<DOCUMENT>
<TYPE>EX-99.77E LEGAL
<SEQUENCE>3
<FILENAME>r77e2.txt
<DESCRIPTION>REGULATION AND LITIGATION MATTERS
<TEXT>
REGULATORY AND LITIGATION MATTERS

Since February 2004, PIMCO, Allianz Global Investors of America L.P.
(PIMCO's parent company), and certain of their affiliates, including the
PIMCO Funds (a series of funds managed by PIMCO), the Allianz Funds (a
series of funds managed by affiliates of PIMCO), certain Directors of the
Fund (in their capacity as Trustees of the PIMCO Funds or the Allianz
Funds) and certain employees of PIMCO, 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 the 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 PIMCO Funds and the Allianz Funds and this alleged activity was not
disclosed. Pursuant to tolling agreements entered into with the derivative
and class action plaintiffs, PIMCO, certain Directors of the Fund (in their
capacity as Trustees of PIMCO Funds or the Allianz Funds), 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 PIMCO Funds and the
Allianz 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 is without merit and intends to vigorously defend itself.

In April 2006, the Fund was 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. In July 2004,
PIMCO was 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 the Fund is alleged to
be a holder. The complaint alleges that in 2000, more than two hundred
noteholders including the Fund 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 granting permission to file the
adversary proceeding and remanded the matter to the Bankruptcy Court for
further proceedings. Following a motion to reconsider, the District Court
upheld its remand on August 7, 2006, and instructed the Bankruptcy Court
to conduct a "cost-benefit" analysis of the Committee's claims, including
claims against the noteholders. The Bankruptcy Court held a status
conference on October 25, 2006 and set a briefing schedule relating to this
costbenefit analysis.

The foregoing speaks only as of the date of this report. It is possible that
these matters and/or other developments resulting from these matters could
lead to a decrease in the market value of the Funds' Shares or other adverse
consequences to the Fund. However, PIMCO believes that these matters are
not likely to have a material adverse effect on the Fund or on PIMCO's
ability to perform its investment advisory services relating to the Fund.
</TEXT>
</DOCUMENT>
