N@N

PIMCO Floating Rate Income Fund and PIMCO Floating Rate Strategy Fund Announce Changes to Fund Names, Investment Policies and G

^{Published on 2009-12-28 13:05:12 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--PIMCO Floating Rate Income Fund (NYSE:PFL) and PIMCO Floating Rate Strategy Fund (NYSE:PFN) (each a "Fund" and collectively, the "Funds") announced that, effective on or about March 1, 2010, each Fund will change its name and rescind its non-fundamental investment policy to, under normal market conditions, invest at least 80% of its net assets (plus any borrowings for investment purposes) in a diversified portfolio of floating rate debt instruments, securities with durations of less than or equal to one year, and fixed rate securities with respect to which the Fund has entered into derivative instruments to effectively convert the fixed rate interest payments into floating rate interest payments (the "80% Policy"). Following these changes, each Fund will seek to achieve its investment objective by ordinarily investing in a diversified portfolio of floating and/or fixed-rate debt instruments. PFL and PFN have also made other changes to the Funds' investment policies and guidelines as outlined below.

The new names for PFL and PFN, will be PIMCO Income Strategy Fund and PIMCO Income Strategy Fund II, respectively. The Funds' new names and rescission of their 80% Policies will take effect on or about March 1, 2010, following 60 days' notice to Fund shareholders. The New York Stock Exchange ticker symbols for the Funds' common shares (PFL and PFN) will remain the same.

Under their new names and policies, the Funds will have flexibility to allocate and re-allocate assets in varying proportions among floating- and fixed-rate debt instruments as well as among investment grade and non-investment grade securities, and may choose to focus more heavily or exclusively on either asset class or rating quality at any time, based on assessments of relative values, market conditions and other factors made by the Funds' sub-adviser, Pacific Investment Management Company LLC ("PIMCO").

Effective immediately, the investment policies and guidelines of the Funds have also been revised as follows:

Below Investment Grade Securities: The policies of PFL and PFN, each of which may invest without limit in below investment grade securities, have been revised such that each Fund may not invest more than 20% of its total assets in securities that are, at the time of purchase, rated CCC/Caa or below by each ratings agency rating the security, or unrated but judged by PIMCO to be of comparable quality. Each of these Funds previously observed a limit of 10% of their total assets in CCC+/Caa1 or lower securities. The Funds may also invest without limit in investment grade securities.

Duration: In addition, the prior guideline observed by the Funds of normally having a low average portfolio duration (zero to three years) has been revised such that the average portfolio duration of each Fund will normally be in a low to intermediate range (zero to eight years), although it may be longer at any time based on PIMCO's assessment of market conditions and other factors.

Emerging Market Securities: Each Fund may now invest up to 25% of its total assets in securities of issuers economically tied to emerging market countries. This reflects an increase in each Fund's previous maximum investment limit in emerging market securities of 10% of total assets.

The changes to PFL's and PFN's policies and guidelines are designed, in part, to address reduced opportunities in the floating rate note and bank loan markets. There has been a reduction in primary bank loan and other floating rate security market activity and a large drop in supply beginning with the credit crisis. Additionally, PIMCO believes that a potential continuation of low short-term interest rates may lead to limited issuance of floating rate bonds and bank loans as companies seek to secure stable, long-term financing in the fixed rate bond market. While there is no assurance that these trends will continue, the noted changes for PFL and PFN are designed to expand the Funds' abilities to invest in longer duration fixed rate instruments to increase the opportunities available to the Funds and to give PIMCO greater flexibility to allocate and re-allocate the Funds' assets in varying proportions among floating- and fixed-rate debt instruments as well as among investment grade and non-investment grade securities, taking into account market conditions and other factors.

The Board of Trustees approved the investment policy and other related changes for PFL and PFN based on a recommendation from Allianz Global Investors Fund Management LLC, the Funds' investment manager, and PIMCO as being in the best interests of each Fund and the Fund's shareholders.

The following summarizes certain risks associated with the Funds' policy and guidelines changes noted above.

As general matter, the potential opportunities provided by lower quality securities in the high yield spectrum carry with them additional risks. Below investment grade securities are regarded as having predominantly speculative characteristics with respect to the issuer's capacity to pay interest and to repay principal when due, and are commonly referred to as "high yield" securities or "junk bonds." They may involve a greater risk of default and their prices are generally more volatile and sensitive to actual or perceived negative developments, such as a decline in the issuer's revenues or a general economic downturn, than are the prices of higher grade securities. Lower-rated securities are generally less liquid than higher-rated securities, which may have an adverse effect on a Fund's ability to dispose of a particular security. These risks are generally greater for lower quality securities in the high yield spectrum. This liquidity risk may be heightened for CCC/Caa and below rated securities due to the relatively smaller universe of eligible investors in these securities in comparison to investment grade issues.

Generally, when market interest rates rise, the prices of fixed rate debt obligations fall, and vice versa. Interest rate risk is the risk that debt obligations and other instruments in the Funds' portfolio will decline in value because of increases in market interest rates. To the extent that the Funds invest in variable and floating rate debt securities, these securities generally are less sensitive to interest rate changes, but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general.

Duration is a measure of the expected life of a debt security that is used to determine the sensitivity of the security's price to changes in interest rates. Generally, the longer a security's duration, the more sensitive it will be to changes in interest rates - i.e., the prices of debt obligations typically fall when market interest rates rise.

Foreign investment risk may be particularly high to the extent that the Funds invest in emerging market securities. These securities may present market, credit, currency, liquidity, legal, political and other risks different from, and greater than, the risks of investing in developed foreign countries, including (i) greater risks of expropriation, confiscatory taxation, nationalization and less social, political and economic stability; (ii) the smaller size of the market for such securities and a lower volume of trading, resulting in lack of liquidity and in price volatility; and (iii) certain national policies which may restrict a Fund's investment opportunities, including restrictions on investing in issuers or industries deemed sensitive to relevant national interests.

The investment objective of PFL and PFN is to seek high current income, consistent with the preservation of capital. There can be no assurance that the Funds will meet their objectives.

Allianz Global Investors Fund Management LLC, an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P., serves as the Funds' investment manager and is a member of Munich-based Allianz Group. PIMCO, an Allianz Global Investors Fund Management affiliate, serves as the Funds' sub-adviser.

The Funds' New York Stock Exchange closing prices, net asset values per share, as well as other information, including updated portfolio statistics and performance, is available at [ http://www.allianzinvestors.com ] or by calling the Funds' shareholder servicing agent at (800) 254-5197.

Statements made in this release that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include, without limitation, the adverse effect from further declines in the securities markets and in the Funds' performance, a general downturn in the economy, competition from other companies, changes in government policy or regulation, inability to attract or retain key employees, inability to implement their operating strategy and/or acquisition strategy, and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations. Each Fund's ability to pay dividends to common shareholders is subject to the restrictions in its registration statement and other governing documents as well as the Investment Company Act of 1940.