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 811-21076
PIMCO Municipal Income Fund II
(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)
LAWRENCE G. ALTADONNA - 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: MAY 31
Date of reporting period: MAY 31
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. ss. 3507.
ITEM 1. REPORT TO SHAREHOLDERS
Annual Report
5.31.04
PIMCO MUNICIPAL INCOME FUND II
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II
PIMCO NEW YORK MUNICIPAL INCOME FUND II
--------------------------------------------------------------------------------
PML CONTENTS
LISTED
NYSE Letter to Shareholders .............................1
THE NEW YORK
STOCK EXCHANGE Performance and Statistics .......................2-4
PCK Schedules of Investments ........................5-23
LISTED
NYSE Statements of Assets and Liabilities ..............24
THE NEW YORK
STOCK EXCHANGE Statements of Operations ..........................25
PNI Statements of Changes in Net Assets ............26-27
LISTED
NYSE Notes to Financial Statements ..................28-34
THE NEW YORK
STOCK EXCHANGE Financial Highlights ...........................35-37
Report of Independent Registered Public
Accounting Firm ...................................38
Privacy Policy, Proxy Voting Policies and
Procedures, Other Information .....................39
Tax Information ...................................40
Dividend Reinvestment Plan ........................41
Board of Trustees .................................42
[PIMCO ADVISORS LOGO]
PIMCO MUNICIPAL INCOME FUNDS II LETTER TO SHAREHOLDERS
--------------------------------------------------------------------------------
July 7, 2004
Dear Shareholder:
We are pleased to provide you with the annual report of PIMCO Municipal Income
Fund II, PIMCO California Municipal Income Fund II, and PIMCO New York Municipal
Income Fund II ("PIMCO Municipal Income Funds II" or the "Funds") for the fiscal
year ended May 31, 2004.
Please refer to the following pages for specific information for each of the
PIMCO Municipal Income Funds II. If you have any questions regarding the
information provided, please contact your financial advisor or call our
shareholder services area at 1-800-331-1710. Please note that a wide range of
information and resources can be accessed through our Web site,
www.pimcoadvisors.com.
We at the Funds, together with PA Fund Management LLC (formerly, PIMCO Advisors
Fund Management LLC), the Funds' investment manager and Pacific Investment
Management Co. LLC, the Funds' sub-adviser, thank you for investing with us. We
remain dedicated to serving your investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
-------------------- ---------------------
Stephen Treadway Brian S. Shlissel
CHAIRMAN PRESIDENT, CHIEF EXECUTIVE OFFICER
5.31.04 | PIMCO Municipal Income Funds II Annual Report 1
PIMCO MUNICIPAL INCOME FUND II PERFORMANCE SUMMARY AND STATISTICS
May 31, 2004 (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SYMBOL:
PML
OBJECTIVE:
To provide income exempt from federal income tax.
PRIMARY INVESTMENTS:
Municipal fixed-income securities, the interest from which is exempt
from federal income tax.
INCEPTION DATE:
June 28, 2002
TOTAL NET ASSETS(1):
$1,317.7 million
PORTFOLIO MANAGER:
Mark McCray
--------------------------------------------------------------------------------
TOTAL RETURN(2): MARKET PRICE NAV
--------------------------------------------------------------------------------
1 Year (3.69)% 2.24%
--------------------------------------------------------------------------------
Commencement of Operations (6/28/02) to 5/31/04 0.68% 5.84%
--------------------------------------------------------------------------------
COMMON SHARE PRICE PERFORMANCE:
Commencement of Operations (6/28/02) to 5/31/04
[ ] at Market Price
[ ] at NAV
[Data below represents line chart in the printed piece]
at NAV at Market Price
6/28/02 14.33 15.00
14.32 15.08
14.35 15.17
14.37 15.19
14.46 15.03
14.46 15.03
14.52 15.06
14.57 15.00
14.50 15.02
14.63 15.04
14.77 15.02
14.89 15.11
15.10 15.04
15.13 15.00
15.17 15.06
15.09 15.06
14.28 14.80
14.15 14.42
14.41 14.74
14.66 14.68
14.53 14.59
14.33 14.40
14.22 14.34
14.51 14.29
14.58 14.10
14.66 14.12
14.50 14.20
14.64 14.54
14.52 14.41
14.49 14.45
14.41 14.43
14.38 14.23
14.39 14.41
14.55 14.50
14.57 14.41
14.39 14.31
14.60 14.31
14.68 14.37
14.48 14.29
14.55 14.25
14.27 14.35
14.35 14.34
14.54 14.49
14.53 14.36
14.57 14.48
14.64 14.64
14.70 14.80
14.68 14.72
14.66 14.80
14.69 14.90
14.77 14.89
14.64 14.75
14.54 14.84
14.56 14.86
14.55 14.67
14.36 14.33
14.06 14.15
13.42 13.64
13.73 14.00
13.51 13.81
13.54 13.66
13.62 13.63
13.77 14.00
13.79 13.81
14.03 13.82
14.08 13.79
14.05 13.95
13.93 13.8
13.91 13.68
14.13 13.73
14.19 13.77
14.25 13.95
14.38 13.84
14.52 13.92
14.64 13.82
14.50 13.98
14.57 13.80
14.65 13.93
14.65 13.90
14.81 13.99
14.97 14.48
14.87 14.61
14.90 14.53
14.79 14.80
14.90 14.84
14.96 14.73
15.01 14.52
14.90 14.75
14.94 14.97
14.89 14.90
14.80 14.80
14.62 14.79
14.46 14.74
14.60 14.25
14.48 13.98
14.43 13.71
14.28 13.69
14.08 13.28
13.81 13.20
13.84 13.02
5/31/04 14.01 13.31
MARKET PRICE/NET ASSET VALUE:
----------------------------------------
Market Price $13.31
----------------------------------------
Net Asset Value $14.01
----------------------------------------
Discount to Net Asset Value 5.00%
----------------------------------------
Market Price Yield(3) 7.61%
----------------------------------------
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the value at the end of
the period and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income dividends
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 greater 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. A portion of the income generated by the Fund may be subject
to federal, state and local taxes, and may at times be subject to the
alternative minimum tax. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current monthly
per share dividend payable to common shareholders by the market price per common
share at May 31, 2004.
2 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II PERFORMANCE SUMMARY AND STATISTICS
May 31, 2004 (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SYMBOL:
PCK
OBJECTIVE:
To provide income exempt from federal and California State income tax.
Primary Investments:
Municipal fixed-income securities, the interest from which is exempt from
federal and California State income tax.
INCEPTION DATE:
June 28, 2002
TOTAL NET ASSETS(1):
$667.7 million
PORTFOLIO MANAGER:
Mark McCray
--------------------------------------------------------------------------------
TOTAL RETURN(2): MARKET PRICE NAV
--------------------------------------------------------------------------------
1 Year (3.92)% (1.31)%
--------------------------------------------------------------------------------
Commencement of Operations (6/28/02) to May 31, 2004 0.07% 3.49%
--------------------------------------------------------------------------------
COMMON SHARE PRICE PERFORMANCE:
Commencement of Operations (6/28/02) to May 31, 2004
[ ] at Market Price
[ ] at NAV
[Data below represents line chart in the printed piece]
at NAV at Market Price
6/28/02 14.33 15.00
14.33 15.10
14.42 15.28
14.42 15.26
14.47 15.04
14.44 15.29
14.49 15.28
14.56 15.28
14.48 15.22
14.60 15.05
14.70 15.18
14.86 15.25
15.02 15.25
15.02 15.10
14.98 15.07
14.80 15.07
14.07 14.26
13.93 14.42
14.25 14.72
14.54 14.80
14.34 14.67
14.16 14.27
14.03 14.35
14.26 14.10
14.36 14.18
14.48 14.18
14.45 14.25
14.48 14.25
14.32 14.11
14.23 14.05
14.17 14.08
14.12 14.05
14.13 14.12
14.25 14.06
14.26 14.10
14.20 14.19
14.47 14.50
14.54 14.36
14.32 14.36
14.38 14.40
14.06 14.31
14.12 14.24
14.34 14.25
14.33 14.28
14.42 14.54
14.47 14.64
14.59 14.78
14.69 14.82
14.66 14.78
14.70 14.96
14.83 15.00
14.57 14.85
14.35 14.59
14.36 14.75
14.29 14.35
13.97 14.10
13.62 13.88
13.06 13.21
13.31 13.66
13.03 13.37
13.09 13.43
13.14 13.62
13.32 13.77
13.33 13.92
13.57 13.98
13.64 13.90
13.59 13.92
13.45 13.88
13.52 13.65
13.68 13.81
13.76 13.88
13.81 13.96
13.94 13.82
14.08 13.74
14.20 13.79
14.04 13.81
14.12 13.51
14.22 13.59
14.23 13.60
14.35 13.65
14.54 13.78
14.44 13.98
14.41 13.96
14.28 14.03
14.41 14.14
14.49 14.09
14.56 14.09
14.48 14.17
14.56 14.37
14.51 14.44
14.41 14.30
14.16 14.31
14.03 13.97
14.13 13.70
13.93 13.53
13.94 13.20
13.79 13.10
13.57 12.91
13.28 12.76
13.33 13.03
5/31/04 13.53 13.27
MARKET PRICE/NET ASSET VALUE:
----------------------------------------
Market Price $13.27
----------------------------------------
Net Asset Value $13.53
----------------------------------------
Discount to Net Asset Value 1.92%
----------------------------------------
Market Price Yield(3) 7.35%
----------------------------------------
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the value at the end of
the period and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income dividends
have been reinvested at prices obtained under the Fund's dividend reinvestment
plan. Total return does not reflect broker commissions or sales charges. Total
return for a period of greater 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. A portion of the income generated by the Fund may be subject
to federal, state and local taxes, and may at times be subject to the
alternative minimum tax. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current monthly
per share dividend payable to common shareholders by the market price per common
share at May 31, 2004.
5.31.04 | PIMCO Municipal Income Funds II Annual Report 3
PIMCO NEW YORK MUNICIPAL INCOME FUND II PERFORMANCE SUMMARY AND STATISTICS
May 31, 2004 (unaudited)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SYMBOL:
PNI
OBJECTIVE:
Seeks to provide current income exempt from federal, New York State and New York
City income tax.
PRIMARY INVESTMENTS:
Municipal fixed-income securities, the interest from which is exempt from
federal, New York State and New York City income tax.
INCEPTION DATE:
June 28, 2002
TOTAL NET ASSETS(1):
$231.0 million
PORTFOLIO MANAGER:
Mark McCray
--------------------------------------------------------------------------------
TOTAL RETURN(2): MARKET PRICE NAV
--------------------------------------------------------------------------------
1 Year (5.15)% 0.13%
--------------------------------------------------------------------------------
Commencement of Operations (6/28/02) to May 31, 2004 (0.82)% 3.49%
--------------------------------------------------------------------------------
COMMON SHARE PRICE PERFORMANCE:
Commencement of Operations (6/28/02) to May 31, 2004
[ ] at Market Price
[ ] at NAV
[Data below represents line chart in the printed piece]
at NAV at Market Price
6/28/02 14.33 15.00
14.31 15.20
14.36 15.11
14.38 15.35
14.42 15.02
14.46 15.35
14.52 15.08
14.56 15.00
14.48 15.16
14.59 15.06
14.69 15.14
14.76 15.12
14.91 15.14
14.91 15.03
15.02 15.06
14.95 14.97
14.29 14.65
14.16 14.25
14.35 14.06
14.62 14.32
14.51 14.30
14.33 14.13
14.19 14.22
14.44 14.06
14.55 14.10
14.63 14.05
14.62 14.02
14.71 14.15
14.544 14.17
14.541 14.09
14.416 13.95
14.403 14.03
14.44 14.00
14.53 14.03
14.48 14.20
14.38 14.23
14.51 14.34
14.62 14.26
14.36 14.22
14.43 14.23
13.78 14.29
13.86 14.15
14.11 14.10
14.02 14.18
14.08 14.16
14.20 14.40
14.25 14.75
14.39 14.65
14.44 14.71
14.47 14.67
14.59 14.70
14.38 14.55
14.31 14.81
14.30 14.92
14.26 14.71
14.01 14.64
13.75 14.08
13.05 14.00
13.39 13.84
13.12 13.85
13.10 13.71
13.18 13.80
13.30 13.98
13.28 13.90
13.72 13.57
13.87 13.69
13.78 13.84
13.65 13.64
13.62 13.79
13.85 13.72
13.88 13.80
13.94 13.85
14.10 13.75
14.23 13.71
14.35 13.89
14.26 13.90
14.37 14.02
14.45 13.80
14.45 13.84
14.54 13.82
14.72 14.19
14.64 14.33
14.65 14.38
14.55 14.45
14.64 14.58
14.71 14.42
14.76 14.60
14.68 14.76
14.76 14.81
14.71 14.66
14.68 14.80
14.54 14.76
14.38 14.59
14.46 14.09
14.31 13.95
14.19 13.48
14.05 13.45
13.75 13.12
13.43 12.71
13.44 12.74
5/31/04 13.54 13.05
MARKET PRICE/NET ASSET VALUE:
-------------------------------------
Market Price $13.05
-------------------------------------
Net Asset Value $13.54
-------------------------------------
Discount to Net Asset Value 3.62%
-------------------------------------
Market Price Yield(3) 7.47%
-------------------------------------
(1) Inclusive of net assets attributable to Preferred Shares outstanding.
(2) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
determined by subtracting the initial investment from the value at the end of
the period and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income dividends
have been reinvested at prices obtained under the Fund's dividend reinvestment
plan. Total return does not reflect broker commissions or sales charges. Total
return for a period of greater than one year represents the average annual total
return.
An investment in the Fund involves risk, including the loss of principal.
Investment return, price, yield and net asset value will fluctuate with changes
in market conditions. This data is provided for information only and is not
intended for trading purposes. A portion of the income generated by the Fund may
be subject to federal, state and local taxes, and may at times be subject to the
alternative minimum tax. Closed-end funds, unlike open-end funds, are not
continuously offered. There is a one-time public offering and once issued,
shares of closed-end funds are sold in the open market through a stock exchange.
Net asset value is total assets applicable to common shareholders less total
liabilities divided by the number of common shares outstanding. Holdings are
subject to change daily.
(3) Market Price Yield is determined by dividing the annualized current monthly
per share dividend payable to common shareholders by the market price per common
share at May 31, 2004.
4 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
MUNICIPAL BONDS & NOTES-88.0%
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--3.8%
$ 29,145 Birmingham Waterworks & Sewer Board. Rev., Ser. B,
5.00%-5.25%, 1/1/27-1/1/37 (MBIA) Aaa/AAA $29,160,868
1,750 Huntsville Health Care Auth.,
5.75%, 6/1/32, Ser. B A2/NR 1,790,670
16,580 Jefferson Cnty. Sewer Rev.,
4.75%, 2/1/38, Ser. B (FGIC) Aaa/AAA 17,783,874
-----------
48,735,412
===========
ALASKA--1.3%
State Housing Fin. Corp.,
13,885 5.00%, 12/1/39, Ser. A Aaa/AAA 13,454,704
3,550 5.25%, 6/1/32, Ser. C (MBIA) Aaa/AAA 3,485,639
-----------
16,940,343
===========
ARIZONA--0.1%
1,300 State Health Fac. Auth. Hosp. Rev., 5.75%, 12/1/32 NR/BBB 1,222,208
===========
CALIFORNIA--5.2%
9,610 Alameda Corridor Transportation Auth. Rev.,
zero coupon, 10/1/16, Ser. A Aaa/AAA 5,234,087
43,775 Economic Recovery GO, 5.00%, 7/1/08-7/1/23, Ser. A Aa3/AA- 47,510,216
12,300 Golden State Tobacco Securitization Corp.,
Tobacco Settlement Rev.,
6.25%-6.75%, 6/1/33-6/1/39, Ser. 2003-A-1 Baa3/BBB 10,945,476
1,000 Rancho Cucamonga Community Facs. Dist.,
6.30%, 9/1/23, Ser. A NR/NR 1,008,180
4,000 Southern California Public Power Auth. Project Rev.,
zero coupon, 7/1/13 Aa3/A+ 2,633,000
-----------
67,330,959
===========
COLORADO--4.9%
30,000 Dawson Ridge Dist. No. 1, GO,
zero coupon, 10/1/22, Ser. A Aaa/NR 11,419,500
5,000 Denver Co. City & Cnty. Cert. of Participation,
5.50%, 12/1/25, Ser. B (AMBAC) Aaa/AAA 5,613,250
25,000 Health Fac. Auth. Rev., Catholic Health Initiatives-A,
5.50%, 3/1/32 Aa2/AA 25,423,250
18,305 Health Fac. Auth. Rev., Exempla Inc.,
5.625%, 1/1/33, Ser. A A1/A- 18,334,837
6,500 Health Fac. Auth. Rev., Liberty Height Retirement Fac.,
zero coupon, 7/15/22 Aaa/AAA 2,501,915
-----------
63,292,752
===========
DISTRICT OF COLUMBIA--1.3%
17,500 Washington DC Convention Ctr. Auth. Tax Rev.,
4.75%, 10/1/28 (AMBAC) Aaa/AAA 16,487,800
===========
5.31.04 | PIMCO Municipal Income Funds II Annual Report 5
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
FLORIDA--3.8%
$ 8,000 Highlands Cnty. Health Fac. Auth. Rev.,
6.00%, 11/15/31, Ser. A A3/A $ 8,369,760
635 Hillsborough Cnty. Health Fac. Indl. Dev. Rev.,
5.625%, 8/15/23 Baa2/BBB 594,512
2,335 Hillsborough Cnty. Pollution Control Rev.,
Tampa Electric Co. Proj. 5.50%, 10/1/23 Baa2/BBB- 2,254,022
7,135 Jacksonville Health Facs. Auth. Rev.,
5.25%, 11/15/32, Ser. A Aa2/AA 7,051,663
7,500 JEA St. Johns River Power Park Syst. Rev., 5.00%, 10/1/09 Aa2/AA- 8,091,300
11,500 Lakeland Hosp. Syst. Rev., Regional Health Sys.,
5.50%, 11/15/32 A1/NR 11,320,830
3,000 Leesburg Hosp. Rev., Leesburg Regional Medical Center,
5.50%, 7/1/32 A3/A 2,936,880
7,550 Orange Cnty. Health Fac., Adventist Health Sys.,
5.625%-6.25%, 11/15/24-11/15/32 A3/A 7,944,498
1,500 Winter Springs Water & Sewer Rev.,
zero coupon, 10/1/29 (FGIC) Aaa/AAA 375,840
-----------
48,939,305
===========
GEORGIA--0.7%
4,000 Atlanta Water & Wastewater,
5.00%, 11/1/39, Ser. A (MBIA) Aaa/AAA 3,908,920
1,500 Grantor Trust Gov't CP, 4.75%, 6/1/28, Ser. A (MBIA) Aaa/AAA 1,417,890
9,600 Richmond Cnty. Dev Auth. Rev., zero coupon, 12/1/21 Aaa/NR 3,875,328
-----------
9,202,138
===========
HAWAII--1.4%
19,170 Honolulu City & Cnty. Wastewater Syst. Rev.,
First Board Resolution, 4.75%, 7/1/28 (FGIC) Aaa/NR 18,373,103
===========
ILLINOIS--16.6%
11,760 Central Lake Cnty. Water Agy. Rev.,
5.125%, 5/1/28-5/1/32, Ser. A (AMBAC) Aaa/NR 11,730,648
5,000 Cicero Corp. GO,
5.25%, 12/1/31 (MBIA) Aaa/AAA 5,059,650
94,485 Chicago City Colleges GO,
zero coupon, 1/1/37-1/1/39 (FGIC) Aaa/AAA 13,751,530
Chicago Board of Education School Reform GO,
15,535 Ser. A, zero coupon, 12/1/16 Aaa/AAA 8,422,766
5,000 Ser. A, zero coupon, 12/1/28 (FGIC) Aaa/AAA 1,247,150
4,500 zero coupon, 12/1/31 (FGIC) Aaa/AAA 941,850
Chicago GO,
10,160 5.00%-5.125%, 1/1/29-1/1/33, (AMBAC) Aaa/AAA 9,965,156
6 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
ILLINOIS--(CONCLUDED)
$ 7,000 Chicago Midway Arpt. Rev.,
5.00%, 1/1/31, Ser. B (MBIA) Aaa/AAA $ 6,868,470
9,862 Chicago Special Assessment, Lake Shore East
6.625%-6.75%, 12/1/22-12/1/32 NR/NR 10,028,179
144,650 Dev. Fin. Auth. Retirement Housing Rev.,
zero coupon, 7/15/23-7/15/25 NR/AAA 44,340,538
20,100 Health Facs. Auth. Rev., Elmurst Memorial Healthcare,
5.625%, 1/1/28 A2/NR 20,269,041
1,000 McHenry & Kane Cnty. Community Consolidated
School Dist. 158, zero coupon, 1/1/12 Aaa/AAA 718,530
110,000 Metropolitan Pier & Exposition Auth.,
zero coupon, 12/15/30-12/15/33(MBIA) Aaa/AAA 22,556,100
State GO,
10,000 5.00%, 3/1/34 Aa3/AA 9,698,100
68,470 State Sports Facs. Auth,
zero coupon, 6/15/10 (AMBAC) Aaa/AAA 50,006,380
------------
215,604,088
============
INDIANA--0.6%
Brownsburg 1999 School Building Corp.,
3,000 5.00%-5.25%, 3/15/25-9/15/25 (FSA) Aaa/AAA 3,036,540
4,125 Fort Wayne Pollution Control Rev., 6.20%, 10/15/25 Baa1/BBB 4,259,351
500 State Bank Rev., 5.25%, 4/1/30, Ser. D (AMBAC) Aaa/AAA 504,755
------------
7,800,646
============
IOWA--0.5%
8,850 Tobacco Settlement Auth., 5.60%, 6/1/35, Ser. B Baa2/BBB 6,546,522
------------
KANSAS--0.2%
2,800 Univ. of Kansas, Hosp. Auth. Health Facs. Rev.,
5.625%, 9/1/32 NR/A- 2,818,984
------------
KENTUCKY--0.9%
Economic Dev. Finance Auth. Hospital Facs. Rev.,
8,545 5.25%, 10/1/19 A3/A 9,311,059
2,500 5.25%, 10/1/30 A1/AA- 2,485,675
------------
11,796,734
============
LOUISIANA--4.2%
20,400 Ochsner Clinic Foundation Pub. Facs. Auth. Rev.,
5.50%, 5/15/32, Ser. B A3/NR 20,341,452
44,395 Tobacco Settlement Financing Corp.,
5.875%, 5/15/39, Ser. 2001B Baa3/BBB 34,708,011
------------
55,049,463
============
MARYLAND--0.1%
1,000 State Health & Higher Educational. Fac. Auth. Rev.,
Adventist Healthcare, 5.75%, 1/1/ 25, Ser. A, Baa1/NR 972,920
============
5.31.04 | PIMCO Municipal Income Funds II Annual Report 7
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
MASSACHUSETTS--2.2%
$ 1,300 Massachusetts Bay Trans. Auth.,
4.75%, 3/1/21, Ser. A (MBIA) Aaa/AAA $ 1,292,486
9,000 State GO, 5.00%, 8/1/11, Ser. A Aaa/AAA 9,806,490
4,295 State Turnpike Auth.,
4.75%, 1/1/34 Ser. A (AMBAC) Aaa/AAA 4,022,998
State Water Reserve Auth.,
12,050 4.75%, 8/1/37, Ser. A Aaa/AAA 11,250,482
2,300 4.75%, 12/1/21, Ser. B Aaa/AAA 2,301,449
-----------
28,673,905
===========
MICHIGAN--2.7%
10,250 Detroit City School Dist.,
5.00%-5.125%, 5/1/31-5/1/32, Ser. A Aaa/AAA 10,154,890
2,500 Detroit Water Supply Sys., 2,478,300
5.00%, 7/1/30, Ser. A (FGIC) Aaa/AAA
2,000 State GO, 5.25%, 12/1/09 Aa1/AA+ 2,193,460
5,000 State Hosp. Fin. Auth. Rev., Ascension Health,
5.25%, 11/15/26, Ser. B Aa2/AA 4,960,750
15,425 State Hosp. Fin. Auth. Rev., Oakwood Obligation Group,
5.75%-6.00%, 4/1/32, Ser. A A2/A 15,629,545
-----------
35,416,945
===========
MISSISSIPPI--0.3%
3,605 Business Finance Corp., Pollution Control Rev.,
5.875%, 4/1/22 Ba1/BBB- 3,618,086
1,000 State Dev. Bank Oblig., Projects & Equipment Acquisitions,
5.00%, 7/1/24 (AMBAC) Aaa/AAA 1,015,210
-----------
4,633,296
===========
MISSOURI--0.1%
1,500 St. Louis Parking Facs. Rev., Downtown Parking Facility,
6.00%, 2/1/28 NR/NR 1,506,240
===========
NEVADA--1.8%
3,400 Clark Cnty. GO, 5.00%, 6/1/31 (FGIC) Aaa/AAA 3,365,184
17,030 Reno Lien Trans.,
5.125%-5.25%, 6/1/27-6/1/41 (AMBAC) Aaa/AAA 17,088,184
3,290 Truckee Meadows Water Auth Rev.,
5.125%, 7/1/30, Ser. A (FSA) Aaa/AAA 3,331,717
-----------
23,785,085
===========
NEW HAMPSHIRE--0.2%
3,000 Health & Educational Facs. Auth. Rev., 6.125%, 7/1/32 Baa1/BBB+ 2,973,990
===========
8 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
NEW JERSEY--2.2%
$ 60 Camden Cnty. Impt. Auth. Rev., Cooper Health,
5.875%-6.00%, 2/15/15-2/15/27 Ba2/NR $ 54,542
750 Economic Dev. Auth., Arbor Glen,
6.00%, 5/15/28, Ser. A NR/NR 670,605
15,405 Economic Dev. Auth., Kapkowski Landfill Proj.,
5.75%, 10/1/21-4/1/31 Baa3/NR 15,687,123
3,500 State Educational Fac. Auth. Rev.,
6.00%, 7/1/25, Ser. D NR/NR 3,507,070
10,030 Tobacco Settlement Financing Corp., Rev.,
6.00%-6.75%, 6/1/37-6/1/43 Baa3/BBB 8,259,811
-----------
28,179,151
===========
NEW MEXICO--0.4%
5,000 Farmington Pollution Control Rev., 5.80%, 4/1/22 Baa2/BBB 5,008,000
===========
NEW YORK--2.2%
Metropolitan Trans. Auth.,
10,600 5.00%, 11/15/30, Ser. A (FSA) Aaa/AAA 10,461,882
10,000 5.25%, 11/15/32 A2/A 10,014,500
6,700 State Dormitory Auth. Rev., 5.00%, 7/1/34, Ser. 1 Aa2/AA 6,556,888
2,000 State Environmental Facilities Corp.,
5.00%, 6/15/28 Aaa/AAA 2,005,720
-----------
29,038,990
===========
OHIO--0.6%
7,500 Lorain Cnty. Hospital Rev.,
5.375%, 10/1/30 A1/AA- 7,479,450
===========
PENNSYLVANIA--3.2%
7,250 Allegheny Cnty. Hosp. Dev. Auth. Rev.,
9.25%, 11/15/15-11/15/30, Ser. B B2/B 8,153,568
4,500 Cumberland Cnty. Auth. Rev., 7.25%, 1/1/35, Ser. A NR/NR 4,477,680
8,750 Montgomery Cnty. Higher Education & Health Auth. Hosp. Rev.,
5.125%, 6/1/27-6/1/32, Ser. A NR/A 8,442,525
5,000 Philadelphia Auth. Dev. Lease Rev.,
5.25%, 10/1/30, Ser. B (FSA) Aaa/AAA 5,046,600
3,050 Philadelphia Auth. Indl. Dev. Rev., Doubletree,
6.50%, 10/1/27 NR/NR 3,075,193
3,000 Philadelphia GO, 5.25%, 9/15/25 (FSA) Aaa/AAA 3,054,540
8,520 Philadelphia Hosp. & Higher Ed. Facs. Auth. Rev.,
6.85%, 7/1/22 Baa2/BBB 8,642,603
500 Pittsburgh & Allegheny Cnty. Pub. Auditorium,
5.00%, 2/1/29 (AMBAC) Aaa/AAA 488,875
-----------
41,381,584
===========
5.31.04 | PIMCO Municipal Income Funds II Annual Report 9
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
PUERTO RICO--0.3%
$ 4,200 Electric Power Auth. Power Rev., 5.125%, 7/1/29, Ser. NN A3/A- $ 4,150,146
============
RHODE ISLAND--4.1%
65,000 Tobacco Settlement Financing. Corp.,
6.25%, 6/1/42, Ser. A Baa3/BBB 52,788,450
============
SOUTH CAROLINA--5.6%
27,745 Greenville Cnty. School District, 5.50%, 12/1/28 A1/AA- 28,075,720
18,120 Jobs Economic Dev. Auth. Economic Dev. Rev.,
5.625%, 11/15/30 A3/A- 17,565,528
23,500 Lexington Cnty. Health Services Dist. Inc. Hosp. Rev.,
5.50%-5.75%, 11/1/28-5/1/37 A2/A 23,617,790
3,250 Tobacco Settlement Rev., 6.375%, 5/15/28, Ser. B Baa3/BBB 2,804,198
1,180 Trans. Infrastructure Rev.,
5.00%, 10/1/29, Ser. A (AMBAC) Aaa/NR 1,291,085
------------
73,354,321
============
TENNESSEE--5.2%
3,750 Knox Cnty. Health Educational & Housing Facs. Board,
Hospital Facs. Rev., 5.25%, 10/1/30 A1/AA- 3,759,750
58,785 Memphis Electric Sys. Rev.,
5.00%, 12/1/11, Ser. A (MBIA) Aaa/AAA 63,787,016
------------
67,546,766
============
TEXAS--9.2%
1,000 Arlington Indpt. School Dist. GO, 5.00%, 2/15/24 Aaa/NR 1,001,170
4,480 Aubrey Indpt. School Dist. GO, 5.50%, 2/15/33 Aaa/NR 4,558,042
6,500 Brazos Cnty. Health Facs. Dev. Corp.,
Franciscan Services Corp., 5.375%, 1/1/32 NR/A- 6,277,765
2,700 Comal Cnty. Health Facs., Mckenna Memorial Hosp.,
6.25%, 2/1/32 Baa2/BBB 2,682,126
5,000 Dallas Area Rapid Transit., 5.00%, 12/1/31 (AMBAC) Aaa/AAA 4,912,000
20,000 Frisco Indpt. School Dist. GO, zero coupon, 8/15/34 Aaa/NR 3,536,600
19,750 Harris Cnty. GO, 5.125%, 8/15/31 Aa1/AA+ 19,676,530
5,250 Harris Cnty. Health Facs. Dev. Corp. Rev.,
5.375%, 2/15/26, Ser. A NR/AA- 5,263,545
25,000 Harris Cnty. Senior Lien Toll Road,
5.00%, 8/15/30 (FSA) Aaa/AAA 24,603,500
7,500 Keller Indpt. School Dist. GO, 4.875%, 8/15/31 Aaa/AAA 7,167,750
3,170 Little Elm Indpt. School Dist. GO, 5.30%, 8/15/29, Ser. A NR/AAA 3,222,844
6,250 North Dallas Thruway Auth., 4.75%, 1/1/29 (FGIC) Aaa/AAA 5,936,812
5,000 Quinlin Indpt. School Dist. GO, 5.10%, 2/15/32 Aaa/NR 4,977,550
State Turnpike Auth. Highway Imps. Rev.,
10,000 zero coupon, 8/15/19 (AMBAC) Aaa/AAA 4,548,900
8,880 5.00%, 8/15/42 (AMBAC) Aaa/AAA 8,543,093
4,900 State Water Financial Assistance GO,
5.00%-5.25%, 8/1/35-8/1/36 Aa1/AA 4,806,008
8,000 Wichita Falls Water & Sewer Rev.,
5.00%, 8/1/27 (AMBAC) Aaa/AAA 7,902,160
------------
119,616,395
============
10 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
VIRGINIA--0.5%
$ 6,500 Fredericksburg Industrial Dev., Medicorp Health Syst.,
5.125%-5.25%, 6/15/27-6/15/33, Ser. B A3/NR $ 6,405,725
==============
WASHINGTON--0.6%
2,250 Energy Northwest Electric Revenue, 5.25%, 7/1/09 Ser. A Aaa/AAA 2,453,513
5,000 Tacoma Sewer Rev., 5.00%, 12/1/31, Ser. A (FGIC) Aaa/AAA 4,912,000
--------------
7,365,513
==============
WISCONSIN--1.0%
Badger Tobacco Asset Securitization Corp.,
9,135 6.125%, 6/1/27 Baa3/BBB 8,132,708
1,125 6.00%, 6/1/17 Baa3/BBB 1,021,095
2,500 State GO, 5.00%, 5/1/09 Aaa/AAA 2,701,750
1,000 State Health & Educational Facs. Auth. Rev.,
5.375%, 10/1/30 NR/A+ 977,200
--------------
12,832,753
==============
Total Municipal Bonds & Notes (cost-$1,156,025,263) 1,143,250,082
==============
------------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE NOTES--7.4% (a) (b) (g)
------------------------------------------------------------------------------------------------------------------------------------
ALABAMA--0.8%
6,675 Jefferson Cnty. Sewer Rev., Residual Ctfs.,
14.35%, 2/1/36, Ser. 352 (FGIC) Aaa/NR 8,816,674
2,100 Montgomery Care Fac. Residual Ctfs.,
13.56%, 11/15/29, Ser. 435 (MBIA) Aaa/NR 1,893,843
--------------
10,710,517
==============
COLORADO--0.2%
2,813 Denver City & Cnty. Airpt Rev., Residual Ctfs.,
15.87%, 11/15/25, Ser. 425 (FSA) Aaa/NR 2,695,388
==============
FLORIDA--0.5%
2,228 Orange Cnty. School Board Cert. of Participation,
15.98%, 8/1/24, Ser. 328 (MBIA) Aaa/NR 2,259,665
4,052 State Governmental Utilities Rev., Residual Ctfs.,
15.98%, 10/1/29, Ser. 327 (AMBAC) Aaa/NR 3,935,303
--------------
6,194,968
==============
ILLINOIS--0.8%
Chicago GO,
2,225 16.48%, 1/1/28 Ser. 332, (MBIA) NR/NR 2,110,724
3,300 15.23%, 1/1/40 Ser. 426, (FGIC) Aaa/NR 3,479,850
1,932 Cook Cnty., Residual Ctfs., 13.56%, 11/15/28, Ser. 403 (FGIC) Aaa/NR 1,824,716
2,200 State GO, Residual Ctfs, 19.15%, 4/1/27, Ser. 783 Aaa/NR 2,346,696
--------------
9,761,986
==============
5.31.04 | PIMCO Municipal Income Funds II Annual Report 11
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
MASSACHUSETTS--2.3%
$ 2,100 Boston Water & Sewer Community Rev., Residual Ctfs.,
13.68%, 11/1/28, Ser. 434 (FGIC) Aaa/NR $ 2,012,220
2,420 State GO,
19.33%, 11/1/30, Ser. 785 (FGIC) Aaa/NR 3,425,074
1,750 State College Bldg. Auth. Proj. Rev.,
43.843%-45.454%, 11/1/22-11/1/31, (XLCA) NR/NR 2,636,551
State Turnpike Auth. Rev., Residual Ctfs.,
11,049 13.68%, 1/1/37, Ser. 334 (AMBAC) Aaa/NR 10,065,970
4,500 13.68%, 1/1/37, Ser. 489 (AMBAC) NR/AAA 4,099,635
8,498 13.68%, 1/1/39, Ser. 335 (AMBAC) Aaa/NR 7,547,480
-----------
29,786,930
===========
NEVADA--0.3%
3,300 State GO, Residual Ctfs., 13.54%, 5/15/28, Ser. 344 (FGIC) Aaa/NR 3,269,211
===========
OHIO--0.1%
1,975 Hamilton Cnty. Sales Tax Residual Ctfs.,
16.01%, 12/1/27, Ser. 356 (MBIA) Aaa/NR 1,931,708
===========
PENNSYLVANIA--0.4%
Philadelphia School Dist. Residual Ctfs., GO,
2,505 12.70%, 4/1/27, Ser. 345, (MBIA) Aaa/NR 2,123,739
4,016 12.73%, 4/1/27, Ser. 496, (MBIA) Aaa/NR 3,404,341
-----------
5,528,080
===========
TENNESSEE--0.5%
6,000 Memphis Electric Sys. Rev., Residual Ctfs.
8.66%, 12/1/11, Ser 880 (MBIA) (d) Aaa/NR 7,021,080
===========
TEXAS--1.3%
3,075 Denton Util. Sys. Rev., Residual Ctfs.,
16.51%, 12/1/29, Ser. 428 (MBIA) Aaa/NR 3,014,238
1,650 Houston Arpt. Sys. Rev., Residual Ctfs.
13.44%, 7/1/25, Ser. 404 (FGIC) Aaa/NR 1,651,271
Houston Water & Sewer Syst. Rev., Residual Ctfs.,
3,838 17.01%, 12/1/30, Ser. 495 NR/AAA 5,376,645
2,750 16.01%, 12/1/28, Ser. 427 Aaa/NR 3,648,260
3,080 State Affordable Housing, American Housing Foundation,
19.87%, 9/1/22, Ser. 780 (MBIA) Aaa/NR 3,522,996
-----------
17,213,410
===========
WASHINGTON--0.2%
2,730 Central Puget Sound Regl. Tran. Auth. Sales Tax &
Motor, Residual Ctfs., 12.70%, 2/1/28, Ser. 360 Aaa/NR 2,294,565
-----------
Total Variable Rate Notes (cost-$92,711,059) 96,407,843
===========
12 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
VARIABLE RATE DEMAND NOTES (c) (d)--3.0%
------------------------------------------------------------------------------------------------------------------------------------
MASSACHUSETTS--0.1%
$ 1,450 State Health & Educational Facilities Auth.,
1.09%, 6/1/04, Ser. C VMIG1/A-1+ $ 1,450,000
==============
MICHIGAN--0.3%
4,000 State University Rev., 1.03%, 6/2/04, Ser. A VMIG1/A-1+ 4,000,000
==============
MISSOURI--0.5%
State Health & Educational Facilities Auth Rev.,
4,400 1.06%, 6/3/04 4,400,000
1,650 1.10%, 6/1/04, Ser. B VMIG1/A-1+ 1,650,000
--------------
6,050,000
==============
NEW YORK--0.5%
7,000 New York City Municipal Water Finance & Auth.
Water & Sewer Syst. Rev.,
1.09%, 6/1/04, Ser. C (FGIC) VMIG1/A-1+ 7,000,000
==============
NORTH CAROLINA--1.1%
3,150 Charlotte Water & Sewer Sys. Rev., 1.08%, 6/3/04, Ser. B Aa1/AAA 3,150,000
3,980 Mecklenburg Cnty., CP., 1.07, 6/3/04 VMIG1/A-1+ 3,980,000
7,000 State GO, 1.03%, 6/2/04, Ser. E VMIG1/A-1+ 7,000,000
--------------
14,130,000
==============
OREGON--0.1%
1,600 State GO, 1.03%, 6/2/04 VMIG1/A-1+ 1,600,000
==============
PENNSYLVANIA--0.1%
1,400 State Hospitals & Higher Education Facilities Auth.,
1.08%, 12/1/03 (MBIA) VMIG1/A-1+ 1,400,000
==============
TEXAS--0.2%
2,200 Harris Cnty Industrial Development Corp., 0.98%, 3/1/24 Aaa/AAA 2,200,000
==============
VIRGINIA--0.1%
2,000 Loudoun Cnty. Indl. Dev. Auth. Rev., Howard Hughes
Med. Ctr., 1.06%, 6/1/04, Ser. C VMIG1/A-1+ 2,000,000
==============
TOTAL VARIABLE RATE DEMAND NOTES (COST-$39,829,923) 39,830,000
==============
------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS (f)--1.6%
------------------------------------------------------------------------------------------------------------------------------------
20,215 1.0148%-1.0899%, 6/3/04-6/17/04 (cost-$20,210,967) Aaa/AAA 20,210,875
==============
TOTAL INVESTMENTS BEFORE CALL OPTIONS WRITTEN
(cost-$1,308,777,212+)--100% 1,299,698,800
==============
5.31.04 | PIMCO Municipal Income Funds II Annual Report 13
PIMCO MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Value
====================================================================================================================================
CALL OPTIONS WRITTEN (h)--(0.0)%
------------------------------------------------------------------------------------------------------------------------------------
Contracts
---------
U.S. Treasury Bond Futures, Chicago Board of Trade:
(575) Strike Price $112, expires 8/27/04 $ (215,625)
(575) Strike Price $113, expires 8/27/04 (152,734)
--------------
Total call options written (premium received-$759,359) (368,359)
==============
TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN
(cost-$1,308,017,853)--100% $1,299,330,441
==============
--------------------------------------------------------------------------------
+ The cost basis of portfolio securities for federal income tax purposes is
$1,308,794,043. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $20,152,677 aggregate
gross unrealized depreciation for securities in which there is an excess of
tax cost over value is $29,247,920 and net unrealized depreciation for
federal income tax purposes is $9,095,243.
14 PIMCO Municipal Income Funds II Annual Report | 5.31.04 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31,2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
CALIFORNIA MUNICIPAL BONDS & NOTES--84.5%
------------------------------------------------------------------------------------------------------------------------------------
$31,300 ABAG Financing Auth. Rev.,
5.20%-5.35%, 11/15/22-11/15/32, Ser. A NR/BBB $ 30,503,279
2,000 ABC Unified School Dist. GO, zero coupon, 8/1/23, Ser. B (FGIC) Aaa/AAA 708,500
1,000 Alpine Union School Dist. GO, zero coupon, 8/1/24, Ser. B (FSA) Aaa/AAA 338,210
8,115 Anaheim City School Dist. GO, 5.00%, 8/1/26 (FGIC) Aaa/AAA 8,082,134
23,000 Bakersfield, CP, zero coupon, 4/15/21, Ser. B NR/AAA 9,347,660
1,945 Bay Area Govt. Assoc. Improvement Bd. Act 1915, 6.30%, 9/2/25 NR/NR 1,971,685
2,000 Bay Area Govt. Assoc. Lease Rev.,
5.00%, 7/1/32, Ser. 2002-1 (AMBAC) Aaa/AAA 1,973,180
1,085 Capistrano Unified School Dist., Community Fac. Dist.
Special Tax, 5.70%, 9/1/20 NR/NR 1,097,716
565 Catholic Health Facs. Fin. Auth. Rev., 5.00%, 7/1/28, Ser. A Baa1/BBB+ 514,896
2,300 Ceres Unified School Dist., GO, zero coupon, 8/1/27 (FGIC) Aaa/AAA 592,848
9,865 Chula Vista Special Tax, 6.05%-6.20%, 9/1/25-9/1/33 NR/NR 9,954,298
8,035 Clovis Unified School Dist. GO,
zero coupon, 8/1/23-8/1/27, Ser. B (FGIC) Aaa/AAA 2,469,845
1,410 Community College Financing Auth. Lease Rev.,
5.00%, 8/1/27, Ser. A (AMBAC) Aaa/AAA 1,398,438
6,355 Corona-Norco Unified School Dist., Public Financing Auth.
Special Tax, 5.55%-6.10%, 9/1/15-9/1/32, Ser. A NR/NR 6,326,847
1,110 Corona-Norco Unified School Dist. Special Tax,
5.10%, 9/1/25 (AMBAC) Aaa/AAA 1,114,362
2,800 Cotati Redev. Agcy. Tax Allocation,
5.00%, 9/1/31, Ser. A (MBIA) Aaa/AAA 2,722,664
3,000 Dinuba Financing Auth. Lease Rev., 5.10%, 8/1/32 (MBIA) Aaa/AAA 2,982,030
2,825 Empire Union School Dist. Special Tax.,
zero coupon, 10/1/30-10/1/32 (AMBAC) Aaa/AAA 594,422
1,000 Escondido Union School Dist. GO, zero coupon, 8/1/27 (FSA) Aaa/AAA 269,620
2,440 Eureka Unified School Dist. GO, zero coupon, 8/1/27 (FSA) Aaa/AAA 657,873
Foothill Eastern Corrider Agcy. Toll Road Rev.,
32,010 zero coupon, 1/1/25-1/1/30, Ser. A Aaa/AAA 8,652,132
1,500 zero coupon, 1/15/27 (MBIA) Aaa/AAA 1,199,940
400 Franklin-McKinley School Dist. GO, 5.00%, 8/1/27, Ser. B (FSA) Aaa/AAA 396,720
47,900 Golden State Tobacco Securitization Corp. Rev.,
6.25%-6.75%, 6/1/33-6/1/39, Ser. 2003-A-1 Baa3/BBB 42,629,244
2,115 Health Facs. Financing Auth. Rev., 5.375%, 11/1/20 NR/BBB 2,130,947
1,750 Huntington Beach Community Facs. Dist. Special Tax,
6.30%, 9/1/32 NR/NR 1,766,572
2,080 Industry Urban Dev. Agcy. Tax Allocation,
4.75%, 5/1/21 (MBIA) Aaa/AAA 2,056,101
7,000 Irvine Improvement Board Act 1915 Special Assessment,
5.70%, 9/2/26 NR/NR 6,964,370
1,900 Jurupa Unified School Dist. GO, zero coupon, 5/1/27 (FGIC) Aaa/AAA 512,278
2,450 Kings Canyon JT Unified School Dist. GO,
zero coupon, 8/1/27 (FGIC) Aaa/AAA 660,569
5,300 Livermore-Amador Valley Water Management Agcy.,
Sewer Rev., 5.00%, 8/1/31 (AMBAC) Aaa/AAA 5,191,668
5.31.04 | PIMCO Municipal Income Funds II Annual Report 15
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
$ 5,935 Long Beach Unified School Dist. GO,
5.00%, 8/1/27, Ser. C (MBIA) Aaa/NR $ 5,886,333
Los Angeles, CP,
9,895 5.00%, 2/1/27 (MBIA) Aaa/AAA 9,814,850
2,685 5.00%, 10/1/27, Ser. AU (MBIA) Aaa/AAA 2,662,902
7,200 Los Angeles Wastewater Syst. Rev.,
5.00%, 6/1/30, Ser. A (FGIC) Aaa/AAA 7,117,344
3,475 Loyola Marymount University Educational Facs. Auth. Rev.,
zero coupon, 10/1/34 (MBIA) Aaa/NR 617,229
1,000 Manhattan Beach Unified School Dist. GO,
zero coupon, 9/1/25 (FGIC) Aaa/AAA 306,150
7,295 Manteca Redev. Agcy. Tax Allocation, 5.00%, 10/1/32 (FSA) Aaa/AAA 7,139,762
Manteca Unified School Dist. Special Tax,
2,365 zero coupon, 9/1/25 (MBIA) Aaa/AAA 716,619
5,330 5.00%, 9/1/29, Ser. C Aaa/AAA 5,195,311
4,000 Merced Cnty. CP, 5.00%, 6/1/32 (AMBAC) Aaa/NR 3,917,360
7,320 Modesto Elementary School Dist., Stanislaus Cnty. GO,
zero coupon, 8/1/23-5/1/27, Ser. A (FGIC) Aaa/AAA 2,370,390
2,150 Modesto High School Dist., Stanislaus Cnty. GO,
zero coupon, 8/1/26, Ser. A (FGIC) Aaa/AAA 620,081
1,000 Modesto Public Financing Auth. Lease Rev.,
5.00%, 9/1/29 (AMBAC) Aaa/AAA 981,630
2,385 Monrovia Financing Auth. Lease Rev.,
5.125%, 12/1/31 (AMBAC) Aaa/AAA 2,391,726
Montebello Unified School Dist. GO,
7,105 zero coupon, 8/1/24-8/1/27 (FGIC) Aaa/AAA 2,116,107
1,485 zero coupon, 8/1/24 (FSA) Aaa/AAA 492,485
2,400 Morgan Hill Unified School Dist. GO,
zero coupon, 8/1/23 (FGIC) Aaa/AAA 850,200
1,500 Mountain View-Whisman School Dist. GO,
5.00%, 6/1/27 Ser. D (MBIA) Aaa/AAA 1,487,850
1,800 Murrieta Redev. Agcy. Tax, 5.00%, 8/1/32 (MBIA) Aaa/AAA 1,762,596
3,245 Newark Unified School Dist. GO,
zero coupon, 8/1/26, Ser D (FSA) Aaa/AAA 935,890
3,580 Oakland Redev. Agcy. Tax Allocation, 5.25%, 9/1/27-9/1/33 NR/A- 3,438,513
1,000 Orange Cnty. Community Facs. Dist. Special Tax,
6.00%, 8/15/25, Ser. A NR/NR 1,016,820
12,000 Orange Cnty. Sanitation Dist. CP, 5.25%, 2/1/30 (FGIC) Aaa/AAA 12,147,120
3,685 Palmdale Community Redev. Agcy. Tax Allocation,
zero coupon, 12/1/30-12/1/32 (AMBAC) Aaa/AAA 772,866
1,750 Paramount Unified School Dist. GO,
zero coupon, 9/1/23, Ser. B (FSA) Aaa/AAA 617,137
Perris Public Financing Auth. Rev.,
1,190 4.75%, 10/1/23, Ser. B (MBIA) Aaa/AAA 1,157,644
2,580 5.375%-5.625%, 10/1/20-10/1/31, Ser. C NR/BBB 2,533,679
14,200 Poway Unified School Dist. Special Tax,
5.50%-6.125%, 9/1/25-9/1/33 NR/NR 14,006,083
16 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
$ 2,000 Rancho Cucamonga Community Facs. Dist. Special Tax,
6.375%, 9/1/31, Ser. A NR/NR $ 2,013,880
1,500 Richmond Wastewater Rev., zero coupon, 8/1/30 (FGIC) Aaa/AAA 339,555
3,510 Riverside CP, 5.00%, 9/1/33 (AMBAC) NR/AAA 3,430,604
17,500 Rocklin Unified School Dist. GO,
zero coupon, 8/1/24-8/1/27 (FGIC) Aaa/AAA 5,255,450
9,250 Roseville Redev. Agcy. Tax Allocation,
5.00%, 9/1/27-9/1/33 (MBIA) Aaa/AAA 9,075,468
Sacramento City Financing Auth. Rev.,
4,500 5.00%, 12/1/32, Ser. A (FSA) Aaa/AAA 4,406,265
4,935 6.25%, 9/1/23 NR/NR 5,029,407
12,490 Sacramento Cnty. Airport Syst. Rev.,
5.00%, 7/1/32, Ser. A (FSA) Aaa/AAA 12,231,082
16,285 San Diego Cnty. Water Auth. Water Rev., CP,
5.00%, 5/1/28-5/1/29, Ser. A (MBIA) Aaa/AAA 16,002,700
1,500 San Diego Public Facs. Financing Auth. Lease Rev.,
5.00%, 4/1/32 (MBIA) Aaa/AAA 1,468,995
1,000 San Diego Public Facs. Financing Auth. Sewer Rev.,
5.00%, 5/15/29, Ser. A (FGIC) Aaa/AAA 988,730
14,000 San Diego Public Facs. Financing Auth. Water Rev.,
5.00%, 8/1/32 (MBIA) Aaa/AAA 13,692,700
San Francisco City & Cnty. Airport Community, Int'l Airport Rev.,
5,585 4.50%, 5/1/28, Ser. 15B (MBIA) Aaa/AAA 5,053,252
20,300 5.00%, 5/1/32, Ser. 28B (MBIA) Aaa/AAA 19,880,196
10,405 San Joaquin Hills Transportation Corridor Agcy. Toll Road Rev.,
zero coupon, 1/1/25 AAA/AAA 3,386,411
10,190 San Jose, GO, 5.125%, 9/1/31 (MBIA) Aa1/AA+ 10,210,584
7,875 San Juan Unified School Dist. GO,
zero coupon, 8/1/23-8/1/26 (FSA) Aaa/AAA 2,387,766
5,000 Santa Margarita Community Fac. Water Dist. Special Tax,
6.00%-6.25%, 9/1/29-9/1/30 NR/NR 5,024,180
4,835 San Mateo Foster City School Dist. GO, 5.10%, 8/1/31 (FGIC) Aaa/AAA 4,837,853
2,300 San Mateo Union High School Dist. GO,
zero coupon, 9/1/20 (FGIC) Aaa/AAA 986,424
1,730 San Rafael City High School Dist. GO,
5.00% 8/1/23, Ser. B (FSA) Aaa/AAA 1,715,814
3,280 San Rafael Elementary School Dist. GO,
5.00%, 8/1/27, Ser. B (FSA) Aaa/AAA 3,253,104
8,690 Santa Clara Unified School Dist. GO,
5.00%, 7/1/25-7/1/27 (MBIA) Aaa/AAA 8,655,293
1,260 Santa Cruz Cnty., CP, 5.25%, 8/1/32 A2/NR 1,239,878
3,465 Saugus Hart School Facs. Financing Auth. Special Tax,
6.10%-6.125%, 9/1/32-9/1/33 NR/NR 3,486,737
1,000 Shasta Union High School Dist. GO, zero coupon, 8/1/24 (FGIC) Aaa/AAA 331,640
4,745 South Tahoe JT Powers Parking Financing Auth. Rev.,
7.00%, 12/1/27, Ser. A NR/NR 4,912,499
1,800 Southern Mono Health Care Dist. GO,
zero coupon, 8/1/26 (MBIA) Aaa/AAA 508,086
5.31.04 | PIMCO Municipal Income Funds II Annual Report 17
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
$ 35,000 State Economic Recovery GO, 5.00%, 7/1/11, Ser. A (MBIA) Aaa/AAA $ 38,150,700
9,375 State Health Facs. Financing Auth. Rev.,
5.125%-5.25%, 1/1/22-1/1/26 NR/BBB 9,068,510
200 State Infrastructure & Economic Dev. Bk. Rev., Bay Area Toll,
5.00%, 7/1/36, Ser. B (AMBAC) Aaa/AAA 196,230
9,605 State Public Works Board Lease Rev.,
5.00%, 10/1/22, Ser. A (FSA) Aaa/AAA 9,636,793
State University Rev. & Colleges,
1,710 5.00%, 11/1/33, Ser. A (AMBAC) Aaa/AAA 1,684,008
1,000 5.00%, 11/1/13, Ser. A (FSA) 1,085,100
1,170 Statewide Community Dev. Auth. CP, 6.10%, 11/1/15 NR/NR 1,179,688
6,555 Statewide Community Dev. Auth. Rev.,
6.75%, 10/1/30-7/1/32 (d) NR/NR 6,506,683
2,770 Statewide Community Dev. Auth., Rev.,
5.50%, 11/1/32, Ser. A A3/A 2,801,439
9,700 Statewide Community Dev. Auth., Rev., Jewish Home Health Fac.,
5.50%, 11/15/33 NR/BBB 9,560,514
Statewide Financing Auth. Tobacco Settlement Rev.,
1,865 5.625%, 5/1/29, Ser. A Baa3/NR 1,539,930
20,000 6.00%, 5/1/37, Ser. B Baa3/NR 15,989,600
7,750 Tamalpais Union High School Dist. GO,
5.00%, 8/1/27 (FSA) Aaa/AAA 7,686,450
Tobacco Securization Agcy. Rev.,
15,000 5.625%-6.00%, 6/1/23-6/1/35 Baa3/BBB 12,811,200
1,800 5.875%, 6/1/43, Ser. A Baa3/NR 1,417,356
4,500 6.00%, 6/1/42 Baa3/NR 3,518,235
995 Tracy Community Facs. Dist. Special Tax, 6.00%, 9/1/27 NR/NR 992,413
6,250 University Revs., 5.00%, 5/15/11, Ser. A (AMBAC) Aaa/AAA 6,783,688
10,000 Ventura Cnty. Community College Dist. GO,
5.00%, 8/1/27, Ser. A (MBIA) Aaa/AAA 9,918,000
1,555 Ventura Unified School Dist. GO, 5.00%, 8/1/32, Ser. F (FSA) Aaa/AAA 1,522,687
2,000 Vernon Elec. Syst. Rev., 5.50%, 4/1/33 A2/BBB+ 2,001,880
3,535 Victor Elementary School Dist.,
zero coupon, 8/1/24-8/1/26, Ser. A (FGIC) Aaa/AAA 1,068,163
1,000 Vista Unified School Dist. GO,
zero coupon, 8/1/26, Ser. A (FSA) Aaa/AAA 288,410
7,320 West Contra Costa University School Dist. GO,
5.00%, 8/1/26-8/1/31, Ser. A (MBIA) Aaa/AAA 7,257,625
3,375 Westlands Water Dist. Rev. CP, 5.00%, 9/1/34 (MBIA) Aaa/AAA 3,297,544
2,000 William S. Hart Union High School Dist. Special Tax,
5.625%, 9/1/34 NR/BBB+ 2,002,020
2,110 Yuba City Unfied School Dist. GO, zero coupon, 9/1/25 (FGIC) Aaa/AAA 645,976
-------------
Total California Municipal Bonds & Notes (cost-$571,562,220) 557,269,120
=============
18 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
OTHER MUNICIPAL BONDS & NOTES--4.3%
------------------------------------------------------------------------------------------------------------------------------------
PUERTO RICO--0.7%
$ 2,000 Electric Power Auth. Rev., 5.125%, 7/1/29, Ser. NN A3/A- $ 1,976,260
2,505 Gov't Fac. Public Buildings Auth. Rev., 5.00%, 7/1/36, Ser. I Baa1/A- 2,378,497
-----------
4,354,757
===========
TENNESSEE--1.3%
8,535 Memphis Elec. Syst. Rev., 5.00%, 12/1/16, Ser. A (MBIA) Aaa/AAA 8,969,517
===========
TEXAS--2.3%
13,845 State Univ. Revs., 5.25%, 8/15/11-8/15/12, Ser. A Aaa/AAA 15,248,559
===========
Total Other Municipal Bonds & Notes (cost-$29,306,664) 28,572,833
===========
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA VARIABLE RATE NOTES (a) (b) (g)--3.5%
------------------------------------------------------------------------------------------------------------------------------------
4,238 Los Angeles Dept. of Water & Power Waterworks Rev.,
16.60%, 7/1/41 (FGIC) Aaa/NR 4,166,988
1,875 Modesto Public Financing Auth. Lease Rev.,
16.10%, 9/1/29, Ser. 354 (AMBAC) AAA/NR 1,737,225
4,952 Oakland GO, 16.10%, 1/15/32, Ser. 756 (FGIC) Aaa/NR 4,652,182
San Diego Unified School Dist. GO,
2,209 16.10%, 7/1/26, Ser. 759 (FSA) NR/NR 2,173,568
1,944 16.10%, 7/1/27, Ser. 758 (FGIC) Aaa/NR 1,880,548
3,743 San Jose GO, 16.10%, 9/1/32 (MBIA) Aaa/NR 3,540,704
2,288 San Jose Unified School Dist. Santa Clara Cnty. GO,
16.10%, 8/1/27 (FSA) Aaa/NR 2,212,470
2,500 University Revs., 16.10%, 9/1/28, Ser. 762 (FGIC) WR/NR 2,409,650
-----------
Total California Variable Rate Notes (cost-$24,091,792) 22,773,335
===========
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA SHORT-TERM VARIABLE RATE DEMAND NOTES (c) (d)--6.4%
------------------------------------------------------------------------------------------------------------------------------------
2,000 Bay Area Toll Auth., Toll Bridge Rev.,
1.04%, 6/3/04 (AMBAC) Aaa/AAA 2,000,000
4,200 Irvine Ranch Water Dist., 1.07%, 6/1/04 Aaa/AAA 4,200,000
4,900 Irvine Ranch Water Dist. GO, 1.07%, 6/1/04, Aaa/AAA 4,900,000
4,400 Irvine Unified School Dist. Special Tax,
1.07%, 6/1/04 (Bank of New York) VMIG1/NR 4,400,000
3,320 Long Beach Unified School Dist. CP,
1.06%, 6/3/04 (AMBAC) VMIG1/NR 3,320,000
2,095 Los Angeles Cnty. Metropolitan Transportation Auth. Rev.,
Sales Tax Rev., 1.06%, 6/3/04, Ser. A (MBIA) VMIG1/A1+ 2,095,000
2,300 Los Angeles Water & Power Rev., 1.06%, 6/3/04 Ser. B-3 VMIG1/AA- 2,300,000
2,315 Northern California Transmission Agency Rev.,
1.08%, 6/3/04 (FSA) VMIG1/AAA 2,315,000
9,000 Orange Cnty. Sanitation Dist. CP, 1.07%, 6/1/04, Ser. B VMIG1/A1+ 9,000,000
3,800 State Health Facs. Fin. Auth. Rev.,
1.06%, 6/1/04, Ser. B (AMBAC) VMIG1/A1+ 3,800,000
2,000 Statewide Community Dev. Auth. CP,
1.07%, 6/1/04 (AMBAC) VMIG1/A1 2,000,000
5.31.04 | PIMCO Municipal Income Funds II Annual Report 19
PIMCO CALIFORNIA MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
$ 2,000 Western Muni. Water Dist. Facs. Rev.,
1.06%, 6/2/04, Ser. A (FSA) NR/AAA $ 2,000,000
--------------
Total California Short-Term Variable Rate Demand Notes
(cost-$42,330,000) 42,330,000
==============
------------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS (f)--1.3%
------------------------------------------------------------------------------------------------------------------------------------
8,650 0.83753%-0.9275%, 6/3/04-6/17/04 (cost-$8,648,168) Aaa/AAA 8,648,127
--------------
TOTAL INVESTMENTS BEFORE CALL OPTION WRITTEN
(cost-$675,938,844+)--100% 659,593,415
==============
------------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN (h)--(0.0)%
------------------------------------------------------------------------------------------------------------------------------------
Contracts
---------
U.S. Treasury Bond Futures, Chicago Board of Trade:
(290) Strike Price $112, expires 8/27/04 (108,750)
(290) Strike Price $113, expires 8/27/04 (77,031)
--------------
Total call options written (premiums received-$382,981) (185,781)
==============
TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN
(cost-$675,555,863)--100% $659,407,634
==============
--------------------------------------------------------------------------------
+ The cost basis of portfolio securities for federal income tax purposes is
$675,938,844. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $1,968,481; aggregate
gross unrealized depreciation for securities in which there is an excess of
tax cost over value is $18,313,910, net unrealized depreciation for federal
income tax purposes is $16,345,429.
20 PIMCO Municipal Income Funds II Annual Report | 5.31.04 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIMCO NEW YORK MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
NEW YORK MUNICIPAL BONDS & NOTES--89.2%
------------------------------------------------------------------------------------------------------------------------------------
$ 1,250 Buffalo Municipal Water Fin. Auth., Water Syst. Rev.,
5.00%-5.125%, 7/1/27-7/1/32, Ser. B (FSA) Aaa/AAA $ 1,250,547
10,000 Erie Cnty. Tobacco Asset, 6.50%, 7/15/32 Baa1/BBB 9,469,900
Metropolitan Transportation Auth. Rev.,
1,850 5.00%, 11/15/30, Ser. A (FSA) Aaa/AAA 1,825,894
10,000 5.25%, 11/15/31, Ser. E A2/A 10,013,200
7,000 Metropolitan Transportation Auth. Service Contract,
5.35%, 7/1/31, Ser. B A3/AAA 7,054,460
New York City, GO
4,000 5.00%, 3/1/33, Ser. I A2/A 3,840,680
1,500 5.75%, 8/1/16, Ser. A A2/A 1,620,405
3,100 New York City Health & Hospital Corp., Rev.,
5.375%-5.45%, 2/15/26, Ser. A A3/BBB 3,112,803
New York City Municipal Water Fin. Auth.,
Water & Sewer Syst. Rev.,
3,055 4.75%, 6/15/25, Ser. D (MBIA-IBC) Aaa/AAA 2,963,992
20,000 5.00%-5.125%, 6/15/32-6/15/34, Ser. A Aa2/AA 19,809,350
1,245 New York City Indl. Dev. Agcy., Civic Fac. Rev., 6.45%, 7/1/32 Ba3/NR 1,152,671
1,000 New York City Indl Dev. Agcy. Rev. 4.95%, 11/20/32 (GNMA) NR/AA+ 965,930
New York City Transitional Fin. Auth. Rev.,
7,195 5.00%, 11/15/26, Ser. A Aa2/AA+ 7,099,235
10,000 5.00%, 11/1/27, Ser. B Aa2/AA+ 9,836,900
2,000 5.25%, 2/1/12, Ser. C Aa2/AA+ 2,188,300
500 5.50%, 11/1/29 (Pre-refunded @ 101, 5/1/10) (i) Aa2/AA+ 562,455
3,600 Port Auth. New York & New Jersey, 5.00%, 4/15/32 Aaa/AAA 3,602,556
6,590 Sachem Central School District of Holbrook,
5.00%, 6/15/28-6/15/29 Aaa/AAA 6,558,140
7,500 State Dormitory Auth. Lease Rev., State Univ. Dormitory Facs.,
5.00%, 7/1/32 A1/AA- 8,197,125
2,000 State Dormitory Auth. Revs., FHA-Kaleida Health Hospital,
5.05%, 2/15/25 (FHA) NR/AAA 1,969,560
3,225 State Dormitory Auth. Revs., FHA-NY & Presbyterian Hospital,
4.75%, 8/1/27(AMBAC) Aaa/AAA 3,072,393
5,000 State Dormitory Auth. Revs., FHA-Saint Barnabas,
5.00%, 2/1/31, Ser. A (AMBAC) Aaa/AAA 4,941,600
1,250 State Dormitory Auth. Revs., FIT Student Housing Corp.,
5.125%, 7/1/34 (FGIC) Aaa/AAA 1,253,362
5,300 State Dormitory Auth. Revs., Lenox Hill Hospital, 5.50%, 7/1/30 A3/NR 5,403,562
1,400 State Dormitory Auth. Revs., Long Island Univ., 5.25%, 9/1/28 Baa3/AA 1,403,220
5,000 State Dormitory Auth. Revs., Memorial Sloan-Kettering Center,
Ser 1, 5.00%, 7/1/34 Aa2/AA 4,893,200
8,850 State Dormitory Auth. Revs., North General Hospital,
5.00%, 2/15/25 NR/AA- 8,681,496
8,600 State Dormitory Auth. Revs., State Personal Income Tax,
5.00%, 3/15/32 A1/AA 8,311,212
4,270 State Dormitory Auth. Revs., Teachers College,
5.00%, 7/1/32 (MBIA) Aaa/NR 4,212,739
5.31.04 | PIMCO Municipal Income Funds II Annual Report 21
PIMCO NEW YORK MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
$ 5,000 State Board Agency School Rev., 5.00%, 6/1/23 Ser. C NR/A+ $ 4,945,600
2,000 State Environmental Facs. Corp., State Clean Water & Drinking,
5.125%, 6/15/31 Aaa/AAA 2,018,960
6,100 State Urban Dev. Corp., Personal Income Tax,
5.00%, 3/15/33, Ser. C A1/AA 5,883,145
6,000 State Urban Dev. Correctional & Youth Fac. Corp.,
5.50%, 1/1/17, Ser. A A3/AA- 6,537,540
TOB Settlement Asset Backed, Inc.
25,000 5.75%, 7/15/32 Baa3/BBB 22,037,250
10,000 6.375%, 7/15/39 Baa3/BBB+ 9,283,700
4,700 Triborough Bridge & Tunnel Auth. Revs.,
5.00%, 1/1/32, Ser. A (FGIC) Aaa/AAA 4,637,490
2,000 Warren & Washington Cnty. Indl. Dev. Agy. Fac. Rev.,
5.00%, 12/1/35, Ser A (FSA) Aaa/AAA 1,941,360
750 Westchester Cnty. Indl Dev. Agcy. Continuing Care,
6.50%, 1/1/34 NR/NR 737,378
------------
Total New York Municipal Bonds & Notes (cost-$207,021,848) 203,289,310
============
------------------------------------------------------------------------------------------------------------------------------------
OTHER MUNICIPAL BONDS & NOTES--3.0%
------------------------------------------------------------------------------------------------------------------------------------
5,675 Children Trust Fund Puerto Rico Tobacco Settlement Rev.,
5.625%, 5/15/43 Baa3/BBB 4,636,475
1,500 Puerto Rico Commonwealth Highway & Transportation Auth.,
5.25%, 7/1/38 Ser. D Baa1/A 1,481,160
750 Puerto Rico Electric Power Authority, Power Revenue
5.125%, 7/1/29, Ser. NN A3/A- 741,098
------------
Total Other Municipal Bonds & Notes (cost-$7,709,765) 6,858,733
============
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK VARIABLE RATE NOTES (a) (b) (g)--3.2%
------------------------------------------------------------------------------------------------------------------------------------
6,994 Long Island Power Auth. Elec. Syst. Rev.,
17.07%, 12/1/26, Ser. 339 (MBIA) (cost $7,006,755) Aaa/NR 7,309,010
============
------------------------------------------------------------------------------------------------------------------------------------
OTHER VARIABLE RATE NOTES (a) (b)--1.2%
------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA--1.2%
1,800 State Economic Recovery GO,
21.015%, 1/1/10, Ser. A (cost $2,501,979) Aa3/NR 2,624,850
============
------------------------------------------------------------------------------------------------------------------------------------
NEW YORK SHORT-TERM VARIABLE RATE DEMAND NOTES (c) (d)--2.3%
------------------------------------------------------------------------------------------------------------------------------------
2,100 Nasaau Cnty. Interim Fin. Auth. Rev., 1.04%, 6/2/04 Aaa/A-1+ 2,100,000
1,200 New York City, GO, 1.06%, 6/1/04 (MBIA) Aaa/AAA 1,200,000
1,990 New York City, GO, 0.98%, 6/1/04 (AMBAC) Aaa/AAA 1,990,000
------------
Total New York Short-Term Variable Rate Demand Notes
(cost-$5,290,000) 5,290,000
============
22 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO NEW YORK MUNICIPAL INCOME FUND II SCHEDULE OF INVESTMENTS
May 31, 2004
--------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) Moody's/S&P* Value
====================================================================================================================================
U.S. TREASURY BILLS (f) --1.1%
------------------------------------------------------------------------------------------------------------------------------------
$2,615 0.88500%-0.94251%, 6/3/04-6/17/04 (cost-$2,614,676) Aaa/AAA $ 2,614,668
--------------
TOTAL INVESTMENTS BEFORE CALL OPTIONS WRITTEN
(cost-$232,145,023+)--100% 227,986,571
==============
------------------------------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN (h)--(0.0)%
------------------------------------------------------------------------------------------------------------------------------------
Contracts
---------
U.S. Treasury Bond Futures, Chicago Board of Trade:
(100) Strike Price $112, expires 8/27/04 (37,500)
(100) Strike Price $113, expires 8/27/04 (26,563)
--------------
Total call options written (premium received-$132,063) (64,063)
==============
TOTAL INVESTMENTS NET OF CALL OPTIONS WRITTEN
(cost-$232,012,960)--100% $227,922,508
==============
--------------------------------------------------------------------------------
+ The cost basis of portfolio securities for federal income tax purposes is
$232,145,023. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $2,155,893, aggregate
gross unrealized depreciation for securities in which there is an excess of
tax cost over value is $6,314,345 and net unrealized depreciation for
federal income tax purposes is $4,158,452.
NOTES TO SCHEDULES OF INVESTMENTS:
----------------------------------
* Unaudited
(a) Private Placement. Restricted as to resale and may not have a readily
available market; the aggregate cost and value of such securities is
$96,407,843 or 7.4% of investments, $22,773,335 or 3.5% of investments and
$9,933,860 or 4.3% of investments, respectively, for Municipal II,
California Municipal II and New York Municipal II.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, typically to qualified institutional investors. These
securities amounted to $96,407,843 or 7.4% of investments, $22,773,335 or
3.5% of investments and $9,933,860 or 4.3% of investments, respectively,
for Municipal II, California Municipal II and New York Municipal II.
(c) Variable Rate Notes -- instruments whose interest rates change on specified
date (such as a coupon date or interest payment date) and/or whose interest
rates vary with changes in a designated base rate (such as the prime
interest rate).
(d) Maturity date shown is date of next call.
(e) Security deemed illiquid.
(f) All or partial principal amount segregated as initial margin on financial
futures contracts.
(g) Residual Interest Municipal Bonds. The interest rate shown bears an inverse
relationship to the interest rate on another security or the value of an
index.
(h) Non-income producing securities.
(i) Pre-refunded bonds are collateralized by U.S. Government or other eligible
securities which are held in escrow and used to pay principal and interest
and retire the bonds at the earliest refunding date.
--------------------------------------------------------------------------------
GLOSSARY:
--------
AMBAC -- insured by American Municipal Bond Assurance Corp.
CP -- Certificates of Participation
FGIC -- insured by Financial Guaranty Insurance Co.
FNMA -- Federal National Mortgage Association
FSA -- insured by Financial Security Assurance, Inc.
GO -- General Obligation Bonds
MBIA -- insured by Municipal Bond Investors Assurance
NR -- Not Rated
XLCA -- insured by XL Capital Assurance
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 5.31.04 | PIMCO Municipal Income Funds II Annual Report 23
PIMCO MUNICIPAL INCOME FUNDS II STATEMENTS OF ASSETS AND LIABILITIES
May 31, 2004
--------------------------------------------------------------------------------
CALIFORNIA NEW YORK
MUNICIPAL II MUNICIPAL II MUNICIPAL II
--------------- --------------- ---------------
ASSETS:
Investments, at value (cost-$1,308,777,212, $675,938,844
and $232,145,023, respectively) $1,299,698,800 $659,593,415 $227,986,571
------------------------------------------------------------- --------------- --------------- ---------------
Cash 4,025,605 -- 693,893
------------------------------------------------------------- --------------- --------------- ---------------
Interest receivable 20,640,058 9,462,264 4,282,348
------------------------------------------------------------- --------------- --------------- ---------------
Receivable for investments sold 14,955,454 5,131,372 --
------------------------------------------------------------- --------------- --------------- ---------------
Receivable for variation margin on futures contracts 3,170,400 850,888 291,593
------------------------------------------------------------- --------------- --------------- ---------------
Prepaid expenses 63,320 37,861 26,895
------------------------------------------------------------- --------------- --------------- ---------------
Total Assets 1,342,553,637 675,075,800 233,281,300
============================================================= =============== =============== ===============
LIABILITIES:
Payable to custodian -- 48,761 --
------------------------------------------------------------- --------------- --------------- ---------------
Payable for investments purchased 18,828,437 4,306,290 1,239,525
------------------------------------------------------------- --------------- --------------- ---------------
Dividends payable to common and preferred shareholders 4,982,961 2,493,328 862,002
------------------------------------------------------------- --------------- --------------- ---------------
Investment management fees payable 557,264 282,195 98,170
------------------------------------------------------------- --------------- --------------- ---------------
Options written, at value (premiums received-
$759,359, $382,981 and $132,063) 368,359 185,781 64,063
------------------------------------------------------------- --------------- --------------- ---------------
Accrued expenses 146,317 100,289 59,907
------------------------------------------------------------- --------------- --------------- ---------------
Total Liabilities 24,883,338 7,416,644 2,323,667
============================================================= =============== =============== ===============
PREFERRED SHARES ($0.00001 PAR VALUE AND $25,000 NET
ASSET AND LIQUIDATION VALUE PER SHARE APPLICABLE TO
AN AGGREGATE OF 20,200, 10,400 AND 3,600 SHARES
ISSUED AND OUTSTANDING, RESPECTIVELY) 505,000,000 260,000,000 90,000,000
------------------------------------------------------------- --------------- --------------- ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 812,670,299 $ 407,659,156 $ 140,957,633
============================================================= =============== =============== ===============
COMPOSITION OF NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS:
Common Stock:
Par value ($0.00001 per share) $ 580 $ 301 $ 104
------------------------------------------------------------- --------------- --------------- ---------------
Paid-in-capital in excess of par 824,260,374 428,070,185 147,757,823
------------------------------------------------------------- --------------- --------------- ---------------
Undistributed net investment income 7,765,501 3,271,140 356,073
------------------------------------------------------------- --------------- --------------- ---------------
Accumulated net realized loss (15,742,017) (10,574,585) (3,541,290)
------------------------------------------------------------- --------------- --------------- ---------------
Net unrealized depreciation of investments, futures
contracts and options written (3,614,139) (13,107,885) (3,615,077)
------------------------------------------------------------- --------------- --------------- ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 812,670,299 $ 407,659,156 $ 140,957,633
============================================================= =============== =============== ===============
Common Shares Outstanding 57,992,613 30,132,862 10,409,718
------------------------------------------------------------- --------------- --------------- ---------------
NET ASSET VALUE PER COMMON SHARE $ 14.01 $ 13.53 $ 13.54
============================================================= =============== =============== ===============
24 PIMCO Municipal Income Funds II Annual Report | 5.31.04 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIMCO MUNICIPAL INCOME FUNDS II STATEMENTS OF OPERATIONS
For the year ended May 31, 2004
--------------------------------------------------------------------------------
CALIFORNIA NEW YORK
MUNICIPAL II MUNICIPAL II MUNICIPAL II
--------------- --------------- ---------------
INVESTMENT INCOME:
Interest $ 76,529,156 $ 38,413,527 $ 12,783,643
------------------------------------------------------------- --------------- --------------- ---------------
EXPENSES:
Investment management fees 8,693,428 4,421,478 1,537,186
------------------------------------------------------------- --------------- --------------- ---------------
Auction agent fees and commissions 1,293,163 678,411 236,627
------------------------------------------------------------- --------------- --------------- ---------------
Custodian and accounting agent fees 165,597 133,740 86,315
------------------------------------------------------------- --------------- --------------- ---------------
Reports to shareholders 121,808 60,522 23,485
------------------------------------------------------------- --------------- --------------- ---------------
Audit and tax services 73,218 35,265 36,679
------------------------------------------------------------- --------------- --------------- ---------------
Investor relations 53,477 27,401 11,728
------------------------------------------------------------- --------------- --------------- ---------------
Trustees' fees and expenses 52,808 37,612 16,235
------------------------------------------------------------- --------------- --------------- ---------------
New York Stock Exchange listing fees 50,459 32,153 25,864
------------------------------------------------------------- --------------- --------------- ---------------
Transfer agent fees 38,372 35,546 37,168
------------------------------------------------------------- --------------- --------------- ---------------
Legal fees 36,300 18,570 5,821
------------------------------------------------------------- --------------- --------------- ---------------
Insurance expense 27,398 15,265 6,635
------------------------------------------------------------- --------------- --------------- ---------------
Miscellaneous 14,327 11,467 9,956
------------------------------------------------------------- --------------- --------------- ---------------
Total expenses 10,620,355 5,507,430 2,033,699
------------------------------------------------------------- --------------- --------------- ---------------
Less: investment management fees waived (2,006,176) (1,020,341) (354,735)
------------------------------------------------------------- --------------- --------------- ---------------
custody credits earned on cash balances (10,471) (13,912) (1,362)
------------------------------------------------------------- --------------- --------------- ---------------
Net expenses 8,603,708 4,473,177 1,677,602
------------------------------------------------------------- --------------- --------------- ---------------
NET INVESTMENT INCOME $ 67,925,448 $ 33,940,350 $ 11,106,041
============================================================= =============== =============== ===============
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 2,809,851 (2,181,033) (142,162)
------------------------------------------------------------- --------------- --------------- ---------------
Futures contracts 14,107,026 3,729,115 134,738
------------------------------------------------------------- --------------- --------------- ---------------
Options written 7,293,851 4,107,736 1,176,416
------------------------------------------------------------- --------------- --------------- ---------------
Net change in unrealized appreciation/depreciation on:
Investments (93,435,002) (54,668,595) (13,736,842)
------------------------------------------------------------- --------------- --------------- ---------------
Futures contracts 15,451,270 7,691,912 608,921
------------------------------------------------------------- --------------- --------------- ---------------
Options written 9,466,248 3,520,298 1,853,605
------------------------------------------------------------- --------------- --------------- ---------------
Net realized and unrealized loss on investments,
futures contracts and options written (44,306,756) (37,800,567) (10,105,324)
------------------------------------------------------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
INVESTMENT OPERATIONS 23,618,692 (3,860,217) 1,000,717
============================================================= =============== =============== ===============
DIVIDENDS ON PREFERRED SHARES FROM
NET INVESTMENT INCOME (4,680,202) (2,082,467) (718,744)
------------------------------------------------------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO
COMMON SHAREHOLDERS RESULTING FROM INVESTMENT
OPERATIONS $ 18,938,490 $ (5,942,684) $ 281,973
============================================================= =============== =============== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 5.31.04 | PIMCO Municipal Income Funds II Annual Report 25
PIMCO MUNICIPAL INCOME FUNDS II STATEMENTS OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
================================================================================
MUNICIPAL II
------------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
INVESTMENT OPERATIONS:
Net investment income $ 67,925,448 $ 53,776,637
-------------------------------------------------------------------------------- ------------- -------------
Net realized gain (loss) on investments, futures contracts and options written 24,210,728 (34,060,562)
-------------------------------------------------------------------------------- ------------- -------------
Net change in unrealized appreciation/depreciation of investments, futures
contracts and options written (68,517,484) 64,903,345
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets resulting from investment operations 23,618,692 84,619,420
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (4,680,202) (4,384,249)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- (504,626)
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from investment operations 18,938,490 79,730,545
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (56,205,302) (48,666,775)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- (5,387,613)
-------------------------------------------------------------------------------- ------------- -------------
Total dividends and distributions to common shareholders (56,205,302) (54,054,388)
================================================================================ ============= =============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock -- 823,703,945
-------------------------------------------------------------------------------- ------------- -------------
Preferred shares underwriting discount charged to paid-in capital
in excess of par -- (5,050,000)
-------------------------------------------------------------------------------- ------------- -------------
Common stock and preferred shares offering costs charged to paid-in capital
in excess of par -- (1,540,514)
-------------------------------------------------------------------------------- ------------- -------------
Reinvestment of dividends and distributions 3,051,924 3,995,596
-------------------------------------------------------------------------------- ------------- -------------
Net increase from capital transactions 3,051,924 821,109,027
-------------------------------------------------------------------------------- ------------- -------------
Total increase (decrease) in net assets applicable to common shareholders (34,214,888) 846,785,184
================================================================================ ============= =============
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 846,885,187 100,003
-------------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed (dividends in excess of) net investment
income of $7,765,501 and $725,557; $3,271,140 and $(465,795);
$356,073 and $(322,399); respectively) $ 812,670,299 $ 846,885,187
================================================================================ ============= =============
COMMON SHARES ISSUED AND REINVESTED:
Issued -- 57,501,148
-------------------------------------------------------------------------------- ------------- -------------
Issued in reinvestment of dividends and distributions 211,747 272,737
-------------------------------------------------------------------------------- ------------- -------------
NET INCREASE 211,747 57,773,885
================================================================================ ============= =============
* Commencement of operations.
26 PIMCO Municipal Income Funds II Annual Report | 5.31.04 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
CALIFORNIA MUNICIPAL II
------------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
INVESTMENT OPERATIONS:
Net investment income $ 33,940,350 $ 26,020,045
-------------------------------------------------------------------------------- ------------- -------------
Net realized gain (loss) on investments, futures contracts and options written 5,655,818 (16,230,403)
-------------------------------------------------------------------------------- ------------- -------------
Net change in unrealized appreciation/depreciation of investments, futures
contracts and options written (43,456,385) 30,348,500
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets resulting from investment operations (3,860,217) 40,138,142
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (2,082,467) (2,140,933)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- --
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from investment operations (5,942,684) 37,997,209
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (28,120,948) (24,344,907)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- --
-------------------------------------------------------------------------------- ------------- -------------
Total dividends and distributions to common shareholders (28,120,948) (24,344,907)
================================================================================ ============= =============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock -- 428,317,500
-------------------------------------------------------------------------------- ------------- -------------
Preferred shares underwriting discount charged to paid-in capital
in excess of par -- (2,600,000)
-------------------------------------------------------------------------------- ------------- -------------
Common stock and preferred shares offering costs charged to paid-in capital
in excess of par -- (951,964)
-------------------------------------------------------------------------------- ------------- -------------
Reinvestment of dividends and distributions 1,752,390 1,452,557
-------------------------------------------------------------------------------- ------------- -------------
Net increase from capital transactions 1,752,390 426,218,093
-------------------------------------------------------------------------------- ------------- -------------
Total increase (decrease) in net assets applicable to common shareholders (32,311,242) 439,870,395
================================================================================ ============= =============
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 439,970,398 100,003
-------------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed (dividends in excess of) net investment
income of $7,765,501 and $725,557; $3,271,140 and $(465,795);
$356,073 and $(322,399); respectively) $ 407,659,156 $ 439,970,398
================================================================================ ============= =============
COMMON SHARES ISSUED AND REINVESTED:
Issued -- 29,900,000
-------------------------------------------------------------------------------- ------------- -------------
Issued in reinvestment of dividends and distributions 125,989 99,892
-------------------------------------------------------------------------------- ------------- -------------
NET INCREASE 125,989 29,999,892
================================================================================ ============= =============
NEW YORK MUNICIPAL II
------------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
INVESTMENT OPERATIONS:
Net investment income $ 11,106,041 $ 8,865,872
-------------------------------------------------------------------------------- ------------- -------------
Net realized gain (loss) on investments, futures contracts and options written 1,168,992 (4,710,282)
-------------------------------------------------------------------------------- ------------- -------------
Net change in unrealized appreciation/depreciation of investments, futures
contracts and options written (11,274,316) 7,659,239
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets resulting from investment operations 1,000,717 11,814,829
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (718,744) (794,061)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- --
-------------------------------------------------------------------------------- ------------- -------------
Net increase (decrease) in net assets applicable to common shareholders
resulting from investment operations 281,973 11,020,768
-------------------------------------------------------------------------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (9,708,825) (8,394,210)
-------------------------------------------------------------------------------- ------------- -------------
Net realized gains -- --
-------------------------------------------------------------------------------- ------------- -------------
Total dividends and distributions to common shareholders (9,708,825) (8,394,210)
================================================================================ ============= =============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock -- 147,473,483
-------------------------------------------------------------------------------- ------------- -------------
Preferred shares underwriting discount charged to paid-in capital
in excess of par -- (900,000)
-------------------------------------------------------------------------------- ------------- -------------
Common stock and preferred shares offering costs charged to paid-in capital
in excess of par -- (458,454)
-------------------------------------------------------------------------------- ------------- -------------
Reinvestment of dividends and distributions 778,884 764,011
-------------------------------------------------------------------------------- ------------- -------------
Net increase from capital transactions 778,884 146,879,040
-------------------------------------------------------------------------------- ------------- -------------
Total increase (decrease) in net assets applicable to common shareholders (8,647,968) 149,505,598
================================================================================ ============= =============
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 149,605,601 100,003
-------------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed (dividends in excess of) net investment
income of $7,765,501 and $725,557; $3,271,140 and $(465,795);
$356,073 and $(322,399); respectively) $ 140,957,633 $ 149,605,601
================================================================================ ============= =============
COMMON SHARES ISSUED AND REINVESTED:
Issued -- 10,294,833
-------------------------------------------------------------------------------- ------------- -------------
Issued in reinvestment of dividends and distributions 55,136 52,768
-------------------------------------------------------------------------------- ------------- -------------
NET INCREASE 55,136 10,347,601
================================================================================ ============= =============
5.31.04 | PIMCO Municipal Income Funds II Annual Report 27
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PIMCO Municipal Income Fund II ("Municipal II"), PIMCO California Municipal
Income Fund II ("California Municipal II") and PIMCO New York Municipal Income
Fund II ("New York Municipal II") collectively referred to as the "Funds" or
"PIMCO Municipal Income Funds II", were organized as Massachusetts business
trusts on March 29, 2002. Prior to commencing operations on June 28, 2002, the
Funds had no operations other than matters relating to their organization and
registration as closed-end management investment companies registered under the
Investment Company Act of 1940 and the rules and regulations thereunder, as
amended. PA Fund Management LLC, (the "Investment Manager"), formerly PIMCO
Advisors Fund Management LLC, serves as the Funds' Investment Manager and is an
indirect, wholly-owned subsidiary of Allianz Dresdner Asset Management of
America L.P. ("ADAM"). ADAM is an indirect, majority-owned subsidiary of Allianz
AG. The Funds have an unlimited amount of $0.00001 par value common stock
authorized.
Municipal II invests substantially all of its assets in a portfolio of municipal
bonds, the interest from which is exempt from federal income taxes. California
Municipal II invests substantially all of its assets in municipal bonds which
pay interest that is exempt from federal and California state income taxes. New
York Municipal II invests substantially all of its assets in municipal bonds
which pay interest that is exempt from federal, New York State and New York City
income taxes. The Funds will seek to avoid bonds generating interest income
which could potentially subject individuals to alternative minimum tax. The
issuers' abilities to meet their obligations may be affected by economic and
political developments in a specific state or region.
Municipal II, California Municipal II and New York Municipal II issued
50,500,000, 26,000,000 and 9,000,000 shares of common stock, respectively, in
their initial public offerings. An additional 7,001,148, 3,900,000 and 1,294,833
shares of Municipal II, California Municipal II and New York Municipal II,
respectively, were issued in connection with the exercises of the underwriters'
over-allotment option on July 15, 2002 and August 6, 2002. These shares were all
issued at $15.00 per share before an underwriting discount of $0.675 per share.
The Investment Manager agreed to reimburse the amount by which the aggregate of
each Fund's organizational and common offering costs (other than sales load)
exceeded $0.03 per common share. Common offering costs of $1,174,197, $682,616
and $308,845 (representing $0.02 per common share for Municipal II and
California Municipal II and $0.03 per common share for New York Municipal II),
were offset against the proceeds of the offerings and were charged to paid-in
capital in excess of par.
In addition, the underwriters discount and offering costs associated with the
Funds' issuance of Preferred Shares in the amounts of $5,050,000 and $366,317,
$2,600,000 and $269,348 and $900,000 and $149,609, for Municipal II, California
Municipal II and New York Municipal II, respectively, were charged to paid-in
capital in excess of par.
The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
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 based upon events 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 consistently
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. The Fund's investments are
valued daily by an independent pricing service approved by the Board of
Trustees. Prices obtained from an independent pricing service use information
provided by market makers or estimates of market values obtained from yield data
relating to investments or securities with similar characteristics. Short-term
investments maturing in sixty days or less are valued at amortized cost, if
their original maturity was 60 days or less or by amortizing their value on the
61st day prior to maturity, if the original term to maturity exceeded 60 days.
Securities for which market quotations are not readily available or if a
development/event occurs that may significantly impact the value of the security
may be fair valued, pursuant to guidelines established by the Board of Trustees.
The prices used by the Funds to value securities may differ from the value that
would be realized if the securities were sold. The Funds net asset value is
determined daily at the close of regular trading (normally 4:00 p.m. Eastern
time) on the New York Stock Exchange.
29 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses on investments are determined on the identified cost basis. Interest
income is recorded on an accrual basis. Original issue discounts or premiums on
debt securities purchased are accreted or amortized daily to non-taxable
interest income. Market discount, if any, is accreted daily to taxable income.
(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. In addition, by distributing substantially all
of their taxable ordinary income and long-term capital gains, if any, during
each calendar year, the Funds intend not to be subject to U.S. federal excise
tax.
(D) 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, held in a segregated account in the name of the futures broker at
the Fund's custodian bank, 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.
(E) OPTION TRANSACTIONS
For hedging purposes, the Funds may purchase and write (sell) put and call
options on municipal bonds, U.S. government securities, swap agreements, indexes
or futures contracts which are standardized and traded on a U.S. or other
exchange, boards of trade, or similar entity, or quoted on an automated
quotation system. 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 which is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded on the expiration date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security. In
writing an option, the Funds bear the market risk of an unfavorable change in
the price of the security underlying the written option. Exercise of an option
written could result in the Funds purchasing a security at a price different
from the current market price.
(F) RESIDUAL INTEREST MUNICIPAL BONDS
The Funds invest in Residual Interest Tax Exempt Bonds ("RITES") whose interest
rates bear an inverse relationship to the interest rate on another security or
the value of an index, RITES are created by dividing the income stream provided
by the underlying bonds to create two securities, one short-term and one
long-term. The interest rate on the short-term component is reset by an index or
auction process normally every seven to 35 days. After income is paid on the
short-term securities at current rates, the residual income from the underlying
bond(s) goes to the long-term securities. Therefore, rising short-term interest
rates result in lower income for the longer-term portion, and vice versa. The
longer-term bonds may be more volatile and less liquid than other Municipal
Bonds of comparable maturity. An investment in RITES typically will involve
greater risk than an investment in a fixed rate bond.
5.31.04 | PIMCO Municipal Income Funds II Annual Report 29
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(G) 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. Each Fund records dividends and distributions to its
shareholders on the ex-dividend date. The amount of dividends and distributions
from net investment income and net realized capital gains are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles. These "book-tax" differences are either
considered 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. To the extent dividends and/or
distributions exceed current and accumulated earnings and profits for federal
income tax purposes they are reported as dividends and/or distributions of
paid-in capital in excess of par.
(H) CUSTODY CREDITS EARNED ON CASH BALANCES
The Funds benefit from an expense offset arrangement with their 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 AND SUB-ADVISER
Each Fund has entered into an Investment Management Agreement (the "Agreements")
with the Investment Manager to serve as Investment Manager to each Fund. Subject
to the supervision by each Fund's Board of Trustees, the Investment Manager is
responsible for managing, either directly or through others selected by it, the
investment activities of the Fund and the Fund's business affairs and other
administrative matters. Pursuant to the Agreements, the Investment Manager will
receive an annual fee, payable monthly, at the annual rate of 0.65% of each
Fund's average daily net assets (including net assets attributable to any
preferred shares that may be outstanding). In order to reduce Fund expenses, the
Investment Manager has contractually agreed to reimburse each Fund for fees and
expenses at the annual rate of 0.15% of each Fund's average daily net assets
(including net assets attributable to any preferred shares that may be
outstanding) from the commencement of operations through June 30, 2007, and for
a declining amount thereafter through June 30, 2009.
The Investment Manager has retained its affiliate, Pacific Investment Management
Company LLC (the "Sub-Adviser") to manage each Fund's investments. Subject to
the supervision of the Investment Manager, the Sub-Adviser makes all investment
decisions with respect to each Fund's assets. The Investment Manager (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 0.50% of each Fund's average daily
net assets (including net assets attributable to any preferred shares that may
be outstanding). The Sub-Adviser has contractually agreed to waive a portion of
the fees it is entitled to receive from the Investment Manager, such that the
Sub-Adviser will receive 0.26% of each Fund's average daily net assets
(including net assets attributable to any preferred shares that may be
outstanding) from the commencement of the Funds' operations through June 30,
2007, and will receive an increasing amount (not to exceed 0.50% of each Fund's
average daily net assets, including net assets attributable to any preferred
shares that may be outstanding) thereafter through June 30, 2009. The Investment
Manager informed the Funds that it paid the Sub-Adviser $3,477,371, $1,768,591
and $614,874 in connection with sub-advisory services for Municipal II,
California Municipal II and New York Municipal II, respectively, for the year
ended May 31, 2004.
30 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
================================================================================
3. INVESTMENTS IN SECURITIES
(a) For the year ended May 31, 2004, purchases and sales of investments, other
than short-term securities, were:
California New York
Municipal II Municipal II Municipal II
--------------------------------------------------------------------------------
Purchases $334,230,372 $259,463,274 $43,529,999
Sales 324,063,491 263,853,104 42,062,310
(b) Futures contracts outstanding at May 31, 2004:
Unrealized
# of Expiration Appreciation
Fund Type Contracts Date (Depreciation)
-------------------------------------------------------------------------------------------------------
Municipal II Short: U.S. Treasury 30 Year Bond 1,889 6/21/04 $6,094,289
Short:U.S. Treasury 30 Year Bond 3,463 9/21/04 (1,021,016)
----------
$5,073,273
==========
California Municipal II Short: U.S. Treasury 30 Year Bond 804 6/21/04 $3,039,719
Short: U.S. Treasury 30 Year Bond 634 9/21/04 625
----------
$3,040,344
==========
New York Municipal II Short: U.S. Treasury 30 Year Bond 245 6/21/04 $547,219
Short: U.S. Treasury 30 Year Bond 247 9/21/04 (71,844)
----------
$475,375
==========
(c) Transactions in options written for the year ended May 31, 2004:
Contracts Premiums
------------------------------------------------------------------------------------
Municipal II:
-------------
Options outstanding, May 31, 2003 2,587 $2,227,143
Options written 20,854 18,212,424
Options expired (5,310) (3,711,673)
Options terminated in closing purchase transactions (8,872) (8,358,370)
Options exercised (8,109) (7,610,165)
----------- -----------
Options outstanding, May 31, 2004 1,150 $759,359
=========== ===========
California Municipal II:
------------------------
Options outstanding, May 31, 2003 947 $ 743,511
Options written 10,204 8,444,538
Options expired (2,198) (1,560,661)
Options terminated in closing purchase transactions (4,602) (4,388,747)
Options exercised (3,771) (2,855,660)
----------- -----------
Options outstanding, May 31, 2004 580 $382,981
=========== ===========
New York Municipal II:
----------------------
Options outstanding, May 31, 2003 507 $ 453,255
Options written 2,650 2,383,558
Options expired (603) (535,741)
Options terminated in closing purchase transactions (1,296) (1,137,033)
Options exercised (1,058) (1,031,976)
----------- -----------
Options outstanding, May 31, 2004 200 $132,063
=========== ===========
5.31.04 | PIMCO Municipal Income Funds II Annual Report 31
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
4. INCOME TAX INFORMATION
MUNICIPAL II:
The tax character of dividends and distributions paid were:
June 28, 2002
(commencement of operations)
Year Ended through
May 31, 2004 May 31, 2003
--------------------------------------------------------------------------------
Ordinary Income $ 2,962,868 $ 4,567,905
Tax Exempt Income 57,922,636 51,126,211
Long-Term Capital Gain -- 3,249,147
At May 31, 2004, the tax character of distributable earnings of $7,765,501 was
composed entirely of tax exempt income.
At May 31, 2004, Municipal II had a capital loss carryforward of $10,260,913,
all of which will expire in 2012, available as a reduction, to the extent
provided in the regulations, of any future net realized capital gains. To the
extent that these losses are used to offset future realized capital gains, such
gains will not be distributed.
CALIFORNIA MUNICIPAL II:
The tax character of dividends paid were:
June 28, 2002
(commencement of operations)
Year Ended through
May 31, 2004 May 31, 2003
--------------------------------------------------------------------------------
Ordinary Income $ 649,740 $ 406,539
Tax Exempt Income 29,553,675 26,079,301
At May 31, 2004, the tax character of distributable earnings of $3,271,140 was
composed entirely of tax exempt income.
At May 31, 2004, California Municipal II had a capital loss carryforward of
$7,337,041 ($1,122,615 of which will expire in 2011 and $6,214,426 of which will
expire in 2012), available as a reduction, to the extent provided in the
regulations, of any future net realized capital gains. To the extent that these
losses are used to offset future realized capital gains, such gains will not be
distributed.
NEW YORK MUNICIPAL II:
The tax character of dividends paid were:
June 28, 2002
(commencement of operations)
Year Ended through
May 31, 2004 May 31, 2003
--------------------------------------------------------------------------------
Ordinary Income $ 66,166 $ 35,774
Tax Exempt Income 10,361,403 9,152,497
At May 31, 2004, the tax character of distributable earnings of $356,073 was
composed entirely of tax exempt income.
At May 31, 2004, New York Municipal II had a capital loss carryforward of
$2,997,915 ($214,685 of which expires in 2011 and $2,783,230 of which will
expire in 2012), available as a reduction, to the extent provided in the
regulations, of any future net realized capital gains. To the extent that these
losses are used to offset future realized capital gains, such gains will not be
distributed.
5. AUCTION PREFERRED SHARES
Municipal II has issued 4,040 shares of Preferred Shares Series A, 4,040 shares
of Preferred Shares Series B, 4,040 shares of Preferred Shares Series C, 4,040
shares of Preferred Shares Series D and 4,040 shares of Preferred Shares Series
E, each with a net asset and liquidation value of $25,000 per share plus accrued
dividends.
32 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
5. AUCTION PREFERRED SHARES (CONCLUDED)
California Municipal II has issued 2,080 shares of Preferred Shares Series A,
2,080 shares of Preferred Shares Series B, 2,080 shares of Preferred Shares
Series C, 2,080 shares of Preferred Shares Series D and 2,080 shares of
Preferred Shares Series E, each with a net asset and liquidation value of
$25,000 per share plus accrued dividends.
New York Municipal II has issued 1,800 shares of Preferred Shares Series A and
1,800 shares of Preferred Shares Series B, each with a net asset and liquidation
value of $25,000 per share, plus accrued dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually.
For the year ended May 31, 2004, the annualized dividend rates ranged from:
High Low At 5/31/04
--------------------------------------------------------------------------------
MUNICIPAL II:
Series A 2.00% 0.70% 1.05%
Series B 1.75% 0.70% 1.10%
Series C 2.00% 0.65% 1.07%
Series D 1.75% 0.45% 1.15%
Series E 1.75% 0.64% 1.05%
CALIFORNIA MUNICIPAL II:
------------------------
Series A 1.75% 0.39% 1.04%
Series B 1.75% 0.40% 1.05%
Series C 1.30% 0.40% 1.07%
Series D 1.75% 0.40% 1.07%
Series E 1.75% 0.40% 1.05%
NEW YORK MUNICIPAL II:
----------------------
Series A 1.15% 0.40% 0.95%
Series B 1.75% 0.45% 1.05%
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 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 June 1, 2004, the following dividends were declared to common shareholders
payable July 1, 2004 to shareholders of record on June 11, 2004:
Municipal II $0.084375 per common share
California Municipal II $0.08125 per common share
New York Municipal II $0.08125 per common share
On July 1, 2004, the following dividends were declared to common shareholders
payable August 2, 2004 to shareholders of record on July 16, 2004:
Municipal II $0.084375 per common share
California Municipal II $0.08125 per common share
New York Municipal II $0.08125 per common share
5.31.04 | PIMCO Municipal Income Funds II Annual Report 23
PIMCO MUNICIPAL INCOME FUNDS II NOTES TO FINANCIAL STATEMENTS
May 31, 2004
================================================================================
7. LEGAL PROCEEDINGS
On May 6, 2004, the Securities and Exchange Commission (the "Commission") filed
a complaint in the U.S. District Court in the Southern District of New York
alleging that the Investment Manager, certain affiliates of the Investment
Manager and Stephen J. Treadway (the chief executive officer of the Investment
Manager as well as the Chairman and a trustee of the Funds) had, among other
things, violated and/or aided and abetted violations of, various antifraud
provisions of the federal securities laws in connection with alleged "market
timing" arrangements in certain open-end investment companies advised by the
Investment Manager. The complaint seeks injunctive relief, disgorgement plus
pre-judgment interest, monetary penalties, and an order permanently enjoining
the defendants from serving as investment advisers, principal underwriters,
officers, directors, or members of any advisory boards to any registered
investment companies.
The above complaint does not allege that any inappropriate activity took place
in the Funds and the Funds are not named in the complaint.
In addition, on June 1, 2004, ADAM and certain other affiliates of the
Investment Manager entered into a consent order and final judgment with the
Attorney General of the State of New Jersey (the "NJAG") in settlement of a
lawsuit filed by the NJAG on February 17, 2004 in connection with alleged
"market timing" arrangements. Under the terms of the settlement, ADAM and
certain of its affiliates agreed to pay the State of New Jersey a civil monetary
penalty of $15 million and $3 million for investigative costs. In addition, ADAM
and certain of its affiliates agreed to make several corporate governance
changes. Also on June 1, 2004, the NJAG dismissed its claims against the
Sub-Adviser, which had been filed as part of the same lawsuit.
If the Commission (or other regulator) were to obtain a court injunction against
the Investment Manager, its affiliates or Mr. Treadway, they (including the
Sub-Adviser) would, in the absence of exemptive relief granted by the
Commission, be barred from serving as an investment adviser/sub-adviser or
principal underwriter to any registered investment company, including the Funds.
In such a case, the Investment Manager and the Sub-Adviser would in turn seek
exemptive relief from the Commission, as contemplated by the Investment Company
Act, although there is no assurance that such exemptive relief would be granted.
The Commission also has the power by order to prohibit the Investment Manager,
the Sub-Adviser and their affiliates from serving as investment advisers and
underwriters, although to date it has not exercised such powers with respect to
market timing arrangements involving other mutual fund complexes.
Since February, 2004, the Investment Manager, the Sub-Adviser and certain of
their affiliates, various investment companies advised by the Investment Manager
or the Sub-Adviser and their trustees (including Mr. Treadway) have been named
as defendants in multiple lawsuits filed in U.S. District Court in the Southern
District of New York, the Central District of California and the Districts of
New Jersey and Connecticut. The lawsuits have been commenced as putative class
actions on behalf of investors who purchased, held or redeemed shares of the
specified funds during specific periods or as derivative actions on behalf of
the specified funds. The lawsuits generally relate to the same facts that are
the subject of the regulatory proceedings discussed above. The lawsuits seek,
among other things, unspecified compensatory damages plus interest and, in some
cases, punitive damages, the rescission of investment advisory contracts, and/or
the return of fees paid under those contracts and restitution. The Funds have
been named in several class action lawsuits. The Investment Manager and the
Sub-Adviser believe that other similar lawsuits may be filed in U.S. federal or
state courts naming ADAM, the Investment Manager, the Sub-Adviser, various
investment companies they advise (which may include the Funds), their boards of
trustees and/or their affiliates.
In November 2003, the Commission settled an enforcement action against an
unaffiliated broker-dealer relating to the undisclosed receipt of fees from
certain mutual fund companies in return for preferred marketing of their funds
and announced that it would be investigating mutual funds and their distributors
generally with respect to compensation arrangements relating to the sale of
mutual fund shares. In that connection, the Investment Manager, the Sub-Adviser
and certain of their affiliates are under investigation by the Commission
relating to revenue-sharing arrangements and the use of brokerage commissions to
recognize brokers effecting sales of open-end investment companies advised by
the Investment Manager, the Sub-Adviser and their affiliates. In addition, the
Attorney General of the State of California has publicly announced an
investigation into the brokerage recognition and revenue-sharing arrangement of
these open-end investment companies.
It is possible that these matters and/or other developments resulting from these
matters could lead to a decrease in the market price of the Funds' shares or
other adverse consequences to the Funds and its shareholders. However, the
Investment Manager and the Sub-Adviser believe that these matters are not likely
to have a material adverse effect on the Funds or on the Investment Manager's or
the Sub-Adviser's ability to perform its respective investment advisory services
related to the Funds.
34 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II FINANCIAL HIGHLIGHTS
For a share of common stock outstanding throughout each period
================================================================================
MUNICIPAL II
---------------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
Net asset value, beginning of period $14.66 $14.33**
----------------------------------------------------------- ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.17 0.93
----------------------------------------------------------- ------------ ------------
Net realized and unrealized gain (loss) on investments,
futures contracts and options written (0.77) 0.53
----------------------------------------------------------- ------------ ------------
Total from investment operations 0.40 1.46
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (0.08) (0.08)
----------------------------------------------------------- ------------ ------------
Net realized gains -- (0.01)
----------------------------------------------------------- ------------ ------------
Total dividends and distributions on preferred shares (0.08) (0.09)
----------------------------------------------------------- ------------ ------------
Net increase in net assets applicable to common
shareholders resulting from investment operations 0.32 1.37
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (0.97) (0.84)
----------------------------------------------------------- ------------ ------------
Net realized gains -- (0.09)
----------------------------------------------------------- ------------ ------------
Total dividends and distributions to common shareholders (0.97) (0.93)
----------------------------------------------------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in capital
in excess of par -- (0.02)
----------------------------------------------------------- ------------ ------------
Preferred shares offering costs/underwriting discounts
charged to paid-in capital in excess of par -- (0.09)
----------------------------------------------------------- ------------ ------------
Total capital share transactions -- (0.11)
----------------------------------------------------------- ------------ ------------
Net asset value, end of period $14.01 $14.66
----------------------------------------------------------- ------------ ------------
Market price, end of period $13.31 $14.80
----------------------------------------------------------- ------------ ------------
TOTAL INVESTMENT RETURN (1) (3.69)% 5.19%
----------------------------------------------------------- ------------ ------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders,
end of period (000) $812,670 $846,885
----------------------------------------------------------- ------------ ------------
Ratio of expenses to average net assets (2)(3)(5) 1.03% 0.95%(4)
----------------------------------------------------------- ------------ ------------
Ratio of net investment income to average net assets (2)(5) 8.16% 6.99%(4)
----------------------------------------------------------- ------------ ------------
Preferred shares asset coverage per share $65,224 $66,920
----------------------------------------------------------- ------------ ------------
Portfolio turnover 26% 27%
----------------------------------------------------------- ------------ ------------
* Commencement of operations
** Initial public offering price of $15.00 per share less underwriting discount
of $0.675 per share.
(1) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day of each period and a sale at the
current market price on the last day for 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(h) in Notes to Financial Statements).
(4) Annualized.
(5) During the periods indicated above, the Investment Manager waived a portion
of its investment management fee. If such waiver had not been in effect, the
ratio of expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.28% and 7.92%, respectively
for the year ended May 31, 2004 and 1.18% (annualized) and 6.76%
(annualized), respectively for the period June 28, 2002 (commencement of
operations) through May 31, 2003.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS | 5.31.04 |
PIMCO Municipal Income Funds II Annual Report 35
PIMCO MUNICIPAL INCOME FUNDS II FINANCIAL HIGHLIGHTS
For a share of common stock outstanding throughout each period
================================================================================
CALIFORNIA MUNICIPAL II
------------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
Net asset value, beginning of period $14.66 $14.33**
----------------------------------------------------------- ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.13 0.87
----------------------------------------------------------- ------------ ------------
Net realized and unrealized gain (loss) on investments,
futures contracts and options written (1.26) 0.46
----------------------------------------------------------- ------------ ------------
Total from investment operations (0.13) 1.33
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (0.07) (0.07)
----------------------------------------------------------- ------------ ------------
Net realized gains -- --
----------------------------------------------------------- ------------ ------------
Total dividends and distributions on preferred shares (0.07) (0.07)
----------------------------------------------------------- ------------ ------------
Net increase (decrease) in net assets applicable to common
shareholders resulting from investment operations (0.20) 1.26
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (0.93) (0.81)
----------------------------------------------------------- ------------ ------------
Net realized gains -- --
----------------------------------------------------------- ------------ ------------
Total dividends and distributions to common shareholders (0.93) (0.81)
----------------------------------------------------------- ------------ ------------
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in capital
in excess of par -- (0.02)
----------------------------------------------------------- ------------ ------------
Preferred shares offering costs/underwriting discounts
charged to paid-in capital in excess of par -- (0.10)
----------------------------------------------------------- ------------ ------------
Total capital share transactions -- (0.12)
----------------------------------------------------------- ------------ ------------
Net asset value, end of period $13.53 $14.66
----------------------------------------------------------- ------------ ------------
Market price, end of period $13.27 $14.78
----------------------------------------------------------- ------------ ------------
TOTAL INVESTMENT RETURN (1) (3.92)% 4.23%
----------------------------------------------------------- ------------ ------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders,
end of period (000) $407,659 $439,970
----------------------------------------------------------- ------------ ------------
Ratio of expenses to average net assets (2)(3)(5) 1.07% 0.97%(4)
----------------------------------------------------------- ------------ ------------
Ratio of net investment income to average net assets (2)(5) 8.08% 6.56%(4)
----------------------------------------------------------- ------------ ------------
Preferred shares asset coverage per share $64,191 $67,301
----------------------------------------------------------- ------------ ------------
Portfolio turnover 43% 84%
----------------------------------------------------------- ------------ ------------
* Commencement of operations
** Initial public offering price of $15.00 per share less underwriting discount
of $0.675 per share.
(1) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day of each period and a sale at the
current market price on the last day for 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(h) in Notes to Financial Statements).
(4) Annualized.
(5) During the periods indicated above, the Investment Manager waived a portion
of its investment management fee. If such waiver had not been in effect, the
ratio of expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.31% and 7.83%, respectively
for the year ended May 31, 2004 and 1.20% (annualized) and 6.34%
(annualized), respectively for the period June 28, 2002 (commencement of
operations) through May 31, 2003.
36 PIMCO Municipal Income Funds II Annual Report | 5.31.04 |
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIMCO MUNICIPAL INCOME FUNDS II FINANCIAL
HIGHLIGHTS For a share of common stock outstanding throughout each period
================================================================================
NEW YORK MUNICIPAL II
----------------------------
For the Period
For the Year June 28, 2002*
ended through
May 31, 2004 May 31, 2003
------------ ------------
Net asset value, beginning of period $14.45 $14.33**
----------------------------------------------------------- ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 1.06 0.86
----------------------------------------------------------- ------------ ------------
Net realized and unrealized gain (loss) on investments,
futures contracts and options written (0.97) 0.28
----------------------------------------------------------- ------------ ------------
Total from investment operations 0.09 1.14
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS ON PREFERRED SHARES FROM:
Net investment income (0.07) (0.08)
----------------------------------------------------------- ------------ ------------
Net realized gains -- --
----------------------------------------------------------- ------------ ------------
Total dividends and distributions on preferred shares (0.07) (0.08)
----------------------------------------------------------- ------------ ------------
Net increase in net assets applicable to common
shareholders resulting from investment operations 0.02 1.06
----------------------------------------------------------- ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO COMMON SHAREHOLDERS FROM:
Net investment income (0.93) (0.81)
----------------------------------------------------------- ------------ ------------
Net realized gains -- --
----------------------------------------------------------- ------------ ------------
Total dividends and distributions to common shareholders (0.93) (0.81)
----------------------------------------------------------- ------------ ------------
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 -- (0.10)
----------------------------------------------------------- ------------ ------------
Total capital share transactions -- (0.13)
----------------------------------------------------------- ------------ ------------
Net asset value, end of period $13.54 $14.45
----------------------------------------------------------- ------------ ------------
Market price, end of period $13.05 $14.71
----------------------------------------------------------- ------------ ------------
TOTAL INVESTMENT RETURN (1) (5.15)% 3.76%
----------------------------------------------------------- ------------ ------------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders,
end of period (000) $140,958 $149,606
----------------------------------------------------------- ------------ ------------
Ratio of expenses to average net assets (2)(3)(5) 1.15% 1.02%(4)
----------------------------------------------------------- ------------ ------------
Ratio of net investment income to average net assets (2)(5) 7.58% 6.47%(4)
----------------------------------------------------------- ------------ ------------
Preferred shares asset coverage per share $64,148 $66,552
----------------------------------------------------------- ------------ ------------
Portfolio turnover 18% 27%
----------------------------------------------------------- ------------ ------------
* Commencement of operations
** Initial public offering price of $15.00 per share less underwriting discount
of $0.675 per share.
(1) Total investment return is calculated assuming a purchase of common stock at
the current market price on the first day of each period and a sale at the
current market price on the last day for each period reported. Dividends are
assumed, for purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Total investment
return does not reflect brokerage commissions or sales charges. Total
investment return for a period of less than one year is not annualized.
(2) Calculated on the basis of income and expenses applicable to both common and
preferred shares relative to the average net assets of common shareholders.
(3) Inclusive of expenses offset by custody credits earned on cash balances at
the custodian bank. (See note 1(h) in Notes to Financial Statements).
(4) Annualized.
(5) During the periods indicated above, the Investment Manager waived a portion
of its investment management fee. If such waiver had not been in effect, the
ratio of expenses to average net assets and the ratio of net investment
income to average net assets would have been 1.39% and 7.34%, respectively
for the year ended May 31, 2004, and 1.25% (annualized) and 6.25%
(annualized), respectively for the period June 28, 2002 (commencement of
operations) through May 31, 2003.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
| 5.31.04 | PIMCO Municipal Income Funds II Annual Report 37
PIMCO MUNICIPAL INCOME FUNDS II REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
================================================================================
To the Shareholders and Board of Trustees of:
PIMCO Municipal Income Fund II, PIMCO California Municipal Income Fund II and
PIMCO New York Municipal Income Fund II
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets applicable to common shareholders and the financial
highlights present fairly, in all material respects, the financial position of
PIMCO Municipal Income Fund II, PIMCOCalifornia Municipal Income Fund II and
PIMCO New York Municipal Income Fund II (collectively hereafter referred to as
the "Funds") at May 31, 2004, the results of each of their operations for the
year then ended, and the changes in each of their net assets applicable to
common shareholders and the financial highlights for the year then ended and for
the period June 28, 2002 (commencement of operations) through May 31, 2003, 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), which 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 May 31, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
July 26, 2004
38 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II PRIVACY POLICY, PROXY VOTING POLICIES AND
PROCEDURES, OTHER INFORMATION (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, we
may disclose information about you or your accounts to a non-affiliated third
party at your request or if you consent in writing to the disclosure.
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.
IMPLEMENTATION OF PROCEDURES
We take seriously the obligation to safeguard your non-public personal
information. We have implemented procedures designed to restrict access to your
non-public personal information to our personnel who need to know that
information to provide products or services to you. To guard your non-public
personal information, physical, electronic, and procedural safeguards are in
place.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES:
A description of the policies and procedures that the Funds have adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Funds at (800) 331-1710 (ii) on the
Funds' website at www.pimcoadvisors.com and (iii) on the Securities and Exchange
Commission's website at www.sec.gov.
--------------------------------------------------------------------------------
OTHER INFORMATION:
Since May 31, 2003, there have been no:(ii) material changes in the Funds'
investment objectives or policies; (ii) changes to the Funds' charter or
by-laws; (iii) material changes in the principal risk factors associated with
investment in the Funds: or (iv) change in the persons primarily responsible for
the day-to-day management of the Funds' portfolios.
5.31.04 | PIMCO Municipal Income Funds II Annual Report 39
PIMCO MUNICIPAL INCOME FUNDS II TAX INFORMATION (unaudited)
================================================================================
Subchapter M of the Internal Revenue Code of 1986, as amended, requires the
Funds to advise shareholders within 60 days of the Funds' tax year end (May 31,
2004) as to the federal tax status of dividends and distributions received by
shareholders during such tax year. Accordingly, please note that substantially
all dividends paid from net investment income from the Funds during the tax
period ended May 31, 2004 were federally exempt interest dividends. However,
these Funds invested in municipal bonds containing market discount, whose
accretion is taxable. Accordingly, the percentage of dividends paid from net
investment income during the tax period which are taxable were:
Municipal II 4.87%
California Municipal II 2.15%
New York Municipal II 0.63%
Since the Funds' fiscal year is not the calendar year, another notification will
be sent with respect to calendar year 2004. In January 2005, you will be advised
on IRS Form 1099 DIV as to the federal tax status of the dividends and
distributions received during the calendar year 2004. The amount that will be
reported, will be the amount to use on your 2004 federal income tax return and
may differ from the amount which must be reported in connection with each Fund's
tax year ended May 31, 2004. Shareholders are advised to consult with their tax
advisers as to the federal, state and local tax status of the income received
from the Funds. In January 2005, an allocation of interest by state will be
provided which may be of value in reducing a shareholder's state or local tax
liability, if any.
40 PIMCO Municipal Income Funds II Annual Report | 5.31.04
PIMCO MUNICIPAL INCOME FUNDS II 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, whose broker or
nominee elects not to participate on the investor's behalf), will be paid in
cash by check mailed, in the case of direct shareholder, to the record holder by
PFPC Inc., as the Fund's dividend disbursement agent.
Unless you (or your 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 Common Shares are trading at or above net asset value on the payment
date, 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 Common Shares are trading below net asset value (minus estimated
brokerage commissions that would be incurred upon the purchase of Common
Shares on the open market) on the payment date, 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.
You 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' transfer agent, PFPC Inc., P.O. Box 43027, Providence, RI 02940-3027,
telephone number 1-800-331-1710.
5.31.04 | PIMCO Municipal Income Funds II Annual Report 41
PIMCO MUNICIPAL INCOME FUNDS II BOARD OF TRUSTEES (unaudited)
================================================================================
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS:
-------------------------------------------------------------------------------------------------------------------------------
STEPHEN TREADWAY Managing Director, Allianz Dresdner Asset Management of America
1345 Avenue of the Americas L.P.: Managing Director and Chief Executive officer, PA Distributors
New York, NY 10105 LLC; Member of the Board of Management of Allianz Dresdner Asset
Age: 56 Management GmbH. Mr. Treadway serves as a director/trustee and holds
TRUSTEE SINCE: 2002 various executive officer positions in connection with Allianz
TERM OF OFFICE: EXPECTED TO STAND FOR Dresdner Asset Management of America L.P.'s affiliated open and
RE-ELECTION AT 2005 ANNUAL MEETING OF SHAREHOLDERS closed-end mutual funds.
TRUSTEE/DIRECTOR OF 62 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
PAUL BELICA
1345 Avenue of the Americas Director, Student Loan Finance Corp., Education Loans, Inc., Goal
New York, NY 10105 Funding I, Inc., Goal Funding II, Inc. and Surety Loan Funding,
Age: 82 Inc.; Formerly, senior executive and member of the Board of Smith
TRUSTEE SINCE: 2002 Barney, Harris Upham & Co.; and the CEO of five State of New York
TERM OF OFFICE: EXPECTED TO STAND FOR Agencies.
RE-ELECTION AT 2004 ANNUAL MEETING OF SHAREHOLDERS
TRUSTEE/DIRECTOR OF 20 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
ROBERT E. CONNOR
1345 Avenue of the Americas Corporate Affairs Consultant; Formerly, Senior Vice President,
New York, NY 10105 Corporate Office, Smith Barney, Inc.
Age: 69
TRUSTEE SINCE: 2002
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2006 ANNUAL MEETING OF SHAREHOLDERS
TRUSTEE/DIRECTOR OF 20 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
JOHN J. DALESSANDRO II
1345 Avenue of the Americas Formerly, President and Director, J.J. Dalessandro II Ltd.,
New York, NY 10105 registered broker-dealer and member of the New York Stock Exchange.
Age: 66
TRUSTEE SINCE: 2002
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2004 ANNUAL MEETING OF SHAREHOLDERS
TRUSTEE OF 15 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
HANS W. KERTESS
1345 Avenue of the Americas President, H Kertess & Co.; Formerly, Managing Director, Royal Bank
New York, NY 10105 of Canada Capital Markets.
Age: 64
TRUSTEE SINCE: 2002
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2006 ANNUAL MEETING OF SHAREHOLDERS
TRUSTEE OF 15 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
R. PETER SULLIVAN III
1345 Avenue of the Americas Formerly, Managing Partner, Bear Wagner Specialists LLC (formerly,
New York, NY 10105 Wagner Scott Mercator LLC), specialist firm on the New York Stock
Age: 62 Exchange.
TRUSTEE SINCE: 2002
TERM OF OFFICE: EXPECTED TO STAND FOR
RE-ELECTION AT 2005 ANNUAL MEETING OF SHAREHOLDERS
TRUSTEE OF 11 FUNDS IN FUND COMPLEX
TRUSTEE OF NO FUNDS OUTSIDE OF FUND COMPLEX
42 PIMCO Municipal Income Funds II Annual Report | 5.31.04
TRUSTEES AND PRINCIPAL OFFICERS
Stephen Treadway
Trustee, Chairman, Chairman of the Board
Paul Belica
Trustee
Robert E. Connor
Trustee
John J. Dalessandro II
Trustee
Hans W. Kertess
Trustee
R. Peter Sullivan III
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Vice President & Secretary
Mark V. McCray
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Jennifer A. Patula
Assistant Secretary
INVESTMENT MANAGER
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
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 Municipal Income Fund II, PIMCO California Municipal
Income Fund II and PIMCO New York Municipal Income Fund II 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 each Fund may purchase
shares of its common stock in the open market.
Information on the Funds is available at www.pimcoadvisors.com or by calling
1-800-331-1710.
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.
(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 $43,450
in 2003 and $48,350 in 2004.
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 $66,832 in 2003
and $11,800 in 2004. 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
$4,700 in 2003 and $4,700 in 2004. 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 for non-audit services to the when
the engagement relates directly to the operations and
financial reporting of the Registrant. The Registrant's policy
is stated below.
PIMCO Municipal Income Funds (THE "FUNDS")
AUDIT OVERSIGHT COMMITTEE POLICY FOR PRE-APPROVAL OF SERVICES PROVIDED BY THE
INDEPENDENT ACCOUNTANTS
The Funds' Audit Oversight Committee ("Committee") is charged with the oversight
of the Funds' 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 FUNDS
On an annual basis, the Funds' Committee will review and pre-approve the scope
of the audits of the Funds and proposed audit fees and permitted non-audit
(including audit-related) services that may be performed by the Funds'
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 Funds will also require
the separate written pre-approval of the President of the Funds, who will
confirm, independently, that the accounting firms'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 $75,000. 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 $75,000. Any such pre-approval shall be reported to the
full Committee at its next regularly scheduled meeting.
PROSCRIBED SERVICES
The Funds' 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 PA Fund Management LLC (Formerly, PIMCO Advisors 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 Funds (including affiliated sub-advisers
to the Funds), provided, in each case, that the engagement relates directly to
the operations and financial reporting of the Funds (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 Funds' 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 2003 Reporting Period was $3,475,413 and the
2004 Reporting Period was $4,065,376.
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
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 The registrant has delegated the voting of
proxies relating to its voting securities to its sub-adviser, Pacific Investment
Management Co. (the "Sub-Adviser"). The Proxy Voting Policies and Procedures of
the Sub-Adviser are included as an Exhibit 99.PROXYPOL hereto.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES. The registrant or any affiliated purchaser did
not purchase shares or other units of any class of the registrant's equity
securities that is registered by the registrant pursuant to Section 12 of the
Exchange Act (15 U.S.C. 781).
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In January 2004, the
Registrant's Board of Trustees adopted a Nominating Committee Charter governing
the affairs of the Nominating Committee of the Board, which is posted on the
PIMCO Advisors website at www.pimcoadvisors.com. Appendix B to the Nominating
Committee Charter includes "Procedures for Shareholders to Submit Nominee
Candidates," which sets forth the procedures by which shareholders may recommend
nominees to the Registrant's Board of Trustees. Among other requirements, the
procedures provide that the recommending shareholder must submit any
recommendation in writing to the Registrant to the attention of the Registrant's
Secretary, at the address of the principal executive offices of the Registrant
and that such submission must be received at such offices not less than 45 days
nor more than 75 days prior to the date of the Board or shareholder meeting at
which the nominee would be elected. Any recommendation must include certain
biographical and other information regarding the candidate and the recommending
shareholder, and must include a written and signed consent of the candidate to
be named as a nominee and to serve as a Trustee if elected. The foregoing
description of the requirements is only a summary and is qualified in its
entirety by reference to Appendix B of the Nominating Committee Charter.
ITEM 10. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act of
1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of this
document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS
(a)(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 99.906CERT - Certification pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Exhibit 99.PROXYPOL - Proxy Voting Policies and Procedures
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PIMCO Municipal Income Fund II
By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: August 5, 2004
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: August 5, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: August 5, 2004
By /s/ Lawrence G. Altadonna
----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: August 5, 2004