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 811-21238
PIMCO Corporate Opportunity Fund
--------------------------------
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
-----------------------------------------------------
(Address of principal executive offices) (Zip code)
Brian S. Shlissel - 1345 Avenue of the Americas, New York, New York 10105
-------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3369
Date of fiscal year end: NOVEMBER 30
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. Section 3507.
ITEM 1. SHAREHOLDER REPORT
SEMI-ANNUAL REPORT
5.31.03
PIMCO CORPORATE OPPORTUNITY FUND
[PTY LISTED NYSE THE NEW YORK STOCK EXCHANGE LOGO]
CONTENTS
Letter to Shareholders 1
Performance Summary and Statistics 2
Schedule of Investments 3-8
Statement of Assets and Liabilities 9
Statement of Operations 10
Statement of Changes in Net Assets 11
Notes to Financial Statements 12-15
Financial Highlights 16
Privacy Policy 17
[PIMCO ADVISORS LOGO]
PIMCO CORPORATE OPPORTUNITY FUND LETTER TO SHAREHOLDERS
July 8, 2003
Dear Shareholder:
We are pleased to provide you with the initial financial report of the PIMCO
Corporate Opportunity Fund (the "Fund") for the period December 27, 2002 through
May 31, 2003.
Please refer to the following page for specific Fund information. 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 Fund, together with PIMCO Advisors Fund Management LLC, the Fund's
investment manager and Pacific Investment Management Co. LLC, the Fund's
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
1
PIMCO CORPORATE OPPORTUNITY FUND PERFORMANCE SUMMARY AND STATISTICS (UNAUDITED)
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
PTY U.S. dollar-denominated corporate 12/27/02
debt obligations of varying
OBJECTIVE: maturities and other corporate TOTAL NET ASSETS(1):
Seeks maximum total return income-producing securities. $1,620.8 million (at 5/31/03)
through a combination of current
income and capital appreciation. PORTFOLIO MANAGERS:
David Hinman
Mark Kiesel
TOTAL RETURN(2): MARKET PRICE NAV
-------------------------------------------------------------------------------------
Commencement of Operations (12/27/02) to 5/31/03 14.67% 20.03%
COMMON SHARE PRICE PERFORMANCE (WEEKLY):
For the period 12/27/02 (commencement of operations) to 5/31/03
[CHART]
12/27/2002 $ 14.30 $ 15.01
$ 14.35 $ 15.04
$ 14.70 $ 15.30
$ 14.62 $ 15.34
$ 14.59 $ 15.19
$ 14.63 $ 15.29
$ 14.63 $ 15.40
$ 14.49 $ 15.62
$ 14.51 $ 15.44
$ 14.59 $ 15.44
$ 14.78 $ 15.72
$ 14.75 $ 15.61
$ 14.64 $ 15.37
$ 14.94 $ 15.49
$ 15.26 $ 15.80
$ 15.23 $ 15.56
$ 15.56 $ 15.84
$ 16.00 $ 15.84
$ 16.40 $ 16.36
$ 16.57 $ 16.50
$ 16.50 $ 16.43
$ 16.61 $ 16.50
5/31/2003 $ 16.59 $ 16.61
PORTFOLIO STATISTICS:
Market Price $ 16.61
---------------------------------------
Net Asset Value $ 16.59
---------------------------------------
Market Price Yield(3) 9.93%
---------------------------------------
(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 redeemable 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 investment return does not
reflect broker commissions or sales charges. Total return for a period of less
than one year is not annualized.
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. 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 per
share dividend to common shareholders by the market price per common share.
2
PIMCO CORPORATE OPPORTUNITY FUND SCHEDULE OF INVESTMENTS
May 31, 2003 (unaudited)
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE*
----------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--97.2%
CORPORATE BONDS & NOTES - 85.8%
AIRLINES - 4.9%
Continental Airlines, Inc., pass thru certificates,
$ 4,656 6.703%, 6/15/21, Ser. 01-1 Baa3/A $ 4,303,612
3,500 7.373%, 12/15/15, Ser. 01-1 Ba1/BBB+ 2,471,476
2,000 7.487%, 4/2/12, Ser. 00-2 Baa3/A 1,868,244
10,902 7.707%, 10/2/22, Ser. 00-2 Baa3/A- 10,185,876
Delta Airlines, Inc., pass thru certificates,
9,455 7.57%, 5/18/12, Ser. 00-1 Baa2/A 9,380,306
13,580 7.92%, 5/18/12, Ser. 00-1 Baa3/BBB 10,792,542
Northwest Airlines Corp., pass thru certificates,
15,100 6.841%, 10/1/12, Ser. 01-1 Baa3/A+ 14,536,861
5,836 7.575%, 3/1/19, Ser. 992A Baa2/A+ 5,792,081
United Airlines, Inc., pass thru certificates,
15,411 7.186%, 4/1/11, Ser. 00-2 Baa3/BBB- 12,483,097
10,000 7.73%, 7/1/10, Ser. 00-1 Baa3/BBB- 7,486,950
--------------
79,301,045
==============
AUTOMOTIVE - 2.5%
4,000 Auburn Hills Trust 12.375%, 5/1/20 A3/BBB+ 6,228,412
24,500 Ford Motor Co., 7.45%, 7/16/31 Baa1/BBB 22,856,393
10,000 General Motors Corp., 9.40%, 7/15/21 A3/BBB 11,467,530
--------------
40,552,335
==============
BANKING - 0.6%
9,706 Riggs Capital Trust II, 8.875%, 3/15/27 Ser. C. Ba2/B+ 9,390,555
--------------
CHEMICALS - 2.6%
2,000 Arco Chemical Co., 10.25%, 11/1/10 Ba3/BB 1,950,000
22,075 Equistar Chemical L.P., 10.125%, 9/1/08 B1/BB 22,516,500
Lyondell Chemical Co.,
3,480 9.50%, 12/15/08 Ba3/BB 3,349,500
9,210 9.625%, 5/1/07, Ser. A Ba3/BB 9,094,875
3,000 9.875%, 5/1/07, Ser. B Ba3/BB 2,962,500
2,000 Millennium America Inc. 9.25%, 6/15/08 (a) (c)
(acquired 4/22/03; cost-$2,180,000) Ba1/BB+ 2,170,000
--------------
42,043,375
==============
DIVERSIFIED MANUFACTURING - 3.5%
Tyco International Group SA,
51,785 4.375%-7.00%, 11/19/04-6/15/28 Ba2/BBB- 56,488,510
--------------
ELECTRONICS - 6.8%
5,000 Centerpoint Energy Resources 7.875%, 4/1/13 (a) (c)
(acquired 3/18/03; cost-$5,000,000) Ba1/BBB 5,860,265
2,000 CMS Energy Corp., 8.90%, 7/15/08 B3/B+ 2,000,000
29,630 Ipalco Enterprises, Inc. 7.375%-7.625%, 11/14/08-11/14/11 Ba1/BB- 31,704,100
65,810 Pinnacle Partners, 8.83%, 8/15/04 (a) (c)
(acquired 1/3/03-3/10/03; cost-$63,784,022) Ba2/BB+ 68,442,400
--------------
108,006,765
==============
ENERGY - 5.4%
51,770 Reliant Energy Resources, 6.50%-8.125%, 7/15/05-2/15/11 Ba1/BBB 58,105,396
10,000 Southern Natural Gas Co., 8.875%, 3/15/10 (a) (c)
(acquired 2/28/03; cost-$9,871,800) B1/B+ 10,900,000
3
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE*
----------------------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
$ 3,100 Transcontinental Gas Pipe Corp., 7.00%, 8/15/11, Ser. B.
Williams Cos., Inc., B3/B+ $ 3,131,000
15,000 7.875%, 9/1/21 Caa1/B+ 13,425,000
1,000 8.75%, 3/15/32 (a) (c) (acquired 12/30/02; cost-$655,000) Caa1/B+ 965,000
--------------
86,526,396
==============
FINANCIAL SERVICES - 4.3%
46,991 Finova Group, Inc., 7.50%, 11/15/09 NR/NR 19,383,787
4,500 Ford Motor Co. Capital Trust, 7.25%, 10/25/11 A3/BBB 4,651,942
25,000 General Motors Acceptance Corp., 8.00%, 11/1/31 A2/BBB 25,901,625
9,200 Mizuho JGB Investment, 9.87%, 6/30/49 (a) (c)
(acquired 1/14/03-4/10/03; cost-$8,960,348) Baa2/BB- 9,837,082
8,300 Mizuho Preferred Capital, 8.79%, 12/29/49 (a) (c)
(acquired 1/10/03-3/18/03; cost-$7,412,370) Baa2/BB- 8,383,000
--------------
68,157,436
==============
FINANCING - 0.9%
5,000 Bombardier Capital Inc., 7.50%, 8/15/04 (a) (c)
(acquired 3/28/03-4/23/03; cost-$4,685,000) Baa3/BBB+ 5,100,000
7,500 Pemex Proj. Master Trust, 8.625%, 2/1/22 Baa1/BBB- 8,737,500
--------------
13,837,500
==============
HEALTHCARE & HOSPITALS - 3.2%
36,000 Healthsouth Corp., 7.625%, 6/1/12 (f) Caa2/D 24,480,000
28,000 Tenet Healthcare Corp., 5.375%-6.875%, 11/15/06-11/15/31 Baa3/BBB- 27,147,500
--------------
51,627,500
==============
HOTELS/GAMING - 2.5%
13,500 Hilton Hotels Corp., 7.625%, 12/1/12 Ba1/BBB- 14,580,000
1,200 Mandalay Resort Group, 9.375%, 2/15/10 Ba3/BB- 1,326,000
24,150 Starwood Hotels & Resorts, 7.375%-7.875%, 5/1/12-11/15/25 Ba1/BB+ 24,832,125
--------------
40,738,125
==============
MISCELLANEOUS - 5.5%
5,000 AES Red Oak LLC., 9.20%, 11/30/29 Ser. B. B2/BB- 5,006,250
9,096 Cedar Brakes II LLC., 9.875%, 9/1/13 Caa1/B 8,345,809
10,000 Gemstone Investors Ltd., 7.71%, 10/31/04 (a) (c)
(acquired 12/30/02; cost-$7,739,500) Caa1/B 9,800,000
50,025 Morgan Stanley TRACERS, 5.878%, 3/1/07 (a) (c)
(acquired 3/27/03; cost-$53,811,392) A3/NR 55,013,743
8,600 Tokai PFD Capital Co., LLC., 9.98%, 12/29/49 (a) (c)
(acquired 1/9/03-4/25/03; cost-$7,933,730) Baa2/BB- 9,207,822
--------------
87,373,624
==============
MULTI-MEDIA - 5.8%
13,000 AOL Time Warner Inc., 7.70%, 5/1/32
CSC Holdings Inc., Baa1/BBB+ 15,305,121
32,225 7.25%-7.875%, 7/15/08-7/15/18 B1/BB- 32,764,975
4,500 8.125%, 8/5/09 Ser. B B1/BB- 4,668,750
24,500 Rogers Cable Inc., 8.75%, 5/1/32 Ba2/BBB- 26,827,500
13,000 Shaw Communications Inc., 7.20%-8.25%, 4/11/10-12/15/11 Ba2/BB+ 13,945,000
--------------
93,511,346
==============
OIL & GAS - 1.8%
28,780 Coastal Corp., 6.50%-7.625%, 5/15/06-2/15/37 Caa1/B 22,933,525
2,000 Key Energy Services Inc., 14.00%, 1/15/09 Ser. B. Ba3/B+ 2,265,000
2,650 Transocean Inc., 9.50%, 12/15/08 Baa2/A- 3,466,356
--------------
28,664,881
==============
4
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE*
-----------------------------------------------------------------------------------------------------------------
PAPER - 5.1%
$ 33,500 Abitibi-Consolidated Inc., 7.50%-8.50%, 4/1/28-8/1/29
Georgia-Pacific Corp., Ba1/BB+ $ 33,431,349
5,000 7.75%, 11/15/29 Ba3/BB+ 4,175,000
12,000 8.125%, 6/15/23 Ba3/NR 10,260,000
1,725 8.25%, 3/1/23 Ba3/BB+ 1,500,750
11,500 8.875%, 2/1/10 (a) (c)
(acquired 1/23/03-1/28/03; cost-$11,356,350) Ba2/BB+ 12,017,500
1,400 9.125%, 7/1/22 Ba3/BB+ 1,309,000
1,000 9.50%, 5/15/22 Ba3/BB+ 965,000
7,750 9.625%, 3/15/22 Ba3/BB+ 7,478,750
8,430 9.875%, 11/1/21 Ba3/BB+ 8,303,550
2,000 Smurfit Capital Funding plc, 7.50%, 11/20/25 Ba3/BB- 1,910,000
--------------
81,350,899
==============
RETAIL - 0.8%
13,000 JC Penny Co. Inc., 8.125%, 4/1/27 Ba3/BBB- 12,480,000
--------------
TELECOMMUNICATIONS - 19.2%
37,600 AT&T Corp., 8.00%-8.625%, 11/15/31-12/1/31 Baa2/BBB+ 43,971,742
24,500 AT&T Wireless Svcs. Inc., 8.125%-8.75%, 5/1/12-3/1/31 Baa2/BBB 30,706,012
6,000 Cincinnati Bell Inc., 6.33%, 12/30/05
Panamsat Corp., Ba2/NR 6,015,000
21,650 6.875%, 1/15/28 Ba2/BB- 20,513,375
20,000 8.50%, 2/1/12 Ba3/B- 21,500,000
23,670 Qwest Capital Funding, 7.00%-7.90%, 8/3/09-8/15/10
Qwest Corp., Caa2/CCC+ 20,431,500
3,000 7.25%, 9/15/25 Ba3/B- 2,722,500
6,150 8.875%, 3/15/12 (a) (c) (acquired 1/22/03; cost-$6,388,374) Ba3/B- 6,918,750
7,950 13.00%, 12/15/07 (a) (c)
(acquired 5/14/03-5/15/03; cost-$8,706,313) NR/CCC+ 8,824,500
12,340 Rogers Cantel Inc., 9.75%, 6/1/16 Ba3/BB+ 13,882,500
85,800 Sprint Capital Corp. (FON Group),
6.375%-8.75%, 5/1/09-3/15/32 Baa3/BBB- 93,090,539
2,000 Telecorp PCS Inc., 11.625%, 4/15/09 Baa2/BBB 2,065,000
31,200 Telus Corp., 7.50%-8.00%, 6/1/07-6/1/11 Ba1/BBB 35,473,375
2,000 Tritel PCS, Inc., 12.75%, 5/15/09 Baa2/BBB 2,065,000
--------------
308,179,793
==============
UTILITIES - 10.4%
8,000 AES Corp., 10.00%, 12/12/05 (a) (c)
(acquired 4/3/03; cost-$8,280,000) B2/BB 8,320,000
5,000 CMS Panhandle Holdings Co., 6.50%, 7/15/09 Ba2/BB 5,225,000
9,461 East Coast Power LLC. 6.737%, 3/31/08 Ser. B Ba2/BB+ 9,508,334
5,643 East Coast Power LLC. 7.066%, 3/31/12 Ser. B Ba2/BB+ 5,713,652
Midwest Generation LLC., pass thru certificates,
28,380 8.30%, 7/2/09 Ser. A B2/BB- 27,812,400
13,070 8.56%, 1/2/16 Ser. B B2/BB- 12,939,300
51,250 PSEG Energy Holdings, 8.50%-10.00%, 10/1/09-6/15/11 Baa3/BBB- 56,080,624
26,090 South Point Energy Center LLC, 8.40% 5/30/12 (a) (c)
(acquired 12/30/02-3/17/03; cost-$17,596,122) B1/BB 24,541,093
15,000 Western Energy Inc. 8.50%, 7/1/22 Ba1/BBB- 15,787,500
--------------
165,927,903
==============
Total Corporate Bonds & Notes (cost-$1,246,580,135) 1,374,157,988
==============
5
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE*
-----------------------------------------------------------------------------------------------------------------
SOVEREIGN DEBT OBLIGATIONS - 6.9%
BRAZIL - 3.6%
Federal Republic of Brazil,
$ 35,095 2.5625%, 4/15/14, Ser. EI-L NR/NR $ 31,280,338
19,680 2.125%, 4/15/06, Ser. RG NR/NR 18,351,600
8,500 11.50%, 3/12/08 B2/B+ 8,869,750
--------------
58,501,688
==============
MEXICO - 1.3%
United Mexican States,
15,350 6.375%-11.375%, 1/14/12-9/24/22 Baa2/BBB- 19,517,038
1,000 8.375%, 1/14/11 Baa2/NR 1,221,000
--------------
20,738,038
==============
PANAMA - 1.0%
Republic of Panama,
6,000 9.375%, 7/23/12 NR/NR 6,900,000
7,000 10.75%, 5/15/20 Ba1/BB 8,715,000
--------------
15,615,000
==============
PERU - 1.0%
15,000 Republic of Peru, 9.125%, 2/21/12 Ba3/BB- 16,537,500
--------------
Total Sovereign Debt Obligations (cost-$95,596,495) 111,392,226
==============
LOAN PARTICIPATIONS (c) (d) (e) - 4.0%
ELECTRONICS - 0.9%
2,000 CMS Energy Corp. 7.50%, 4/30/04, Term C
(Merrill Lynch, Pierce, Fenner & Smith Inc.)
(acquired 4/17/03; cost-$1,975,000) NR/NR 2,003,750
13,000 CMS Enterprises., 7.50%, 4/30/04 Term A
(Citibank N.A.) (acquired 4/17/03; cost-$12,915,861) NR/NR 13,113,750
--------------
15,117,500
==============
FINANCE - 1.2%
9,384 Nextel Finance Co. 4.75%, 6/30/08 Term B
(Credit Suisse First Boston)
(acquired 1/3/03-3/28/03; cost-$8,813,441) NR/NR 9,210,477
9,384 Nextel Finance Co. 5.00%, 12/31/08 Term C
(Credit Suisse First Boston)
(acquired 1/3/03-3/28/03; cost-$8,812,663) NR/NR 9,210,477
--------------
18,420,954
==============
MULTI-MEDIA - 0.9%
16,373 Charter Communications Holdings, LLC, 4.58%, 3/18/08 Term B
(Morgan Stanley Senior Funding, Inc.)
(acquired 1/3/03-1/21/03; cost-$13,949,744) NR/NR 15,103,640
--------------
OIL & GAS - 0.8%
1,905 Aquila, Inc. 7.00%, 4/15/04 Term 1
(Morgan Stanley Senior Funding, Inc.)
(acquired 4/1/03-4/14/03; cost-$1,894,881) NR/NR 1,916,667
1,905 Aquila, Inc. 7.00%, 4/15/04 Term B
(Morgan Stanley Senior Funding, Inc.)
(acquired 4/1/03-4/14/03; cost-$1,902,183) NR/NR 1,916,667
8,190 Aquila, Inc. 8.75%, 4/15/06 Term 2
(Morgan Stanley Senior Funding, Inc.)
(acquired 4/1/03-4/14/03; cost-$8,147,988) NR/NR 8,241,667
--------------
12,075,001
==============
6
PRINCIPAL
AMOUNT CREDIT RATING
(000) (MOODY'S/S&P) VALUE*
----------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.2%
$ 3,000 Crown Castle International Corp.4.15%, 3/15/08 Term B
(Goldman Sachs Credit Partners)
(acquired 1/21/03; cost-$2,880,000) NR/NR $ 2,996,874
---------------
Total Loan Participations (cost-$61,511,860) 63,713,969
===============
U.S. TREASURY NOTES - 0.5%
7,410 1.015%-1.0755%, 3/8/07-3/8/14 (cost-$6,186,791) AAA/Aaa 7,391,408
---------------
Total Long-Term Investments (cost-$1,409,875,281) 1,556,655,591
===============
SHORT-TERM INVESTMENTS--3.0%
COMMERCIAL PAPER - 0.2%
DIVERSIFIED MANUFACTURING - 0.2%
4,000 Tyco International Group SA.,
1.79%, 7/30/03 (b) (cost-$3,972,593) Ba2/BBB- 3,981,200
---------------
CORPORATE NOTES - 2.7%
BANKING - 0.4%
6,200 WestPac Capital Corp. 1.18%, 8/5/03 NR/NR 6,186,112
---------------
ENERGY - 2.0%
30,750 Williams Cos., Inc., 9.25%, 3/15/04 Caa1/B+ 31,518,750
---------------
MISCELLANEOUS - 0.3%
4,800 Danske Corp. Ser. A., 1.245%, 6/24/03 NR/NR 4,796,182
---------------
Total Short-Term Corporate Notes (cost-$37,758,410) 42,501,044
===============
REPURCHASE AGREEMENT - 0.1%
609 State Street Bank & Trust Co.,
dated 5/30/03, 1.05%, due 6/2/03,
proceeds $609,053: collateralized by Federal Home Loan Bank,
5/13/05, valued at $623,100 (cost-$609,000) 609,000
---------------
Total Short-Term Investments (cost-$42,340,003) 47,091,244
===============
TOTAL INVESTMENTS, BEFORE OPTIONS WRITTEN (cost-$1,452,215,284+) - 100.2% 1,603,746,835
===============
OPTIONS WRITTEN--(0.2)%
Contracts
U.S. Treasury Bond Futures, Chicago Board of Trade:
(649) Strike Price $115, expires 8/22/03 (Call) (2,525,016)
(477) Strike Price $108, expires 8/23/03 (Put) (81,984)
---------------
Total options written (premiums received-$1,330,543) (2,607,000)
===============
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost-$1,450,884,741) - 100.0% $ 1,601,139,835
===============
7
NOTES TO SCHEDULE OF INVESTMENTS:
* Long-term debt securities are valued by an independent pricing service
authorized by the Board of Trustees.
(a) 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. At May 31,
2003, these securities amounted to $246,301,155 or 15.4% of investments.
(b) Floating Rate Security. Interest rate shown is the rate in effect at May
31, 2003. Maturity date shown is the date of the next change.
(c) Private Placement. Restricted as to resale and does not have a readily
available market; the aggregate cost and value of such securities is
$310,015,124 or 19.3% of investments.
(d) Participation interests were acquired through the financial institution
indicated parenthetically.
(e) llliquid security.
(f) Security in default.
+ The cost basis of portfolio securities for federal income tax purposes is
$1,452,215,284. Aggregate gross unrealized appreciation for securities in
which there is an excess of value over tax cost is $177,885,724; aggregate
gross unrealized depreciation for securites in which there is an excess of
tax cost over value is $26,354,173; net unrealized appreciation for federal
income tax purposes is $151,531,551.
GLOSSARY:
NR - Not Rated
TRACERS - Traded Custody Receipts
8
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF ASSETS AND LIABILITIES
May 31, 2003 (unaudited)
ASSETS:
Investments, at value (cost-$1,452,215,284) $ 1,603,746,835
------------------------------------------------------------------------------------------ ---------------
Cash 9,955
------------------------------------------------------------------------------------------ ---------------
Interest receivable 31,738,926
------------------------------------------------------------------------------------------ ---------------
Receivable for investments sold 4,671,938
------------------------------------------------------------------------------------------ ---------------
Interest receivable from swaps 26,134
------------------------------------------------------------------------------------------ ---------------
Prepaid expenses 79,512
------------------------------------------------------------------------------------------ ---------------
Total Assets 1,640,273,300
========================================================================================== ===============
LIABILITIES:
Dividends payable to common and preferred shareholders 8,826,986
------------------------------------------------------------------------------------------ ---------------
Payable for investments purchased 5,757,594
------------------------------------------------------------------------------------------ ---------------
Options written, at value (premium received $1,330,543) 2,607,000
------------------------------------------------------------------------------------------ ---------------
Investment management fee payable 822,955
------------------------------------------------------------------------------------------ ---------------
Net unrealized depreciation on forward foreign currency contracts 806,113
------------------------------------------------------------------------------------------ ---------------
Net unrealized depreciation on swaps 389,950
------------------------------------------------------------------------------------------ ---------------
Common stock and preferred shares offering costs payable 56,397
------------------------------------------------------------------------------------------ ---------------
Interest payable 36,008
------------------------------------------------------------------------------------------ ---------------
Accrued expenses 151,550
------------------------------------------------------------------------------------------ ---------------
Total Liabilities 19,454,553
------------------------------------------------------------------------------------------ ---------------
PREFERRED SHARES ($0.00001 PAR VALUE AND $25,000 NET ASSET AND LIQUIDATION VALUE PER
SHARE APPLICABLE TO AN AGGREGATE OF 22,600 SHARES ISSUED AND OUTSTANDING) 565,000,000
------------------------------------------------------------------------------------------ ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 1,055,818,747
========================================================================================== ===============
COMPOSITION OF NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Common stock:
Par value ($0.00001 per share, applicable to 63,629,157 shares issued and outstanding) $ 636
------------------------------------------------------------------------------------------ ---------------
Paid-in-capital in excess of par 904,095,084
------------------------------------------------------------------------------------------ ---------------
Undistributed net investment income 4,055,427
------------------------------------------------------------------------------------------ ---------------
Net realized loss on investments (1,473,016)
------------------------------------------------------------------------------------------ ---------------
Net unrealized appreciation of investments, swaps, options written and foreign
currency transactions 149,140,616
------------------------------------------------------------------------------------------ ---------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS $ 1,055,818,747
------------------------------------------------------------------------------------------ ---------------
NET ASSET VALUE PER COMMON SHARE $ 16.59
========================================================================================== ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF OPERATIONS
For the period December 27, 2002* through May 31, 2003 (unaudited)
INTEREST INCOME:
Interest $ 44,778,631
--------------------------------------------------------------------- ---------------
EXPENSES:
Investment management fees 3,282,528
--------------------------------------------------------------------- ---------------
Auction agent fees and commissions 373,027
--------------------------------------------------------------------- ---------------
Custodian and accounting agent fees 66,261
--------------------------------------------------------------------- ---------------
Trustees' fees and expenses 30,035
--------------------------------------------------------------------- ---------------
Audit and tax service fees 26,379
--------------------------------------------------------------------- ---------------
Legal fees 22,544
--------------------------------------------------------------------- ---------------
New York Stock Exchange listing fees 17,956
--------------------------------------------------------------------- ---------------
Reports to shareholders 16,006
--------------------------------------------------------------------- ---------------
Transfer agent fees 12,207
--------------------------------------------------------------------- ---------------
Excise tax expense 6,230
--------------------------------------------------------------------- ---------------
Insurance expense 3,634
--------------------------------------------------------------------- ---------------
Miscellaneous 4,257
--------------------------------------------------------------------- ---------------
Total expenses 3,861,064
--------------------------------------------------------------------- ---------------
Less: custody credits earned on cash balances (9,531)
--------------------------------------------------------------------- ---------------
Net expenses 3,851,533
--------------------------------------------------------------------- ---------------
NET INVESTMENT INCOME $ 40,927,098
===================================================================== ===============
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
--------------------------------------------------------------------- ---------------
Investments 1,952,194
--------------------------------------------------------------------- ---------------
Foreign currency transactions (3,425,210)
--------------------------------------------------------------------- ---------------
Net unrealized appreciation of investments, swaps, options
written and foreign currency transactions 149,140,616
--------------------------------------------------------------------- ---------------
Net realized and unrealized gain on investments, swaps, options
written and foreign currency transactions 147,667,600
--------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS 188,594,698
===================================================================== ===============
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (1,978,772)
--------------------------------------------------------------------- ---------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS
RESULTING FROM INVESTMENT OPERATIONS $ 186,615,926
===================================================================== ===============
* Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
PIMCO CORPORATE OPPORTUNITY FUND STATEMENT OF CHANGES IN NET ASSETS
APPLICABLE TO COMMON SHAREHOLDERS
FOR THE PERIOD
DECEMBER 27, 2002*
THROUGH
MAY 31, 2003
------------------
INVESTMENT OPERATIONS:
Net investment income $ 40,927,098
--------------------------------------------------------------------- ------------------
Net realized loss on investments, swaps and foreign currency
transactions (1,473,016)
--------------------------------------------------------------------- ------------------
Net unrealized appreciation of investments, swaps, options
written and foreign currency transactions 149,140,616
--------------------------------------------------------------------- ------------------
Net increase in net assets resulting from investment operations 188,594,698
===================================================================== ==================
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (1,978,772)
--------------------------------------------------------------------- ------------------
Net increase in net assets applicable to common shareholders
resulting from investment operations 186,615,926
--------------------------------------------------------------------- ------------------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME (34,892,899)
--------------------------------------------------------------------- ------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of common stock 905,769,750
--------------------------------------------------------------------- ------------------
Preferred shares underwriting discount charged to paid-in capital
in excess of par (5,650,000)
--------------------------------------------------------------------- ------------------
Common stock and preferred shares offering costs charged to
paid-in capital in excess of par (2,148,068)
--------------------------------------------------------------------- ------------------
Reinvestment of dividends 6,024,035
--------------------------------------------------------------------- ------------------
Net increase in capital share transactions 903,995,717
--------------------------------------------------------------------- ------------------
Total increase in net assets applicable to common shareholders 1,055,718,744
===================================================================== ==================
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS:
Beginning of period 100,003
--------------------------------------------------------------------- ------------------
End of period (including undistributed net investment income
of $4,055,427) $ 1,055,818,747
===================================================================== ==================
COMMON SHARES ISSUED AND REINVESTED:
Issued 63,230,000
--------------------------------------------------------------------- ------------------
Issued in reinvestment of dividends 392,176
--------------------------------------------------------------------- ------------------
NET INCREASE 63,622,176
===================================================================== ==================
* Commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
PIMCO CORPORATE OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS
May 31, 2003 (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
PIMCO Corporate Opportunity Fund (the "Fund"), was organized as a Massachusetts
business trust on September 13, 2002. Prior to commencing operations on December
27, 2002, the Fund had no operations other than matters relating to its
organization and registration as a diversified, closed-end management investment
company registered under the Investment Company Act of 1940 and the rules and
regulations thereunder, as amended, and the sale and issuance of 6,981 shares of
beneficial interest at an aggregate purchase price of $100,003 to Allianz
Dresdner Asset Management of America L.P. ("ADAM"). PIMCO Advisors Fund
Management LLC (the "Investment Manager"), serves as the Fund's Investment
Manager and is an indirect wholly-owned subsidiary of ADAM. ADAM is an indirect,
majority-owned subsidiary of Allianz AG. The Fund has an unlimited amount of
$0.0001 par value common stock authorized.
The Fund seeks to maximize total return through a combination of current income
and capital appreciation in a diversified portfolio of U.S. dollar denominated
corporate debt obligations of varying maturities and other income producing
securities.
The Fund issued 55,500,000 shares of common stock, in its initial public
offering. An additional 7,730,000 shares were issued in connection with the
exercise of the underwriters' over-allotment option. These shares were all
issued at $15.00 per share before an underwriting discount of $0.675 per share.
Offering costs of $1,573,068 (representing $0.024 per share) were offset against
the proceeds of the offering and have been charged to paid-in capital in excess
of par. The Investment Manager has agreed to pay all offering costs (other than
the sales load) and organizational expenses exceeding $0.03 per share. In
addition, the underwriters' commission and offering costs associated with the
issuance of Preferred Shares in the amounts of $5,650,000 and $575,000,
respectively, have been 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
these estimates. In the normal course of business the Fund enters into contracts
that contain a variety of representations which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund
that have not yet occurred. However, the Fund expects the risk of any loss to be
remote.
The following is a summary of significant accounting policies followed by the
Fund:
(a) VALUATION OF INVESTMENTS
Portfolio securities and other assets for which market quotations are readily
available are valued each day at market value. Market value is generally
determined on the basis of the last reported sales price, or if no sales are
reported, based on quotes obtained from a quotation reporting system,
established market makers, or independent pricing services approved by the Board
of Trustees. Any security or other asset for which market quotations are not
readily available is valued at fair value as determined in good faith under
procedures established by the Board of Trustees. The Fund invests substantially
all of its assets in a diversified portfolio of corporate debt obligations of
varying maturities and other corporate income-producing securities. Short-term
debt securities having a remaining maturity of sixty days or less are valued at
amortized cost or amortized value, which approximates market value. Forward
currency contracts are valued at prevailing forward exchange rates of the
underlying currencies.
(b) FEDERAL INCOME TAXES
The Fund intends to distribute all of its taxable income and to comply with the
other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no provision for U.S.
federal income taxes is required. In addition, by distributing substantially all
of its ordinary income and long-term capital gains, if any, during each calendar
year the Fund intends not to be subject to U.S. federal excise tax. Under
certain circumstances, however, the Fund may determine to retain a portion of
its taxable income, if such retention is deemed to be in the interest of the
Fund and its shareholders. In such a circumstance, the Fund may be subject to a
4% excise tax.
(c) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Securities
purchased or sold on a when-issued or delayed delivery basis may be settled a
month or more after trade date. Realized gains and losses on investments are
determined on the identified cost basis. Interest income is recorded on an
accrual basis. Discounts or premiums on debt securities purchased are accreted
or amortized to interest income over the lives of the respective securities
using the effective interest method. Market discount, if any, is accreted daily.
12
(d) DIVIDENDS AND DISTRIBUTIONS -- COMMON STOCK
The Fund declares dividends from net investment income monthly to common
shareholders. Distributions of net realized capital gains, if any, are paid at
least annually. The Fund records dividends and distributions to its shareholders
on the ex-dividend date. The amount of dividends and distributions from net
investment income and net realized capital gains are determined in accordance
with federal income tax regulations, which may differ from generally accepted
accounting principles. These "book-tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature, such amounts are reclassified within the capital accounts based on
their income tax treatment; temporary differences do not require
reclassification. To the extent dividends and/or distributions exceed current
and accumulated earnings and profits for federal income tax purposes, they are
reported as dividends and/or distributions of paid-in capital in excess of par.
(e) INTEREST RATE SWAPS
The Fund may invest in interest rate swap contracts ("swaps") for investment
purposes, to manage its interest rate risk and to add leverage.
Interest rate swap agreements involve the exchange by the Fund with a
counterparty of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Net payments of interest on interest rate swap
agreements are recorded daily as part of interest income.
Swaps are marked to market daily by the Fund's Investment Manager based upon
quotations from market makers and the change in value, if any, is recorded as
unrealized appreciation or depreciation in the Fund's Statement of Operations.
Payments received or made, if any, upon termination or maturity of the interest
rate swaps, net of any basis in the interest rate swaps, is recorded as a
realized gain or loss in the Statement of Operations. For a credit default swap
sold by the Fund, payment of the agreed upon amount made by the Fund in the
event of default of the referenced debt obligation is recorded as the cost of
the referenced debt obligation purchased/received. For a credit default swap
purchased by the Fund, the agreed upon amount received by the Fund in the event
of default of the referenced debt obligation is recorded as proceeds from
sale/delivery of the referenced debt obligation and the resulting gain or loss
realized on the referenced debt obligation is recorded as such by the Fund.
Entering into swaps involves, to varying degrees, elements of credit and market
risk in excess of the amounts recognized on the Statement of Assets and
Liabilities. Such risks involve the possibility that there will be no liquid
market for these agreements, that the counterparty to the agreements may default
on its obligation to perform or disagree as to the meaning of the contractual
terms in the agreements, and that there may be unfavorable changes in net
interest rates.
Interest rate swap contracts outstanding at May 31, 2003 were as follows:
RATE TYPE
-----------------------------------------
NOTIONAL
SWAP AMOUNT TERMINATION PAYMENTS RECEIVED BY PAYMENTS MADE BY UNREALIZED
COUNTERPARTY (IN 000) DATE THE FUND THE FUND DEPRECIATION
----------------------------------------------------------------------------------------------------
Goldman Sachs $ 55,000 3/18/05 1 week LIBOR 1.813% $ 389,950
==========
(f) REPURCHASE AGREEMENTS
The Fund may enter into transactions with its custodian bank or securities
brokerage firms approved by the Board of Trustees whereby it purchases
securities under agreements to resell at an agreed upon price and date
("repurchase agreements"). Such agreements are carried at the contract amount in
the financial statements. Collateral pledged (the securities received), which
consists primarily of U.S. government obligations and asset backed securities,
are held by the custodian bank until maturity of the repurchase agreement.
Provisions of the repurchase agreements and the procedures adopted by the Fund
require that the market value of the collateral, including accrued interest
thereon, is sufficient in the event of default by the counterparty. If the
counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Fund may be delayed or limited.
13
(g) FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency contracts for the purpose of
hedging against foreign currency risk arising from the investment or anticipated
investment in securities denominated in foreign currencies. The Fund may also
enter these contracts for purposes of increasing exposure to a foreign currency
or to shift exposure to foreign currency fluctuations from one country to
another. A forward foreign currency contract is an agreement between two parties
to buy and sell a currency at a set exchange rate on a future date. The market
value of a forward foreign currency contract fluctuates with changes in forward
currency exchange rates. All commitments are marked to market daily at the
applicable exchange rates and any resulting unrealized gains and losses are
recorded. Realized gains or losses are recorded at the time the forward contract
matures or by delivery of the currency. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
Forward foreign currency contracts outstanding at May 31, 2003 were:
U.S.$ VALUE ON U.S.$ VALUE UNREALIZED
SOLD: ORIGINATION DATE APRIL 30, 2003 DEPRECIATION
---------------------------------------------------------------------------------------------
31,481,000 Euros, settling 6/25/03 $ 36,192,762 $ 36,998,875 $ 806,113
=========
(h) OPTION TRANSACTIONS
For hedging purposes, the Fund 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 Fund
pays a premium whether or not the option is exercised. Additionally, the Fund
bears the risk of loss of premium and change in market value should the
counterparty not perform under the contract. Put and call options purchased are
accounted for in the same manner as portfolio securities. The cost of securities
acquired through the exercise of call options is increased by the premiums paid.
The proceeds from the securities sold through the exercise of put options is
decreased by the premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded on the expiration date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the security. In
writing an option, the Fund bears the market risk of an unfavorable change in
the price of the security underlying the written option. Exercise of an written
option could result in the Fund purchasing a security at a price different from
the current market.
Transactions in options written for the period ended May 31, 2003 were:
CONTRACTS PREMIUMS
------------------------------------------------------------------------------
Options outstanding, beginning of period - -
Options written 1,126 $ 1,330,543
----- -----------
Options outstanding at May 31, 2003 1,126 $ 1,330,543
----- -----------
(i) LOAN PARTICIPATIONS
The Fund may invest in loan participations. When the Fund purchases a loan
participation, the Fund typically enters into a contractual relationship with
the lender or third party selling such participations ("Selling Participant"),
but not the borrower. As a result, the Fund assumes the credit risk of the
borrower, the Selling Participant and any other persons interpositioned between
the Fund and the borrower. The Fund may not directly benefit from the collateral
supporting the senior loan in which it has purchased the loan participation.
(j) CUSTODY CREDITS ON CASH BALANCES
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian
expenses. Had these cash balances been invested in income producing securities,
they would have generated income for the Fund.
14
2. INVESTMENT MANAGER AND SUB-ADVISER
The Fund has entered into an Investment Management Agreement (the "Agreement")
with the Investment Manager to serve as Investment Manager of the Fund. Subject
to the supervision of the Fund's Board of Trustees, the Investment Manager is
responsible for managing, either directly or through others selected by it, the
investment activities of the Fund and the Fund's business affairs and other
administrative matters. Pursuant to the Agreement, the Investment Manager will
receive an annual fee, payable monthly, at an annual rate of 0.60% of the Fund's
average daily net assets (inclusive of net assets attributable to any preferred
shares that may be outstanding.)
The Investment Manager has retained its affiliate, Pacific Investment Management
Company LLC (the "Sub-Adviser") to manage the Fund's investments. Subject to the
supervision of the Investment Manager, the Sub-Adviser makes all investment
decisions with respect to the Fund's assets. The Investment Manager (not the
Fund) pays a portion of the fees it receives to the Sub-Adviser in return for
its services, at the maximum annual rate of 0.39% of the Fund's average daily
net assets (inclusive of net assets attributable to any preferred shares that
may be outstanding) for the period from commencement of operations through
December 31, 2007 and at the maximum annual rate of 0.55% of average daily net
assets (inclusive of net assets attributable to any preferred shares that may be
outstanding) thereafter while the Agreement remains in effect, provided that the
fee will be reduced to 0.325% during the first five years of operations and
0.45% thereafter while the Agreement remains in effect, if and while the
Investment Manager is obligated to pay a fee to Merrill Lynch, Pierce Fenner &
Smith, Inc. ("Merrill Lynch"), the underwriter of the Fund's shares. The
Investment Manager (not the Fund) has agreed to pay a quarterly fee to Merrill
Lynch at the annual rate of 0.10% of the Fund's average daily net assets
(inclusive of net assets attributable to any preferred shares that may be
outstanding) during the continuance of the Agreement. The Investment Manager
informed the Fund that it paid the Sub-Adviser $2,133,643 in connection with its
sub-advisory services for the period ended May 31, 2003.
3. INVESTMENTS IN SECURITIES
For the period ended May 31, 2003, purchases and sales of investments, other
than short-term securities, were $1,441,203,045 and $35,622,477, respectively.
4. AUCTION PREFERRED SHARES
The Fund has issued 4,520 shares of Preferred Shares Series M, 4,520 shares of
Preferred Shares Series T, 4,520 shares of Preferred Shares Series W, 4,520
shares of Preferred Shares Series TH, and 4,520 shares of Preferred Shares
Series F each with a net asset and liquidation value of $25,000 per share plus
accrued dividends.
Dividends are accumulated daily at an annual rate set through auction
procedures. Distributions of net realized capital gains, if any, are paid
annually.
For the period ended May 31, 2003, the annualized dividend rate ranged from:
HIGH LOW AT MAY 31, 2003
-----------------------------------------------------------------------------------
Series M 1.375% 1.25% 1.32%
Series T 1.375% 1.30% 1.35%
Series W 1.375% 1.25% 1.33%
Series TH 1.375% 1.25% 1.35%
Series F 1.375% 1.30% 1.30%
The Fund is subject to certain limitations and restrictions while Preferred
Shares are outstanding. Failure to comply with these limitations and
restrictions could preclude the Fund from declaring any dividends or
distributions to common shareholders or repurchasing common shares and/or could
trigger the mandatory redemption of Preferred Shares at their liquidation value.
Preferred Shares, which are entitled to one vote per share, generally vote with
the common stock but vote separately as a class to elect two Trustees and on any
matters affecting the rights of the Preferred Shares.
15
5. SUBSEQUENT DIVIDEND DECLARATIONS -- COMMON SHAREHOLDERS
On June 2, 2003, a dividend of $0.1375 per share was declared to common
shareholders payable July 1, 2003 to shareholders of record on June 13, 2003.
On July 1, 2003, a dividend of $0.1375 per share was declared to common
shareholders payable August 1, 2003 to shareholders of record on July 11, 2003.
PIMCO CORPORATE OPPORTUNITY FUND FINANCIAL HIGHLIGHTS
For a share of common stock outstanding for the period December 27, 2002*
through May 31, 2003: (unaudited)
Net asset value, beginning of period $ 14.33**
-------------------------------------------------------------------------------------- -----------
INVESTMENT OPERATIONS:
Net investment income 0.64
-------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 2.32
-------------------------------------------------------------------------------------- -----------
Total from investment operations 2.96
-------------------------------------------------------------------------------------- -----------
DIVIDENDS ON PREFERRED SHARES FROM NET INVESTMENT INCOME (0.03)
====================================================================================== ===========
Net increase in net assets applicable to common shares resulting from
investment operations 2.93
-------------------------------------------------------------------------------------- -----------
DIVIDENDS TO COMMON SHAREHOLDERS FROM NET INVESTMENT INCOME: (0.55)
-------------------------------------------------------------------------------------- -----------
CAPITAL SHARE TRANSACTIONS:
Common stock offering costs charged to paid-in capital in excess of par (0.02)
-------------------------------------------------------------------------------------- -----------
Preferred shares offering costs/underwriting discount charged to paid-in capital
in excess of par (0.10)
-------------------------------------------------------------------------------------- -----------
Total capital share transactions (0.12)
-------------------------------------------------------------------------------------- -----------
Net asset value, end of period $ 16.59
-------------------------------------------------------------------------------------- -----------
Market price, end of period $ 16.61
-------------------------------------------------------------------------------------- -----------
TOTAL INVESTMENT RETURN (1) 14.7%
-------------------------------------------------------------------------------------- -----------
RATIOS/SUPPLEMENTAL DATA:
Net assets applicable to common shareholders, end of period (000) $ 1,055,819
-------------------------------------------------------------------------------------- -----------
Ratio of expenses to average net assets (2)(3)(4) 0.96%
-------------------------------------------------------------------------------------- -----------
Ratio of net investment income to average net assets (2)(4) 10.23%
-------------------------------------------------------------------------------------- -----------
Preferred shares asset coverage per share $ 71,711
-------------------------------------------------------------------------------------- -----------
Portfolio turnover 4%
-------------------------------------------------------------------------------------- -----------
* 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 and a sale at the current
market price on the last day of the 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 on cash balances from the
custodian bank. (See note 1(j) in Notes to Financial Statements).
(4) Annualized
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
16
PIMCO CORPORATE OPPORTUNITY FUND 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.
17
TRUSTEES AND PRINCIPAL OFFICERS
Stephen Treadway
Chairman
Paul Belica
Trustee
Robert E. Connor
Trustee
John J. Dalessandro II
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Newton B. Schott, Jr.
Executive Vice President & Secretary
David C. Hinman
Vice President
Mark Kiesel
Vice President
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
INVESTMENT MANAGER
PIMCO Advisors 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.
400 Bellevue Parkway
Wilmington, DE 19809
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA. 02210-2624
This report, including the financial information herein, is transmitted to the
shareholders of PIMCO Corporate Opportunity Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that from time to time the Fund may purchase
shares of its common stock in the open market.
The financial information included herein is taken from the records of the Fund
without examination by independent auditors, who did not express an opinion
hereon.
Daily information on the Fund is available at www.pimcoadvisors.com or by
calling 1-800-331-1710
[PIMCO ADVISORS LOGO]
ITEM 2. CODE OF ETHICS Disclosure requirement not currently effective
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Disclosure requirement not currently
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Disclosure requirement not
currently effective
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT Disclosure requirement not
currently effective
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Disclosure requirement not currently effective
ITEM 8. [RESERVED]
ITEM 9. 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 10. EXHIBITS
(a) Disclosure requirement not currently effective.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act
(17 CFR 270.30a-2).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) PIMCO CORPORATE OPPORTUNITY FUND
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By /s/ Brian S. Shlissel
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President and Chief Executive Officer
Date July 31, 2003
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By /s/ Lawrence G. Altadonna
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Treasurer
Date July 31, 2003
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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
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President and Chief Executive Officer
Date July 31, 2003
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By /s/ Lawrence G. Altadonna
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Treasurer
Date July 31, 2003
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