NEW YORK, Oct. 24, 2008 (GLOBE NEWSWIRE) -- PIMCO Floating Rate Income Fund (NYSE:PFL), PIMCO Floating Rate Strategy Fund (NYSE:PFN) and PIMCO High Income Fund (NYSE:PHK) (the "Funds") may be required to delay the payment of declared dividends and the declaration of the next scheduled dividend on the Funds' common shares due to the recent unprecedented market conditions.
In accordance with the Investment Company Act of 1940, as amended and the Funds' By-laws, the Funds are not permitted to declare or pay common share dividends unless the Funds' auction rate preferred shares ("ARPS") have asset coverage of 200% after payment of the common share dividend ("200% Level"). Additionally, in accordance with the Funds' By-laws, the Funds must maintain asset coverage in line with the requirements of the rating agencies that rate the ARPS ("Rating Agency Level") in order to declare and pay common share dividends. Due to the unprecedented market conditions, recently the Funds' asset coverage ratios have declined below the 200% Level. Depending on market conditions, these coverage ratios may increase or decrease further. In the event that the 200% Level or the Rating Agency Level is not met at the time of the scheduled payment of dividends on November 3, 2008 for PHK and November 7, 2008 for PFL and PFN, the Funds that do not meet these coverage tests would have to postpone the payment of the previously declared dividend. These same dates are also planned as the declaration dates for the December common share dividends, and any Funds that do not meet the coverage tests would have to postpone the declaration of the December dividend beyond its previously planned declaration date until the situation is corrected.
The Funds' ability to earn sufficient income to pay the previously declared dividend was not impacted by this decline in the asset coverage ratios or market conditions. Therefore, if market conditions improve and the values of the Funds' assets increase to a point where the Funds have adequate asset coverage on the respective dividend payment and declaration dates, the Funds intend to pay the common share dividends on the payment dates and declare the December dividend. The Funds will make a subsequent public announcement on or before the dividend payment and declaration dates to confirm whether or not the November common share dividend will be paid and the December common share dividend declared on the scheduled payment and declaration dates.
The Funds considered other options to regain adequate asset coverage, such as redeeming a portion of the Funds' ARPS. To do so would require the Funds to sell a significant number of securities for cash. The Funds do not believe that this is in their best interest at this time. Market conditions continue to be extraordinarily volatile and the Funds believe that market prices do not reflect the fundamental value of securities. Market valuations are being impacted in a notable way by a systemic deleveraging of the financial system that has accelerated dramatically during the past four weeks.
The Funds believe that recently announced governmental policy measures will, as they are implemented in size, begin to help stabilize the financial system. Selling portfolio holdings now to redeem the Funds' ARPS could deprive common shareholders of the opportunity to benefit from these government programs, which the Funds expect will have a positive impact on markets when fully implemented.
PHK's investment objective is to seek high current income. Capital appreciation is a secondary objective. PFL's and PFN's investment objective is to seek high current income, consistent with the preservation of capital. There can be no assurance that the Funds will achieve their stated objectives.
Allianz Global Investors Fund Management LLC, an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P., serves as the Funds' investment manager and is a member of Munich-based Allianz Group (NYSE: AZ). Pacific Investment Management Company LLC, an Allianz Global Investors Fund Management affiliate, serves as the Funds' sub-adviser.
The Funds' daily New York Stock Exchange closing prices and net asset values per share are available by calling the Funds' shareholder servicing agent at (800) 331-1710. This information, as well as updated portfolio statistics and performance, is available at http://www.allianzinvestors.com.
Statements made in this release that look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include, without limitation, the adverse effect from further declines in the securities markets and in the Funds' performance, a general downturn in the economy, competition from other companies, changes in government policy or regulation, inability to attract or retain key employees, inability to implement its operating strategy and/or acquisition strategy, and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations. The Funds' ability to maintain leverage and to pay dividends to common shareholders is subject to the restrictions in their registration statements, By-laws and other governing documents.