EX-99.77E LEGAL 4 r77e.htm

Legal Proceedings

Since February 2004, PIMCO, Allianz Global Investors of America L.P. (formerly
known as Allianz Dresdner Asset Management of America L.P.), PEA Capital LLC
(an entity affiliated with PIMCO through common ownership) and Allianz Global
Investors Distributors LLC (an entity affiliated with PIMCO through common
ownership), and certain of their affiliates, including the PIMCO Funds, the
Allianz Funds (formerly known as PIMCO Funds: Multi-Manager Series), and the
Trustees and employees of the PIMCO Funds, have been named as defendants in
fifteen lawsuits filed in various jurisdictions. Eleven of those lawsuits
concern "market timing," and they have been transferred to and consolidated
for pre-trial proceedings in a multi-district litigation proceeding in the U.S.
District Court for the District of Maryland; the other four lawsuits concern
"revenue sharing" and have been consolidated into a single action in the U.S.
District Court for the District of Connecticut. The lawsuits have been
commenced as putative class actions on behalf of investors who purchased, held
or redeemed shares of the various series of the PIMCO Funds and the Allianz
Funds during specified periods, or as derivative actions on behalf of the PIMCO
Funds and Allianz Funds.

The market timing actions in the District of Maryland generally allege that
certain hedge funds were allowed to engage in "market timing" in certain of
the Allianz Funds and the PIMCO Funds and this alleged activity was not
disclosed. Pursuant to tolling agreements entered into with the derivative and
class action plaintiffs, PIMCO, the Trustees, and certain employees of PIMCO
who were previously named as defendants have all been dropped as defendants in
the market timing actions; the plaintiffs continue to assert claims on behalf
of the shareholders of the PIMCO Funds or on behalf of the PIMCO Funds
themselves against other defendants. By order dated November 3, 2005, the U.S.
District Court for the District of Maryland granted the PIMCO Funds' motion to
dismiss claims asserted against it in a consolidated amended complaint where
the PIMCO Funds were named, in the complaint, as a nominal defendant. The
revenue sharing action in the District of Connecticut generally alleges that
fund assets were inappropriately used to pay brokers to promote the Allianz
Funds and PIMCO Funds, including directing fund brokerage transactions to such
brokers, and that such alleged arrangements were not fully disclosed to
shareholders. On August 11, 2005 the U.S. District Court for the District of
Connecticut conducted a hearing on defendants' motion to dismiss the
consolidated amended complaint in the revenue sharing action but has not yet
ruled on the motion to dismiss. The market timing and revenue sharing lawsuits
seek, among other things, unspecified compensatory damages plus interest and,
in some cases, punitive damages, the rescission of investment advisory
contracts, the return of fees paid under those contracts and restitution.

Two nearly identical class action civil complaints have been filed in August
2005, in the Northern District of Illinois Eastern Division, alleging that
the plaintiffs each purchased and sold a 10-year Treasury note futures
contract and suffered damages from an alleged shortage when PIMCO held
both physical and futures positions in 10-year Treasury notes for its client
accounts. The two actions have been consolidated into one action, and the two
separate complaints have been replaced by a consolidated complaint. PIMCO is a
named defendant, and the PIMCO Funds have been added as a defendant, to the
consolidated action. PIMCO strongly believes the complaint (and any
consolidated complaint filed hereafter) is without merit and intends to
vigorously defend itself.

Certain series of the PIMCO Funds were recently served in an adversary
proceeding brought by the Official Committee of Asbestos Claimants of G-I
Holdings, Inc. in G-I Holdings, Inc.'s bankruptcy in the District of New Jersey.
PIMCO was previously named in this lawsuit and remains a defendant. The
plaintiff seeks to recover for the bankruptcy estate assets that were
transferred by the predecessor entity of G-I Holdings, Inc. to a wholly-owned
subsidiary in 1994. The subsidiary has since issued notes, of which certain
series of the PIMCO Funds are alleged to be holders. The complaint alleges that
in 2000, more than two hundred noteholders - including certain series of the
PIMCO Funds - were granted a second priority lien on the assets of the
subsidiary in exchange for their consent to a refinancing transaction and the
granting of a first priority lien to the lending banks. The plaintiff is seeking
invalidation of the lien in favor of the noteholders and/or the value of the
lien. On June 21, 2006, the District of New Jersey overturned the Bankruptcy
Court's decision giving permission to file the adversary proceeding and remanded
the matter to Bankruptcy Court for further proceedings. On June 30, 2006, the
plaintiff filed a motion to reconsider in the District Court.

The foregoing speaks only as of the date of this report. None of the
aforementioned complaints alleges that any improper activity took place in the
Fund. PIMCO believes that these developments will not have a material adverse
effect on the Fund or on PIMCO's ability to perform its investment advisory
services on behalf of the Fund.