UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09721
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Fixed Income SHares
-------------------
(Exact name of registrant as specified in charter)
1345 Avenue of the Americas, New York, New York 10105
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(Address of principal executive offices) (Zip code)
Brian S. Shlissel - 1345 Avenue of the Americas, New York, New York 10105
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-739-3369
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Date of fiscal year end: October 31
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Date of reporting period: April 30
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. (Section) 3507.
SEMI-ANNUAL REPORT
4.30.03
Item 1. Report to Shareholders
FIXED INCOME SHARES
CONTENTS
Letter to Shareholders .................................................1
Schedule of Investments ................................................2-16
Statements of Assets and Liabilities ...................................17
Statements of Operations ...............................................18
Statements of Changes in Net Assets ....................................19-20
Financial Highlights ...................................................21
Notes to Financial Statements ..........................................22-27
Privacy Policy .........................................................28
[PIMCO ADVISORS LOGO]
FIXED INCOME SHARES LETTER TO SHAREHOLDERS
June 12, 2003
Dear Shareholder:
We are pleased to provide you with the semi-annual report of Fixed Income SHares
for the six months ended April 30, 2003. The two series of the Trust, Series C
and Series M are used in conjunction with other assets to create the PIMCO Total
Return Investment Strategy for Managed Accounts.
We thank you for investing with us and remain dedicated to serving your
investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
Stephen Treadway Brian S. Shlissel
Chairman President, Chief Executive Officer
04.30.03 | PIMCO Fixed Income SHares Semi-Annual Report 1
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
CORPORATE BONDS & NOTES -- 68.4%
AIRLINES -- 2.1%
American Airlines, Inc., pass thru certificates,
$ 857 6.978%, 4/1/11, Ser. 01-2 (a) $ 777,245
------------
425 10.18%, 1/2/13, Ser. 91-A2 (b) 42,617
------------
Continental Airlines, Inc., pass thru certificates,
500 6.32%, 11/1/08, Ser. 98-3 (a) 427,027
------------
900 7.918%, 5/1/10, Ser. 00-1 (a) 792,149
------------
22 11.50%, 4/2/08, Ser. 96-2D (a) 9,004
------------
Delta Airlines, Inc., pass thru certificates,
1,300 7.111%, 9/18/11, Ser. 01-1 (a) 1,249,689
------------
1,450 7.57%, 11/18/10, Ser. 00-1 (a) 1,407,898
------------
200 10.50%, 4/30/16, Ser. 93-A2 (a) 105,105
------------
United Airlines, Inc., pass thru certificates,
1,571 7.186%, 4/1/11, Ser. 00-2 (a) 1,158,504
------------
400 7.73%, 7/1/10, Ser. 00-1 (a) 277,158
------------
100 10.125%, 3/22/15, Ser. 91-B2 (b) 20,141
------------
6,266,537
------------
AUTOMOTIVE -- 1.0%
Federal-Mogul Corp.,
100 7.375%, 1/15/06 (b) (c) (d) 14,981
------------
Ford Motor Co.,
3,380 7.45%, 7/16/31 (a) 3,016,508
------------
3,031,489
------------
BANKING -- 1.2%
Banque Centrale de Tunisie,
100 7.375%, 4/25/12 (a) 112,000
------------
HSBC Capital Funding LP,
1,000 10.176%, 06/30/30, VRN, (a) (e) 1,510,235
------------
KBC Bank Funding Trust III,
500 9.86%, 11/2/09, VRN, (a) (e) 627,673
------------
Royal Bank of Scotland Group plc,
1,000 9.118%, 3/31/49, Ser. 1 (a) 1,264,682
------------
3,514,590
------------
CHEMICALS -- 1.2%
Dow Chemical Co.,
1,000 6.00%, 10/1/12 (a) 1,063,833
------------
Lyondell Chemical Co.,
1,300 9.625%, 5/1/07 Ser. A (a) 1,345,500
------------
500 11.125%, 7/15/12 (a) 542,500
------------
Millennium America, Inc.,
700 9.25%, 6/15/08 (a) 773,500
------------
3,725,333
------------
CONGLOMERATES -- 1.7%
General Electric Co.,
5,000 5.00%, 2/1/13 (a) 5,177,845
------------
2 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- --------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
DIVERSIFIED MANUFACTURING -- 1.2%
Hutchison Whampou International Ltd.,
$ 475 6.50%, 2/13/13 (a) (e) $ 482,487
-----------
Tyco International Group SA,
3,100 6.375%, 10/15/11 (a) 3,069,000
-----------
3,551,487
-----------
ENERGY -- 0.8%
MidAmerican Energy Holdings Co.,
1,600 5.875%, 10/1/12 (a) 1,675,230
-----------
South Point Energy Center, LLC,
756 8.40%, 5/30/12 (a) (e) 677,305
-----------
2,352,535
-----------
FINANCIAL SERVICES -- 4.2%
Citigroup, Inc.,
3,000 5.625%-6.00%, 2/21/12-8/27/12 (a) 3,309,567
-----------
FINOVA Group, Inc.,
45 7.50%, 11/15/09 (a) 18,225
-----------
Goldman Sachs Group, Inc.,
2,600 4.125%-6.125%, 1/15/08-2/15/33 (a) 2,693,521
-----------
J.P. Morgan Chase & Co.,
3,400 6.625%-6.75%, 2/1/11-3/15/12 (a) 3,851,777
-----------
Morgan Stanley Dean Witter & Co.,
2,500 6.60%, 4/1/12 (a) 2,835,017
-----------
12,708,107
-----------
FINANCING -- 7.8%
CIT Group, Inc.,
2,800 7.75%, 4/2/12 (a) 3,252,197
-----------
Ford Motor Credit Co.,
300 1.77%, 7/18/03, FRN (a) 282,293
-----------
5,600 7.25%-7.375%, 2/1/11-10/25/11 (a) 5,633,952
-----------
General Electric Capital Corp.
400 6.75%, 3/15/32 (a) 464,464
-----------
General Motors Acceptance Corp., Ser. A
6,310 6.875%-8.00%, 2/1/12-11/1/31 (a) 6,530,088
-----------
Household Finance Corp.,
4,000 6.375%-7.00%, 5/15/12-11/27/12 (a) 4,462,857
-----------
Pemex Project Funding Master Trust,
800 8.00%, 11/15/11 (a) 912,000
-----------
PP&L Capital Funding, Inc.,
100 7.75%, 4/15/05, Ser. C (a) 109,843
-----------
Principal Life Global, Inc.,
1,800 5.25%, 1/15/13 (a) (e) 1,843,133
-----------
23,490,827
-----------
FOOD -- 1.3%
Kroger Co.,
2,400 5.50%-6.20%, 6/15/12-2/1/13 (a) 2,484,669
-----------
4.30.03 | Fixed Income SHares Semi-Annual Report 3
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -----------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
FOOD (CONCLUDED)
Safeway, Inc.,
$ 1,300 5.80%, 8/15/12 (a) $ 1,372,879
-----------
3,857,548
-----------
HEALTHCARE & HOSPITALS -- 2.3%
Beverly Enterprises, Inc.,
700 9.00%, 2/15/06 (a) 626,500
-----------
Columbia-HCA The Healthcare Corp.,
570 7.25%, 5/20/08 (a) 631,063
-----------
HCA Inc.,
2,500 6.25%-6.95%, 2/15/13-5/1/12 (a) 2,649,928
-----------
HCA-The Healthcare Corp.,
500 8.75%, 9/1/10 (a) 585,556
-----------
HEALTHSOUTH Corp.,
1,000 3.25%, 4/1/49 (c) (d) 275,000
-----------
1,025 7.625%-8.375%, 10/1/11-6/1/12 658,563
-----------
Tenet Healthcare Corp.,
1,700 6.50%, 6/1/12 (a) 1,619,250
-----------
7,045,860
-----------
HOTELS/GAMING -- 6.2%
Harrah's Operating Co., Inc.,
3,190 8.00%, 2/1/11(a) 3,673,783
-----------
Hilton Hotels Corp.,
1,800 7.625%, 5/15/08-12/1/12 (a) 1,924,257
-----------
International Game Technology,
1,901 7.875%, 5/15/04 (a) 1,995,645
-----------
Mandalay Resort Group,
1,100 9.375%, 2/15/10 (a) 1,199,000
-----------
MGM Grand, Inc.,
2,100 6.95%, 2/1/05 (a) 2,189,250
-----------
Mirage Resorts, Inc.,
3,000 6.625%, 2/1/05 (a) 3,112,500
-----------
Park Place Entertainment Corp.,
450 7.50%, 9/1/09 (a) 480,375
-----------
Starwood Hotels & Resorts Worldwide, Inc.,
3,300 7.85%, 5/1/12 (a) 3,469,125
-----------
Station Casinos, Inc.,
700 8.375%, 2/15/08 (a) 754,250
-----------
18,798,185
-----------
INSURANCE -- 0.4%
Travelers Property Casualty Corp.
1,200 5.00%, 3/15/13 (a) (e) 1,224,386
-----------
MEDICAL PRODUCTS -- 0.3%
Fresenius Medical Capital Trust.,
800 7.875%, 6/15/11 (a) 840,000
-----------
4 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -----------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
MULTIMEDIA -- 4.8%
AOL Time Warner, Inc.,
$ 4,980 6.875%-7.70%, 5/1/12-5/1/32 (a) $ 5,552,105
-----------
British Sky Broadcasting Group plc,
1,530 8.20%, 7/15/09 (a) 1,746,789
-----------
Clear Channel Communications, Inc.,
825 7.875%, 6/15/05 (a) 911,627
-----------
Comcast Cable Communications, Inc.,
1,000 8.875%, 5/1/17 (a) 1,269,803
-----------
Continental Cablevision, Inc.,
1,000 8.30%, 5/15/06 (a) 1,131,674
-----------
CSC Holdings, Inc.,
1,950 7.625%-8.125%, 7/15/09-4/1/11, Ser. B (a) 2,064,375
-----------
Mediacom Broadbrand, LLC
300 11.00%, 7/15/13 (a) 342,750
-----------
Time Warner Inc.
200 6.625%, 5/15/29 (a) 198,207
-----------
Turner Broadcasting System, Inc.,
800 8.40%, 2/1/24 (a) 888,739
-----------
Viacom, Inc.,
400 6.625%, 5/15/11 (a) 461,540
-----------
14,567,609
-----------
OIL & GAS -- 7.1%
Amerada Hess Corp.,
2,000 7.30%-7.875%, 10/1/29-8/15/31(a) 2,351,468
-----------
Barrett Resources Corp.,
500 7.55%, 2/1/07 (a) 510,495
-----------
CMS Panhandle Holding Co.,
300 6.50%-7.00%, 7/15/09-7/15/29 (a) 306,000
-----------
Coastal Corp.,
650 7.75%, 6/15/10 (a) 575,250
-----------
Devon Financing Corp.,
200 6.875%, 9/30/11 (a) 230,410
-----------
Dynegy Holdings, Inc.,
1,200 8.75%, 2/15/12 (a) 1,146,000
-----------
El Paso Corp.,
1,000 7.875%, 6/15/12 (a) (e) 890,000
-----------
El Paso Natural Gas Co.,
1,750 8.375%, 6/15/32 (a) (e) 1,776,250
-----------
Kern River Funding Corp.,
2,700 4.893%, 4/30/18 (b) (e) 2,720,952
-----------
Kerr-McGee Corp.,
1,500 7.875%, 9/15/31 (a) 1,797,739
-----------
Kinder Morgan, Inc.,
500 6.50%, 9/1/12 (a) 557,864
-----------
4.30.03 | Fixed Income SHares Semi-Annual Report 5
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
OIL & GAS (CONCLUDED)
Occidental Petroleum Corp.,
$ 1,500 6.75%, 1/15/12 (a) $ 1,730,582
-----------
Pemex Project Funding Master Trust,
600 7.375%, 12/15/14 (a) 652,500
-----------
Pioneer Natural Resources Co.,
1,500 7.50%, 4/15/12 (a) 1,706,465
-----------
Sonat, Inc.,
25 7.625%, 7/15/11 (a) 21,875
-----------
Southern Natural Gas Co.,
600 7.35%-8.00%, 2/15/31-3/1/32 (a) 607,000
-----------
Transocean, Inc.,
250 7.50%, 4/15/31 (a) 306,223
-----------
Valero Logistics Operations LP.,
700 6.05%, 3/15/13 (a) (e) 735,068
-----------
Vintage Petroleum, Inc.,
800 8.25%, 5/1/12 (a) 858,000
-----------
XTO Energy, Inc.,
1,800 6.25%, 4/15/13 (a) (e) 1,885,500
-----------
21,365,641
-----------
PAPER & RELATED PRODUCTS -- 3.4%
Abitibi-Consolidated, Inc.
3,035 8.30%-8.55%, 8/1/05-8/1/10 (a) 3,428,003
-----------
Bowater Canada Finance Corp.,
2,650 7.95%, 11/15/11 (a) 2,787,328
-----------
Georgia-Pacific Corp.,
1,050 8.125%-9.125%, 5/15/11-3/1/23 (a) 982,750
-----------
International Paper Co.,
700 6.75%, 9/1/11 (a) 794,484
-----------
Weyerhaeuser Co.,
2,000 6.75%, 3/15/12 (a) 2,244,312
-----------
10,236,877
-----------
REAL ESTATE -- 0.4%
EOP Operating LP.,
1,000 5.875%, 1/15/13 (a) 1,058,893
-----------
TELECOMMUNICATIONS -- 11.0%
AT&T Broadband Corp.,
2,000 8.375%, 3/15/13 (a) 2,445,290
-----------
AT&T Corp.,
3,000 8.00%, 11/15/31 (a) 3,351,684
-----------
AT&T Wireless Services, Inc.,
1,710 7.50%-8.125%, 5/1/07-5/1/12 (a) 1,997,591
-----------
British Telecom plc,
1,000 8.125%, 12/15/10 (a) 1,232,940
-----------
6 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -----------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
TELECOMMUNICATIONS (CONCLUDED)
Citizen Communications Co.,
$ 1,300 9.25%, 5/15/11 (a) $ 1,646,042
-----------
Cox Communications, Inc.,
2,100 6.69%-6.75%, 9/20/04-3/15/11 (a) 2,384,249
-----------
Deutsche Telekom International Finance,
1,700 9.25%, 6/1/32 (a) 2,307,634
-----------
France Telecom SA,
3,500 7.75%-8.50%, 3/1/11-3/1/31 (a) 4,561,705
-----------
Panamsat Corp.,
800 8.50%, 2/1/12 (a) 870,000
-----------
Qwest Capital Funding, Inc.,
740 7.25%, 2/15/11(a) 616,050
-----------
Qwest Corp.,
500 8.875%, 3/15/12 (a) (e) 550,000
-----------
Sprint Capital Corp.,
6,410 6.875%-8.75%, 3/15/12-3/15/32 (a) 6,492,675
-----------
Telus Corp.,
1,000 8.00%, 6/1/11 (a) 1,135,000
-----------
US West Communications, Inc.,
1,000 6.875%, 9/15/33 (a) 865,000
-----------
Verizon New England, Inc.,
2,200 6.50%, 9/15/11 (a) 2,500,681
-----------
Vodafone Group plc,
100 7.75%, 2/15/10 (a) 121,018
-----------
WorldCom, Inc.
750 7.375%, 1/15/11 (c) (e) (d) 213,750
-----------
33,291,309
-----------
TRANSPORTATION -- 0.3%
Canadian National Railways Co.,
1,000 4.40%, 3/15/13 (a) 985,951
-----------
UTILITIES -- 8.9%
Appalachian Power Co.,
100 5.95%, 5/15/33 (a) 99,789
-----------
Carolina Power & Light Co.,
1,000 6.65%, 4/1/08, Ser. D (a) 1,137,436
-----------
CenterPoint Energy Resources Co.,
1,000 7.875, 4/1/13 (a) (e) 1,152,500
-----------
Cleveland Electric Illuminating Co.,
500 6.86%, 10/1/08 (a) 571,308
-----------
1,800 7.67%, 7/1/04, Ser.B (a) 1,908,481
-----------
Columbus Southern Power Co.,
400 5.50%, 3/1/13 (a) (e) 422,482
-----------
Dominion Resources, Inc.
1,600 5.70%, 9/17/12 (a) 1,710,250
-----------
400 6.75%, 12/15/32, Ser. E (a) 443,191
-----------
4.30.03 | Fixed Income SHares Semi-Annual Report 7
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- ------------------------------------------------------------------------------
CORPORATE BONDS & NOTES (CONTINUED)
UTILITIES (CONCLUDED)
Entergy Mississippi, Inc.
$ 1,100 4.35%, 4/1/08 (a) $ 1,111,583
------------
GG1B Funding Corp.
291 7.43%, 1/15/11 (a) 307,579
------------
Idaho Power Corp.,
200 6.60%, 3/2/11 (a) 227,072
------------
IPALCO Enterprises, Inc.
700 7.625%-7.375%, 11/14/08-11/14/11 (a) 761,250
------------
Midwest Generation LLC, pass thru certificates,
250 8.30%, 7/2/09, Ser. A (a) 245,000
------------
500 8.56%, 1/2/16, Ser. B (a) 482,500
------------
Niagara Mohawk Power Corp.,
150 zero coupon until 7/1/03, Ser H, FRN (a) 155,653
------------
1,650 5.375%-7.75%, 10/1/04-5/15/06 (a) 1,738,330
------------
Ohio Edison Co.,
1,000 5.45%, 5/1/15 (a) (e) 1,024,245
------------
Oncor Electric Delivery Co.,
145 6.375%, 5/1/12 (a) 162,255
------------
1,000 6.375%, 1/15/15 (a) (e) 1,117,218
------------
Pepco Holdings, Inc.,
2,200 6.45%, 8/15/12 (e) 2,445,005
------------
Pinnacle Partners LP,
2,500 8.83%, 8/15/04 (a) (e) 2,639,313
------------
PNPP II Funding Corp.,
528 8.51%, 11/30/06 (a) 564,839
------------
Progress Energy, Inc.,
2,950 6.05%-7.75%, 4/15/07-10/30/31 (a) 3,338,428
------------
PSEG Energy Holdings, Inc.,
300 8.50%, 6/15/11 (a) 324,574
------------
PSEG Power LLC
900 6.95%, 6/1/12 (a) 1,028,964
------------
500 7.75%, 4/15/11 (a) 593,984
------------
Southern California Edison Co.,
1,000 8.00%, 2/15/07 (a) (e) 1,095,000
------------
Waterford 3 Funding Corp.,
107 8.09%, 1/2/17 (a) 114,878
------------
26,923,107
------------
WASTE DISPOSAL -- 0.8%
Waste Management, Inc.,
2,200 6.375%-7.375%, 8/1/10-11/15/12 (a) 2,528,401
------------
Total Corporate Bonds & Notes (cost--$193,503,374) 206,542,517
------------
8 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -----------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 24.5%
FANNIE MAE -- 13.8%
$ 4,100 zero coupon, 6/1/17 (a) $ 1,965,798
-----------
734 4.00%-7.50%, 2/25/09-7/1/32 (a) 782,744
-----------
157 3.51%-6.99%, 5/1/03-5/25/03, FRN (a) 161,172
-----------
37,650 5.50%-6.00%, 5/31/18-6/30/33 (f) 38,702,594
-----------
41,612,308
-----------
FREDDIE MAC -- 0.6%
1,517 5.625%, 7/15/28 (a) 1,546,611
-----------
180 4.00%-5.06%, 5/1/03, FRN (a) 184,426
-----------
1,731,037
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 10.1%
87 5.375%, 5/1/03, FRN (a) 88,673
-----------
29,000 5.50%-6.00%, 5/31/33 (f) 29,995,000
-----------
557 7.50%, 1/15/31-8/15/31 (a) 595,113
-----------
30,678,786
-----------
Total U.S. Government Agency Securities (cost--$73,439,752) 74,022,131
-----------
SOVEREIGN DEBT OBLIGATIONS (A) -- 7.0%
BRAZIL -- 0.6%
Republic of Brazil,
1,789 8.00%-11.50%, 3/12/08-4/15/14 (a) 1,648,645
-----------
CHILE -- 0.8%
Republic of Chile,
2,030 7.125%, 1/11/12 (a) 2,310,343
-----------
CROATIA -- 0.5%
Republic of Croatia, FRN
1,556 2.19%, 7/31/03 (a) 1,550,866
-----------
MEXICO -- 2.2%
United Mexican States,
6,050 6.375%-8.30%, 1/16/13-8/15/31 (a) 6,596,700
-----------
PANAMA -- 0.8%
Republic of Panama,
286 2.25%, 7/17/03 FRN (a) 241,256
-----------
2,000 8.25%-9.625%, 4/22/08-7/23/12 (a) 2,254,500
-----------
2,495,756
-----------
PERU -- 1.9%
Republic of Peru,
5,300 9.125%, 2/21/12 (a) 5,830,000
-----------
SOUTH AFRICA -- 0.2%
Republic of South Africa,
465 9.125%, 5/19/09 (a) 568,463
-----------
Total Sovereign Debt Obligations (cost--$18,701,349) 21,000,773
-----------
4.30.03 | Fixed Income SHares Semi-Annual Report 9
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- 1.5%
Bank of America Mortgage Securities,
$ 510 5.77%, 10/20/32 (a) $ 521,801
----------
Bear Stearns Adjustable Rate Mortgage Trust,
93 6.18%, 5/1/03, FRN (a) 93,365
----------
CS First Boston Mortgage Securities Corp.,
22 1.67%, 5/25/03, FRN (a) 22,517
----------
1,914 2.36%, 5/25/03, FRN (b) (e) (g) 1,913,806
----------
First Nationwide Trust,
102 8.50%, 9/25/31 (a) 105,849
----------
Hilton Hotels Pool Trust,
38,747 0.93%, 5/1/03, FRN, IO (a) (e) 1,651,901
----------
Residential Asset Securitization Trust,
223 7.00%, 1/25/28 (a) 226,969
----------
Washington Mutual Mortgage Corp.,
130 6.43%, 5/1/03, FRN (a) 131,012
----------
Total Mortgage-Backed Securities (cost--$4,397,281) 4,667,220
----------
ASSET-BACKED SECURITIES -- 0.6%
Keystone Owner Trust,
1,726 8.35%, 12/25/24 (b) (e) (g) 1,776,059
----------
48 8.50%, 1/25/29 (b) (e) 41,589
----------
Total Asset-Backed Securities (cost--$1,794,189) 1,817,648
----------
U.S. TREASURY NOTES & BONDS (A) -- 0.5%
115 3.375%, 1/15/07 (h) 125,786
----------
1,000 8.125%, 8/15/19 1,402,969
----------
Total U.S. Treasury Notes & Bonds (cost--$1,481,844) 1,528,755
----------
RIGHTS (B) -- 0.0%
250 United Mexican States, Ser. B, Expires 6/1/04 2,000
----------
250 United Mexican States, Ser. C, Expires 6/1/05 687
----------
250 United Mexican States, Ser. D, Expires 6/30/06 313
----------
250 United Mexican States, Ser. E, Expires 6/1/07 188
----------
Total Rights (cost--$0) 3,188
----------
SHORT-TERM INVESTMENTS -- 18.5%
COMMERCIAL PAPER -- 10.5%
BANKING -- 1.6%
ANZ (Delaware) Inc.,
3,600 1.23%-1.25%, 5/6/03-7/30/03 (a) 3,590,413
----------
Svenska Handelsbanken AB
1,200 1.23%, 6/24/03 (a) 1,197,786
----------
FINANCING -- 8.9%
Barclay US Funding Corp.,
700 1.26%, 6/4/03 (a) 699,170
----------
10 Fixed Income SHares Semi-Annual Report 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONTINUED)
FINANCING (CONCLUDED)
Danske Corp.,
$ 4,900 1.21%-1.24%, 6/25/03-7/28/03 (a) $ 4,887,617
-----------
HBOS Treasury Services plc,
13,900 1.22%-1.27%, 5/7/03-8/4/03 (a) 13,886,860
-----------
KFW International Finance,
3,400 1.26%, 5/7/03 (a) 3,395,081
-----------
UBS Finance, Inc.,
4,200 1.24%, 5/21/03 (a) 4,197,107
-----------
Total Commercial Paper (cost--$31,854,216) 31,854,034
-----------
CORPORATE NOTES -- 4.8%
DIVERSIFIED MANUFACTURING -- 0.4%
Tyco International Group SA,
1,250 6.25%, 6/15/03 (a) 1,253,125
-----------
FINANCIAL SERVICES -- 0.1%
Bear Stearns Co., Inc., Ser. B,
200 1.63%, 5/19/03, FRN (a) 200,392
-----------
FINANCING -- 0.3%
Redwood Capital II Ltd.,
500 4.29%, 7/1/03, FRN (e) (b) 499,005
-----------
Steers Credit Backed Trust,
500 6.97%, 5/27/03, (b) (e) (g) 485,000
-----------
HOTELS/GAMING -- 1.2%
Park Place Entertainment Corp.,
3,475 7.95%, 8/1/03 (a) 3,535,812
-----------
MULTIMEDIA -- 1.3%
Clear Channel Communications, Inc.,
2,600 7.25%, 9/15/03 (a) 2,646,327
-----------
Continental Cablevision, Inc.,
300 8.625%, 8/15/03 (a) 304,881
-----------
TCI Communications, Inc.
500 6.375%, 5/1/03 (a) 500,000
-----------
Turner Broadcasting System, Inc.,
300 7.40%, 2/1/04 (a) 308,052
-----------
OIL & GAS -- 0.8%
Coastal Corp.,
1,250 1.95%, 5/1/03, FRN (a) 1,217,563
-----------
El Paso Natural Gas Co.,
1,275 6.75%, 11/15/03 (a) 1,284,563
-----------
4.30.03 | Fixed Income SHares Semi-Annual Report 11
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES C
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- -------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONCLUDED)
TELECOMMUNICATIONS -- 0.5%
Quest Corp.,
$ 1,500 7.625%, 6/9/03 (a) $ 1,507,500
------------
WASTE DISPOSAL -- 0.2%
Allied Waste NA,
700 7.375%, 1/1/04, Ser. B (a) 721,000
------------
Total Corporate Notes (cost--$14,271,669) 14,463,220
------------
U.S. GOVERNMENT AGENCY SECURITIES -- 2.3%
4,700 Fannie Mae, 1.20%, 8/11/03 (a) 4,683,597
------------
2,200 Freddie Mac, 1.23%, 5/8/03-5/29/03 (a) 2,198,613
------------
Total U.S. Government Agency Securities (cost--$6,882,699) 6,882,210
------------
U.S. TREASURY BILLS -- 0.1%
190 1.15%-1.16%, 5/15/03 (a) (cost--$189,915) 189,914
------------
REPURCHASE AGREEMENT -- 0.8%
Agreement with State Street Bank & Trust Co., dated April 30, 2003,
1.05% due 5/1/03, proceeds: $2,558,075; collateralized by Fannie Mae
2,558 6.00% due 6/15/11, valued at $2,612,981; (cost--$2,558,000) 2,558,000
------------
Total Short-Term Investments (cost--$55,756,499) 55,947,378
------------
Total Investments before options written (cost--$349,074,288)+ -- 121.0% 365,529,610
------------
Contracts
CALL OPTIONS WRITTEN (B) (D) -- (0.0)%
Swap Option 3 Month LIBOR Call,
(1,600,000) Strike rate @ 5.13%, expires 11/10/03 (premiums received--$52,480) (103,162)
------------
PUT OPTIONS WRITTEN (B) (D) -- (0.0)%
Swap Option 3 Month LIBOR Put,
(1,600,000) Strike rate @ 6.13%, expires 11/10/03 (2,598)
------------
Swap Option 3 Month LIBOR Put,
(3,000,000) Strike rate @ 6.30%, expires 1/2/04 (3,867)
------------
Total Put Options Written (premiums received--$162,780) (6,465)
------------
Total Options Written (premiums received--$215,260) (109,627)
------------
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost--$348,859,028) 121.0% 365,419,983
LIABILITIES IN EXCESS OF OTHER ASSETS (21.0) (63,496,371)
----- ------------
NET ASSETS 100.0% $301,923,612
----- ------------
- --------------------------------------------------------------------------------
+ The cost of securities for federal income tax purposes is $349,074,288.
Aggregate gross unrealized appreciation for securities in which there is
an excess of value over tax cost is $19,663,187; aggregate gross
unrealized depreciation for securities in which there is an excess of tax
cost over value is $3,207,865; net unrealized appreciation for federal
income tax purposes is $16,455,322.
- --------------------------------------------------------------------------------
12 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES M
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- ---------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 145.8%
FANNIE MAE -- 104.7%
$ 2,081 1.79%-7.88%, 5/1/03-5/25/03, FRN (a) $ 2,144,506
------------
10,078 3.88%-3.94%, 5/25/03, FRN 10,294,457
------------
259,500 5.00%-6.50%, 6/30/18-6/30/33 (f) 267,225,656
------------
22,634 6.25%-7.50%, 2/25/09-1/1/33 (a) 23,598,832
------------
875 6.50%, 7/1/29-8/1/32 914,920
------------
1,141 6.50%, 7/18/27, PO (a) 1,223,231
------------
305,401,602
------------
FREDDIE MAC -- 14.2%
6,645 1.66%-6.04%, 5/1/03-3/1/04, FRN (a) 6,837,198
------------
33,171 6.00%-7.50%, 7/1/08-8/15/30 (a) 34,670,694
------------
41,507,892
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 26.9%
12,049 4.25%-5.75%, 5/1/03-2/1/04, FRN (a) 12,307,388
------------
39,200 5.50%-6.50%, 5/31/33 (f) 40,953,357
------------
23,974 6.50%-7.50%, 5/15/29-11/15/32 (a) 25,210,302
------------
78,471,047
------------
Total U.S. Government Agency Securities (cost--$422,487,059) 425,380,541
------------
MORTGAGE-RELATED SECURITIES -- 16.1%
American Southwest Financial Securities Corp.,
3,000 8.00%, 1/18/09 (a) 3,494,850
------------
Bear Stearns Adjustable Rate Mortgage Trust.,
549 6.72%, 5/1/03, FRN (a) 552,746
------------
Bear Stearns Alt-A Trust,
1,146 5.70%, 3/25/32 (a) 1,153,751
------------
Bear Stearns Mortgage Securities, Inc.,
245 6.73%, 5/1/03, FRN (a) 257,160
------------
Carey Commercial Mortgage Trust,
2,175 5.97%, 9/20/19 (b) (e) 2,279,894
------------
Citicorp Mortgage Securities, Inc.,
3,851 1.72%, 5/25/03, FRN (a) 3,851,935
------------
803 5.75%, 6/25/09 (a) 817,495
------------
Commercial Capital Access One, Inc.,
1,052 6.30%, 11/25/28 (e) 1,132,951
------------
Countrywide Home Loans,
532 6.50%-6.75%, 6/25/13-12/25/30 (a) 547,339
------------
CS First Boston Mortgage Securities Corp.,
378 1.87%, 5/25/03, FRN (a) 379,164
------------
3,504 7.00%, 8/25/04, IO (b) 131,781
------------
First Nationwide Trust,
361 8.00%, 10/25/30 (a) 368,950
------------
4.30.03 | Fixed Income SHares Semi-Annual Report 13
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES M
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- --------------------------------------------------------------------------------------
MORTGAGE-RELATED SECURITIES -- (CONCLUDED)
GMAC Commercial Mortgage Securities, Inc.,
$ 1,000 2.36%, 9/9/15 (b) (e) (g) $ 970,000
------------
GMAC Mortgage Corp. Loan Trust,
1,199 7.50%, 2/25/31 (a) 1,198,147
------------
GS Mortgage Securities Corp. II,
3,000 6.62%, 5/3/18 (a) (e) 3,345,455
------------
Headlands Mortgage Securities Inc.,
1,547 6.65%, 2/25/29 (a) 1,607,354
------------
Hilton Hotel Pool Trust,
38,747 0.89%, 5/1/03, FRN, IO (e) 1,651,901
------------
Impac Secured Assets Owner Trust,
900 7.37%, 4/25/32 (a) 932,469
------------
Mellon Residential Funding Corp.,
1,000 1.77%, 5/1/03, FRN (a) 1,021,869
------------
Merrill Lynch Credit Corp. Mortgage Investors, Inc.,
1,146 1.71%, 5/15/03, FRN (a) 1,146,511
------------
Mortgage Capital Funding, Inc.
3,570 7.29%, 2/20/27 (a) 3,945,133
------------
PNC Mortgage Securities Corp.,
56 7.50%, 2/25/31 (a) 56,555
------------
Residential Funding Mortgage Securities I,
6,962 6.75%-7.50%, 5/25/11-6/25/28 (a) 7,044,843
------------
Structured Asset Securities Corp.,
470 2.92%, 5/25/03 (a) 473,587
------------
Washington Mutual Mortgage Securities Corp.,
516 4.25%, 9/25/32 (a) 518,588
------------
3,305 5.21%, 5/1/03, FRN (a) 3,411,140
------------
Wells Fargo Mortgage Backed Securities Trust,
2,226 4.94%-6.07%, 5/1/03, FRN (a) 2,246,152
------------
Vendee Mortgage Trust,
2,416 6.50%, 9/15/24(a) 2,579,367
------------
Total Mortgage-Related Securities (cost--$46,011,744) 47,117,087
------------
ASSET-BACKED SECURITIES -- 9.5%
Asset Backed Funding Certificates,
16,786 4.75%, IO, 10/25/04 (b) 962,006
------------
Asset Backed Securities Corp., Home Equity,
5,271 1.73%-2.01%, 5/15/03, FRN (a) 5,278,148
------------
Bayview Financial Acquistion Trust,
668 1.70%, 5/25/03, FRN (a) (e) 667,619
------------
Conseco Finance Home Equity Loan,
2,000 2.81%, 5/15/03, FRN (a) (g) 2,073,800
------------
2,000 6.16%, 4/15/32 (a) 2,011,238
------------
Conseco Finance Home Loan Trust,
1,000 8.88%, 6/15/24 (a) 1,040,667
------------
14 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES M
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- ----------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES -- (CONCLUDED)
Conseco Finance Securitizations Corp.,
$ 775 3.22%, 9/1/33 (a) $ 776,890
------------
EMC Mortgage Loan Trust,
316 1.69%, 5/25/03, FRN (e) (b) 316,390
------------
First Investor Auto Owner Trust,
549 3.46%, 12/15/08 (a) (e) (g) 526,465
------------
Green Tree Financial Corp.,
737 7.55%, 1/15/29 (a) 723,081
------------
Merrill Lynch Mortgage Investor, Inc.,
7,339 1.68%-2.32%, 5/25/03, FRN (a) 7,370,460
------------
Regions Auto Receivables Trust,
2,000 1.94%, 5/16/05 (a) 2,005,626
------------
Residential Asset Mortgage Products, Inc.,
750 6.58%, 1/25/32 (a) 777,902
------------
Residential Funding Mortgage Securities I,
58 7.18%, 12/25/22 (a) 59,869
------------
Salomon Brothers Mortgage Securities VII,
2,646 1.73%-2.28%, 11/15/03-11/25/03, FRN (a) 2,656,850
------------
Sequoia Mortgage Trust,
178 2.43%, 11/25/03, FRN (a) 178,001
------------
UCFC Home Equity Loan,
188 1.55%, 11/15/03, FRN (a) 188,059
------------
Total Asset-Backed Securities (cost--$27,417,430) 27,613,071
------------
SHORT-TERM INVESTMENTS -- 35.7%
ASSET-BACKED SECURITIES -- 0.1%
NPF XII, Inc.,
2,000 2.76%, 11/1/03 (b) (c) (d) (e) (g) 20,000
------------
Residential Funding Mortgage Securities I,
9,000 10.00%, 9/25/03, IO (b) 286,884
------------
Total Asset-Backed Securities (cost--$2,281,204). 306,884
------------
COMMERCIAL PAPER -- 1.5%
COMGLOMERATES -- 0.9%
General Electric Capital Corp.,
2,500 1.25%-1.26%, 6/12/03-6/25/03 (a) 2,496,281
------------
DRUGS & MEDICAL PRODUCTS -- 0.6%
Merck & Co., Inc.
1,700 1.20%, 5/23/03 (a) 1,698,753
------------
Total Commercial Paper (cost--$4,195,034) 4,195,034
------------
REPURCHASE AGREEMENT -- 0.4%
1,141 Agreement with State Street Bank & Trust Co., dated April 30, 2003,
1.05% due 5/1/03, proceeds: $1,141,033; collateralized by Fannie Mae
6.00% due 5/15/08, valued at $1,165,800; (cost--$1,141,000) 1,141,000
------------
4.30.03 | Fixed Income SHares Semi-Annual Report 15
FIXED INCOME SHARES SCHEDULE OF INVESTMENTS -- SERIES M
April 30, 2003 (unaudited)
Principal
Amount
(000) Value
- ---------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (CONCLUDED)
U.S. GOVERNMENT AGENCY DISCOUNT NOTES -- 33.7%
37,000 Fannie Mae 1.16%-1.33%, 5/1/03-8/11/03 (a) 36,936,435
-----------
61,600 Freddie Mac 1.15%-1.31%, 5/14/03-9/3/03 (a) 61,455,653
-----------
Total U.S. Government Agency Discount Notes (cost--$98,398,785) 98,392,088
-----------
104,035,006
Total Short-Term Investments (cost--$106,016,023) -----------
Contracts
PUT OPTIONS PURCHASED (D) -- 0.0%
Federal National Mortgage Association, Over-the-Counter, 6.50%, 1/32,
50,000,000 Strike price @ $90.75, expires 9/8/03 (e) (premiums paid--$5,860) 5,500
-----------
Total Investments before put options written (cost--$601,938,116)+ -- 207.1% 604,151,205
-----------
PUT OPTIONS WRITTEN (D) (B) -- (0.0)%
Swap Option 3 Month LIBOR, (3,867)
(3,000,000) Strike rate @ 6.30% expires 1/2/04 (premium received--$109,500) -----------
TOTAL INVESTMENTS, NET OF PUT OPTIONS WRITTEN (cost --$601,828,616) 207.1% 604,147,338
LIABILITIES IN EXCESS OF OTHER ASSETS (107.1) (312,372,261)
------ ------------
NET ASSETS 100.0% $291,775,077
------ ------------
- ----------------
+ The cost of securities for federal income tax purposes is $601,938,116.
Aggregate gross unrealized appreciation for securities in which there is
an excess of value over tax cost is $4,769,619; aggregate gross
unrealized depreciation for securities in which there is an excess of tax
cost over value is $2,556,530; net unrealized appreciation for federal
income tax purposes is $2,213,089.
- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS:
(a) All or partial amount segregated as collateral for when-issued or
delayed-delivery securities.
(b) Security deemed illiquid.
(c) Security in default -- $503,731 or 0.17% and $20,000 or 0.01% of net
assets, for Series C and Series M, respectively.
(d) Non-income producing.
(e) Security exempt from registration under Rule 144a of the Securities
Act of 1933. These securities may be resold in transactions exempt
from registration, typically to qualified institutional investors.
At April 30, 2003, these securities amounted to $31,399,862 or
10.39% of net assets and $10,910,675 or 3.74% of net assets for
Series C and Series M, respectively.
(f) When-issued or delayed-delivery security. To be delivered/settled
after April 30, 2003.
(g) Fair-valued security.
(h) Inflationary Bonds -- Principal amount is adjusted for inflation.
- --------------------------------------------------------------------------------
GLOSSARY:
- --------
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, 2003.
IO -- Interest Only
LIBOR -- London Interbank Offered Rate
PO -- Principal Only
VRN -- Variable Rate Note, maturity date shown is date of next rate
change and the interest rate disclosed reflects the rate in
effect on April 30, 2003.
16 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2003 (unaudited)
SERIES C SERIES M
ASSETS:
Investments, at value (cost--$349,074,288 and $601,938,116,
respectively) $ 365,529,610 $ 604,151,205
- ----------------------------------------------------------------------- ---------------------------------
Foreign currency (Series C with a cost of $389,357) 400,770 --
- ----------------------------------------------------------------------- ---------------------------------
Receivable for investments sold 30,056,317 182,464,209
- ----------------------------------------------------------------------- ---------------------------------
Receivable for shares of beneficial interest sold 5,404,700 5,415,253
- ----------------------------------------------------------------------- ---------------------------------
Interest receivable 4,371,804 1,144,894
- ----------------------------------------------------------------------- ---------------------------------
Unrealized appreciation on swaps 436,165 --
- ----------------------------------------------------------------------- ---------------------------------
Swap premiums paid 36,111 --
- ----------------------------------------------------------------------- ---------------------------------
Total Assets 406,235,477 793,175,561
- ----------------------------------------------------------------------- ---------------------------------
LIABILITIES:
Due to custodian 3,572,082 5,154,760
- ----------------------------------------------------------------------- ---------------------------------
Payable for investments purchased 98,262,747 494,782,655
- ----------------------------------------------------------------------- ---------------------------------
Dividends payable 1,449,946 992,573
- ----------------------------------------------------------------------- ---------------------------------
Payable for shares of beneficial interest redeemed 633,172 466,629
- ----------------------------------------------------------------------- ---------------------------------
Unrealized depreciation on swaps 181,074 --
- ----------------------------------------------------------------------- ---------------------------------
Options written, at value (premiums received--$215,260 and $109,500,
respectively) 109,627 3,867
- ----------------------------------------------------------------------- ---------------------------------
Variation margin payable 35,006 --
- ----------------------------------------------------------------------- ---------------------------------
Swap premiums received 34,463 --
- ----------------------------------------------------------------------- ---------------------------------
Unrealized depreciation on forward foreign currency contracts 33,748 --
- ----------------------------------------------------------------------- ---------------------------------
Total Liabilities 104,311,865 501,400,484
- ----------------------------------------------------------------------- ---------------------------------
NET ASSETS $301,923,612 $291,775,077
- ----------------------------------------------------------------------- ---------------------------------
NET ASSETS CONSIST OF:
Beneficial interest shares of $0.001 par value (unlimited number
authorized) 25,875 25,167
- ----------------------------------------------------------------------- ---------------------------------
Paid-in-capital in excess of par 280,294,698 282,323,360
- ----------------------------------------------------------------------- ---------------------------------
Undistributed net investment income 278,962 --
- ----------------------------------------------------------------------- ---------------------------------
Accumulated net realized gain 4,582,043 7,107,828
- ----------------------------------------------------------------------- ---------------------------------
Net unrealized appreciation of investments, futures contracts, options
written, swaps and other assets and liabilities denominated in
foreign currency 16,742,034 2,318,722
- ----------------------------------------------------------------------- ---------------------------------
NET ASSETS $ 301,923,612 $ 291,775,077
- ----------------------------------------------------------------------- ---------------------------------
Shares Outstanding 25,875,424 25,167,324
- ----------------------------------------------------------------------- ---------------------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $11.67 $11.59
- ----------------------------------------------------------------------- ---------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.03 | Fixed Income SHares Semi-Annual Report 17
FIXED INCOME SHARES STATEMENTS OF OPERATIONS
For the six months ended April 30, 2003 (unaudited)
SERIES C SERIES M
INVESTMENT INCOME:
Interest $ 8,322,685 $ 5,403,280
- ------------------------------------------------------------------- -----------------------------
Expenses -- --
- ------------------------------------------------------------------- -----------------------------
Net Investment Income 8,322,685 5,403,280
- ------------------------------------------------------------------- -----------------------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 4,699,796 7,110,929
- ------------------------------------------------------------------- -----------------------------
Futures contracts (329,562) --
- ------------------------------------------------------------------- -----------------------------
Options written 156,438 (18,868)
- ------------------------------------------------------------------- -----------------------------
Swaps (65,150) --
- ------------------------------------------------------------------- -----------------------------
Foreign currency transactions 99,031 --
- ------------------------------------------------------------------- -----------------------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions 22,003,149 543,421
- ------------------------------------------------------------------- -----------------------------
Net realized and unrealized gain 26,563,702 7,635,482
- ------------------------------------------------------------------- -----------------------------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT
OPERATIONS $34,886,387 $13,038,762
- ------------------------------------------------------------------- -----------------------------
18 Fixed Income SHares Semi-Annual Report | 4.30.03
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES STATEMENTS OF CHANGES IN NET ASSETS
SERIES C
Six months Year ended
ended October 31,
April 30, 2003 2002
(unaudited)
INVESTMENT OPERATIONS:
Net investment income $ 8,322,685 $ 8,138,016
- ---------------------------------------------------------------------- --------------------------------
Net realized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 4,560,553 1,204,333
- ---------------------------------------------------------------------- --------------------------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions 22,003,149 (7,005,468)
- ---------------------------------------------------------------------- --------------------------------
Net increase in net assets resulting from investment operations 34,886,387 2,336,881
- ----------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (8,322,685) (8,155,965)
- ---------------------------------------------------------------------- --------------------------------
Net realized gains (988,226) (1,276,599)
- ---------------------------------------------------------------------- --------------------------------
Total dividends and distributions to shareholders (9,310,911) (9,432,564)
- ----------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 99,402,906 180,138,755
- ---------------------------------------------------------------------- --------------------------------
Cost of shares redeemed (28,935,613) (18,702,832)
- ---------------------------------------------------------------------- --------------------------------
Net increase in net assets from capital share transactions 70,467,293 161,435,923
- ---------------------------------------------------------------------- --------------------------------
TOTAL INCREASE IN NET ASSETS 96,042,769 154,340,240
- ----------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 205,880,843 51,540,603
- ---------------------------------------------------------------------- --------------------------------
End of period (including undistributed net investment income of
$278,962 at the end of each period) $ 301,923,612 $ 205,880,843
- ---------------------------------------------------------------------- --------------------------------
SHARES ISSUED AND REDEEMED:
Issued 8,888,012 16,798,178
- ---------------------------------------------------------------------- --------------------------------
Redeemed (2,601,986) (1,750,993)
- ---------------------------------------------------------------------- --------------------------------
NET INCREASE 6,286,026 15,047,185
- ---------------------------------------------------------------------- --------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.03 | Fixed Income SHares Semi-Annual Report 19
FIXED INCOME SHARES STATEMENTS OF CHANGES IN NET ASSETS
SERIES M
Six months Year ended
ended October 31,
April 30, 2003 2002
(unaudited)
INVESTMENT OPERATIONS:
Net investment income $ 5,403,280 $ 5,650,490
- ------------------------------------------------------------------ --------------------------------
Net realized gain on investments and options written 7,092,061 9,622,879
- ------------------------------------------------------------------ --------------------------------
Net change in unrealized appreciation/depreciation of investments
and options written 543,421 587,121
- ------------------------------------------------------------------ --------------------------------
Net increase in net assets resulting from investment operations 13,038,762 15,860,490
- ------------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (5,403,280) (5,650,490)
- ------------------------------------------------------------------ --------------------------------
Net realized gains (9,607,094) (2,266,109)
- ------------------------------------------------------------------ --------------------------------
Total dividends and distributions to shareholders (15,010,374) (7,916,599)
- ------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 103,172,381 179,970,399
- ------------------------------------------------------------------ --------------------------------
Cost of shares redeemed (25,228,916) (23,685,457)
- ------------------------------------------------------------------ --------------------------------
Net increase in net assets from capital share transactions 77,943,465 156,284,942
- ------------------------------------------------------------------ --------------------------------
Total increase in net assets 75,971,853 164,228,833
- ------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 215,803,224 51,574,391
- ------------------------------------------------------------------ --------------------------------
End of period $ 291,775,077 $ 215,803,224
- ------------------------------------------------------------------ --------------------------------
SHARES ISSUED AND REDEEMED:
Issued 8,987,317 15,986,615
- ------------------------------------------------------------------ --------------------------------
Redeemed (2,190,236) (2,088,295)
- ------------------------------------------------------------------ --------------------------------
NET INCREASE 6,797,081 13,898,320
- ------------------------------------------------------------------ --------------------------------
20 Fixed Income SHares Semi-Annual Report | 4.30.03
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
Six months For the Period
ended Year ended Year ended March 17, 2000*
April 30, 2003 October 31, October 31, through
SERIES C: (unaudited) 2002 2001 October 31, 2000
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net asset value, beginning of period $10.51 $11.35 $10.12 $10.00
- ------------------------------------------- ----------------- ------------- ------------- -----------------
INVESTMENT OPERATIONS:
Net investment income 0.38 0.73 0.75 0.45
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net realized and unrealized gain (loss) on
investments, futures contracts, options
written, swaps and foreign currency
transactions 1.21 (0.62) 1.31 0.12
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Total from investment operations 1.59 0.11 2.06 0.57
- ------------------------------------------- ----------------- ------------- ------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.38) (0.72) (0.75) (0.45)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net realized gains (0.05) (0.23) (0.08) --
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Total dividends and distributions to
shareholders (0.43) (0.95) (0.83) (0.45)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net asset value, end of period $11.67 $10.51 $11.35 $10.12
- ------------------------------------------- ----------------- ------------- ------------- -----------------
TOTAL INVESTMENT RETURN (1) 15.35% 1.06% 21.09% 5.79%
- ------------------------------------------- ----------------- ------------- ------------- -----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $301,924 $205,881 $51,541 $10,396
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Ratio of expenses to average net assets 0.00%(2) 0.00% 0.00% 0.00%(2)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Ratio of net investment income to average
net assets 6.83%(2) 6.78% 6.53% 7.04%(2)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Portfolio Turnover 186% 332% 605% 547%
- ------------------------------------------- ----------------- ------------- ------------- -----------------
SERIES M
- --------
NET ASSET VALUE, BEGINNING OF PERIOD $11.75 $11.53 $10.45 $10.00
- ------------------------------------------- ----------------- ------------- ------------- -----------------
INVESTMENT OPERATIONS:
Net investment income 0.26 0.52 0.69 0.45
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net realized and unrealized gain on
investments, futures contracts and option
written 0.34 0.62 1.26 0.45
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Total income from investment operations 0.60 1.14 1.95 0.90
- ------------------------------------------- ----------------- ------------- ------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.26) (0.52) (0.69) (0.45)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net realized gains (0.50) (0.40) (0.18) --
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Total dividends and distributions to
shareholders (0.76) (0.92) (0.87) (0.45)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Net asset value, end of period $11.59 $11.75 $11.53 $10.45
- ------------------------------------------- ----------------- ------------- ------------- -----------------
TOTAL INVESTMENT RETURN (1) 5.36% 10.65% 19.49% 9.16%
- ------------------------------------------- ----------------- ------------- ------------- -----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $291,775 $215,803 $51,574 $10,597
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Ratio of expenses to average net assets 0.00%(2) 0.00% 0.00% 0.00%(2)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Ratio of net investment income to average
net assets 4.52%(2) 4.54% 5.65% 7.00%(2)
- ------------------------------------------- ----------------- ------------- ------------- -----------------
Portfolio Turnover 350% 722% 870% 930%
- ------------------------------------------- ----------------- ------------- ------------- -----------------
* Commencement of operations.
(1) Assumes reinvestment of all dividends and distributions. Total return for
a period of less than one year is not annualized.
(2) Annualized.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.03 | Fixed Income SHares Semi-Annual Report 21
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Income SHares (the "Trust"), was organized as a Massachusetts business
trust on November 3, 1999 and offers two series of shares: Series C and Series
M (the "Portfolios"). Prior to commencing operations on March 17, 2000, the
Trust had no operations other than matters relating to its organization and
registration as a non-diversified, open-end investment company under the
Investment Company Act of 1940, as amended, and the sale and issuance to
Allianz Dresdner Asset Management of America L.P., ("ADAM") of 10,000 shares of
beneficial interest at an aggregate purchase price of $100,000. PIMCO Advisors
Fund Management LLC (the "Investment Manager"), formerly PIMCO Funds Advisors,
serves as the Fund's Investment Manager and is an indirect, wholly-owned
subsidiary of ADAM. ADAM is an indirect, majority-owned subsidiary of Allianz
AG. The Portfolios are authorized to issue an unlimited number of shares of
beneficial interest at $0.001 par value.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
In the normal course of business the Portfolios enter into contracts that
contain a variety of representations which provide claims that may be made
against the Portfolios that have not yet occurred. However, the Portfolios
expect the risk of loss to be remote.
The following is a summary of significant accounting policies followed by the
Portfolios:
(A) VALUATION OF INVESTMENTS
Securities and other financial instruments for which market quotations are
readily available are stated at market value. Market value is determined at the
close of regular trading (normally, 4:00 p.m., Eastern Time) on the New York
Stock Exchange on each day the New York Stock Exchange is open on the basis of
last reported sale price, or if no sale is reported, as is the case for most
securities traded over-the-counter, the mean between representative bid and
asked quotations obtained from a quotation reporting system or from established
market makers. Fixed income securities, including those to be purchased under
firm commitment agreements, are normally valued on the basis of quotes obtained
from brokers and dealers or independent pricing services. Short-term
investments maturing in 60 days or less are valued at amortized cost, which
approximates market value. Certain fixed income securities for which daily
market quotations are not readily available may be valued, pursuant to
guidelines established by the Board of Trustees, with reference to fixed income
securities whose prices are more readily obtainable. Prices may be obtained
from independent pricing services which use information provided by market
makers or estimates of market values obtained from yield data relating to
investments or securities with similar characteristics. The prices used by the
Portfolios to value securities may differ from the value that would be realized
if the securities were sold.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Securities
purchased or sold on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date. Realized gains and losses on investments
are determined on the identified cost basis. Dividend income is recorded on the
ex-dividend date, except for certain dividends from foreign securities which
are recorded as soon after the ex-dividend date, as the Portfolios, using
reasonable diligence, become aware of such dividends. Interest income, adjusted
for the accretion of discounts and amortization of premiums, is recorded on an
accrual basis. Paydown gains and losses on mortgage-and-asset- backed
securities are recorded as adjustments to interest income.
(C) FEDERAL INCOME TAXES
The Portfolios intend to distribute all of their taxable income and comply with
the other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no
22 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
provision for U.S. federal income taxes is required. In addition, by
distributing substantially all of its ordinary income and long-term capital
gains, if any, during each calendar year, the Portfolios intend not to be
subject to U.S. federal excise tax.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid
annually.
The Portfolios record dividends and distributions to shareholders on the
ex-dividend date. The amount of dividends and distributions are determined in
accordance with federal income tax regulations, which may differ from
accounting principles generally accepted in the United States of America. These
"book-tax" differences are considered either temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal income tax
treatment; temporary differences do not require reclassification.
(E) FOREIGN CURRENCY TRANSLATION -- SERIES C
The accounting records are maintained in U.S. dollars as follows: (1) the
foreign currency market value of investments and other assets and liabilities
denominated in foreign currency are translated at the prevailing exchange rate
at the end of the period; and (2) purchases and sales, income and expenses are
translated at the prevailing exchange rate on the respective dates of such
transactions. The resulting net foreign currency gain or loss is included in
the Statement of Operations.
Series C does 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, Series C does isolate the
effect of fluctuations in foreign currency exchange rates when determining the
gain or loss upon the sale or maturity of foreign currency denominated debt
obligations pursuant to U.S. federal income tax regulations; such amount is
categorized as foreign currency gain or loss for both financial reporting and
income tax reporting purposes.
(F) FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
financial instrument at a set price on a future date. Upon entering into such a
contract, the Portfolios are required to pledge to the broker an amount of cash
or securities equal to the minimum "initial margin" requirements of the
exchange. Pursuant to the contracts, the Portfolios agree to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in the value
of the contracts. Such receipts 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 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 Portfolios invest in
futures contracts for both hedging and investment purposes. 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.
4.30.03 | Fixed Income SHares Semi-Annual Report 23
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(F) FUTURES CONTRACTS (CONCLUDED)
Futures contracts outstanding at April 30, 2003 were as follows:
Series C:
Unrealized
# of Expiration Appreciation
Type Contracts Date (Depreciation)
- ---- --------------------------------------------
Long: Financial Future Euro-Bund 10 Year EUX 60 6/30/03 $ (63,130)
Short: U.S. Treasury 5 Year Note (45) 6/19/03 (5,625)
U.S. Treasury 10 Year Note (62) 6/19/03 12,594
U.S. Treasury 20 Year Bond (7) 6/19/03 4,484
---------
$ (51,677)
---------
Series M: There were no futures contracts outstanding at April 30, 2003.
(G) OPTION TRANSACTIONS
For hedging purposes, each Portfolio may purchase and write (sell) put and call
options on equity, fixed income or other securities or indexes in standardized
contracts traded on foreign or domestic securities exchanges, boards of trade,
similar entities or over the counter. The risk associated with purchasing an
option is that the Portfolio pays a premium whether or not the option is
exercised. Additionally, the Portfolio bears the risk of loss of premium and
change in market value should the counterparty not perform under the contract.
Put and call options purchased are accounted for in the same manner as
portfolio securities. The cost of securities acquired through the exercise of
call options is increased by the premiums paid. The proceeds from securities
sold through the exercise of put options is decreased by the premiums paid.
When an option is written, the premium received is recorded as an asset with an
equal liability which is subsequently adjusted to the current market value of
the option written. Premiums received from writing options which expire
unexercised are recorded on the expiration date as a realized gain. The
difference between the premium received and the amount paid on effecting a
closing purchase transaction, including brokerage commissions, is also treated
as a realized gain, or if the premium is less than the amount paid for the
closing purchase transactions, as a realized loss. If a call option is
exercised, the premium is added to the proceeds from the sale of the underlying
security in determining whether there has been a realized gain or loss. If a
put option is exercised, the premium reduces the cost basis of the security. In
writing an option, a Portfolio bears the market risk of an unfavorable change
in the price of the security or currency underlying the written option.
Exercise of an option written could result in a Portfolio purchasing a security
or currency at a price different from the current market value.
Transactions in options written for the six months ended April 30, 2003 were:
Series C:
Contracts Premiums
--------- --------
Options outstanding at October 31, 2002 6,200,422 $ 519,365
Options written -- --
Options expired (360) (157,088)
Options terminated in closing purchase transactions (62) (147,017)
--------- ----------
Options outstanding at April 30, 2003 6,200,000 $ 215,260
--------- ----------
24 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) OPTION TRANSACTIONS (CONCLUDED)
Series M:
Contracts Premiums
--------- --------
Options outstanding at October 31, 2002 3,000,000 $ 109,500
Options written -- --
--------- ---------
Options outstanding at April 30, 2003 3,000,000 $ 109,500
--------- ---------
(H) FORWARD FOREIGN CURRENCY CONTRACTS -- SERIES C
Series C enters into forward foreign currency contracts for the purpose of
hedging against foreign currency risk arising from the investment or
anticipated investment in securities denominated in foreign currencies. Series
C may also enter these contracts for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another. All commitments are marked to market daily at the
applicable foreign exchange rates and any resulting unrealized gains and losses
are recorded. Realized gains or losses are recorded at the time the forward
foreign currency contract matures or by delivery of the currency. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
Transactions in forward foreign currency contracts outstanding at April 30,
2003 were:
U.S.$ Value on U.S.$ Value Unrealized
Sold: Origination Date April 30, 2003 Depreciation
- --------------------------------------------------------------------------------
Euro, settling 5/15/03 $863,040 $896,788 $33,748
-------
(I) 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, even though investors do not receive principal until maturity.
(J) WHEN-ISSUED/DELAYED-DELIVERY TRANSACTIONS
The Portfolios may purchase or sell securities on a when-issued or
delayed-delivery basis. These transactions involve a commitment to purchase or
sell securities for a predetermined price or yield, with payment and delivery
taking place beyond the customary settlement period. When delayed-delivery
purchases are outstanding, the Portfolio will set aside and maintain until the
settlement date in a segregated account, liquid assets in an amount sufficient
to meet the purchase price. When purchasing a security on a delayed-delivery
basis, a Portfolio assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. A Portfolio may dispose of
or renegotiate a delayed-delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may result in a
realized gain or loss. When a Portfolio sells a security on a delayed-delivery
basis, the Portfolio does not participate in future gains and losses with
respect to the security.
(K) REPURCHASE AGREEMENTS
The Portfolios' custodian takes possession of the collateral pledged for
investments in repurchase agreements. The underlying collateral is valued daily
on a mark-to-market basis to ensure that the value, including accrued interest,
is at least equal to the repurchase price. In the event of default of the
obligation to repurchase, the Portfolio has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligations. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings.
4.30.03 | Fixed Income SHares Semi-Annual Report 25
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(L) 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.
(M) SWAP AGREEMENTS
A swap is an agreement between two parties to exchange a series of cash flows
at specified intervals. Based on a notional amount, each party pays an interest
rate or the change in the value of a security. Dividends and interest on the
securities in the swap are included in the value of the exchange. Swaps are
marked to market daily based upon quotations from market makers and vendors and
any unrealized gain or loss is included in net unrealized appreciation or
depreciation of investments. Payments received or made at the beginning of the
measurement period are reflected as such on the Statement of Assets and
Liabilities. Gain or loss is realized on the termination date of the swap and
is equal to the difference between the Portfolio's basis in the swap and the
proceeds of the closing transaction, including any fees. Entering into these
agreements 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
contractual terms in the agreements, and that there may be unfavorable changes
in interest rates.
Series C: Interest rate swap agreements outstanding at April 30, 2003 were:
Rate Type
-----------------------------------
Notional Payment Payment Unrealized
Amount Termination made by received by Appreciation
Swap Counterparty (000) Date the Portfolio the Portfolio (Depreciation)
- -------------------------------------------------------------------------------------------------------------
Goldman Sachs & Co. US$ 1,000 6/18/13 5.00% 6 Month LIBOR $ (49,746)
Goldman Sachs & Co. EURO 13,500 3/15/16 6 Month LIBOR 6.50% 436,165
Goldman Sachs & Co GBP 8,000 3/15/16 5.50% 6 Month LIBOR (131,328)
----------
$ 255,091
==========
- ----------------
EURO -- Eurodollars
GBP -- Great British Pounds
LIBOR -- London Interbank Offered Rate
Series M: There were no interest rate swap agreements outstanding at April 30,
2003.
(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.
26 Fixed Income SHares Semi-Annual Report | 4.30.03
FIXED INCOME SHARES NOTES TO FINANCIAL STATEMENTS
April 30, 2003
(2) INVESTMENT ADVISER/SUB-ADVISER/ADMINISTRATOR & DISTRIBUTOR
(A) INVESTMENT ADVISER/SUB-ADVISER
The Investment Manager serves as the Investment Manager to the Portfolios
pursuant to an Investment Management Agreement between the Investment Manager
and the Trust. Pursuant to a Portfolio Management Agreement, the Investment
Manager employs Pacific Investment Management Company LLC ("PIMCO" or 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 or PIMCO. 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.
(B) ADMINISTRATOR
The Investment Manager also serves as administrator to the Portfolios pursuant
to an administration agreement ("Administration Agreement") with the Trust. The
Administrator's responsibilities include providing or procuring certain
administrative services to the Portfolios as well as arranging at its own
expense for the provision of legal, audit, custody, transfer agency and other
services required for the ordinary operation of the Portfolios, and is
responsible for printing, trustees fees, and other costs of the Portfolios.
Under the Administration Agreement, the Investment Manager has agreed to
provide or procure these services, and to bear these expenses at no charge to
the Portfolios.
(C) DISTRIBUTOR
PIMCO Advisors 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) INVESTMENTS IN SECURITIES
Purchases and sales of securities (excluding short-term investments) for the
period ended April 30, 2003, were:
U.S. Government Agency All Other
---------------------------------- -----------------------------
Purchases Sales Purchases Sales
-------------- -------------- ------------ -----------
Series C: $ 436,180,758 $ 442,954,353 $139,742,329 $86,093,349
Series M: $1,685,311,708 $1,562,768,994 $ 18,102,272 $10,819,961
4.30.03 | Fixed Income SHares Semi-Annual Report 27
FIXED INCOME SHARES PRIVACY POLICY
OUR COMMITMENT TO YOU
We consider customer privacy to be a fundamental aspect of our relationship
with clients. We are committed to maintaining the confidentiality, integrity,
and security of our current, prospective and former clients' personal
information. We have developed policies designed to protect this
confidentiality, while allowing client needs to be served.
OBTAINING PERSONAL INFORMATION
In the course of providing you with products and services, we may obtain
non-public personal information about you. This information may come from
sources such as account applications and other forms, from other written,
electronic or verbal correspondence, from your transactions, from your
brokerage or financial advisory firm, financial adviser or consultant, and/or
from information captured on our internet web sites.
RESPECTING YOUR PRIVACY
We do not disclose any personal or account information provided by you or
gathered by us to non-affiliated third parties, except as required or permitted
by law. As is common in the industry, non-affiliated companies may from time to
time be used to provide certain services, such as preparing and mailing
prospectuses, reports, account statements and other information, conducting
research on client satisfaction, and gathering shareholder proxies. We may also
retain non-affiliated companies to market our products and enter in joint
marketing agreements with other companies. These companies may have access to
your personal and account information, but are permitted to use the information
solely to provide the specific service or as otherwise permitted by law. We may
also provide your personal and account information to your brokerage or
financial advisory firm and/or to your financial adviser or consultant.
SHARING INFORMATION WITH THIRD PARTIES
We do reserve the right to disclose or report personal information to
non-affiliated third parties in limited circumstances where we believe in good
faith that disclosure is required under law, to cooperate with regulators or
law enforcement authorities, to protect our rights or property, or upon
reasonable request by any mutual fund in which you have chosen to invest. In
addition, we may disclose information about you or your accounts to a
non-affiliated third party at your request or if you consent in writing to the
disclosure.
SHARING INFORMATION WITH AFFILIATES
We may share client information with our affiliates in connection with
servicing your account or to provide you with information about products and
services that we believe may be of interest to you. The information we share
may include, for example, your participation in our mutual funds or other
investment programs, your ownership of certain types of accounts (such as
IRAs), or other data about your accounts. Our affiliates, in turn, are not
permitted to share your information with non-affiliated entities, except as
required or permitted by law.
IMPLEMENTATION OF PROCEDURES
We take seriously the obligation to safeguard your non-public personal
information. We have implemented procedures designed to restrict access to your
non-public personal information to our personnel who need to know that
information to provide products or services to you. To guard your non-public
personal information, physical, electronic, and procedural safeguards are in
place.
28 Fixed Income SHares Semi-Annual Report | 4.30.03
TRUSTEES AND PRINCIPAL OFFICERS
Stephen Treadway, Chairman
Paul Belica, Trustee
Robert E. Connor, Trustee
Brian S. Shlissel, President & Chief Executive Officer
Newton B. Schott, Jr., Secretary
Lawrence G. Altadonna, Treasurer
INVESTMENT MANAGER
PIMCO Advisors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
ADMINISTRATOR
PIMCO Advisors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
DISTRIBUTOR
PIMCO Advisors Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
CUSTODIAN & ACCOUNTING AGENT
State Street Corp.
801 Pennsylvania Avenue
Kansas City, MO 64105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
National Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholders of Fixed Income SHares Inc. 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
Funds without examination by independent accountants, who did not express an
opinion hereon.
[PIMCO ADVISORS LOGO]
#527427
ITEM 2. CODE OF ETHICS Disclosure requirement not currently effective
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Disclosure requirement not
currently effective
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Disclosure requirement not
currently effective
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT Disclosure requirement not
currently effective
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Disclosure requirement not currently effective
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure
controls and procedures (as defined in Rule 30a-2(c) under the
Investment Company Act of 1940, as amended are effective based on their
evaluation of these controls and procedures as of a date within 90 days
of the filing date of this document.
(b) There were no significant changes in the registrant's internal controls
or in factors that could affect these controls subsequent to the date
of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a) Disclosure requirement not currently effective.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2).