Since February 2004, PIMCO, Allianz Global Investors of America L.P. ("AGI")
(formerly known as Allianz Dresdner Asset Management of America L.P.) (PIMCO's
parent company), and certain of their affiliates, including PIMCO Funds (a
complex of mutual funds managed by PIMCO) and Allianz Funds (formerly known as
PIMCO Funds: Multi-Manager Series) (a complex of mutual funds managed by
affiliates of PIMCO), certain trustees of PIMCO Funds, and certain employees of
PIMCO have been named as defendants in eleven lawsuits filed in various
jurisdictions. These 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 lawsuits have been commenced as putative class actions on behalf of
investors who purchased, held or redeemed shares of the various series of PIMCO
Funds and Allianz Funds during specified periods, or as derivative actions on
behalf of PIMCO Funds and Allianz Funds. These 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.
These actions generally allege that certain hedge funds were allowed to engage
in "market timing" in certain funds of PIMCO Funds and Allianz Funds and this
alleged activity was not disclosed. Pursuant to tolling agreements dated
January 14, 2005 entered into with the derivative and class action plaintiffs,
PIMCO, certain trustees of PIMCO Funds, and certain employees of PIMCO who
were previously named as defendants have all been removed as defendants in the
market timing actions; however, the plaintiffs continue to assert claims on
behalf of the shareholders of PIMCO Funds or on behalf of PIMCO Funds itself
against other defendants. By order dated November 3, 2005, the U.S. District
Court for the District of Maryland granted PIMCO Funds' motion to dismiss
claims asserted against it in a consolidated amended complaint where PIMCO
Funds was named as a nominal defendant. Thus, at present PIMCO Funds is not a
party to any "market timing" lawsuit.
Pacific Investment Management Company LLC ("PIMCO"), a subsidiary of Allianz
Global Investors of America L.P., and PIMCO Funds are the subject of a lawsuit
in the Northern District of Illinois Eastern Division in which the complaint
alleges that 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. In July 2007, the court granted class certification of a class
consisting of those persons who purchased futures contracts to offset short
positions between May 9, 2005 and June 30, 2005. Management currently
believes that the complaint is without merit and PIMCO and PIMCO Funds intend
to vigorously defend against this action.
In April 2006, certain registered investment companies and other funds managed
by PIMCO were 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 certain registered investment companies and other
funds managed by PIMCO are alleged to be holders. The complaint alleges that
in 2000, more than two hundred noteholders - including certain registered
investment companies and other funds managed by PIMCO - 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. A Plan of Reorganization
(the "Plan") is currently under consideration by the Court in the underlying
bankruptcy case. If the Plan is approved, it is expected that the adversary
proceeding to which PIMCO and other funds managed by PIMCO ("PIMCO Entities")
are parties will be dismissed. It is not known at this time when the Plan
may be approved, if at all. In the meantime, the adversary proceeding is
stayed. This matter is not expected to have a material adverse effect on the
relevant PIMCO Entities.
