6.                                       This Proxy Voting Policy Statement (including Appendix B), the Proxy Voting Policy Summary of AGIFM and summary of the detailed proxy voting policy of the sub-adviser of a Trust’s with proxy voting authority, shall be made available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) on the Trust’s website at www.allianzinvestors.com.  In addition, to the extent required by applicable law or determined by a Trust’s Chief Compliance Officer or Board of Trustees, the Proxy Voting Policy Summary of AGIFM and summaries of the detailed proxy voting policies of each sub-adviser with proxy voting authority shall also be included in the Trust’s Registration Statement or Form N-CSR filings.




Appendix A

ALLIANZ GLOBAL INVESTORS FUND MANAGEMENT LLC (“AGIFM”)

1.                                       It is the policy of AGIFM that proxies should be voted in the interest of the shareholders of the applicable fund, as determined by those who are in the best position to make this determination.  AGIFM believes that the firms and/or persons purchasing and selling securities for the funds and analyzing the performance of the funds’ securities are in the best position and have the information necessary to vote proxies in the best interests of the funds and their shareholders, including in situations where conflicts of interest may arise between the interests of shareholders, on one hand, and the interests of the investment adviser, a sub-adviser and/or any other affiliated person of the fund, on the other.  Accordingly, AGIFM’s policy shall be to delegate proxy voting responsibility to those entities with portfolio management responsibility for the funds.

2.                                       AGIFM, for each fund which it acts as an investment adviser, delegates the responsibility for voting proxies to the sub-adviser for the respective fund, subject to the terms hereof.

3.                                       The party voting the proxies (e.g., the sub-adviser) shall vote such proxies in accordance with such party’s proxy voting policies and, to the extent consistent with such policies, may rely on information and/or recommendations supplied by others.

4.                                       AGIFM and each sub-adviser of a fund shall deliver a copy of its respective proxy voting policies and any material amendments thereto to the board of the relevant fund promptly after the adoption or amendment of any such policies.

5.                                       The party voting the proxy shall:  (i) maintain such records and provide such voting information as is required for such funds’ regulatory filings including, without limitation, Form N-PX and the required disclosure of policy called for by Item 18 of Form N-2 and Item 7 of Form N-CSR; and (ii) shall provide such additional information as may be requested, from time to time, by such funds’ respective boards or chief compliance officers.

6.                                       This Proxy Voting Policy Summary and summaries of the proxy voting policies for each sub-adviser of a fund advised by AGIFM shall be available (i) without charge, upon request, by calling 1-800-426-0107 and (ii) at www.allianzinvestors.com.  In addition, to the extent required by applicable law or determined by the relevant fund’s board of directors/trustees or chief compliance officer, this Proxy Voting Policy Summary and summaries of the detailed proxy voting policies of each sub-adviser and each other entity with proxy voting authority for a fund advised by AGIFM shall also be included in the Registration Statement or Form N-CSR filings for the relevant fund.




Appendix B

PACIFIC INVESTMENT MANAGEMENT COMPANY LLC

Pacific Investment Management Company LLC (“PIMCO”) has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended. PIMCO has implemented the Proxy Policy for each of its clients as required under applicable law, unless expressly directed by a client in writing to refrain from voting that client’s proxies. Recognizing that proxy voting is a rare event in the realm of fixed income investing and is typically limited to solicitation of consent to changes in features of debt securities, the Proxy Policy also applies to any voting rights and/or consent rights of PIMCO, on behalf of its clients, with respect to debt securities, including but not limited to, plans of reorganization, and waivers and consents under applicable indentures.

The Proxy Policy is designed and implemented in a manner reasonably expected to ensure that voting and consent rights are exercised in the best interests of PIMCO’s clients. Each proxy is voted on a case-bycase basis taking into consideration any relevant contractual obligations as well as other relevant facts and circumstances at the time of the vote. In general, PIMCO reviews and considers corporate governance issues related to proxy matters and generally supports proposals that foster good corporate governance practices. PIMCO may vote proxies as recommended by management on routine matters related to the operation of the issuer and on matters not expected to have a significant economic impact on the issuer and/or its shareholders.

PIMCO will supervise and periodically review its proxy voting activities and implementation of the Proxy Policy. PIMCO will review each proxy to determine whether there may be a material conflict between PIMCO and its client. If no conflict exists, the proxy will be forwarded to the appropriate portfolio manager for consideration. If a conflict does exist, PIMCO will seek to resolve any such conflict in accordance with the Proxy Policy. PIMCO seeks to resolve any material conflicts of interest by voting in good faith in the best interest of its clients. If a material conflict of interest should arise, PIMCO will seek to resolve such conflict in the client’s best interest by pursuing any one of the following courses of action: (i) convening a committee to assess and resolve the conflict; (ii) voting in accordance with the instructions of the client; (iii) voting in accordance with the recommendation of an independent third-party service provider; (iv) suggesting that the client engage another party to determine how the proxy should be voted; (v) delegating the vote to a third-party service provider; or (vi) voting in accordance with the factors discussed in the Proxy Policy.

Clients may obtain a copy of PIMCO’s written Proxy Policy and the factors that PIMCO may consider in determining how to vote a client’s proxy. Except as required by law, PIMCO will not disclose to third parties how it voted on behalf of a client. However, upon request from an appropriately authorized individual, PIMCO will disclose to its clients or the entity delegating the voting authority to PIMCO for such clients, how PIMCO voted such client’s proxy. In addition, a client may obtain copies of PIMCO’s Proxy Policy and information as to how its proxies have been voted by contacting PIMCO.




ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

(a)(1)

As of October 6, 2006, the following individual has primary responsibility for the day-to-day implementation of the PIMCO and PIMCO Floating Rate Strategy Fund (“PFN”) (the “Fund”):

Raymond G. Kennedy, CFA
Mr. Kennedy is a Managing Director, portfolio manager, and senior member of PIMCO’s investment strategy group. He manages High Yield funds, oversees bank loan trading and collateralized debt obligations and heads the global high yield business for PIMCO. Mr. Kennedy joined the firm in 1996, previously having been associated with the Prudential Insurance Company of America as a private placement asset manager, where he was responsible for investing and managing a portfolio of investment grade and high yield privately placed fixed income securities. Prior to that, he was a consultant for Andersen Consulting (now Accenture) in Los Angeles and London. He has twenty years of investment management experience and holds a bachelor’s degree from Stanford University and an MBA from the Anderson Graduate School of Management at the University of California, Los Angeles.

(a)(2)

The following summarizes information regarding each of the accounts, excluding the Funds that were managed by the Portfolio Manager as of July 31, 2006, including accounts managed by a team, committee, or other group that includes the Portfolio Manager.  Unless mentioned otherwise, the advisory fee charged for managing each of the accounts listed below is not based on performance.

 

 

 

 

Registered Investment
Companies

 

Other Pooled Investment
Vehicles

 

Other Accounts

 

PM

 

Fund

 

#

 

AUM($million)

 

#

 

AUM($million)

 

#

 

AUM($million)

 

Raymond G. Kennedy

 

PFN

 

10

 

13,309.75

 

5

 

1,069.98

 

12

*

2,767.24

*

 


* Of these other accounts, one account totaling $29.09 million in assets pay an advisory fee that is    based in part on the performance of the accounts.

From time to time, potential conflicts of interest may arise between a portfolio manager’s management of the investments of a Fund, on the one hand, and the management of other accounts, on the other. The other accounts might have similar investment objectives or strategies as the Fund, track the same index a Fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. The other accounts might also have different investment objectives or strategies than the Fund.

Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the portfolio manager’s day-to- day management of a Fund. Because of their positions with the Fund, the portfolio managers know the size, timing and possible market impact of a Fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of a Fund.




Investment Opportunities. A potential conflict of interest may arise as result of the portfolio manager’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both a Fund and other accounts managed by the portfolio manager, but may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a Fund and another account. Pacific Investment Management Company LLC (“PIMCO”) has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

Under PIMCO’s allocation procedures, investment opportunities are allocated among various investment strategies based on individual account investment guidelines and PIMCO’s investment outlook. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by- side management of the Fund and certain pooled investment vehicles, including investment opportunity allocation issues.

Performance Fees. A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to a Fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between such other accounts and the Fund on a fair and equitable basis over time.

 (a) (3)

As of July 31, 2006, the following explains the compensation structure of the individual that shares primary responsibility for day-to-day portfolio management of the Funds:

PIMCO has adopted a “Total Compensation Plan” for its professional level employees, including its portfolio managers, that is designed to pay competitive compensation and reward performance, integrity and teamwork consistent with the firm’s mission statement. The Total Compensation Plan includes a significant incentive component that rewards high performance standards, work ethic and consistent individual and team contributions to the firm. The compensation of portfolio managers consists of a base salary, a bonus, and may include a retention bonus. Portfolio managers who are Managing Directors of PIMCO also receive compensation from PIMCO’s profits. Certain employees of PIMCO, including portfolio managers, may elect to defer compensation through PIMCO’s deferred compensation plan. PIMCO also offers its employees a non-contributory defined contribution plan through which PIMCO makes a contribution based on the employee’s compensation.  PIMCO’s contribution rate increases at a specified compensation level, which is a level that would include portfolio managers.

Salary and Bonus. Base salaries are determined by considering an individual portfolio manager’s experience and expertise and may be reviewed for adjustment annually. Portfolio managers are entitled to receive bonuses, which may be significantly more than their base salary, upon attaining certain performance objectives based on predetermined measures of group or department success. These goals are specific to individual portfolio managers and are mutually agreed upon annually by each portfolio manager and his or her manager. Achievement of these goals is an important, but not exclusive, element of the bonus decision process.




In addition, the following non-exclusive list of qualitative criteria (collectively, the “Bonus Factors”) may be considered when determining the bonus for portfolio managers:

·                  3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax investment performance as judged against the applicable benchmarks for each account managed by a portfolio manager (including the Funds) and relative to applicable industry peer groups;

·                  Appropriate risk positioning that is consistent with PIMCO’s investment philosophy and the Investment Committee/CIO approach to the generation of alpha;

·                  Amount and nature of assets managed by the portfolio manager;

·                  Consistency of investment performance across portfolios of similar mandate and guidelines (reward low dispersion);

·                  Generation and contribution of investment ideas in the context of PIMCO’s secular and cyclical forums, portfolio strategy meetings, Investment Committee meetings, and on a day-to-day basis;

·                  Absence of defaults and price defaults for issues in the portfolios managed by the portfolio manager;

·                  Contributions to asset retention, gathering and client satisfaction;

·                  Contributions to mentoring, coaching and/or supervising; and

·                  Personal growth and skills added.

A portfolio manager’s compensation is not based directly on the performance of any portfolio or any other account managed by that portfolio manager. Final award amounts are determined by the PIMCO Compensation Committee.

Retention Bonuses. Certain portfolio managers may receive a discretionary, fixed amount retention bonus, based upon the Bonus Factors and continued employment with PIMCO. Each portfolio manager who is a Senior Vice President or Executive Vice President of PIMCO receives a variable amount retention bonus, based upon the Bonus Factors and continued employment with PIMCO.

Investment professionals, including portfolio managers, are eligible to participate in a Long Term Cash Bonus Plan (“Cash Bonus Plan”), which provides cash awards that appreciate or depreciate based upon the performance of PIMCO’s parent company, Allianz Global Investors of America L.P. (“AGI”), and PIMCO over a three-year period. The aggregate amount available for distribution to participants is based upon AGI’s profit growth and PIMCO’s profit growth. Participation in the Cash Bonus Plan is based upon the Bonus Factors, and the payment of benefits from the Cash Bonus Plan, is contingent upon continued employment at PIMCO.

Profit Sharing Plan. Instead of a bonus, portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO’s net profits. Portfolio managers who are Managing Directors receive an amount determined by the Managing Director Compensation Committee, based upon an individual’s overall contribution to the firm and the Bonus Factors.

From time to time, under the PIMCO Class B Unit Purchase Plan, Managing Directors and certain executive management (including Executive Vice Presidents) of PIMCO may become eligible to purchase Class B Units of PIMCO. Upon their purchase, the Class B Units are immediately exchanged for Class A Units of PIMCO Partners, LLC, a California limited liability company that holds a minority interest in PIMCO and is owned by the Managing Directors and certain executive management of PIMCO. The Class A Units of PIMCO Partners, LLC entitle their holders to distributions of a portion of the profits of PIMCO. The PIMCO Compensation Committee determines which Managing Directors and executive management may purchase




Class B Units and the number of Class B Units that each may purchase. The Class B Units are purchased pursuant to full recourse notes issued to the holder. The base compensation of each Class B Unit holder is increased in an amount equal to the principal amortization applicable to the notes given by the Managing Director or member of executive management.

Portfolio managers who are Managing Directors also have long-term employment contracts, which guarantee severance payments in the event of involuntary termination of a Managing Director’s employment with PIMCO.

 (a)(4)

The following summarizes the dollar range of securities the portfolio manager for the Fund beneficially owned of the Fund that he managed as of July 31, 2006.

 

PIMCO Floating Rate Strategy Fund

Portfolio Manager

 

Dollar Range of Equity Securities in the Funds

Raymond G. Kennedy

 

$500,000 - $1,000,000

 




ITEM 9.  PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES

 

 

 

 

 

 

Total Number

 

Maximum Number of

 

 

 

 

 

 

 

Of Shares Purchased

 

Shares That May Yet Be

 

 

 

Total Number

 

Average

 

As Part Of Publicly

 

Purchased Under The

 

 

 

Of Shares

 

Price Paid

 

Announced Plans Or

 

Plans

 

Period

 

Purchased

 

Per Share

 

Programs

 

Or Programs

 

 

 

 

 

 

 

 

 

 

 

August 2005

 

N/A

 

N/A

 

N/A

 

N/A

 

September 2005

 

N/A

 

N/A

 

N/A

 

N/A

 

October 2005

 

N/A

 

N/A

 

N/A

 

N/A

 

November 2005

 

N/A

 

N/A

 

N/A

 

N/A

 

December 2005

 

N/A

 

N/A

 

N/A

 

N/A

 

January 2006

 

N/A

 

N/A

 

N/A

 

N/A

 

February 2006

 

N/A

 

N/A

 

N/A

 

N/A

 

March 2006

 

N/A

 

N/A

 

N/A

 

N/A

 

April 2006

 

N/A

 

18.97

 

66,287

 

N/A

 

May 2006

 

N/A

 

N/A

 

N/A

 

N/A

 

June 2006

 

N/A

 

N/A

 

N/A

 

N/A

 

July 2006

 

N/A

 

18.83

 

63,981

 

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) (1)  Exhibit 99.CODE ETH - Code of Ethics

(a) (2)  Exhibit 99 Cert. - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(b)  Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002




Signature

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)

PIMCO Floating Rate Strategy Fund

 

 

 

 

By

/s/ Brian S. Shlissel

 

President and Chief Executive Officer

 

 

 

 

Date

October 6, 2006

 

 

 

 

By

/s/ Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

 

Date

October 6, 2006

 

 

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

October 6, 2006

 

 

 

 

 

 

 

 

 

 

By

/s/ Lawrence G. Altadonna

 

 

 

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

 

 

 

 

 

 

Date

October 6, 2006