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)
Lawrence G. Altadonna - 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: 212-739-3371
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.
Item 1. Report to Shareholders
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SEMI-ANNUAL REPORT
4.30.04
FIXED INCOME SHARES - SERIES C, SERIES M
- --------------------------------------------------------------------------------
CONTENTS
Letter to Shareholders ................................................. 1
Performance Summary and Statistics ..................................... 2-3
Schedules of Investments ............................................... 4-17
Statements of Assets and Liabilities ................................... 18
Statements of Operations ............................................... 19
Statements of Changes in Net Assets .................................... 20-21
Financial Highlights ................................................... 22
Notes to Financial Statements .......................................... 23-31
PIMCO ADVISORS
FIXED INCOME SHARES LETTER TO SHAREHOLDERS
June 17, 2004
Dear Shareholder:
We are pleased to provide you with the semi-annual report of Fixed Income SHares
Series C and Series M for the six month period ended April 30, 2004. 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 we remain dedicated to serving your
investment needs.
Sincerely,
/s/ Stephen Treadway /s/ Brian S. Shlissel
- -------------------- ---------------------
Stephen Treadway Brian S. Shlissel
Chairman President, Chief Executive Officer
4.30.04 | Fixed Income SHares Semi-Annual Report 1
FIXED INCOME SHARES - SERIES C PERFORMANCE SUMMARY AND STATISTICS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
SYMBOL: FXICX
PRIMARY INVESTMENTS:
Intermediate maturity fixed income securities
INCEPTION DATE:
3/17/00
NET ASSETS:
$476.9 million
PORTFOLIO MANAGER:
Mark Kiesel
- --------------------------------------------------------------------------------
TOTAL RETURN(1):
- --------------------------------------------------------------------------------
Six Months 2.80%
1 Year 5.30%
3 Years 10.50%
Commencement of Operations (3/17/00) to 4/30/04 11.60%
- ---------------------------------------------------
Net Asset Value $11.48
- ---------------------------------------------------
Distribution Yield(2) 4.51%
- ---------------------------------------------------
Duration 6.49 YEARS
- ---------------------------------------------------
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return assumes
reinvestment of all dividends and distributions. Total return does not
reflect broker commissions or "wrap fee" charges. Total return for a period
of less than one year is not annualized. Total return for a period greater
than one year represents the average annual total return.
(2) Distribution yield is determined by dividing the annualized current monthly
per share dividend by the net asset value at April 30, 2004.
An investment in the Portfolio involves risk, including the loss of
principal. Total return, distribution yield, net asset value and duration
will fluctuate with changes in market conditions. This data is provided for
information only and is not intended for trading purposes. Net asset value
is total assets less total liabilities divided by the number of shares
outstanding. Holdings are subject to change daily.
2 Fixed Income SHares Semi-Annual Report | 4.30.04
FIXED INCOME SHARES - SERIES M PERFORMANCE SUMMARY AND STATISTICS
April 30, 2004 (unaudited)
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SYMBOL:
FXIMX
PRIMARY INVESTMENTS:
Intermediate maturity mortgage-backed securities
INCEPTION DATE:
3/17/00
NET ASSETS:
$477.9 million
PORTFOLIO MANAGERS:
Scott Simon
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TOTAL RETURN(1):
- --------------------------------------------------------------------------------
Six Months 2.80%
1 Year 4.08%
3 Years 10.39%
Commencement of Operations (3/17/00) to 4/30/04 11.78%
Net Asset Value $11.37
- -----------------------------------------
Distribution Yield(2) 3.53%
- -----------------------------------------
Duration 6.10 YEARS
- -----------------------------------------
(1) PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Total return assumes
reinvestment of all dividends and distributions. Total return does not
reflect broker commissions or "wrap fee" charges. Total return for a period
of less than one year is not annualized. Total return for a period greater
than one year represents the average annual total return.
(2) Distribution yield is determined by dividing the annualized current monthly
per share dividend by the net asset value at April 30, 2004.
An investment in the Portfolio involves risk, including the loss of
principal. Total return, distribution yield, net asset value and duration
will fluctuate with changes in market conditions. This data is provided for
information only and is not intended for trading purposes. Net asset value
is total assets less total liabilities divided by the number of shares
outstanding. Holdings are subject to change daily.
4.30.04 | Fixed Income SHares Semi-Annual Report 3
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES -- 54.4%
AIRLINES -- 1.3%
Continental Airlines, Inc., pass thru certificates,
$ 500 6.32%, 11/1/08, Ser. 98-3 (a) Baa3/A $ 497,932
900 7.92%, 5/1/10, Ser. 00-1 (a) Baa3/A- 910,471
22 11.50%, 4/2/08, Ser. 96-2D (b) Caa1/B- 17,291
1,815 Delta Air Lines, Inc., pass thru certificates, 7.38%-7.57%,
11/18/11-5/18/12, Ser. 00-1 (a) Baa3/BBB- 1,768,804
700 JetBlue Airways Corp., pass thru certificates, 5.36%, 6/15/04,
FRN, Ser. 04-1 (a) Ba1/BB+ 721,721
United Air Lines, Inc., pass thru certificates,
1,767 7.19%, 4/1/11, Ser. 00-2 (a) NR/BBB- 1,574,845
650 7.73%, 7/1/10, Ser. 00-1 (a) NR/BBB- 572,328
100 10.125%, 3/22/15, Ser. 91-B2 (b)(c) NR/CCC- 38,992
------------
6,102,384
============
AUTOMOTIVE -- 1.6%
1,600 DaimlerChrysler NA Holdings, 7.30%-8.50%,
1/15/12-1/18/31 (a) A3/BBB 1,844,170
100 Federal-Mogul Corp., 7.375%, 1/15/06 (b)(c)(d) NR/NR 28,500
1,955 Ford Motor Co., 7.45%, 7/16/31 (a) Baa1/BBB- 1,911,288
2,000 General Motor Corp., 8.25%, 7/15/23 (a) Baa1/BBB 2,145,654
1,600 Hyundai Motor Manufacturing, Alabama LLC, 5.30%,
12/19/08 (a)(e)(f) (acquired 12/16/03; cost--$1,593,304) Ba1/BB+ 1,596,199
------------
7,525,811
============
BANKING -- 2.6%
100 Banque Centrale de Tunisie, 7.375%, 4/25/12 (a) Baa1/BBB 110,250
3,400 HBOS plc, 5.375%, 11/1/13, VRN (a)(e)
(acquired 10/22/03-12/9/03; cost--$3,393,820) Aa3/A 3,354,987
HSBC Capital Funding LP,
1,300 4.61%, 06/27/13, VRN, (a)(e)
(acquired 1/24/03; cost--$1,300,000) A2/A- 1,201,515
1,000 10.18%, 6/27/30, VRN, (a)(e)
(acquired 5/30/02; cost--$1,279,219) A2/A- 1,428,176
500 KBC Bank Funding Trust III, 9.86%, 11/2/09, VRN, (a)(b)(e)
(acquired 3/18/02; cost--$568,035) A2/A- 622,535
1,600 Royal Bank of Scotland Group plc, 9.118%, 3/31/10, Ser. 1 (a) A1/A 1,964,563
3,900 Washington Mutual, Inc., 1.40%, 5/4/04, FRN (a) A3/BBB+ 3,907,679
------------
12,589,705
------------
BUILDING/CONSTRUCTION -- 0.3%
1,700 KB Home, 5.75% 2/1/14 (a)(e)
(acquired 1/13/04; cost--$1,691,231) Ba1/BB+ 1,610,750
============
CHEMICALS -- 0.4%
2,000 Dow Chemical Co., 6.00%, 10/1/12 (a) A3/A- 2,115,390
============
4 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES (CONTINUED)
CONTAINERS -- 0.2%
$ 1,100 Ball Corp., 6.875%, 12/15/12 (a) Ba3/BB $ 1,166,000
============
DIVERSIFIED MANUFACTURING -- 1.8%
5,000 General Electric Co., 5.00%, 2/1/13 (a) Aaa/AAA 4,980,025
2,775 Hutchison Whampoa International Ltd., 6.25%-6.50%,
2/13/13-1/24/14 (a)(e)
(acquired 1/11/03-3/31/03; cost--$2,776,543) A3/A- 2,740,964
700 Tyco International Group SA, 6.375%, 2/15/06 (a) Ba2/BBB- 737,792
------------
8,458,781
============
ENERGY -- 0.2%
700 Peabody Energy Corp., 6.875%, 3/15/13, Ser. B (a) Ba3/BB- 731,500
============
FINANCIAL SERVICES -- 4.0%
2,200 Bear Stearns Cos., Inc., 1.30%, 7/16/04 FRN (a) A1/A 2,201,212
Citigroup, Inc.,
300 3.50%, 2/1/08 (a) Aa1/AA- 298,332
1,100 5.625%, 8/27/12 (a) Aa2/A+ 1,148,929
6,300 Goldman Sachs Group, Inc., 4.125%-5.70%, 1/15/08-7/15/13 (a) Aa3/A+ 6,421,069
3,800 J.P. Morgan Chase & Co., 5.75%-6.75%, 2/1/11-1/2/13 (a) A2/A 4,179,402
Morgan Stanley & Co.,
1,900 4.75%, 4/1/14 (a)(h) A1/A 1,699,772
2,800 5.30%-6.60%, 4/1/12-3/1/13 (a) Aa3/A+ 3,056,399
------------
19,005,115
============
FINANCING -- 8.1%
CIT Group, Inc.,
2,000 1.33%, 6/21/04, FRN (a) A2/A 2,005,538
2,000 7.75%, 4/2/12 (a) A2/A 2,313,014
8,140 Ford Motor Credit Co., 7.25%-7.60%, 8/1/05-10/25/11 (a) A3/BBB- 8,632,966
8,635 General Motors Acceptance Corp., 6.875%-8.00%,
2/1/12-11/1/31, Ser. A (a) A3/BBB 9,083,990
4,000 Household Finance Corp., 6.375%-7.00%, 5/15/12-11/27/12 (a) A1/A 4,357,993
2,300 MBNA America Bank, NA, 7.125%, 11/15/12 (a) Baa2/BBB 2,587,475
3,000 National Rural Utilities Corp., 7.25%, 3/1/12 (a) A2/A 3,439,389
1,200 Preferred Term Securities XIII Ltd., 1.66%, 6/24/04, FRN
(a)(b)(e)(g) (acquired 3/9/04; cost--$1,200,000) Aaa/AAA 1,200,000
1,800 Principal Life Global, Inc., 5.25%, 1/15/13 (a)(e)
(acquired 2/10/03; cost--$1,808,143) Aa3/AA 1,811,570
1,000 Rabobank Capital Fund II, 5.26%, 12/31/13, VRN (a)(e)
(acquired 2/24/04; cost--$1,022,418) Aa2/AA 988,407
1,900 UFJ Finance Aruba AEC, 6.75%, 7/15/13 (a) Baa1/BBB- 2,009,679
------------
38,430,021
============
FOOD -- 1.8%
1,000 Albertson's, Inc., 7.50%, 2/15/11 (a) Baa2/BBB 1,137,321
2,000 Kraft Foods, Inc., 6.25%, 6/1/12 (a) A3/BBB+ 2,145,762
4.30.04 Fixed Income SHares Semi-Annual Report 5
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES (CONTINUED)
FOOD (CONCLUDED)
$ 2,800 Kroger Co., 5.50%-6.20%, 6/15/12-2/1/13 (a) Baa2/BBB $ 2,854,319
2,300 Safeway, Inc., 5.80%, 8/15/12 (a) Baa2/BBB 2,366,594
------------
8,503,996
============
HEALTHCARE & HOSPITALS -- 1.1%
570 Columbia-HCA, The Healthcare Corp., 7.25%, 5/20/08 (a) Ba1/BBB- 611,763
3,200 HCA Inc., 6.25%-7.125%, 6/1/06-2/15/13 (a) Ba1/BBB- 3,310,427
1,700 Tenet Healthcare Corp., 6.50%, 6/1/12 (a) B3/B- 1,483,250
------------
5,405,440
============
HOTELS/GAMING -- 1.7%
Harrah's Operating Co., Inc.,
2,450 7.50%-8.00%, 2/1/09-2/1/11(a) Baa3/BBB- 2,814,416
1,000 7.875%, 12/15/05 (a) Ba1/BB+ 1,073,750
1,800 Hilton Hotels Corp., 7.625%, 5/15/08-12/1/12 (a) Ba1/BBB- 2,004,500
1,700 Mandalay Resort Group, 6.50%-9.375%, 7/31/09-2/15/10 (a) Ba2/BB+ 1,911,500
450 Park Place Entertainment Corp., 7.50%, 9/1/09 (a) Ba1/BB+ 492,750
------------
8,296,916
============
LEISURE -- 0.3%
1,400 Royal Caribbean Cruises Ltd., 8.00%, 5/15/10 (a) Ba2/BB+ 1,533,000
============
MULTI-MEDIA -- 4.5%
4,660 AOL Time Warner, Inc., 6.875%-7.70%, 4/15/12-5/1/32 (a) Baa1/BBB+ 5,138,060
1,530 British Sky Broadcasting Group plc, 8.20%, 7/15/09 (a) Baa3/BBB- 1,786,461
1,000 Clear Channel Communications, Inc., 5.75%, 1/15/13 (a) Baa3/BBB- 1,024,220
1,000 Comcast Cable Communications, Inc., 8.875%, 5/1/17 (a) Baa3/BBB 1,245,849
1,000 Continental Cablevision, Inc., 8.30%, 5/15/06 (a) Baa3/BBB 1,102,357
4,400 Cox Communications, Inc., 4.625%-6.75%, 3/15/11-6/1/13 (a) Baa2/BBB 4,296,455
300 CSC Holdings, Inc., 8.125%, 7/15/09, Ser. B (a) B1/BB- 321,750
1,000 News America Holdings, 9.25%, 2/1/13 (a) Baa3/BBB- 1,271,421
300 Mediacom Broadbrand, LLC, 11.00%, 7/15/13 (a) B2/B+ 322,500
2,000 Roger Cable, Inc., 6.25%, 6/15/13 (a) Ba2/BBB- 1,935,884
600 Viacom, Inc., 5.625%-6.625%, 5/15/11-8/15/12 (a) A3/A- 652,392
2,000 Walt Disney Co., 6.375%, 3/1/12 (a) Baa1/BBB+ 2,168,940
------------
21,266,289
============
OIL & GAS -- 6.3%
2,200 Amerada Hess Corp., 6.65%, 8/15/11(a) Ba1/BBB1 2,348,454
500 Barrett Resources Corp., 7.55%, 2/1/07 (a) B3/B+ 537,500
2,400 Centerpoint Energy Resources Corp., 7.875%, 4/1/13 (a) Ba1/BBB 2,711,018
200 Devon Financing Corp., 6.875%, 9/30/11 (a) Baa2/BBB 222,375
1,800 Duke Capital Corp., 6.25%, 2/15/13 (a) Baa3/BBB- 1,853,820
2,000 Halliburton Co., 2.65%, 7/17/04, FRN (a) Baa2/BBB 2,024,318
6 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES (CONTINUED)
OIL & GAS (CONCLUDED)
$ 1,681 Kern River Funding Corp., 4.893%, 4/30/18 (a)(e)
(acquired 4/28/03; cost--$1,721,500) A3/A- $ 1,644,295
500 Kinder Morgan, Inc., 6.50%, 9/1/12 (a) Baa2/BBB 539,036
2,000 Nexen, Inc., 5.05%, 11/20/13 (a) Baa2/BBB 1,944,510
2,500 Panhandle Eastern Pipe Line Co., 6.05%, 8/15/13 (a) Baa3/BBB 2,616,010
3,100 Pemex Project Funding Master Trust, 7.375%-8.00%,
11/15/11-12/15/14 (a) Baa1/BBB- 3,299,800
3,650 Pioneer Natural Resources Co., 6.50%-7.50%,
1/15/08-4/15/12 (a) Baa3/BBB- 4,043,224
700 Premcor Refining Group, Inc., 6.75%, 5/1/14 (a) Ba3/BB- 700,000
775 Ras Laffan Liquefied Natural Gas., Ltd., 3.44%, 9/15/09 (a)(e)
(acquired 3/4/04; cost--$775,000) Baa1/A- 767,103
25 Sonat, Inc., 7.625%, 7/15/11 (a) Caa1/CCC+ 21,750
400 Southern Natural Gas Co., 8.00%, 3/1/32 (a) B1/B- 402,000
700 Valero Logistics Operations LP., 6.05%, 3/15/13 (a) Baa3/BBB 725,915
800 Vintage Petroleum, Inc., 8.25%, 5/1/12 (a) Ba3/BB- 880,000
2,700 XTO Energy, Inc., 6.25%, 4/15/13 (a) Baa3/BBB- 2,881,726
------------
30,162,854
============
PAPER/PAPER PRODUCTS -- 2.4%
2,235 Abitibi-Consolidated, Inc., 8.30%-8.55%, 8/1/05-8/1/10 (a) Ba2/BB 2,417,833
1,000 Boise Cascade Corp., 7.00%, 11/1/13 (a) Ba2/BB 1,054,716
1,650 Bowater Canada Finance Corp., 7.95%, 11/15/11 (a) Ba2/BB 1,765,500
1,050 Georgia-Pacific Corp. 8.125%-9.125%, 5/15/11-3/1/23 (a) Ba3/BB+ 1,134,775
2,600 International Paper Co., 5.85%-6.75%, 9/1/11-10/30/12 (a) Baa2/BBB 2,728,357
2,150 Weyerhaeuser Co., 6.125%-6.75%, 3/15/07-3/15/12 (a) Baa2/BBB 2,347,140
------------
11,448,321
============
PHARMACEUTICALS -- 0.6%
800 Fresenius Medical Capital Trust, 7.875%, 6/15/11 (a) Ba2/BB- 880,000
1,000 Schering-Plough Corp., 5.30%, 12/1/13 (a) A3/A- 1,000,254
1,000 Wyeth, 5.50%, 2/1/14 (a) Baa1/A 994,320
------------
2,874,574
============
TELECOMMUNICATIONS -- 6.5%
4,000 AT&T Broadband Corp., 8.375%, 3/15/13 Baa3/BBB 4,780,252
2,950 AT&T Corp., 8.05%-8.75%, 11/15/11-11/15/31, VRN (a) Baa2/BBB 2,095,640
2,350 AT&T Wireless Services, Inc., 7.50%-8.125%, 5/1/07-5/1/12 (a) Baa2/BBB 2,725,206
1,400 British Telecom plc, 7.875%-8.375%,
12/15/05-12/15/10, VRN (a) Baa1/A- 1,526,751
2,000 Citizen Communications Co., 9.25%, 5/15/11 (a) Baa2/BBB 2,107,582
3,110 Deutsche Telekom International Finance, 8.125%-8.50%,
6/15/05-5/29/12, VRN (a) Baa2/BBB+ 3,887,133
3,840 France Telecom SA, 7.50%-8.75%, 9/1/04-3/14/08, VRN (a) Baa2/BBB+ 4,490,093
800 PanAmSat Corp., 8.50%, 2/1/12 (a) Ba3/B+ 908,000
4.30.04 Fixed Income SHares Semi-Annual Report 7
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES (CONTINUED)
TELECOMMUNICATIONS (CONCLUDED)
$ 740 Qwest Capital Funding, Inc., 7.25%, 2/15/11(a) Caa2/CCC+ $ 606,800
4,360 Sprint Capital Corp., 6.875%-8.375%, 3/15/12-11/15/28 (a) Baa3/BBB- 4,729,772
1,000 Telus Corp., 8.00%, 6/1/11(a) Baa3/BBB 1,161,561
1,000 Verizon Global Funding Inc., 4.00%-4.375%, 1/15/08-6/1/13 (a) A2/A+ 979,401
900 Verizon New England, Inc., 6.50%, 9/15/11 (a) Aa3/A+ 976,684
100 Vodafone Group plc, 7.75%, 2/15/10 (a) A2/A 115,939
-----------
31,090,814
===========
TOBACCO -- 0.7%
3,000 Philip Morris Cos., Inc., 6.375%-7.00%, 7/15/05-2/1/06 (a) Baa2/BBB 3,145,510
===========
UTILITIES -- 7.4%
1,000 Carolina Power & Light Co., 6.65%, 4/1/08, Ser. D (a) Baa1/BBB 1,087,769
500 Cleveland Electric Illuminating Co., 6.86%, 10/1/08, Ser. A (a) Baa2/BBB- 550,238
400 Columbus Southern Power Co., 5.50%, 3/1/13 (a) A3/BBB 407,919
1,300 Constellation Energy Group, Inc., 7.00%, 4/1/12 (a) Baa1/BBB 1,441,492
Dayton Power & Light Co.,
1,300 5.125%, 10/1/13 (a)(e)
(acquired 9/24/03; cost--$1,295,199) Baa3/BBB- 1,256,544
1,200 6.875%, 9/1/11 (a) Ba3/B+ 1,188,000
600 Duke Energy Corp., 5.625%, 11/30/12 (a) Baa1/BBB 608,891
210 Edison Mission Energy, 7.73%, 6/15/09 (a) B2/B 199,500
Entergy Gulf States, Inc.
1,200 2.01%, 6/18/04, FRN (a)(e)
(acquired 4/7/04; cost--$1,201,200) Baa3/BBB- 1,204,733
1,500 3.60%, 6/1/08 (a) Baa3/BBB- 1,453,590
900 Entergy Mississippi, Inc., 4.35%, 4/1/08 (a) Baa2/BBB+ 899,064
700 GC1C Funding Corp.
5.13%, 1/15/14 (b)(e)(h)
(acquired 4/16/04; cost--$700,000) NR/BB- 691,387
274 GG1B Funding Corp., 7.43%, 1/15/11 (a) Baa3/BBB- 282,234
200 Idaho Power Corp., 6.60%, 3/2/11 (a) A2/A 221,874
900 IPALCO Enterprises, Inc., 8.375%-8.625%, 11/14/08-11/14/11 (a) Ba1/BB- 1,003,500
1,000 MidAmerican Energy Holdings Co., 5.875%, 10/1/12 (a) Baa3/BBB- 1,035,384
200 Niagara Mohawk Power Corp., 7.75%, 5/15/06 (a) Baa2/A+ 219,013
1,600 Ohio Edison Co., 4.00%, 5/1/08 (a) Baa2/BB+ 1,573,426
2,500 Ohio Power Co., 6.375%, 7/15/33, Ser. I (a) A3/BBB 2,463,205
395 Oncor Electric Delivery Co., 6.375%, 5/1/12-1/15/15 (a) Baa1/BBB 424,167
2,800 Pacific Gas & Electric Co., 1.81%, 7/5/04, FRN (a) Baa2/BBB 2,801,425
2,600 Pepco Holdings, Inc., 6.45%, 8/15/12 (a) Baa2/BB 2,775,386
376 PNPP II Funding Corp., 8.51%, 11/30/06 (a) Baa2/BB+ 398,007
2,000 PPL Capital Funding, Inc., 4.33%, 3/1/09 (a)(e)
(acquired 2/20/04; cost--$2,000,000) Baa3/BBB- 1,952,682
1,200 Progress Energy, Inc., 6.05%-6.85%, 4/15/07-4/15/12(a) Baa2/BBB- 1,312,181
3,000 PSE&G Energy Holdings, LLC, 8.50%, 6/15/11(a) Ba3/BB- 330,000
2,900 PSE&G Power LLC, 3.75%-7.75%, 4/1/09-6/1/12 (a) Baa1/BBB 3,058,921
8 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
CORPORATE BONDS & NOTES (CONCLUDED)
UTILITIES (CONCLUDED)
$ 1,000 Southern California Edison Co., 8.00%, 2/15/07 (a) Baa2/BBB $ 1,121,942
1,000 Tampa Electric Co., 6.875%, 6/15/12 (a) Baa2/BBB- 1,087,152
1,900 TXU Energy Co., 7.00%, 3/15/13 (a) Baa2/BBB 2,103,790
97 Waterford 3 Funding Corp., 8.09%, 1/2/17 (a) Baa3/BBB- 106,828
------------
35,260,244
============
WASTE MANAGEMENT -- 0.6%
2,650 Waste Management, Inc., 6.375%-7.375%, 8/1/10-11/15/12 (a) Baa3/BBB 2,915,920
------------
Total Corporate Bonds & Notes (cost--$254,991,844) 259,639,335
============
U.S. GOVERNMENT AGENCY SECURITIES -- 11.1%
FANNIE MAE -- 5.5%
4,100 zero coupon, 6/1/17 (a) Aaa/AAA 1,929,358
98 3.09%-5.96%, 5/25/04-6/1/05, FRN, CMO (a) Aaa/AAA 98,926
14,762 4.00%-7.50%, 6/1/32-12/1/31, CMO (a) Aaa/AAA 14,764,579
9,600 5.50%, 11/1//33, CMO (f) Aaa/AAA 9,578,995
------------
26,371,858
============
FREDDIE MAC -- 0.1%
93 3.125%-4.09%, 5/1/04-7/1/04, FRN (a) Aaa/AAA 94,176
46 5.625%, 7/15/28 (a) Aaa/AAA 46,646
------------
140,822
============
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.1%
61 4.375%, 5/1/04, FRN (a) Aaa/AAA 61,585
24,264 5.50%-7.50%, 1/15/31-1/15/34 (a) Aaa/AAA 24,319,763
------------
24,381,348
============
OTHER GOVERNMENT AGENCIES -- 0.4%
2,000 Small Business Investment Companies, 4.50%, 2/1/14 (a) Aaa/AAA 1,902,212
------------
Total U.S. Government Agency Securities (cost--$53,582,202) 52,796,240
============
SOVEREIGN DEBT OBLIGATIONS (a) -- 5.1%
BRAZIL -- 0.6%
Republic of Brazil,
777 2.0625%, 10/15/04, FRN (a) B2/B+ 702,078
2,754 8.00%-11.50%, 3/12/08-1/20/34 (a) B2/B+ 2,442,340
------------
3,144,418
============
CHILE -- 0.5%
2,030 Republic of Chile, 7.125%, 1/11/12 (a) Baa1/A 2,277,254
============
CROATIA -- 0.3%
Republic of Croatia, FRN
1,182 2.00%, 7/31/04, Ser. A (a) Baa3/BBB- 1,180,531
138 2.00%, 7/31/04, Ser. B (a) Baa3/BBB- 137,696
------------
1,318,227
============
4.30.04 Fixed Income SHares Semi-Annual Report 9
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
============================================================================================================
SOVEREIGN DEBT OBLIGATIONS (CONCLUDED)
MEXICO -- 1.3%
United Mexican States,
$ 6,000 6.375%-8.30%, 1/16/13-8/15/31 (a) Baa2/BBB- $ 6,260,000
50 8.00%, 9/24/22, Ser. A (a) Baa2/BBB- 53,775
-----------
6,313,775
===========
PANAMA -- 0.5%
2,000 Republic of Panama, 8.25%-9.625%, 2/8/11-7/23/12 (a) Ba1/BB 2,261,000
===========
PERU -- 1.2%
5,300 Republic of Peru, 9.125%, 2/21/12 (a) Ba3/BB- 5,591,500
===========
RUSSIA -- 0.6%
Republic of Russia,
1,700 5.00%, 3/31/07, FRN (a) Baa3/BB+ 1,563,150
1,334 10.00%, 6/26/07 (a) Baa3/BB+ 1,520,835
-----------
3,083,985
===========
SOUTH AFRICA -- 0.1%
465 Republic of South Africa, 9.125%, 5/19/09 (a) Baa2/BBB 552,139
-----------
Total Sovereign Debt Obligations (cost--$23,127,115) 24,542,298
===========
U.S. TREASURY NOTES & BONDS (a) -- 0.7%
1,750 3.25%-3.375%, 1/15/07-8/15/08 (a) Aaa/AAA 1,739,747
118 3.375%, 1/15/07 (a)(g) Aaa/AAA 126,738
1,000 8.125%, 8/15/19 (a) Aaa/AAA 1,318,985
-----------
Total U.S. Treasury Notes & Bonds (cost--$3,229,425) 3,185,470
===========
MORTGAGE-BACKED SECURITIES -- 1.3%
141 Bank of America Mortgage Securities, 5.72%, 5/1/04 FRN (a) NR/AAA 143,742
3,000 Chase Commercial Mortgage Securities Corp.,
6.48%, 5/1/04, FRN (a)(e) Aaa/NR 3,216,523
1,284 CS First Boston Mortgage Securities Corp.,
2.36%, 11/25/04, FRN (b)(e)(h) NR/AAA 1,287,480
21 First Nationwide Trust, 8.50%, 9/25/31(a) NR/AAA 21,699
38,166 Hilton Hotel Pool Trust, 0.89%, 5/1/04, FRN, IO (e) NR/AAA 1,439,081
-----------
Total Mortgage-Backed Securities (cost--$5,899,296) 6,108,525
===========
CONVERTIBLE PREFERRED STOCK (a) -- 0.5%
Shares
(000)
-------
80 General Motors Corp.,
6.25%, 7/15/33, Ser. C (cost--$2,000,000) NR/NR 2,438,400
===========
ASSET-BACKED SECURITIES -- 0.4%
Principal
Amount
(000)
- ---------
$ 1,718 Keystone Owner Trust, 8.35%-8.50%, 12/25/24-1/25/29 (b)(e) Ba2/NR 1,730,510
Total Asset-Backed Securities (cost--$1,740,824) ==========
10 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Shares Credit Rating
(000) (Moody's/S&P) Value
====================================================================================================================
RIGHTS (D) -- 0.0%
250 United Mexican States, Ser. B, expires 6/1/04 NR/NR $ 1,250
250 United Mexican States, Ser. C, expires 6/1/05 NR/NR 5,000
250 United Mexican States, Ser. D, expires 6/30/06 NR/NR 3,750
250 United Mexican States, Ser. E, expires 6/1/07 NR/NR 2,500
-----------
Total Rights (cost--$0) NR/NR 12,500
===========
SHORT-TERM INVESTMENTS -- 27.4%
Principal
Amount
(000)
- ---------
COMMERCIAL PAPER (A) -- 18.0%
BANKING -- 7.7%
$ 9,000 ANZ (Delaware) Inc., 1.02%-1.04%, 5/17/04-6/25/04 P-1/A-1+ 8,994,824
10,900 HBOS Treasury Services plc, 1.09%-1.07%, 6/21/04-9/1/04 P-1/A-1+ 10,879,414
6,500 Royal Bank of Scotland plc, 1.02%-1.14%, 5/12/04-8/26/04 P-1/A-1+ 6,490,007
10,400 Westpac Trust Secs. Ltd., 1.03%-1.04%, 5/20/04-5/25/04 P-1/A-1+ 10,393,176
-----------
36,757,421
===========
FINANCING -- 10.0%
9,100 Barclay US Funding Corp., 1.11%, 8/25/04-8/26/04 P-1/A-1+ 9,066,306
3,300 CBA (Delaware) Finance, 1.02%-1.05%, 6/10/04-7/2/04 P-1/A-1+ 3,295,563
3,300 CDC Commercial Paper Corp., 1.02%-1.12%, 6/11/04-8/19/04 P-1/A-1+ 3,292,242
9,600 Danske Corp., 1.03%, 5/12/04-6/18/04 P-1/A-1+ 9,594,496
9,100 General Electric Capital Corp., 1.04%-1.06%, 6/15/04-7/16/04 P-1/A-1+ 9,081,395
13,400 UBS Finance, Inc., 1.04%-1.07%, 7/6/04-7/15/04 P-1/A-1+ 13,370,187
-----------
47,700,189
===========
TOBACCO -- 0.3%
1,500 Altria Group, Inc., 1.80% 10/29/04 P-3/A-2 1,500,000
-----------
Total Commercial Paper (cost--$85,959,725) 85,957,610
===========
CORPORATE NOTES (A) -- 3.6%
AUTOMOTIVE -- 0.4%
1,600 DaimlerChrysler N.A. Holdings, 7.40%, 1/20/05 A3/BBB 1,661,307
===========
DIVERSIFIED MANUFACTURING -- 0.3%
1,500 Tyco International Group SA, 5.875%, 11/1/04 Baa2/BBB- 1,529,679
===========
FINANCING -- 1.3%
Ford Motor Credit Co.,
4,000 1.36%, 7/28/04, FRN A3/BBB- 3,977,004
2,000 7.50%, 3/15/05 A3/BBB- 2,088,666
-----------
6,065,670
===========
HOTELS/GAMING -- 0.5%
2,100 MGM Grand Inc., 6.95%, 2/1/05 Ba1/BB+ 2,176,125
200 Mirage Resorts, Inc., 6.625%, 2/1/05 Ba1/BB+ 207,250
-----------
2,383,375
===========
MULTI-MEDIA -- 0.0%
100 Cox Communications, Inc., 6.69%, 9/20/04 Baa2/BBB 101,791
===========
TELECOMMUNICATIONS -- 0.4%
2,000 Sprint Capital Corp. FON Group, 7.90%, 3/15/05 Baa3/BBB- 2,099,316
===========
4.30.04 Fixed Income SHares Semi-Annual Report 11
FIXED INCOME SHARES -- SERIES C SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Rating
(000) (Moody's/S&P) Value
========================================================================================================================
SHORT-TERM INVESTMENTS (CONCLUDED)
UTILITIES -- 0.7%
$ 500 Cleveland Electric Illuminating Co., 7.67%, 7/1/04, Ser. B Baa2/BBB- $ 504,626
1,100 Edison International, Inc., 6.875%, 9/15/04. Ba2/BB+ 1,120,625
1,450 Niagara Mohawk Power Corp., 5.375%, 10/1/04 Baa3/A- 1,472,838
100 PP&L Capital Funding, Inc., 7.75%, 4/15/05 , Ser. C Baa3/BBB- 104,887
------------
3,202,976
------------
Total Corporate Notes (cost--$16,951,958) 17,044,114
============
U.S. GOVERNMENT AGENCY SECURITIES (a) -- 2.5%
12,200 Fannie Mae, 1.01%-1.05%, 5/5/04-7/14/04 (cost--$12,184,386) Aaa/AAA 12,184,055
============
U.S. TREASURY BILLS (a) -- 1.7%
7,900 1.01%, 5/6/04-6/17/04 (cost--$7,896,000) Aaa/AAA 7,896,000
============
REPURCHASE AGREEMENT -- 1.6%
7,656 Agreement with State Street Bank & Trust Co., dated April 30,
2004, 0.80% due 5/3/04, proceeds: $7,656,051; collateralized
by Federal Farm Credit Bank, 1.95% due 12/30/04, valued at
$7,810,029; (cost--$7,656,000) Aaa/AAA 7,656,000
------------
Total Short-Term Investments (cost--$130,648,069) 130,737,779
============
Total Investments, before options written
(cost--$475,218,775+) -- 100.9% 481,191,057
============
CALL OPTIONS WRITTEN (d) -- (0.0)%
Contracts
- ---------
U.S Treasury Notes 10 yr Futures, Chicago Board of Trade:
(25) Strike price $114, expires 8/27/04 (10,547)
(12) Strike price $115, expires 5/21/04 (375)
(6) Strike price $115, expires 8/27/04 (1,781)
(121) Strike price $116, expires 5/21/04 (1,891)
(56) Strike price $117, expires 5/21/04 (875)
------------
Total Call Options Written (premiums received--$143,971) (15,469)
============
PUT OPTIONS WRITTEN (d) -- (0.0)%
(56) U.S Treasury Notes 10 yr Futures, Chicago Board of Trade:
Strike price $110, expires 5/21/04
(premiums received--$88,165) (39,375)
============
Total Options Written (premiums received--$232,136) (54,844)
============
TOTAL INVESTMENTS, NET OF OPTIONS WRITTEN (cost--$474,986,639) 100.9% 481,136,213
Liabilities in excess of other assets (0.9) (4,194,271)
----- ------------
NET ASSETS 100.0% $476,941,942
----- ============
- --------------------------------------------------------------------------------
+ The cost of securities for federal income tax purposes is $475,218,775.
Aggregate gross unrealized appreciation for securities in which there is an
excess of value over tax cost is $10,842,806; aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $4,870,524; net unrealized appreciation for federal income tax
purposes is $5,972,282.
12 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
===========================================================================================================
U.S. GOVERNMENT AGENCY SECURITIES -- 125.5%
FANNIE MAE -- 82.7%
$ 23,104 1.17%-7.84%, 5/1/04-5/25/04, FRN (a) Aaa/AAA $ 23,713,522
15,968 3.50%-7.50%, 2/25/09-1/1/34 (a) Aaa/AAA 16,126,600
353,700 5.00%-5.50%, 5/30/19-5/30/34 (f) Aaa/AAA 354,331,903
844 6.50%, 7/18/27, PO (a) Aaa/AAA 878,326
-------------
395,050,351
=============
FREDDIE MAC -- 25.8%
25,637 1.54%-6.04%, 11/1/03-11/15/03, FRN (a) Aaa/AAA 26,299,923
13,779 5.00%-7.50%, 7/1/08-8/15/30 (a) Aaa/AAA 14,301,000
83,000 5.50%, 5/31/34 (f) Aaa/AAA 82,896,250
-------------
123,497,173
=============
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 17.0%
15,458 1.40%-5.75%, 5/16/04-4/1/05, FRN (a) Aaa/AAA 15,679,146
30,000 5.50%, 5/20/34 (f) Aaa/AAA 30,009,360
35,303 5.50%-7.50%, 5/15/23-3/15/34 (a) Aaa/AAA 35,373,861
-------------
81,062,367
=============
Total U.S. Government Agency Securities (cost--$605,340,395) 599,609,891
=============
MORTGAGE-RELATED SECURITIES -- 22.5%
Bank of America Mortgage Securities, Inc.,
4,047 4.74%, 8/25/32 (a) Aa2/NR 4,099,355
3,083 4.74%, 8/25/32 (a) A2/NR 3,114,399
15,088 Bear Stearns Alt-A Trust, 1.38%, 5/25/04, FRN (a) Aaa/AAA 15,125,788
151 Bear Stearns Mortgage Securities, Inc., 6.74%, 5/25/04, FRN (a) Aaa/NR 153,472
12,099 Carey Commercial Mortgage Trust, 5.97%, 9/20/19 (e)
(acquired 8/27/02-7/25/03; cost--$12,613,028) Aaa/NR 12,364,769
2,872 Cendant Mortgage Corp., 6.00%, 7/25/43 (e)
(acquired 10/24/03; cost--$2,837,933) NR/AAA 2,908,503
176 Citicorp Mortgage Securities, Inc., 5.75%, 6/25/09 (a) Aaa/AAA 177,481
Commercial Capital Access One, Inc.,
805 6.30%, 11/15/28 (a)(e)
(acquired 1/24/02; cost--$970,262) Aaa/NR 846,104
3,505 7.70%, 5/1/04, FRN (a)(e)
(acquired 5/9/03; cost--$3,779,126) NR/NR 3,678,721
198 Countrywide Home Loans, 6.75%, 12/25/30 (a) Aaa/NR 198,294
CS First Boston Mortgage Securities Corp.,
266 1.50%-1.65%, 5/25/04, FRN (a) Aaa/Aaa 266,331
432 2.00%, 5/25/04, FRN (b)(e)(h)
(acquired 5/9/03; cost--$3,779,126) NR/NR 426,994
3,000 2.40%, 5/15/04, FRN (a)(e)
(acquired 8/5/03; cost--$3,059,298) A1/AA+ 3,000,825
2,000 2.60%, 6/15/04, FRN (a)(e)
(acquired 8/21/03; cost--$4,988,319) A2/AA-- 2,003,510
5,000 2.85%, 5/15/04, FRN (a)(e)
(acquired 8/21/03; cost--$4,988,319) A3/A 5,004,602
3,179 6.75%, 6/25/31(a) Aaa/AAA 3,218,673
4.30.04 Fixed Income SHares Semi-Annual Report 13
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
============================================================================================================
MORTGAGE-RELATED SECURITIES (CONCLUDED)
$ 72 First Nationwide Trust, 8.00%, 10/25/30 (a) NR/AAA $ 72,357
GS Mortgage Securities Corp. II,
1,500 6.62%, 2/16/16 (a)(e)
(acquired 11/1/03; cost--$1,641,281) NR/AAA 1,626,061
3,000 6.62%, 5/3/18 (a)(e)
(acquired 1/17/02; cost--$3,059,555) Aaa/AAA 3,288,591
180 Headlands Mortgage Securities Inc., 6.65%, 2/25/29 (a) NR/AAA 181,620
38,166 Hilton Hotel Pool Trust, 0.89%, 5/1/04, FRN, IO (b)(e)
(acquired 2/12/02-2/13/02; cost--$1,328,195) Aaa/AA 1,439,081
308 Impac Secured Assets Owner Trust, 7.37%, 4/25/32 (a) Aaa/AAA 313,371
2,000 J.P. Morgan Chase Commercial Mortgage Sec. Corp.,
6.47%, 11/15/35 (a) NR/AAA 2,196,315
1,000 Mellon Residential Funding Corp., 1.59%, 5/1/04, FRN (a) NR/AAA 976,694
1,576 Merrill Lynch Credit Corp. Mortgage Investors, Inc., 1.50%-1.52%,
11/15/03, FRN (a) Aaa/AAA 1,580,351
2,289 Morgan Stanley Dean Witter Capital, 4.60%, 3/25/33 (a) Aaa/AAA 2,307,326
2,474 Mortgage Capital Funding, Inc., 7.29%, 2/20/27 (a) Aaa/NR 2,615,369
1,227 Residential Asset Securitization Trust, 5.50%, 7/25/33 (a) NR/AAA 1,245,318
92 Residential Funding Mortgage Securities I, 7.00%, 5/25/11 (a) NR/AAA 92,055
8,524 Structured Asset Mortgage Investments I, Inc., 5.93%,
5/24/04, FRN (a) NR/AA 8,680,425
6,919 Structured Asset Mortgage Investments II, Inc., 1.45%, 5/19/04,
FRN (a)(h) Aaa/AAA 6,873,484
164 Structured Asset Securities Corp., 2.64%, 5/1/04, FRN (a) Aaa/AAA 166,376
Washington Mutual Mortgage Securities Corp.,
893 5.16%, 5/1/04, FRN (a) Aaa/AAA 909,543
7,341 5.16%, 5/1/04, FRN (a) Aa2/AA 7,396,326
5,672 5.16%, 5/1/04, FRN (a) A2/A 5,694,963
236 5.57%, 6/25/32 (a) A2/A 238,018
426 Wells Fargo Mortgage Backed Securities Trust, 4.65%, 5/1/04 (a) Aaa/AAA 428,810
2,606 Vendee Mortgage Trust, 6.50%, 9/15/24 (a) NR/NR 2,682,401
-------------
Total Mortgage-Related Securities (cost--$107,927,086) 107,592,676
=============
ASSET-BACKED SECURITIES -- 13.4%
7,227 Aegis Asset Backed Securities Trust, 4.00%, 11/25/33, IO (b) Aaa/AAA 382,126
753 Amortizing Residential Collateral Trust, 1.37%, 5/25/04, FRN (a) NR/AAA 753,664
5,000 Asset Backed Securities Corp., Home Equity, 1.80%, 5/15/04,
FRN (a) Aa2/AA 5,040,374
456 Bayview Financial Acquisition Trust, 1.48%, 5/25/04, FRN (a)(e)
(acquired 2/12/02-2/13/02; cost--$545,792) Aaa/AAA 457,019
6,104 Bear Stearns Asset Backed Securities, Inc., 1.69%, 5/25/04,
FRN (a) Aaa/AAA 6,172,403
2,079 Beneficial Mortgage Corp., 1.22%, 5/28/04, FRN (a) Aaa/AAA 2,069,713
800 Community Program Loan Trust, 4.50%, 4/1/29 (a) NR/AAA 714,180
2,000 Conseco Finance Home Equity Loan, 2.60%, 5/15/04, FRN (a) Aa2/AA 2,056,102
200 Conseco Finance Home Loan Trust, 8.88%, 6/15/24 (a) Aa2/AAA 201,051
2,000 Conseco Finance Securitization Co., 2.45%, 5/15/04, FRN (a) Aa2/AA 2,008,096
14 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
============================================================================================================
ASSET-BACKED SECURITIES (CONCLUDED)
$ 203 EMC Mortgage Loan Trust, 1.47%, 5/25/04, FRN (e)
(acquired 6/28/01; cost--$256,478) Aaa/AAA $ 203,985
279 First Investor Auto Owner Trust, 3.46%, 12/15/08 (a)(e)
(acquired 1/17/02; cost--$395,974) Aaa/AAA 281,565
80 First Plus Home Loan Trust, 7.32%, 11/10/23 (a) NR/AA 80,025
331 Fremont Home Loan Owner Trust, 1.50%, 5/25/04, FRN (a) Aaa/AAA 332,107
1,466 Fremont Home Loan Trust, 1.47%, 5/25/04, FRN (a) Aaa/AAA 1,470,827
Green Tree Financial Corp.,
1,000 7.06%, 2/1/31 (a) NR/BBB 788,664
2,003 7.40%, 6/15/27 (a) Aa3/AAA 2,139,575
648 7.55%, 1/15/29 (a) NR/AA+ 686,693
5,851 Home Equity Mortgage Trust, 1.52%, 5/25/04, FRN (a) Aaa/AAA 5,875,013
471 Household Mortgage Loan Trust, 1.40%, 5/20/04, FRN (a) Aaa/AAA 472,083
3,831 Irwin Home Equity Trust, 1.62%, 5/25/04, FRN (a) Aaa/AAA 3,852,269
Merrill Lynch Mortgage Investor, Inc.,
2,548 1.46%, 5/25/04, FRN (a) Aaa/AAA 2,555,986
2,500 2.10%, 5/25/04, FRN (a) Aa2/AA 2,532,150
4,337 Morgan Stanley ABS Capital I, Inc., 1.44%, 5/25/04, FRN (a) Aaa/AAA 4,349,025
275 Nissan Auto Receivables Owner Trust, 4.28%, 10/16/06 (a) Aaa/AAA 280,640
2,871 Renaissance Home Equity Loan Trust, 1.30%, 5/25/04, FRN (a) Aaa/AAA 2,873,548
367 Residential Asset Mortgage Products, Inc., 6.58%, 1/25/32 (a) Aaa/AAA 369,979
10,000 Residential Asset Securities Corp., 8.19%, 2/25/31 (a) NR/AAA 10,792,094
23 Residential Funding Mortgage Securities I, 7.18%, 12/25/22 (a) Aaa/AAA 22,542
Salomon Brothers Mortgage Securities VII,
174 1.68%, 5/15/04, FRN (a) NR/AAA 174,451
3,800 2.25%, 5/25/04, FRN (a) NR/A+ 3,840,983
156 Sequoia Mortgage Trust, 2.35%, 5/25/04, FRN (a) Aaa/AAA 159,644
-------------
Total Asset-Backed Securities (cost--$63,724,300) 63,988,576
=============
U.S. TREASURY BONDS (a) -- 5.5%
69,000 zero coupon, 11/15/21 (cost--$26,552,544) Aaa/AAA 26,065,647
=============
SHORT-TERM INVESTMENTS -- 31.4%
U.S. GOVERNMENT DISCOUNT NOTES (a) -- 22.4%
80,400 Fannie Mae 1.01%-1.06%, 6/1/04-9/8/04 Aaa/AAA 80,226,206
13,300 Federal Home Loan Bank, 1.01%-1.09%, 5/28/04-8/27/04 Aaa/AAA 13,276,153
13,800 Freddie Mac 1.01%-1.09%, 5/28/03-8/27/04 Aaa/AAA 13,777,179
-------------
Total U.S. Government Agency Discount Notes (cost--$107,286,319) 107,279,538
=============
U.S. TREASURY BILLS (a) -- 4.8%
22,900 1.01%-1.03%, 6/3/04-6/17/04 (cost--$22,875,239) Aaa/AAA 22,875,239
=============
COMMERCIAL PAPER (a) -- 3.7%
FINANCING -- 3.0%
14,300 General Electric Capital Corp., 1.04%-1.06%, 6/8/04-8/13/04 P-1/A-1+ 14,274,131
=============
PHARMACEUTICALS -- 0.7%
3,200 Pfizer, Inc., 1.01%, 5/24/04-6/8/04 P-1/A-1+ 3,197,197
=============
Total Commercial Paper (cost--$17,471,906) 17,471,328
=============
4.30.04 Fixed Income SHares Semi-Annual Report 15
FIXED INCOME SHARES -- SERIES M SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
Principal
Amount Credit Ratings
(000) (Moody's/S&P) Value
========================================================================================================
SHORT-TERM INVESTMENTS (CONCLUDED)
ASSET-BACKED SECURITIES -- 0.1%
$ 698 Capital Asset Research Funding LP, 6.40%, 6/15/04 (b)(e)(h)
(acquired 5/20/03; cost--$702,366) Aaa/AAA $ 692,977
2,000 NPF XII, Inc., 2.76%, 11/1/03, FRN (b)(c)(d)(e)(h)
(acquired 8/3/01; cost--$2,000,000) Ca/NR 12
-------------
Total Asset-Backed Securities (cost--$2,702,366) 692,989
=============
MORTGAGE-RELATED SECURITIES -- 0.0%
1,737 CS First Boston Mortgage Securities Corp.,
2.00%, 5/25/04, IO (b) (cost--$31,192) Aaa/AAA 27,122
=============
REPURCHASE AGREEMENT -- 0.4%
1,835 Agreement with State Street Bank & Trust Co., dated April 30,
2004, 0.80% due 5/3/04 proceeds: $1,835,122; collateralized
by Federal Home Loan Bank, 4.125% due 5/13/05, valued at
$1,875,938; (cost--$1,835,000) Aaa/AAA 1,835,000
-------------
Total Short-Term Investments (cost--$152,202,022) 150,181,216
=============
PUT OPTIONS PURCHASED (d) -- 0.0%
Contracts
- ---------
44,000 Federal National Mortgage Association, Over-the-Counter,
6.60%, 8/34, Strike price $81.00, expires 8/6/04
(premiums paid--$5,156) 1,408
=============
TOTAL INVESTMENTS (cost--$955,751,503+) 198.3% 947,439,414
Liabilities in excess of other assets (98.3) (469,550,333)
------- -------------
NET ASSETS 100.0% $477,889,081
------- =============
- ----------------
+ The cost of securities for federal income tax purposes is $955,751,503.
Aggregate gross unrealized appreciation for securities in which there is an
excess of value over tax cost is $1,499,908; aggregate gross unrealized
depreciation for securities in which there is an excess of tax cost over
value is $9,811,997; net unrealized depreciation for federal income tax
purposes is $8,312,089.
- --------------------------------------------------------------------------------
16 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C, M SCHEDULE OF INVESTMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
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.
(d) Non-income producing security.
(e) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities are Private Placements and are restricted as to
resale and do not have a readily available market. These securities may be
resold in transactions exempt from registration, typically to qualified
institutional investors. These securities amounted to $31,745,441 or 6.66%
of net assets and $38,223,319 or 8.00% of net assets for Series C and
Series M, respectively.
(f) When-issued or delayed-delivery security. To be delivered/settled after
April 30, 2004.
(g) Inflationary Bonds--Principal amount of security is adjusted for inflation.
(h) Fair-valued security.
- --------------------------------------------------------------------------------
GLOSSARY:
CMO -- Collateralized Mortgage 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, 2004.
IO -- Interest only
NR -- Not Rated.
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, 2004.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.04 Fixed Income SHares Semi-Annual Report 17
FIXED INCOME SHARES -- SERIES C, M STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
SERIES C SERIES M
----------------- ---------------
ASSETS:
Investments, at value (cost--$475,218,775 and $955,751,503,
respectively) $ 481,191,057 $947,439,414
- -------------------------------------------------------------------------- ------------- ------------
Cash (including foreign currency on Series C of $917,615 with a cost of
$907,434) 829,584 1,036
- -------------------------------------------------------------------------- ------------- ------------
Interest receivable 5,088,284 1,238,094
- -------------------------------------------------------------------------- ------------- ------------
Receivable for shares of beneficial interest sold 1,811,615 1,806,913
- -------------------------------------------------------------------------- ------------- ------------
Unrealized appreciation on swaps 665,325 --
- -------------------------------------------------------------------------- ------------- ------------
Swap premiums paid 529,560 --
- -------------------------------------------------------------------------- ------------- ------------
Receivable for variation margin on futures contracts 506,070 13,781
- -------------------------------------------------------------------------- ------------- ------------
Receivable for investments sold 244 1,128,926
- -------------------------------------------------------------------------- ------------- ------------
Total Assets 490,621,739 951,628,164
- -------------------------------------------------------------------------- ============= ============
LIABILITIES:
Payable for investments purchased 10,405,000 471,772,953
- -------------------------------------------------------------------------- ------------- ------------
Dividends payable 1,705,793 1,334,845
- -------------------------------------------------------------------------- ------------- ------------
Unrealized depreciation on swaps 710,784 --
- -------------------------------------------------------------------------- ------------- ------------
Payable for shares of beneficial interest redeemed 599,600 631,285
- -------------------------------------------------------------------------- ------------- ------------
Swap premiums received 131,012 --
- -------------------------------------------------------------------------- ------------- ------------
Unrealized depreciation on forward foreign currency contracts 72,764 --
- -------------------------------------------------------------------------- ------------- ------------
Options written, at value (premiums received on Series C--$232,136) 54,844 --
- -------------------------------------------------------------------------- ------------- ------------
Total Liabilities 13,679,797 473,739,083
- -------------------------------------------------------------------------- ------------- ------------
NET ASSETS $ 476,941,942 $477,889,081
- -------------------------------------------------------------------------- ============= ============
NET ASSETS CONSIST OF:
Beneficial interest shares of $0.001 par value (unlimited number
authorized) 41,528 42,027
- -------------------------------------------------------------------------- ------------- ------------
Paid-in-capital in excess of par 463,379,842 476,955,285
- -------------------------------------------------------------------------- ------------- ------------
Undistributed net investment income 11,988 --
- -------------------------------------------------------------------------- ------------- ------------
Accumulated net realized gain 10,855,307 9,236,667
- -------------------------------------------------------------------------- ------------- ------------
Net unrealized appreciation (depreciation) of investments, futures
contracts, options written, swaps and other assets and liabilities
denominated in foreign currency 2,653,277 (8,344,898)
- -------------------------------------------------------------------------- ------------- ------------
NET ASSETS $ 476,941,942 $477,889,081
- -------------------------------------------------------------------------- ============= ============
Shares Outstanding 41,528,269 42,026,961
- -------------------------------------------------------------------------- ------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $ 11.48 $ 11.37
- -------------------------------------------------------------------------- ============= ============
18 Fixed Income SHares Semi-Annual Report 4.30.04
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES C, M STATEMENTS OF OPERATIONS
For the six months ended April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
SERIES C SERIES M
---------------- --------------
INVESTMENT INCOME:
Interest $ 9,691,370 $ 8,507,543
- -------------------------------------------------------------------- ------------- ------------
Dividends 69,661 --
- -------------------------------------------------------------------- ------------- ------------
Total Investment Income 9,761,031 8,507,543
- -------------------------------------------------------------------- ------------- ------------
EXPENSES:
Interest expense -- 31,087
- -------------------------------------------------------------------- ------------- ------------
NET INVESTMENT INCOME 9,761,031 8,476,456
- -------------------------------------------------------------------- ------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments 7,251,360 9,496,124
- -------------------------------------------------------------------- ------------- ------------
Futures contracts 4,113,286 (237,589)
- -------------------------------------------------------------------- ------------- ------------
Options written 401,241 88,994
- -------------------------------------------------------------------- ------------- ------------
Swaps (97,888) --
- -------------------------------------------------------------------- ------------- ------------
Foreign currency transactions (24,826) --
- -------------------------------------------------------------------- ------------- ------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions (11,372,017) (7,824,187)
- -------------------------------------------------------------------- ------------- ------------
Net realized and unrealized gain on investments, futures contracts,
options written, swaps and foreign currency transactions 271,156 1,523,342
- -------------------------------------------------------------------- ------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
INVESTMENT OPERATIONS $ 10,032,187 $ 9,999,798
- -------------------------------------------------------------------- ============= ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.04 Fixed Income SHares Semi-Annual Report 19
FIXED INCOME SHARES -- SERIES C STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the
Six Months
ended Year ended
April 30, 2004 October 31,
(unaudited) 2003
---------------- ----------------
INVESTMENT OPERATIONS:
Net investment income $ 9,761,031 $ 17,916,616
- ------------------------------------------------------------------------ ------------- -------------
Net realized gain on investments, futures contracts, options written,
swaps and foreign currency transactions 11,643,173 5,788,785
- ------------------------------------------------------------------------ ------------- -------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts, options written, swaps and foreign currency
transactions (11,372,017) 19,286,409
- ------------------------------------------------------------------------ ------------- -------------
Net increase in net assets resulting from investment operations 10,032,187 42,991,810
- ------------------------------------------------------------------------ ============= =============
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (10,293,545) (17,916,616)
- ------------------------------------------------------------------------ ------------- -------------
Net realized gains (6,332,601) (988,226)
- ------------------------------------------------------------------------ ------------- -------------
Total dividends and distributions to shareholders (16,626,146) (18,904,842)
- ------------------------------------------------------------------------ ============= =============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 174,556,436 228,757,401
- ------------------------------------------------------------------------ ------------- -------------
Cost of shares redeemed (65,117,839) (84,627,908)
- ------------------------------------------------------------------------ ------------- -------------
Net increase in net assets from capital share transactions 109,438,597 144,129,493
- ------------------------------------------------------------------------ ------------- -------------
TOTAL INCREASE IN NET ASSETS 102,844,638 168,216,461
- ------------------------------------------------------------------------ ============= =============
NET ASSETS:
Beginning of period 374,097,304 205,880,843
- ------------------------------------------------------------------------ ------------- -------------
End of period (including undistributed net investment income of $11,988
and $544,502, respectively) $ 476,941,942 $ 374,097,304
- ------------------------------------------------------------------------ ============= =============
SHARES ISSUED AND REDEEMED:
Issued 14,876,722 20,015,740
- ------------------------------------------------------------------------ ------------- -------------
Redeemed (5,546,192) (7,407,399)
- ------------------------------------------------------------------------ ------------- -------------
NET INCREASE 9,330,530 12,608,341
- ------------------------------------------------------------------------ ============= =============
20 Fixed Income SHares Semi-Annual Report 4.30.04
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES --SERIES M STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the
Six Months
ended Year ended
April 30, 2004 October 31,
(unaudited) 2003
---------------- ----------------
INVESTMENT OPERATIONS:
Net investment income $ 8,476,456 $ 12,712,575
- ------------------------------------------------------------------- ------------- -------------
Net realized gain on investments and futures contracts 9,347,529 6,804,067
- ------------------------------------------------------------------- ------------- -------------
Net change in unrealized appreciation/depreciation of investments,
futures contracts and options written (7,824,187) (2,296,012)
- ------------------------------------------------------------------- ------------- -------------
Net increase in net assets resulting from investment operations 9,999,798 17,220,630
- ------------------------------------------------------------------- ============= =============
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (8,476,456) (12,712,575)
- ------------------------------------------------------------------- ------------- -------------
Net realized gains (6,930,696) (9,607,094)
- ------------------------------------------------------------------- ------------- -------------
Total dividends and distributions to shareholders (15,407,152) (22,319,669)
- ------------------------------------------------------------------- ============= =============
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares 177,684,089 231,926,326
- ------------------------------------------------------------------- ------------- -------------
Cost of shares redeemed (62,999,718) (74,018,447)
- ------------------------------------------------------------------- ------------- -------------
Net increase in net assets from capital share transactions 114,684,371 157,907,879
- ------------------------------------------------------------------- ------------- -------------
Total increase in net assets 109,277,017 152,808,840
- ------------------------------------------------------------------- ------------- -------------
NET ASSETS:
Beginning of period 368,612,064 215,803,224
- ------------------------------------------------------------------- ------------- -------------
End of period $ 477,889,081 $ 368,612,064
- ------------------------------------------------------------------- ============= =============
SHARES ISSUED AND REDEEMED:
Issued 15,370,410 20,174,077
- ------------------------------------------------------------------- ------------- -------------
Redeemed (5,446,125) (6,441,644)
- ------------------------------------------------------------------- ------------- -------------
NET INCREASE 9,924,285 13,732,433
- ------------------------------------------------------------------- ============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4.30.04 Fixed Income SHares Semi-Annual Report 21
FIXED INCOME SHARES -- SERIES C, M FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
For the
Six Months Year ended For the Period
ended ---------------------------------------- March 17, 2000*
April 30, 2004 October 31, October 31, October 31, through
(unaudited) 2003 2002 2001 October 31, 2000
SERIES C: ---------------------- ------------ ------------- ------------- -----------------
Net asset value, beginning of period $ 11.62 $ 10.51 $ 11.35 $ 10.12 $ 10.00
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
INVESTMENT OPERATIONS:
Net investment income 0.26 0.71 0.73 0.75 0.45
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net realized and unrealized gain (loss)
on investments, futures contracts,
options written, swaps and foreign
currency transactions 0.06 1.16 (0.62) 1.31 0.12
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Total from investment operations 0.32 1.87 0.11 2.06 0.57
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.28) (0.71) (0.72) (0.75) (0.45)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net realized gains (0.18) (0.05) (0.23) (0.08) --
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Total dividends and distributions to
shareholders (0.46) (0.76) (0.95) (0.83) (0.45)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net asset value, end of period $11.48 $11.62 $10.51 $11.35 $10.12
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
TOTAL INVESTMENT RETURN (1) 2.80% 18.16% 1.06% 21.09% 5.79%
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $476,942 $374,097 $ 205,881 $51,541 $10,396
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Ratio of operating expenses to average
net assets 0.00%(2) 0.00% 0.00% 0.00% 0.00%(2)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Ratio of net investment income to
average net assets 4.55%(2) 6.11% 6.78% 6.53% 7.04%(2)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Portfolio Turnover 72% 297% 332% 605% 547%
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
- ----------------------------------------------------------------------------------------------------------------------------
SERIES M:
- ------------------------------------------
Net asset value, beginning of period $11.48 $11.75 $11.53 $10.45 $10.00
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
INVESTMENT OPERATIONS:
Net investment income 0.23 0.51 0.52 0.69 0.45
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net realized and unrealized gain on
investments, futures contracts and option
written 0.09 0.23 0.62 1.26 0.45
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Total income from investment operations 0.32 0.74 1.14 1.95 0.90
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.23) (0.51) (0.52) (0.69) (0.45)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net realized gains (0.20) (0.50) (0.40) (0.18) --
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Total dividends and distributions to
shareholders (0.43) (1.01) (0.92) (0.87) (0.45)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Net asset value, end of period $11.37 $11.48 $11.75 $11.53 $10.45
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
TOTAL INVESTMENT RETURN (1) 2.80% 6.67% 10.65% 19.49% 9.16%
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $477,889 $368,612 $ 215,803 $51,574 $10,597
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Ratio of operating expenses to average
net assets 0.00%(2)(3) 0.00% 0.00% 0.00% 0.00%(2)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Ratio of net investment income to
average net assets 3.98%(2) 4.43% 4.54% 5.65% 7.00%(2)
- ------------------------------------------ ---------------------- ------------ ------------- ------------- -----------------
Portfolio Turnover 397% 750% 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.
(3) If interest expense was included, the ratio of operating expenses to
average net assets would be 0.01% (annualized).
22 Fixed Income SHares Semi-Annual Report 4.30.04
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
These financial statements relate to Series C and Series M. The financial
statements for Series R and the Allianz Dresdner Daily Asset Fund are provided
separately.
Fixed Income SHares (the "Trust"), was organized as a Massachusetts business
trust on November 3, 1999. The Trust is comprised of Series C, Series M, (the
"Portfolios"), Series R and the Allianz Dresdner Daily Asset Fund. 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 5,000 shares each of beneficial interest of Series C
and Series M at an aggregate purchase price of $100,000. PA Fund Management LLC
(the "Investment Manager") (formerly PIMCO Advisors Fund Management LLC) serves
as the Portfolio'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 general indemnifications. The
Portfolios maximum exposure under these arrangements is unknown as such exposure
would involve claims that may be made against the Portfolios that have not yet
been asserted. However, the Portfolios expect the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Portfolios:
(A) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market quotations
are readily available are stated at market value. The Portfolios' Investments
are valued daily by an independent pricing service approved by the Board of
Trustees, dealers quotations, or are valued at the last sale price on the
exchange that is the primary market for such securities, or the last quoted bid
price for those securities for which the over-the-counter market is the primary
market or for listed securities in which there were no sales. Prices obtained
from an independent pricing service use information provided by market makers or
estimates of market values obtained from yield data relating to investments or
securities with similar characteristics. Short-term investments maturing in 60
days or less are valued at amortized cost, if their original maturity was 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
the original term to maturity exceeded 60 days. Exchange traded options, futures
and options on futures are valued at the settlement price determined by the
relevant exchange. Securities for which market quotations are not readily
available or if a development/event occurs that may significantly impact the
value of the security, may be fair valued, pursuant to guidelines established by
the Board of Trustees. The prices used by the Portfolios to value securities may
differ from the value that would be realized if the securities were sold and the
differences could be material to the financial statements. The Portfolios' net
asset value is determined daily at the close of regular trading (normally 4:00
p.m. Eastern time) on the New York Stock Exchange.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Securities
purchased or sold on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date. Realized gains and losses on investments are
determined on the identified cost basis. Dividend income is recorded on the
ex-dividend date, except for certain dividends from foreign securities which are
recorded as soon after the ex-dividend date, as the Portfolios, using reasonable
diligence, become aware of such dividends. Interest income, adjusted for the
accretion of discounts and amortization of premiums, is recorded on an accrual
basis. Paydown gains and losses on mortgage- and asset- backed securities are
recorded as adjustments to interest income in the Statements of Operations.
4.30.04 Fixed Income SHares Semi-Annual Report 23
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 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
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, a cash deposit
that is held at the Portfolios' custodian bank in a segregated account in the
name of the futures broker. Futures contracts are marked to market daily and an
appropriate payable or receivable for the change in value ("variation margin")
is recorded by the Portfolios. When the contracts are closed, the Portfolios
record a realized gain or loss equal to the difference between the value of the
contracts at the time they were opened and the value at the time they were
closed. Any unrealized appreciation or depreciation recorded is simultaneously
reversed. The use of futures transactions involves the risk of an imperfect
correlation in the movements in the price of futures contracts, interest rates
and the underlying hedged assets, and the possible inability of counterparties
to meet the terms of their contracts.
(G) OPTION TRANSACTIONS
For hedging purposes, the Portfolios 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
24 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(H) SWAP AGREEMENTS
The Portfolios may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Portfolios may enter into interest rate and credit default
agreements to manage its exposure to interest rate and credit risk.
Interest rate swap agreements involve the exchange by the Portfolios with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to
the notional amount of principal.
In a credit default swap, one party makes a stream of payments to another party
in exchange for the right to receive a specified return in the event of a
default by a third party, typically corporate issues or sovereign issues of an
emerging country on its obligation. The Portfolios may use credit default swaps
to provide a measure of protection against defaults of sovereign issuers (i.e.,
to reduce risk where the Fund owns or has exposure to the sovereign issuer) or
to take an active long or short position with respect to the likelihood of a
partficular issuer's default.
Swaps are marked to market daily based upon quotations from market makers and
the change in value, if any, is recorded as unrealized gain or loss in the
Statement of Operations. Payments received or made at the beginning of the
measurement period are reflected on the Statement of Assets and Liabilities. A
liquidation payment received or made at the termination of the swap is recorded
as realized gain or loss in the Statement of Operations. Net periodic payments
received by the Portfolio are included as part of realized gain/loss and or
unrealized appreciation/depreciation on the Statement of Operations. Entering
into these agreement involves, to varying degrees, elements of credit market and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements may
default on its obligation to perform or disagree as to the meaning of
contractual terms in the agreements, and that there may be unfavorable changes
in interest rates.
Periodic payments made or accrued under interest rate swap agreements were
previously included within interest income but, as a result of a recent FASB
Emerging Issues Task Force consensus and subsequent related Securities and
Exchange Commission staff guidance, are now shown as a component of either
realized gain (loss) or change in unrealized appreciation/depreciation in the
Statement of Operations. This change does not affect the calculation of net
asset value per share. The impact of this change on prior years' net investment
income and realized and unrealized gain/(loss) in the Statement of Changes in
Net Assets and net investment income and realized gain/(loss) per share amounts
and ratios in the financial highlights is less than $0.01 per share.
4.30.04 Fixed Income SHares Semi-Annual Report 25
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) 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. In addition these contracts may involve
market risk in excess of the unrealized gain or loss reflected in the
Portfolios' Statements of Assets and Liabilities.
(J) INFLATION-INDEXED BONDS
Inflation-indexed bonds are fixed income securities whose principal value is
periodically adjusted to the rate of inflation. The interest rate on these bonds
is generally fixed at issuance at a rate lower than typical bonds. Over the life
of an inflation-indexed bond, however, interest will be paid based on a
principal value, which is adjusted for inflation. Any increase in the principal
amount of an inflation-indexed bond will be considered interest income in the
Statement of Operations, even though investors do not receive principal until
maturity.
(K) 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.
(L) REVERSE REPURCHASE AGREEMENTS
In a reverse repurchase agreement, the Portfolio sells securities to a bank or
broker-dealer and agrees to repurchase the securities at a mutually agreed date
and price. Generally, the effect of such a transaction is that the Portfolio can
recover and reinvest all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement and
still be entitled to the returns associated with those portfolio securities.
Such transactions are advantageous if the interest cost to the Portfolio of the
reverse repurchase transaction is less than the returns it obtains on
investments purchased with the cash. Unless the Portfolio covers its positions
in reverse repurchase agreements (by segregating liquid assets at least equal in
amount to the forward purchase commitment), its obligations under the agreements
will be subject to the Portfolio's limitations on borrowings. Reverse repurchase
agreements involve leverage risk and also the risk that the market value of the
securities that the Portfolio is obligated to repurchase under the agreement may
decline below the repurchase price. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, the
Portfolio's use of the proceeds of the agreement may be restricted pending
determination by the other party, or its trustee or receiver, whether to enforce
the Portfolio's obligation to repurchase the securities. For Series M, the
weighted average daily balance of reverse repurchase agreements outstanding
during the six months ended April 30, 2004 was $14,260,000 at a weighted average
interest rate of 1.09%. Series C did not engage in any reverse repurchase
agreement transactions during the six month period.
(M) 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
26 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(N) WHEN-ISSUED/DELAYED-DELIVERY TRANSACTIONS
The Portfolios may purchase or sell securities on a when-issued or
delayed-delivery basis. These transactions involve a commitment to purchase or
sell securities for a predetermined price or yield, with payment and delivery
taking place beyond the customary settlement period. When delayed-delivery
purchases are outstanding, the Portfolio will set aside and maintain until the
settlement date in a designated account, liquid assets in an amount sufficient
to meet the purchase price. When purchasing a security on a delayed-delivery
basis, a Portfolio assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes such fluctuations
into account when determining its net asset value. A Portfolio may dispose of or
renegotiate a delayed-delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may result in a
realized gain or loss. When a Portfolio sells a security on a delayed-delivery
basis, the Portfolio does not participate in future gains and losses with
respect to the security.
(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.
(2) INVESTMENT ADVISER/SUB-ADVISER/ADMINISTRATOR & DISTRIBUTOR
(A) INVESTMENT ADVISER/SUB-ADVISER
The Investment Manager serves in its capacity pursuant to an Investment
Management Agreement with the Trust. Pursuant to a Portfolio Management
Agreement, the Investment Manager employs 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, 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.
(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.
4.30.04 Fixed Income SHares Semi-Annual Report 27
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(2) INVESTMENT ADVISER/SUB-ADVISER/ADMINISTRATOR & DISTRIBUTOR (CONCLUDED)
(C) DISTRIBUTOR
PA Distributors LLC ("the Distributor"), formerly PIMCO Advisors Distributors
LLC, an affiliate of the Investment Manager, serves as the distributor of the
Trust's shares. Pursuant to a distribution agreement with the Trust, the
Investment Manager on behalf of the Portfolios pays the Distributor.
(3) INVESTMENTS IN SECURITIES
(a) Purchases and sales of securities (excluding short-term investments) for
the six months ended April 30, 2004, were:
U.S. Government Agency All Other
----------------------------------- ---------------------------
Purchases Sales Purchases Sales
---------------- ---------------- ------------- -----------
Series C: 126,972,954 159,281,798 138,709,466 98,203,799
Series M: 3,013,315,700 2,985,694,809 37,222,144 7,057,595
(b) Futures contracts outstanding at April 30, 2004 were:
Series C:
Unrealized
# of Expiration Appreciation
Type Contracts Date (Depreciation)
- --------------------------------------------- ----------- ------------ -----------------
Long: Financial Future Euro-Bobl 5 year Eux 486 6/8/04 $ (790,282)
Financial Future Euro-Bund 10 Year Eux 60 6/8/04 (25,025)
Eurodollar Futures 3 3/14/05 863
Eurodollar Futures 393 6/13/05 (629,800)
Eurodollar Futures 4 9/19/05 (3,113)
Eurodollar Futures 471 12/19/05 (1,177,837)
Eurodollar Futures 1 3/13/06 (2,875)
U.S. Treasury 10 Year Note 709 6/21/04 (937,588)
U.S. Treasury 10 Year Note 40 9/21/04 (27,987)
Short: U.S. Treasury 5 Year Note (45) 6/21/04 169,805
U.S. Treasury 30 Year Bond (7) 6/21/04 36,094
-------------
$ (3,387,745)
=============
Series M:
Long: U.S. Treasury 10 Year Notes 42 9/21/04 $ (32,809)
=============
(c) Options written for the six months period ended April 30, 2004:
Series C:
Contracts Premiums
---------- ----------
Options outstanding, October 31, 2003 6,200,193 $ 339,646
Options written 460 364,227
Options expired (3,200,238) (247,336)
Options terminated in closing purchase transactions (3,000,139) (224,401)
---------- ----------
Options outstanding, April 30, 2004 276 $ 232,136
========== ==========
28 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN SECURITIES (CONTINUED)
Series M:
Options outstanding, October 31, 2003 3,000,000 $109,500
Options expired (3,000,000) (109,500)
---------- --------
Options outstanding, April 30, 2004 -- --
========== ========
(d) Forward foreign currency contracts outstanding at April 30, 2004:
Series C:
Unrealized
U.S.$ Value on U.S.$ Value Appreciation/
Origination Date April 30, 2004 (Depreciation)
------------------ ---------------- ---------------
Purchased:
Brazilian Real, settling 5/24/04-7/26/04 $ 271,291 $ 271,427 $ 136
Chilean Peso, settling 5/19/04-6/18/04 180,000 175,339 (4,661)
Hong Kong Dollar, settling 5/24/04-7/26/04 273,079 272,587 (492)
Indian Rupee, settling 5/21/04-6/21/04 180,000 183,292 3,292
Mexican Peso, settling 5/12/04-6/18/04 360,000 351,604 (8,396)
Peruvian Nouvian Sol, settling 5/24/04-6/21/04 180,000 179,444 (556)
Russian Ruble, settling 5/19/04-7/23/04 270,360 265,918 (4,442)
Singapore Dollar, settling 5/24/04-6/18/04 272,659 272,071 (588)
Slovakian Koruna, settling 5/10/04-6/21/04 360,000 354,003 (5,997)
South African Rand, settling 5/21/04-6/21/04 450,000 430,026 (19,974)
South Korean Won, settling 5/24/04-7/26/04 272,396 270,667 (1,729)
Taiwan Dollar, settling 5/24/04-6/18/04 183,000 182,900 (100)
---------
$ (43,507)
=========
Sold:
Euro, settling 5/10/04 5,357,658 5,386,915 $ (29,257)
=========
Series M: There were no forward foreign currency contract transactions
outstanding at the end of the six months ended April 30, 2004.
4.30.04 Fixed Income SHares Semi-Annual Report 29
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(3) INVESTMENTS IN SECURITIES (CONCLUDED)
(e) Series C: Interest rate swap agreements outstanding at April 30, 2004:
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$ 13,900 6/16/09 3 Month LIBOR 4.00% $ (604,616)
Goldman Sachs & Co. US$ 1,000 6/16/14 6.00% 3 Month LIBOR 9,386
Goldman Sachs & Co. Euro 13,500 3/15/16 6 Month LIBOR 6.50% 548,219
Goldman Sachs & Co GBP 8,000 3/15/16 5.50% 6 Month LIBOR (106,168)
Lehman Securities, Inc. US$ 1,600 6/16/14 6.00% 3 Month LIBOR 107,720
----------
$ (45,459)
==========
- ----------------
GBP -- Great Britain Pounds
LIBOR -- London Interbank Offered Rate
Series M: There were no interest rate swap agreements outstanding at
April 30, 2004
(4) LEGAL PROCEEDINGS
On May 6, 2004, the Securities and Exchange Commission (the "Commission") filed
a complaint in the U.S. District Court in the Southern District of New York
alleging that the Investment Manager, certain affiliates of the Investment
Manager and Stephen J. Treadway (the chief executive officer of the Investment
Manager as well as the chairman of the Trust) had, among other things, violated
and/or aided and abetted violations of various antifraud provisions of the
federal securities laws in connection with alleged "market timing" arrangements
in certain open-end investment companies advised by the Investment Manager. The
complaint seeks injunctive relief, disgorgement plus pre-judgment interest,
monetary penalties, and an order permanently enjoining the defendants from
serving as investment advisers, principal underwriters, officers, directors, or
members of any advisory boards to any registered investment companies.
The above complaint does not allege that any inappropriate activity took place
in the Portfolios and the Portfolios are not named in the complaint.
In addition, on June 1, 2004, ADAM and certain other affiliates of the
Investment Manager entered into a consent order and final judgment with the
Attorney General of the State of New Jersey (the "NJAG") in settlement of a
lawsuit filed by the NJAG on February 17, 2004 in connection with alleged
"market timing" arrangements. Under the terms of the settlement, ADAM and
certain of its affiliates agreed to pay the State of New Jersey a civil monetary
penalty of $15 million and $3 million for investigative costs. In addition, ADAM
and certain of its affiliates agreed to make several corporate governance
changes. Also on June 1, 2004, the NJAG dismissed its claims against the
Sub-Adviser, which had been filed as part of the same lawsuit.
If the Commission (or other regulator) were to obtain a court injunction against
the Investment Manager, its affiliates or Mr. Treadway, they and their
affiliates (including the Sub-Adviser) would, in the absence of exemptive relief
granted by the Commission, be barred from serving as an investment
adviser/sub-adviser or principal underwriter for any registered investment
company, including the Portfolios. In such a case, the Investment Manager and
Sub-Adviser would in turn seek exemptive relief from the Commission, as
contemplated by the Investment Company Act, although there is no assurance that
such exemptive relief would be granted. The Commission also has the power by
order to prohibit the Investment Manager, the Sub-Adviser and their affiliates
from serving as investment advisers and underwriters, although to date it has
not exercised such powers with respect to market timing arrangements involving
other mutual fund complexes.
30 Fixed Income SHares Semi-Annual Report 4.30.04
FIXED INCOME SHARES -- SERIES C, M NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
(4) LEGAL PROCEEDINGS (CONCLUDED)
Since February, 2004, the Investment Manager, the Sub-Adviser and certain of
their affiliates, various investment companies advised by the Investment Manager
or the Sub-Adviser and their trustees (including Mr. Treadway) have been named
as defendants in multiple lawsuits filed in U.S. District Court in the Southern
District of New York, the Central District of California and the Districts of
New Jersey and Connecticut. The lawsuits have been commenced as putative class
actions on behalf of investors who purchased, held or redeemed shares of the
specified funds during specified periods or as derivative actions on behalf of
the specified funds. The lawsuits generally relate to the same facts that are
the subject of the regulatory proceedings discussed above. The lawsuits seek,
among other things, unspecified compensatory damages plus interest and, in some
cases, punitive damages, the rescission of investment advisory contracts, and/or
the return of fees paid under those contracts and restitution. The Trust has
been named in several class action lawsuits. The Investment Manager and the
Sub-Adviser believe that other similar lawsuits may be filed in U.S. federal or
state courts naming ADAM, the Investment Manager, the Sub-Adviser, various
investment companies they advise (which may include the Trust), their boards of
trustees and/or their affiliates.
In November 2003, the Commission settled an enforcement action against an
unaffiliated broker-dealer relating to the undisclosed receipt of fees from
certain mutual fund companies in return for preferred marketing of their funds
and announced that it would be investigating mutual funds and their distributors
generally with respect to compensation arrangements relating to the sale of
mutual fund shares. In that connection, the Investment Manager, the Sub-Adviser
and certain of their affilates are under investigation by the Commission
relating to revenue-sharing arrangements and the use of brokerage commissions to
recognize brokers effecting sales of open-end investment companies advised by
the Investment Manager, the Sub-Adviser and their affiliates. In addition, the
Attorney General of the State of California has publicly announced an
investigation into the brokerage recognition and revenue-sharing arrangements of
these open-end investment companies.
The Investment Manager and the Sub-Adviser believe that these matters are not
likely to have a material adverse effect on the Portfolios or on the Investment
Manager's or the Sub-Adviser's ability to perform its respective advisory
services related to the Portfolios.
4.30.04 Fixed Income SHares Semi-Annual Report 31
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32 Fixed Income SHares Semi-Annual Report 4.30.04
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
Jennifer Patula, Assistant Secretary
INVESTMENT MANAGER
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
ADMINISTRATOR
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
DISTRIBUTOR
PA 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
Boston Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholders of Fixed Income SHares Inc.--Series C and Series M 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 each
Portfolio without examination by an independent registered public accounting
firm, who did not express an opinion hereon.
PIMCO
- --------
ADVISORS
1345 Avenue of the Americas
New York, NY 10105-4800
#530889
FIXED INCOME SHARES - SERIES R
SEMI-ANNUAL REPORT
APRIL 30, 2004
FIXED INCOME SHARES - SERIES R LETTER TO SHAREHOLDERS
June 17, 2004
Dear Shareholder:
We are pleased to provide you with the initial financial report of Fixed Income
SHares - Series R for the period April 15, 2004 (commencement of operations)
through April 30, 2004. Series R is 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,
Stephen Treadway Brian S. Shlissel
Chairman President, Chief Executive Officer
FIXED INCOME SHARES - SERIES R
SCHEDULE OF INVESTMENTS
APRIL 30, 2004
(UNAUDITED)
PRINCIPAL
AMOUNT CREDIT RATINGS
(000) (MOODY'S/S&P) VALUE
- --------- --------------- -----
U.S. TREASURY NOTES & BONDS - 89.4%
$2,586 2.00%-3.875%, 1/15/08-4/15/29 (a) (cost- $2,684,032) ........................... Aaa/AAA $2,671,542
----------
REPURCHASE AGREEMENT - 10.2%
303 Agreement with State Street Bank & Trust Co., dated April 30, 2004,
0.80% due 5/3/04 proceeds: $303,020; collateralized by Fannie Mae,
2.00% due 1/15/06, valued at $310,464; (cost-$303,000).......................... 303,000
----------
Total Investments (cost-$2,987,032*) - 99.6% ................................. 99.6% 2,974,542
Other assets less liabilities - 0.4% ......................................... 0.4 12,968
--------------- ----------
Net Assets - 100.0% .......................................................... 100.0% $2,987,510
--------------- ----------
- -----------------------
* The cost of securities for federal income tax purposes is $2,987,032.
Aggregate gross unrealized depreciation for securities in which there is an
excess of tax cost over value is $12,490; net unrealized depreciation for
federal income tax purposes is $12,490.
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Inflationary Bonds - Principal amount of security is adjusted for
inflation.
See accompanying notes to financial statements.
FIXED INCOME SHARES - SERIES R
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2004
(UNAUDITED)
ASSETS:
Investments, at value (cost-$2,987,032)......................................... $2,974,542
Cash ........................................................................... 695
Interest receivable............................................................. 15,403
----------
Total Assets................................................................ 2,990,640
----------
LIABILITIES:
Dividend payable .............................................................. 3,130
----------
Total Liabilities........................................................... 3,130
----------
Net Assets.................................................................. $2,987,510
==========
NET ASSETS CONSIST OF:
Paid-in-capital (no par value, unlimited number of shares authorized)........... $3,000,000
Net unrealized depreciation of investments...................................... (12,490)
----------
Net Assets.................................................................. $2,987,510
==========
Shares outstanding.............................................................. 300,000
----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER Share.................. $9.96
==========
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 15, 2004* THROUGH APRIL 30, 2004
(UNAUDITED)
INVESTMENT INCOME:
Interest........................................................................ $3,130
EXPENSES: -
----------
Net investment income....................................................... 3,130
----------
UNREALIZED LOSS:
Net unrealized depreciation of investments...................................... (12,490)
----------
Net decrease in net assets resulting from investment operations................. $(9,360)
==========
- -------------------
* Commencement of operations.
See accompanying notes to financial statements.
FIXED INCOME SHARES - SERIES R
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD APRIL 15, 2004* THROUGH APRIL 30, 2004
(UNAUDITED)
INVESTMENT OPERATIONS:
Net investment income........................................................ $3,130
Net unrealized depreciation of investments................................... (12,490)
------------------
Net decrease in net assets resulting from investment operations.......... (9,360)
------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income........................................................ (3,130)
------------------
SHARE TRANSACTIONS:
Net proceeds from the sale of shares......................................... 3,000,000
------------------
Total increase in net assets............................................. 2,987,510
NET ASSETS:
Beginning of period.......................................................... -
------------------
End of period................................................................ $2,987,510
==================
SHARES ISSUED................................................................ 300,000
------------------
- -------------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
FIXED INCOME SHARES - SERIES R
FINANCIAL HIGHLIGHTS
FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING FOR THE PERIOD
APRIL 15, 2004* THROUGH APRIL 30, 2004
(UNAUDITED)
Net asset value, beginning of period............................. $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................ 0.01
Net unrealized loss on investments............................... (0.04)
------
Total income (loss) from investment operations.............. (0.03)
------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income............................................ (0.01)
------
Net asset value, end of period................................... $9.96
======
TOTAL RETURN (1) ................................................ (0.30)%
------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's)................................ $2,988
Ratio of expenses to average net assets (2)...................... 0.00%
Ratio of net investment income to average net assets (2)......... 2.38%
Portfolio Turnover .............................................. 0%
- -------------------------------------
* Commencements of operations.
(1) Assumes reinvestment of all dividends. Total return for a period of less
than one year is not annualized.
(2) Annualized.
See accompanying notes to financial statements.
FIXED INCOME SHARES - SERIES R
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Income SHares (the "Trust"), was organized as a Massachusetts business
trust on November 3, 1999. The Trust is comprised of Series C, Series M, Series
R (the "Portfolio") and the Allianz Dresdner Daily Asset Fund. 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 5,000 shares each of beneficial interest of Series C
and Series M at an aggregate purchase price of $100,000. PA Fund Management LLC
(the "Investment Manager"), formerly PIMCO Advisors Fund Management LLC, serves
as the Portfolio's Investment Manager and is an indirect wholly-owned subsidiary
of ADAM. ADAM is an indirect majority-owned subsidiary of Allianz AG. The
Portfolio is authorized to issue an unlimited number of $0.01 par value shares
of beneficial interest.
These financial statements relate to the Portfolio. The financial statements for
Series C, Series M and Allianz Dresdner Daily Asset Fund are provided
separately.
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 Portfolio enters into contracts that
contain a variety of representations which provide general indemnifications. The
Portfolio's maximum exposure under these arrangements is unknown as such
exposure would involve claims that may be made against the Portfolio that have
not yet been asserted occurred. However, the Portfolio expects the risk of any
loss to be remote.
The following is a summary of significant accounting policies followed by the
Portfolio:
(A) VALUATION OF INVESTMENTS
Portfolio securities and other financial instruments for which market quotations
are readily available are stated at market value. The Portfolio's investments
are valued daily by an independent pricing service approved by the Board of
Trustees, dealers quotations, or are valued at the last sale on the exchange
that is the primary market for such securities, or the last quoted bid price for
those securities for which the over-the-counter market is the primary market or
for listed securities in which there were no sales. Prices obtained from an
independent pricing service use information provided by market makers or
estimates of market values obtained from yield data relating to investments or
securities with similar characteristics. Short-term investments maturing in 60
days or less are valued at amortized cost, if their maturity was 60 days or
less, or by amortizing their value on the 61st day prior to maturity, if the
original term to maturity exceeded 60 days. Securities for which market
quotations are not readily available or if development/event occurs that may
significantly impact the value of the security, may be fair valued, pursuant to
guidelines established by the Board of Trustees. The prices used by the
Portfolio to value securities may differ from the value that would be realized
if the securities were sold. The Portfolio's net asset valued is determined
daily at the close of regular trading (normally 4:00 p.m. Eastern Time) on the
New York Stock Exchange.
(B) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Realized gains and
losses from 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
Portfolio, 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.
FIXED INCOME SHARES - SERIES R
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(C) FEDERAL INCOME TAXES
The Portfolio intends to distribute all of its taxable income and comply with
the other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no provision for U.S.
federal income taxes is required. In addition, by distributing substantially all
of its ordinary income and long-term capital gains, if any, during each calendar
year, the Portfolio intends not to be subject to U.S. federal excise tax.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid
annually.
The Portfolio 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) 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.
(F) REPURCHASE AGREEMENTS
The Portfolio's 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.
FIXED INCOME SHARES - SERIES R
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONTINUED)
(2) RELATED PARTY TRANSACTIONS
(A) INVESTMENT ADVISER/SUB-ADVISER
The Investment Manager serves in its capacity pursuant to an Investment
Management Agreement with the Trust. Pursuant to a Portfolio Management
Agreement, the Investment Manager employs 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 Portfolio.
The Investment Manager receives no investment management or other fees from the
Portfolio 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
Portfolio. It should be understood, however, that the Portfolio is expected to
become an integral part of "wrap-fee" programs sponsored by investment advisers
unaffiliated with the Portfolio, the Investment Manager or the Sub-Adviser.
Typically, participants in these programs pay a "wrap fee" to their investment
adviser. Although the Portfolio does 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 sponsor of
wrap fee program for which the Trust is an investment option.
(B) ADMINISTRATOR
The Investment Manager also serves as administrator to the Portfolio pursuant to
an administration agreement ("Administration Agreement") with the Trust. The
administrator's responsibilities include providing or procuring certain
administrative services to the Portfolio as well as arranging at its own expense
for the provision of legal, audit, custody, transfer agency, tax and other
services required for the ordinary operation of the Portfolio, and is
responsible for printing, trustees fees, and other Portfolio costs. 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
Portfolio.
(C) DISTRIBUTOR
PA Distributors LLC ("the Distributor"), formerly PIMCO Advisors Distributors
LLC, an affiliate of the Investment Manger, serves as the distributor of the
Trust's shares. Pursuant to a distribution agreement with the Trust, the
Investment Manager on behalf of the Portfolio pays the Distributor.
(3) INVESTMENT IN SECURITIES
(a) Purchase and sales of securities (excluding short-term investments) for
the period April 15, 2004 (commencement of operations) through April 30, 2004
were:
- --------------------------------------------------------------------------------
U.S. Government Agency All Other
- --------------------------------------------------------------------------------
Purchases Sales Purchases Sales
- --------------------------------------------------------------------------------
$2,682,439 $0 $0 $0
- --------------------------------------------------------------------------------
FIXED INCOME SHARES - SERIES R
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONTINUED)
(4) LEGAL PROCEEDINGS
On May 6, 2004, the Securities and Exchange Commission (the "Commission") filed
a complaint in the U.S. District Court in the Southern District of New York
alleging that the Investment Manager, certain affiliates of the Investment
Manager and Stephen J. Treadway (the chief executive officer of the Investment
Manager as well as the chairman of the Trust) had, among other things, violated
and/or aided and abetted violations of various antifraud provisions of the
federal securities laws in connection with alleged "market timing" arrangements
in certain open-end investment companies advised by the Investment Manager. The
complaint seeks injunctive relief, disgorgement plus pre-judgment interest,
monetary penalties, and an order permanently enjoining the defendants from
serving as investment advisers, principal underwriters, officers, directors, or
members of any advisory boards to any registered investment companies.
The above complaint does not allege that any inappropriate activity took place
in the Portfolio and the Portfolio is not named in the complaint.
In addition, on June 1, 2004, ADAM and certain other affiliates of the
Investment Manager entered into a consent order and final judgment with the
Attorney General of the State of New Jersey (the "NJAG") in settlement of a
lawsuit filed by the NJAG on February 17, 2004 in connection with alleged
"market timing" arrangements. Under the terms of the settlement, ADAM and
certain of its affiliates agreed to pay the State of New Jersey a civil monetary
penalty of $15 million and $3 million for investigative costs. In addition, ADAM
and certain of its affiliates agreed to make several corporate governance
changes. Also on June 1, 2004, the NJAG dismissed its claims against the
Sub-Adviser, which had been filed as part of the same lawsuit.
If the Commission (or other regulator) were to obtain a court injunction against
the Investment Manager, its affiliates or Mr. Treadway, they and their
affiliates (including the Sub-Adviser) would, in the absence of exemptive relief
granted by the Commission, be barred from serving as an investment
adviser/sub-adviser or principal underwriter for any registered investment
company, including the Portfolio. In such a case, the Investment Manager and
Sub-Adviser would in turn seek exemptive relief from the Commission, as
contemplated by the Investment Company Act, although there is no assurance that
such exemptive relief would be granted. The Commission also has the power by
order to prohibit the Investment Manager, the Sub-Adviser and their affiliates
from serving as investment advisers and underwriters, although to date it has
not exercised such powers with respect to market timing arrangements involving
other mutual fund complexes.
Since February 2004, the Investment Manager, the Sub-Adviser and certain of
their affiliates, various investment companies advised by the Investment Manager
or the Sub-Adviser and their trustees (including Mr. Treadway) have been named
as defendants in multiple lawsuits filed in U.S. District Court in the Southern
District of New York, the Central District of California and the Districts of
New Jersey and Connecticut. The lawsuits have been commenced as putative class
actions on behalf of investors who purchased, held or redeemed shares of the
specified funds during specific periods or as derivative actions on behalf of
the specified funds. The lawsuits generally relate to the same facts that are
the subject of the regulatory proceedings discussed above. The lawsuits seek,
among other things, unspecified compensatory damages plus interest and, in some
cases, punitive damages, the rescission of investment advisory contracts, and/or
the return of fees paid under those contracts and restitution. The Trust has
been named in several class action lawsuits. The Investment Manager and the
Sub-Adviser believe that other similar lawsuits may be filed in U.S. federal or
state courts naming ADAM, the Investment Manager, the Sub-Adviser, various
investment companies they advise (which may include the Trust), their boards of
trustees and/or their affiliates.
FIXED INCOME SHARES - SERIES R
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONCLUDED)
(4) LEGAL PROCEEDINGS (CONCLUDED)
In November 2003, the Commission settled an enforcement action against an
unaffiliated broker-dealer relating to the undisclosed receipt of fees from
certain mutual fund companies in return for preferred marketing of their funds
and announced that it would be investigating mutual funds and their distributors
generally with respect to compensation arrangements relating to the sale of
mutual fund shares. In that connection, the Investment Manager, the Sub-Adviser
and certain of their affiliates are under investigation by the Commission
relating to revenue-sharing arrangements and the use of brokerage commissions to
recognize brokers effecting sales of certain open-end investment companies
advised by the Investment Manager, the Sub-Adviser and their affiliates. In
addition, the Attorney General of the State of California has publicly announced
an investigation into the brokerage recognition and revenue-sharing arrangements
of these open-end investment companies.
The Investment Manager and the Sub-Adviser believe that these matters are not
likely to have a material adverse effect on the Portfolio or on the Investment
Manager's or the Sub-Adviser's ability to perform its respective investment
advisory services related to the Portfolio.
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
Jennifer A. Patula Assistant Secretary
INVESTMENT MANAGER
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
SUB-ADVISER
Pacific Investment Management Company LLC
840 Newport Center Drive, Suite 300
Newport Beach, CA 92660
ADMINISTRATOR
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
DISTRIBUTOR
PA Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
CUSTODIAN AND ACCOUNTING AGENT
State Street Corp.
801 Pennsylvania Avenue
Kansas City, MO 64105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
Boston Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholder of Fixed Income Shares Inc. - Series 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
Portfolio without examination by an independent Registered Public Accounting
Firm, who did not express an opinion hereon.
FIXED INCOME SHARES - SERIES R
ALLIANZ DRESDNER DAILY ASSET FUND
SEMI-ANNUAL REPORT
APRIL 30, 2004
FIXED INCOME SHARES - ALLIANZ DRESDNER DAILY ASSET FUND LETTER TO SHAREHOLDER
June 18, 2004
The outlook for interest rates changed dramatically during the month of April.
As an example, at the beginning of the month, the 2-year Treasury note was
trading at 1.59% and on the last day of the month it was trading at 2.34%. The
reason for this rather dramatic backup is the belief that inflation is starting
to accelerate and the economy can continue to grow without further fiscal
stimulus. In reaction to the sudden spike in rates, Dresdner Advisors invested
in six-month securities. We invested more than $27 million (roughly 13% of the
total assets) approximately 165 days at 1.23%. This investment strategy
increased the total weighted average maturity to 41 days, while increasing the
yield on the portfolio to 1.07%. Dresdner Advisors believes the earliest the
Federal Reserve Board will increase interest rates is August. Currently, the Fed
Funds Futures market is pricing in a 50% chance of a rise by June. We believe
the Federal Reserve would like to actually see long-term sustainable growth
before acting to tighten monetary policy. They will do everything in their power
to prevent putting the economy back into a recession.
/s/ Charles H. Dedekind /s/ John Bilello
Charles H. Dedekind, Portfolio Manager John Bilello, Portfolio Manager
Dresdner Advisors LLC Dresdner Advisors LLC
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
SCHEDULE OF INVESTMENTS
APRIL 30, 2004
(UNAUDITED)
PRINCIPAL
AMOUNT
(000) VALUE
- --------- -----
BANK NOTES - 5.4%
$ 5,000 General Electric Capital Corp., 1.3125%, 5/3/04, FRN........................... $ 5,000,347
1,000 Goldman Sachs Group, Inc., 1.33%, 6/25/04, FRN................................. 1,000,382
5,000 Sigma Finance, Inc., 1.18%, 6/18/04, FRN....................................... 5,002,878
-----------
Total Bank Notes (cost- $11,003,607)........................................... 11,003,607
-----------
CERTIFICATES OF DEPOSIT - 4.9%
10,000 Natexis Banque Populaires, 1.03%, 5/26/04 (cost-$10,000,000).................. 10,000,000
-----------
COMMERCIAL PAPER - 89.8%
10,000 Apreco LLC, 1.03%, 6/11/04..................................................... 9,988,269
10,000 Atlantis One Funding Corp., 1.03%, 5/14/04..................................... 9,996,281
10,000 Bavaria Trust Corp., 1.06%, 5/20/04............................................ 9,994,406
9,000 Dorada Finance, Inc., 1.25%, 10/12/04.......................................... 8,949,570
10,000 Falcon Asset Securitization Corp., 1.031%, 5/25/04............................. 9,993,133
10,000 Fortis Funding LLC, 1.03%, 5/24/04............................................. 9,993,419
10,000 Giro Funding U.S. Corp., 1.04%, 5/4/04......................................... 9,999,133
10,000 HBOS Treasury Services plc, 1.04%, 6/21/04..................................... 9,985,267
10,000 K2 (USA) LLC, 1.05%, 5/25/04................................................... 9,993,000
9,000 Mont Blanc Capital Corp., 1.03%, 5/21/04....................................... 8,994,850
10,000 Newport Funding Corp., 1.03%, 5/20/04.......................................... 9,994,564
10,000 Preferred Receivables Funding, 1.02%, 5/4/04................................... 9,999,150
7,670 Receivables Capital Corp., 1.03%, 5/17/04...................................... 7,666,489
9,000 Scaldis Capital LLC, 1.18%, 10/12/04........................................... 8,952,030
10,000 Sheffield Receivables Corp., 1.04%, 5/25/04.................................... 9,993,133
10,000 Silver Tower U.S. Funding, 1.27%, 10/12/04..................................... 9,942,144
10,000 Societe Generale N.A., 1.03%, 5/19/04.......................................... 9,994,850
10,000 Thames Asset Global Securitization N.A., 1.04%, 5/13/04........................ 9,996,533
10,000 Windmill Funding Corp., 1.03%, 5/19/04......................................... 9,994,850
-----------
Total Commercial Paper (cost-$184,421,071) ................................ 184,421,071
-----------
REPURCHASE AGREEMENT - 0.0%
92 Agreement with State Street Bank & Trust Co., dated April 30, 2004,
0.80% due 5/3/04, proceeds: $92,006; collateralized by Freddie Mac,
2.00% due 2/23/06, valued at $94,690; (cost-$92,000).......................... 92,000
-----------
Total Investments (cost-$205,516,678+) - 100.1% .......................... 205,516,678
Liabilities in excess of other assets - (0.1)% ........................... (150,516)
-----------
Net Assets - 100.0% ................................................ $205,366,162
============
- -----------------------------------
+ The cost basis of portfolio securities for federal income tax purposes is
$205,516,678.
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, 2004.
See accompanying notes to financial statements.
FIXED INCOME SHARES
ALIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2004
(UNAUDITED)
Assets:
Investments, at value (cost-$205,516,678)................................................................. $205,516,678
Cash ..................................................................................................... 107
Interest receivable....................................................................................... 31,858
Receivable from Investment Adviser........................................................................ 1,502
Prepaid expenses.......................................................................................... 509
------------
Total Assets.......................................................................................... 205,550,654
------------
LIABILITIES:
Dividend payable ........................................................................................ 171,620
Accrued expenses ........................................................................................ 12,872
------------
Total Liabilities..................................................................................... 184,492
------------
Net Assets............................................................................................ $205,366,162
============
NET ASSETS CONSIST OF:
Paid-in-capital (no par value, unlimited number of shares authorized; 205,366,162 shares outstanding)..... $205,366,162
------------
Net Assets............................................................................................ $205,366,162
============
NET ASSET VALUE PER share................................................................................. $1.00
============
See accompany notes to financial statements.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 24, 2004* THROUGH APRIL 30, 2004
(UNAUDITED)
Investment Income:
Interest ............................................................. $227,514
--------
EXPENSES:
Administration fees................................................... 6,436
Investment advisory fees.............................................. 3,754
Custodian and accounting agent fees................................... 2,145
Registration fees..................................................... 2,145
Audit and tax services fees........................................... 536
Transfer Agent fees................................................... 536
Miscellaneous......................................................... 1,269
--------
Total expenses..................................................... 16,821
Less: investment advisory fees waived .............................. (3,754)
expense reimbursed by Investment Adviser...................... (1,502)
custody credits earned on cash balances....................... (62)
--------
Net expenses........................................................ 11,503
--------
Net investment income......................................... 216,011
--------
REALIZED GAIN:
Net realized gain on investments...................................... 233
--------
NET INCREASE IN NET ASSETS RESULTING FROM INVESTMENT Operations....... $216,244
========
- -----------------------------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 24, 2004* THROUGH APRIL 30, 2004
(UNAUDITED)
Investment Operations:
Net investment income............................................................... $216,011
Net realized gain on investments.................................................... 233
------------
Net increase in net assets resulting from investment operations................. 216,244
------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investments income.............................................................. (216,011)
Net realized gains ................................................................. (233)
------------
Total dividends and distributions to shareholders.............................. (216,244)
------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the sale of shares................................................ 209,090,000
Cost of shares redeemed ............................................................ (3,723,838)
------------
Net increase in net assets from capital share transactions............. 205,366,162
------------
Total increase in net assets...................................... 205,366,162
NET ASSETS:
Beginning of period................................................................. -
------------
End of period ..................................................................... $205,366,162
============
SHARES ISSUED AND REDEEMED:
Issued.............................................................................. 209,090,000
Redeemed............................................................................ (3,723,838)
------------
Net increase ..................................................... 205,366,162
============
- -----------------------------------------------------
* Commencement of operations.
See accompanying notes to financial statements.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OF OUTSTANDING FOR THE PERIOD MARCH 24, 2004*
THROUGH APRIL 30, 2004:
Net asset value, beginning of period................................ $1.00
--------
INVESTMENT OPERATIONS:
Net investment income............................................... 0.00 **
Net realized gain on investments ................................... 0.00 **
--------
Total from investment operations.................................. 0.00
--------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................... 0.00 **
Net realized gain .................................................. 0.00 **
--------
Total dividends and distributions to shareholders................. 0.00
--------
Net asset value, end of period...................................... $1.00
========
TOTAL RETURN (1) ................................................... 0.11%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) .................................. $205,366
Ratio of expenses to average net assets (2)(3)(4)................... 0.05%
Ratio of net investment income to average net assets (3)(4) ....... 1.01%
- -------------------
* 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 fiscal period indicated above, the Investment Adviser waived all
of its fee and assumed a portion of the Fund's operating expenses. If such
waiver and assumption had not been in effect, the ratio of expenses to
average net assets and the ratio of net investment income to average net
assets would have been 0.08% (annualized) and 0.98% (annualized),
respectively.
(4) Annualized.
See accompanying notes to financial statements.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Fixed Income SHares (the "Trust"), was organized as a Massachusetts business
trust on November 3, 1999. The Trust is comprised of Series C, Series M, Series
R and the Allianz Dresdner Daily Asset Fund (the "Fund"). 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 5,000 shares each of beneficial interest of Series C and Series M
at an aggregate purchase price of $100,000.
These financial statements relate to the Fund. The financial statements for
Series C, Series M and Series R are provided separately.
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 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
occurred. However, the Fund expects the risk of any loss to be remote.
The following is a summary of significant accounting policies followed by the
Fund:
(A) VALUATION OF INVESTMENTS
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) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security transactions are accounted for on the trade date. Realized gains and
losses from securities sold are recorded on the identified cost basis. Interest
income, adjusted for the accretion of discounts and amortization of premiums, is
recorded on an accrual basis.
(C) FEDERAL INCOME TAXES
The Fund intends to distribute all of its taxable income and comply with the
other requirements of the U.S. Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies. Accordingly, no provision for U.S.
federal income taxes is required. In addition, by distributing substantially all
of its ordinary income and capital gains, if any, during each calendar year, the
Fund intends not to be subject to U.S. federal excise tax.
(D) DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared daily and paid monthly.
Distributions from net realized capital gains, if any, are declared and paid
annually.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONTINUED)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(E) REPURCHASE AGREEMENTS
The Fund's 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 Fund 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
(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
expenses. Had these cash balances been invested in income producing securities,
they would have generated income for the Fund.
(2) RELATED PARTY TRANSACTIONS
(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 contractually
agreed, for the period March 24, 2004 through March 23, 2005, to waive its
investment advisory fee 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
PA Fund Management LLC ("the Administrator"), formerly PIMCO Advisors Fund
Management LLC, an indirect wholly-owned subsidiary of ADAM, serves as the
Fund's administrator and is responsible for managing the Fund's business affairs
and other 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.
(C) DISTRIBUTOR
PA Distributors LLC (the "Distributor"), formerly PIMCO Advisors Distributors
LLC, an indirect wholly-owned subsidiary of ADAM, 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
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONTINUED)
(3) LEGAL PROCEEDINGS
On May 6, 2004, the Securities and Exchange Commission (the "Commission") filed
a complaint in the U.S. District Court in the Southern District of New York
alleging that the Administrator, certain affiliates of the Administrator,
Stephen J. Treadway (the chief executive officer of the Administrator as well as
the chairman of the Trust) had, among other things, violated and/or aided and
abetted violations of various antifraud provisions of the federal securities
laws in connection with alleged "market timing" arrangements in certain open-end
investment companies advised by the Administrator. The complaint seeks
injunctive relief, disgorgement plus pre-judgment interest, monetary penalties,
and an order permanently enjoining the defendants from serving as investment
advisers, principal underwriters, officers, directors, or members of any
advisory boards to any registered investment companies.
The above complaint does not allege that any inappropriate activity took place
in the Fund and the Fund is not named in the complaint.
In addition, on June 1, 2004, ADAM and certain other affiliates of the
Administrator entered into a consent order and final judgment with the Attorney
General of the State of New Jersey (the "NJAG") in settlement of a lawsuit filed
by the NJAG on February 17, 2004 in connection with alleged "market timing"
arrangements. Under the terms of the settlement, ADAM and certain of its
affiliates agreed to pay the State of New Jersey a civil monetary penalty of $15
million and $3 million for investigative costs. In addition, ADAM and certain of
its affiliates agreed to make several corporate governance changes.
If the Commission (or other regulator) were to obtain a court injunction against
the Administrator, its affiliates or Mr. Treadway, they and their affiliates
(including the Investment Adviser) would, in the absence of exemptive relief
granted by the Commission, be barred from serving as an investment
adviser/sub-adviser or principal underwriter for any registered investment
company, including the Fund. In such a case, the Investment Adviser and
Administrator would in turn seek exemptive relief from the Commission, as
contemplated by the Investment Company Act, although there is no assurance that
such exemptive relief would be granted. The Commission also has the power by
order to prohibit the Investment Adviser, the Administrator and their affiliates
from serving as investment advisers and underwriters, although to date it has
not exercised such powers with respect to market timing arrangements involving
other mutual fund complexes.
Since February 2004, the Administrator and certain of its affiliates, various
investment companies advised by the Administrator and their trustees (including
Mr. Treadway) have been named as defendants in multiple lawsuits filed in U.S.
District Court in the Southern District of New York, the Central District of
California and the Districts of New Jersey and Connecticut. The lawsuits have
been commenced as putative class actions on behalf of investors who purchased,
held or redeemed shares of the specified funds during specific periods or as
derivative actions on behalf of the specified funds. The lawsuits generally
relate to the same facts that are the subject of the regulatory proceedings
discussed above. The lawsuits seek, among other things, unspecified compensatory
damages plus interest and, in some cases, punitive damages, the rescission of
investment advisory contracts, and/or the return of fees paid under those
contracts and restitution. The Trust has been named in several class action
lawsuits. The Administrator believes that other similar lawsuits may be filed in
U.S. federal or state courts naming ADAM, the Administrator, various investment
companies they advise (which may include the Trust), their boards of trustees
and/or their affiliates.
FIXED INCOME SHARES
ALLIANZ DRESDNER DAILY ASSET FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2004
(UNAUDITED) (CONCLUDED)
(3) LEGAL PROCEEDINGS (CONCLUDED)
In November 2003, the Commission settled an enforcement action against an
unaffiliated broker-dealer relating to the undisclosed receipt of fees from
certain mutual fund companies in return for preferred marketing of their funds
and announced that it would be investigating mutual funds and their distributors
generally with respect to compensation arrangements relating to the sale of
mutual fund shares. In that connection, the Administrator and certain of its
affiliates are under investigation by the Commission relating to revenue-sharing
arrangements and the use of brokerage commissions to recognize brokers effecting
sales of certain open-end investment companies advised by the Administrator and
its affiliates. In addition, the Attorney General of the State of California has
publicly announced an investigation into the brokerage recognition and
revenue-sharing arrangements of these open-end investment companies.
It is possible that these matters and/or other developments resulting from these
matters could have adverse consequences to the Fund and its shareholders.
However, the Investment Adviser and Administrator believe that these matters are
not likely to have a material adverse effect on the Fund or on the Investment
Adviser's or the Administrator's ability to perform its respective investment
advisory and administrative services related to the Fund.
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
Jennifer A. Patula Assistant Secretary
INVESTMENT ADVISER
Dresdner Advisors LLC
1301 Avenue of the Americas
New York, NY 10019
ADMINISTRATOR
PA Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
DISTRIBUTOR
PA Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
CUSTODIAN AND ACCOUNTING AGENT
State Street Corp.
801 Pennsylvania Avenue
Kansas City, MO 64105
TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR
Boston Financial Data Services
330 West 9th Street
Kansas City, MO 64105
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
1055 Broadway
Kansas City, MO 64105
LEGAL COUNSEL
Ropes & Gray LLP
One International Place
Boston, MA 02110
This report, including the financial information herein, is transmitted to the
shareholders of Fixed Income Shares Inc.-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 Trust or any securities mentioned in
this report.
The financial information included herein is taken from the records of the Fund
without examination by an independent registered public accounting firm, who did
not express an opinion hereon.
ITEM 1. REPORT TO SHAREHOLDERS
ITEM 2. CODE OF ETHICS Not required in this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT Not required in this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES Not required in this filing
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT Not required in this filing.
ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of
the report to shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not applicable
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED COMPANIES Not applicable
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable
ITEM 10. CONTROLS AND PROCEDURES
(a) The registrant's President and Chief Executive Officer and Principal
Financial Officer have concluded that the registrant's disclosure controls
and procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940, as amended are effective based on their evaluation of these
controls and procedures as of a date within 90 days of the filing date of
this document.
(b) There were no significant changes in the registrant's internal controls or
in factors that could affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
ITEM 11. EXHIBITS
(a) Exhibit 99.302 Cert. - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Fixed Income SHares
-------------------
By /s/ Brian S. Shlissel
- ------------------------
President and Chief Executive Officer
Date July 9, 2004
- -----------------
By /s/ Lawrence G. Altadonna
- ----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 9, 2004
- -----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Brian S. Shlissel
- ------------------------
President and Chief Executive Officer
Date July 9, 2004
- -----------------
By /s/ Lawrence G. Altadonna
- ----------------------------
Treasurer, Principal Financial & Accounting Officer
Date July 9, 2004
- -----------------