UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10555
---------
Fixed Income SHares
(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: October 31, 2005
----------------
Date of reporting period: April 30, 2005
---------------
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
Fixed Income SHares - Series C, M, R
Semi-Annual Report
April 30, 2005
CONTENTS
Letter to Shareholders ....................................................... 1
Performance Summary & Statistics ........................................... 2-4
Schedules of Investments .................................................. 5-20
Statements of Assets and Liabilities ........................................ 21
Statements of Operations .................................................... 22
Statements of Changes in Net Assets ...................................... 23-25
Financial Highlights ..................................................... 26-27
Notes to Financial Statements ............................................ 28-40
Shareholder Meeting Results ................................................. 40
[GRAPHIC OMITTED]
[ALLIANZ LOGO]
GLOBAL INVESTORS
FIXED INCOME SHARES - SERIES C, M, R LETTER TO SHAREHOLDERS
- --------------------------------------------------------------------------------
June 16, 2005
Dear Shareholder:
We are pleased to provide you with the semi-annual report of Fixed Income
SHares-Series C, Series M and Series R for the six months ended April 30, 2005.
Series C, Series M and Series R are used in conjunction with other assets to
create the PIMCO Total Return and Real Return Investment Strategies for managed
accounts.
We thank you for investing with us, we remain dedicated to serving your
investment needs.
Sincerely,
/s/ Robert E. Connor /s/ Brian S. Shlissel
- -------------------- ---------------------
Robert E. Connor Brian S. Shlissel
Chairman President & Chief Executive Officer
4.30.05 | Fixed Income SHares - Series C, M, R Semi-Annual Report 1
FIXED INCOME SHARES - SERIES C PERFORMANCE & STATISTICS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
FXICX Intermediate maturity fixed 3/17/00
income securities
NET ASSETS:
$769.3 million
PORTFOLIO MANAGEMENT:
Managed by a team of
investment professionals
led by Bill Gross.
TOTAL RETURN(1):
- --------------------------------------------------------------------------------
Six Months 3.80%
1 Year 11.21%
3 Years 10.30%
5 Years 11.87%
Commencement of Operations (3/17/00) to 4/30/05 11.53%
- -----------------------------------------------
Net Asset Value $11.82
- -----------------------------------------------
Distribution Yield(2) 4.28%
- -----------------------------------------------
Duration 6.97 YEARS
- -----------------------------------------------
CHANGE IN VALUE OF $10,000 INVESTMENT IN SERIES C
AND THE LEHMAN INTERMEDIATE U.S. CREDIT INDEX
[LINE CHART OMITTED]
FISH C LEHMAN INTERMEDIATE US CREDIT INDEX*
RETURN GROWTH $ RETURN GROWTH $
------ -------- ------ --------
10,000 10,000
3/17/00 0.00% 10,000 0.00% 10,000
4/30/00 -0.21% 9,979 -0.21% 9,979
7/31/00 3.42% 10,320 2.98% 10,276
10/31/00 2.50% 10,578 2.36% 10,518
1/31/01 7.86% 11,410 5.36% 11,081
4/30/01 2.10% 11,649 1.62% 11,261
7/31/01 4.01% 12,116 3.58% 11,664
10/31/01 5.72% 12,810 3.58% 12,082
1/31/02 0.67% 12,895 -0.79% 11,987
4/30/02 1.04% 13,029 0.59% 12,057
7/31/02 -4.64% 12,425 2.09% 12,309
10/31/02 4.19% 12,946 3.02% 12,681
1/31/03 8.49% 14,045 3.74% 13,155
4/31/03 6.32% 14,932 3.38% 13,600
7/31/03 -3.01% 14,483 -0.54% 13,526
10/31/03 5.61% 15,295 2.37% 13,847
1/31/2004 3.86% 15,886 2.11% 14,139
4/28/2004 -1.02% 15,724 -0.60% 14,054
7/31/2004 1.04% 15,887 0.74% 14,158
10/31/2004 6.04% 16,847 3.11% 14,598
1/31/2005 2.61% 17,287 0.29% 14,641
4/28/2005 1.16% 17,487 -0.37% 14,587
Inception, 3.17.00
MOODY'S RATINGS AS A % OF TOTAL INVESTMENTS
[PIE CHART OMITTED]
Aaa 58.6%
Aa 1.6%
A 5.2%
Baa 14.1%
Ba 4.4%
B 4.1%
Caa 0.1%
P-1 9.6%
NR 2.3%
-----
100.0%
=====
* The Lehman Intermediate U.S. Credit Index is an unmanaged index that is not
available for direct investment. Its performance is inclusive of reinvested
dividends.
** March 17, 2000
Assumes reinvestment of all dividends and distributions.
Past performance is not predictive of future performance.
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
calculated by subtracting the value of an investment in the Portfolio at the
beginning of each specified period from the value at the end of the period
and dividing the remainder by the value of the investment at the beginning
of the period and expressing the result as a percentage. The calculation
assumes that all dividends and distributions have been reinvested. Total
return does not reflect broker commissions or "wrap fee" charges. Total
return for a period of less than one year is not annualized. Total return
for a period greater than one year represents the average annual total
return.
(2) Distribution yield is determined by dividing the annualized current monthly
per share dividend by the net asset value at October 31, 2004.
EXPENSE TABLE:
The Investment Manager has agreed irrevocably to waive all fees and pay or
reimburse all expenses of the Portfolio, except extraordinary expenses. The
financial statements reflect the fact that no fees or expenses are incurred
by the Portfolio due to this waiver and reimbursement. Consequently, no
expense table is included in the semi-annual report. You should be aware,
however, that the Portfolio is an integral part of "wrap fee" programs
sponsored by investment advisers and broker-dealers unaffiliated with the
Portfolio, the Investment Manager or the Sub-Adviser. Participants on these
programs pay a "wrap fee" to the sponsor of the program. You should read
carefully the wrap-fee brochure provided to you by the program sponsor. The
brochure is required to include information about the fees charged to you by
the sponsor and the fees paid by the sponsor to the Investment Manager and
its affiliates. You pay no additional fees or expenses to purchase shares of
the Portfolio.
AN INVESTMENT IN THE PORTFOLIO INVOLVES RISK, INCLUDING THE LOSS OF
PRINCIPAL. TOTAL RETURN, DISTRIBUTION YIELD, NET ASSET VALUE AND DURATION
WILL FLUCTUATE WITH CHANGES IN MARKET CONDITIONS. THIS DATA IS PROVIDED FOR
INFORMATION ONLY AND IS NOT INTENDED FOR TRADING PURPOSES. NET ASSET VALUE
IS TOTAL ASSETS LESS TOTAL LIABILITIES DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING. HOLDINGS ARE SUBJECT TO CHANGE DAILY.
2 Fixed Income SHares - Series C, M, R Semi-Annual Report | 4.30.05
FIXED INCOME SHARES - SERIES M PERFORMANCE & STATISTICS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
FXIMX Intermediate maturity 3/17/00
mortgage-backed securities
NET ASSETS:
$764.2 million
PORTFOLIO MANAGEMENT:
Managed by a team of
investment professionals
led by Bill Gross.
TOTAL RETURN(1):
- --------------------------------------------------------------------------------
Six Months 1.68%
1 Year 7.98%
3 Years 8.62%
5 Years 11.14%
Commencement of Operations (3/17/00) to 4/30/05 11.03%
- -----------------------------------------------
Net Asset Value $11.41
- -----------------------------------------------
Distribution Yield(2) 4.13%
- -----------------------------------------------
Duration 5.09 YEARS
- -----------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SERIES M
AND THE LEHMAN FIXED RATE MORTGAGED-BACKED SECURITIES INDEX
[LINE CHART OMITTED]
LEHMAN FIXED RATE
FISH M MORTGAGED-BACKED SECURITIES INDEX*
RETURN GROWTH $ RETURN GROWTH $
------ -------- ------ --------
10,000 10,000
3/17/00 0.00% 10,000 0.00% 10,000
4/30/00 -0.75% 10,075 0.29% 10,029
7/31/00 3.55% 10,433 2.84% 10,314
10/31/00 4.63% 10,916 3.31% 10,655
1/31/01 7.02% 11,682 4.74% 11,160
4/30/01 0.70% 11,763 1.30% 11,305
7/31/01 3.99% 12,233 2.67% 11,607
10/31/01 6.63% 13,043 3.81% 12,049
1/31/02 -0.61% 12,964 -0.38% 12,003
4/30/02 2.84% 13,332 1.96% 12,238
7/31/02 4.60% 13,946 2.72% 12,571
10/31/02 3.49% 14,432 1.89% 12,808
1/31/03 2.16% 14,743 1.22% 12,965
4/31/03 3.13% 15,205 1.10% 13,107
7/31/03 -2.98% 14,752 1.63% 13,321
10/31/03 4.35% 15,393 2.07% 13,597
1/31/2004 3.95% 16,001 1.92% 13,858
4/28/2004 2.16% 16,347 -0.52% 13,786
7/31/2004 -0.58% 16,252 1.57% 14,002
10/31/2004 3.40% 16,805 2.52% 14,355
1/31/2005 0.60% 16,906 0.99% 14,497
4/28/2005 1.07% 17,087 0.45% 14,562
Inception, 3.17.00
MOODY'S RATINGS AS A % OF TOTAL INVESTMENTS
[PIE CHART OMITTED]
Aaa 92.0%
Aa 2.3%
A 0.2%
Baa 0.8%
NR 4.1%
P1 0.6%
-----
100.0%
=====
* The Lehman Fixed Rate Mortgage Back Securities Index is an unmanaged index
that is not available for direct investment. Its performance is inclusive of
reinvested dividends.
** March 17, 2000
Assumes reinvestment of all dividends and distributions.
Past performance is not predictive of future performance.
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
calculated by subtracting the value of an investment in the Portfolio at the
beginning of each specified period from the value at the end of the period
and dividing the remainder by the value of the investment at the beginning
of the period and expressing the result as a percentage. The calculation
assumes that all dividends and distributions have been reinvested. Total
return does not reflect broker commissions or "wrap fee" charges. Total
return for a period of less than one year is not annualized. Total return
for a period greater than one year represents the average annual total
return.
(2) Distribution yield is determined by dividing the annualized current monthly
per share dividend by the net asset value at April 30, 2005.
EXPENSE TABLE:
The Investment Manager has agreed irrevocably to waive all fees and pay or
reimburse all expenses of the Portfolio, except extraordinary expenses. The
financial statements reflect the fact that no fees or expenses are incurred
by the Portfolio due to this waiver and reimbursement. Consequently, no
expense table is included in the semi-annual report. You should be aware,
however, that the Portfolio is an integral part of "wrap fee" programs
sponsored by investment advisers and broker-dealers unaffiliated with the
Portfolio, the Investment Manager or the Sub-Adviser. Participants on these
programs pay a "wrap fee" to the sponsor of the program. You should read
carefully the wrap-fee brochure provided to you by the program sponsor. The
brochure is required to include information about the fees charged to you by
the sponsor and the fees paid by the sponsor to the Investment Manager and
its affiliates. You pay no additional fees or expenses to purchase shares of
the Portfolio.
AN INVESTMENT IN THE PORTFOLIO INVOLVES RISK, INCLUDING THE LOSS OF
PRINCIPAL. TOTAL RETURN, DISTRIBUTION YIELD, NET ASSET VALUE AND DURATION
WILL FLUCTUATE WITH CHANGES IN MARKET CONDITIONS. THIS DATA IS PROVIDED FOR
INFORMATION ONLY AND IS NOT INTENDED FOR TRADING PURPOSES. NET ASSET VALUE
IS TOTAL ASSETS LESS TOTAL LIABILITIES DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING. HOLDINGS ARE SUBJECT TO CHANGE DAILY.
4.30.05 | Fixed Income SHares - Series C, M, R Semi-Annual Report 3
FIXED INCOME SHARES - SERIES R PERFORMANCE SUMMARY & STATISTICS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
SYMBOL: PRIMARY INVESTMENTS: INCEPTION DATE:
FXIRX Intermediate maturity Inflation- 4/15/04
indexed fixed income
securities
NET ASSETS:
$77.6 million
PORTFOLIO MANAGEMENT:
Managed by a team of
investment professionals
led by John Brynjolfsson.
TOTAL RETURN(1):
- --------------------------------------------------------------------------------
Six Months 3.38%
1 Year 10.33%
Commencement of Operations (4/15/04) to 4/30/05 9.59%
- -----------------------------------------------
Net Asset Value $10.51
- -----------------------------------------------
Distribution Yield(2) 7.40%
- -----------------------------------------------
Duration 6.75 YEARS
- -----------------------------------------------
CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
SERIES R AND THE U.S. TIPS INDEX
[LINE CHART OMITTED]
FISH R LEHMAN U.S. TIPS INDEX*
RETURN GROWTH $ RETURN GROWTH $
------ -------- ------ --------
10,000 10,000
4/15/04 0.00% 10,000 0.00% 10,000
4/30/04 -0.30% 9,970 -4.85% 9,515
5/31/04 1.62% 10,132 1.80% 9,686
6/30/04 -0.16% 10,115 0.04% 9,690
7/31/04 1.27% 10,244 0.93% 9,780
8/31/04 2.45% 10,495 2.68% 10,042
9/30/04 0.22% 10,518 0.20% 10,062
10/31/04 1.17% 10,641 1.00% 10,162
11/30/04 0.02% 10,643 -0.24% 10,138
12/31/04 1.37% 10,789 1.74% 10,314
1/31/05 0.22% 10,813 0.01% 10,315
2/28/05 -0.38% 10,771 -0.43% 10,271
3/31/05 0.26% 10,779 0.09% 10,280
4/30/05 1.87% 11,001 1.91% 10,477
Inception, 4.15.04
MOODY'S RATINGS AS A % OF TOTAL INVESTMENTS
[PIE CHART OMITTED]
Aaa 93.5%
Aa 0.0%
Baa 0.2%
Ba 0.5%
P1 5.8%
-----
100.0%
=====
* The Lehman U.S. Tips Index is an unmanaged index that is not available for
direct investment. The performance is inclusive of reinvested dividends.
** Inception 4/15/04
Assumes reinvestment of all dividends.
Past performance is not predictive of future performance.
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return is
calculated by subtracting the value of an investment in the Portfolio at the
beginning of each specified period from the value at the end of the period
and dividing the remainder by the value of the investment at the beginning
of the period and expressing the result as a percentage. The calculation
assumes that all dividends have been reinvested. Total return does not
reflect broker commissions or "wrap fee" charges. Total return for a period
of less than one year is not annualized.
(2) Distribution yield is determined by dividing the annualized current monthly
per share dividend by the net asset value at April 30, 2005.
EXPENSE TABLE:
The Investment Manager has agreed irrevocably to waive all fees and pay or
reimburse all expenses of the Portfolio, except extraordinary expenses. The
financial statements reflect the fact that no fees or expenses are incurred
by the Portfolio due to this waiver and reimbursement. Consequently, no
expense table is included in the semi-annual report. You should be aware,
however, that the Portfolio is an integral part of "wrap fee" programs
sponsored by investment advisers and broker-dealers unaffiliated with the
Portfolio, the Investment Manager or the Sub-Adviser. Participants on these
programs pay a "wrap fee" to the sponsor of the program. You should read
carefully the wrap-fee brochure provided to you by the program sponsor. The
brochure is required to include information about the fees charged to you by
the sponsor and the fees paid by the sponsor to the Investment Manager and
its affiliates. You pay no additional fees or expenses to purchase shares of
the Portfolio.
AN INVESTMENT IN THE PORTFOLIO INVOLVES RISK, INCLUDING THE LOSS OF
PRINCIPAL. TOTAL RETURN, DISTRIBUTION YIELD, NET ASSET VALUE AND DURATION
WILL FLUCTUATE WITH CHANGES IN MARKET CONDITIONS. THIS DATA IS PROVIDED FOR
INFORMATION ONLY AND IS NOT INTENDED FOR TRADING PURPOSES. NET ASSET VALUE
IS TOTAL ASSETS LESS TOTAL LIABILITIES DIVIDED BY THE NUMBER OF SHARES
OUTSTANDING. HOLDINGS ARE SUBJECT TO CHANGE DAILY.
4 Fixed Income SHares - Series C, M, R Semi-Annual Report | 4.30.05
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
- ---------------------------------------------------------------------------------------------------------
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- --------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 34.9%
FANNIE MAE -- 33.4%
$ 61 3.57%-5.58%, 5/1/05, FRN, CMO (a) Aaa/AAA $ 61,627
575 4.00%-7.50%, 2/25/09-9/1/33, CMO (a) Aaa/AAA 594,926
254,000 5.50%, 5/1/35 (b) Aaa/AAA 256,460,752
--------------
257,117,305
--------------
FREDDIE MAC -- 0.00%
77 3.25%, 5/1/05, FRN (a) Aaa/AAA 77,996
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 1.2% Aaa/AAA 48,661
48 3.375%, 5/1/05, CMO (a) Aaa/AAA 9,242,437
9,065 5.50%-7.50%, 1/15/31-1/15/34, CMO (a) --------------
9,291,098
--------------
OTHER GOVERNMENT AGENCIES -- 0.3%
1,941 Small Business Investment Companies, 4.50%, 2/1/14 (a) NR/NR 1,927,428
--------------
Total U.S. Government Agency Securities 268,413,827
(cost--$266,288,229) --------------
SOVEREIGN DEBT OBLIGATIONS (a) -- 29.3%
BRAZIL -- 4.2%
Republic of Brazil,
10,545 4.3125%, 10/17/05, FRN B1/BB- 10,020,917
20,221 8.00%-11.50%, 3/12/08-8/17/40 B1/BB- 22,179,666
--------------
32,200,583
--------------
FRANCE -- 16.9%
Republic of France
euro 85,000 4.00%-5.75%, 4/25/14-10/25/32 Aaa/AAA 130,289,284
--------------
MEXICO -- 1.4%
United Mexican States,
$ 6,000 6.375%-8.00%, 1/16/13-9/24/22, Ser. A Baa1/BBB 6,741,000
3,000 8.30%, 8/15/31 Baa1/BBB 3,873,375
--------------
10,614,375
PANAMA -- 1.0% --------------
6,500 Republic of Panama, 9.625%, 2/8/11 Ba1/BB 7,653,750
--------------
PERU -- 0.9%
5,800 Republic of Peru, 9.125%, 2/21/12 Ba3/BB 6,670,000
--------------
RUSSIA -- 4.6%
Republic of Russia,
31,700 5.00%, 3/31/07, VRN Baa3/BB+ 33,735,140
1,334 10.00%, 6/26/07 Baa3/BB+ 1,479,673
--------------
35,214,813
--------------
SOUTH AFRICA -- 0.3%
2,505 Republic of South Africa, 6.50%-9.125%, 5/19/09-6/2/14 Baa1/BBB 2,773,916
--------------
Total Sovereign Debt Obligations (cost--$219,848,254) 225,416,721
--------------
</TABLE>
4.30.05 | Fixed Income SHares -- Series C, M, R Semi-Annual Report 5
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES -- 24.6%
AIRLINES -- 1.1%
Continental Airlines, Inc., pass thru certificates,
$ 500 6.32%, 11/1/08, Ser. 98-3 (a) Baa3/A $ 502,377
1,100 6.50%, 6/15/11, Ser. 01-1 (a) Baa3/A 1,052,890
900 7.92%, 5/1/10, Ser. 00-1 (a) Baa3/BBB+ 895,720
548 Delta Air Lines Inc., 7.38%, 5/18/10 Ser. 00-1 (a) Ba1/BB- 517,482
1,500 JetBlue Airways Corp., 5.39%, 11/15/08, Ser. 04-2, FRN (a) Ba1/BB+ 1,500,112
2,000 Northwest Airlines, Inc., 6.84%, 4/1/11, Ser. 01-1 (a) Baa3/BBB 1,936,880
United Air Lines, Inc., pass thru certificates,
1,759 7.19%, 4/1/11, Ser. 00-2 (a) NR/NR 1,618,838
650 7.73%, 7/1/10, Ser. 00-1 (a) NR/NR 590,116
100 10.125%, 3/22/15, Ser. 91-B2 (c)(d) NR/NR 40,640
------------
8,655,055
------------
AUTOMOTIVE -- 1.3%
DaimlerChrysler NA Holdings,
5,000 3.45%-3.47%, 5/24/05-6/10/05, FRN Ser. D (a) A3/BBB 4,974,138
200 7.30%, 1/15/12 (a) A3/BBB 214,508
4,000 General Motor Corp., 8.375%, 7/15/33 (a)(h) Baa3/BBB- 3,051,448
1,600 Hyundai Motor Manufacturing, Alabama LLC, 5.30%,
12/19/08 (a)(e) Baa3/BB+ 1,611,000
------------
9,851,094
------------
BANKING -- 2.5%
7,000 Banque Centrale de Tunisie, 7.375%, 4/25/12 (a) Baa2/BBB 7,962,500
3,400 HBOS plc, 5.375%, 11/1/13, VRN (a)(e) Aa3/A 3,452,472
HSBC Capital Funding LP,
1,300 4.61%, 6/27/13, VRN (a)(e) A1/A- 1,248,589
1,000 10.18%, 6/30/30, VRN (a)(e) A1/A- 1,567,068
500 KBC Bank Funding Trust III, 9.86%, 11/2/09, VRN, (c)(e) A2/A- 602,964
1,600 Royal Bank of Scotland Group plc, 9.12%, 3/31/10, VRN (a) A1/A 1,908,613
2,700 United Overseas Bank Ltd, 5.375%, 9/3/14, VRN (a)(e) A1/A- 2,723,841
------------
19,466,047
------------
BUILDING/CONSTRUCTION -- 0.8%
3,300 D.R. Horton, Inc., 5.625%, 9/15/14 (a) Ba1/BB+ 3,216,388
3,100 KB Home, 5.75%-6.375%, 8/15/11-2/1/14 (a) Ba1/BB+ 3,110,303
------------
6,326,691
------------
CONSUMER PRODUCTS -- 0.1%
700 Clorox Co., 3.125%, 6/15/05, FRN (a)(e) A3/A- 701,344
------------
FINANCIAL SERVICES -- 2.3%
2,200 Bear Stearns Cos., Inc., 3.31%, 7/18/05, FRN (a) A1/A 2,203,857
300 Citigroup, Inc., 3.50%, 2/1/08 (a) Aa1/AA- 294,777
Goldman Sachs Group, Inc.,
2,600 3.52%, 7/7/05 FRN (a) Aa3/A+ 2,611,859
3,500 4.125%-5.25%, 1/15/08-10/15/13 (a) Aa3/A+ 3,527,300
</TABLE>
6 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
$ 2,400 JPMorgan Chase & Co., 6.625%, 3/15/12 (a) A1/A $ 2,653,733
Morgan Stanley & Co.,
3,000 3.275%, 7/18/05, FRN (a) Aa3/A+ 3,000,738
2,900 4.75%, 4/1/14 (a) A1/A 2,808,000
500 5.30%, 3/1/13 (a) Aa3/A+ 511,764
------------
17,612,028
------------
FINANCING -- 3.2%
2,000 CIT Group, Inc., 3.27%, 6/20/06, FRN (a) A2/A 2,004,030
3,500 Ford Motor Credit Co., 7.00%-7.375%, 2/1/11-10/1/13 (a) A3/BBB- 3,263,662
3,100 Fuji JGB Investment LLC, 9.87%, 6/30/08, VRN (a)(e) Baa1/BBB 3,546,493
5,300 General Motors Acceptance Corp., 6.875%-7.00%,
2/1/12-8/28/12, (a) Baa2/BBB- 4,589,166
1,400 Household Finance Corp., 4.125%-7.00%,
11/16/09-5/15/12 (a) A1/A 1,522,646
110 Merrill Lynch CLO XX Pilgrim America, 3.38%, 6/23/10 (c)(f) NR/NR 109,722
1,200 Preferred Term Securities XIII Ltd., 3.58%, 6/24/34, FRN
(c)(e)(f) Aaa/AAA 1,186,741
4,400 Rabobank Capital Fund II, 5.25%-5.26%, 12/31/13-12/31/16,
VRN (a)(e) Aa2/AA 4,437,513
1,290 Simsbury CLO Ltd., 3.92%, 9/26/05, FRN (a)(f) Aaa/AAA 1,280,567
2,800 UFJ Finance Aruba AEC, 6.75%, 7/15/13 (a) A2/BBB+ 3,091,301
------------
25,031,841
------------
FOOD -- 0.5%
1,600 H.J. Heinz Co., 6.19%, 12/1/20 (c)(e) A3/A 1,621,013
2,000 Kraft Foods, Inc., 6.25%, 6/1/12 (a) A3/BBB+ 2,175,604
400 Kroger Co., 6.20%, 6/15/12 (a) Baa2/BBB 428,176
------------
4,224,793
------------
HEALTHCARE & HOSPITALS -- 0.6%
700 Community Health System, Inc, 6.50%, 12/15/12 B3/B 689,500
950 Coventry Health Care, Inc., 5.875%, 1/15/12 (a)(e) Ba1/BBB- 950,000
1,400 DaVita, Inc., 6.625%, 3/15/13 (a)(e) B2/B 1,393,000
1,700 HCA, Inc., 6.375%-7.125%, 6/1/06-1/15/15 (a) Ba2/BB+ 1,730,420
------------
4,762,920
------------
HOTELS/GAMING -- 0.4%
570 Harrah's Operating Co., Inc., 7.50%, 1/15/09 (a) Baa3/BBB- 623,887
600 MGM Mirage, Inc., 6.00%, 10/1/09 (a) Ba2/BB 594,750
650 Starwood Hotels & Resorts Worldwide, Inc, 7.875%,
5/1/12(a) Ba1/BB+ 715,813
800 Station Casinos Inc., 6.00%, 4/1/12 (a) Ba3/BB- 798,000
------------
2,732,450
------------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 7
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
INSURANCE -- 0.1%
$ 500 Prudential Financial, Inc., 4.10%, 11/15/06 (a) A3/A- $ 503,264
--------------
MULTI-MEDIA -- 1.2%
1,530 British Sky Broadcasting Group plc, 8.20%, 7/15/09 (a) Baa2/BBB- 1,733,475
800 Comcast Corp. 5.30%, 1/15/14 (a) Baa3/BBB 813,424
1,000 Continental Cablevision, Inc., 8.30%, 5/15/06 (a) Baa2/BBB 1,042,939
1,800 CSC Holding, Inc., 7.875%, 12/15/07 (a) B1/BB- 1,849,500
1,000 Lenfest Communications, Inc., 7.625%, 2/15/08 (a) Baa2/BBB 1,080,314
800 Rogers Cable Inc., 7.25%, 12/15/11 (a) Ba3/BB+ 647,038
1,075 Time Warner Cos, Inc., 7.48%, 1/15/08 (a) Baa1/BBB+ 1,160,659
600 Viacom, Inc., 5.625%-6.625%, 5/15/11-8/15/12 (a) A3/A- 628,694
--------------
8,956,043
--------------
OIL & GAS -- 5.1%
1,700 Chesapeake Energy Corp., 6.375% 6/15/15 (a)(e) Ba3/BB- 1,674,500
200 Devon Financing Corp., 6.875%, 9/30/11 (a) Baa2/BBB 222,406
4,250 El Paso Production Holdings Co., 7.75%, 6/1/13 (a) B3/B- 4,303,125
3,675 Enterprise Products Operating L.P., 4.625%-6.65%,
10/15/09-10/15/34, Ser. B (a) Baa3/BB+ 3,687,305
1,000 Evergreen Resoutces, Inc., 5.875%, 3/15/12 (a) Baa3/BBB- 1,001,301
1,000 Gazprom International SA., 7.20%, 2/1/20 (a) NR/BBB- 1,042,582
1,605 Kern River Funding Corp., 4.89%, 4/30/18 (a)(e) A3/A- 1,602,455
2,750 Kerr-McGee Corp., 5.875%, 9/15/06 (a) Ba3/BB+ 2,786,352
500 Kinder Morgan, Inc., 6.50%, 9/1/12 (a) Baa2/BBB 547,084
2,500 Panhandle Eastern Pipe Line Co., 6.05%, 8/15/13 (a) Baa3/BBB 2,648,517
Pemex Project Funding Master Trust,
3,100 7.375%-8.00%, 11/15/11-12/15/14 (a) Baa1/BBB 3,397,100
7,950 9.25%, 3/30/18 (a)(e) Baa1/BBB 9,818,250
3,750 Pioneer Natural Resources Co., 5.875%-6.50%,
7/15/08-7/15/16 (a) Baa3/BBB- 3,839,776
25 Sonat, Inc., 7.625%, 7/15/11 (a) Caa1/CCC+ 24,375
400 Southern Natural Gas Co., 8.00%, 3/1/32 (a) B1/B- 443,858
2,000 William Cos, Inc., 7.625%, 7/15/19 (a) B1/B+ 2,155,000
--------------
39,193,986
--------------
PAPER PRODUCTS -- 0.8%
900 Abitibi-Consolidated, Inc., 8.55%, 8/1/10 (a) Ba3/BB- 870,750
2,000 Fort James Corp., 6.875%, 9/15/07 (a) Ba2/BB+ 2,060,000
2,200 Georgia-Pacific Corp., 7.50%, 5/15/06 (a) Ba3/BB+ 2,266,000
600 International Paper Co., 6.75%, 9/1/11 (a) Baa2/BBB 655,418
220 Weyerhaeuser Co., 6.125%, 3/15/07 (a) Baa2/BBB 227,542
--------------
6,079,710
--------------
TELECOMMUNICATIONS -- 1.6%
350 AT&T Wireless Services, Inc., 7.50%, 5/1/07 (a) Baa2/A 371,688
100 British Telecommunications plc, 8.125%, 12/15/10 (a) Baa1/A- 117,451
</TABLE>
8 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
euro 1,280 Deutsche Telekom International Finance, 8.125%, 5/29/12,
VRN (a) Baa1/A- $ 2,118,043
$ 840 France Telcom, 7.00%, 3/14/08, VRN (a) Baa1/A- 1,206,738
740 Qwest Capital Funding, Inc., 7.25%, 2/15/11(a) Caa2/B 666,000
750 Qwest Communications International, Inc., 7.25%, 2/15/11
(a)(e) B3/B 708,750
400 Rogers Wireless Inc., 7.625%, 12/15/11 (a) Ba3/BB 326,706
SBC Communications, Inc.,
2,100 4.25%, 6/5/2 (a)(e) A2/A 2,102,062
2,800 5.10%, 9/15/14 (a) A2/A 2,806,437
600 Verizon Global Funding Inc., 4.00%, 1/15/08 (a) A2/A+ 596,411
900 Verizon New England, Inc., 6.50%, 9/15/11 (a) A2/A+ 973,864
100 Vodafone Group plc, 7.75%, 2/15/10 (a) A2/A 113,963
------------
12,108,113
------------
UTILITIES -- 2.9%
1,000 Carolina Power & Light Co., 6.65%, 4/1/08, Ser. D (a) Baa1/BBB 1,060,325
500 Cleveland Electric Illuminating Co., 6.86%, 10/1/08 (a) Baa2/BBB- 537,938
400 Columbus Southern Power Co., 5.50%, 3/1/13, Ser. C (a) A3/BBB 415,994
1,300 Constellation Energy Group, Inc., 7.00%, 4/1/12 (a) Baa1/BBB 1,460,068
1,300 Dayton Power & Light Co., 5.125%, 10/1/13 (a)(e) Baa2/BBB- 1,326,367
1,500 Entergy Gulf States, Inc., 3.60%, 6/1/08 (a) Baa3/BBB+ 1,467,963
900 Entergy Mississippi, Inc., 4.35%, 4/1/08 (a) Baa2/A- 899,028
629 GC1C Funding Corp., 5.13%, 1/15/14 (e) Baa3/BBB 623,265
200 Idaho Power Corp., 6.60%, 3/2/11 (a) A3/A- 220,717
1,000 MidAmerican Energy Holdings Co., 5.875%, 10/1/12 (a) Baa3/BBB- 1,054,959
2,300 Monongahela Power Co., 7.36% 1/125/10, Ser. A (a) Ba2/B 2,492,522
200 Niagara Mohawk Power Corp., 7.75%, 5/15/06 (a) A3/A+ 208,153
Ohio Edison Co.,
3,300 4.00%-5.45%, 5/1/08-5/15/15 (a) Baa2/BB+ 3,311,544
1,600 5.65%, 6/15/09 (a)(e) Baa2/BB+ 1,662,561
246 PNPP II Funding Corp., 8.51%, 11/30/06 (a) Baa2/BB+ 251,221
200 Progress Energy, Inc., 6.05%, 4/15/07 (a) Baa2/BBB- 206,001
500 PSE&G Power LLC, 7.75%, 4/15/11 (a) Baa1/BBB 574,730
327 Southern California Edison Co., 8.00%, 2/15/07 (a) A3/BBB+ 348,350
900 System Energy Resources, Inc., 4.875%, 10/1/07 (a) Baa3/BBB 910,256
1,000 Tampa Electric Co., 6.875%, 6/15/12 (a) Baa2/BBB 1,121,945
2,200 TXU Energy Co., 7.00%, 3/15/13 (a) Baa2/BBB 2,445,555
97 Waterford 3 Funding Corp., 8.09%, 1/2/17 (a) Baa2/BBB- 106,813
------------
22,706,275
------------
WASTE DISPOSAL -- 0.1%
500 Waste Management Inc., 6.50%, 11/15/08 (a) Baa3/BBB 532,709
------------
Total Corporate Bonds & Notes (cost--$189,479,474) 189,444,363
------------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 9
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 3.7%
$ 70 Bank of America Mortgage Securities, 5.59%, 5/1/05,
FRN (a) NR/AAA $ 70,104
3,000 Chase Commercial Mortgage Securities Corp., 6.48%,
5/1/05, FRN (a)(e) Aaa/NR 3,261,309
761 CS First Boston Mortgage Securities Corp., 3.40%,
8/25/33 (e)(f) NR/NR 765,139
5 First Nationwide Trust, 8.50%, 9/25/31, (a) NR/AAA 4,700
20,000 Greenpoint Mortgage Funding Trust, 3.34%, 6/25/35 (b) NR/NR 19,907,006
37,528 Hilton Hotel Pool Trust, 0.88%, 5/1/05, FRN, IO (e) Aaa/AAA 1,208,356
3,082 Ocwen Residential MBS Corp., 7.00%, 10/25/40 (a)(e) B3/NR 2,458,432
750 PNC Mortgage Acceptance Corp., 7.61%, 2/15/10 (a) Aaa/NR 835,895
--------------
Total Mortgage-Backed Securities (cost--$28,292,342) 28,510,941
--------------
U.S. TREASURY BONDS & NOTES -- 1.3%
5,810 3.375%, 1/15/07 (a)(g) Aaa/AAA 6,099,082
4,000 3.625%, 7/15/09 (b) Aaa/AAA 3,967,344
--------------
Total U.S. Treasury Bonds & Notes (cost--$10,012,516) 10,066,426
--------------
MUNICIPAL BONDS & NOTES (a) -- 1.2%
8,555 Detroit City School Distrist, GO, 5.00%, 5/1/33, Ser. B
(FGIC) (cost--$8,503,787) Aaa/AAA 8,891,810
--------------
ASSET-BACKED SECURITIES (a)(e) -- 0.1%
Keystone Owner Trust,
844 8.35%, 12/25/24 Ba2/NR 842,270
17 9.00%, 1/25/29 Ba2/NR 16,033
--------------
Total Asset-Backed Securities (cost--$870,972) 858,303
--------------
PREFERRED STOCK -- 0.2%
Shares
(000)
- ---------
FINANCIAL SERVICES -- 0.2%
56 Goldman Sachs Group, Inc., 3.91%, 8/10/05, FRN
(cost--$1,400,0000) A2/A- 1,398,880
--------------
RIGHTS -- 0.0%
250 United Mexican States, Ser. C, expires 6/1/05 NR/NR 6,475
250 United Mexican States, Ser. D, expires 6/30/06 NR/NR 1,625
250 United Mexican States, Ser. E, expires 6/1/07 NR/NR 5,938
--------------
Total Rights (cost--$0) NR/NR 14,038
--------------
</TABLE>
10 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 51.0%
U.S. GOVERNMENT AGENCY SECURITIES (a) -- 17.3%
$ 57,000 Fannie Mae, 2.48%-3.01%, 5/11/05-7/27/05 Aaa/AAA $ 56,778,961
76,900 Freddie Mac, 2.67%-3.02%, 5/27/05-9/8/05 Aaa/AAA 76,636,452
--------------
Total U.S. Government Agency Securities
(cost--$133,424,938) 133,415,413
--------------
COMMERCIAL PAPER (a) -- 14.1%
BANKING -- 3.0%
23,200 Skandinaviska Enskilda Banken, 2.68%-2.70%,
5/3/05-5/27/05 P-1/A-1 23,147,153
--------------
FINANCING -- 10.0%
20,400 Barclay US Funding LLC, 2.67%-2.86%, 5/2/05-6/3/05 P-1/A-1+ 20,391,624
21,700 General Motors Acceptance Corp., 2.362-3.92%,
3/21/05-10/20/05 P-2/A-3 21,672,576
11,700 Rabobank USA Finance Corp., 2.89%, 5/2/05 P-1/A-1+ 11,699,061
22,900 UBS Finance, Inc., 2.675%-2.91%, 5/3/05-6/10/05 P-1/A-1+ 22,869,710
--------------
76,632,971
--------------
OIL & GAS -- 1.1%
8,700 TotalFinaElf Capital plc., 2.81% 5/9/05 P-1/A-1+ 8,694,567
--------------
Total Commercial Paper (cost--$108,475,345) 108,474,691
--------------
SOVEREIGN DEBT OBLIGATIONS -- 11.7%
euro 69,800 Republic of France, 2.01%, 7/13/05-7/28/05
(cost--$90,124,034) Aaa/AAA 89,741,810
--------------
CORPORATE NOTES -- 6.3%
AUTOMOTIVE -- 0.0%
$ 100 Federal-Mogul Corp., 7.375%, 1/15/06 (c)(d) NR/NR 24,000
--------------
BANKING -- 0.5%
3,900 Washington Mutual, Inc., 3.02%, 5/3/05, FRN (a) A3/A- 3,906,295
--------------
DIVERSIFIED MANUFACTURING -- 0.1%
700 Tyco International Group SA, 6.375%, 2/15/06 (a) Baa3/BBB 713,495
--------------
ELECTRONICS -- 0.9%
6,650 Electronic Data System Corp., 7.125%, 5/15/05 (a)(e) Ba1/BBB- 6,654,449
--------------
FINANCING -- 1.3%
Ford Motor Crediit Co.,
1,600 3.59%, 7/18/05, FRN (a) A3/BBB- 1,598,051
6,300 6.875%-7.60%, 8/1/05-2/1/06 (a) A3/BBB- 6,358,418
2,200 General Motors Acceptance Corp., 4.39%-4.75%,
5/19/05-7/20/05, FRN (a) Baa2/BBB- 2,200,202
--------------
10,156,671
--------------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 11
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- -----------------------------------------------------------------------------------------------------------
FOOD -- 0.4%
$ 3,000 Safeway, Inc., 3.80%, 8/15/05 (a) Baa2/BBB $ 2,998,755
-------------
HOTELS/GAMING -- 0.3%
1,000 Harrahs Operating Co., Inc., 7.875%, 12/15/05 (a) Ba1/BB+ 1,025,000
1,000 Marriott International Inc., 6.875%, 11/15/05, Ser. B (a) Baa2/BBB+ 1,016,970
-------------
2,041,970
-------------
MULTI-MEDIA -- 0.4%
3,400 AOL Time Warner, Inc., 6.125%, 4/15/06 (a) Baa1/BBB+ 3,470,132
-------------
OIL & GAS -- 0.1%
610 Halliburton Co., 4.65%, 7/17/05, FRN (a) Baa2/BBB 613,813
-------------
TELECOMMUNICATIONS -- 0.9%
1,300 British Telecommunications plc, 7.875%, 12/15/05 (a) Baa1/A- 1,332,772
2,000 Continental Cablevision, Inc., 8.875%, 9/15/05 (a) Baa2/BBB 2,036,316
1,400 Deutsche Telekom International Finance, 8.25%, 6/15/05 (a) Baa1/BBB+ 1,407,899
2,000 France Telecom SA, 7.20%, 3/1/06, VRN (a) Baa1/A- 2,058,286
180 Lenfest Communications, Inc., 8.375%, 11/1/05 (a) Baa2/BBB 183,721
-------------
7,018,994
-------------
TOBACCO -- 0.7%
5,400 Philip Morris Cos., Inc., 6.375%-7.00%, 7/15/05-2/1/06 (a) Baa2/BBB 5,444,759
-------------
UTILITIES -- 0.7%
4,000 Progress Energy, Inc., 6.75%, 3/1/06 (a) Baa2/BBB- 4,090,624
900 Gulf States Utilities Co., 6.77%, 8/1/05, Ser. B (a) Baa3/BBB 907,202
350 Pacific Gas & Electric Co., 3.82%, 7/5/05 (a) Baa1/BBB 350,862
-------------
5,348,688
-------------
Total Corporate Notes (cost--$48,648,303) 48,392,021
-------------
U.S. TREASURY BILLS (a) -- 0.9%
7,175 2.59%-2.75%, 5/5/05-6/16/05 (cost--$7,154,207) Aaa/AAA 7,154,207
-------------
REPURCHASE AGREEMENT (a) -- 0.7%
5,001 Agreement with State Street Bank & Trust Co., dated
April 29, 2005, 2.40% due 5/2/05, proceeds: $5,200,000;
collateralized by Freddie Mac 1.50% due 8/15/05, valued
at $5,105,998 with accrued interest (cost--$5,001,000) 5,001,000
-------------
Total Short-Term Investments (cost--$392,827,827) 392,179,142
-------------
TOTAL INVESTMENTS BEFORE OPTIONS WRITTEN (cost--$1,117,523,401) -- 146.3% 1,125,194,451
-------------
</TABLE>
12 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Contracts Value
- ------------------------------------------------------------------------------------------------------------
CALL OPTIONS WRITTEN (i) -- (0.1)%
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade,
(200) Strike price $113, expires 5/20/05 $ (25,000)
(255) Strike price $114, expires 5/20/05 (11,953)
(121,200,000) Swap Option 3 Month LIBOR,
Strike rate 4.50%, expires 5/20/05 (582,487)
---------------
Total Call Options Written (premiums received--$466,290) (619,440)
---------------
</TABLE>
<TABLE>
PUT OPTIONS WRITTEN (i) -- (0.0)%
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade
(200) Strike price $108, expires 5/20/05 (6,250)
(255) Strike price $109, expires 5/20/05 (15,938)
(121,200,000) Swap Option 3 Month LIBOR,
Strike rate 5.25%, expires 5/20/05 (121)
----------------
Total Put Options Written (premiums received--$565,566) (22,309)
----------------
Total Options Written (premiums received--$1,031,856) (641,749)
----------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost--$1,116,491,545) 146.2% 1,124,552,702
Liabilities in excess of other assets (46.2) (355,274,553)
----- ----------------
NET ASSETS 100.0% $ 769,278,149
----- ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 13
</TABLE>
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 113.9%
FANNIE MAE -- 97.0%
$ 22,920 3.29%-7.91%, 5/1/05-5/25/05, CMO, FRN (a) Aaa/AAA $ 23,197,482
584,500 4.50%-6.00%, 5/31/20-5/31/35 (b) Aaa/AAA 587,847,851
128,480 4.50%-7.50%, 2/25/09-3/1/35, CMO (a) Aaa/AAA 129,997,083
--------------
741,042,416
--------------
FREDDIE MAC -- 11.7%
12,866 3.40%-5.56%, 5/1/05-5/15/05, CMO, FRN (a) Aaa/AAA 13,086,986
37,330 3.50%-7.50%, 7/1/08-8/15/30, CMO (a) Aaa/AAA 37,581,820
39,000 5.00%-5.50%, 5/31/35 (b) Aaa/AAA 38,831,548
--------------
89,500,354
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.2%
16,178 2.75%-5.75%, 5/1/05-4/1/06, CMO, FRN (a) Aaa/AAA 16,371,064
22,728 5.50%-7.50%, 3/20/13-3/15/34, CMO (a) Aaa/AAA 23,155,489
--------------
39,526,553
--------------
Total U.S. Government Agency Securities (cost-$865,513,096) 870,069,323
--------------
ASSET-BACKED SECURITIES -- 33.2%
Aegis Asset Backed Securities Trust,
1,782 3.42%, 5/25/05, FRN (a) Aaa/AAA 1,787,417
4,283 4.00%, 11/25/33, IO (c)(e) Aaa/AAA 142,364
260 Amortizing Residential Collateral Trust, 3.29%, 5/25/05,
FRN (a) NR/AAA 260,308
3,940 Bayview Financial Asset Trust, 3.42%, 5/25/05, FRN (a)(e) Aaa/NR 3,947,811
Bear Stearns Asset Backed Securities, Inc.,
6,104 3.61%, 5/25/05, FRN (a) Aaa/AAA 6,177,200
10,940 5.00%, 3/25/07, IO (c)(e) NR/AAA 953,897
72 Cendant Mortgage Corp., 5.98%, 5/1/05, FRN (a)(e) NR/AAA 73,743
Centex Home Equity,
6,392 3.30%, 5/25/05, FRN (a) Aaa/AAA 6,400,260
8,029 3.70%, 6/25/22 (a) Aaa/AAA 8,012,781
15,000 Chase Credit Card Master Trust, 3.00%, 5/15/05, FRN (a) Aaa/AAA 15,009,680
18,209 Citigroup Mortgage Loan Trust, Inc., 3.11%, 5/25/05, FRN (a) Aaa/AAA 18,224,091
800 Community Program Loan Trust, 4.50%, 4/1/29 (a) NR/AAA 759,774
1,609 Conseco Recreational Enthusiast Consumer Trust,
5.55%, 8/15/25 (a) Aa2/AA- 1,642,753
Countrywide Asset-Backed Certificates, Inc.,
5,366 3.26%, 5/25/05, FRN (a) Aaa/AAA 5,371,865
2,757 3.49%, 5/25/05, FRN (a)(e) Aaa/AAA 2,762,748
16,000 4.26%, 12/25/17 (a) Aaa/AAA 16,005,598
2,468 Credit-Based Asset Servicing and Securitization, 3.47%,
5/25/05, FRN (a) Aaa/AAA 2,482,832
10,502 CS First Boston Mortgage Securities Corp., 3.49%, 5/25/05,
FRN (a)(e) Aaa/AAA 10,488,493
</TABLE>
14 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ------------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (CONTINUED)
$ 137 EMC Mortgage Loan Trust, 3.39%, 5/25/05, FRN (a)(e) Aaa/AAA $ 137,715
18,167 First Franklin Mortgage Loan Asset Backed Certificate,
3.40%, 5/25/05, FRN (a) Aaa/AAA 18,254,464
46 First Plus Home Loan Trust, 7.32%, 11/10/23 (a) NR/AA 46,492
162 Fremont Home Loan Owner Trust, 3.81%, 5/25/05, FRN (a) Aaa/AAA 162,416
677 Fremont Home Loan Trust, 3.39%, 5/25/05, FRN (a) Aaa/AAA 677,939
Green Tree Financial Corp.,
9,424 6.18%-6.87%, 4/1/30 (a) Baa3/NR 9,747,293
1,353 6.81%, 12/1/27 (a) Baa3/A- 1,427,733
1,000 7.06%, 2/1/31 (a) NR/B 862,182
1,649 7.40%, 6/15/27 (a) A2/AA+ 1,754,737
578 7.55%, 1/15/29 (a) NR/AA 624,653
603 Home Equity Mortgage Trust, 3.44%, 5/25/05, FRN (a) Aaa/AAA 603,872
257 Household Mortgage Loan Trust, 3.29%, 5/20/05, FRN (a) Aaa/AAA 257,512
1,458 Irwin Home Equity Trust, 3.54%, 5/25/05, FRN (a) Aaa/AAA 1,466,690
14,000 Ixis Real Estate Capital Trust, 3.21%, 5/25/05, FRN (a) Aaa/AAA 14,002,189
7,500 Long Beach Mortgage Loan Trust, 3.97%, 5/25/05, FRN (a) Aa2/NR 7,595,288
500 Madison Avenue Manufactured Housing, 4.47%, 5/25/05,
FRN (a) Baa3/A+ 479,644
177 Merrill Lynch Mortgage Investor, Inc., 3.38%, 5/25/05, FRN (a) Aaa/AAA 176,812
2,455 Mid-State Trust, 6.01%, 8/15/37 (a) Aaa/AAA 2,485,084
2,099 Morgan Stanley ABS Capital I, Inc., 3.36%, 4/25/05, FRN (a) Aaa/AAA 2,105,162
104 Nissan Auto Receivables Owner Trust, 4.28%, 10/16/06 (a) Aaa/AAA 103,866
31,242 Park Place Securities Inc., 3.14%, 5/25/05, FRN (a) Aaa/AAA 31,272,350
1,007 Renaissance Home Equity Loan Trust, 3.22%, 5/25/05,
FRN (a) Aaa/AAA 1,007,616
2,000 Residential Asset Mortgage Products, Inc., 5.90%, 7/25/34 (a) Aaa/AAA 2,030,838
Residential Asset Securities Corp.,
3,000 3.45%, 5/25/05, FRN (a) Aa2/AA 3,002,982
915 7.14%, 4/25/32 (a) A2/A 934,692
8,689 8.19%, 2/25/31 (a) NR/AAA 8,932,826
27,479 Residential Funding Mortgage Securities,
3.17%, 5/25/05, FRN (a) Aaa/AAA 27,498,495
3,800 Salomon Brothers Mortgage Securities VII, Inc., 4.17%,
5/25/05, FRN (a) NR/AAA 3,806,821
1,251 Saxon Asset Securities Trust, 4.17%, 5/25/05, FRN (a) Aa2/NR 1,253,110
SLM Student Loan Trust,
330 3.15%, 5/25/05, FRN (a) Aaa/AAA 329,542
8,117 3.44%, 5/25/05, FRN (a) Aaa/AAA 8,209,275
2,000 World Financial Network Credit Card Master Trust, 2.91%,
5/15/05, FRN (a) Aaa/AAA 2,000,312
--------------
Total Asset-Backed Securities (cost--$253,593,660) 253,754,217
--------------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, RSemi-Annual Report 15
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES -- 23.9%
Bear Stearns Alt-A Trust,
$ 5,829 3.30%, 5/25/05, FRN (a) Aaa/AAA $ 5,851,735
9,981 4.77%, 5/1//05, FRN (a) Aaa/AA+ 9,953,358
104 Bear Stearns Mortgage Securities, Inc., 6.77%, 5/1/05,
FRN (a) Aaa/NR 106,923
11,821 Carey Commercial Mortgage Trust, 5.97%, 9/20/19 (a)(e) Aaa/NR 12,037,319
79 Citicorp Mortgage Securities, Inc., 5.75%, 6/25/09 (a) Aaa/AAA 78,599
3,505 Commercial Capital Access One, Inc., 7.68%, 5/1/05,
FRN (a)(e) NR/NR 3,825,507
26,775 Countrywide Alternative Loan Trust., 3.24%, 5/25/05,
FRN (a)(f) Aaa/AAA 26,454,185
Countrywide Home Loans,
11,494 3.33%, 5/25/05, FRN (a)(f) Aaa/AAA 11,522,035
4,844 3.41%, 5/25/05, FRN (a) Aaa/AAA 4,854,685
2,938 3.54%, 5/1/05, FRN (a)(f) NR/AAA 2,957,649
261 CS First Boston Mortgage Securities Corp.,
3.23%, 5/25/05, FRN (a)(f) NR/NR 261,402
23,807 First Horizon Mortgage Pass-through Trust, 3.42%, 5/25/05,
FRN (a)(e) NR/AAA 23,751,165
851 GMAC Commercial Mortgage Securities Inc.,
6.50%, 5/15/35 (a) NR/BB+ 906,474
GS Mortgage Securities Corp. II,
1,500 6.61%, 2/14/16 (a)(e) NR/AAA 1,656,179
3,000 6.62%, 5/3/18 (a)(e) Aaa/AAA 3,335,560
37,528 Hilton Hotel Pool Trust, 0.62%, 5/1/05, FRN, IO (a)(e) Aaa/AA 1,208,356
17 Impac Secured Assets Corp., 7.37%, 4/25/32 (a) Aaa/AAA 17,467
4,949 Indymac Index Mortgage Loan Trust, 3.30%, 5/25/05,
FRN (a)(f) Aaa/AAA 4,937,684
2,000 JPMorgan Chase Commercial Mortgage Security Corp.,
6.47%, 11/15/35 (a) NR/AAA 2,194,853
928 Mellon Residential Funding Corp., 3.48%, 5/1/05, FRN (a) NR/AAA 931,731
1,257 Merrill Lynch Credit Corp. Mortgage Investors, Inc.,
3.33%-3.55%, 5/15/05, FRN (a) Aaa/AAA 1,261,211
3,271 Merrill Lynch Mortgage Investors, Inc., 3.27%, 5/25/05,
FRN (a) Aa1/AAA 3,271,470
1,604 Morgan Stanley Dean Witter Capital I, Inc., 4.60%,
3/25/33 (a) Aaa/AAA 1,621,862
899 Morgan Stanley Mortgage Trust, 3.64%, 5/20/05, FRN (a) NR/AAA 899,381
1,220 Mortgage Capital Funding, Inc., 7.29%, 7/20/27 (a) Aaa/NR 1,250,079
370 Residential Asset Securitization Trust, 5.50%, 7/25/33 (a) NR/AAA 370,032
20,197 Residential Funding Mortgage Securities, Inc., 4.60%, 5/1/05,
FRN (a) Aaa/AAA 20,281,656
5,000 Structured Adjustable Rate Mortgage Loan, 3.51%, 5/25/05,
FRN (a) Aaa/AAA 5,024,750
</TABLE>
16 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ------------------------------------------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES (CONTINUED)
$ 5,713 Structured Asset Mortgage Investments Inc.,
3.33%, 5/19/05, FRN (a) Aaa/AAA $ 5,725,149
94 Structured Asset Securities Corp., 4.14%, 5/1/05, FRN (a) Aaa/AAA 95,638
2,780 Vendee Mortgage Trust, 6.50%, 9/15/24 (a) NR/NR 2,953,691
Washington Mutual Mortgage Securities Corp.,
5,384 3.19%-5.13%, 5/1/05-5/25/05, FRN (a) Aaa/AAA 5,393,694
5,506 5.13%, 5/1/05, FRN (a) Aaa/AA+ 5,469,748
4,256 5.13%, 5/1/05, FRN (a) Aa2/A+ 4,215,057
Wells Fargo Mortgage Backed Securities Trust,
7,021 4.81%, 5/1/05 FRN (a) Aaa/AAA 7,017,059
916 5.00%, 6/25/18 (a) Aaa/AAA 916,296
------------
Total Mortgage-Related Securities (cost-$182,968,074) 182,609,639
------------
MUNICIPAL BONDS & NOTES (a) -- 1.4%
CALIFORNIA - 0.7%
5,000 Los Angles California Water & Power Rev, 5.00%, 7/01/30,
Ser. A Aa3/AA- 5,213,950
------------
NEW YORK - 0.7%
5,000 New York City Muni. Water Finance Auth. Rev., 5.00%,
6/15/35 Aa2/AA+ 5,206,100
------------
Total Municipal Bonds & Notes (cost-$9,851,838) 10,420,050
------------
PREFERRED STOCK (a) - 0.1%
Shares
- ----------
17,350 Fannie Mae, 7.00%, 6/30/05, FRN (cost-$867,500) Aa3/AA- 967,806
------------
SHORT-TERM INVESTMENTS - 10.7%
Principal
Amount
(000)
- ----------
U.S. GOVERNMENT AGENCY DISCOUNT NOTES (a) - 7.9%
$ 23,400 Fannie Mae 2.73%-3.01%, 5/02/05-7/27/05 Aaa/AAA 23,226,934
21,000 Federal Home Loan Bank, 2.69%, 5/2/05 Aaa/AAA 20,998,367
16,400 Freddie Mac 2.88%-3.00%, 7/12/05-8/09/05 Aaa/AAA 16,272,492
------------
Total U.S. Government Agency Discount Notes
(cost-$60,512,483) 60,497,793
------------
COMMERCIAL PAPER (a) - 1.2%
BANKING - 1.2%
4,200 Skandinaviska Enskilda Banken, 2.68%, 5/3/05 P-1/A-1 4,199,375
4,700 UBS Finance, Inc., 2.73%, 6/1/05-6/2/05 P-1/A-1+ 4,688,763
------------
Total Commercial Paper (cost--$8,888,138) 8,888,138
------------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 17
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
U.S. TREASURY BILLS (a) - 0.6%
$ 4,745 2.675%-2.75%, 6/2/05-6/16/05 (cost-$4,729,500) Aaa/AAA $ 4,729,500
--------------
ASSET-BACKED SECURITIES - 0.0%
2,000 NPF XII, Inc. 0.00%, 11/1/03, FRN (c)(d)(e)(f)(h)
(cost-$2,000,000) NR/NR --
--------------
REPURCHASE AGREEMENT - 1.0%
7,860 Agreement with State Street Bank & Trust Co.,
dated April 29, 2005, 2.40% due 5/2/05 proceeds:
$7,861,572; collateralized by Freddie Mac, 1.50% due
8/15/05, valued at $8,020,858 with accrued interest,
(cost-$7,860,000) Aaa/AAA 7,860,000
--------------
Total Short-Term Investments (cost-$83,990,121) 81,975,431
--------------
PUT OPTIONS PURCHASED (i) - 0.0%
Contracts
------------
U.S. Treasury Notes 10 yr Futures, Chicago Board of Trade,
450 Strike price $101, expires 5/20/05 7,031
298 Strike price $107, expires 5/20/05 4,656
--------------
Total Put Options Purchased (premiums paid-$14,493) 11,687
--------------
TOTAL INVESTMENTS BEFORE CALL OPTIONS WRITTEN (cost-$1,396,798,782)-183.2% 1,399,808,153
--------------
CALL OPTIONS WRITTEN (i) - (0.1)%
(125,000,000) Swap Option 3 month LIBOR,
Strike rate 4.50%, expires 5/20/05 (600,750)
(125,000,000) Swap Option 3 month LIBOR,
Strike rate 5.25%, 5/20/05 (125)
--------------
Total Call Options Written (premiums received-$775,000) (600,875)
--------------
TOTAL INVESTMENTS, NET OF CALL OPTIONS WRITTEN (cost-$1,396,023,782) 183.1% 1,399,207,278
Liabilities in excess of other assets (83.1) (635,012,199)
------- --------------
NET ASSETS 100.0% $ 764,195,079
------- --------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
18 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES R SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
- --------------------------------------------------------------------------------------------------------------
U.S. TREASURY NOTES & BONDS (a) -- 95.9%
$ 100 U.S. Treasury Bonds, 6.625%, 2/15/27 Aaa/AAA $ 127,433
49,269 U.S. Treasury Inflation Index, 1.875%-3.875%, 1/15/07-4/15/29 (g) Aaa/AAA 53,337,603
5,120 U.S. Treasury Inflation Index, 2.00%, 7/15/14 (b)(g) Aaa/AAA 5,314,760
14,885 U.S. Treasury Notes, 0.875%-3.00%, 4/15/10-1/15/15 Aaa/AAA 15,558,313
-----------
Total U.S. Treasury Bonds & Notes (cost--$73,538,328) 74,338,109
-----------
SOVEREIGN DEBT OBLIGATIONS (a) -- 1.5%
FRANCE -- 0.2%
euro 100 Republic of France, 5.75%, 10/25/32 Aaa/AAA 167,521
-----------
GERMANY -- 0.7%
300 Republic of Germany, 6.25%, 1/4/30 Aaa/AAA 528,105
-----------
SPAIN -- 0.6%
300 Kingdom of Spain, 5.75%, 7/30/32 Aaa/AAA 501,869
-----------
Total Sovereign Debt Obligations (cost--$1,200,028) 1,197,495
-----------
CORPORATE BONDS -- 0.8%
FINANCE -- 0.2%
$ 200 General Motors Acceptance Corp., 4.05%, 7/18/05, FRN (a) Baa2/BB 191,018
-----------
HOTELS/GAMING -- 0.6%
400 Park Place Entertainment Corp., 9.375%, 2/15/07 Ba2/BB- 428,500
-----------
Total Corporate Bonds (cost--$627,876) 619,518
-----------
PREFERRED STOCK (e) -- 0.0%
Shares
- -----------
FINANCE -- 0.0%
600 Fannie Mae, 7.00%, 6/30/05, FRN (cost--$30,000) Aa3/AA- 33,469
-----------
SHORT-TERM INVESTMENTS -- 8.7%
Principal
Amount
(000)
- -----------
COMMERCIAL PAPER (a) -- 6.2%
BANKING -- 2.6%
$ 1,200 ING U.S. Funding LLC., 2.98%-3.10%, 7/27/05-7/28/05 P-1/A-1+ 1,191,693
800 Swedbank Forenings., 2.98%, 7/1/05 P-1/A-1+ 795,752
-----------
1,987,445
-----------
FINANCIAL SERVICES -- 3.6%
1,000 CBA Finance, Inc., 3.02%, 7/8/05 P-1/A-1+ 994,070
1,600 Dexia Delaware, Inc., 3.00%, 7/5/05 P-1/A-1+ 1,590,928
200 UBS Finance, Inc., 2.95%, 5/25/05 P-1/A-1+ 199,607
-----------
2,784,605
-----------
Total Commercial Paper (cost--$4,773,014) 4,772,050
-----------
U.S. TREASURY BILLS (a) -- 0.1%
110 2.68%-2.69%, 6/2/05 (cost--$109,737) Aaa/AAA 109,737
-----------
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 19
FIXED INCOME SHARES -- SERIES R SCHEDULE OF INVESTMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
Principal
Amount
(000) Value
- ------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
REPURCHASE AGREEMENT -- 2.4%
$1,836 Agreement with State Street Bank & Trust Co., dated April 29,
2005, 2.40% due 5/2/05 proceeds: $1,836,367; collateralized
by Federal Home Loan Bank, 3.25% due 11/15/06, valued at
$1,877,167, with accrued interest (cost--$1,836,000) $ 1,836,000
------------
Total Short-Term Investments (cost--$6,718,751) 6,717,787
------------
TOTAL INVESTMENTS BEFORE OPTIONS WRITTEN (cost--$82,114,983) -- 106.9% 82,906,378
------------
CALL OPTIONS WRITTEN (i) -- 0.0%
Contracts
- --------
U.S. Treasury Notes 10 Year Futures, Chicago Board of Trade,
(12) Strike price $112, expires 5/20/05 (4,125)
(19) Strike price $113, expires 5/20/05 (2,375)
(2) Strike price $114, expires 5/20/05 (94)
------------
Total Call Options Written (premiums received--$4,945) (6,594)
------------
PUT OPTIONS WRITTEN (i) -- 0.0%
U.S. Treasury Notes 10 Year Futures, Chicago Board of Trade, (234)
(15) Strike price $107, expires 5/20/05 (1,125)
(18) Strike price $109, expires 5/20/05 ------------
Total Put Options Written (premiums received--$6,633) (1,359)
------------
Total Options Written (premiums received--$11,578) (7,953)
------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost--$82,103,405) 106.9% 82,898,425
Liabilities in excess of other assets (6.9) (5,344,736)
----- ------------
NET ASSETS 100.0% $ 77,553,689
===== ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS:
(a) All or partial amount segregated as collateral for futures
contracts, when-issued or delayed-delivery
securities.
(b) When-issued or delayed-delivery security. To be delivered/settled
after April 30, 2005.
(c) Security deemed illiquid.
(d) Security in default.
(e) 144A Security--security exempt from registration under Rule 144A of
the Securities Act of 1933. These securities may be resold in
transactions exempt from registration, typically only to qualified
institutional investors.
(f) Fair-valued security.
(g) Inflationary Bonds--principal amount of security is adjusted for
inflation.
(h) Security pledged as collateral for reverse repurchase agreement.
(i) Non-income producing.
- --------------------------------------------------------------------------------
GLOSSARY:
CLO -- Collateralized Loan Obligation
CMO -- Collateralized Mortgage Obligation
EURO -- Eurodollar
FGIC -- Insured by Financial Guaranty Insurance Co.
FRN -- Floating Rate Note -- maturity date shown is date of next rate change
and the interest rate disclosed reflects the rate in effect on April
30, 2005.
GO -- General Obligation Bond
IO -- Interest Only
LIBOR -- London Interbank Offered Rate
NR -- Not Rated
VRN -- Variable Rate Note -- maturity date shown is date of next rate change
and the interest rate disclosed reflects the rate in effect on April
30, 2005.
20 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES C, M, R STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
SERIES C SERIES M SERIES R
------------------- ----------------- --------------
ASSETS:
Investments, at value (cost--$1,117,523,401,
$1,396,798,782 and $82,114,983, respectively) $ 1,125,194,451 $1,399,808,153 $82,906,378
- ----------------------------------------------------------- --------------- -------------- -----------
Cash (including foreign currency for Series C of
$712,874 with cost of $716,399) 741,890 8,967 442
- ----------------------------------------------------------- --------------- -------------- -----------
Swap premiums paid 10,483,584 -- 17,910
- ----------------------------------------------------------- --------------- -------------- -----------
Receivable for investments sold 10,106,497 21,807,587 720
- ----------------------------------------------------------- --------------- -------------- -----------
Interest receivable 6,941,055 2,021,457 474,282
- ----------------------------------------------------------- --------------- -------------- -----------
Unrealized appreciation on swaps 3,656,480 -- 33,847
- ----------------------------------------------------------- --------------- -------------- -----------
Receivable for shares of beneficial interest sold 3,069,051 3,058,193 443,995
- ----------------------------------------------------------- --------------- -------------- -----------
Unrealized appreciation on forward foreign
currency contracts 2,291,942 -- 18,089
- ----------------------------------------------------------- --------------- -------------- -----------
Receivable for variation margin on futures contracts 14,055 -- --
- ----------------------------------------------------------- --------------- -------------- -----------
Total Assets 1,162,499,005 1,426,704,357 83,895,663
=========================================================== =============== ============== ===========
LIABILITIES:
Payable for investments purchased 368.635.921 650,636,361 5,739,354
- ----------------------------------------------------------- ---------------- -------------- -----------
Payable for short sales (cost--$10,106,250 and
$6,603,594, for Series C and Series M, respectively) 10,171,880 6,611,722 --
- ----------------------------------------------------------- ---------------- -------------- -----------
Swap premiums received 6,029,620 1,023,244 123,456
- ----------------------------------------------------------- ---------------- -------------- -----------
Payable for reverse repurchase agreement 3,400,000 -- --
- ----------------------------------------------------------- ---------------- -------------- -----------
Dividends payable 2,613,810 2,509,441 419,533
- ----------------------------------------------------------- ---------------- -------------- -----------
Unrealized depreciation on swaps 1,346,314 660,237 48,632
- ----------------------------------------------------------- ---------------- -------------- -----------
Variation margin payable 130,125 330,250 2,662
- ----------------------------------------------------------- ---------------- -------------- -----------
Options written, at value (premiums received--
$1,031,856; $775,000 and $11,578, respectively) 641,749 600,875 7,953
- ----------------------------------------------------------- ---------------- -------------- -----------
Payable for shares of beneficial interest redeemed 137,632 137,148 --
- ----------------------------------------------------------- ---------------- -------------- -----------
Unrealized depreciation on forward foreign
currency contracts 113,805 -- 384
- ----------------------------------------------------------- ---------------- -------------- -----------
Total Liabilities 393,220,856 662,509,278 6,341,974
=========================================================== =============== ============== ===========
NET ASSETS $ 769,278,149 $ 764,195,079 $77,553,689
=========================================================== =============== ============== ===========
NET ASSETS CONSIST OF:
Beneficial interest shares of $0.001 par value (unlimited
number authorized) 65,060 66,952 7,379
- ----------------------------------------------------------- ---------------- -------------- -----------
Paid-in-capital in excess of par 740,484,949 762,551,495 76,550,798
- ----------------------------------------------------------- ---------------- -------------- -----------
Dividends in excess of net investment income (790,968) (643,843) (3,093)
- ----------------------------------------------------------- ---------------- -------------- -----------
Accumulated net realized gain (loss) 16,753,886 (1,537,675) 172,595
- ----------------------------------------------------------- ---------------- -------------- -----------
Net unrealized appreciation of investments, futures
contracts, options written, swaps and other assets
and liabilities denominated in foreign currency 12,765,222 3,758,150 826,010
- ----------------------------------------------------------- ---------------- -------------- -----------
NET ASSETS $ 769,278,149 $ 764,195,079 $77,553,689
=========================================================== =============== ============== ===========
Shares Outstanding 65,060,347 66,951,674 7,378,751
- ----------------------------------------------------------- ---------------- -------------- -----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE $ 11.82 $ 11.41 $ 10.51
=========================================================== =============== ============== ===========
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 21
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES C, M, R STATEMENTS OF OPERATIONS
For the six months ended April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
SERIES C SERIES M SERIES R
-------------- -------------- --------------
INVESTMENT INCOME:
Interest $ 12,467,695 $ 11,021,194 $ 609,160
- -------------------------------------------------------- ------------ ------------ ----------
Dividends 66,250 15,350 --
- -------------------------------------------------------- ------------ ------------ ----------
Total Investment Income 12,533,945 11,036,544 609,160
- -------------------------------------------------------- ------------ ------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 2,047,125 1,674,308 162,322
- -------------------------------------------------------- ------------ ------------ ----------
Futures contracts 256,037 1,994,427 35,178
- -------------------------------------------------------- ------------ ------------ ----------
Options written 614,495 -- --
- -------------------------------------------------------- ------------ ------------ ----------
Swaps 11,689,705 (1,158,761) (5,960)
- -------------------------------------------------------- ------------ ------------ ----------
Foreign currency transactions 3,023,296 -- (9,352)
- -------------------------------------------------------- ------------ ------------ ----------
Net change in unrealized appreciation/depreciation of:
Investments (3,175,999) 2,219,511 680,304
- -------------------------------------------------------- ------------ ------------ ----------
Futures contracts (1,069,960) (2,797,000) 22,226
- -------------------------------------------------------- ------------ ------------ ----------
Options written 215,794 174,125 3,627
- -------------------------------------------------------- ------------ ------------ ----------
Swaps (4,516,369) (532,813) (3,645)
- -------------------------------------------------------- ------------ ------------ ----------
Foreign currency transactions 2,977,056 -- 17,495
- -------------------------------------------------------- ------------ ------------ ----------
Net realized and unrealized gain on investments,
futures contracts, options written, swaps and foreign
currency transactions 12,061,180 1,573,797 902,195
- -------------------------------------------------------- ------------ ------------ ----------
NET INCREASE IN NET ASSETS RESULTING FROM
INVESTMENT OPERATIONS $ 24,595,125 $ 12,610,341 $1,511,355
======================================================== ============ ============ ==========
</TABLE>
22 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES C STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
Six Months
ended
April 30, 2005 Year ended
(unaudited) October 31, 2004
---------------- -----------------
INVESTMENT OPERATIONS:
Net investment income $ 12,533,945 $ 19,648,605
- ---------------------------------------------------------------------- ------------- --------------
Net realized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 17,630,658 22,470,738
- ---------------------------------------------------------------------- ------------- --------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions (5,569,478) 4,309,406
- ---------------------------------------------------------------------- ------------- --------------
Net increase in net assets resulting from investment operations 24,595,125 46,428,749
====================================================================== ============= ==============
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (15,688,750) (20,334,474)
- ---------------------------------------------------------------------- ------------- --------------
Net realized gains (20,054,440) (6,332,601)
- ---------------------------------------------------------------------- ------------- --------------
Total dividends and distributions to shareholders (35,743,190) (26,667,075)
====================================================================== ============= ==============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 278,202,980 313,314,630
- ---------------------------------------------------------------------- ------------- --------------
Cost of shares redeemed (72,951,998) (131,998,376)
- ---------------------------------------------------------------------- ------------- --------------
Net increase in net assets from capital share transactions 205,250,982 181,316,254
- ---------------------------------------------------------------------- ------------- --------------
TOTAL INCREASE IN NET ASSETS 194,102,917 201,077,928
====================================================================== ============= ==============
NET ASSETS:
Beginning of period 575,175,232 374,097,304
- ---------------------------------------------------------------------- ------------- --------------
End of period (including (dividends in excess) undistributed net
investment income of $(790,968) and $2,363,837, respectively) $ 769,278,149 $ 575,175,232
====================================================================== ============= ==============
SHARES ISSUED AND REDEEMED:
Issued 23,530,311 26,819,713
- ---------------------------------------------------------------------- ------------- --------------
Redeemed (6,155,925) (11,331,491)
- ---------------------------------------------------------------------- ------------- --------------
NET INCREASE 17,374,386 15,488,222
====================================================================== ============= ==============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 23
FIXED INCOME SHARES -- SERIES M STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
Six Months
ended
April 30, 2005 Year ended
(unaudited) October 31, 2004
---------------- -----------------
INVESTMENT OPERATIONS:
Net investment income $ 11,036,544 $ 15,041,774
- ------------------------------------------------------------------- ------------- --------------
Net realized gain on investments, futures contracts and
options written 2,509,974 20,846,302
- ------------------------------------------------------------------- ------------- --------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written and swaps (936,177) 5,215,038
- ------------------------------------------------------------------- ------------- --------------
Net increase in net assets resulting from investment operations 12,610,341 41,103,114
=================================================================== ============= ==============
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (11,726,815) (17,215,884)
- ------------------------------------------------------------------- ------------- --------------
Net realized gains (22,562,551) (6,930,696)
- ------------------------------------------------------------------- ------------- --------------
Total dividends and distributions to shareholders (34,289,366) (24,146,580)
=================================================================== ============= ==============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 286,359,549 314,000,613
- ------------------------------------------------------------------- ------------- --------------
Cost of shares redeemed (70,177,361) (129,877,295)
- ------------------------------------------------------------------- ------------- --------------
Net increase in net assets from capital share transactions 216,182,188 184,123,318
- ------------------------------------------------------------------- ------------- --------------
Total increase in net assets 194,503,163 201,079,852
=================================================================== ============= ==============
NET ASSETS:
Beginning of period 569,691,916 368,612,064
- ------------------------------------------------------------------- ------------- --------------
End of period (including (dividends in excess) undistributed net
investment income of $(643,843) and $46,428, respectively) $ 764,195,079 $ 569,691,916
=================================================================== ============= ==============
SHARES ISSUED AND REDEEMED:
Issued 25,082,809 27,163,063
- ------------------------------------------------------------------- ------------- --------------
Redeemed (6,133,762) (11,263,112)
- ------------------------------------------------------------------- ------------- --------------
NET INCREASE 18,949,047 15,899,951
=================================================================== ============= ==============
</TABLE>
24 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES R STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
Six Months For the Period
ended April 15, 2004*
April 30, 2005 through
(unaudited) October 31, 2004
---------------- -----------------
INVESTMENT OPERATIONS:
Net investment income $ 609,160 $ 78,421
- ---------------------------------------------------------------------- ------------ ----------
Net realized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 182,188 6,255
- ---------------------------------------------------------------------- ------------ ----------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions 720,007 106,003
- ---------------------------------------------------------------------- ------------ ----------
Net increase in net assets resulting from investment operations 1,511,355 190,679
====================================================================== ============ ==========
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (612,183) (78,421)
- ---------------------------------------------------------------------- ------------ ----------
Net realized gains (15,918) --
- ---------------------------------------------------------------------- ------------ ----------
Total dividends and distributions to shareholders (628,101) (78,421)
====================================================================== ============ ==========
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 75,394,738 3,001,997
- ---------------------------------------------------------------------- ------------ ----------
Cost of shares redeemed (1,838,558) --
- ---------------------------------------------------------------------- ------------ ----------
Net increase in net assets from capital share transactions 73,556,180 3,001,997
- ---------------------------------------------------------------------- ------------ ----------
TOTAL INCREASE IN NET ASSETS 74,439,434 3,114,255
====================================================================== ============ ==========
NET ASSETS:
Beginning of period 3,114,255 --
- ---------------------------------------------------------------------- ------------ ----------
End of period (including dividends in excess of net investment
income of $3,093 and $70, respectively) $ 77,553,689 $3,114,255
====================================================================== ============ ==========
SHARES ISSUED AND REDEEMED:
Issued 7,255,169 300,194
- ---------------------------------------------------------------------- ------------ ----------
Redeemed (176,612) --
- ---------------------------------------------------------------------- ------------ ----------
NET INCREASE 7,078,557 300,194
====================================================================== ============ ==========
</TABLE>
*Commencement of operations.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 25
FIXED INCOME SHARES -- SERIES C, M FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
For the Year ended
Six Months -----------------------------------------------------------------
ended
April 30, 2005 October 31, October 31, October 31, October 31,
(unaudited) 2004 2003 2002 2001
---------------- ----------------- ----------------- -------------- --------------
SERIES C:
- ---------
Net asset value, beginning of
period $ 12.06 $ 11.62 $ 10.51 $ 11.35 $ 10.12
- ----------------------------------- ------------- ---------- ---------- -------- --------
INVESTMENT OPERATIONS:
Net investment income 0.23 0.49 0.71 0.73 0.75
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net realized and unrealized gain
(loss) on investments, futures
contracts, options written,
swaps and foreign currency
transactions 0.22 0.64 1.16 (0.62) 1.31
- ----------------------------------- ------------- ---------- ---------- -------- --------
Total from investment operations 0.45 1.13 1.87 0.11 2.06
- ----------------------------------- ------------- ---------- ---------- -------- --------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.29) (0.51) (0.71) (0.72) (0.75)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net realized gains (0.40) (0.18) (0.05) (0.23) (0.08)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Total dividends and distributions
to shareholders (0.69) (0.69) (0.76) (0.95) (0.83)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net asset value, end of period $ 11.82 $ 12.06 $ 11.62 $ 10.51 $ 11.35
- ----------------------------------- ------------- ---------- ---------- -------- --------
TOTAL INVESTMENT RETURN (1) 3.80% 10.14% 18.16% 1.06% 21.09%
- ----------------------------------- ------------- ---------- ---------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 769,278 $ 575,175 $ 374,097 $205,881 $ 51,541
- ----------------------------------- ------------- ---------- ---------- -------- --------
Ratio of operating expenses to
average net assets (4) 0.00%(2) 0.00% 0.00% 0.00% 0.00%
- ----------------------------------- ------------- ---------- ---------- -------- --------
Ratio of net investment income
to average net assets (4) 3.87%(2) 4.16% 6.11% 6.78% 6.53%
- ----------------------------------- ------------- ---------- ---------- -------- --------
Portfolio Turnover 95% 180% 297% 332% 605%
- -------------------------------------------------------------------------------------------------------------------
SERIES M:
- ---------
Net asset value, beginning of
period $ 11.87 $ 11.48 $ 11.75 $ 11.53 $ 10.45
- ----------------------------------- ------------- ---------- ---------- -------- --------
INVESTMENT OPERATIONS:
Net investment income 0.20 0.37 0.51 0.52 0.69
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net realized and unrealized gain
(loss) on investments, futures
contracts and option written (0.02) 0.65 0.23 0.62 1.26
- ----------------------------------- ------------- ---------- ---------- -------- --------
Total income from investment
operations 0.18 1.02 0.74 1.14 1.95
- ----------------------------------- ------------- ---------- ---------- -------- --------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.20) (0.43) (0.51) (0.52) (0.69)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net realized gains (0.44) (0.20) (0.50) (0.40) (0.18)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Total dividends and distributions
to shareholders (0.64) (0.63) (1.01) (0.92) (0.87)
- ----------------------------------- ------------- ---------- ---------- -------- --------
Net asset value, end of period $ 11.41 $ 11.87 $ 11.48 $ 11.75 $ 11.53
- ----------------------------------- ------------- ---------- ---------- -------- --------
TOTAL INVESTMENT RETURN (1) 1.68 9.17% 6.67% 10.65% 19.49%
- ----------------------------------- ------------- ---------- ---------- -------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 764,195 $ 569,692 $ 368,612 $215,803 $ 51,574
- ----------------------------------- ------------- ---------- ---------- -------- --------
Ratio of operating expenses to
average net assets (4) 0.00%(2) 0.00%(3) 0.00%(3) 0.00% 0.00%
- ----------------------------------- ------------- ---------- ---------- -------- --------
Ratio of net investment income
to average net assets (4) 3.45%(2) 3.21% 4.43% 4.54% 5.65%
- ----------------------------------- ------------- ---------- ---------- -------- --------
Portfolio Turnover 307% 894% 750% 722% 870%
- ----------------------------------- ------------- ---------- ---------- -------- --------
For the Period
March 17, 2000*
through
October 31, 2000
----------------
SERIES C:
- ---------
Net asset value, beginning of
period $ 10.00
- ----------------------------------- --------------
INVESTMENT OPERATIONS:
Net investment income 0.45
- ----------------------------------- --------------
Net realized and unrealized gain
(loss) on investments, futures
contracts, options written,
swaps and foreign currency
transactions 0.12
- ----------------------------------- --------------
Total from investment operations 0.57
- ----------------------------------- --------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.45)
- ----------------------------------- --------------
Net realized gains --
- ----------------------------------- --------------
Total dividends and distributions
to shareholders (0.45)
- ----------------------------------- --------------
Net asset value, end of period $ 10.12
- ----------------------------------- --------------
TOTAL INVESTMENT RETURN (1) 5.79%
- ----------------------------------- --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 10,396
- ----------------------------------- --------------
Ratio of operating expenses to
average net assets (4) 0.00%(2)
- ----------------------------------- --------------
Ratio of net investment income
to average net assets (4) 7.04%(2)
- ----------------------------------- --------------
Portfolio Turnover 547%
- ----------------------------------------------------
SERIES M:
- ---------
Net asset value, beginning of
period $ 10.00
- ----------------------------------- --------------
INVESTMENT OPERATIONS:
Net investment income 0.45
- ----------------------------------- --------------
Net realized and unrealized gain
(loss) on investments, futures
contracts and option written 0.45
- ----------------------------------- --------------
Total income from investment
operations 0.90
- ----------------------------------- --------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income (0.45)
- ----------------------------------- --------------
Net realized gains --
- ----------------------------------- --------------
Total dividends and distributions
to shareholders (0.45)
- ----------------------------------- --------------
Net asset value, end of period $ 10.45
- ----------------------------------- --------------
TOTAL INVESTMENT RETURN (1) 9.16%
- ----------------------------------- --------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 10,597
- ----------------------------------- --------------
Ratio of operating expenses to
average net assets (4) 0.00%(2)
- ----------------------------------- --------------
Ratio of net investment income
to average net assets (4) 7.00%(2)
- ----------------------------------- --------------
Portfolio Turnover 930%
- ----------------------------------- --------------
</TABLE>
* Commencement of operations.
(1) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(2) Annualized.
(3) If interest expense were included, the ratio of operating expenses to
average net assets would be 0.01%.
(4) Reflects the fact that no fees or expenses are incurred. The Portfolio is
an integral part of "wrap-fee" programs sponsored by investment advisers
and/or broker-dealers unaffiliated with the Portfolio, the Investment
Manager or the Sub-Adviser. Participants in these programs pay a "wrap"
fee to the sponsor of the program.
26 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES R FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
For the For the Period
Six months ended April 15, 2004*
April 30, 2005 through
(unaudited) October 31, 2004
------------------ ------------------
SERIES R
- --------
Net asset value, beginning of period $ 10.37 $ 10.00
- -------------------------------------------------------------------- -------- -------
INVESTMENT OPERATIONS:
Net investment income 0.19 0.26
- -------------------------------------------------------------------- -------- -------
Net realized and unrealized gain on investments, futures contracts,
options written swaps and foreign currency transactions 0.15 0.37
- -------------------------------------------------------------------- -------- -------
Total income from investment operations 0.34 0.63
- -------------------------------------------------------------------- -------- -------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.19) (0.26)
- -------------------------------------------------------------------- -------- --------
Net realized gains (0.01) --
- -------------------------------------------------------------------- -------- --------
Total dividends and distributions to shareholders (0.20) (0.26)
- -------------------------------------------------------------------- -------- --------
- -------------------------------------------------------------------- --------- --------
Net asset value, end of period $ 10.51 $ 10.37
- -------------------------------------------------------------------- --------- --------
TOTAL INVESTMENT RETURN (1) 3.38% 6.41%
- -------------------------------------------------------------------- --------- --------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $ 77,554 $ 3,114
- -------------------------------------------------------------------- --------- --------
Ratio of operating expenses to average net assets (2)(3) 0.00% 0.00%
- -------------------------------------------------------------------- --------- --------
Ratio of net investment income to average net assets (2)(3) 4.10% 4.72%
- -------------------------------------------------------------------- --------- --------
Portfolio Turnover 122% 23%
- -------------------------------------------------------------------- --------- --------
</TABLE>
* Commencement of operations.
(1) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(2) Annualized.
(3) Reflects the fact that no fees or expenses are incurred. The Portfolio is
an integral part of "wrap-fee" programs sponsored by investment advisers
and/or broker-dealers unaffiliated with the Portfolio, the Investment
Manager or the Sub-Adviser. Participants in these programs pay a "wrap"
fee to the sponsor of the program.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 27
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Income SHares (the "Trust"), was organized as a Massachusetts business
trust on November 3, 1999. The Trust is comprised of Series C, Series M, Series
R (the "Portfolios"), and the Allianz Dresdner Daily Asset Fund. These
financial statements relate to Series C, Series M and Series R. The financial
statements for Allianz Dresdner Daily Asset Fund are provided separately. Prior
to commencing operations on March 17, 2000, the Trust had no operations other
than matters relating to its organization and registration as a
non-diversified, open-end investment company under the Investment Company Act
of 1940, as amended. Allianz Global Investors Fund Management LLC (the
"Investment Manager"), formerly PA Fund Management LLC, serves as the
Portfolios' Investment Manager and is an indirect, wholly-owned subsidiary of
Allianz Global Investors of America L.P. ("Allianz Global"). Allianz Global is
an indirect, majority-owned subsidiary of Allianz AG. The Portfolios are
authorized to issue an unlimited number of shares of beneficial interest at
$0.001 par value.
The preparation of 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.
Under the Trust's organizational documents, the Portfolios' officers, trustees,
employees and agents are indemnified against certain liabilities that may arise
out of performance of their duties to the Portfolios. Additionally, in the
normal course of business, the Portfolios enter into contracts that contain a
variety of representations which provide general indemnifications. The
Portfolios maximum exposure under these arrangements is unknown as such
exposure would involve claims that may be made against the Portfolios that have
not yet been asserted. However, the Portfolios expect the risk of any loss to
be remote.
The following is a summary of significant accounting policies followed by the
Portfolios:
(A) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market
quotations are readily available are stated at market value. Portfolio
securities and other financial instruments for which market quotations are not
readily available or if a development/event occurs that may significantly
impact the value of a security may be fair-valued in good faith pursuant to
procedures established by the Board of Trustees, including certain fixed income
securities which may be valued with reference to securities whose prices are
more readily available. The Portfolios' investments are valued daily by an
independent pricing service, dealers quotations, or are valued at the last sale
price on the exchange that is the primary market for such securities, or the
last quoted bid price for those securities for which the over-the-counter
market is the primary market or for listed securities in which there were no
sales. Prices obtained from an independent pricing service use information
provided by market makers or estimates of market values obtained from yield
data relating to investments or securities with similar characteristics.
Short-term investments maturing in 60 days or less are valued at amortized
cost, if their original maturity was 60 days or less, or by amortizing their
value on the 61st day prior to maturity, if the original term to maturity
exceeded 60 days. Exchange traded options, futures and options on futures are
valued at the settlement price determined by the relevant exchange. The prices
used by the Portfolios to value securities may differ from the value that would
be realized if the securities were sold and the differences could be material
to the financial statements. The Portfolios' 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.
(B) 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 the trade date. Realized gains and losses on investments
are determined on the identified cost basis. Dividend income is recorded on the
ex-dividend date, except for certain dividends from foreign securities which
are recorded as soon after the ex-dividend date, as the Portfolios, using
reasonable diligence, become aware of such dividends. Interest income, adjusted
for the accretion of discounts and amortization of premiums, is recorded on an
accrual basis. Paydown gains and losses on mortgage- and asset- backed
securities are recorded as adjustments to interest income in the Statements of
Operations.
(C) FEDERAL INCOME TAXES
The Portfolios intend to distribute all of their taxable income and comply with
the other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no
28 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Portfolios intend not to be
subject to U.S. federal excise tax.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid
annually.
The Portfolios record dividends and distributions to shareholders on the
ex-dividend date. The amount of dividends and distributions are determined in
accordance with federal income tax regulations, which may differ from
accounting principles generally accepted in the United States of America. These
"book-tax" differences are considered either temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal income tax
treatment; temporary differences do not require reclassification.
(E) FOREIGN CURRENCY TRANSLATION
Accounting records are maintained in U.S. dollars as follows: (1) the foreign
currency market value of investments and other assets and liabilities
denominated in foreign currency are translated at the prevailing exchange rate
at the end of the period; and (2) purchases and sales, income and expenses are
translated at the prevailing exchange rate on the respective dates of such
transactions. The resulting net foreign currency gain or loss is included in
the Statement of Operations.
The Portfolios do not generally isolate that portion of the results of
operations arising as a result of changes in the foreign currency exchange
rates from the fluctuations arising from changes in the market prices of
securities. Accordingly, such foreign currency gain (loss) is included in net
realized and unrealized gain (loss) on investments. However, the Portfolios do
isolate the effect of fluctuations in foreign currency exchange rates when
determining the gain or loss upon the sale or maturity of foreign currency
denominated debt obligations pursuant to U.S. federal income tax regulations;
such amount is categorized as foreign currency gain or loss for both financial
reporting and income tax reporting purposes.
(F) 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 Portfolios are required to pledge to the broker an amount of cash
or securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contracts, the Portfolios 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 of payments are known as "variation margin" and
are recorded by the Portfolios as unrealized appreciation or depreciation. When
the contracts are closed, the Portfolios 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.
(G) OPTION TRANSACTIONS
The Portfolios may purchase and write (sell) put and call options for hedging
and/or risk management purposes or as part of its investment strategy. The risk
associated with purchasing an option is that the Portfolios pay a premium
whether or not the option is exercised. Additionally, the Portfolios bears the
risk of loss of premium and change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired
through the exercise of call options is increased by the premiums paid. The
proceeds from the securities sold through the exercise of put options is
decreased by the premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. These liabilities are reflected as options written in the
Statement of Assets and Liabilities. Premiums received from writing options
which expire unexercised are recorded on the expiration date as a realized
gain. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain,
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 29
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, a
Portfolios bears the market risk of an unfavorable change in the price of the
security or currency underlying the written option. Exercise of a option
written could result in the Portfolios purchasing a security or currency at a
price different from the current market value.
(H) INTEREST RATE/CREDIT DEFAULT SWAPS
The Portfolios enters into interest rate and credit default swap contracts
("swaps") for investment purposes, to manage its interest rate and credit risk
or to add leverage.
As a seller in a credit default swap contract, the Portfolios would be required
to pay the notional or other agreed-upon value to the counterparty in the event
of a default by a third party, such as a U.S. or foreign corporate issuer, on
the referenced debt obligation. In return, the Portfolios would receive from
the counterparty a periodic stream of payments over the term of the contract
provided that no event of default has occurred. If no default occurs, the
Portfolios would keep the stream of payments and would have no payment
obligations. Such periodic payments are accrued daily and charged to realized
gain (loss).
The Portfolios may also purchase credit default swap contracts in order to
hedge against the risk of default of debt securities held, in which case the
Portfolios would function as the counterparty referenced in the preceding
paragraph. As a purchaser of a credit default swap contract, the Portfolios
would receive the notional or other agreed upon value from the counterparty in
the event of a default by a third party, such as a U.S. or foreign corporate
issuer on the referenced debt obligation. In return, the Portfolios would make
periodic payments to the counterparty over the term of the contract provided no
event of default has occurred. Such periodic payments are accrued daily and
charged to realized gain (loss).
Interest rate swap agreements involve the exchange by the Portfolios with a
counterparty of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Net periodic payments received by the Portfolios
are included as part of net realized gain (loss) on the Statement of
Operations.
Swaps are marked to market daily by Pacific Investment Management Company LLC
(the "Sub-Adviser") based upon quotations from market makers and the change in
value, if any, is recorded as unrealized appreciation or depreciation in the
Portfolios' Statement of Operations. Payments received or made at the beginning
of the measurement period are reflected on the Statement of Assets and
Liabilities. For a credit default swap sold by the Portfolios payment of the
agreed upon amount made by the Portfolios 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
Portfolios, the agreed upon amount received by the Portfolios 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
Portfolio.
Entering into swaps involves, to varying degrees, elements of credit, market
and documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will be
no liquid market for these agreements, that the counterparty to the agreements
may default on its obligation to perform or disagree as to the meaning of the
contractual terms in the agreements, and that there will be unfavorable changes
in net interest rates.
(I) FORWARD FOREIGN CURRENCY CONTRACTS -- SERIES C, SERIES R
Series C and Series R 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. Series
C and Series R 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. All commitments are marked to market
daily at the applicable foreign exchange rates and any resulting unrealized
gains and losses are recorded. Realized gains or losses are recorded at the
time the forward foreign currency 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. In addition these contracts may involve market risk in excess of the
unrealized gain or loss reflected in the Portfolios' Statements of Assets and
Liabilities.
30 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(J) INFLATION-INDEXED BONDS
Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted to the rate of inflation. The interest rate on these
bonds is generally fixed at issuance at a rate lower than typical bonds. Over
the life of an inflation-indexed bond, however, interest will be paid based on
a principal value, which is adjusted for inflation. Any increase in the
principal amount of an inflation-indexed bond will be considered interest
income in the Statement of Operations, even though investors do not receive
principal until maturity.
(K) STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS")
SMBS represent a participation in, or are secured by and payable from, mortgage
loans on real property, and may be structured in classes with rights to receive
varying proportions of principal and interest. SMBS include interest-only
securities (IOs), which receive all of the interest, and principal-only
securities (POs), which receive all of the principal. If the underlying
mortgage assets experience greater than anticipated payments of principal, the
Portfolio may fail to recoup some or all of its initial investment in these
securities. The market value of these securities is highly sensitive to changes
in interest rates.
(L) REPURCHASE AGREEMENTS
The Portfolios enters into transactions with its custodian bank or securities
brokerage firms approved by the Board of Trustees whereby it purchases
securities under agreements to resell at an agreed upon price and date
("repurchase agreements"). Such agreements are carried at the contract amount
in the financial statements. Collateral pledged (the securities received),
which consists of 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 Portfolios 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 Portfolios may be delayed or limited.
(M) REVERSE REPURCHASE AGREEMENTS
In a reverse repurchase agreement, the Portfolio sells securities to a bank or
broker-dealer and agrees to repurchase the securities at a mutually agreed date
and price. Generally, the effect of such a transaction is that the Portfolio
can recover and reinvest all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement and
still be entitled to the returns associated with those portfolio securities.
Such transactions are advantageous if the interest cost to the Portfolio of the
reverse repurchase transaction is less than the returns it obtains on
investments purchased with the cash. Unless the Portfolio covers its positions
in reverse repurchase agreements (by segregating liquid assets at least equal
in amount to the forward purchase commitment), its obligations under the
agreements will be subject to the Portfolio's limitations on borrowings.
Reverse repurchase agreements involve leverage risk and also the risk that the
market value of the securities that the Portfolio is obligated to repurchase
under the agreement may decline below the repurchase price. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy
or becomes insolvent, the Portfolio's use of the proceeds of the agreement may
be restricted pending determination by the other party, or its trustee or
receiver, whether to enforce the Portfolio's obligation to repurchase the
securities.
(N) WHEN-ISSUED/DELAYED-DELIVERY TRANSACTIONS
The Portfolios may purchase or sell securities on a when-issued or
delayed-delivery basis. These transactions involve a commitment to purchase or
sell securities for a predetermined price or yield, with payment and delivery
taking place beyond the customary settlement period. When delayed-delivery
purchases are outstanding, the Portfolio will set aside and maintain until the
settlement date in a designated account, liquid assets in an amount sufficient
to meet the purchase price. When purchasing a security on a delayed-delivery
basis, a Portfolio assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. A Portfolio may dispose of
or renegotiate a delayed-delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may result in a
realized gain or loss. When a Portfolio sells a security on a delayed-delivery
basis, the Portfolio does not participate in future gains and losses with
respect to the security.
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 31
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(O) RESTRICTED SECURITIES
The Portfolios are permitted to invest in securities that are subject to legal
or contractual restrictions on resale. These securities generally may be resold
in transactions exempt from registration or to the public if the securities are
registered. Disposal of these securities may involve time-consuming
negotiations and expenses, and prompt sale at an acceptable price may be
difficult.
(P) SHORT SALES
Series C and Series M entered into short sales transactions during the fiscal
year. A short sale is a transaction in which a Portfolio sells securities it
does not own in anticipation of a decline in the market price of the
securities. The Portfolio is obligated to deliver securities at the market
price at the time the short position is closed. Possible losses from short
sales may be limited, whereas losses from purchases cannot exceed the total
amount invested.
(2) INVESTMENT MANAGER/SUB-ADVISER/ADMINISTRATOR & DISTRIBUTOR
(A) INVESTMENT MANAGER/SUB-ADVISER
The Investment Manager serves in its capacity pursuant to an Investment
Management Agreement with the Trust. Pursuant to a Portfolio Management
Agreement, the Investment Manager employs the Sub-Adviser, an affiliate of the
Investment Manager, to serve as sub-adviser and provide investment advisory
services to the Portfolios. The Investment Manager receives no investment
management or other fees from the Portfolios and at its own expense pays the
fees of the Sub-Adviser. The financial statements reflect the fact that no fees
or expenses are incurred by the Portfolios. It should be understood, however,
that the Portfolios are an integral part of "wrap-fee" programs sponsored by
investment advisers unaffiliated with the Portfolios, the Investment Manager or
the Sub-Adviser. Typically, participants in these programs pay a "wrap fee" to
their investment adviser. Although the Portfolios do not compensate the
Investment Manager or Sub-Adviser directly for their services under the
Investment Management Agreement or Portfolio Management Agreement,
respectively, the Investment Manager and Sub-Adviser may benefit from their
relationship with the sponsors of wrap fee programs for which the Portfolios
are an investment option.
(B) ADMINISTRATOR
The Investment Manager also serves as administrator to the Portfolios pursuant
to an administration agreement ("Administration Agreement") with the Trust. The
administrator's responsibilities include providing or procuring certain
administrative services to the Portfolios as well as arranging at its own
expense for the provision of legal, audit, custody, transfer agency and other
services required for the ordinary operation of the Portfolios, and is
responsible for printing, trustees fees, and other costs of the Portfolios.
Under the Administration Agreement, the Investment Manager has agreed to
provide or procure these services, and to bear these expenses at no charge to
the Portfolios.
(C) DISTRIBUTOR
Allianz Global Investors Distributors LLC ("the Distributor"), formerly PA
Distributors LLC, an affiliate of the Investment Manager, serves as the
distributor of the Trust's shares. Pursuant to a distribution agreement with
the Trust, the Investment Manager on behalf of the Portfolios pays the
Distributor.
(3) INVESTMENTS IN SECURITIES
(a) Purchases and sales of securities (excluding short-term investments)
for the six months period ended
April 30, 2005 were:
<TABLE>
U.S. Government Agency All Other
----------------------------------- ---------------------------------
Purchases Sales Purchases Sales
---------------- ---------------- --------------- ---------------
Series C: $ 516,474,680 $ 269,232,918 $347,913,848 $159,262,177
Series M: 3,203,991,361 2,760,328,230 354,523,309 18,193,153
Series R: 111,628,655 41,445,929 1,928,874 78,810
</TABLE>
32 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN SECURITIES (CONTINUED)
(b) Futures contracts outstanding at April 30, 2005:
<TABLE>
Notional Unrealized
Amount Expiration Appreciation
Series C: (000) Date (Depreciation)
- --------- ---------- ------------ ---------------
Type
- ----
Short: Financial Future Euribor December 2005 (323) 12/19/05 $ 75,497
Long; Financial Future Euro-Bond 10 year Eux 99 6/13/05 375,730
Eurodollar Future June 2005 225 6/19/06 4,500
Eurodollar Future September 2005 1,203 9/19/05 (813,617)
U.S. Treasury 10 Year Notes June 2005 208 6/21/05 242,367
------------
$ (115,523)
============
Series M:
- ---------
Long: U.S. Treasury 10 Year Notes June 2005 1,321 06/21/05 $ 1,243,019
============
Series R:
- ---------
Long: Eurodollar Future June 2005 5 6/13/05 $ (2,862)
U.S. Treasury 10 Year Notes June 2005 5 6/21/05 8,019
U.S. Treasury 20 Year Notes June 2005 7 6/21/05 23,152
------------
$ 28,309
============
(c) Options written during the six months ended April 30, 2005:
Series C: Contracts Premiums
- ---------
Options outstanding, 10/31/04 600 $ 310,250
Options written 242,401,678 1,336,101
Options expired (600) (310,250)
Options terminated in closing transaction (768) (304,245)
----------- -----------
Options outstanding, 4/30/05 242,400,910 $ 1,031,856
=========== ===========
Series M:
- ---------
Options outstanding, 10/31/04 -- --
Options written 250,000,000 $ 775,000
----------- -----------
Options outstanding, 4/30/05 250,000,000 $ 775,000
=========== ===========
Series R:
- ---------
Options outstanding, 10/31/04 -- --
Options written 66 $ 11,578
----------- -----------
Options outstanding, 4/30/05 66 $ 11,578
=========== ===========
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 33
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN SECURITIES (CONTINUED)
(d) Forward foreign currency contracts outstanding at April 30, 2005:
Series C:
- ---------
<TABLE>
Unrealized
U.S. $ Value on U.S. $ Value Appreciation
Broker Origination Date April 30, 2005 (Depreciation)
----------------------- ------------------ ---------------- ---------------
Purchased:
- ----------
Brazilian Real, settling 5/23/05 Morgan Stanley $ 103,959 $ 108,086 $ 4,127
Brazilian Real, settling 6/11/05 Morgan Stanley 95,915 104,451 8,536
Brazilian Real, settling 7/20/05 Morgan Stanley 99,039 102,160 3,121
Chilean Peso, settling 5/16/05 Morgan Stanley 97,621 95,332 (2,289)
Chilean Peso, settling 6/13/05 Morgan Stanley 92,468 93,477 1,009
Chilean Peso, settling 8/2/05 Morgan Stanley 30,416 30,284 (132)
Euro Dollar, settling 5/18/05 State Street Corp. 1,979,245 1,974,893 (4,352)
Great Britain Pounds, settling 6/9/05 State Street Corp. 600,661 600,401 (260)
Indian Rupee, settling 6/21/05 JPMorgan Chase & Co. 93,649 93,226 (423)
Indian Rupee, settling 6/21/05 Citigroup, Inc. 93,927 93,525 (402)
Japanese Yen, settling 5/17/05 Bank of America 32,000,000 32,257,866 257,866
Japanese Yen, settling 6/13/05 Citigroup, Inc. 38,817,571 40,022,011 1,204,440
Mexican Peso, settling 5/27/05 Morgan Stanley 89,458 90,212 754
Mexican Peso, settling 6/23/05 Morgan Stanley 264,957 269,958 5,001
Peruvian Nouvian Sol, settling 5/23/05 Morgan Stanley 96,083 96,393 310
Peruvian Nouvian Sol, settling 6/14/05 Citigroup, Inc. 95,998 96,023 25
Polish Zloty, settling 5/23/05 Morgan Stanley 105,151 97,907 (7,244)
Polish Zloty, settling 6/23/05 Citigroup, Inc. 103,893 97,421 (6,472)
Russian Ruble, settling 5/23/05 Citigroup, Inc. 94,986 95,461 475
Russian Ruble, settling 6/22/05 JPMorgan Chase & Co. 99,528 98,709 (819)
Russian Ruble, settling 7/28/05 HSBC Securities Inc. 92,829 92,708 (121)
Singapore Dollar, settling 5/24/05 HSBC Securities Inc. 97,111 97,359 248
Singapore Dollar, settling 7/21/05 Citigroup, Inc. 95,095 94,380 (715)
Singapore Dollar, settling 7/26/05 HSBC Securities Inc. 92,542 93,272 730
Slovakian Koruna settling 5/27/05 Morgan Stanley 102,030 97,334 (4,696)
Slovakian Koruna settling 6/21/05 Morgan Stanley 102,756 98,810 (3,946)
South Korean Won, settling 5/24/05 Citigroup, Inc. 105,442 108,592 3,150
South Korean Won, settling 6/21/05 Citigroup, Inc. 106,041 106,466 425
South Korean Won, settling 7/27/05 Citigroup, Inc. 194,638 194,968 330
Taiwan Dollar, settling 5/24/05 Barclay Bank 98,345 98,961 616
Taiwan Dollar, settling 6/21/05 Citigroup, Inc. 98,436 95,874 (2,562)
----------
$1,456,730
==========
Sold:
- -----
Canadian Dollar, settling 6/9/05 State Street Corp. 969,760 956,794 $ 12,966
Euro Dollar, settling 5/18/05 State Street Corp. 87,665,011 87,559,164 105,847
Euro Dollar, settling 5/25/05 CS First Boston Corp. 55,443,117 54,761,151 681,966
Euro Dollar, settling 5/25/05 CS First Boston Corp. 89,730,259 89,809,631 (79,372)
----------
$ 721,407
==========
</TABLE>
34 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN SECURITIES (CONTINUED)
Series R:
- ---------
<TABLE>
Unrealized
U.S.$ Value on U.S.$ Value Appreciation
Broker Origination Date April 30, 2005 (Depreciation)
----------------- ------------------ ---------------- ---------------
Purchases:
Japanese Yen, settling 6/13/05 Citigroup, Inc. $ 40,613 $ 41,873 $ 1,260
Slovakian Koruna, settling 6/21/05 Morgan Stanley 10,006 9,622 (384)
-------
$ 876
=======
Sold:
- -----
Euro Dollar, settling 5/25/05 Citigroup, Inc. 1,233,189 1,214,360 $16,829
=======
(e) Interest rate swap contracts outstanding at April 30, 2005:
Series C:
- ---------
Rate Type
-----------------------------------
Notional Payments Payments Unrealized
Swap Amount Termination made by received by Appreciation
Counterparty (000) Date the Portfolio the Portfolio (Depreciation)
- ------------------------- ------------ ------------- ----------------- --------------- ---------------
Goldman Sachs $321,000 6/15/2006 3 Month LIBOR 3.00% $ (785,102)
Goldman Sachs 1,000 6/15/2015 5.00% 3 Month LIBOR (14,139)
Lehman Securities, Inc. 111,400 6/15/2010 4.00% 3 Month LIBOR 751,214
Lehman Securities, Inc. 1,600 6/15/2015 5.00% 3 Month LIBOR (22,622)
Merrill Lynch & Co. 700 12/15/2024 6.00% 3 Month LIBOR (64,902)
Merrill Lynch & Co. 700 12/15/2024 6.00% 3 Month LIBOR 1,253,462
Morgan Stanley 37,500 6/15/2015 5.00% 3 Month LIBOR (412,827)
Morgan Stanley euro 66,600 6/18/2014 6 Month LIBOR 6.00% 1,651,804
-----------
$ 2,356,888
===========
Series M:
- ---------
Rate Type
---------------------------------
Notional Payments Payments Unrealized
Swap Amount Termination made by received by Appreciation
Counterparty (000) Date the Portfolio the Portfolio (Depreciation)
- ----------------- ------------ ------------- --------------- --------------- ---------------
Morgan Stanley $ 98,200 6/15/2010 3 Month Libor 4.00% $660,237
========
Series R:
- ---------
Rate Type
---------------------------------
Notional Payments Payments Unrealized
Swap Amount Termination made by received by Appreciation
Counterparty (000) Date the Portfolio the Portfolio (Depreciation)
- ------------------------- ------------ ------------- --------------- --------------- ---------------
Goldman Sachs $2,100 6/15/2015 5.00% 3 Month Libor $ (45,174)
Lehman Securities, Inc. 1,000 6/15/2010 4.00% 3 Month Libor 7,733
Lehman Securities, Inc. 1,400 6/15/2015 5.00% 3 Month Libor 5,980
Morgan Stanley 1,800 6/15/2015 5.00% 3 Month Libor 16,676
---------
$ (14,785)
=========
</TABLE>
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 35
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(f) Credit default swap contracts outstanding at April 30, 2005:
<TABLE>
Series C:
- ---------
Notional
Swap Amount Fixed
Counterparty/ payable on Payments
Referenced Debt Default Termination Received Unrealized
Obligation (000) Date by Portfolio (Depreciation)
- ----------------------------------- ------------ ------------- -------------- ----------------
Goldman Sachs
General Motors Acceptance Corp. $5,000 6/20/2006 2.80% $(39,100)
General Motors Acceptance Corp. 1,600 6/20/2006 3.50% (243)
Merrill Lynch & Co.
Burlington 1,300 3/20/2010 0.28% (2,981)
Canada Natural Resource 1,800 3/20/2010 0.32% (715)
XTO Energy 1,300 3/20/2010 0.38% (3,683)
--------
$(46,722)
========
</TABLE>
(g) Short sales outstanding at April 30, 2005:
<TABLE>
Series C:
- ---------
Type Coupon Maturity Par Proceeds Value
- --------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 5.50% 5/31/2035 10,000,000 $10,106,250 $10,171,880
===========
Series M:
- ---------
Government National Mortgage Association 5.50% 5/31/2035 6,500,000 $6,603,594 $6,611,722
==========
(h) Reverse repurchase agreement outstanding at April 30, 2005:
Series C:
- ---------
Broker Coupon Maturity Par Proceeds Value
- --------------------------------------------------------------------------------------------------------------
Lehman Securities, Inc. 0.20% 5/2/2005 3,400,000 $3,400,000 $3,400,000
==========
</TABLE>
The weighted average daily balance of reverse repurchase agreements outstanding
for Series C during the six months ended April 30, 2005 was $3,400,000 at a
weighted average interest rate of 0.20%. On April 30, 2005, securities valued
at $3,051,448, were pledged as collateral for reverse repurchase agreements.
Series M and R did not engage in reverse repurchase agreement transactions
during the period.
(4) INCOME TAX INFORMATION
The cost of investments for federal income tax purposes was substantially the
same as for book purposes. Gross unrealized appreciation and gross unrealized
depreciation of investments at April 30, 2005 were:
Gross Gross Net
Cost of Unrealized Unrealized Unrealized
Investments Appreciation Depreciation Appreciation
----------------- -------------- -------------- -------------
Series C $1,117,523,401 $12,895,020 $5,223,970 $7,671,050
Series M 1,396,798,782 8,134,406 5,125,035 3,009,371
Series R 82,114,983 808,845 17,450 791,395
36 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(5) LEGAL PROCEEDINGS
On September 13, 2004, the Securities and Exchange Commission (the
"Commission") announced that the Investment Manager, the Distributor and
certain of their affiliates (together with the Investment Manager and the
Distributor, the "Affiliates") had agreed to a settlement of charges that they
and certain of their officers had, among other things, violated various
antifraud provisions of the federal securities laws in connection with an
alleged market-timing arrangement involving trading of shares of certain
open-end investment companies ("open-end funds") advised or distributed by
these certain affiliates. In their settlement with the Commission, the
Affiliates consented to the entry of an order by the Commission and, without
admitting or denying the findings contained in the order, agreed to implement
certain compliance and governance changes and consented to cease-and-desist
orders and censures. In addition, the Affiliates agreed to pay civil money
penalties in the aggregate amount of $40 million and to pay disgorgement in the
amount of $10 million, for an aggregate payment of $50 million. In connection
with the settlement, the Affiliates have been dismissed from the related
complaint the Commission filed on May 6, 2004 in the U.S. District Court in the
Southern District of New York. Neither the complaint nor the order alleges any
inappropriate activity took place with respect to the Portfolios.
In a related action on June 1, 2004, the Attorney General of the State of New
Jersey ("NJAG") announced that it had entered into a settlement agreement with
Allianz Global and the Affiliates, in connection with a complaint filed by the
NJAG on February 17, 2004. The NJAG dismissed claims against the Sub-Adviser,
which had been part of the same complaint. In the settlement, Allianz Global
and other named affiliates neither admitted nor denied the allegations or
conclusions of law, but did agree to pay New Jersey a civil fine of $15 million
and $3 million for investigative costs and further potential enforcement
initiatives against unrelated parties. They also undertook to implement certain
governance changes. The complaint relating to the settlement contained
allegations arising out of the same matters that were the subject of the
Commission order regarding market-timing described above and does not allege
any inappropriate activity took place with respect to the Portfolios.
On September 15, 2004, the Commission announced that the Affiliates had agreed
to settle an enforcement action in connection with charges that they violated
various antifraud and other provisions of federal securities laws as a result
of, among other things, their failure to disclose to the board of trustees and
shareholders of various open-end funds advised or distributed by the Affiliates
material facts and conflicts of interest that arose from their use of brokerage
commissions on portfolio transactions to pay for so-called "shelf space"
arrangements with certain broker-dealers. In their settlement with the
Commission, the Affiliates consented to the entry of an order by the Commission
without admitting or denying the findings contained in the order. In connection
with the settlement, the Affiliates agreed to undertake certain compliance and
disclosure reforms and consented to cease-and-desist orders and censures. In
addition, the Affiliates agreed to pay a civil money penalty of $5 million and
to pay disgorgement of approximately $6.6 million based upon the aggregate
amount of brokerage commissions alleged to have been paid by such open-end
funds in connection with these shelf-space arrangements (and related interest).
In a related action, the California Attorney General announced on September 15,
2004 that it had entered into an agreement with an affiliate of the Investment
Manager in resolution of an investigation into matters that are similar to
those discussed in the Commission order. The settlement agreement resolves
matters described in a complaint filed contemporaneously by the California
Attorney General in the Superior Court of the State of California alleging,
among other things, that this affiliate violated certain antifraud provisions
of California law by failing to disclose matters related to the shelf-space
arrangements described above. In the settlement agreement, the affiliate did
not admit to any liability but agreed to pay $5 million in civil penalties and
$4 million in recognition of the California Attorney General's fees and costs
associated with the investigation and related matters. Neither the Commission
order nor the California Attorney General's complaint alleges any inappropriate
activity took place with respect to the Portfolios.
On April 11, 2005, the Attorney General of the State of West Virginia filed a
complaint in the Circuit Court of Marshall County, West Virginia (the "West
Virginia Complaint") against the Investment Manager and certain of its
Affiliates based on the same circumstances as those cited in the 2004
settlements with the Commission and NJAG involving alleged "market timing"
activities described above. The West Virginia Complaint alleges, among other
things, that the Investment Manager and certain of its Affiliates improperly
allowed broker-dealers, hedge funds and investment advisers to engage in
frequent trading of various open-end funds advised or distributed by the
Affiliates in violation of the funds' stated restrictions on "market timing."
As of the date of this report, the West Virginia Complaint has not been formally
served upon the Investment Manager or the Affiliates. The West Virginia
Complaint also names numerous other defendants unaffiliated with the Affiliates
in separate claims alleging improper market timing and/or late trading of
open-end investment companies advised or distributed by such other defendants.
The West Virginia Complaint seeks injunctive relief, civil monetary penalties,
investigative costs and attorney's fees. The West Virginia Complaint does not
allege that any inappropriate activity took place with respect to the
Portfolios.
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 37
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(5) LEGAL PROCEEDINGS (CONTINUED)
Since February 2004, certain of the Affiliates and their employees have been
named as defendants in a total of 14 lawsuits filed in one of the following:
U.S. District Court in the Southern District of New York, the Central District
of California and the Districts of New Jersey and Connecticut. Ten of those
lawsuits concern "market timing," and they have been transferred to and
consolidated for pre-trial proceedings in the U.S. District Court for the
District of Maryland; the remaining four lawsuits concern "revenue sharing"
with brokers offering "shelf space" and have been consolidated into a single
action in the U.S. District Court for the District of Connecticut. The lawsuits
have been commenced as putative class actions on behalf of investors who
purchased, held or redeemed shares of affiliated funds during specified periods
or as derivative actions on behalf of the funds.
The lawsuits generally relate to the same facts that are the subject of the
regulatory proceedings discussed above. The lawsuits seek, among other things,
unspecified compensatory damages plus interest and, in some cases, punitive
damages, the rescission of investment advisory contracts, the return of fees
paid under those contracts and restitution. The Investment Manager and
Distributor believe that other similar lawsuits may be filed in federal or
state courts naming as defendants the Investment Manager, the Distributor, the
Affiliates, Allianz Global, the Portfolios, other open- and closed-end funds
advised or distributed by the Investment Manager and/or its affiliates, the
boards of directors or trustees of those funds, and/or other affiliates and
their employees. Under Section 9(a) of the 1940 Act, if any of the various
regulatory proceedings or lawsuits were to result in a court injunction against
the Investment Manager, Allianz Global/or their affiliates, they and their
affiliates would, in the absence of exemptive relief granted by the Commission,
be barred from serving as an investment manager/sub-adviser or principal
underwriter for any registered investment company, including the Fund. In
connection with an inquiry from the Commission concerning the status of the New
Jersey settlement described above under Section 9(a), the Investment Manager
and certain of its affiliates (together, the "Applicants") have sought
exemptive relief from the Commission under Section 9(c) of the 1940 Act.
The Commission has granted the Applicants a temporary exemption from the
provisions of Section 9(a) with respect to the New Jersey settlement until the
earlier of (i) September 13, 2006 and (ii) the date on which the Commission
takes final action on their application for a permanent order. There is no
assurance that the Commission will issue a permanent order. If the West
Virginia Attorney General were to obtain a court injunction against the
Investment Manager or the Affiliates, the Investment Manager or the Affiliates
would, in turn, seek exemptive relief under Section 9(c) with respect to that
matter, although there is no assurance that such exemptive relief would be
granted.
A putative class action lawsuit captioned Charles Mutchka et al. v. Brent R.
Harris, et al., filed in January 2005 by and on behalf of individual
shareholders of certain open-end funds that hold equity securities and that are
sponsored by the Investment Manager and the Affiliates, is currently pending in
the federal district court for the Central District of California. The
plaintiff alleges that fund trustees, investment advisers and affiliates
breached fiduciary duties and duties of care by failing to ensure that the
open-end funds participated in securities class action settlements for which
those funds were eligible. The plaintiff has claimed as damages disgorgement of
fees paid to the investment advisers, compensatory damages and punitive
damages.
The Investment Manager believes that the claims made in the lawsuit against the
Investment Manager and the Affiliates are baseless, and the Investment Manager
and the Affiliates intend to vigorously defend the lawsuit. As of the date
hereof, the Investment Manager believes a decision, if any, against the
defendants would have no material adverse effect on the Portfolios or the
ability of the Investment Manager or the Affiliates to perform their duties
under the investment management or portfolio management agreements, as the case
may be.
The Investment Manager and the Sub-Adviser believe that these matters are not
likely to have a material adverse effect on the Portfolios or on the Investment
Manager's or the Sub-Adviser's ability to perform their respective investment
advisory services related to the Portfolios.
The foregoing speaks only as of the date hereof. There may be additional
litigation or regulatory developments in connection with the matters discussed
above.
(6) MATTERS RELATING TO THE TRUSTEES CONSIDERATION OF THE CONTINUANCE OF THE
ADVISORY AND PORTFOLIO MANAGEMENT AGREEMENT -- SERIES C, M
The Independent Trustees were advised by independent legal counsel throughout
this approval process.
At a meeting held on February 16 and 17, 2005, the Board of Trustees, including
a majority of the independent Trustees, approved the continuation of the
Advisory Agreement and Portfolio Management Agreement for Fixed Income Shares:
Series C and Fixed Income Shares: Series M. In determining to approve the
continuation of the
38 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(6) MATTERS RELATING TO THE TRUSTEES CONSIDERATION OF THE CONTINUANCE OF THE
ADVISORY AND PORTFOLIO MANAGEMENT AGREEMENT -- SERIES C, M (CONTINUED)
Advisory Agreement and the Portfolio Management Agreement, the Trustees met
with the relevant investment advisory personnel from the Investment Manager and
Sub-Adviser and considered information relating to personnel providing services
under the applicable agreement. The information considered included the
education and experience of the personnel providing services, including the
education and experience of the investment professionals on the team of
investment professionals managing each Portfolio. The Trustees also took into
account the time and attention that had been devoted by senior management to
the Portfolios and the other funds in the complex. The Trustees evaluated the
level of skill required to manage the Portfolios and concluded that the human
resources devoted by the Investment Manager and Sub-Adviser to Fixed Income
Shares: Series C and Fixed Income Shares: Series M were appropriate to fulfill
effectively the duties of the Investment Manager and Sub-Adviser under the
applicable agreement. The Trustees also considered the business reputation of
the Investment Manager and Sub-Adviser since their inception in 1987 and 1971,
respectively, their significant financial resources, the Sub-Adviser's
experience in managing fixed income portfolios, including assets under
management of approximately $445.7 billion as of December 31, 2004, and their
professional liability insurance coverage and concluded that they would be able
to meet any reasonably foreseeable obligations under the applicable agreement.
The Trustees received information concerning the investment philosophy and
investment process applied by the Sub-Adviser in managing the Portfolios, as
described in the Prospectus. In this connection, the Trustees considered the
Sub-Adviser's in-house research capabilities, including its ongoing forecasting
of interest rates and the development of its ongoing outlook on the global
economy, as well as other resources available to the Sub-Adviser's personnel,
including research services available to the Sub-Adviser as a result of
securities transactions effected for the Portfolios and other investment
advisory clients. The Trustees concluded that the Sub-Adviser's investment
process, research capabilities and philosophy were well suited to the
Portfolios, given each Portfolio's investment objective and policies.
The Trustees considered the scope of the services provided by the Investment
Manager and Sub-Adviser to the Portfolios under the Advisory Agreement and
Portfolio Management Agreement, respectively, relative to services provided by
third parties to other mutual funds and relative to services provided by the
Investment Manager and Sub-Adviser to their other advisory clients. The
Trustees noted that the Investment Manager's and Sub-Adviser's standard of care
was comparable to that found in most mutual fund investment advisory
agreements. The Trustees also considered the tools and procedures used to
assure each Portfolio's compliance with applicable regulations and policies.
The Trustees concluded that the scope of the Investment Manager's and
Sub-Adviser's services to the Portfolios, as described above, was consistent
with the Portfolios' investment objective and other operational requirements,
including compliance with each Portfolio's investment restrictions, tax and
reporting requirements and related shareholder services.
The Trustees also evaluated the procedures of the Investment Manager and
Sub-Adviser designed to fulfill their fiduciary duty to the Portfolios with
respect to possible conflicts of interest, including their codes of ethics
(regulating the personal trading of their officers and employees), the
procedures by which the Sub-Adviser allocates trades among its various
investment advisory clients, the integrity of the systems in place to ensure
compliance with the foregoing and the record of the Sub-Adviser in these
matters. The Trustees also received information concerning standards of the
Investment Manager and Sub-Adviser with respect to the execution of portfolio
transactions. The information considered by the Trustees included information
regarding the Investment Manager and the Sub-Adviser, their personnel, policies
and practices included in their respective Forms ADV.
The Trustees also considered information relating to the investment performance
of the Portfolios relative to their respective performance benchmark(s),
relative to other similar accounts managed by the Investment Manager and the
Sub-Adviser and relative to funds managed similarly by other advisers. The
Trustees reviewed performance over various periods, including one- and
three-year periods and since-inception, the volatility of each Portfolio's
returns, as well as factors identified by the Investment Manager or the
Sub-Adviser as contributing to performance. The Trustees noted that for each of
the one- and three-year periods and since inception, the Portfolios had
outperformed their respective performance benchmarks.
In approving the agreements, the Trustees also gave substantial consideration
to the fact that no fees are payable under either the Advisory Agreement or the
Portfolio Management Agreement. The Trustees did consider, however, the amounts
paid to the Invesment Manager and the Sub-Adviser through the "wrap fee" paid
to the sponsors of the wrap program, as well as the fees "imputed" to the
Investment Manager and Sub-Adviser, as disclosed in the Fund's Prospectus. The
Board of Trustees also considered the fact that the Investment Manager and
Sub-Adviser may benefit from their relationship with the sponsors of wrap
programs for which the Trust is an investment option. Such
4.30.05 Fixed Income SHares -- Series C, M, R Semi-Annual Report 39
FIXED INCOME SHARES -- SERIES C, M, R NOTES TO FINANCIAL STATEMENTS
April 30, 2005 (unaudited)
- --------------------------------------------------------------------------------
(6) MATTERS RELATING TO THE TRUSTEES CONSIDERATION OF THE CONTINUANCE OF THE
ADVISORY AND PORTFOLIO MANAGEMENT AGREEMENT -- SERIES C, M (CONCLUDED)
benefits include the receipt by their affiliates of fees paid by the sponsor of
the wrap program based on assets under management of the wrap program. The
Trustees also took into account so-called "fallout benefits" to the Investment
Manager and Sub-Adviser such as reputational value derived from serving as
investment Investment Manager and sub-adviser, respectively, to the Portfolios
and the fact that the Investment Manager and Sub-Adviser will receive services
from brokers who execute portfolio transactions for the Trust.
The Trustees also considered the profitability to the Investment Manager of the
relationship of the Investment Manager and its affiliates to the Portfolios.
The Trustees considered the costs of the services provided under the Advisory
and Portfolio Management Agreements, as well as the fees and profits, if any,
expected to be realized by the Investment Manager, the Sub-Adviser and their
affiliates from their relationship with the Portfolios. For the year ended
December 31, 2004, the Investment Manager incurred a net loss from its
relationship with the Portfolios.
Based on the foregoing, the Trustees decided to continue to engage the
Investment Manager and Sub-Adviser to serve as investment advisors for the
Portfolios. Because the Portfolios do not charge fees, the Trustees did not
consider the extent to which economies of scale would be realized due to
Portfolio growth, whether fee levels reflect economies of scale for the
Portfolios' shareholders, or comparisons of fees paid by the Portfolios with
fees paid to other investment advisers or by other clients of the Investment
Manager of the Sub-Adviser.
- -------------------------------------------------------------------------------
SHAREHOLDER MEETINGS RESULTS:
The Trust held a meeting of shareholders on January 26, 2005. Shareholders
voted to elect John J. Dalessandro II, David C. Flattum, Hans W. Kertess and R.
Peter Sullivan III as trustees of the Portfolios.
The resulting vote count is indicated below:
Withhold
Affirmative Authority
------------- ----------
Election of John J. Dalessandro II 285,321,252 288,097
Election of David C. Flattum 285,321,252 288,097
Election of Hans W. Kertess 285,321,252 288,097
Election of R. Peter Sullivan III 285,321,252 288,097
Messrs. Paul Belica and Robert E. Connor continue to serve as Trustees.
40 Fixed Income SHares -- Series C, M, R Semi-Annual Report 4.30.05
TRUSTEES AND PRINCIPAL OFFICERS
Robert E. Connor, Chairman of the Board of Trustees
Paul Belica, Trustee
John J. Dalessandro II, Trustee
David C. Flattum, Trustee
Hans W. Kertess, Trustee
R. Peter Sullivan III, Trustee
Brian S. Shlissel, President & Chief Executive Officer
Newton B. Schott, Jr., Vice President
Lawrence G. Altadonna, Treasurer
Thomas J. Fuccillo, Secretary
Youse Guia, Chief Compliance Officer
Jennifer A. Patula, Assistant Secretary
INVESTMENT MANAGER/ADMINISTRATOR
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
DISTRIBUTOR
Allianz Global Investors Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
CUSTODIAN & ACCOUNTING AGENT
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, MO 64105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
Boston Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholders of Fixed Income SHares Inc.--Series C, Series M and Series R for
their information. It is not a prospectus, circular or representation intended
for use in the purchase of shares of the Portfolios or any securities mentioned
in this report.
The financial information included herein is taken from the records of each
Portfolio without examination by an independent registered public accounting
firm, who did not express an opinion hereon.
A description of the policies and procedures that the Portfolios have adopted
to determine how to vote proxies relating to portfolio securities and
information about how the Portfolios voted proxies relating to portfolio
securities held during the twelve months ended June 30, 2004 is available (i)
without charge, upon request, by calling the Trust at (800) 462-7727; (ii) on
the Trust's website at www.allianzinvestors.com; and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
The Portfolios file their complete schedules of portfolio holdings with the
Securities and Exchange Commission (the "Commission") for the first and third
quarters of their fiscal year on Form N-Q. Form N-Q is available (i) on the
Trust's website at www.allianzinvestors.com (ii) on the Commission's website at
www.sec.gov and (iii) at the Commission's Public Reference Room which is
located at the Commission's headquarter's office, 450 5th Street N.W. Room
1200, Washington, D.C. 20549, (202) 942,8090.
ALLIANZ [LOGO]
GLOBAL INVESTORS
ALLIANZ DRESDNER DAILY ASSET FUND
SEMI-ANNUAL REPORT
APRIL 30, 2005
Allianz Dresdner Daily Asset Fund - LETTER TO SHAREHOLDERS
- -------------------------------------------------------------------------------
June 20, 2005
We are pleased to provide you with the semi-annual report of the
Allianz Dresdner Daily Asset Fund (the "Fund") for the six months ended
April 30, 2005.
At the beginning of the six month period, we believed the Federal
Reserve (the "Fed') would continue to raise interest rates at a
measured pace for the foreseeable future. A Bloomberg survey of
economists forecasted a fed funds rate of 3.5% by December 31, 2005.
That forecast implied the Fed would skip an increase during at least
three of its eight meetings in 2005. We did not agree with that
assessment. Since the Fund is utilized for the investment of securities
lending proceeds, we thought it would be a better strategy to invest
based on the assumption the Fed would increase interest rates at each
meeting. We tried to structure the Fund's portfolio so the floating
rate securities purchased would reset almost immediately after any Fed
rate move. To date, we have been correct with this more conservative
approach.
At the end of the six month period ended April 30, 2005, in excess of
76% of the Fund's portfolio was invested in floating rate securities
based on the following indexes: one-month and three-month LIBOR (London
Inter-bank Offered Rate) and the fed funds open. The balance of the
Fund has been invested in short-term commercial paper.
The Fund's weighted average duration at April 30, 2005 was 13 days with
a yield of 2.95%.
We thank you for investing with us and remain dedicated to serving your
investment needs.
Sincerely,
/s/ Charles H. Dedekind /s/ John Bilello
Charles H. Dedekind, John Bilello
Portfolio Manager Portfolio Manager
Dresdner Advisors LLC Dresdner Advisors LLC
Allianz Dresdner Daily Asset Fund PERFORMANCE SUMMARY & STATISTICS
- --------------------------------------------------------------------------------
PRIMARY INVESTMENTS: INCEPTION DATE:
Money Market Instruments 3/24/04
NET ASSETS:
$668.9 million
PORTFOLIO MANAGERS:
John Bilello
Charles H. Dedekind
TOTAL RETURN (1):
- --------------------------------------------------------------------------------
Six Months 1.21%
1 Year 1.90%
Commencement of Operations (3/24/04) to 4/30/05 1.82%
SEVEN DAY & THIRTY-DAY YIELDS:
- --------------------------------------------------------------------------------
7 day yield 2.91%
7 day compounded yield 2.95%
30 day yield 2.86%
30 day compounded yield 2.89%
ASSET ALLOCATION (% OF NET ASSETS)
- --------------------------------------------------------------------------------
CORPORATE NOTES 49.6%
COMMERCIAL PAPER 22.1%
MASTER NOTES 13.4%
CERTIFICATES OF DEPOSIT 7.5%
ASSET-BACKED SECURITIES 3.6%
COLLATERALIZED MORTGAGE OBLIGATIONS 1.5%
TIME DEPOSITS 2.3%
REPURCHASE AGREEMENT 0.0%
[PIECHART OMITTED]
SHAREHOLDER EXPENSE EXAMPLE:
As a Shareholder of the Fund you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including Management fees and other Fund expenses.
This example is intended to help you understand your ongoing costs (in dollars)
of investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested on November 1, 2004, at
the beginning of the period and held for the entire period ending April 30,
2005.
ACTUAL EXPENSES:
The first line of the table below provides information about actual account
values and actual expenses. Shareholders may use the information in this line,
together with the amount you invested, to estimate the expenses that you paid
over the period. Simply divide your account value by $1,000 (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply the result by
number in the first line under the heading entitled "Expenses Paid During
Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES:
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account value and expenses may not be
used to estimate the actual ending account balance or expenses you paid for the
period. You may use this information to compare the ongoing costs of investing
in the Fund and other funds. To do so, compare this 5% hypothetical examples
that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight ongoing
cost only and do not reflect any transaction costs. Therefore, the second line
of the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction cost were included, your cost would have been higher.
<TABLE>
Expenses Paid
During the Period
Beginning Account Value Ending November 1, 2004 through
October 31, 2005 Account Value April 30, 2005*
April 30, 2005 (1)
- ---------------------- ------------------------ ----------------------- ------------------------------
Actual $1,000 $1,012.10 $0.25
- ---------------------- ------------------------ ----------------------- ------------------------------
Hypothetical $1,000 $1,024.54 $0.25
- ---------------------- ------------------------ ----------------------- ------------------------------
</TABLE>
* Expenses are equal to the Fund's annualized expense ratio of 0.05%; multiplied
by the average account value over the period, multiplied by 181/365 (to reflect
the # of days in the period).
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return assumes
reinvestment of all dividends and distributions. An investment in the Fund
involves risk, including the loss of principal. Total return and yield will
fluctuate with changes in market conditions. This data is provided for
information only and is not intended for trading purposes. Net asset value is
total assets less total liabilities divided by the number of shares outstanding.
Holdings are subject to change daily. Total return for a period greater than one
year represents the average annual total return. Total return for a period of
less than one year is not annualized.
ALLIANZ DRESDNER DAILY ASSET FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 2005
(UNAUDITED)
<TABLE>
PRINCIPAL
AMOUNT
(000) VALUE
- --------- -------------
CORPORATE NOTES - 49.6%
$ 10,000 Bank One NA, 2.95%, 5/3/05, FRN ..................................... $ 10,004,743
35,000 Beta Finance, Inc., 3.04%, 5/2/05, FRN (a) .......................... 34,998,393
20,000 BMW US Capital LLC, 2.92%, 5/16/05, FRN (a) ........................ 20,000,000
35,000 CC USA, Inc., 3.04%, 5/2/05, FRN (a) ................................ 34,998,365
10,000 CIT Group, Inc., 3.62%, 7/29/05, FRN ................................ 10,009,922
25,000 Countrywide Financial Corp., 3.12%, 6/21/05, Ser. A, FRN ............ 25,000,000
10,000 Countrywide Home Loans, Inc., 3.13%, 6/23/05, Ser. M, FRN ........... 10,000,209
31,000 Credit Suisse First Boston Corp., 3.13%, 5/2/05, FRN ................ 31,015,781
35,000 Dorada Finance, Inc., 3.04%, 5/2/05, FRN (a) ........................ 34,998,379
10,000 Irish Life & Permanent plc, 3.00%, 5/23/05, FRN ..................... 9,999,176
8,000 Merrill Lynch & Co., Inc., 3.26%, 6/7/05, Ser. B, FRN .............. 8,021,573
20,000 Morgan Stanley, 2.86%-2.95%, 5/3/05-5/16/05, FRN .................... 20,000,000
10,000 Natexis Banque Populaires, 2.80%, 5/3/05 ........................... 10,000,000
12,000 Natexis Banque Populaires, 2.85%, 5/9/05, FRN ...................... 11,999,387
14,000 Northern Rock plc, 2.88%, 5/3/05, FRN (a) ........................... 14,000,000
1,350 Salomon Smith Barney Holdings, 3.38%, 7/27/05, Ser.K, FRN .......... 1,351,841
40,000 Sigma Finance, Inc,, 2.94%-3.14%, 5/2/05, FRN (a) ................... 40,007,940
5,750 SouthTrust Bank, 2.95%, 6/14/05, FRN ................................ 5,748,990
-------------
Total Corporate Notes (cost-$332,154,699) ....................... 332,154,699
-------------
COMMERCIAL PAPER - 22.1%
35,000 Amstel Funding Corp., 2.91%, 5/24/05 ................................ 34,934,929
40,000 Davis Square Funding III Ltd., 2.93%-3.04%, 5/23/05-5/31/05 ......... 39,909,809
15,000 Morgan Stanley, 3.07%, 12/6/05 ...................................... 15,000,904
40,000 Park Granada LLC, 3.04%, 5/31/05 .................................... 39,898,667
18,000 Skandin Ens Banken AG, 2.47%, 1/20/06 ............................... 18,000,000
-------------
Total Commercial Paper (cost-$147,744,309) ...................... 147,744,309
-------------
MASTER NOTES - 13.4%
35,000 Bank of America, 3.08%, 5/2/05, FRN ................................. 35,000,000
40,000 Bear Stearns Co, Inc., 3.15%, 5/2/05, FRN ........................... 40,000,000
15,000 Citigroup, Inc. 3.07%, 5/2/05, FRN .................................. 15,000,000
-------------
Total Master Notes (cost-$90,000,000) ........................... 90,000,000
-------------
</TABLE>
ALLIANZ DRESDNER DAILY ASSET FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 2005
(UNAUDITED)(CONTINUED)
<TABLE>
PRINCIPAL
AMOUNT
(000) VALUE
- ----------- --------------
CERTIFICATES OF DEPOSIT - 7.5%
$ 35,000 Goldman Sachs Group, Inc., 3.12%, 8/2/05-9/27/05 ............................................... $ 35,000,000
15,000 Lakeside Funding LLC, 2.95%, 5/9/05 ............................................................ 15,000,000
--------------
Total Certificates of Deposits (cost-$50,000,000) .......................................... 50,000,000
--------------
ASSET-BACKED SECURITIES - 3.6%
10,000 Cheyne High Grade ABS CDO, Ltd., 2.79%, 5/10/05, FRN (a) ....................................... 10,000,000
4,110 GE Commercial Equipment Financing LLC, 2.95%, 5/20/05, FRN .................................... 4,109,553
10,000 Whitehawk CDO Funding Ltd., 3.04%, 6/15/05, FRN (a) ............................................ 10,000,000
--------------
Total Asset-Backed Securities (cost-$24,109,553) ............................................... 24,109,553
--------------
TIME DEPOSITS - 2.3%
15,392 Canadian Imperial Bank of Commerce, 2.93%, 5/2/05 (cost-$15,391,862) ........................... 15,391,862
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 1.5%
10,000 Permanent Financing plc, 2.89%, 5/10/05, FRN (cost-$10,000,000) ................................ 10,000,000
--------------
REPURCHASE AGREEMENT - 0.1%
77,000 Agreement with State Street Bank Corp., dated April 29, 2005, 2.40% due 5/2/05
proceeds: $77,015; collateralized by Federal Home Loan Bank, 3.25%, 8/15/05,
valued at $80,522 with accrued interest. (cost-$77,000) ........................................ 77,000
--------------
Total Investments (cost-$669,477,423) - 100.1% ............................................ 669,477,423
Liabilities in excess of other assets - (0.1)% ............................................ (492,794)
--------------
Net Assets - 100.0% ................................................................. $668,984,629
===============
</TABLE>
- -----------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
(a) 144A Security - Security exempt from registration under Rule 144A of the
Securities Act of 1933.
These securities may be resold in transactions exempt from registration,
typically only to qualified institutional investors.
GLOSSARY:
CDO - Collateralized Debt Obligation
FRN - Floating Rate Note, maturity date shown is date of next rate change and
the interest rate disclosed reflects the rate in effect on April 30, 2005.
See accompanying notes to financial statements.
ALLIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2005
(UNAUDITED)
<TABLE>
ASSETS:
Investments, at value (cost-$669,477,423) ................................................................ $ 669,477,423
Cash ..................................................................................................... 78,245
Interest receivable ...................................................................................... 1,325,380
Prepaid expenses ......................................................................................... 16,104
----------------
Total Assets ......................................................................................... 670,897,152
----------------
LIABILITIES:
Dividends payable ........................................................................................ 1,866,269
Investment advisory fee payable .......................................................................... 752
Accrued expenses ......................................................................................... 45,502
----------------
Total Liabilities .................................................................................... 1,912,523
----------------
Net Assets .......................................................................................... $ 668,984,629
================
NET ASSETS CONSIST OF:
Paid-in-capital (no par value, unlimited number of shares authorized; 668,980,765 shares outstanding) .... $ 668,980,765
Accumulated net realized gain on investments ............................................................. 3,864
----------------
Net Assets ........................................................................................... $ 668,984,629
================
NET ASSET VALUE PER SHARE ................................................................................ $1.00
================
</TABLE>
See accompanying notes to financial statements.
ALLIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2005
(UNAUDITED)
<TABLE>
INVESTMENT INCOME:
Interest $ 6,115,985
--------------
EXPENSES:
Administration fees 69,444
Investment advisory fees 40,510
Custodian and accounting agent fees 24,833
Audit and tax services fees 11,286
Registration fees 8,523
Transfer agent fees 6,886
Trustees' fees 6,559
Insurance expense 3,258
Reports to shareholders 1,333
Legal fees 441
Miscellaneous 149
--------------
Total expenses 173,222
Less: investment advisory fees waived (40,510)
expenses reimbursed by Investment Adviser (7,488)
custody credits earned on cash balances (2,539)
--------------
Net expenses 122,685
--------------
Net investment income 5,993,300
--------------
Net realized gain on investments 3,864
--------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT OPERATIONS $ 5,997,164
==============
</TABLE>
See accompanying notes to financial statements.
ALLIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED MARCH 24, 2004*
APRIL 30, 2005 THROUGH
(UNAUDITED) OCTOBER 31, 2004
------------------- --------------------
INVESTMENT OPERATIONS:
Net investment income $5,993,300 $1,631,317
Net realized gain on investments 3,864 1,330
------------------- --------------------
Net increase in net assets resulting from investment operations 5,997,164 1,632,647
------------------- --------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investments income (5,993,300) (1,631,317)
Net realized gains (1,097) (233)
------------------- --------------------
Total dividends and distributions to shareholders (5,994,397) (1,631,550)
------------------- --------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 1,202,733,818 287,885,520
Cost of shares redeemed (738,875,766) (82,762,807)
------------------- --------------------
Net increase in net assets from capital share transactions 463,858,052 205,122,713
------------------- --------------------
Total increase in net assets 463,860,819 205,123,810
NET ASSETS:
Beginning of period 205,123,810 -
------------------- --------------------
End of period $668,984,629 $205,123,810
=================== ====================
SHARES ISSUED AND REDEEMED:
Issued 1,202,733,818 287,885,520
Redeemed (738,875,766) (82,762,807)
------------------- --------------------
Net increase 463,858,052 205,122,713
=================== ====================
</TABLE>
- -----------------------------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
ALLIANZ DRESDNER DAILY ASSET FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OF OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
FOR THE
SIX MONTHS FOR THE PERIOD
ENDED MARCH 24, 2004*
APRIL 30, 2005 THROUGH
(UNAUDITED) OCTOBER 31, 2004
----------------- ----------------
Net asset value, beginning of period .................................................. $1.00 $1.00
----------------- ---------------
INVESTMENT OPERATIONS:
Net investment income ................................................................. 0.01 0.01
Net realized gain on investments ...................................................... 0.00 ** 0.00 **
----------------- ---------------
Total from investment operations .................................................... 0.01 0.01
----------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................................................. (0.01) (0.01)
Net realized gain ..................................................................... (0.00)** (0.00)**
----------------- ---------------
Total dividends and distributions to shareholders ................................... (0.01) (0.01)
----------------- ---------------
Net asset value, end of period ........................................................ $1.00 $1.00
================= ===============
TOTAL RETURN (1) ...................................................................... 1.21% 0.79%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) ..................................................... $668,985 $205,124
Ratio of expenses to average net assets (2)(3)(4) ..................................... 0.05% 0.05%
Ratio of net investment income to average net assets (3)(4) ........................... 2.59% 1.30%
</TABLE>
- ----------------------------------------------------------------------------
* Commencement of operations.
** Less than $0.005 per share.
(1) Assumes reinvestment of all dividends and distributions. Total return for a
period of less than one year is not annualized.
(2) Inclusive of expenses offset by custody credits earned on cash balances at
the custodian bank (See (1)(F) in Notes to Financial Statements).
(3) During the periods indicated above, the Investment Adviser waived all or a
portion of its fee and assumed a portion of the Fund's operating expenses.
If such waivers and assumptions had not been in effect, the ratios of
expenses to average net assets and the ratios of net investment income to
average net assets would have been 0.07% (annualized) and 2.57%
(annualized), respectively, for the six months ended April 30, 2005 and
0.09% (annualized) and 1.26% (annualized), respectively for the period March
24, 2004 (commencement of operations) through October 31, 2004.
(4) Annualized.
See accompanying notes to financial statements.
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Allianz Dresdner Daily Asset Fund (the "the "Fund") is one of four separate
funds which comprise Fixed Income SHares (the "Trust"). The Trust was organized
as a Massachusetts business trust on November 3, 1999 and in addition to the
Fund is comprised of Series C, Series M, Series R (the "Portfolios"). These
financial statements relate to the Fund. The financial statements for the
Portfolios are provided separately. The Fund is registered under the Investment
Company Act of 1940 ("1940 Act") as an open-end investment company. The Fund is
authorized to issue an unlimited number of shares of beneficial interest at
$.001 par value.
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.
Under the Trust's organizational documents, the Fund's officers trustees,
employees and agents are indemnified against certain liabilities that may arise
out of performance of their duties to the Fund. Additionally, 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 such exposure would involve
claims that may be made against the Fund that have not yet been asserted.
However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(A) VALUATION OF INVESTMENTS
The Fund values its investments on the basis of amortized cost which
approximates market value. The amortized cost method involves valuing a security
at cost on the date of purchase and thereafter assuming a constant dollar
amortization to maturity of the difference between the principal amount due at
maturity and the initial cost of the security. The use of amortized cost is
subject to compliance with the Fund's amortized cost procedures and certain
conditions under Rule 2a-7 of the 1940 Act.
(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, adjusted for the accretion of discounts and amortization of premiums, is
recorded on an accrual basis.
(C) FEDERAL INCOME TAXES
The Fund intends to distribute all of its taxable income and 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 capital gains, if any, during each calendar year, the
Fund intends not to be subject to U.S. federal excise tax.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid
annually.
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
(UNAUDITED)(CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Fund records dividends and distributions to shareholders on the ex-dividend
date. The amount of dividends and distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States of America. These "book-tax" differences
are considered either temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal income tax treatment; temporary
differences do not require reclassification.
(E) REPURCHASE AGREEMENTS
The Fund enters into transactions with its custodian bank or securities
brokerage firms approved by the Board of Trustees whereby it purchases
securities under agreements to resell at an agreed upon price and date
("repurchase agreements"). Such agreements are carried at the contract amount in
the financial statements. Collateral pledged (the securities received), which
consists primarily of U.S. government obligations and asset-backed securities,
are held by the custodian bank until maturity of the repurchase agreement.
Provisions of the repurchase agreements and the procedures adopted by the Fund
require that the market value of the collateral, including accrued interest
thereon, is sufficient in the event of default by the counterparty. If the
counterparty defaults and the value of the collateral declines or if the
counterparty enters an insolvency proceeding, realization of the collateral by
the Fund may be delayed or limited.
(F) CUSTODY CREDITS EARNED ON CASH BALANCES
The Fund benefits from an expense offset arrangement with its custodian bank
whereby uninvested cash balances earn credits which reduce monthly custodian and
accounting agent expenses. Had these cash balances been invested in income
producing securities, they would have generated income for the Fund.
(2) INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
(A) INVESTMENT ADVISER
Dresdner Advisors LLC ("Dresdner Advisors" or the "Investment Adviser"), a
wholly-owned subsidiary of Dresdner Bank AG, serves as the Fund's investment
adviser. Subject to the supervision of the Board of Trustees, the Investment
Adviser is responsible for managing the Fund's investment activities. Pursuant
to an investment advisory agreement with the Fund, the Investment Adviser
receives an annual fee, payable monthly, at the annual rate of 0.0175% of the
Fund's average daily net assets. The Investment Adviser has agreed to waive its
investment advisory fee and/or pay all or a portion of the Fund's other
operating expenses so that the Fund's net operating expenses do not exceed
0.053% (net of any expense offset) of the Fund's average daily net assets.
(B) ADMINISTRATOR
Allianz Global Investors Fund Management LLC ("the Administrator"), formerly PA
Fund Management LLC, an affiliate of the Investment Adviser, and an indirect
wholly-owned subsidiary of Allianz Global Investors of America L.P., ("Allianz
Global") serves as the Fund's administrator and is responsible for managing the
Fund's business affairs and administrative matters. Pursuant to an
administration agreement with the Fund, the Administrator receives an annual
fee, payable monthly, at an annual rate of 0.03% of the Fund's average daily net
assets.
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
(UNAUDITED)(CONTINUED)
(2) INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR (CONTINUED)
(C) DISTRIBUTOR
Allianz Global Investors Distributors LLC (the "Distributor"), formerly, PA
Distributors LLC, an indirect wholly-owned subsidiary of Allianz Global, serves
as the distributor of the Fund's shares. Pursuant to a distribution agreement
with the Trust, the Investment Adviser on behalf of the Fund pays the
Distributor.
(3) CAPITAL STOCK
The following schedule details shareholders owing 5% or more of the Fund and the
percentage held by such shareholder at April 30, 2005:
OWNERSHIP PERCENTAGE
--------------------
Miami Dade County 52.3%
Nicholas Applegate Institutional Funds 12.4
US Allianz PIMCO PEA Renaissance Fund 10.4
US Allianz Van Kampen Comstock Fund 9.2
Investment activity by these shareholders could have a material impact on the
Fund.
(4) LEGAL PROCEEDINGS
On September 13, 2004, the Securities and Exchange Commission (the "Commission")
announced that the Administrator, the Distributor and certain of their
affiliates (together with the Administrator and the Distributor, the
"Affiliates") had agreed to a settlement of charges that they and certain of
their officers had, among other things, violated various antifraud provisions of
the federal securities laws in connection with an alleged market-timing
arrangement involving trading of shares of certain open-end investment companies
("open-end funds") advised or distributed by these certain affiliates. In their
settlement with the Commission, the Affiliates consented to the entry of an
order by the Commission and, without admitting or denying the findings contained
in the order, agreed to implement certain compliance and governance changes and
consented to cease-and-desist orders and censures. In addition, the Affiliates
agreed to pay civil money penalties in the aggregate amount of $40 million and
to pay disgorgement in the amount of $10 million, for an aggregate payment of
$50 million. In connection with the settlement, the Affiliates have been
dismissed from the related complaint the Commission filed on May 6, 2004 in the
U.S. District Court in the Southern District of New York. Neither the complaint
nor the order alleges any inappropriate activity took place with respect to the
Fund.
In a related action on June 1, 2004, the Attorney General of the State of New
Jersey ("NJAG") announced that it had entered into a settlement agreement with
Allianz Global and the Affiliates, in connection with a complaint filed by the
NJAG on February 17, 2004. In the settlement, Allianz Global and other named
affiliates neither admitted nor denied the allegations or conclusions of law,
but did agree to pay New Jersey a civil fine of $15 million and $3 million for
investigative costs and further potential enforcement initiatives against
unrelated parties. They also undertook to implement certain governance changes.
The complaint relating to the settlement contained allegations arising out of
the same matters that were the subject of the Commission order regarding
market-timing described above and does not allege any inappropriate activity
took place with respect to the Fund.
On September 15, 2004, the Commission announced that the Affiliates had agreed
to settle an enforcement action in connection with charges that they violated
various antifraud and other provisions of federal securities laws as a result
of, among other things, their failure to disclose to the board of trustees and
shareholders of various open-end funds advised or distributed by the Affiliates
material facts and conflicts of interest that arose from their use of brokerage
commissions on portfolio transactions to pay for so-called "shelf space"
arrangements with certain broker-dealers. In their settlement with the
Commission, the
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
(UNAUDITED)(CONTINUED)
(4) LEGAL PROCEEDINGS (CONTINUED)
Affiliates consented to the entry of an order by the Commission without
admitting or denying the findings contained in the order. In connection with the
settlement, the Affiliates agreed to undertake certain compliance and disclosure
reforms and consented to cease-and-desist orders and censures. In addition, the
Affiliates agreed to pay a civil money penalty of $5 million and to pay
disgorgement of approximately $6.6 million based upon the aggregate amount of
brokerage commissions alleged to have been paid by such open-end funds in
connection with these shelf-space arrangements (and related interest). In a
related action, the California Attorney General announced on September 15, 2004
that it had entered into an agreement with an affiliate of the Administrator in
resolution of an investigation into matters that are similar to those discussed
in the Commission order. The settlement agreement resolves matters described in
a complaint filed contemporaneously by the California Attorney General in the
Superior Court of the State of California alleging, among other things, that
this affiliate violated certain antifraud provisions of California law by
failing to disclose matters related to the shelf-space arrangements described
above. In the settlement agreement, the affiliate did not admit to any liability
but agreed to pay $5 million in civil penalties and $4 million in recognition of
the California Attorney General's fees and costs associated with the
investigation and related matters. Neither the Commission order nor the
California Attorney General's complaint alleges any inappropriate activity took
place with respect to the Fund.
On April 11, 2005, the Attorney General of the State of West Virginia filed a
complaint in the Circuit Court of Marshall County, West Virginia (the "West
Virginia Complaint") against the Administrator and certain of its Affiliates
based on the same circumstances as those cited in the 2004 settlements with the
Commission and NJAG involving alleged "market timing" activities described
above. The West Virginia Complaint alleges, among other things, that the
Administrator and certain of its Affiliates improperly allowed broker-dealers,
hedge funds and investment advisers to engage in frequent trading of various
open-end funds advised or distributed by the Affiliates in violation of the
funds' stated restrictions on "market timing." As of the date of this report,
the West Virginia Complaint has not been formally served upon the Administrator
or the Affiliates. The West Virginia Complaint also names numerous other
defendants unaffiliated with the Affiliates in separate claims alleging improper
market timing and/or late trading of open-end investment companies advised or
distributed by such other defendants. The West Virginia Complaint seeks
injunctive relief, civil monetary penalties, investigative costs and attorney's
fees. The West Virginia Complaint does not allege that any inappropriate
activity took place with respect to the Fund.
Since February 2004, certain of the Affiliates and their employees have been
named as defendants in a total of 14 lawsuits filed in one of the following:
U.S. District Court in the Southern District of New York, the Central District
of California and the Districts of New Jersey and Connecticut. Ten of those
lawsuits concern "market timing," and they have been transferred to and
consolidated for pre-trial proceedings in the U.S. District Court for the
District of Maryland; the remaining four lawsuits concern "revenue sharing" with
brokers offering "shelf space" and have been consolidated into a single action
in the U.S. District Court for the District of Connecticut. The lawsuits have
been commenced as putative class actions on behalf of investors who purchased,
held or redeemed shares of affiliated funds during specified periods or as
derivative actions on behalf of the funds.
The lawsuits generally relate to the same facts that are the subject of the
regulatory proceedings discussed above. The lawsuits seek, among other things,
unspecified compensatory damages plus interest and, in some cases, punitive
damages, the rescission of investment advisory contracts, the return of fees
paid under those contracts and restitution. The Administrator and Distributor
believe that other similar lawsuits may be filed in federal or state courts
naming as defendants the Administrator, the Distributor, the Affiliates, Allianz
Global, the Fund, other open- and closed-end funds advised or distributed by the
Administrator the Distributor and/or the Affiliates, the boards of directors or
trustees of those funds, and/or other affiliates and their employees. Under
Section 9(a) of the 1940 Act, if any of the various regulatory proceedings or
lawsuits were to result in a court injunction against the Administrator,
Distributor, Allianz Global/or their affiliates, they and their affiliates
would, in the absence of exemptive relief granted by the Commission, be
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2005
(UNAUDITED)(CONTINUED)
(4) LEGAL PROCEEDINGS (CONTINUED)
barred from serving as an investment manager/sub-adviser or principal
underwriter for any registered investment company, including the Fund. In
connection with an inquiry from the Commission concerning the status of the New
Jersey settlement described above under Section 9(a), the Investment Manager and
certain of its affiliates (together, the "Applicants") have sought exemptive
relief from the Commission under Section 9(c) of the 1940 Act
The Commission has granted the Applicants a temporary exemption from the
provisions of Section 9(a) with respect to the New Jersey settlement until the
earlier of (i) September 13, 2006 and (ii) the date on which the Commission
takes final action on their application for a permanent order. There is no
assurance that the Commission will issue a permanent order. If the West Virginia
Attorney General were to obtain a court injunction against the Administrator or
the Affiliates, the Administrator or the Affiliates would, in turn, seek
exemptive relief under Section 9(c) with respect to that matter, although there
is no assurance that such exemptive relief would be granted.
A putative class action lawsuit captioned Charles Mutchka et al. v. Brent R.
Harris, et al., filed in January 2005 by and on behalf of individual
shareholders of certain open-end funds that hold equity securities and that are
sponsored by the Administrator and the Affiliates, is currently pending in the
federal district court for the Central District of California. The plaintiff
alleges that fund trustees, investment advisers and affiliates breached
fiduciary duties and duties of care by failing to ensure that the open-end funds
participated in securities class action settlements for which those funds were
eligible. The plaintiff has claimed as damages disgorgement of fees paid to the
investment advisers, compensatory damages and punitive damages.
The Administrator believes that the claims made in the lawsuit against the
Administrator and the Affiliates are baseless, and the Administrator and the
Affiliates intend to vigorously defend the lawsuit. As of the date hereof, the
Administrator believes a decision, if any, against the defendants would have no
material adverse effect on the Fund or the ability of the Administrator or the
Affiliates to perform their duties under the administration agreement.
It is possible that these matters and/or other developments resulting from these
matters could lead to increased Fund redemptions or other adverse consequences
to the Fund and its shareholders. However, the Investment Adviser, Administrator
and Distributor believe that these matters are not likely to have a material
adverse effect on the Fund or on the Investment Adviser's, Administrator's or
Distributor's ability to perform their respective investment advisory,
administration or distribution services related to the Fund.
The foregoing speaks only as of the date hereof. There may be additional
litigation or regulatory developments in connection with the matters discussed
above.
- --------------------------------------------------------------------------------
SHAREHOLDER MEETING RESULTS:
The Trust held a meeting of shareholders on January 26, 2005. Shareholders
voted to elect John J. Dalessandro II, David C. Flattum, Hans W. Kertess and R.
Peter Sullivan III as Trustees..
The resulting vote count is indicated below:
Withheld
Affirmative Authority
- --------------------------------------------------------------------------------
Election of John J. Dalessandro II 285,321,252 288,097
Election of David C. Flattum 285,321,252 288,097
Election of Hans W. Kertess 285,321,252 288,097
Election of R. Peter Sullivan III 285,321,252 288,097
Messrs. Paul Belica and Robert E. Connor continue to serve as Trustees.
TRUSTEES AND PRINCIPAL OFFICERS
Robert E. Connor Chairman of the Board of Trustees
Paul Belica Trustee
John J. Dalessandro II Trustee
David C. Flattum Trustee
Hans W. Kertess Trustee
R. Peter Sullivan III Trustee
Brian S. Shlissel President & Chief Executive Officer
Newton B. Schott, Jr. Vice President
Lawrence G. Altadonna Treasurer
Thomas J. Fuccillo Secretary
Youse Guia Chief Compliance Officer
Jennifer A. Patula Assistant Secretary
INVESTMENT ADVISER
Dresdner Advisors LLC
1301 Avenue of the Americas
New York, NY 10019
ADMINISTRATOR
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
DISTRIBUTOR
Allianz Global Investors Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, MO 64105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
Boston Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholders of Allianz Dresdner Daily Asset Fund for their information. It is
not a prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report.
The financial information included herein is taken from the records of the Fund
without examination by an independent registered public accounting firm, who did
not express an opinion hereon.
Proxy Voting - since the Fund invests exclusively in non-voting securities, the
Fund does not have proxy policies and procedures.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (the "Commission") for the first and third quarters of
its fiscal year on Form N-Q. Form N-Q is available (i) on the Commission's
website at www.sec.gov and (ii) at the Commission's Public Reference Room which
is located at the Commission's headquarter's office, 450 5th Street N.W. Room
1200, Washington, DC 20549, telephone number (202) 942-8090.
ITEM 2. CODE OF ETHICS Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of
the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not required in this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT COMPANIES Not effective
at time of filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES Disclosure not required for open-end
management investment Companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There have been
no material changes to the procedures by which shareholders may recommend
nominees to the Fund's Board of Trustees since the Fund's last provided
disclosure in response to this item.
ITEM 11. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS
(a) Exhibit 99.302 Cert. - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Fixed Income SHares
-------------------
By /s/ Brian S. Shlissel
- ------------------------
President and Chief Executive Officer
Date July 7, 2005
- -----------------
By /s/ Lawrence G. Altadonna
- ----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 7, 2005
- -----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
- ------------------------
President and Chief Executive Officer
Date July 7, 2005
- -----------------
By /s/ Lawrence G. Altadonna
- ----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 7, 2005
- -----------------
