PIMCO High Income Fund Announces Elimination of a Non-Fundamental Investment Policy
NEW YORK--(BUSINESS WIRE)-- PIMCO High Income Fund (PHK) (the Fund) announced that its Board of Trustees has approved the elimination of its non-fundamental investment policy which provides that the Fund will not invest in interest-only (IO) or principal-only (PO) securities or inverse floating rate (inverse floater) securities. The change takes effect immediately, such that the Fund may now invest in these instruments.
The Funds management team believes the Fund would benefit from the ability to utilize these instruments in targeted situations in current and future market conditions, including to react to changes in interest rates or the rate of principal payments (including pre-payments) on underlying mortgage assets and to better capitalize on the management teams views on the housing and mortgage markets.
IOs are a class of debt security, typically representing an interest in a pool of mortgage-related or other asset-backed securities, which receives all of the interest from the asset pool, while the PO class of the security receives all of the principal. The value of (i.e. the yield to maturity and price) an IO or PO class is extremely sensitive to the rate of principal payments (including prepayments) on the related, underlying mortgages or other assets. For example, a rapid rate of principal payments may have a material adverse effect on the value of IO securities, while a slower than expected rate of principal payments may have a material adverse effect on a PO class securitys value. If the underlying mortgage or other assets experience greater or slower than anticipated prepayments of principal, the Fund may fail to recoup some or all of its initial investment in IOs or POs, even if the security is in one of the highest rating categories.
An inverse floater is a type of debt instrument that bears a floating or variable interest rate that moves in the opposite direction to interest rates generally or the interest rate on another security or index. Changes in interest rates generally, or the interest rate of the other security or index, inversely affect the interest rate paid on the inverse floater, with the result that the inverse floaters price will be considerably more volatile than that of a fixed-rate instrument of similar credit quality. The market prices of inverse floaters may be highly sensitive to changes in interest rates and prepayment rates on the underlying securities, and may decrease significantly when interest rates increase or prepayment rates change.
Investment in IOs, POs and inverse floaters may also subject the Fund to illiquidity and other risks.
The Fund is a closed-end management investment company. The Funds primary investment objective is to seek high current income. Capital appreciation is a secondary objective. There can be no assurance that the Fund will achieve its stated objectives.
Allianz Global Investors Fund Management LLC (AGIFM), an indirect, wholly-owned subsidiary of Allianz Asset Management of America L.P., serves as the Funds investment manager and is a member of Munich-based Allianz Group. Pacific Investment Management Company LLC (PIMCO), an AGIFM affiliate, serves as the Funds sub-adviser.
The Funds daily New York Stock Exchange closing market price, net asset value per share, as well as other information, including updated portfolio statistics and performance are available at www.allianzinvestors.com/closedendfunds or by calling the Funds shareholder servicing agent at (800) 254-5197.
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 a decline in the securities markets or a decline 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 pay dividends to common shareholders is subject to the restrictions in its registration statement, by-laws and other governing documents, as well as the Investment Company Act of 1940.
For information on PIMCO Closed-End Funds:
Financial Advisors: 800-628-1237
Media Relations: 212-739-3501
Source: PIMCO High Income FundCopyright Business Wire 2013