Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
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 H, Series M, Series R (the ‘‘Portfolios’’), and the Allianz Dresdner Daily Asset Fund. These financial statements relate to Series C, Series H, Series M and Series R. The financial statements for Allianz Dresdner Daily Asset Fund are provided separately. Allianz Global Investors Fund Management LLC (the ‘‘Investment Manager’’) 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 SE. The Portfolios are authorized to issue an unlimited number of shares of beneficial interest at $0.001 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 those estimates.
In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, ‘‘Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109’’ (the ‘‘Interpretation’’). The Interpretation establishes for all entities, including pass-through entities such as the Portfolios, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. The Portfolios’ management has begun to evaluate the application of the Interpretation, and is not in a position at this time to estimate the significance of its impact, if any, on the Portfolios’ financial statements. On December 22, 2006, the Securities & Exchange Commission announced that it would not object if a Portfolio implements Interpretation 48 in its NAV calculation as late as its last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. Consequently, the Portfolios will be required to comply with the Interpretation by April 30, 2008.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (‘‘SFAS’’) 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Portfolios are in the process of reviewing the Standard against their current valuation policies to determine future applicability.
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 this would involve future claims that may be made against the Portfolios based upon events 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, are fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees, including certain fixed income securities which may be valued with reference to securities whose prices are more readily available. The Portfolios’ investments, including over-the-counter options, are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. The Portfolios’ investments in senior floating rate loans (‘‘Senior Loans’’) for which a secondary market exists will be valued at the mean of the last available bid and asked prices in the market for such Senior Loans, as provided by an independent pricing service. Other Senior Loans are valued at fair value pursuant to procedures approved by the Board of Trustees, which include consideration and evaluation of: (1) the creditworthiness of the borrower and any intermediate participants; (2) the term of the Senior Loan; (3) recent prices in the market for similar loans, if any; (4) recent prices in the market for loans of similar quality, coupon rate, and period until next interest rate reset and maturity; and (5) general economic and market conditions affecting the fair value of the Senior Loan. At April 30, 2007,
52 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
1. Organization and Significant Accounting Policies (continued)
no Senior Loans were fair valued. Exchange traded options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement value. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the 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 values are determined daily as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (‘‘NYSE’’) on each day the NYSE is open for business.
(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income adjusted for the accretion of discounts and amortization of premiums, is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. 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 to comply with the other requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.
(d) Dividends and Distributions
Dividends from net investment income are declared daily and paid monthly. Distributions of net realized capital gains, if any, are declared and paid at least 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 generally accepted accounting principles 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. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions of paid-in capital in excess of par.
(e) Foreign Currency Translation
The Portfolios’ 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 Statements 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) Option Transactions
The Portfolios may purchase and write (sell) put and call options for hedging purposes, risk management purposes or as a part of their 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 bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options is decreased by the premiums paid.
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 53
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
1. Organization and Significant Accounting Policies (continued)
When an option is written, the premium received is recorded as an asset with an equal liability and is subsequently marked to market to reflect the current market value of the option written. These liabilities are reflected as options written in the Statements of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transactions, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the security. In writing an option, the Portfolios bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Portfolios purchasing a security at a price different from the current market.
(g) Credit Default/Interest Rate Swaps
The Portfolios may enter into interest rate and credit default swap contracts (‘‘swaps’’) for investment purposes, to manage their interest rate and credit risk or to add leverage.
As a seller in the credit default swap contract, the Portfolios would be required to pay the notional amount or other agreed-upon value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or foreign corporate issuer, on the referenced debt obligation. In return, the 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 recorded as 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 amount or other agreed upon value of a referenced debt obligation from the counterparty in the event of default by a third party, such as a U.S. or foreign corporate issuer on the referenced 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 recorded as 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 realized gain (loss) and or change in unrealized appreciation/depreciation in the Statements of Operations.
Swaps are marked to market daily based upon quotations from brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation in the Portfolio’s Statement of Operations. 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 Portfolios.
Entering into swaps involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in net interest rates.
(h) 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 or 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
54 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
1. Organization and Significant Accounting Policies (continued)
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.
(i) Forward Foreign Currency Contracts—Series C, Series M, Series R
A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Series C, Series M and Series R may enter into forward foreign currency contracts for the purpose of hedging against foreign currency risk arising from the investment or anticipated investment in securities denominated in foreign currencies. These Portfolios may also enter into these contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. The market value of a forward foreign currency contract fluctuates with changes in forward currency exchange rates. All commitments are marked to market daily at the applicable exchange rates and any resulting unrealized appreciation or depreciation is recorded. Realized gains or losses are recorded at the time the forward contract matures or by delivery of the currency. Risks may arise upon entering these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar.
(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 Statements of Operations, even though investors do not receive principal until maturity.
(k) Repurchase Agreements
The Portfolios enter into transactions with their custodian bank or securities brokerage firms whereby they purchase 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 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.
(l) Reverse Repurchase Agreements
The Portfolios may enter into reverse repurchase agreements. In a reverse repurchase agreement, the Portfolios sell securities to a bank or broker-dealer and agree to repurchase the securities at a mutually agreed upon date and price. Generally, the effect of such a transaction is that the Portfolios 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 Portfolios of the reverse repurchase transaction is less than the returns they obtain on investments purchased with the cash. Unless the Portfolios cover their positions in reverse repurchase agreements (by segregating liquid assets at least equal in amount to the forward purchase commitment), their obligations under the agreements will be subject to the Portfolios’ limitations on borrowings. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Portfolios are 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 Portfolios’ 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 Portfolios’ obligation to repurchase the securities. At April 30, 2007, the Portfolios had no reverse repurchase agreements outstanding.
(m) When-Issued/Delayed-Delivery Transactions
The Portfolios may purchase or sell securities on a when-issued or delayed-delivery basis. The transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Portfolios will set
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 55
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
1. Organization and Significant Accounting Policies (continued)
aside and maintain until the settlement date in a designated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed-delivery basis, the Portfolios assume 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 their net asset values. The Portfolios may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a realized gain or loss. When a security on a delayed-delivery basis is sold, the Portfolios do not participate in future gains and losses with respect to the security.
(n) 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.
(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
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 unlimited, whereas losses from purchases cannot exceed the total amount invested.
(q) Senior Loans
The Portfolios purchase assignments of Senior Loans originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution (the ‘‘Agent’’) for a lending syndicate of financial institutions (the ‘‘Lender’’). When purchasing an assignment, the Portfolios succeed all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender.
2. Investment Manager/Sub-Adviser/Administrator/Distributor
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 Trust is an investment option.
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.
56 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
2. Investment Manager/Sub-Adviser/Administrator/Distributor (continued)
Allianz Global Investors Distributors LLC (‘‘the Distributor’’), 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. Investment in Securities
Purchases and sales of securities (excluding short-term investments) for the six months ended April 30, 2007, were:
| | | | | | | | | | | | | | | | | | |
| | | U.S. Government Agency | | All Other |
| | | Purchases | | Sales | | Purchases | | Sales |
| Series C: | | $ | 2,531,691,122 | | | $ | 2,689,763,832 | | | $ | 470,374,362 | | | $ | 195,496,867 | |
| Series H: | | | — | | | | — | | | | 3,160,660 | | | | 154,704 | |
| Series M: | | | 20,691,348,670 | | | | 21,281,911,579 | | | | 49,142,060 | | | | 183,683,622 | |
| Series R: | | | 896,005,748 | | | | 948,007,863 | | | | 4,134,345 | | | | 523,090 | |
|
(a) Futures contracts outstanding at April 30, 2007:
| | | | | | | | | | | | | | | | | | |
| Series C: | | Contracts | | Market Value
(000) | | Expiration
Date | | Unrealized
Appreciation
(Depreciation) |
| Long: Financial Future Euro–90 day | | | 11,601 | | | $ | 2,749,437 | | | | 9/17/07 | | | $ | (6,436,747 | ) |
| Financial Future Euro–90 day | | | 8,843 | | | | 2,099,991 | | | | 12/17/07 | | | | (670,453 | ) |
| Financial Future Euro–90 day | | | 3,046 | | | | 724,834 | | | | 3/17/08 | | | | 792,674 | |
| Financial Future Euro–90 day | | | 236 | | | | 56,274 | | | | 12/15/08 | | | | 105,190 | |
| Financial Future Euro–90 day | | | 2,020 | | | | 481,316 | | | | 6/15/09 | | | | 133,886 | |
| U.S. Treasury Bond Futures | | | 61 | | | | 6,817 | | | | 6/30/07 | | | | (88,164 | ) |
| Short: Financial Future Euro–90 day | | | (454 | ) | | | (108,188 | ) | | | 6/16/08 | | | | (43,997 | ) |
| Financial Future Euro–90 day | | | (454 | ) | | | (108,251 | ) | | | 9/15/08 | | | | (86,664 | ) |
| U.S. Treasury Notes 10 yr. Futures | | | (13 | ) | | | (1,408 | ) | | | 6/20/07 | | | | 3,047 | |
| | | | | | | | | | | | | | | $ | (6,291,228 | ) |
|
| | | | | | | | | | | | | | | | | | |
| Series M: | | Contracts | | Market Value
(000) | | Expiration
Date | | Unrealized
Appreciation
(Depreciation) |
| Long: Financial Future Euro–90 day | | | 12,411 | | | $ | 2,941,407 | | | | 9/17/07 | | | $ | (5,574,724 | ) |
| Financial Future Euro–90 day | | | 3,400 | | | | 807,415 | | | | 12/17/07 | | | | (1,034,456 | ) |
| U.S. Treasury Bond Futures | | | 492 | | | | 54,981 | | | | 6/30/07 | | | | (534,812 | ) |
| U.S. Treasury Notes 10 yr. Futures | | | 159 | | | | 17,224 | | | | 6/20/07 | | | | 59,625 | |
| Short: U.S. Treasury Notes 5 yr. Futures | | | (1,345 | ) | | | (142,339 | ) | | | 6/29/07 | | | | (493,866 | ) |
| | | | | | | | | | | | | | | $ | (7,578,233 | ) |
|
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 57
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
| | | | | | | | | | | | | | | | | | |
| Series R: | | Contracts | | Market Value
(000) | | Expiration
Date | | Unrealized
Appreciation
(Depreciation) |
| Long: U.S. Treasury Notes 5 yr. Futures | | | 135 | | | $ | 14,287 | | | | 6/29/07 | | | $ | 76,211 | |
| U.S. Treasury Notes 10 yr. Futures | | | 484 | | | | 52,431 | | | | 6/20/07 | | | | (42,124 | ) |
| Euro Bund 10 yr. Futures | | | 1 | | | | 156 | | | | 6/30/07 | | | | (2,216 | ) |
| Japanese Government Bond 10 yr. Futures | | | 4 | | | | 5,622 | | | | 6/11/07 | | | | 1,771 | |
| Financial Future British Pound–90 day | | | 70 | | | | 16,477 | | | | 3/19/08 | | | | (40,461 | ) |
| Financial Future British Pound–90 day | | | 129 | | | | 30,380 | | | | 6/18/08 | | | | (45,645 | ) |
| Short: Financial Future Euro–90 day | | | (29 | ) | | | (6,887 | ) | | | 12/17/07 | | | | 36,250 | |
| Financial Future Euro–90 day | | | (29 | ) | | | (6,901 | ) | | | 3/17/08 | | | | 26,100 | |
| Financial Future Euro–90 day | | | (59 | ) | | | (14,060 | ) | | | 6/16/08 | | | | 4,950 | |
| Financial Future Euro–90 day | | | (59 | ) | | | (14,068 | ) | | | 9/15/08 | | | | (900 | ) |
| Financial Future Euro–90 day | | | (30 | ) | | | (7,154 | ) | | | 12/15/08 | | | | (15,375 | ) |
| Financial Future Euro–90 day | | | (30 | ) | | | (7,152 | ) | | | 3/16/09 | | | | (15,938 | ) |
| U.S. Treasury Bond Future | | | (135 | ) | | | (15,086 | ) | | | 6/30/07 | | | | 159,703 | |
| | | | | | | | | | | | | | | $ | 140,326 | |
|
(b) Transactions in options written for the six months ended April 30, 2007:
| | | | | | | | | | |
| Series C: | | Contracts/Notional | | Premiums |
| Options outstanding, October 31, 2006 | | | 64,001,880 | | | $ | 1,250,688 | |
| Options written | | | 396,000,000 | | | | 5,538,714 | |
| Options terminated in closing transactions | | | (100,001,880 | ) | | | (611,859 | ) |
| Options outstanding, April 30, 2007 | | | 360,000,000 | | | $ | 6,177,543 | |
|
| | | | | | | | | | |
| Series M: | | Contracts/Notional | | Premiums |
| Options outstanding, October 31, 2006 | | | — | | | $ | 0 | |
| Options written | | | 171,000,000 | | | | 554,414 | |
| Options terminated in closing transactions | | | (171,000,000 | ) | | | (554,414 | ) |
| Options outstanding, April 30, 2007 | | | — | | | $ | 0 | |
|
| | | | | | | | | | |
| Series R: | | Contracts/Notional | | Premiums |
| Options outstanding, October 31, 2006 | | | 62 | | | $ | 29,714 | |
| Options written | | | 24 | | | | 11,086 | |
| Options exercised | | | (82 | ) | | | (43,243 | ) |
| Options expired | | | 41 | | | | 21,622 | |
| Options terminated in closing transactions | | | (45 | ) | | | (19,179 | ) |
| Options outstanding, April 30, 2007 | | | — | | | $ | 0 | |
|
58 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
(c) Credit default swaps contracts outstanding at April 30, 2007:
Series C:
| | | | | | | | | | | | | | | | | | |
Swap Counterparty/
Referenced Debt Issuer | | Notional Amount
Payable on
Default (000) | | Termination
Date | | Payments
Received (Paid)
by Portfolio | | Unrealized
Appreciation
(Depreciation) |
| Goldman Sachs | | | | | | | | | | | | | | | | |
| Anadarko Petroleum | | $ | 3,700 | | | | 3/20/08 | | | | 0.15 | % | | $ | 1,850 | |
| AutoZone | | | 2,400 | | | | 6/20/12 | | | | (0.34 | )% | | | (4,972 | ) |
| Centex | | | 2,300 | | | | 3/20/17 | | | | (0.849 | )% | | | 153,568 | |
| Chesapeake Energy | | | 1,500 | | | | 3/20/14 | | | | 1.32 | % | | | (1,464 | ) |
| ConAgra Foods | | | 1,500 | | | | 6/20/12 | | | | (0.299 | )% | | | (2,312 | ) |
| CSC Holdings | | | 5,000 | | | | 12/20/07 | | | | (0.55 | )% | | | (12,332 | ) |
| Dow Jones CDX | | | 37,800 | | | | 6/20/12 | | | | 0.35 | % | | | (3,695 | ) |
| Federated BP | | | 300 | | | | 6/20/12 | | | | (0.53 | )% | | | (525 | ) |
| Ford Motor Credit | | | 5,000 | | | | 6/20/07 | | | | 4.65 | % | | | 56,371 | |
| Ford Motor Credit | | | 10,000 | | | | 6/20/07 | | | | 4.65 | % | | | 112,742 | |
| Ford Motor Credit | | | 15,000 | | | | 12/20/07 | | | | 0.81 | % | | | 12,936 | |
| Ford Motor Credit | | | 10,000 | | | | 3/20/08 | | | | 1.30 | % | | | 40,580 | |
| International Paper | | | 3,000 | | | | 6/20/10 | | | | 0.78 | % | | | 53,632 | |
| Kohls | | | 2,400 | | | | 6/20/12 | | | | (0.22 | )% | | | (2,580 | ) |
| Nordstrom | | | 2,200 | | | | 6/20/11 | | | | (0.18 | )% | | | (3,781 | ) |
| Pulte Homes | | | 2,300 | | | | 3/20/17 | | | | (0.859 | )% | | | 153,437 | |
| Southwest Airlines | | | 2,000 | | | | 6/20/11 | | | | (0.29 | )% | | | 813 | |
| V.F. Corp. | | | 2,400 | | | | 6/20/12 | | | | (0.22 | )% | | | (1,487 | ) |
| Weyerhaeuser | | | 2,300 | | | | 3/20/17 | | | | (1.018 | )% | | | (15,156 | ) |
| Whirlpool | | | 700 | | | | 6/20/12 | | | | (0.63 | )% | | | (5,723 | ) |
| Lehman Brothers | | | | | | | | | | | | | | | | |
| Chesapeake Energy | | | 2,300 | | | | 3/20/14 | | | | 1.16 | % | | | (23,396 | ) |
| DR Horton | | | 4,400 | | | | 3/20/12 | | | | (0.705 | )% | | | 108,002 | |
| Federative Republic of Brazil | | | 4,400 | | | | 7/20/13 | | | | 2.02 | % | | | 291,353 | |
| Ford Motor Credit | | | 20,000 | | | | 3/20/08 | | | | 0.75 | % | | | (35,936 | ) |
| GMAC | | | 15,000 | | | | 3/20/08 | | | | 0.75 | % | | | (19,298 | ) |
| GMAC | | | 10,000 | | | | 3/20/08 | | | | 1.05 | % | | | 16,196 | |
| GMAC | | | 2,500 | | | | 3/20/08 | | | | 1.55 | % | | | 16,873 | |
| International Paper | | | 1,000 | | | | 6/20/12 | | | | (0.45 | )% | | | (3,205 | ) |
| MeadWestvaco | | | 1,000 | | | | 6/20/12 | | | | (0.51 | )% | | | 4,866 | |
| Nordstrom | | | 600 | | | | 6/20/12 | | | | (0.179 | )% | | | (53 | ) |
| Pemex | | | 8,000 | | | | 3/20/09 | | | | 0.34 | % | | | 3,384 | |
| Proctor & Gamble | | | 40,200 | | | | 9/20/08 | | | | 0.07 | % | | | 26,366 | |
| Reynolds American | | | 1,800 | | | | 6/20/12 | | | | 1.00 | % | | | (3,075 | ) |
Starwood Hotels & Resorts
Worldwide | | | 2,700 | | | | 9/20/11 | | | | 1.01 | % | | | 4,388 | |
| Toll Brothers | | | 2,300 | | | | 3/20/17 | | | | (1.20 | )% | | | 76,115 | |
| United Mexican States | | | 7,500 | | | | 3/20/09 | | | | 0.24 | % | | | 6,994 | |
| United Mexican States | | | 1,000 | | | | 1/20/17 | | | | 0.67 | % | | | 13,049 | |
| Weyerhaeuser | | | 700 | | | | 6/20/12 | | | | (0.45 | )% | | | 1,876 | |
|
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 59
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
| | | | | | | | | | | | | | | | | | |
Swap Counterparty/
Referenced Debt Issuer | | Notional Amount
Payable on
Default (000) | | Termination
Date | | Payments
Received (Paid)
by Portfolio | | Unrealized
Appreciation
(Depreciation) |
| Merrill Lynch | | | | | | | | | | | | | | | | |
| Apache | | $ | 4,500 | | | | 6/20/10 | | | | 0.39 | % | | $ | 38,302 | |
| Canadian Natural Resources | | | 1,800 | | | | 3/20/10 | | | | 0.32 | % | | | 9,714 | |
| Centex | | | 4,500 | | | | 3/20/12 | | | | (0.45 | )% | | | 162,727 | |
| Ford Motor Credit | | | 1,100 | | | | 9/20/10 | | | | 3.80 | % | | | 45,367 | |
| General Electric Credit | | | 1,800 | | | | 6/20/10 | | | | 0.30 | % | | | 11,178 | |
| Lennar | | | 4,700 | | | | 3/20/12 | | | | (0.58 | )% | | | 105,334 | |
| Pulte Homes | | | 4,500 | | | | 3/20/12 | | | | (0.45 | )% | | | 164,622 | |
| Toll Brothers | | | 3,900 | | | | 3/20/12 | | | | (0.89 | )% | | | 36,892 | |
| XTO Energy | | | 1,300 | | | | 3/20/10 | | | | 0.38 | % | | | 9,733 | |
| Morgan Stanley | | | | | | | | | | | | | | | | |
| Altira Group | | | 2,500 | | | | 12/20/10 | | | | 0.95 | % | | | 64,342 | |
| ConocoPhillips | | | 4,700 | | | | 3/20/11 | | | | 0.23 | % | | | 26,124 | |
| Darden Restaurants | | | 2,500 | | | | 6/20/12 | | | | (0.49 | )% | | | 20,425 | |
| Dow Jones CDX | | | 25,200 | | | | 12/20/16 | | | | (0.65 | )% | | | 62,824 | |
| Glitnir banki hf | | | 20,000 | | | | 6/20/12 | | | | (0.29 | )% | | | (39,028 | ) |
| GMAC | | | 3,000 | | | | 3/20/08 | | | | 0.60 | % | | | (9,475 | ) |
| Inco Ltd. | | | 9,000 | | | | 12/20/11 | | | | (0.50 | )% | | | (104,991 | ) |
| Liz Claiborne | | | 3,300 | | | | 6/20/12 | | | | (0.48 | )% | | | (2,673 | ) |
| Office Depot | | | 2,400 | | | | 6/20/12 | | | | (0.45 | )% | | | 4,623 | |
| Republic of Indonesia | | | 7,700 | | | | 3/20/09 | | | | 0.46 | % | | | 11,741 | |
| Republic of Peru | | | 7,700 | | | | 3/20/09 | | | | 0.32 | % | | | 353 | |
| Russian Federation | | | 8,000 | | | | 3/20/09 | | | | 0.31 | % | | | 6,228 | |
| Time Warner | | | 5,000 | | | | 9/20/10 | | | | 0.58 | % | | | 64,388 | |
| Ukraine | | | 7,700 | | | | 3/20/09 | | | | 0.66 | % | | | 13,789 | |
| Vale Overseas Ltd. | | | 9,000 | | | | 12/20/11 | | | | 0.70 | % | | | 93,465 | |
| Walt Disney | | | 1,400 | | | | 6/20/11 | | | | (0.18 | )% | | | (3,989 | ) |
| Whirlpool | | | 2,300 | | | | 3/20/17 | | | | (0.78 | )% | | | 26,363 | |
| | | | | | | | | | | | | | | $ | 1,834,779 | |
|
Series M:
| | | | | | | | | | | | | | | | | | |
Swap Counterparty/
Referenced Debt Issuer | | Notional Amount
Payable on
Default (000) | | Termination
Date | | Payments
(Paid) by Portfolio | | Unrealized
Appreciation
(Depreciation) |
| Goldman Sachs | | | | | | | | | | | | | | | | |
| MeadWestvaco | | $ | 2,900 | | | | 6/20/12 | | | | (0.519 | )% | | $ | 12,822 | |
| Lehman Brothers | | | | | | | | | | | | | | | | |
| International Paper | | | 3,400 | | | | 6/20/12 | | | | (0.46 | )% | | | (12,606 | ) |
| Weyerhaeuser Co. | | | 3,400 | | | | 6/20/12 | | | | (0.47 | )% | | | 5,879 | |
| | | | | | | | | | | | | | | $ | 6,095 | |
|
60 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
Series R:
| | | | | | | | | | | | | | | | | | |
Swap Counterparty/
Referenced Debt Issuer | | Notional Amount
Payable on
Default (000) | | Termination
Date | | Payments Received
by Portfolio | | Unrealized
Appreciation |
| Goldman Sachs | | | | | | | | | | | | | | |
| Ford Motor Credit | | $ | 500 | | | | 9/20/07 | | | 2.30% | | $ | 4,500 | |
| GMAC | | | 300 | | | | 6/20/11 | | | 3.40% | | | 19,866 | |
| Morgan Stanley | | | | | | | | | | | | | | |
| Russian Federation | | | 1,000 | | | | 12/20/07 | | | 0.26% | | | 1,165 | |
| | | | | | | | | | | | | $ | 25,531 | |
|
(d) Interest rate swap agreements outstanding at April 30, 2007:
Series C:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Rate Type | | |
| Swap Counterparty | | Notional
Amount
(000) | | Termination
Date | | Payments
Made by
Fund | | Payments
Received by
Fund | | Unrealized
Appreciation
(Depreciation) |
| Goldman Sachs | | ¥97,200,000 | | | 3/18/09 | | | 6-Month JPY-LIBOR | | 1.00% | | $ | (386,638 | ) |
| Goldman Sachs | | $160,000 | | | 6/20/09 | | | 3-Month USD-LIBOR | | 5.00% | | | 877,840 | |
| Goldman Sachs | | ¥49,200,000 | | | 3/20/11 | | | 1.50% | | 6-Month JPY-LIBOR | | | 377,157 | |
| Goldman Sachs | | €5,900 | | | 3/30/12 | | | 5-Year French CPI Ex
Tobacco Daily
Reference Index | | 1.96% | | | 6,710 | |
| Goldman Sachs | | $67,200 | | | 6/20/12 | | | 3-Month USD-LIBOR | | 5.00% | | | 270,211 | |
| Goldman Sachs | | £6,400 | | | 12/15/35 | | | 4.00% | | 6-Month GBP-LIBOR | | | 398,399 | |
| Lehman Brothers | | $700,000 | | | 6/21/07 | | | 3-Month USD-LIBOR | | 4.00% | | | (1,429,284 | ) |
| Lehman Brothers | | 182,000 | | | 6/20/12 | | | 3-Month USD-LIBOR | | 5.00% | | | 1,369,822 | |
| Lehman Brothers | | 121,200 | | | 6/20/14 | | | 5.00% | | 3-Month USD-LIBOR | | | 666,370 | |
| Lehman Brothers | | 1,600 | | | 6/20/17 | | | 5.00% | | 3-Month USD-LIBOR | | | 35,031 | |
| Lehman Brothers | | £118,000 | | | 12/15/35 | | | 4.00% | | 6-Month GBP-LIBOR | | | 7,735,426 | |
| Merrill Lynch | | BRL 151,000 | | | 1/4/10 | | | BRL-CDI-Compounded | | 12.948% | | | 2,685,213 | |
| Merrill Lynch | | MXN 750,000 | | | 11/4/16 | | | 28-Day Mexico TIIE Banxico | | 8.17% | | | (195,890 | ) |
| Merrill Lynch | | $700 | | | 12/15/24 | | | 6.00% | | 3-Month USD-LIBOR | | | (16,721 | ) |
| Merrill Lynch | | CAD 9,200 | | | 6/15/27 | | | 3-Month Canadian
Bank Bill | | 4.50% | | | (258,887 | ) |
| Morgan Stanley | | ¥214,400,000 | | | 3/18/09 | | | 6-Month JPY-LIBOR | | 1.00% | | | (958,355 | ) |
| Morgan Stanley | | NZD 110,345 | | | 6/15/09 | | | 3-Month New
Zealand Bank Bill | | 7.25% | | | (492,655 | ) |
| Morgan Stanley | | $283,100 | | | 6/20/09 | | | 3-Month USD-LIBOR | | 5.00% | | | (527,557 | ) |
| Morgan Stanley | | BRL 138,000 | | | 1/4/10 | | | BRL-CDI-Compounded | | 12.78% | | | 2,448,625 | |
| Morgan Stanley | | AUD 112,000 | | | 1/15/10 | | | 6-Month Australian Bank Bill | | 6.50% | | | 31,160 | |
| Morgan Stanley | | 83,500 | | | 1/15/10 | | | 6-Month Australian Bank Bill | | 6.50% | | | (1,184 | ) |
| Morgan Stanley | | ¥107,800,000 | | | 3/20/11 | | | 1.50% | | 6-Month JPY-LIBOR | | | 1,051,130 | |
| Morgan Stanley | | $55,300 | | | 6/20/14 | | | 5.00% | | 3-Month USD-LIBOR | | | (562,395 | ) |
| Morgan Stanley | | MXN 109,000 | | | 11/4/16 | | | 28-Day Mexico TIIE Banxico | | 8.17% | | | (47,970 | ) |
| Morgan Stanley | | $ | 38,500 | | | | 6/20/17 | | | 5.00% | | 3-Month USD-LIBOR | | | 56,706 | |
| Morgan Stanley | | | ¥15,500,000 | | | | 12/15/35 | | | 6-Month JPY-LIBOR | | 3.00% | | | (253,239 | ) |
| | | | | | | | | | | | | | | $ | 12,879,025 | |
|
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 61
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
Series M:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Rate Type | | |
| Swap Counterparty | | Notional
Amount
(000) | | Termination
Date | | Payments
Made by
Fund | | Payments
Received by
Fund | | Unrealized
Appreciation
(Depreciation) |
| Goldman Sachs | | $ | 149,500 | | | 6/20/12 | | 3-Month USD-LIBOR | | 5.00% | | $ | 601,140 | |
| Goldman Sachs | | | 1,184,100 | | | 12/21/16 | | 5.00% | | 3-Month USD-LIBOR | | | 8,188,179 | |
| Goldman Sachs | | | 394,500 | | | 6/20/17 | | 5.00% | | 3-Month USD-LIBOR | | | (3,150,324 | ) |
| Goldman Sachs | | | 90,000 | | | 12/15/35 | | 3-Month USD-LIBOR | | 5.00% | | | (1,679,688 | ) |
| Goldman Sachs | | | 15,600 | | | 6/20/37 | | 3-Month USD-LIBOR | | 5.00% | | | (476,320 | ) |
| Lehman Brothers | | | 939,000 | | | 6/20/12 | | 3-Month USD-LIBOR | | 5.00% | | | 7,956,223 | |
| Lehman Brothers | | | 33,000 | | | 6/20/14 | | 5.00% | | 3-Month USD-LIBOR | | | 181,437 | |
| Morgan Stanley | | | 75,000 | | | 6/20/09 | | 5.00% | | 3-Month USD-LIBOR | | | (166,237 | ) |
| Morgan Stanley | | | 32,000 | | | 6/20/14 | | 5.00% | | 3-Month USD-LIBOR | | | (325,437 | ) |
| Morgan Stanley | | | 42,800 | | | 12/21/16 | | 5.00% | | 3-Month USD-LIBOR | | | 305,078 | |
| Morgan Stanley | | | 226,100 | | | 6/20/37 | | 3-Month USD-LIBOR | | 5.00% | | | (6,878,381 | ) |
| | | | | | | | | | | | | $ | 4,555,670 | |
|
Series R:
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Rate Type | | |
| Swap Counterparty | | Notional
Amount
(000) | | Termination
Date | | Payments
Made by
Fund | | Payments
Received by
Fund | | Unrealized
Appreciation
(Depreciation) |
| Goldman Sachs | | $ | 6,200 | | | | 6/20/09 | | | 3-Month USD-LIBOR | | 5.00% | | $ | (11,554 | ) |
| Goldman Sachs | | €2,300 | | | 12/15/11 | | | 5-Year French CPI Ex
Tobacco Daily Reference Index | | 1.976% | | | 15,216 | |
| Goldman Sachs | | €2,400 | | | 3/15/12 | | | 5-Year French CPI Ex
Tobacco Daily Reference Index | | 1.995% | | | 11,010 | |
| Goldman Sachs | | €6,600 | | | 3/30/12 | | | 5-Year French CPI Ex
Tobacco Daily Reference Index | | 1.96% | | | 7,506 | |
| Goldman Sachs | | €500 | | | 6/17/15 | | | 4.50% | | 6-month EUR-LIBOR | | | 42,388 | |
| Goldman Sachs | | | £2,500 | | | | 9/15/15 | | | 5.00% | | 6-Month GBP-LIBOR | | | 78,539 | |
| Lehman Brothers | | $ | 1,000 | | | | 6/20/12 | | | 5.00% | | 3-Month USD-LIBOR | | | 6,929 | |
| Lehman Brothers | | | 800 | | | | 6/20/14 | | | 5.00% | | 3-Month USD-LIBOR | | | 4,399 | |
| Lehman Brothers | | | 100 | | | | 6/20/17 | | | 5.00% | | 3-Month USD-LIBOR | | | 2,189 | |
| Merrill Lynch | | CAD 800 | | | 6/15/35 | | | 3-Month Canadian
Bank Bill | | 5.50% | | | (25,851 | ) |
| Morgan Stanley | | $ | 500 | | | | 6/20/09 | | | 3-Month USD-LIBOR | | 5.00% | | | (932 | ) |
| Morgan Stanley | | €100 | | | 6/15/17 | | | 4.00% | | 6-Month EUR-LIBOR | | | 4,513 | |
| Morgan Stanley | | $ | 3,900 | | | | 6/20/17 | | | 5.00% | | 3-Month USD-LIBOR | | | 5,744 | |
| | | | | | | | | | | | | | | $ | 140,096 | |
|
62 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
AUD–Australian Dollar
BRL–Brazilian Real
CAD–Canadian Dollar
CDI–Inter-bank Deposit Certificate
CPI–Consumer Price Index
€–Euros
EUR–Euros
£–British Pound
GBP–British Pound
¥–Japanese Yen
JPY–Japanese Yen
LIBOR–London Inter-bank Offered Rate
MXN–Mexican Peso
NZD–New Zealand Dollar
TIIE–Inter-bank Equilibrium Interest Rate
Series C and Series M received $10,750,000 and $18,500,000 par value, respectively, in U.S. Treasury Bills as collateral for swap contracts.
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 63
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
(e) Forward foreign currency contracts outstanding at April 30, 2007:
| | | | | | | | | | | | | | |
| Series C: | | U.S.$ Value
Origination
Date | | U.S.$ Value
April 30, 2007 | | Unrealized
Appreciation
(Depreciation) |
| Purchased: | | | | | | | | | | | | |
| 9,539,180 Brazilian Real settling 5/3/07 | | $ | 4,335,762 | | | $ | 4,691,023 | | | $ | 355,261 | |
| 13,045,930 Brazilian Real settling 3/4/08 | | | 6,076,287 | | | | 6,151,033 | | | | 74,745 | |
| 111,000,000 Chilean Peso settling 5/8/07 | | | 210,918 | | | | 211,333 | | | | 415 | |
| 400,455,000 Chilean Peso settling 6/19/07 | | | 759,473 | | | | 762,573 | | | | 3,100 | |
| 111,000,000 Chilean Peso settling 3/13/08 | | | 210,686 | | | | 211,461 | | | | 775 | |
| £ 20,000,000 settling 5/17/07 | | | 39,473,400 | | | | 39,993,670 | | | | 520,270 | |
| 25,496,000 Indian Rupee settling 5/29/07 | | | 572,429 | | | | 615,282 | | | | 42,853 | |
| 8,190,000 Indian Rupee settling 6/20/07 | | | 183,797 | | | | 196,812 | | | | 13,015 | |
| ¥ 1,184,291,000 settling 5/15/07 | | | 10,000,000 | | | | 9,930,456 | | | | (69,544 | ) |
| 108,905,000 South Korean Won settling 5/25/07 | | | 116,352 | | | | 117,090 | | | | 738 | |
| 197,700,000 South Korean Won settling 6/26/07 | | | 209,844 | | | | 212,700 | | | | 2,856 | |
| 3,075,980,000 South Korean Won settling 7/18/07 | | | 3,306,083 | | | | 3,311,192 | | | | 5,109 | |
| 3,108,165,500 South Korean Won settling 9/21/07 | | | 3,349,975 | | | | 3,350,847 | | | | 873 | |
| 66,430,056 Mexican Peso settling 3/13/08 | | | 5,911,889 | | | | 5,959,002 | | | | 47,113 | |
| 25,061,000 Norwegian Krone settling 6/7/07 | | | 4,111,798 | | | | 4,218,676 | | | | 106,878 | |
| 1,588,818 New Zealand Dollar settling 5/24/07 | | | 1,181,397 | | | | 1,178,209 | | | | (3,188 | ) |
| 6,232,288 Polish Zloty settling 9/28/07 | | | 2,250,000 | | | | 2,254,938 | | | | 4,938 | |
| 12,499,066 Polish Zloty settling 3/13/08 | | | 4,325,834 | | | | 4,531,608 | | | | 205,774 | |
| 67,489,042 Russian Ruble settling 9/19/07 | | | 2,570,761 | | | | 2,630,494 | | | | 59,734 | |
| 3,376,458 Russian Ruble settling 11/2/07 | | | 127,174 | | | | 131,606 | | | | 4,432 | |
| 170,468,800 Russian Ruble settling 12/10/07 | | | 6,551,784 | | | | 6,643,514 | | | | 91,730 | |
| 5,094,241 Singapore Dollar settling 7/18/07 | | | 3,370,322 | | | | 3,371,343 | | | | 1,022 | |
| 1,245,000 Singapore Dollar settling 8/7/07 | | | 830,138 | | | | 825,095 | | | | (5,043 | ) |
| 4,572,758 Singapore Dollar settling 9/21/07 | | | 3,059,256 | | | | 3,040,644 | | | | (18,612 | ) |
| 6,101,113,000 Taiwan Dollar settling 5/2/07 | | | 184,615 | | | | 183,138 | | | | (1,477 | ) |
| 2,596,750 South African Rand settling 5/16/07 | | | 339,420 | | | | 368,382 | | | | 28,962 | |
| Sold: | | | | | | | | | | | | |
| 642,000 Australian Dollar settling 5/17/07 | | | 533,529 | | | | 534,126 | | | | (597 | ) |
| 9,539,180 Brazilian Real settling 5/3/07 | | | 4,610,527 | | | | 4,691,023 | | | | (80,496 | ) |
| 1,200,000 Canadian Dollar settling 5/17/07 | | | 1,037,231 | | | | 1,086,375 | | | | (49,144 | ) |
| 111,000,000 Chilean Peso settling 5/8/07 | | | 210,506 | | | | 211,333 | | | | (827 | ) |
| € 43,561,000 settling 5/24/07 | | | 59,222,269 | | | | 59,509,207 | | | | (286,939 | ) |
| £ 20,812,000 settling 5/17/07 | | | 120,117,207 | | | | 121,604,752 | | | | (1,487,545 | ) |
| ¥ 684,297,000 settling 5/15/07 | | | 5,731,272 | | | | 5,737,932 | | | | (6,660 | ) |
| 877,000 New Zealand Dollar settling 5/17/07 | | | 647,204 | | | | 650,705 | | | | (3,501 | ) |
| 6,101,113 Taiwan Dollar settling 6/4/07 | | | 183,935 | | | | 183,278 | | | | (658 | ) |
| | | | | | | | | | | $ | (443,638 | ) |
|
64 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
3. Investment in Securities (continued)
| | | | | | | | | | | | | | |
| Series M: | | U.S.$ Value
Origination
Date | | U.S.$ Value
April 30, 2007 | | Unrealized
Appreciation
(Depreciation) |
| Purchased: | | | | | | | | | | | | |
| ¥ 26,600,000 settling 5/15/07 | | $ | 223,012 | | | $ | 223,045 | | | $ | 33 | |
| ¥ 120,000,000 settling 5/15/07 | | | 1,005,969 | | | | 1,006,218 | | | | 249 | |
| ¥ 156,200,000 settling 5/15/07 | | | 1,332,810 | | | | 1,309,760 | | | | (23,050 | ) |
| ¥ 214,028,000 settling 5/15/07 | | | 1,826,142 | | | | 1,794,657 | | | | (31,485 | ) |
| Sold: | | | | | | | | | | | | |
| ¥ 29,387,000 settling 5/15/07 | | | 247,879 | | | | 246,414 | | | | 1,464 | |
| ¥ 59,739,000 settling 5/15/07 | | | 504,309 | | | | 500,920 | | | | 3,389 | |
| | | | | | | | | | | $ | (49,400 | ) |
|
| | | | | | | | | | | | | | |
| Series R: | | U.S.$ Value
Origination
Date | | U.S.$ Value
April 30, 2007 | | Unrealized
Appreciation
(Depreciation) |
| Purchased: | | | | | | | | | | | | |
| 11,851,272 Yuan Renminbi settling 1/10/08 | | $ | 1,558,000 | | | $ | 1,597,741 | | | $ | 9,741 | |
| 4,576,190 Yuan Renminbi settling 3/7/08 | | | 624,000 | | | | 623,008 | | | | (992 | ) |
| 7,534,071 Yuan Renminbi settling 3/2/09 | | | 1,064,500 | | | | 1,077,891 | | | | 13,391 | |
| ¥ 29,291,000 settling 5/15/07 | | | 243,406 | | | | 245,609 | | | | 2,203 | |
| Sold: | | | | | | | | | | | | |
| 132,000 Canadian Dollar settling 5/17/07 | | | 114,095 | | | | 119,501 | | | | (5,406 | ) |
| € 7,785,000 settling 5/24/07 | | | 10,583,902 | | | | 10,635,182 | | | | (51,280 | ) |
| £ 622,000 settling 5/17/07 | | | 1,230,316 | | | | 1,243,803 | | | | (13,487 | ) |
| ¥ 45,887,152 settling 5/15/07 | | | 393,000 | | | | 384,771 | | | | 8,229 | |
| | | | | | | | | | | $ | (37,601 | ) |
|
(f) Short sales outstanding at April 30, 2007:
| | | | | | | | | | | | | | | | | | | | | | |
| Series C: | | Coupon | | Maturity | | Par | | Proceeds | | Value |
| Government National Mortgage Association, MBS | | | 5.50 | % | | | 5/1/37 | | | | 3,100,000 | | | $ | 3,078,688 | | | $ | 3,083,532 | |
| Series M: | | | | | | | | | | | | | | | | | | | | |
| Fannie Mae | | | 5.00 | % | | | 5/31/37 | | | | 23,000,000 | | | $ | 22,292,031 | | | $ | 22,223,750 | |
| Series R: | | | | | | | | | | | | | | | | | | | | |
| U.S. Treasury Notes | | | 4.875 | % | | | 8/15/16 | | | | 800,000 | | | $ | 806,863 | | | $ | 814,938 | |
| U.S. Treasury Inflation Indexed Bonds & Notes | | | 2.375 | % | | | 1/15/17 | | | | 203,182 | | | | 205,397 | | | | 205,397 | |
| U.S. Treasury Inflation Indexed Notes | | | 3.00 | % | | | 7/15/12 | | | | 32,246,435 | | | | 33,659,653 | | | | 33,659,653 | |
| | | | | | | | | | | | | | | | | | | $ | 34,679,988 | |
|
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 65
Fixed Income SHares—Series C, H, M, R
Notes to Financial Statements
4. Income Tax Information
The cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at April 30, 2007 were:
| | | | | | | | | | | | | | | | | | |
| | | Cost of Investments | | Gross
Unrealized
Appreciation | | Gross
Unrealized
Depreciation | | Net Unrealized
Appreciation
(Depreciation) |
| Series C | | $ | 1,616,720,558 | | | $ | 23,124,617 | | | $ | 11,925,248 | | | $ | 11,199,369 | |
| Series H | | | 3,793,635 | | | | 11,555 | | | | — | | | | 11,555 | |
| Series M | | | 2,983,076,674 | | | | 11,119,764 | | | | 7,013,771 | | | | 4,105,993 | |
| Series R | | | 224,711,855 | | | | 1,181,993 | | | | 2,191,177 | | | | (1,009,184 | ) |
|
5. Legal Proceedings
In June and September 2004, the Investment Manager, certain of its affiliates (including Allianz Global Investors Distributors LLC and PEA Capital LLC) and Allianz Global, agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (the ‘‘Commission’’), the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. Two settlements (with the Commission and New Jersey) related to an alleged ‘‘market timing’’ arrangement in certain open-end funds sub-advised by PEA Capital LLC. Two settlements (with the Commission and California) related to the alleged use of cash and fund portfolio commissions to finance ‘‘shelf-space’’ arrangements with broker-dealers for open-end funds. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims related to market timing and $20.6 million to settle the claims related to shelf space. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, brokerage commissions, revenue sharing and shelf space arrangements, and consented to cease and desist orders and censures. The settling parties did not admit or deny the findings in these settlements. None of the settlements allege that any inappropriate activity took place with respect to the Fund.
Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in fifteen lawsuits filed in various jurisdictions. Eleven of those lawsuits concern market timing and have been transferred to and consolidated for pre-trial proceedings in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland; the other four lawsuits concern revenue sharing and have been consolidated into a single action in the U.S. District Court for the District of Connecticut. The lawsuits generally relate to the same allegations that are the subject of the regulatory proceedings discussed above. The lawsuits seek, among other things, unspecified compensatory damages plus interest and, in some cases, punitive damages, the rescission of investment advisory contracts, the return of fees paid under those contracts, restitution, and waiver of or return of certain sales charges paid by open-end fund shareholders.
The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Fund or on their ability to perform their respective investment advisory activities relating to the Fund. The foregoing speaks only as of the date hereof.
6. Corporate Changes:
On September 12, 2006, the Fund’s Board of Trustees appointed William B. Ogden, IV as a Trustee. On October 10, 2006, David C. Flattum, an interested Trustee, resigned.
On December 12, 2006, the Fund’s Board of Trustees appointed John C. Maney as an (interested) Trustee and appointed Hans W. Kertess as Chairman of the Board of Trustees, effective January 1, 2007.
66 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Fixed Income SHares—Series H
Matters Relating to the Trustees
Consideration of the Investment
Management and Portfolio Management
Agreements
The Investment Company Act of 1940 requires that both the full Board of Trustees (the ‘‘Trustees’’) and a majority of the non-interested (‘‘independent’’) Trustees, voting separately, approve the Trust’s Investment Advisory Agreement (the ‘‘Advisory Agreement’’) with the Investment Manager and a Portfolio Management Agreement (the ‘‘Sub-Advisory Agreement’’ and together with the Advisory Agreement the ‘‘Agreements’’) with the Sub-Adviser, as it pertains to Series H (the ‘‘Portfolio’’) of the Trust. The Trustees met on February 20, 2007 (the ‘‘contract review meeting&rs quo;’) for the specific purpose of considering whether to approve the Advisory Agreement and the Sub-Advisory Agreement. The independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting.
Based on their evaluation of factors that they deemed to be material, including those factors described below, the Board of Trustees, including a majority of the independent Trustees, concluded that the Trust’s Advisory Agreement and the Sub-Advisory Agreement should be approved for an initial two-year period commencing April 1, 2007.
In connection with their deliberations regarding the approval of the Agreements, the Trustees, including the independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. As described below, the Trustees considered the nature, quality, and extent of the investment management, administrative and other services performed by the Investment Manager and the Sub-Adviser under these Agreements.
In connection with their contract review meeting, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information regarding the investment performance and management fees of comparable portfolios of other clients of the Sub-Adviser, (ii) an estimate of the profitability to the Investment Manager and its affiliates from its relationship with the Portfolio, (iii) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Portfolio, such as compliance monitoring and portfolio trading practices, and (iv) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regardi ng senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Portfolio.
The Trustees conclusions as to the continuation of the Agreements were based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors.
In determining to approve the Agreements, the Trustees met with the relevant investment advisory personnel from the Investment Manager and the 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 professional expected to be managing the assets of the Portfolio. The Trustees also took into account the time and attention that had been devoted by senior management to the Trust and the other funds in the complex. The Trustees evaluated the level of skill required to manage the Trust and concluded that the human resourc es devoted by the Investment Manager and the Sub-Adviser to the Portfolio 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, their significant financial resources, the Investment Manager’s and Sub-Adviser’s experience in managing the Trust, including their professional liability insurance coverage and the Investment Manager’s assets under management and concluded that they would be able to meet any reasonably foreseeable obligations under the applicable agreements.
The Trustees received information concerning the investment philosophy and investment process applied by the Investment Manager and Sub-Adviser in managing the Portfolio, as described in the Prospectuses. In this connection, the Trustees considered the Investment Manager’s and Sub-Adviser’s in-house research capabilities, including their ongoing forecasting of industry, sector and overall market movements, interest rates and the development of their ongoing outlook on the global economy, as well as other resources available to the Investment Manager’s and Sub-Adviser’s personnel, including research services available to the Investment Manager and Sub-Adviser as a result of securities transactions effected for the Trust and other investment advisory clients. The Trustees concluded that the Investment Manager’s and Sub-Adviser’s investment processes, research capabilities and philosophy were well suited to the Trust, given each Portfolio’s investment objectives and policies.
4.30.07 | Fixed Income SHares—Series C, H, M, R Semi-Annual Report 67
Fixed Income SHares—Series H
Matters Relating to the Trustees
Consideration of the Investment
Management and Portfolio Management
Agreements
The Trustees considered the scope of the services provided by the Investment Manager and Sub-Adviser to the Trust under the Agreements 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 required 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 the Trust’s compliance with applicable regulations and policies including the appointment of a Chief Compliance Officer and the adoption of enhanced compliance pol icies and procedures. The Trustees apprised themselves and took account of past claims made by regulators and others against affiliates of the Investment Manager and the steps taken to address those claims. The Trustees concluded that the scope of the Investment Manager’s and Sub-Adviser’s services to the Trust, as described above, was consistent with the Trust’s operational requirements, including, in addition to the applicable investment objectives, compliance with the Trust’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 Trust with respect to possible conflicts of interest, including their codes of ethics, the procedures by which the Investment Manager and Sub-Adviser allocate trades among their various investment advisory clients, the integrity of the systems in place to ensure compliance with the foregoing and the record of the Investment Manager and Sub-Adviser in these matters. The Trustees also confirmed information concerning standards of the Investment Manager and Sub-Adviser with respect to the execution of the Portfolio’s transactions. The information considered by the Trustees included information r egarding the Investment Manager and the Sub-Adviser, their personnel, policies and practices included in each of their respective Forms ADV.
In the course of their deliberations, the Trustees took into account information provided by the Investment Manager in connection with the contract review meeting, as well as information previously provided to the Trustees at the June 2006 meeting, where the Agreements were reapproved with respect to the other Portfolios of the Trust. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with the Investment Manager’s and Sub-Adviser’s responses.
In approving the Agreements, the Trustees also gave substantial consideration to the fact that, with respect to the Portfolio, no fees are payable under either the Advisory Agreement with the Investment Manager or the Portfolio Management Agreement between the Investment Manager and the Sub-Adviser. The Trustees did consider, however, the amounts paid to the Investment Manager and the Sub-Adviser from the ‘‘wrap fee’’ paid by the sponsors of the wrap programs to the Investment Manager’s affiliate, AGI Managed Accounts LLC, as well as the fees ‘‘imputed’’ to the Investment Manager and the Sub-Adviser, as disclosed in the Portfolio’s Prospectus. Because the Portfolio woul d not pay fees, the Trustees did not consider the extent to which economies of scale would be realized due to the Portfolio’s anticipated growth of assets, whether fee levels reflect economies of scale for the Portfolio’s shareholders or comparisons of fees paid by the Portfolio with fees paid to other investment advisers or by other clients of the Investment Manager or the Sub-Adviser.
The Trustees also considered the expected profitability to the Investment Manager and its affiliates of the relationship of the Investment Manager and its affiliates to the Portfolio, and determined that such profitability was not excessive. The Trustees considered the costs of the services provided under the 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 Portfolio.
The Trustees considered the fact that the Investment Manager and the Sub-Adviser may benefit from their relationship with the sponsors of wrap programs for which the Portfolio will be an investment options. Such 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 the Sub-Adviser, such as reputational value derived from serving as investment adviser and the fact that the Investment Manager and the Sub-Adviser will receive services from brokers who execute portfolio transactions for the Portfolio.
Based on the foregoing, the Trustees decided to approve the engagement of the Investment Manager and Sub-Adviser to serve as investment advisors for the Portfolio.
68 Fixed Income SHares—Series C, H, M, R Semi-Annual Report | 4.30.07
Trustees and Principal Officers
Hans W. Kertess
Trustee, Chairman of the Board of Trustees
Paul Belica
Trustee
Robert E. Connor
Trustee
John J. Dalessandro II
Trustee
John C. Maney
Trustee
William B. Ogden, IV
Trustee
R. Peter Sullivan III
Trustee
Brian S. Shlissel
President & Chief Executive Officer
Lawrence G. Altadonna
Treasurer, Principal Financial & Accounting Officer
Thomas J. Fuccillo
Vice President, Secretary & Chief Legal Officer
Scott Whisten
Assistant Treasurer
Youse E. Guia
Chief Compliance Officer
Kathleen A. Chapman
Assistant Secretary
William V. Healey
Assistant Secretary
Richard H. Kirk
Assistant Secretary
Lagan Srivastava
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
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 64105-1307
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 02210-2624
This report, including the financial information herein, is transmitted to the shareholders of Fixed Income Shares-Series C, M, H, R for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Trust or any securities mentioned in this report.
The financial information included herein is taken from the records of the Trust without examintation by an independent registered public accounting firm, who did not express an opinion hereon
The Trust files its complete schedules of portfolio holdings with the Securities and Exchange Commission (‘‘SEC’’) for the first and third quarter of its fiscal year on Form N-Q. The Trust’s Form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Allianz Dresdner Daily Asset Fund
Semi-Annual Report
April 30, 2007
This material is authorized for use only when preceded or accompanied by the current Fund’s prospectus.
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.
Allianz Dresdner Daily Asset Fund – Letter to Shareholders
June 13, 2007
Dear Shareholder:
During six months ended April 30, 2007, the Allianz Dresdner Daily Asset Fund (the “Fund”) experienced significant growth. The Fund’s net assets were $2,059,106,592 at October 31, 2006 and stood at $2,883,728,106 on April 30, 2007.
At the beginning of 2007 we evaluated some of the risks that we felt would come to a head in 2007. The first issue was the direction of interest rates. The majority of economists believed the Federal Reserve (the “Fed”) would hold rates steady for at least the first six months of the year. Some believed the Fed would lower rates by as much as 50 basis points. The market had priced in a roughly 50% chance of a fed funds reduction in rates of 25 basis points. Others thought the Fed would raise rates by 50 basis points.
Since there is no real consensus on interest rates, the market is very susceptible to moves in either direction. We have a good portion of our investments in floating rate securities. At the end of April in excess of 95% of the Fund was invested in floating rate securities based on the following indexes: LIBOR (both one and three month LIBOR), and Fed Funds. Our strategy has been to maintain a very short duration through the use of floating rate securities and especially fed funds floaters which comprise over 54% of the floaters in the Fund’s portfolio. In an uncertain rate environment a short duration can potentially reduce interest rate risk. The Fund yielded approximately fed funds flat plus 1, after fees, which is a key securities lending rebate rate barometer.
The credit quality of the fund is well within the AAA rating parameters.
Charles H. Dedekind, Portfolio Manager
Dresdner Advisors LLC
John Bilello, Portfolio Manager
Dresdner Advisors LLC
Allianz Dresdner Daily Asset Fund Performance & Statistics
April 30, 2007 (unaudited)
Primary Investments:
Inception Date:
Money Market Instruments
3/24/04
Net Assets:
$2,883.7 million
Portfolio Managers:
John Bilello and Charles Dedekind
Total Return
Six months
2.67%
Past performance is no guarantee of future results. Total return for a period of less than one year is not annualized. Returns shown do not reflect the deduction of taxes that a shareholder would pay on distributions or the redemption of shares.
Seven Day & Thirty-Day Yields:
7 day yield
5.34%
7 day compounded yield
5.48%
30 day yield
5.35%
30 day compounded yield
5.48%
Investments in the Fund is not insured or guaranteed by the FDIC or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
Asset Allocation (% of investments)
The 7-day yield quotation more closely reflects the current earning of the Fund than the total return quotation.
Allianz Dresdner Daily Asset Fund Performance & Statistics (unaudited) (continued)
Expense Example: Please refer to the “Important Fund Information” page herein for an explanation of the information presented in the following Expense Example.
| | | | |
| Beginning
Account Value
November 1, 2006 | Ending Account
Value
April 30, 2007 | Annualized
Expense Ratio
based on the Period
November 1, 2006
through
April 30, 2007 | Expenses Paid
during the
Period**
November 1,2006 through
April 30, 2007 |
Actual | $1,000 | $1,026.68 | 0.05% | $0.25 |
Hypothetical | $1,000 | $1,024.55 | 0.05% | $0.25 |
** 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).
Allianz Dresdner Daily Asset Fund Important Fund Information (unaudited)
Proxy Voting - since the Fund invests exclusively in non-voting securities, the Fund does not have proxy voting policies and procedures.
Form N-Q - The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of its fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
The following disclosure provides important information regarding the Fund’s Expense Example, which appears on the Fund’s Performance & Statistics page in this Annual Report. Please refer to this information when reviewing the Expense Example for the Fund.
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 at the beginning of the period and held for the entire period (November 1, 2006 to April 30, 2007).
Actual Expenses:
The first line of the expense table provides information about actual account values and actual expenses. You 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 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 your 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.
Allianz Dresdner Daily Asset Fund
SCHEDULE OF INVESTMENTS
April 30, 2007
(unaudited)
| | |
Principal
Amount
(000) | | Value |
| CORPORATE BONDS & NOTES - 64.0% | |
$125,000 | Axon Financial Funding LLC, 5.31%, 5/25/07, FRN | $124,989,794 |
| Beta Finance, Inc., FRN (a), | |
25,000 | 5.315%, 5/25/07 | 25,003,639 |
50,000 | 5.343%, 5/1/07 | 49,985,861 |
60,000 | 5.413%, 5/1/07 | 60,001,155 |
23,000 | BMW US Capital LLC, 5.34%, 5/15/07, FRN (a) | 23,000,000 |
10,000 | BNP Paribas, 5.31%, 5/29/07, FRN (a) | 10,000,549 |
| CC USA, Inc., FRN (a), | |
7,500 | 5.31%, 5/21/07 | 7,500,713 |
77,000 | 5.412%, 5/1/07 | 77,001,481 |
50,000 | Cheyne Finance LLC, 5.353%, 5/1/07, FRN (a) | 49,990,411 |
| CIT Group, Inc., FRN, | |
2,900 | 5.42%, 6/19/07 | 2,901,399 |
97,125 | 5.43%, 5/21/07 | 97,189,410 |
10,000 | 5.43%, 5/24/07 | 10,002,844 |
25,000 | 5.453%, 5/1/07 | 25,012,561 |
1,734 | 5.60%, 5/23/07 | 1,736,426 |
10,880 | Countrywide Financial Corp., 5.428%, 6/27/07, Ser. B, FRN | 10,880,151 |
37,500 | Country Home Loans, Inc., 5.61%, 5/16/07, Ser. M | 37,538,427 |
| Dorada Finance, Inc., FRN (a), | |
77,600 | 5.293%, 5/15/07 | 77,595,804 |
60,000 | 5.413%, 5/1/07 | 60,001,181 |
120,000 | Five Finance, Inc., 5.34%, 5/1/07, FRN | 119,974,269 |
| Goldman Sachs Group, Inc., Ser. B, FRN, | |
1,900 | 5.46%, 5/11/07 | 1,900,584 |
50,000 | 5.473%, 5/1/07 | 50,031,908 |
1,000 | 5.474%, 7/2/07 | 1,000,226 |
| Harrier Finance Funding LLC, FRN (a), | |
70,000 | 5.388%, 5/1/07 | 70,007,266 |
50,000 | 5.418%, 5/1/07 | 50,000,636 |
6,000 | HSBC Finance Corp., 5.40%, 6/1/07, FRN | 6,000,257 |
75,000 | HSH Nordbank AG, 5.33%, 5/21/07, FRN | 75,000,000 |
20,000 | JPMorgan Chase & Co., 5.30%, 5/11/07, FRN | 20,000,000 |
| K2 USA LLC, FRN (a), | |
20,000 | 5.32%, 5/29/07 | 20,001,938 |
25,000 | 5.36%, 5/29/07 | 25,006,065 |
70,000 | 5.363%, 5/1/07 | 69,996,788 |
Allianz Dresdner Daily Asset Fund
SCHEDULE OF INVESTMENTS
April 30, 2007
(unaudited)(continued)
| | |
Principal Amount
(000) | | Value |
| Lehman Brothers Holdings, Inc., FRN, | |
$40,000 | 5.33%, 5/29/07 | $40,000,000 |
15,000 | 5.463%, 5/1/07, Ser. H | 15,001,186 |
| Links Finance LLC, FRN (a), | |
25,000 | 5.315%, 5/15/07 | 25,003,490 |
30,000 | 5.315%, 5/22/07 | |
50,000 | 5.33%, 5/25/07 | 49,999,828 |
31,000 | Macquarie Bank Ltd., 5.34%, 5/21/07, FRN (a) | 30,999,998 |
| Merrill Lynch & Co., Inc., FRN, | |
80,000 | 5.363%, 5/1/07 | 79,999,854 |
5,000 | 5.428%, 5/1/07, Ser. C | 5,000,776 |
20,000 | 5.443%, 5/1/07, Ser. C | 20,002,787 |
| Morgan Stanley, FRN, | |
10,000 | 5.36%, 5/3/07 | 10,000,000 |
1,410 | 5.48%, 7/27/07 | 1,410,485 |
5,000 | 5.493%, 5/1/07, Ser. F | 5,004,001 |
14,000 | Northern Rock PLC, 5.38%, 5/3/07, FRN (a) | 14,000,000 |
50,000 | Sedna Finance, Inc., 5.316%, 7/16/07, FRN (a) | 49,996,548 |
| Sigma Finance, Inc., FRN (a), | |
1,200 | 5.29%, 5/10/07 | 1,199,662 |
25,000 | 5.353%, 5/1/07 | 24,999,486 |
| Tango Finance Corp., | |
2,000 | 5.318%, 6/4/07 | 1,999,892 |
1,000 | 5.34%, 5/24/07 | 1,000,000 |
30,000 | 5.353%, 5/1/07 | 29,999,530 |
70,000 | 5.355%, 5/1/07 | 69,987,676 |
4,500 | Toyota Motor Credit Corp., 5.385%, 5/1/07, Ser. B, FRN | 4,500,508 |
| Unicredito Italiano Bank, FRN, | |
25,000 | 5.34%, 5/9/07 | 25,000,000 |
50,000 | 5.34%, 7/11/07 | 50,000,000 |
2,159 | Wachovia Corp., 5.435, 7/20/07, FRN | 2,159,407 |
| Total Corporate Bonds & Notes (cost-$1,846,520,725) | 1,846,520,725 |
Allianz Dresdner Daily Asset Fund
SCHEDULE OF INVESTMENTS
April 30, 2007
(unaudited)(continued)
| | |
Principal
Amount
(000) | | Value |
| MASTER NOTES - 11.4% | |
$115,000 | Bank of America Corp., 5.373%, 5/1/07, FRN | $115,000,000 |
100,000 | Bear Stearns Co., Inc., 5.433%, 5/1/07, FRN | 100,000,000 |
| Citigroup Global Markets, Inc., FRN, | |
15,000 | 5.383%, 5/1/07. | 15,000,000 |
100,000 | 5.413%, 5/1/07 | 100,000,000 |
| Total Master Notes (cost-$330,000,000) | 330,000,000 |
| CERTIFICATES OF DEPOSIT - 9.8% | |
25,000 | Barclays Bank PLC, 5.275%, 5/8/07, FRN | 24,999,344 |
50,000 | Calyon NY, 5.26%, 5/3/07, FRN | 49,992,647 |
50,000 | Credit Suisse First Boston Corp., 5.33%, 5/29/07, FRN | 50,000,000 |
5,300 | Deutsche Bank AG, 5.408%, 5/1/07, FRN | 5,300,516 |
90,000 | Natexis Banques Populaires, 5.368%, 5/1/07, FRN | 90,000,000 |
| Societe Generale, FRN, | |
9,200 | 5.258%, 5/21/07 | 9,199,457 |
3,000 | 5.265%, 5/21/07 | 2,999,479 |
50,000 | Wachovia Corp., 5.31%, 5/29/07 | 50,002,842 |
| Total Certificates of Deposit (cost-$282,494,285) | 282,494,285 |
| | |
| COMMERCIAL PAPER - 9.6% | |
| Morgan Stanley, | |
35,000 | 5.373%, 7/6/07 | 35,000,000 |
22,000 | 5.373%, 8/17/07 | 22,000,000 |
50,000 | 5.383%, 12/4/07 | 50,000,000 |
10,000 | 5.383%, 12/28/07 | 10,000,000 |
40,000 | Morrigan TRR Funding LLC, 5.30%, 5/21/07 | 39,882,222 |
| Ormond Quay Funding LLC, | |
40,000 | 5.28%, 5/15/07 | 39,999,691 |
40,000 | 5.28%, 7/16/07 | 39,998,285 |
40,000 | 5.28%, 11/2/07 | 39,994,999 |
| Total Commercial Paper (cost-$276,875,197) | 276,875,197 |
| | |
| PROMISSORY NOTES - 2.6% | |
| Goldman Sachs Group, Inc., | |
55,000 | 5.413%, 10/22/07 | 55,000,000 |
20,000 | 5.442%, 12/18/07 | 20,000,000 |
| Total Promissory Notes (cost-$75,000,000) | 75,000,000 |
Allianz Dresdner Daily Asset Fund
SCHEDULE OF INVESTMENTS
April 30, 2007
(unaudited)(continued)
| | |
Principal
Amount
(000) | | Value |
| ASSET-BACKED SECURITIES - 1.6% | |
$10,000 | Cheyne High Grade ABS CDO Ltd., 5.37%, 5/10/07, FRN (a) | $10,000,000 |
35,000 | Holmes Financing PLC, 5.30%, 5/15/07, FRN | 35,000,000 |
| Total Asset-Backed Securities (cost-$45,000,000) | 45,000,000 |
| | |
| TIME DEPOSIT - 0.9% | |
25,551 | Sun Trust Bank, 5.25%, 5/1/07 (cost-$25,550,588) | 25,550,588 |
| Total Investments (cost-$2,881,440,795) - 99.9% | 2,881,440,795 |
| Other assets less liabilities - 0.1% | 2,287,311 |
| Net Assets - 100.0% | $2,883,728,106 |
___________________________________
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 buyers. Unless otherwise indicated, these securities are not considered to be illiquid.
Glossary:
ABS -
Asset-Backed Security
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, 2007.
See accompanying Notes to Financial Statements.
Allianz Dresdner Daily Asset Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2007
(unaudited)
| |
Assets: | |
Investments, at value (cost-$2,881,440,795) | $2,881,440,795 |
Receivable for Fund shares sold | 89,994,517 |
Interest receivable | 13,661,278 |
Prepaid expenses | 108,837 |
Total Assets | 2,985,205,427 |
| |
| |
| |
Liabilities: | |
Due to custodian for overdraft | 123,217 |
Payable for Fund shares repurchased | 89,391,242 |
Dividends payable | 11,872,896 |
Investment management fees payable | 11,504 |
Accrued expenses | 78,462 |
Total Liabilities | 101,477,321 |
| |
Net Assets | $2,883,728,106 |
| |
Net Assets consist of: | |
Paid-in-capital (no par value, unlimited number of shares authorized; 2,883,743,506 shares outstanding) | $2,883,743,506 |
Accumulated net realized loss on investments. | (15,400) |
| |
Net Assets | $2,883,728,106 |
| |
| |
Net asset value per share | $1.00 |
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the six months ended April 30, 2007
(unaudited)
| |
Investment Income: | |
Interest | $63,748,740 |
| |
Expenses: | |
Administration fees | 353,793 |
Investment advisory fees | 206,379 |
Custodian and accounting agent fees | 75,736 |
Registration fees | 61,754 |
Insurance expense | 21,771 |
Trustees' fees and expenses | 15,747 |
Audit and tax service fees | 14,572 |
Legal fees | 10,971 |
Transfer agent fees | 5,360 |
Shareholder communications | 1,084 |
Miscellaneous expense | 1,151 |
Total expenses | 768,318 |
| |
Less: investment advisory fees waived | (139,223) |
custody credits earned on cash balances | (4,061) |
| |
Net expenses | 625,034 |
| |
Net investment income | 63,123,706 |
| |
| |
Net realized gain on investments | 9,375 |
| |
Net Increase in Net Assets Resulting from Investment Operations | $63,133,081 |
See accompanying Notes to Financial Statements.
Allianz Dresdner Daily Asset Fund
STATEMENT OF CHANGES IN NET ASSETS
| | | |
| Six months
ended
April 30, 2007
(unaudited) | | For the
Year ended
October 31, 2006 |
Investment Operations: | | | |
Net investment income | $63,123,706 | | $66,609,119 |
Net realized gain (loss) on investments | 9,375 | | (24,775) |
Net increase in net assets resulting from investment operations | 63,133,081 | | 66,584,344 |
| | | |
Dividends and Distributions to Shareholders from: | | | |
Net investment income | (63,123,706) | | (66,609,119) |
Net realized gains | — | | (2,428) |
Total dividends and distributions to shareholders | (63,123,706) | | (66,611,547) |
| | | |
Capital Share Transactions: | | | |
Net proceeds from the sale of shares | 7,816,681,052 | | 6,992,743,695 |
Cost of shares redeemed | (6,992,068,913) | | (5,482,193,749) |
Net increase in net assets from capital share transactions | 824,612,139 | | 1,510,549,946 |
Total increase in net assets | 824,621,514 | | 1,510,522,743 |
| | | |
Net Assets: | | | |
Beginning of period | 2,059,106,592 | | 548,583,849 |
End of period | $2,883,728,106 | | $2,059,106,592 |
| | | |
Shares Issued and Redeemed: | | | |
Issued | 7,816,681,052 | | 6,992,743,695 |
Redeemed | (6,992,068,913) | | (5,482,193,749) |
Net increase | 824,612,139 | | 1,510,549,946 |
See accompanying Notes to Financial Statements.
Allianz Dresdner Daily Asset Fund
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
| | | | | | | | |
| Six months
ended
April 30, 2007
(unaudited) | | | | | | For the Period
March 24, 2004*
through
October 31,
2004 | |
|
| Year ended |
| | October 31, 2006 | | October 31, 2005 | | |
| | | | | | | | |
Net asset value, beginning of period | $1.00 | | $1.00 | | $1.00 | | $1.00 | |
| | | | | | | | |
Investment Operations: | | | | | | | | |
Net investment income | 0.03 | | 0.05 | | 0.03 | | 0.01 | |
Net realized gain (loss) on investments | (0.00) | ** | (0.00) | ** | 0.00 | ** | 0.00 | ** |
Total from investment operations | 0.03 | | 0.05 | | 0.03 | | 0.01 | |
| | | | | | | | |
Dividends and Distributions to Shareholders from: | | | | | | | | |
Net investment income | (0.03) | | (0.05) | | (0.03) | | (0.01) | |
Net realized gain | - | | (0.00) | ** | (0.00) | ** | (0.00) | ** |
Total dividends and distributions to shareholders | (0.03) | | (0.05) | | (0.03) | | (0.01) | |
| | | | | | | | |
Net asset value, end of period | $1.00 | | $1.00 | | $1.00 | | $1.00 | |
| | | | | | | | |
Total Return (1) | 2.67% | | 4.97% | | 2.97% | | 0.79% | |
| | | | | | | | |
Ratios/Supplemental data: | | | | | | | | |
Net assets, end of period (000's) | $2,883,728 | | $2,059,107 | | $548,584 | | $205,124 | |
Ratio of expenses to average net assets (2)(3) | 0.05% | (4) | 0.05% | | 0.05% | | 0.05% | (4) |
Ratio of net investment income to average net assets (3) | 5.35% | (4) | 5.07% | | 3.06% | | 1.30% | (4) |
*
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 0.06% (annualized) and 5.34% (annualized), respectively, for the six months ended April 30, 2007; 0.07% and 5.05%, respectively, for the year ended October 31, 2006; 0.08% and 3.03%, respectively, for the year ended October 31, 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, 2007
(unaudited)
(1) Organization and Significant Accounting Policies
Allianz Dresdner Daily Asset Fund (the “Fund”) is one of five 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 H, Series M and Series R (the “Portfolios”). The Fund commenced operations on March 24, 2004. 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 no 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.
In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109” (the “Interpretation”). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is effective for fiscal years beginning after December 15, 2006, and is to be applied to all open tax years as of the date of effectiveness. Fund management has begun to evaluate the application of the Interpretation, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund’s financial statements. On December 22, 2006, the Securities & Exchange Commission announced that it would not object if a fund implements Interpretation 48 in its NAV calculation as late as its last NAV calculation in the first required financial statement reporting period for its fiscal year beginning after December 15, 2006. Consequently, the Fund will be required to comply with the Interpretation by April 30, 2008.
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Funds are in the process of reviewing the Standard against its current valuation policies to determine future applicability.
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.
Allianz Dresdner Daily Asset Fund
NOTES TO FINANCIAL STATEMENTS
April 30, 2007
(unaudited)(continued)
(1) Organization and Significant Accounting Policies (continued)
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.
(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 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 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.
Allianz Dresdner Daily Asset Fund
NOTES TO FINANCIAL STATEMENTS
April 30, 2007
(unaudited)(continued)
(1) Organization and Significant Accounting Policies (continued)
(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”), 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.
Effective July 1, 2007, the Administrator will be paid 0.03% of the Funds’ average daily net assets up to $3 billion, 0.015% of the Fund’s average daily net assets between $3 billion-$10 billion and 0.005% of the Fund’s average daily net assets in excess of $10 billion.
(C)
Distributor
Allianz Global Investors Distributors LLC (the “Distributor”), 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 owning 5% or more of the Fund and the percentage held by such shareholder at April 30, 2007:
| | | |
| | Ownership Percentage | |
| Miami Dade County | 19.15% | |
| Massachusetts Mutual Insurance Co. | 18.37 | |
| Allianz RCM Technology Fund | 9.31 | |
Investment activity by these shareholders could have a material impact on the Fund.
Allianz Dresdner Daily Asset Fund
NOTES TO FINANCIAL STATEMENTS
April 30, 2007
(unaudited)(continued)
(4) Income Tax Information
The cost basis of portfolio securities for federal income tax purposes is $2,881,440,795.
(5) Legal Proceedings
In June and September 2004, the Administrator, certain of its affiliates (including the Distributor and PEA Capital LLC) and Allianz Global, agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (the “Commission”), the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Administrator serves as investment adviser. Two settlements (with the Commission and New Jersey) related to an alleged “market timing” arrangement in certain open-end funds sub-advised by PEA Capital LLC. Two settlements (with the Commission and California) related to the alleged use of cash and fund portfolio commissions to finance “shelf-space” arrangements with broker-dealers for open-end funds. The Administrator and its affiliates agreed to pay a total of $68 million to settle the claims related to market timing and $20.6 million to settle the claims related to shelf space. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, brokerage commissions, revenue sharing and shelf space arrangements, and consented to cease and desist orders and censures. None of the settlements allege that any inappropriate activity took place with respect to the Fund.
Since February 2004, the Administrator and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing” and “revenue sharing/self-space/directed brokerage,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland, and the revenue sharing/shelf-space/directed brokerage lawsuits have been consolidated in the U.S. District Court for the District of Connecticut. Any potential resolution of these matters may include, but not be limited to judgments or settlements for damages against the Administrator or its affiliates or related injunctions.
The Administrator believes that these matters are not likely to have a material adverse effect on the Fund or on its ability to perform its respective investment advisory activities relating to the Fund. The foregoing speaks only as of the date hereof.
(6) Corporate Changes
On December 12, 2006 the Fund’s Board of Trustees appointed John C. Maney as a (interested) Trustee and appointed Hans W. Kertess as Chairman of the Board of Trustees, effective January 1, 2007.
| | |
Trustees and Principal Officers | | |
Hans W. Kertess | | Brian S. Shlissel |
Trustee, Chairman of the Board of Trustees | | President & Chief Executive Officer |
Paul Belica | | Lawrence G. Altadonna |
Trustee | | Treasurer, Principal Financial & accounting Officier |
Robert E. Connor | | Thomas J. Fuccillo |
Trustee | | Vice President, Secretary & Chief Legal Officer |
John J. Dalessandro II | | Scott Whisten |
Trustee | | Assistant Treasurer |
John C. Maney | | Youse E. Guia |
Trustee | | Chief Compliance Officer |
William B. Ogden IV | | Kathleen A. Chapman |
Trustee | | Assistant Secretary |
R. Peter Sullivan III | | William V. Healey |
Trustee | | Assistant Secretary |
| | Richard H. Kirk |
| | Assistant Secretary |
| | Lagan Srivastava |
| | 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 | | |
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
Disclosure not required for open-end investment management companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Disclosure not required for open-end investment management companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED COMPANIES.
Disclosure not required for open-end investment management 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 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 have been no changes in the Registrant's internal controls over
financial reporting (as defined in Rule 30a-3(d) under the Investment Company
act of 1940, as amended) that occurred during the second fiscal quarter of the
period covered by this report that materially affected, or is reasonably likely
to affect, the Registrant's internal control over financial reporting.
report that has materially affected, or is reasonably likely to materially
affect, the registrants control over financial reporting.
ITEM 12. EXHIBITS
(a) (1) 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.
Fixed Income SHares
By /s/ Brian S. Shlissel
- ------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: July 9, 2007
By /s/ Lawrence G. Altadonna
- ----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: July 9, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
- ------------------------
Brian S. Shlissel, President & Chief Executive Officer
Date: July 9, 2007
By /s/ Lawrence G. Altadonna
- ----------------------------
Lawrence G. Altadonna, Treasurer, Principal Financial & Accounting Officer
Date: July 9, 2007
