As filed with the Securities and Exchange Commission on April 19, 2024

1933 Act File No.

1940 Act File No. 811-21601

Subject to Completion

PIMCO Income Strategy Fund II

Base Prospectus

[], 2024

PIMCO Income Strategy Fund II

 

 

PIMCO Income Strategy Fund II (the “Fund”) is a diversified, closed-end

management investment company that commenced operations on October 29, 2004, following

the initial public offering of its common shares of beneficial interest, par value $0.00001 per

share (the “Common Shares”).

 

The Fund’s investment objective is to seek high current income,

consistent with the preservation of capital. The Fund cannot assure you that it will achieve its

investment objective, and you could lose all of your investment in the Fund.

 

The Fund seeks to achieve its investment objective by utilizing a

dynamic asset allocation strategy that focuses on duration management, credit quality

analysis, risk management techniques and broad diversification among issuers, industries and

sectors. The Fund normally invests in a diversified portfolio of floating and/or fixed rate debt

instruments. In managing the Fund, Pacific Investment Management Company LLC, the

Fund’s investment manager (“PIMCO” or the “Investment Manager”), employs an active

approach to allocation among multiple fixed income sectors based on, among other things,

market conditions, valuation assessments, economic outlook, credit market trends and other

economic factors. The Fund focuses on seeking income generating investment ideas across

multiple fixed income sectors, with an emphasis on seeking opportunities in developed and

emerging global credit markets.

 

The Fund seeks to achieve its investment objective by ordinarily investing in a diversified portfolio of floating- and/or

fixed-rate debt instruments. The Fund may invest a substantial portion of its floating-rate assets in floating-rate loans. Other floating-rate debt

instruments in which the Fund may invest include catastrophe and other event-linked bonds, bank capital securities, unsecured and/or secured

loans (including, but not limited to, bank and/or other syndicated loans and non-syndicated (private direct) loans), corporate bonds and other debt

securities, money market instruments and certain types of mortgage-backed and other asset-backed securities that pay interest at rates that

adjust whenever a specified interest rate changes and/or reset on predetermined dates (such as the last day of a month or calendar quarter). The

Fund also considers floating rate assets to include securities with durations of less than or equal to one year and fixed-rate securities with respect

to which the Fund has entered into derivative instruments to effectively convert the fixed-rate interest payments into floating-rate interest

payments. The Fund also may invest in a wide variety of fixed-rate debt securities, including corporate bonds and mortgage-backed and other

asset-backed securities issued on a public or private basis, including mortgage pass-through securities (e.g., securities representing interests in

“pools” of mortgage loans secured by residential or commercial real property), collateralized mortgage obligations (“CMOs”), commercial or

residential mortgage-backed securities, mortgage dollar rolls/buybacks, CMO residuals, stripped mortgage-backed securities (“SMBSs”) (e.g., a

type of mortgage-backed security that receives differing proportions of the interest and principal payments from the underlying assets) and other

securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. The Fund

may make use of a variety of other instruments, including collateralized bond obligations, collateralized loan obligations, collateralized debt

obligations, preferred securities, commercial paper, zero-coupon and inflation-indexed bonds, bank certificates of deposit, fixed time deposits

and bankers’ acceptances, real estate investment trusts (“REITs”), bonds, debentures, notes, and other debt securities of U.S. and foreign

(non-U.S.) corporate and other issuers; obligations of foreign governments or their sub-divisions, agencies and government sponsored

enterprises and obligations of international agencies and supranational entities; municipal securities and other debt securities issued by states or

local governments and their agencies, authorities and other government-sponsored enterprises, including taxable municipal securities (such as

Build America Bonds); inflation-indexed bonds issued by both governments and corporations; structured notes, including hybrid or indexed

securities; credit-linked notes; structured credit products; loans (including, among others, senior loans, delayed draw and delayed funding loans,

revolving credit facilities and loan participations and assignments); covenant-lite obligations, preferred securities and convertible debt securities

(i.e., debt securities that may be converted at either a stated price or stated rate into underlying shares of common stock), including synthetic

convertible debt securities (i.e., instruments created through a combination of separate securities that possess the two principal characteristics of

a traditional convertible security, such as an income producing security and the right to acquire an equity security) and contingent convertible

securities. Certain debt instruments, such as convertible bonds, also may include the right to participate in equity appreciation. The principal

and/or interest rate on some debt instruments may be determined by reference to the performance of a benchmark asset or market, such as an

index of securities, or the differential performance of two assets or markets, such as the level of exchange rates between the U.S. dollar and a

foreign currency or currencies. The Fund may invest in debt securities of stressed, distressed and defaulted issuers. Subject to the Fund’s

investment limitations, at any given time and from time to time, substantially all of the Fund’s portfolio may consist of below investment grade

securities. The Fund may invest in various levels of the capital structure of an issuer of mortgage-backed or asset-backed securities, including

the equity or “first loss” tranche. The rate of interest on an income-producing security may be fixed, floating or variable.

The Fund invests predominantly in U.S. dollar-denominated debt securities, which may include those issued by foreign corporations or

supra-national government agencies. The Fund may invest without limit in non-U.S. dollar denominated securities (of both developed and

“emerging market” countries), including obligations of non-U.S. governments and their respective sub-divisions, agencies and

government-sponsored enterprises. The Fund may invest up to 40% of its total assets in securities and instruments that are economically tied to

“emerging market” countries except the Fund may invest without limit in investment grade sovereign debt denominated in the relevant country's

local currency with less than 1 year remaining to maturity issued by emerging market issuers. The Fund may also invest directly in foreign

currencies, including local emerging market currencies.

The Fund may invest up to 20% of its total assets in common stocks and other equity securities from time to time, including those it has received

through the conversion of a convertible security held by the Fund or in connection with the restructuring of a debt security.

The Fund may, but is not required to, utilize various derivative strategies (both long and short positions) involving the purchase or sale of futures

and forward contracts (including foreign currency exchange contracts), call and put options, credit default swaps, total return swaps, basis swaps

and other swap agreements and other derivative instruments for investment purposes, leveraging purposes or in an attempt to hedge against

market, credit, interest rate, currency and other risks in the portfolio. The Fund may purchase and sell securities on a when-issued, delayed

delivery or forward commitment basis and may engage in short sales. The Fund may also seek to obtain market exposure to the securities in

which it invests by entering into a series of purchase and sale contracts. The Fund may use derivative instruments for other purposes, including

to seek to increase liquidity, provide efficient portfolio management, broaden investment opportunities (including taking short or negative

positions), implement a tax or cash management strategy, gain exposure to a particular security or segment of the market, modify the effective

duration of the Fund’s portfolio investments and/or enhance total return.

The Fund may invest without limit in debt securities that are, at the time of purchase, rated below investment grade (commonly referred to as

“high yield” securities or “junk bonds”), and may also invest without limit in investment grade securities. However, the Fund will not normally invest

more than 20% of its total assets in debt instruments, other than mortgage-related and other asset-backed securities, that are, at the time of

purchase, rated CCC+ or lower by S&P Global Ratings (“S&P”) and Fitch Ratings, Inc. (“Fitch”) and Caa1 or lower by Moody’s Investors Service,

Inc. (“Moody's”), or that are unrated but determined by PIMCO to be of comparable quality. The Fund may invest without limit in mortgage-related

and other asset-backed securities regardless of rating—i.e., of any credit quality.

The Fund may invest in securities that have not been registered for public sale in the U.S. or relevant non-U.S. jurisdictions, including without limit

securities eligible for purchase and sale pursuant to Rule 144A under the Securities Act of 1933, as amended, or relevant provisions of applicable

non-U.S. law, and other securities issued in private placements. The Fund may invest in securities of other open- or closed-end investment

companies (including those advised by PIMCO), including, without limitation, exchange-traded funds, to the extent that such investments are

consistent with the Fund’s investment objective, strategies and policies and permissible under the Investment Company Act of 1940, as

amended. The Fund may invest in securities of companies of any market capitalization, including small and medium capitalizations.

The Fund may invest without limit in illiquid investments (i.e., investments that the Fund reasonably expects cannot be sold or disposed of in

current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the

investment).

 

The Fund currently utilizes leverage principally through reverse repurchase agreements, and may also obtain additional leverage

through the issuance of preferred shares (the “Preferred Shares”) and the use of dollar rolls/buybacks or borrowings, such as through bank loans

or commercial paper and/or other credit facilities. The Fund may also enter into transactions other than those noted above that may give rise to a

form of leverage including, among others, selling credit default swaps, futures and forward contracts (including foreign currency exchange

contracts), total return swaps and other derivative transactions, loans of portfolio securities, short sales and when-issued, delayed delivery and

forward commitment transactions. The Fund may also determine to issue other types of preferred shares. Depending upon market conditions and

other factors, the Fund may or may not determine to add leverage following an offering to maintain or increase the total amount of leverage (as a

percentage of the Fund’s total assets) that the Fund currently maintains, taking into account the additional assets raised through the issuance of

Common Shares in such offering. The Fund utilizes certain kinds of leverage, such as reverse repurchase agreements and selling credit default

swaps, opportunistically and may choose to increase or decrease, or eliminate entirely, its use of such leverage over time and from time to time

based on PIMCO’s assessment of the yield curve environment, interest rate trends, market conditions and other factors. The Fund may also

determine to decrease the leverage it currently maintains through its outstanding Preferred Shares through Preferred Share redemptions or

tender offers and may or may not determine to replace such leverage through other sources. If the Fund determines to add leverage following an

offering, it is not possible to predict with accuracy the precise amount of leverage that would be added, in part because it is not possible to predict

the number of Common Shares that ultimately will be sold in an offering or series of offerings. To the extent that the Fund does not add additional

leverage following an offering, the Fund’s total amount of leverage as a percentage of its total assets will decrease, which could result in a

reduction of investment income available for distribution to holders of the Fund’s Common Shares (“Common Shareholders”). By using leverage,

the Fund will seek to obtain a higher return for holders of common shares than if the Fund did not use leverage. Leveraging transactions pursued

by the Fund may increase its duration and sensitivity to interest rate movements. Leveraging is a speculative technique and there are special

risks and costs involved. There can be no assurance that a leveraging strategy will be used or that it will be successful during any period in which

it is employed. See “Use of Leverage” and “Principal Risks of the Fund—Leverage Risk.”

 

This prospectus is part of a registration statement that the Fund has filed with the U.S. Securities and Exchange

Commission (the “SEC”), using the “shelf” registration process. Under the shelf registration process, the Fund may offer, from time to time, in one

or more offerings, up to $300 million of Common Shares on terms to be determined at the time of the offering. This prospectus provides you with

a general description of the Common Shares that the Fund may offer. Each time the Fund uses this prospectus to offer Common Shares, the

Fund will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may

also add, update or change information contained in this prospectus. You should read this prospectus and the applicable prospectus supplement,

which contain important information about the Fund, carefully before you invest in the Common Shares. Common Shares may be offered directly

to one or more purchasers, through agents designated from time to time by the Fund, or to or through underwriters or dealers. The prospectus

supplement relating to an offering will identify any agents, underwriters or dealers involved in the sale of Common Shares, and will set forth any

applicable purchase price, fee, commission or discount arrangement between the Fund and its agents or underwriters, or among the Fund’s

underwriters, or the basis upon which such amount may be calculated. See “Plan of Distribution.” The Fund may not sell any Common Shares

through agents, underwriters or dealers without delivery or deemed delivery of a prospectus supplement describing the method and terms of the

particular offering of the Common Shares.

You should retain this prospectus and any prospectus supplement for future reference. A Statement of Additional Information, dated [], 2024,

containing additional information about the Fund has been filed with the SEC and is incorporated by reference in its entirety into this prospectus.

You may request a free copy of the Statement of Additional Information, request the Fund’s most recent annual and semiannual reports, request

The Common Shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository

institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government

agency.

The Common Shares are listed on the New York Stock Exchange (“NYSE”) under the symbol “PFN.” The last reported sale price of the Common

Shares, as reported by the NYSE on March 28, 2024, was $7.46 per Common Share. The net asset value (“NAV”) of the Common Shares at the

close of business on March 28, 2024, was $7.15 per Common Share.

Prospectus Summary

The Fund is a diversified, closed-end management investment company.

The Fund commenced operations on October 29, 2004, following the

initial public offering of its Common Shares. Effective March 1, 2010,

the Fund changed its name from PIMCO Floating Rate Strategy Fund to

its current name, PIMCO Income Strategy Fund II.

The Common Shares are listed on the New York Stock Exchange

(“NYSE”) under the symbol “PFN.” As of March 28, 2024, the net assets

of the Fund attributable to Common Shares were $616 million and the

Fund had outstanding 86,130,947 Common Shares and 1,556 auction

rate preferred shares of beneficial interest (“ARPS” and, together with

any other preferred shares issued by the Fund, “Preferred Shares”). The

last reported sale price of the Common Shares, as reported by the NYSE

on March 28, 2024, was $7.46 per Common Share. The net asset value

(“NAV”) of the Common Shares at the close of business on March 28,

2024, was $7.15 per Common Share. See “Description of Capital

Structure.”

The Fund may offer, from time to time, in one or more offerings, up to

$300 million of Common Shares on terms to be determined at the time

of the offering. The Common Shares may be offered at prices and on

terms to be set forth in one or more prospectus supplements. You

should read this prospectus and the applicable prospectus supplement

carefully before you invest in the Common Shares. Common Shares may

be offered directly to one or more purchasers, through agents

designated from time to time by the Fund, or to or through underwriters

or dealers. The prospectus supplement relating to an offering will

identify any agents, underwriters or dealers involved in the sale of

Common Shares, and will set forth any applicable purchase price, fee,

commission or discount arrangement between the Fund and its agents

or underwriters, or among the Fund’s underwriters, or the basis upon

which such amount may be calculated. See “Plan of Distribution.” The

Fund may not sell any Common Shares through agents, underwriters or

dealers without delivery or deemed delivery of a prospectus supplement

describing the method and terms of the particular offering of the

Common Shares.

The net proceeds of an offering will be invested in accordance with the

Fund’s investment objective and policies as set forth below. It is

currently anticipated that the Fund will be able to invest substantially all

The Fund’s investment objective is to seek high current income,

consistent with the preservation of capital. The Fund seeks to achieve its

investment objective by ordinarily investing in a diversified portfolio of

floating- and/or fixed-rate debt instruments. The Fund may invest a

substantial portion of its floating-rate assets in floating-rate loans.

Other floating-rate debt instruments in which the Fund may invest

include catastrophe and other event-linked bonds, bank capital

securities, unsecured and/or secured loans (including, but not limited to,

bank and/or other syndicated loans and non-syndicated (private direct)

loans), corporate bonds and other debt securities, money market

instruments and certain types of mortgage-backed and other

asset-backed securities that pay interest at rates that adjust whenever a

specified interest rate changes and/or reset on predetermined dates

(such as the last day of a month or calendar quarter). The Fund cannot

assure you that it will achieve its investment objective, and you could

lose all of your investment in the Fund.

 

In managing the Fund, the Fund’s

investment manager, Pacific Investment Management Company LLC

(“PIMCO” or the “Investment Manager”), employs an active approach

to allocation among multiple fixed income sectors based on, among

other things, market conditions, valuation assessments, economic

outlook, credit market trends and other economic factors. With PIMCO’s

macroeconomic analysis as the basis for top-down investment

decisions, including geographic and credit sector emphasis, PIMCO

manages the Fund with a focus on seeking income generating

investment ideas across multiple fixed income sectors, with an emphasis

on seeking opportunities in developed and emerging global credit

markets. The Fund has the flexibility to allocate assets in varying

proportions among floating- and fixed-rate debt instruments, as well as

1  

Base Prospectus

 

Once the Fund’s top-down,

portfolio positioning decisions have been made as described above,

PIMCO selects particular investments for the Fund by employing a

bottom-up, disciplined credit approach which is driven by fundamental,

independent research within each sector/asset class represented in the

Fund, with a focus on identifying securities and other instruments with

solid and/or improving fundamentals.

PIMCO utilizes strategies that focus on credit quality analysis, duration

management and other risk management techniques. PIMCO attempts

to identify, through fundamental research driven by independent credit

analysis and proprietary analytical tools, debt obligations and other

income-producing securities that provide current income and/or

opportunities for capital appreciation based on its analysis of the

issuer’s credit characteristics and the position of the security in the

issuer’s capital structure.

Consideration of yield is only one component of the portfolio managers’

approach in managing the Fund. PIMCO also attempts to identify

investments that may appreciate in value based on PIMCO’s assessment

of the issuer’s credit characteristics, forecast for interest rates and

outlook for particular countries/regions, currencies, industries, sectors

and the global economy and bond markets generally.

 

The Fund may invest without limit in debt securities

that are, at the time of purchase, rated below investment grade (below

Baa3 by Moody’s Investors Service, Inc. (“Moody’s”) or below BBB- by

either S&P Global Ratings (“S&P”) or Fitch Ratings, Inc. (“Fitch”)) or

that are unrated but judged by PIMCO to be of comparable quality

(commonly referred to as “high yield” securities or “junk bonds”).The

Fund will not normally invest more than 20% of its total assets in debt

instruments, other than mortgage-related and other asset-backed

securities, that are, at the time of purchase, rated CCC+ or lower by S&P

and Fitch and Caa1 or lower by Moody’s, or that are unrated but

determined by PIMCO to be of comparable quality. The Fund may invest

without limit in mortgage-related and other asset-backed securities

regardless of rating (i.e., of any credit quality). Subject to this 20%

restriction, the Fund may invest in issuers of any credit quality (including

bonds in the lowest ratings categories and securities that are in default

or the issuers of which are in bankruptcy). For purposes of applying the

foregoing policies, in the case of securities with split ratings (i.e., a

security receiving two different ratings from two different rating

agencies), the Fund will apply the higher of the applicable ratings.

Subject to the aforementioned investment restrictions, the Fund may

invest in securities of stressed issuers, which include securities at risk of

being in default as to the repayment of principal and/or interest at the

 

PIMCO relies primarily on its own

analysis of the credit quality and risks associated with individual debt

instruments considered for the Fund, rather than relying exclusively on

rating agencies or third-party research. The Fund’s portfolio managers

utilize this information in an attempt to manage credit risk and/or to

identify issuers, industries or sectors that are undervalued and/or that

offer attractive yields relative to PIMCO’s assessment of their credit

characteristics. This aspect of PIMCO’s capabilities will be particularly

important to the extent that the Fund invests in floating rate loans, high

yield securities and in securities of emerging market issuers.

 

It is expected that the Fund normally will

have a short to intermediate average portfolio duration (i.e., within a

zero to eight (0 to 8) year range), as calculated by PIMCO, although it

may be shorter or longer at any time or from time to time depending on

market conditions and other factors. For example, if the Fund has an

average portfolio duration of eight years, a 1% increase in interest rates

would tend to correspond to an 8% decrease in the value of the Fund’s

debt portfolio. While the Fund seeks to maintain a short to intermediate

average portfolio duration, there is no limit on the maturity or duration

of any individual security in which the Fund may invest. Duration is a

measure used to determine the sensitivity of a security’s price to

changes in interest rates. The Fund's duration strategy may entail

maintaining a negative average portfolio duration from time to time,

meaning the portfolio would tend to increase in value in response to an

increase in interest rates. For example, if the Fund has a negative

average portfolio duration, a 1% increase in interest rates would tend to

correspond to a 1% increase in the value of the Fund's debt portfolio for

every year of negative duration. A negative average portfolio duration

would potentially benefit the portfolio in an environment of rising

market interest rates, but would generally adversely impact the portfolio

in an environment of falling or neutral market interest rates. See

“Principal Risks of the Fund—Interest Rate Risk.” The Fund may use

various derivatives strategies to manage (increase or decrease) the

dollar-weighted average effective duration of the Fund's portfolio.

[], 2024 |

  

The Fund seeks to achieve its investment objective by ordinarily

investing in a diversified portfolio of floating- and/or fixed-rate debt

instruments. The Fund may invest a substantial portion of its

floating-rate assets in floating-rate loans. Other floating-rate debt

instruments in which the Fund may invest include catastrophe and other

event-linked bonds, bank capital securities, unsecured and/or secured

loans (including, but not limited to, bank and/or other syndicated loans

and non-syndicated (private direct) loans), corporate bonds and other

debt securities, money market instruments and certain types of

mortgage-backed and other asset-backed securities that pay interest at

rates that adjust whenever a specified interest rate changes and/or reset

on predetermined dates (such as the last day of a month or calendar

quarter). The Fund also considers floating-rate assets to include

securities with durations of less than or equal to one year and fixed-rate

securities with respect to which the Fund has entered into derivative

instruments to effectively convert the fixed-rate interest payments into

floating-rate interest payments. The Fund also may invest in a wide

variety of fixed-rate debt securities, including corporate bonds and

mortgage-backed and other asset-backed securities issued on a public

or private basis, including mortgage pass-through securities (e.g.,

securities representing interests in “pools” of mortgage loans secured

by residential or commercial real property), collateralized mortgage

obligations (“CMOs”), commercial or residential mortgage-backed

securities, mortgage dollar rolls/buybacks, CMO residuals, stripped

mortgage-backed securities (“SMBSs”) (e.g., a type of mortgage-backed

security that receives differing proportions of the interest and principal

payments from the underlying assets) and other securities that directly

or indirectly represent a participation in, or are secured by and payable

from, mortgage loans on real property. The Fund may make use of a

variety of other instruments, including collateralized bond obligations

(“CBOs”), collateralized loan obligations (“CLOs”), collateralized debt

obligations (“CDOs”), preferred securities, commercial paper,

zero-coupon and inflation-indexed bonds, bank certificates of deposit,

fixed time deposits and bankers’ acceptances, real estate investment

trusts (“REITs”), bonds, debentures, notes, and other debt securities of

U.S. and foreign (non-U.S.) corporate and other issuers; obligations of

foreign governments or their sub-divisions, agencies and government

sponsored enterprises and obligations of international agencies and

supranational entities; municipal securities and other debt securities

issued by states or local governments and their agencies, authorities

and other government-sponsored enterprises, including taxable

municipal securities (such as Build America Bonds); inflation-indexed

bonds issued by both governments and corporations; structured notes,

including hybrid or indexed securities; credit-linked notes; structured

credit products; loans (including, among others, senior loans, delayed

draw and delayed funding loans, revolving credit facilities and loan

The Fund invests predominantly in U.S. dollar-denominated debt

securities, which may include those issued by foreign corporations or

supra-national government agencies. The Fund may invest without limit

in non-U.S. dollar denominated securities (of both developed and

“emerging market” countries), including obligations of

non-U.S. governments and their respective sub-divisions, agencies and

government-sponsored enterprises. The Fund may invest up to 40% of

its total assets in securities and instruments that are economically tied

to “emerging market” countries except the Fund may invest without

limit in investment grade sovereign debt denominated in the relevant

country's local currency with less than 1 year remaining to maturity

(“short-term investment grade sovereign debt”) issued by emerging

market issuers. The Fund may also invest directly in foreign currencies,

including local emerging market currencies.

The Fund may invest up to 20% of its total assets in common stocks and

other equity securities from time to time, including those it has received

through the conversion of a convertible security held by the Fund or in

3  Base Prospectus

The Fund may, but is not required to, utilize various derivative strategies

(both long and short positions) involving the purchase or sale of futures

and forward contracts (including foreign currency exchange contracts),

call and put options, credit default swaps, total return swaps, basis

swaps and other swap agreements and other derivative instruments for

investment purposes, leveraging purposes or in an attempt to hedge

against market, credit, interest rate, currency and other risks in the

portfolio. The Fund may purchase and sell securities on a when-issued,

delayed delivery or forward commitment basis and may engage in short

sales. The Fund may also seek to obtain market exposure to the

securities in which it invests by entering into a series of purchase and

sale contracts. The Fund may use derivative instruments for other

purposes, including to seek to increase liquidity, provide efficient

portfolio management, broaden investment opportunities (including

taking short or negative positions), implement a tax or cash

management strategy, gain exposure to a particular security or segment

of the market, modify the effective duration of the Fund's portfolio

investments and/or enhance total return.

The Fund may invest without limit in debt securities that are, at the time

of purchase, rated below investment grade (commonly referred to as

“high yield” securities or “junk bonds”) and may also invest without

limit in investment grade securities. However, the Fund will not normally

invest more than 20% of its total assets in debt instruments, other than

mortgage-related and other asset-backed securities, that are, at the

time of purchase, rated CCC+ or lower by S&P and Fitch and Caa1 or

lower by Moody’s, or that are unrated but determined by PIMCO to be

of comparable quality. The Fund may invest without limit in

mortgage-related and other asset-backed securities regardless of

rating—i.e., of any credit quality.

The Fund has a policy not to concentrate investments in any particular

industry, but may (consistent with that policy) invest up to 25% of its

assets in any particular industry, and may invest a substantial portion of

its assets in companies in related sectors, such as those in the banking

or financial services sectors, which may share common characteristics

and are often subject to similar business risks and regulatory burdens.

The Fund may invest in securities that have not been registered for

public sale in the U.S. or relevant non-U.S. jurisdictions, including

without limit securities eligible for purchase and sale pursuant to

Rule 144A under the Securities Act of 1933, as amended (the

“Securities Act”), or relevant provisions of applicable non-U.S. law, and

other securities issued in private placements. The Fund may invest in

securities of other open- or closed-end investment companies (including

those advised by PIMCO), including, without limitation,

exchange-traded funds (“ETFs”), to the extent that such investments

are consistent with the Fund’s investment objective, strategies and

policies and permissible under the Investment Company Act of 1940, as

amended (the “1940 Act”). The Fund may invest in securities of

companies of any market capitalization, including small and medium

capitalizations.

The Fund may enter into repurchase agreements, in which the Fund

purchases a security from a bank or broker-dealer and the bank or

broker-dealer agrees to repurchase the security at the Fund’s cost plus

interest within a specified time.

The Fund may lend its portfolio securities to brokers, dealers or other

financial institutions provided a number of conditions are satisfied,

including that the loan is fully collateralized.

The Fund may engage in frequent and active trading of portfolio

securities to achieve its investment objective, particularly during periods

of volatile market movements.

In connection with rating the Fund’s ARPS, Moody’s and Fitch impose

asset coverage tests and other restrictions that may limit the Fund’s

ability to engage in certain of the transactions described above.

In attempting to respond to adverse market, economic, political, or other

conditions, as determined by PIMCO, when PIMCO deems it appropriate

to do so, the Fund may, for temporary defensive purposes, deviate from

its investment strategy by investing some or all of its total assets in

investments such as high grade debt securities, including high quality,

short-term debt securities, and cash and cash equivalents. The Fund may

not achieve its investment objective when it does so.

The Fund has received exemptive relief from the SEC that, to the extent

the Fund relies on such relief, permits it to (among other things)

co-invest with certain other persons, including certain affiliates of the

Investment Manager and certain public or private funds managed by the

Investment Manager and its affiliates, subject to certain terms and

conditions. The exemptive relief from the SEC with respect to co

investments imposes extensive conditions on any co-investments made

in reliance on such relief.

The Fund currently utilizes leverage principally through reverse

repurchase agreements and may also obtain additional leverage

through the issuance of Preferred Shares and the use of dollar

rolls/buybacks or borrowings, such as through bank loans or commercial

paper, other credit facilities and/or other transactions. The amount of

leverage the Fund utilizes may vary but total leverage resulting from the

issuance of Preferred Shares and senior securities representing

indebtedness of the Fund will not exceed 50% of the Fund’s total assets

less all liabilities and indebtedness not represented by senior securities.

Information regarding the terms and features of the ARPS is provided

under “Description of Capital Structure” in this Prospectus.

The Fund may also enter into transactions other than those noted above

that may give rise to a form of leverage including, among others, selling

credit default swaps, futures and forward contracts (including foreign

currency exchange contracts), total return swaps and other derivative

transactions, loans of portfolio securities, short sales and when-issued,

[], 2024 |

  

Depending upon market conditions and other factors, the Fund may or

may not determine to add leverage following an offering to maintain or

increase the total amount of leverage (as a percentage of the Fund’s

total assets) that the Fund currently maintains, taking into account the

additional assets raised through the issuance of Common Shares in such

offering. The Fund utilizes certain kinds of leverage, such as reverse

repurchase agreements and selling credit default swaps,

opportunistically and may choose to increase or decrease, or eliminate

entirely, its use of such leverage over time and from time to time based

on PIMCO’s assessment of the yield curve environment, interest rate

trends, market conditions and other factors. The Fund may also

determine to decrease the leverage it currently maintains through its

outstanding Preferred Shares through Preferred Shares redemptions or

tender offers and may or may not determine to replace such leverage

through other sources. If the Fund determines to add leverage following

an offering, it is not possible to predict with accuracy the precise

amount of leverage that would be added, in part because it is not

possible to predict the number of Common Shares that ultimately will

be sold in an offering or series of offerings. To the extent that the Fund

does not add additional leverage following an offering, the Fund’s total

amount of leverage as a percentage of its total assets will decrease,

which could result in a reduction of investment income available for

distribution to holders of the Common Shares (“Common

Shareholders”).

The Fund’s net assets attributable to its Preferred Shares and the net

proceeds the Fund obtains from reverse repurchase agreements or other

forms of leverage utilized, if any, will be invested in accordance with the

Fund’s investment objective and policies as described in this prospectus

and any prospectus supplement. So long as the rate of return, net of

applicable Fund expenses, on the debt obligations and other

investments purchased by the Fund exceeds the dividend rates payable

on the Preferred Shares together with the costs to the Fund of other

leverage it utilizes, the investment of the Fund’s net assets attributable

to leverage will generate more income than will be needed to pay the

costs of the leverage. If so, and all other things being equal, the excess

may be used to pay higher dividends to Common Shareholders than if

the Fund were not so leveraged. There can be no assurance these

circumstances will occur.

Regarding the costs associated with the Fund’s ARPS, the terms of the

ARPS provide that they would ordinarily pay dividends at a rate set at

auctions held every seven days, normally payable on the first business

day following the end of the rate period, subject to a maximum

applicable rate calculated as a function of the ARPS’ then-current rating

and a reference interest rate. However, the weekly auctions for the

ARPS, as well as auctions for similar preferred shares of other

Under the 1940 Act, the Fund is not permitted to issue new Preferred

Shares unless, immediately after such issuance, the value of the Fund's

total assets, less the Fund’s liabilities and indebtedness not represented

by senior securities, is at least 200% of the liquidation value of any

outstanding Preferred Shares plus the aggregate amount of any senior

securities of the Fund representing indebtedness (i.e., such liquidation

value plus the aggregate amount of senior securities representing

indebtedness may not exceed 50% of the Fund's total assets, less the

Fund’s liabilities and indebtedness not represented by senior securities).

In addition, the Fund is not permitted to declare any cash dividend or

other distribution on its Common Shares unless, at the time of such

5  Base Prospectus

The Fund is subject to the 1940 Act requirement that an investment

company satisfy an asset coverage requirement of 300% of its senior

securities represented by indebtedness measured at the time the

investment company incurs the indebtedness. This means that at any

given time the value of the Fund's total senior securities represented

indebtedness may not exceed one-third the value of its total assets

(including assets attributable to such leverage). The Fund's issuance of

Preferred Shares and use of derivatives results in leverage, but any such

leverage is not subject to the 300% asset coverage requirement. This is

because (1) derivatives will, to the extent permitted by the Derivatives

Rule (as defined below), not be “senior securities” under the 1940 Act

and (2) under the 1940 Act, Preferred Shares are subject to the 200%

asset coverage requirement described above (not the 300% asset

coverage requirement applicable to indebtedness). The interests of

persons with whom the Fund enters into leverage arrangements will not

necessarily be aligned with the interests of the Fund's shareholders and

such persons will have claims on the Fund's assets that are senior to

those of the Fund's shareholders.

The Fund may enter into derivatives or other transactions that may

provide leverage (other than through the issuance of Preferred Shares or

bank borrowing). Rule 18f-4 under the 1940 Act (the “Derivatives

Rule”) regulates a registered investment company's use of derivatives

and certain other transactions that create future payment and/or

delivery obligations by the Fund. This rule became operative in August

2022. The Derivatives Rule prescribes specific value-at risk (“VaR”)

leverage limits that apply to the Fund (although the Fund in the future

could qualify as a limited derivatives user (as defined in the Derivatives

Rule) and would therefore not be subject to all the requirements of the

Derivatives Rule). VaR is an estimate of potential losses on an

instrument or portfolio over a specified time horizon and at a given

confidence level. The Fund may apply a relative VaR test or an absolute

VaR test (if the Fund's derivatives risk manager determines that a

designated reference portfolio would not provide an appropriate

reference portfolio for purposes of the relative VaR test). The limit under

the relative VaR test when a fund has outstanding preferred shares is

250% (or 200% when no preferred shares are outstanding) of the VaR

of a designated reference portfolio, which, very generally, may be a

designated unleveraged index or the fund's securities portfolio

excluding derivatives. If applicable, the limit under the absolute VaR test

when a fund has outstanding preferred shares is 25% (or 20% when no

preferred shares are outstanding) of the value of the fund's net assets.

The Derivatives Rule also requires the Fund to appoint a derivatives risk

manager, maintain a derivatives risk management program designed to

identify, assess, and reasonably manage the risks associated with

transactions covered by the rule, and abide by certain Board and other

reporting obligations and recordkeeping requirements. With respect to

reverse repurchase agreements or other similar financing transactions in

particular, the Derivatives Rule permits a fund to enter into such

transactions if the fund either (i) complies with the asset coverage

requirements of Section 18 of the 1940 Act, and combines the

The Fund’s ability to utilize leverage may also be limited by asset

coverage requirements and other guidelines imposed by the terms of

the Preferred Shares and may be imposed by rating agencies that

provide ratings for the Preferred Shares, which may be more restrictive

than the limitations imposed by the 1940 Act noted above. See

“Description of Capital Structure and Shares – Preferred Shares.”

Leveraging is a speculative technique and there are special risks and

costs involved. The Fund cannot assure you that its Preferred Shares and

use of any other forms of leverage (such as the use of reverse

repurchase agreements or derivatives strategies), if any, will result in a

higher yield on your Common Shares. When leverage is used, the NAV

and market price of the Common Shares and the yield to Common

Shareholders will be more volatile. See “Principal Risks of the

Fund—Leverage Risk.” In addition, dividend, interest and other costs

and expenses borne by the Fund with respect to its Preferred Shares and

its use of any other forms of leverage are borne by the Common

Shareholders (and not by the holders of Preferred Shares) and result in a

reduction of the NAV of the Common Shares.

In addition, because the fees received by the Investment Manager are

based on the average weekly total managed assets of the Fund (“total

managed assets” includes the total assets of the Fund (including any

assets attributable to any preferred shares or other forms of leverage

that may be outstanding) minus accrued liabilities (other than liabilities

representing leverage), the Investment Manager has a financial

incentive for the Fund to use preferred shares to obtain leverage (as

opposed to other available forms), which may create a conflict of

interest between the Investment Manager, on the one hand, and the

Common Shareholders, on the other hand.

The Fund’s ability to utilize leverage is also limited by asset coverage

requirements and other guidelines imposed by rating agencies (currently

Moody’s and Fitch) that provide ratings for the Preferred Shares, which

are more restrictive than the limitations imposed by the 1940 Act noted

above. See “Description of Capital Structure” for more information.

The Fund also may borrow money in order to repurchase its shares or as

a temporary measure for extraordinary or emergency purposes,

including for the payment of dividends or the settlement of securities

transactions which otherwise might require untimely dispositions of

portfolio securities held by the Fund.

[], 2024 |

  

Investment Manager

PIMCO serves as the investment manager of the Fund. Subject to the

supervision of the Board of Trustees of the Fund (the “Board”) PIMCO is

responsible for managing the investment activities of the Fund and the

Fund’s business affairs and other administrative matters. Alfred T.

Murata, Mohit Mittal and Giang Bui are jointly and primarily responsible

for the day-to-day management of the Fund.

The Investment Manager receives an annual fee from the Fund, payable

monthly, in an amount equal to 0.830% of the Fund’s average weekly

“total managed assets.” “Total managed assets” includes the total

assets of the Fund (including any assets attributable to any preferred

shares or other forms of leverage that may be outstanding) minus

accrued liabilities (other than liabilities representing leverage). For

purposes of calculating average weekly total managed assets, the

Fund’s derivative instruments will be valued based on their market

value. PIMCO is located at 650 Newport Center Drive, Newport Beach,

CA, 92660. Organized in 1971, PIMCO provides investment

management and advisory services to private accounts of institutional

and individual clients and to registered investment companies. PIMCO is

a majority-owned indirect subsidiary of Allianz SE, a publicly traded

European insurance and financial services company. As of December 31,

2023, PIMCO had approximately $1.86 trillion in assets under

management and $1.46 trillion in third party assets under

management.

The Fund makes regular monthly cash distributions to Common

Shareholders at a rate based upon the past and projected net income of

the Fund. Subject to applicable law, the Fund may fund a portion of its

distributions with gains from the sale of portfolio securities and other

sources. Distributions can only be made from net investment income

after paying any accrued dividends to holders of the Preferred Shares. 

The Fund’s dividend policy, as well as the dividend rate that the Fund

pays on its Common Shares, may vary as portfolio and market

conditions change, and will depend on a number of factors. There can

be no assurance that a change in market conditions or other factors will

not result in a change in the Fund distribution rate or that the rate will

be sustainable in the future.

The Fund generally distributes each year all of its net investment income

and net short-term capital gains. In addition, at least annually, the Fund

generally distributes net realized long-term capital gains not previously

distributed, if any. The Fund may distribute less than the entire amount

of net investment income earned in a particular period. The

undistributed net investment income would be available to supplement

future distributions. As a result, the distributions paid by the Fund for

any particular monthly period may be more or less than the amount of

net investment income actually earned by the Fund during the period.

The tax treatment and characterization of the Fund’s distributions may

vary significantly from time to time because of the varied nature of the

Fund’s investments.

The tax characterization of the Fund’s distributions made in a taxable

year cannot finally be determined until at or after the end of such

taxable year. As a result, there is a possibility that the Fund may make

total distributions during a taxable year in an amount that exceeds the

Fund’s net investment income and net realized capital gains for the

relevant year (as reduced by any capital loss carry-forwards). For

example, the Fund may distribute amounts early in the year that are

derived from short-term capital gains, but incur net short-term capital

losses later in the year, thereby offsetting short-term capital gains out of

which the Fund has already made distributions. In such a situation, the

amount by which the Fund’s total distributions exceed net investment

income and net realized capital gains would generally be treated as a

tax-free return of capital up to the amount of a shareholder’s tax basis

in his or her Common Shares, with any amounts exceeding such basis

treated as gain from the sale of Common Shares. In general terms, a

return of capital would occur where the Fund distribution (or portion

thereof) represents a return of a portion of your investment, rather than

net income or capital gains generated from your investment during a

particular period. Although return of capital distributions are not

taxable, such distributions would reduce the basis of a shareholder’s

Common Shares and therefore may increase a shareholder’s capital

gains, or decrease a shareholder’s capital loss, upon a sale of Common

Shares, thereby potentially increasing a shareholder’s tax liability. The

Fund will prepare and make available to shareholders detailed tax

information with respect to the Fund’s distributions annually. See “Tax

Matters.”

7  Base Prospectus

Unless a Common Shareholder elects to receive distributions in cash, all

distributions of Common Shareholders whose shares are registered with

the plan agent under the Dividend Reinvestment Plan (the “Plan”) will

be automatically reinvested in additional Common Shares of the Fund

under the Plan. For more information on the Fund’s dividends and

distributions, see “Distributions” and “Dividend Reinvestment Plan.”

The Board may change the Fund’s distribution policy and the amount or

timing of distributions, based on a number of factors, including the

amount of the Fund’s undistributed net investment income and net

short and long-term capital gains and historical and projected net

investment income and net short- and long-term capital gains.

State Street Bank and Trust Company serves as custodian of the Fund’s

assets and also provides certain fund accounting and sub-administrative

services to the Investment Manager on behalf of the Fund. Equiniti Trust

Company, LLC serves as the Fund’s transfer agent and dividend

disbursement agent. The Investment Manager, at its own expense, has

retained Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith,

Incorporated, and UBS Securities LLC to serve as shareholder servicing

agents for the Fund. Deutsche Bank Trust Company Americas serves as

auction agent, transfer agent, registrar, dividend paying agent and

redemption agent for the Preferred Shares. See “Custodian, Transfer

Agent, Shareholder Servicing Agent, Auction Agent and Dividend

Disbursement Agent.”

The Fund’s outstanding Common Shares are listed on the NYSE under

the trading or “ticker” symbol “PFN” as will be the Common Shares

offered in this prospectus, subject to notice of issuance.

Shares of closed-end investment companies frequently trade at prices

lower than NAV. Shares of closed-end investment companies have

during some periods traded at prices higher than NAV and during other

periods traded at prices lower than NAV. The Fund cannot assure you

that Common Shares will trade at a price equal to or higher than NAV in

the future. Proceeds from the sale of Common Shares of an offering will

be reduced by any sales load and/or commissions and the amount of

The following is a summary of the principal risks associated with an

investment in Common Shares of the Fund. Investors should also refer

to “Principal Risks of the Fund” in this prospectus and “Investment

Objective and Policies” in the Statement of Additional Information for a

more detailed explanation of these and other risks associated with

investing in the Fund.

The price of the Fund’s Common Shares will fluctuate with market

conditions and other factors. If you sell your Common Shares, the price

received may be more or less than your original investment. The

Common Shares are designed for long-term investors and should not be

treated as trading vehicles. Shares of closed-end management

investment companies frequently trade at a discount from their NAV. The

Common Shares may trade at a price that is less than the offering price

for Common Shares issued pursuant to an offering. This risk may be

greater for investors who sell their Common Shares relatively shortly

after completion of an offering. The sale of Common Shares by the Fund

(or the perception that such sales may occur), particularly if sold at a

discount to the then current market price of the Common Shares, may

have an adverse effect on the market price of the Common Shares.

The market price of securities owned by the Fund may go up or down,

sometimes rapidly or unpredictably. Securities may decline in value due

to factors affecting securities markets generally or particular industries

or companies represented in the securities markets. The value of a

security may decline due to general market conditions that are not

specifically related to a particular company, such as real or perceived

adverse economic conditions, changes in the general outlook for

corporate earnings, changes in interest or currency rates, adverse

changes to credit markets or adverse investor sentiment generally. The

value of a security may also decline due to factors that affect a

particular industry or industries, such as labor shortages or increased

production costs and competitive conditions within an industry. During

[], 2024 |

  

In addition, market risk includes the risk that geopolitical and other

events will disrupt the economy on a national or global level. For

instance, war, terrorism, social unrest, recessions, supply chain

disruptions, market manipulation, government defaults, government

shutdowns, political changes, diplomatic developments or the

imposition of sanctions and other similar measures, public health

emergencies (such as the spread of infectious diseases, pandemics and

epidemics), natural/environmental disasters, climate-change and climate

related events can all negatively impact the securities markets, which

could cause the Fund to lose value. These events could reduce consumer

demand or economic output, result in market closures, changes in

interest rates, inflation/deflation, travel restrictions or quarantines, and

significantly adversely impact the economy.

As computing technology and data analytics continually advance there

has been an increasing trend towards machine driven and artificially

intelligent trading systems, particularly providing such systems with

increasing levels of autonomy in trading decisions. More recently,

advancements in the artificial intelligence sector have rapidly

developed. In light of such advancements, regulators are increasingly

focused on considering regulations and market restrictions on the

artificial intelligence sector. Such regulations may relate to algorithmic

and other machine assisted trading strategies, including efforts to

require pre-testing of such techniques, to impose automatic volume

controls and/or to impose liability for negative or manipulative market

impacts of such trading. Such restrictions may also impair the operation

of fully autonomous trading systems and technologies, either by design

or inadvertently. In addition, such technologies are relatively recent

developments and may be subject to one or more undetected errors,

defects or security vulnerabilities. Some such errors may only be

discovered after a product or service has been used by end customers or

after substantial operations in the market place. Any exploitable errors

or security vulnerabilities discovered after such products are in wide

spread operation could result in substantial loss of revenues or assets,

or material liabilities or sanctions. The potential speed of such trading

technology may exacerbate the impact of any such flaws, particularly

where such flaws are exploited by other artificially intelligent systems

and may act to impair or prevent the intervention of a human control.

The current contentious domestic political environment, as well as

political and diplomatic events within the United States and abroad,

such as presidential elections in the U.S. or abroad or the

U.S. government’s inability at times to agree on a long-term budget and

deficit reduction plan, has in the past resulted, and may in the future

result, in a government shutdown or otherwise adversely affect the

U.S. regulatory landscape, the general market environment and/or

investor sentiment, which could have an adverse impact on the Fund’s

investments and operations. Additional and/or prolonged U.S. federal

Recently, there have been inflationary price movements. As such, fixed

income securities markets may experience heightened levels of interest

rate, volatility and liquidity risk. As discussed more under “Interest Rate

Risk,” the U.S. Federal Reserve (the “Federal Reserve”) has raised

interest rates from historically low levels and may continue to raise

interest rates. Any additional interest rate increases in the future could

cause the value of any fund, such as the Fund, that invests in fixed

income securities to decrease.

Although interest rates have significantly increased since 2022 through

the date of this prospectus, the prices of real estate-related assets

generally have not decreased as much as may be expected based on

historical correlations between interest rates and prices of real

estate-related assets. This presents an increased risk of a correction or

severe downturn in real estate-related asset prices, which could

adversely impact the value of other investments as well (such as loans,

securitized debt and other fixed income securities). This risk is

particularly present with respect to commercial real estate-related asset

prices, and the value of other investments with a connection to the

commercial real estate sector. As examples of the current risks faced by

real estate-related assets: tenant vacancy rates, tenant turnover and

tenant concentration have increased; owners of real estate have faced

headwinds, delinquencies and difficulties in collecting rents and other

payments (which increases the risk of owners being unable to pay or

otherwise defaulting on their own borrowings and obligations);

property values have declined; inflation, upkeep costs and other

expenses have increased; and rents have declined for many properties.

Exchanges and securities markets may close early, close late or issue

trading halts on specific securities, which may result in, among other

things, the Fund being unable to buy or sell certain securities or financial

instruments at an advantageous time or accurately price its portfolio

investments.

9  Base Prospectus

Asset Allocation Risk

The Fund’s investment performance depends upon how its assets are

allocated and reallocated. A principal risk of investing in the Fund is that

PIMCO may make less than optimal or poor asset allocation decisions.

PIMCO employs an active approach to allocation among multiple fixed-

income sectors, but there is no guarantee that such allocation

techniques will produce the desired results. It is possible that PIMCO

will focus on an investment that performs poorly or underperforms other

investments under various market conditions. You could lose money on

your investment in the Fund as a result of these allocation decisions.

The Fund is subject to management risk because it is an actively

managed investment portfolio. PIMCO and each individual portfolio

manager will apply investment techniques and risk analysis in making

investment decisions for the Fund, but there can be no guarantee that

these decisions will produce the desired results or that the due diligence

conducted by PIMCO or such other fund’s investment adviser and

individual portfolio managers will expose all material risks associated

with an investment. Additionally, PIMCO or such other fund’s

investment adviser and individual portfolio managers may not be able

to identify suitable investment opportunities and may face competition

from other investment managers when identifying and consummating

certain investments. Certain securities or other instruments in which the

Fund seeks to invest may not be available in the quantities desired,

including in circumstances where other funds for which PIMCO acts as

investment adviser, including funds with names, investment objectives

and policies, and/or portfolio management teams, similar to the Fund,

are seeking to invest in the same or similar securities or instruments. In

addition, regulatory restrictions, actual or potential conflicts of interest

or other considerations may cause PIMCO to restrict or prohibit

participation in certain investments. In such circumstances, PIMCO or

the individual portfolio managers may determine to purchase other

securities or instruments as substitutes. Such substitute securities or

instruments may not perform as intended, which could result in losses

to the Fund. To the extent the Fund employs strategies targeting

perceived pricing inefficiencies, arbitrage strategies or similar strategies,

it is subject to the risk that the pricing or valuation of the securities and

instruments involved in such strategies may change unexpectedly, which

may result in reduced returns or losses to the Fund. The Fund is also

subject to the risk that deficiencies in the internal systems or controls of

PIMCO or another service provider will cause losses for the Fund or

hinder Fund operations. For example, trading delays or errors (both

human and systemic) could prevent the Fund from purchasing a security

expected to appreciate in value. Please refer to “Investment

Manager—Conflicts of Interest” in the Statement of Additional

Information for further information. Additionally, actual or potential

conflicts of interest, legislative, regulatory, or tax restrictions, policies or

developments may affect the investment techniques available to PIMCO

and each individual portfolio manager in connection with managing the

Fund and may also adversely affect the ability of the Fund to achieve its

investment objective. There also can be no assurance that all of the

personnel of PIMCO will continue to be associated with PIMCO for any

In addition, the Fund may rely on various third-party sources to calculate

its NAV. As a result, the Fund is subject to certain operational risks

associated with reliance on service providers and service providers’ data

sources. In particular, errors or systems failures and other technological

issues may adversely impact the Fund’s calculations of its NAV, and such

NAV calculation issues may result in inaccurately calculated NAV, delays

in NAV calculation and/or the inability to calculate NAV over extended

periods. The Fund may be unable to recover any losses associated with

such failures.

The value of a security may decline for a number of reasons that directly

relate to the issuer, such as management performance, major litigation,

investigations or other controversies, changes in the issuer’s financial

condition or credit rating, changes in government regulations affecting

the issuer or its competitive environment and strategic initiatives such

as mergers, acquisitions or dispositions and the market response to any

such initiatives, financial leverage, reputation or reduced demand for the

issuer’s goods or services, as well as the historical and prospective

earnings of the issuer and the value of its assets. A change in the

financial condition of a single issuer may affect one or more other

issuers or securities markets as a whole. These risks can apply to the

Common Shares issued by the Fund and to the issuers of securities and

other instruments in which the Fund invests.

Interest rate risk is the risk that fixed income securities and other

instruments in the Fund’s portfolio will fluctuate in value because of a

change in interest rates. For example, as nominal interest rates rise, the

value of certain fixed income securities held by the Fund is likely to

decrease. A nominal interest rate can be described as the sum of a real

interest rate and an expected inflation rate. Interest rate changes can be

sudden and unpredictable, and the Fund may lose money as a result of

movements in interest rates. The Fund may not be able to effectively

hedge against changes in interest rates or may choose not to do so for

cost or other reasons.

A wide variety of factors can cause interest rates or yields of

U.S. Treasury securities (or yields of other types of bonds) to rise,

including but not limited to central bank monetary policies, changing

inflation or real growth rates, general economic conditions, increasing

bond issuances or reduced market demand for low yielding investments.

Risks associated with rising interest rates are heightened under current

market conditions given that the Federal Reserve has raised interest

rates from historically low levels and may continue to raise interest

rates. In addition, changes in monetary policy may exacerbate the risks

associated with changing interest rates. Further, in market environments

where interest rates are rising, issuers may be less willing or able to

make principal and interest payments on fixed-income investments

when due.

[], 2024 |

  

Variable and floating rate securities may decline in value if their interest

rates do not rise as much, or as quickly, as interest rates in general.

Conversely, floating rate securities will not generally increase in value if

interest rates decline. Inverse floating rate securities may decrease in

value if interest rates increase. Inverse floating rate securities may also

exhibit greater price volatility than a fixed rate obligation with similar

credit quality. When the Fund holds variable or floating rate securities, a

decrease (or, in the case of inverse floating rate securities, an increase)

in market interest rates will adversely affect the income received from

such securities and the NAV of the Fund’s shares.

During periods of very low or negative interest rates, the Fund may be

unable to maintain positive returns. Very low or negative interest rates

may magnify interest rate risk. Changing interest rates, including rates

that fall below zero, may have unpredictable effects on markets, may

result in heightened market volatility and may detract from Fund

performance to the extent the Fund is exposed to such interest rates.

Measures such as average duration may not accurately reflect the true

interest rate sensitivity of the Fund. This is especially the case if the Fund

consists of securities with widely varying durations. Therefore, if the

Fund has an average duration that suggests a certain level of interest

rate risk, the Fund may in fact be subject to greater interest rate risk

than the average would suggest. This risk is greater to the extent the

Fund uses leverage or derivatives in connection with the management

of the Fund.

Convexity is an additional measure used to understand a security's or

fund's interest rate sensitivity.  Convexity measures the rate of change

of duration in response to changes in interest rates. With respect to a

security’s price, a larger convexity (positive or negative) may imply more

dramatic price changes in response to changing interest rates. Convexity

may be positive or negative. Negative convexity implies that interest

rate increases result in increased duration and that interest rate

decreases result in declining duration (i.e., increased sensitivity in prices

in response to rising and/or declining interest rates). Thus, securities

with negative convexity, which may include bonds with traditional call

features and certain mortgage-backed securities, may experience

greater losses in periods of rising interest rates. Accordingly, if the Fund

holds such securities, the Fund may be subject to a greater risk of losses

in periods of rising interest rates.

The Fund could lose money if the issuer or guarantor of a fixed income

security (including a security purchased with securities lending

collateral), or the counterparty to a derivatives contract, repurchase

agreement or a loan of portfolio securities is unable or unwilling, or is

perceived (whether by market participants, rating agencies, pricing

services or otherwise) as unable or unwilling, to make timely principal

and/or interest payments or to otherwise honor its obligations. The risk

that such issuer, guarantor or counterparty is less willing or able to do

so is heightened in market environments where interest rates are rising.

The downgrade of the credit of a security held by the Fund may

decrease its value. Measures such as average credit quality may not

accurately reflect the true credit risk of the Fund. This is especially the

case if the Fund consists of securities with widely varying credit ratings.

Credit risk is greater to the extent the Fund uses leverage or derivatives

in connection with the management of the Fund. Rising or high interest

rates may deteriorate the credit quality of an issuer or counterparty,

particularly if an issuer or counterparty faces challenges rolling or

refinancing its obligations.

Generally, rising interest rates tend to extend the duration of fixed rate

mortgage-related assets, making them more sensitive to changes in

interest rates. As a result, in a period of rising interest rates, the Fund

may exhibit additional volatility since individual mortgage holders are

less likely to exercise prepayment options, thereby putting additional

downward pressure on the value of these securities and potentially

causing the Fund to lose money. The Fund’s investments in other

asset-backed instruments are subject to risks similar to those associated

with mortgage-related assets, as well as additional risks associated with

the nature of the assets and the servicing of those assets. Payment of

principal and interest on asset-backed instruments may be largely

dependent upon the cash flows generated by the assets backing the

instruments, and asset-backed instruments may not have the benefit of

any security interest in the related assets.

11  Base Prospectus

The mortgage markets in the United States and in various foreign

countries have experienced extreme difficulties in the past that

adversely affected the performance and market value of certain

mortgage-related investments. Delinquencies and losses on residential

and commercial mortgage loans (especially subprime and second-lien

mortgage loans) may increase, and a decline in or flattening of housing

and other real property values may exacerbate such delinquencies and

losses. In addition, reduced investor demand for mortgage loans and

mortgage-related securities and increased investor yield requirements

have caused limited liquidity in the secondary market for

mortgage-related securities, which can adversely affect the market value

of mortgage-related securities. It is possible that such limited liquidity in

such secondary markets could continue or worsen.

Mortgage-related derivative instruments involve risks associated with

mortgage-related and other asset-backed instruments, privately-issued

mortgage-related securities, the mortgage market, the real estate

industry, derivatives and credit default swaps. See “Mortgage-Related

and Other Asset-Backed Instruments Risk,” “Privately-Issued

Mortgage-Related Securities Risk,” “Derivatives Risk,” and “Credit

Default Swaps Risk.”

There are no direct or indirect government or agency guarantees of

payments in pools created by non-governmental issuers. Privately-issued

mortgage-related securities are also not subject to the same

underwriting requirements for the underlying mortgages that are

applicable to those mortgage-related securities that have a government

or government-sponsored entity guarantee.

Privately-issued mortgage-related securities are not traded on an

exchange and there may be a limited market for the securities, especially

when there is a perceived weakness in the mortgage and real estate

market sectors. Without an active trading market, mortgage-related

securities held in the Fund’s portfolio may be particularly difficult to

value because of the complexities involved in assessing the value of the

underlying mortgage loans.

High Yield Securities Risk

To the extent that the Fund invests in high yield securities and unrated

securities of similar credit quality (commonly known as “high yield

securities” or “junk bonds”), the Fund may be subject to greater levels

of credit risk, call risk and liquidity risk than funds that do not invest in

such securities, which could have a negative effect on the NAV and

market price of the Fund’s Common Shares or Common Share

dividends. These securities are considered predominantly speculative

with respect to an issuer’s continuing ability to make principal and

interest payments, and may be more volatile than other types of

securities. An economic downturn or individual corporate developments

could adversely affect the market for these securities and reduce the

Fund’s ability to sell these securities at an advantageous time or price.

The Fund may purchase distressed securities that are in default or the

issuers of which are in bankruptcy, which involve heightened risks.

High yield securities structured as zero-coupon bonds or pay-in-kind

securities tend to be especially volatile as they are particularly sensitive

to downward pricing pressures from rising interest rates or widening

spreads and may require the Fund to make taxable distributions of

imputed income without receiving the actual cash currency. Issuers of

high yield securities may have the right to “call” or redeem the issue

prior to maturity, which may result in the Fund having to reinvest the

proceeds in other high yield securities or similar instruments that may

pay lower interest rates. The Fund may also be subject to greater levels

of liquidity risk than funds that do not invest in high yield securities.

Consequently, transactions in high yield securities may involve greater

costs than transactions in more actively traded securities. A lack of

publicly-available information, irregular trading activity and wide

bid/ask spreads among other factors, may, in certain circumstances,

make high yield debt more difficult to sell at an advantageous time or

price than other types of securities or instruments. These factors may

result in the Fund being unable to realize full value for these securities

and/or may result in the Fund not receiving the proceeds from a sale of

a high yield security for an extended period after such sale, each of

which could result in losses to the Fund. Because of the risks involved in

investing in high yield securities, an investment in the Fund should be

considered speculative.

In general, lower rated debt securities carry a greater degree of risk that

the issuer will lose its ability to make interest and principal payments,

which could have a negative effect on the Fund. Securities of below

investment grade quality are regarded as having predominantly

speculative characteristics with respect to capacity to pay interest and

repay principal and are commonly referred to as “high yield” securities

or “junk bonds.” High yield securities involve a greater risk of default

and their prices are generally more volatile and sensitive to actual or

perceived negative developments. Debt securities in the lowest

investment grade category also may be considered to possess some

speculative characteristics by certain rating agencies. The Fund may

purchase stressed or distressed securities that are in default or the

issuers of which are in bankruptcy, which involve heightened risks.

[], 2024 |

  

The Fund’s credit quality policies apply only at the time a security is

purchased, and the Fund is not required to dispose of a security in the

event that a rating agency or PIMCO downgrades its assessment of the

credit characteristics of a particular issue. In determining whether to

retain or sell such a security, PIMCO may consider factors including, but

not limited to, PIMCO's assessment of the credit quality of the issuer of

such security, the price at which such security could be sold and the

rating, if any, assigned to such security by other rating agencies. Analysis

of creditworthiness may be more complex for issuers of high yield

securities than for issuers of higher quality debt securities.

See “Investment Objective and Policies–Portfolio Contents-High Yield

Securities” for additional information.

Investments in the securities of financially distressed issuers involve

substantial risks, including the risk of default. Distressed securities

generally trade significantly below “par” or full value because

investments in such securities and debt of distressed issuers or issuers in

default are considered speculative and involve substantial risks in

addition to the risks of investing in high-yield bonds. Such investments

may be in default at the time of investment. In addition, these securities

may fluctuate more in price, and are typically less liquid. The Fund also

will be subject to significant uncertainty as to when, and in what

manner, and for what value obligations evidenced by securities of

financially distressed issuers will eventually be satisfied. Defaulted

obligations might be repaid only after lengthy workout or bankruptcy

proceedings, during which the issuer might not make any interest or

other payments. In any such proceeding relating to a defaulted

obligation, the Fund may lose its entire investment or may be required

to accept cash or securities with a value substantially less than its

original investment. Moreover, any securities received by the Fund upon

completion of a workout or bankruptcy proceeding may be less liquid,

speculative or restricted as to resale. Similarly, if the Fund participates in

negotiations with respect to any exchange offer or plan of

reorganization with respect to the securities of a distressed issuer, the

Fund may be restricted from disposing of such securities. To the extent

Also among the risks inherent in investments in a troubled issuer is that

it frequently may be difficult to obtain information as to the true

financial condition of such issuer. PIMCO’s judgments about the credit

quality of a financially distressed issuer and the relative value of its

securities may prove to be wrong.

Inflation-indexed debt securities are subject to the effects of changes in

market interest rates caused by factors other than inflation (real interest

rates). In general, the value of an inflation-indexed security, including

Treasury Inflation-Protected Securities (“TIPS”), tends to decrease when

real interest rates increase and can increase when real interest rates

decrease. Thus generally, during periods of rising inflation, the value of

inflation-indexed securities will tend to increase and during periods of

deflation, their value will tend to decrease. Interest payments on

inflation-indexed securities are unpredictable and will fluctuate as the

principal and interest are adjusted for inflation. There can be no

assurance that the inflation index used (i.e., the Consumer Price Index

(“CPI”)) will accurately measure the real rate of inflation in the prices of

goods and services. Increases in the principal value of TIPS due to

inflation are considered taxable ordinary income for the amount of the

increase in the calendar year. Any increase in the principal amount of an

inflation-indexed debt security will be considered taxable ordinary

income, even though the Fund will not receive the principal until

maturity. Additionally, a CPI swap can potentially lose value if the

realized rate of inflation over the life of the swap is less than the fixed

market implied inflation rate (fixed breakeven rate) that the investor

agrees to pay at the initiation of the swap. With municipal

inflation-indexed securities, the inflation adjustment is integrated into

the coupon payment, which is federally tax-exempt (and may be state

tax-exempt). For municipal inflation-indexed securities, there is no

adjustment to the principal value. Because municipal inflation-indexed

securities are a small component of the municipal bond market, they

may be less liquid than conventional municipal bonds.

Loan interests may take the form of direct interests acquired during a

primary distribution or other purchase of a loan, or assignments of,

novations of or participations in all or a portion of a loan acquired in

secondary markets. In addition to credit risk and interest rate risk, the

Fund's exposure to loan interests may be subject to additional risks. For

example, purchasers of loans and other forms of direct indebtedness

depend primarily upon the creditworthiness of the borrower for

payment of principal and interest. Loans are subject to the risk that

scheduled interest or principal payments will not be made in a timely

manner or at all, either of which may adversely affect the value of the

loan. If the Fund does not receive scheduled interest or principal

13  Base Prospectus

Moreover, the purchaser of an assignment typically succeeds to all the

rights and obligations under the loan agreement with the same rights

and obligations as the assigning lender. Assignments may, however, be

arranged through private negotiations between potential assignees and

potential assignors, and the rights and obligations acquired by the

purchaser of an assignment may differ from, and be more limited than,

those held by the assigning lender.

Investments in loans through a purchase of a loan or a direct

assignment of a financial institution’s interests with respect to a loan

may involve additional risks to the Fund. For example, if a loan is

foreclosed, the Fund could become owner, in whole or in part, of any

collateral, which could include, among other assets, real estate or other

real or personal property, and would bear the costs and liabilities

associated with owning and holding or disposing of the collateral. The

purchaser of an assignment typically succeeds to all the rights and

obligations under the loan agreement with the same rights and

obligations as the assigning lender. Assignments may, however, be

arranged through private negotiations between potential assignees and

potential assignors, and the rights and obligations acquired by the

purchaser of an assignment may differ from, and be more limited than,

those held by the assigning lender.

In connection with purchasing loan participations, the Fund generally

will have no right to enforce compliance by the borrower with the terms

of the loan agreement relating to the loan, nor any rights

of set-off against the borrower, and the Fund may not directly benefit

from any collateral supporting the loan in which it has purchased the

loan participation. As a result, the Fund will be subject to the credit risk

of both the borrower and the lender that is selling the participation. In

the event of the insolvency of the lender selling a participation, the Fund

may be treated as a general creditor of the lender and may not benefit

from any set-off between the lender and the borrower. Certain loan

participations may be structured in a manner designed to prevent

purchasers of participations from being subject to the credit risk of the

lender, but even under such a structure, in the event of the lender’s

insolvency, the lender’s servicing of the participation may be delayed

and the assignability of the participation impaired.

The Fund may have difficulty disposing of loans and loan participations.

Because there is no liquid market for many such investments, the Fund

anticipates that such investments could be sold only to a limited number

of institutional investors. The lack of a liquid secondary market may have

an adverse impact on the value of such investments and the Fund’s

ability to dispose of particular loans and loan participations when that

would be desirable, including in response to a specific economic event

Investments in loans may include participations in bridge loans, which

are loans taken out by borrowers for a short period (typically less than

one year) pending arrangement of more permanent financing through,

for example, the issuance of bonds, frequently high yield bonds issued

for the purpose of acquisitions.

Investments in loans may include acquisitions of, or participation in,

delayed draw and delayed funding loans and revolving credit facilities.

These commitments may have the effect of requiring the Fund to

increase its investment in a borrower at a time when it might not

otherwise decide to do so (including at a time when the company’s

financial condition makes it unlikely that such amounts will be repaid).

Delayed draw and delayed funding loans and revolving credit facilities

may be subject to restrictions on transfer, and only limited opportunities

may exist to resell such instruments. As a result, a Fund may be unable

to sell such investments at an opportune time or may have to resell

them at less than fair market value. Further, the Fund may need to hold

liquid assets in order to provide funding for these types of

commitments, meaning the Fund may not be able to invest in other

attractive investments, or the Fund may need to liquidate existing assets

in order to provide such funding.

To the extent the Fund invests in loans (including, but not limited to,

bank loans and non-syndicated loans), the Fund may be subject to

greater levels of credit risk, call risk, settlement risk and liquidity risk.

These instruments are considered predominantly speculative with

respect to an issuer’s continuing ability to make principal and interest

payments and may be more volatile than other types of securities. The

Fund may also be subject to greater levels of liquidity risk than funds

that do not invest in loans. In addition, the loans in which the Fund

invests may not be listed on any exchange and a secondary market for

such loans may be comparatively illiquid relative to markets for other

more liquid fixed income securities. Consequently, transactions in loans

may involve greater costs than transactions in more actively traded

securities. In connection with certain loan transactions, transaction costs

that are borne by the Fund may include the expenses of third parties

that are retained to assist with reviewing and conducting diligence,

negotiating, structuring and servicing a loan transaction, and/or

providing other services in connection therewith. Furthermore, the Fund

may incur such costs in connection with loan transactions that are

pursued by the Fund but not ultimately consummated (so-called

“broken deal costs”).

Restrictions on transfers in loan agreements, a lack of publicly available

information, irregular trading activity and wide bid/ask spreads, among

other factors, may, in certain circumstances, make loans more difficult to

sell at an advantageous time or price than other types of securities or

instruments. These factors may result in the Fund being unable to realize

full value for the loans and/or may result in the Fund not receiving the

proceeds from a sale of a loan for an extended period after such sale,

each of which could result in losses to the Fund. Some loans may have

[], 2024 |

  

The Fund’s investments in subordinated and unsecured loans generally

are subject to similar risks as those associated with investments in

secured loans. Subordinated or unsecured loans are lower in priority of

payment to secured loans and are subject to the additional risk that the

cash flow of the borrower and property securing the loan or debt, if any,

may be insufficient to meet scheduled payments after giving effect to

the senior secured obligations of the borrower. This risk is generally

higher for subordinated unsecured loans or debt, which are not backed

by a security interest in any specific collateral. Subordinated and

unsecured loans generally have greater price volatility than secured

loans and may be less liquid. There is also a possibility that originators

will not be able to sell participations in subordinated or unsecured

loans, which would create greater credit risk exposure for the holders of

such loans. Subordinate and unsecured loans share the same risks as

other below investment grade securities.

There may be less readily available information about most loans and

the underlying borrowers than is the case for many other types of

securities. Loans may be issued by borrowers that are not subject to SEC

reporting requirements and therefore may not be required to file reports

with the SEC or may file reports that are not required to comply with

SEC form requirements. In addition, such borrowers may be subject to a

less stringent liability disclosure regime than companies subject to SEC

reporting requirements. Loans may not be considered “securities,” and

purchasers, such as the Fund, therefore may not be entitled to rely on

the anti-fraud protections of the federal securities laws. Because there is

limited public information available regarding loan investments, the

Fund is particularly dependent on the analytical abilities of the Fund’s

portfolio managers.

Economic exposure to loan interests through the use of derivative

transactions may involve greater risks than if the Fund had invested in

the loan interest directly during a primary distribution, through

assignments of, novations of or participations in a loan acquired in

secondary markets since, in addition to the risks described above,

certain derivative transactions may be subject to leverage risk and

greater illiquidity risk, counterparty risk, valuation risk and other risks.

Covenant-lite obligations contain fewer maintenance covenants than

other obligations, or no maintenance covenants, and may not include

terms that allow the lender to monitor the performance of the borrower

and declare a default if certain criteria are breached. Covenant-lite

loans carry a risk that the borrower could transfer or encumber its

assets, which could reduce the amount of assets that can be used to

satisfy debts and result in losses for debtholders. Covenant-lite loans

may carry more risk than traditional loans as they allow individuals and

Loans, and debt instruments collateralized by loans, acquired by the

Fund may be subprime in quality, or may become subprime in quality.

Although there is no specific legal or market definition of “subprime,”

subprime loans are generally understood to refer to loans made to

borrowers that display poor credit histories and other characteristics

that correlate with a higher default risk. Accordingly, subprime loans,

and debt instruments secured by such loans have speculative

characteristics and are subject to heightened risks, including the risk of

nonpayment of interest or repayment of principal, and the risks

associated with investments in high yield securities. In addition, these

instruments could be subject to increased regulatory scrutiny. The Fund

is not restricted by any particular borrower credit risk criteria and/or

qualifications when acquiring loans or debt instruments collateralized

by loans.

Income from the Fund’s portfolio will decline if and when the Fund

invests the proceeds from matured, traded or called debt obligations at

market interest rates that are below the portfolio’s current earnings rate.

For instance, during periods of declining interest rates, an issuer of debt

obligations may exercise an option to redeem securities prior to

maturity, forcing the Fund to invest in lower-yielding securities. The Fund

also may choose to sell higher yielding portfolio securities and to

purchase lower yielding securities to achieve greater portfolio

diversification, because the portfolio managers believe the current

holdings are overvalued or for other investment-related reasons. A

decline in income received by the Fund from its investments is likely to

have a negative effect on dividend levels and the market price, NAV

and/or overall return of the Common Shares.

Call risk refers to the possibility that an issuer may exercise its right to

redeem a fixed income security earlier than expected (a call). Issuers

may call outstanding securities prior to their maturity for a number of

reasons (e.g., declining interest rates, changes in credit spreads and

improvements in the issuer's credit quality). If an issuer calls a security in

which the Fund has invested, the Fund may not recoup the full amount

of its initial investment and may be forced to reinvest in lower-yielding

securities, securities with greater credit risks or securities with other, less

favorable features.

Foreign (non-U.S.) securities may experience more rapid and extreme

changes in value than securities of U.S. issuers or securities that trade

exclusively in U.S. markets. The securities markets of many foreign

countries are relatively small, with a limited number of companies

15  Base Prospectus

Foreign (non-U.S.) investment risk may be particularly high to the extent

that the Fund invests in securities of issuers based in or doing business

in emerging market countries or invests in securities denominated in the

currencies of emerging market countries. Investing in securities of

issuers based in or doing business in emerging markets entails all of the

risks of investing in foreign securities noted above, but to a heightened

degree.

Investments in emerging market countries pose a greater degree of

systemic risk (i.e., the risk of a cascading collapse of multiple institutions

within a country, and even multiple national economies). The

inter-relatedness of economic and financial institutions within and

among emerging market economies has deepened over the years, with

the effect that institutional failures and/or economic difficulties that are

of initially limited scope may spread throughout a country, a region or

all or most emerging market countries. This may undermine any attempt

by the Fund to reduce risk through geographic diversification of its

portfolio.

There is a heightened possibility of imposition of withholding taxes on

interest or dividend income generated from emerging market securities.

Governments of emerging market countries may engage in confiscatory

taxation or expropriation of income and/or assets to raise revenues or to

pursue a domestic political agenda. In the past, emerging market

countries have nationalized assets, companies and even entire sectors,

including the assets of foreign investors, with inadequate or no

compensation to the prior owners. There can be no assurance that the

Fund will not suffer a loss of any or all of its investments, or interest or

dividends thereon, due to adverse fiscal or other policy changes in

emerging market countries.

There is also a greater risk that an emerging market government may

take action that impedes or prevents the Fund from taking income

and/or capital gains earned in the local currency and converting into

U.S. dollars (i.e., “repatriating” local currency investments or profits).

Certain emerging market countries have sought to maintain foreign

exchange reserves and/or address the economic volatility and

dislocations caused by the large international capital flows by

controlling or restricting the conversion of the local currency into other

currencies. This risk tends to become more acute when economic

conditions otherwise worsen. There can be no assurance that if the Fund

earns income or capital gains in an emerging market currency or PIMCO

otherwise seeks to withdraw the Fund’s investments from a given

emerging market country, capital controls imposed by such country will

not prevent, or cause significant expense, or delay in, doing so.

Emerging market countries typically have less established legal,

accounting and financial reporting systems than those in more

developed markets, which may reduce the scope or quality of financial

information available to investors. Governments in emerging market

countries are often less stable and more likely to take extra-legal action

with respect to companies, industries, assets, or foreign ownership than

those in more developed markets. Moreover, it can be more difficult for

investors to bring litigation or enforce judgments against issuers in

emerging markets or for U.S. regulators to bring enforcement actions

against such issuers. The Fund may also be subject to emerging markets

risk if it invests in derivatives or other securities or instruments whose

value or return are related to the value or returns of emerging markets

securities.

The economy of some emerging markets may be particularly exposed to

or affected by a certain industry or sector, and therefore issuers and/or

securities of such emerging markets may be more affected by the

performance of such industries or sectors.

If the Fund invests directly in foreign (non-U.S.) currencies or in

securities that trade in, and receive revenues in, foreign (non-U.S.)

currencies, or in derivatives or other instruments that provide exposure

to foreign (non-U.S.) currencies, it will be subject to the risk that those

currencies will decline in value relative to the U.S. dollar, or, in the case

of hedging positions, that the U.S. dollar will decline in value relative to

the currency being hedged. Although the Fund may attempt to hedge its

currency exposure into the U.S. dollar, it may not be successful in

reducing the effects of currency fluctuations. The Fund may also hedge

from one foreign currency to another. In addition, the Fund's use of

currency hedging may not be successful and the use of such strategies

may lower the Fund's potential returns.

Investments denominated in foreign (non-U.S.) currencies or that trade

in, and receive revenues in, foreign (non-U.S.) currencies, derivatives or

other investments that provide exposure to foreign (non-U.S.)

currencies, are subject to the risk that those currencies will decline in

value relative to the U.S. dollar, or, in the case of hedging positions, that

the U.S. dollar will decline in value relative to the currency being

hedged.

Currency rates in foreign (non-U.S.) countries may fluctuate significantly

over short periods of time for a number of reasons, including changes in

interest rates, rates of inflation, balance of payments and governmental

surpluses or deficits, intervention (or the failure to intervene) by U.S. or

foreign (non-U.S.) governments, central banks or supranational entities

such as the International Monetary Fund, or by the imposition of

[], 2024 |

  

Certain U.S. government securities, such as U.S. Treasury bills, notes,

bonds, and mortgage-related securities guaranteed by the Government

National Mortgage Association (“GNMA”), are supported by the full

faith and credit of the United States; others, such as those of the Federal

Home Loan Banks (“FHLBs”) or the Federal Home Loan Mortgage

Corporation (“FHLMC”), are supported by the right of the issuer to

borrow from the U.S. Department of the Treasury (the “U.S. Treasury”);

others, such as those of the Federal National Mortgage Association

(“FNMA”), are supported by the discretionary authority of the

U.S. government to purchase the agency’s obligations; and still others

are supported only by the credit of the agency, instrumentality or

corporation. U.S. government securities are subject to market risk,

interest rate risk and credit risk. Although legislation has been enacted

to support certain government sponsored entities, including the FHLBs,

FHLMC and FNMA, there is no assurance that the obligations of such

entities will be satisfied in full, or that such obligations will not decrease

in value or default. It is difficult, if not impossible, to predict the future

political, regulatory or economic changes that could impact the

government sponsored entities and the values of their related securities

or obligations. In addition, certain governmental entities, including

FNMA and FHLMC, have been subject to regulatory scrutiny regarding

their accounting policies and practices and other concerns that may

result in legislation, changes in regulatory oversight and/or other

consequences that could adversely affect the credit quality, availability

or investment character of securities issued by these entities. Yields

available from U.S. government debt securities are generally lower than

the yields available from other debt securities. The values of

U.S. government securities change as interest rates fluctuate.

Periodically, uncertainty regarding the status of negotiations in the

U.S. government to increase the statutory debt ceiling could increase the

risk that the U.S. government may default on payments on certain

U.S. government securities, cause the credit rating of the

U.S. government to be downgraded, increase volatility in the stock and

bond markets, result in higher interest rates, reduce prices of

U.S. Treasury and other securities, and/or increase the costs of various

kinds of debt. If a government-sponsored entity is negatively impacted

by legislative or regulatory action (or lack thereof), is unable to meet its

obligations, or its creditworthiness declines, the performance of a fund

that holds securities of the entity will be adversely impacted.

Convertible Securities Risk

The market values of convertible securities may decline as interest rates

increase and, conversely, may increase as interest rates decline. A

convertible security’s market value, however, tends to reflect the market

price of the common stock of the issuing company when that stock price

approaches or is greater than the convertible security’s “conversion

price.” The conversion price is defined as the predetermined price at

which the convertible security could be exchanged for the associated

stock. As the market price of the underlying common stock declines, the

price of the convertible security tends to be influenced more by the yield

of the convertible security. Thus, it may not decline in price to the same

extent as the underlying common stock. In the event of a liquidation of

the issuing company, holders of convertible securities may be paid

before the company’s common stockholders but after holders of any

senior debt obligations of the company. Consequently, the issuer’s

convertible securities generally entail less risk than its common stock

but more risk than its other debt obligations. Convertible securities are

often rated below investment grade or not rated.

Synthetic convertible securities involve the combination of separate

securities that possess the two principal characteristics of a traditional

convertible security (i.e., an income-producing component and a right to

acquire an equity security). Synthetic convertible securities are often

achieved, in part, through investments in warrants or options to buy

common stock (or options on a stock index), and therefore are subject

to the risks associated with derivatives. The value of a synthetic

convertible security will respond differently to market fluctuations than

a traditional convertible security because a synthetic convertible is

composed of two or more separate securities or instruments, each with

its own market value. Because the convertible component is typically

achieved by investing in warrants or options to buy common stock at a

certain exercise price, or options on a stock index, synthetic convertible

securities are subject to the risks associated with derivatives. In

addition, if the value of the underlying common stock or the level of the

index involved in the convertible component falls below the exercise

price of the warrant or option, the warrant or option may lose all value.

Contingent convertible securities (“CoCos”) have no stated maturity,

have fully discretionary coupons and are typically issued in the form of

subordinated debt instruments. CoCos generally either convert into

equity or have their principal written down (including potentially to

zero) upon the occurrence of certain triggering events (“triggers”)

linked to regulatory capital thresholds or regulatory actions relating to

the issuer's continued viability. As a result, an investment by the Fund in

CoCos is subject to the risk that coupon (i.e., interest) payments may be

cancelled by the issuer or a regulatory authority in order to help the

issuer absorb losses and the risk of total loss. An investment by the Fund

in CoCos is also subject to the risk that, in the event of the liquidation,

dissolution or winding-up of an issuer prior to a trigger event, the

Fund's rights and claims will generally rank junior to the claims of

holders of the issuer's other debt obligations and CoCos may also be

17  Base Prospectus

Certain securities in which the Fund invests may be less liquid and more

difficult to value than other types of securities. Investments for which

market quotations are not readily available or are valued at fair value as

determined in good faith pursuant to Rule 2a-5 under the Act. Fair value

pricing may require subjective determinations about the value of a

security or other asset. As a result, there can be no assurance that fair

value pricing will result in adjustments to the prices of securities or other

assets, or that fair value pricing will reflect actual market value, and it is

possible that the fair value determined for a security or other asset will

be materially different from quoted or published prices, from the prices

used by others for the same security or other asset and/or from the

value that actually could be or is realized upon the sale of that security

or other asset.

The Fund’s use of leverage (as described under “Use of Leverage” in the

body of this prospectus) creates the opportunity for increased Common

Share net income, but also creates special risks for Common

Shareholders (including an increased risk of loss). To the extent used,

there is no assurance that the Fund’s leveraging strategies will be

successful. Leverage is a speculative technique that may expose the

Fund to greater risk and increased costs. The Fund’s assets attributable

to leverage, if any, will be invested in accordance with the Fund’s

investment objective and policies. Interest expense payable by the Fund

with respect to derivatives and other forms of leverage, and dividends

payable with respect to any preferred shares outstanding, if any, will

generally be based on shorter-term interest rates that would be

periodically reset. So long as the Fund’s portfolio investments provide a

higher rate of return (net of applicable Fund expenses) than the interest

expenses and other costs to the Fund of such leverage, the investment

of the proceeds thereof will generate more income than will be needed

to pay the costs of the leverage. If so, and all other things being equal,

the excess may be used to pay higher dividends to Common

Shareholders than if the Fund were not so leveraged. If, however,

shorter-term interest rates rise relative to the rate of return on the

Fund’s portfolio, the interest and other costs to the Fund of leverage

could exceed the rate of return on the debt obligations and other

investments held by the Fund, thereby reducing return to Common

Shareholders. Leveraging transactions pursued by the Fund may

increase its duration and sensitivity to interest rate movements. In

addition, fees and expenses of any form of leverage used by the Fund

will be borne entirely by the Common Shareholders (and not by

preferred shareholders, if any) and will reduce the investment return of

In addition, the counterparties to the Fund’s leveraging transactions and

any preferred shareholders of the Fund will have priority of payment

over the Fund’s Common Shareholders.

Reverse repurchase agreements involve the risks that the interest

income earned on the investment of the proceeds will be less than the

interest expense and Fund expenses associated with the repurchase

agreement, that the market value of the securities sold by the Fund may

decline below the price at which the Fund is obligated to repurchase

such securities and that the securities may not be returned to the Fund.

There is no assurance that reverse repurchase agreements can be

successfully employed. Dollar roll/buyback transactions involve the risk

that the market value of the securities the Fund is required to purchase

may decline below the agreed upon purchase price of those securities.

Successful use of dollar rolls/buybacks may depend upon the Investment

Manager’s ability to correctly predict interest rates and prepayments.

There is no assurance that dollar rolls/buybacks can be successfully

employed. In connection with reverse repurchase agreements and dollar

rolls/buybacks, the Fund will also be subject to counterparty risk with

respect to the purchaser of the securities. If the broker/dealer to whom

the Fund sells securities becomes insolvent, the Fund’s right to purchase

or repurchase securities may be restricted.

The Fund may engage in total return swaps, reverse repurchases, loans

of portfolio securities, short sales and when-issued, delayed delivery and

forward commitment transactions, credit default swaps, basis swaps

and other swap agreements, purchases or sales of futures and forward

contracts (including foreign currency exchange contracts), call and put

options or other derivatives. The Fund’s use of such transactions gives

rise to associated leverage risks described above, and may adversely

affect the Fund’s income, distributions and total returns to Common

Shareholders. To the extent that any offsetting positions do not behave

in relation to one another as expected, the Fund may perform as if it is

leveraged through use of these derivative strategies.

Any total return swaps, reverse repurchases, loans of portfolio securities,

short sales and when-issued, delayed delivery and forward commitment

transactions, credit default swaps, basis swaps and other swap

[], 2024 |

  

Because the fees received by the Investment Manager may increase

depending on the types of leverage utilized by the Fund, the Investment

Manager has a financial incentive for the Fund to use certain forms of

leverage, which may create a conflict of interest between the Investment

Manager, on the one hand, and the Common Shareholders, on the other

hand.

The Fund may, but is not required to, utilize a variety of derivative

instruments (both long and short positions) for investment or risk

management purposes. Derivatives are financial contracts whose value

depends on, or is derived from, the value of an underlying asset,

reference rate or index. For example, the Fund may use derivative

instruments for purposes of increasing liquidity, providing efficient

portfolio management, broadening investment opportunities (including

taking short or negative positions), implementing a tax or cash

management strategy, gaining exposure to a particular security or

segment of the market, modifying the effective duration of the Fund’s

portfolio investments and/or enhancing total return.

The use of derivative instruments involves risks different from, or

possibly greater than, the risks associated with investing directly in

securities and other traditional investments. Derivatives and other

similar instruments (referred to collectively as “derivatives”), which may

increase market exposure are subject to a number of risks including

leverage risk, liquidity risk (which may be heightened for highly

customized derivatives), interest rate risk, market risk, counterparty

(including credit) risk, operational risk (such as documentation issues,

settlement issues and systems failures), legal risk (such as insufficient

documentation, insufficient capacity or authority of a counterparty, and

issues with the legality or enforceability of a contract), counterparty risk,

tax risk and management risk, as well as risks arising from changes in

applicable requirements, risks arising from margin requirements and

risks arising from mispricing or valuation complexity. They also involve

the risk that changes in the value of a derivative instrument may not

correlate perfectly with the underlying asset, rate or index. By investing

in a derivative instrument, the Fund could lose more than the initial

amount invested, and derivatives may increase the volatility of the Fund,

especially in unusual or extreme market conditions. Certain derivatives

have the potential for unlimited loss, regardless of the size of the initial

investment. The Fund may be required to hold additional cash or sell

other investments in order to obtain cash to close out a position and

changes in the value of a derivative may also create margin delivery or

settlement payment obligations for the Fund. Also, suitable derivative

transactions may not be available in all circumstances and there can be

no assurance that the Fund will engage in these transactions to reduce

exposure to other risks when that would be beneficial or that, if used,

Over-the-counter (“OTC”) derivatives are also subject to the risk that a

counterparty to the transaction will not fulfill its contractual obligations

to the other party, as many of the protections afforded to centrally

cleared derivative transactions might not be available for OTC

derivatives. The primary credit risk on derivatives that are

exchange-traded or traded through a central clearing counterparty

resides with the Fund’s clearing broker, or the clearinghouse itself.

Participation in the markets for derivative instruments involves

investment risks and transaction costs to which the Fund may not be

subject absent the use of these strategies. The skills needed to

successfully execute derivative strategies may be different from those

needed for other types of transactions. If the Fund incorrectly forecasts

the value and/or creditworthiness of securities, currencies, interest rates,

counterparties or other economic factors involved in a derivative

transaction, the Fund might have been in a better position if the Fund

had not entered into such derivative transaction. In evaluating the risks

and contractual obligations associated with particular derivative

instruments, it is important to consider that certain derivative

transactions may be modified or terminated only by mutual consent of

the Fund and its counterparty.

Therefore, it may not be possible for the Fund to modify, terminate, or

offset the Fund’s obligations or the Fund’s exposure to the risks

associated with a derivative transaction prior to its scheduled

termination or maturity date, which may create a possibility of increased

volatility and/or decreased liquidity to the Fund. Hedges are sometimes

subject to imperfect matching between the derivative and the

underlying instrument, and there can be no assurance that the Fund’s

hedging transactions will be effective. In such case, the Fund may lose

money.

Because the markets for certain derivative instruments (including

markets located in foreign countries) are relatively new and still

developing, appropriate derivative transactions may not be available in

all circumstances for risk management or other purposes. Upon the

expiration of a particular contract, the Fund may wish to retain the

Fund’s position in the derivative instrument by entering into a similar

contract but may be unable to do so if the counterparty to the original

contract is unwilling to enter into the new contract and no other

appropriate counterparty can be found. When such markets are

unavailable, the Fund will be subject to increased liquidity and

investment risk.

The Fund may enter into opposite sides of interest rate swap and other

derivatives for the principal purpose of generating distributable gains on

the one side (characterized as ordinary income for tax purposes) that

are not part of the Fund’s duration or yield curve management

strategies (“paired swap transactions”), and with a substantial

possibility that the Fund will experience a corresponding capital loss

and decline in NAV with respect to the opposite side transaction (to the

extent it does not have corresponding offsetting capital gains).

Consequently, Common Shareholders may receive distributions and owe

19  Base Prospectus

When a derivative is used as a hedge against a position that the Fund

holds, any loss generated by the derivative generally should be

substantially offset by gains on the hedged investment, and vice versa.

Although hedging can reduce or eliminate losses, it can also reduce or

eliminate gains. Hedges are sometimes subject to imperfect matching

between the derivative and the underlying instrument, and there can be

no assurance that the Fund’s hedging transactions will be effective. The

regulation of the derivatives markets has increased over the past several

years, and additional future regulation of the derivatives markets may

make derivatives more costly, may limit the availability or reduce the

liquidity of derivatives, or may otherwise adversely affect the value or

performance of derivatives. Any such adverse future developments could

impair the effectiveness or raise the costs of the Fund’s derivative

transactions, impede the employment of the Fund’s derivatives

strategies, or adversely affect the Fund’s performance.

Credit default swap agreements may involve greater risks than if the

Fund had invested in the reference obligation directly since, in addition

to general market risks, credit default swaps are subject to leverage risk,

illiquidity risk, counterparty risk and credit risk. A buyer generally also

will lose its investment and recover nothing should no credit event occur

and the swap is held to its termination date. If a credit event were to

occur, the value of any deliverable obligation received by the seller (if

any), coupled with the upfront or periodic payments previously received,

may be less than the full notional value it pays to the buyer, resulting in

a loss of value to the seller. When the Fund acts as a seller of a credit

default swap, it is exposed to many of the same risks of leverage

described herein. As the seller, the Fund would receive a stream of

payments over the term of the swap agreement provided that no event

of default has occurred with respect to the referenced debt obligation

upon which the swap is based. The Fund would effectively add leverage

to its portfolio because, If a default occurs, the stream of payments may

stop and, in addition to its total net assets, the Fund would be subject to

investment exposure on the notional amount of the swap.

Although the Fund may seek to realize gains by selling credit default

swaps that increase in value, to realize gains on selling credit default

swaps, an active secondary market for such instruments must exist or

the Fund must otherwise be able to close out these transactions at

advantageous times. In addition to the risk of losses described above, if

no such secondary market exists or the Fund is otherwise unable to

close out these transactions at advantageous times, selling credit

default swaps may not be profitable for the Fund.

The Fund will be subject to credit risk with respect to the counterparties

to the derivative contracts and other instruments entered into by the

Fund or held by special purpose or structured vehicles in which the Fund

invests. In the event that the Fund enters into a derivative transaction

with a counterparty that subsequently becomes insolvent or becomes

the subject of a bankruptcy case, the derivative transaction may be

terminated in accordance with its terms and the Fund’s ability to realize

its rights under the derivative instrument and its ability to distribute the

proceeds could be adversely affected. If a counterparty becomes

bankrupt or otherwise fails to perform its obligations under a derivative

contract due to financial difficulties, the Fund may experience significant

delays in obtaining any recovery (including recovery of any collateral it

has provided to the counterparty) in a dissolution, assignment for the

benefit of creditors, liquidation, winding-up, bankruptcy or other

analogous proceeding. In addition, in the event of the insolvency of a

counterparty to a derivative transaction, the derivative transaction

would typically be terminated at its fair market value. If the Fund is

owed this fair market value in the termination of the derivative

transaction and its claim is unsecured, the Fund will be treated as a

general creditor of such counterparty and will not have any claim with

respect to any underlying security or asset. The Fund may obtain only a

limited recovery or may obtain no recovery in such circumstances. While

the Fund may seek to manage its counterparty risk by transacting with a

number of counterparties, concerns about the solvency of, or a default

by, one large market participant could lead to significant impairment of

liquidity and other adverse consequences for other counterparties.

The market price of common stocks and other equity securities may go

up or down, sometimes rapidly or unpredictably. Equity securities may

decline in value due to factors affecting equity securities markets

generally, particular industries represented in those markets, or the

issuer itself. The values of equity securities may decline due to real or

perceived adverse economic conditions, changes in the general outlook

for corporate earnings, changes in interest or currency rates, adverse

changes to credit markets or adverse investor sentiment generally. They

may also decline due to labor shortages or increased production costs

and competitive conditions within an industry. Equity securities

generally have greater price volatility than bonds and other debt

securities.

[], 2024 |

  

Preferred Securities Risk

In addition to equity securities risk, credit risk and possibly high yield

risk, investment in preferred securities involves certain other risks.

Certain preferred securities contain provisions that allow an issuer

under certain conditions to skip or defer distributions. If the Fund owns

a preferred security that is deferring its distribution, the Fund may be

required to include the amount of the deferred distribution in its taxable

income for tax purposes although it does not currently receive such

amount in cash. In order to receive the special treatment accorded to

regulated investment companies (“RICs”) and their shareholders under

the Internal Revenue Code of 1986, as amended (the “Code”) and to

avoid U.S. federal income and/or excise taxes at the Fund level, the Fund

may be required to distribute this income to shareholders in the tax year

in which the income is recognized (without a corresponding receipt of

cash by the Fund). Therefore, the Fund may be required to pay out as an

income distribution in any such tax year an amount greater than the

total amount of cash income the Fund actually received and to sell

portfolio securities, including at potentially disadvantageous times or

prices, to obtain cash needed for these income distributions. Preferred

securities often are subject to legal provisions that allow for redemption

in the event of certain tax or legal changes or at the issuer’s call. In the

event of redemption, the Fund may not be able to reinvest the proceeds

at comparable rates of return. Preferred securities are subordinated to

bonds and other debt securities in an issuer’s capital structure in terms

of priority for corporate income and liquidation payments, and therefore

will be subject to greater credit risk than those debt securities. Preferred

securities may trade less frequently and in a more limited volume and

may be subject to more abrupt or erratic price movements than many

other securities.

A private placement involves the sale of securities that have not been

registered under the Securities Act or relevant provisions of applicable

non-U.S. law to certain institutional and qualified individual purchasers,

such as the Fund. In addition to the general risks to which all securities

are subject, securities received in a private placement generally are

subject to strict restrictions on resale, and there may be no liquid

secondary market or ready purchaser for such securities. See “Principal

Risks of the Fund - Liquidity Risk.” Therefore, the Fund may be unable to

dispose of such securities when it desires to do so, or at the most

favorable time or price. Private placements may also raise valuation

risks.

Restricted securities are often purchased at a discount from the market

price of unrestricted securities of the same issuer reflecting the fact that

such securities may not be readily marketable without some time delay.

Such securities are often more difficult to value and the sale of such

securities often requires more time and results in higher brokerage

charges or dealer discounts and other selling expenses than does the

sale of liquid securities trading on national securities exchanges or in

the over-the-counter markets. Until the Fund can sell such securities into

the public markets, its holdings may be less liquid and any sales will

need to be made pursuant to an exemption under the Securities Act.

Confidential Information Access Risk

In managing the Fund (and other PIMCO clients), PIMCO may from time

to time have the opportunity to receive material, non-public information

(“Confidential Information”) about the issuers of certain investments,

including, without limitation, senior floating rate loans, other loans and

related investments being considered for acquisition by the Fund or held

in the Fund’s portfolio. For example, an issuer of privately placed loans

considered by the Fund may offer to provide PIMCO with financial

information and related documentation regarding the issuer that is not

publicly available. Pursuant to applicable policies and procedures,

PIMCO may (but is not required to) seek to avoid receipt of Confidential

Information from the issuer so as to avoid possible restrictions on its

ability to purchase and sell investments on behalf of the Fund and other

clients to which such Confidential Information relates. In such

circumstances, the Fund (and other PIMCO clients) may be

disadvantaged in comparison to other investors, including with respect

to the price the Fund pays or receives when it buys or sells an

investment. Further, PIMCO’s and the Fund’s abilities to assess the

desirability of proposed consents, waivers or amendments with respect

to certain investments may be compromised if they are not privy to

available Confidential Information. PIMCO may also determine to

receive such Confidential Information in certain circumstances under its

applicable policies and procedures. If PIMCO intentionally or

unintentionally comes into possession of Confidential Information, it

may be unable, potentially for a substantial period of time, to purchase

or sell investments to which such Confidential Information relates.

Inflation risk is the risk that the value of assets or income from the

Fund’s investments will be worth less in the future as inflation decreases

the value of payments at future dates. As inflation increases, the real

value of the Fund’s portfolio could decline. Inflation has increased and it

cannot be predicted when, if, or the degree to which it may decline.

Inflation rates may change frequently and significantly as a result of

various factors, including unexpected shifts in the domestic or global

economy or changes in fiscal or monetary policies. Deflation risk is the

risk that prices throughout the economy decline over time. Deflation

may have an adverse effect on the creditworthiness of issuers and may

make issuer default more likely, which may result in a decline in the

value of the Fund’s portfolio and Common Shares.

Financial entities, such as investment companies and investment

advisers, are generally subject to extensive government regulation and

intervention. Government regulation and/or intervention may change

the way the Fund is regulated, affect the expenses incurred directly by

the Fund and the value of its investments, and limit and /or preclude the

Fund’s ability to achieve its investment objective. Government

regulation may change frequently and may have significant adverse

consequences. The Fund and the Investment Manager have historically

been eligible for exemptions from certain regulations. However, there is

21  Base Prospectus

Moreover, government regulation may have unpredictable and

unintended effects. Legislative or regulatory actions to address

perceived liquidity or other issues in fixed income markets generally, or

in particular markets such as the municipal securities market, may alter

or impair the Fund’s ability to pursue its investment objective or utilize

certain investment strategies and techniques.

While there continues to be uncertainty about the full impact of these

and other regulatory changes, it is the case that the Fund will be subject

to a more complex regulatory framework, and may incur additional

costs to comply with new requirements as well as to monitor for

compliance in the future. Actions by governmental entities may also

impact certain instruments in which the Fund invests and reduce market

liquidity and resiliency. For example, the Fund’s investments (including,

but not limited to, repurchase agreements, collateralized loan

obligations and mortgage-backed securities), payment obligations and

financing terms may rely in some fashion on LIBOR. For more

information related to the LIBOR transition, see “Principal Risks of the

Fund - Regulatory Risk - LIBOR.”

Certain instruments in which the Fund may invest have relied or

continue to rely in some fashion upon the London Interbank Offered

Rate (“LIBOR”). LIBOR was traditionally an average interest rate,

determined by the ICE Benchmark Administration, that banks charge

one another for the use of short-term money. On March 5, 2021, the

Financial Conduct Authority (“FCA”), the United Kingdom’s financial

regulatory body and regulator of LIBOR, publicly announced that all

U.S. Dollar LIBOR settings will either cease to be provided by any

administrator or will no longer be representative (i) immediately after

December 31, 2021 for one-week and two-month U.S. Dollar LIBOR

settings and (ii) immediately after June 30, 2023 for the remaining

U.S. Dollar LIBOR settings. As of January 1, 2022, as a result of

supervisory guidance from U.S. regulators, U.S. regulated entities have

generally ceased entering into new LIBOR contracts with limited

exceptions. Publication of all Japanese yen and the one- and six-month

sterling LIBOR settings have ceased, and while publication of the

three-month Sterling LIBOR setting will continue through at least the

end of March 2024 on the basis of a changed methodology (known as

“synthetic LIBOR”), this rate has been designated by the FCA as

unrepresentative of the underlying market that it seeks to measure and

is solely available for use in legacy transactions. Certain bank-sponsored

committees in other jurisdictions, including Europe, the United Kingdom,

Japan and Switzerland, have selected alternative reference rates

denominated in other currencies. Although the transition process away

from LIBOR for many instruments has been completed, some LIBOR use

is continuing and there are potential effects related to the transition

away from LIBOR or continued use of LIBOR on the Fund, or on certain

instruments in which the Fund invests, which can be difficult to

ascertain, and may vary depending on factors that include, but are not

limited to: (i) existing fallback or termination provisions in individual

The CFTC has adopted regulations that subject registered investment

companies and their investment advisers to regulation by the CFTC if

the registered investment company invests more than a prescribed level

of its liquidation value in futures, options on futures or commodities,

swaps, or other financial instruments regulated under the Commodity

Exchange Act (“CEA”) and the rules thereunder (“commodity

interests”), or if the Fund markets itself as providing investment

exposure to such instruments. The Investment Manager is registered

with the CFTC as a CPO. However, with respect to the Fund, the

Investment Manager has claimed an exclusion from registration as a

CPO pursuant to CFTC Rule 4.5. For the Investment Manager to remain

eligible for this exclusion, the Fund must comply with certain limitations,

including limits on its ability to use any commodity interests and limits

[], 2024 |

  

Liquidity risk exists when particular investments are difficult to purchase

or sell. Illiquid investments are investments that the Fund reasonably

expects cannot be sold or disposed of in current market conditions in

seven calendar days or less without the sale or disposition significantly

changing the market value of the investment. Illiquid investments may

become harder to value, especially in changing markets. The Fund’s

investments in illiquid investments may reduce the returns of the Fund

because it may be unable to sell the illiquid investments at an

advantageous time or price or possibly require the Fund to dispose of

other investments at unfavorable times or prices in order to satisfy its

obligations, which could prevent the Fund from taking advantage of

other investment opportunities. Additionally, the market for certain

investments may become illiquid under adverse market or economic

conditions independent of any specific adverse changes in the

conditions of a particular issuer.

Further fixed income securities with longer durations until maturity face

heightened levels of liquidity risk as compared to fixed income securities

with shorter durations until maturity. The risks associated with illiquid

instruments may be particularly acute in situations in which the Fund’s

operations require cash (such as in connection with repurchase offers)

and could result in the Fund borrowing to meet its short-term needs or

incurring losses on the sale of illiquid instruments. It may also be the

case that other market participants may be attempting to liquidate fixed

income holdings at the same time as the Fund, causing increased supply

in the market and contributing to liquidity risk and downward pricing

pressure. See “Principal Risks of the Fund-Valuation Risk.”

The Fund has elected to be treated as a “regulated investment

company” under the Code and intends each year to qualify and be

eligible to be treated as such, so that it generally will not be subject to

U.S. federal income tax on its net investment income or net short-term

or long-term capital gains that are distributed to shareholders. In order

to qualify and be eligible for such treatment, the Fund must meet

certain asset diversification tests, derive at least 90% of its gross

income for such year from certain types of qualifying income, and

distribute to its shareholders at least 90% of its “investment company

taxable income” as that term is defined in the Code (which includes,

among other things, dividends, taxable interest and the excess of any

net short-term capital gains over net long-term capital losses, as

reduced by certain deductible expenses).

If, in any year, the Fund were to fail to qualify for treatment as a RIC

under the Code, and were ineligible to or did not otherwise cure such

failure, the Fund would be subject to tax on its taxable income at

corporate rates and, when such income is distributed, shareholders

would be subject to further tax on such distributions to the extent of the

Fund’s current or accumulated earnings and profits.

The Investment Manager manages the Fund without regard generally to

restrictions on portfolio turnover. The use of futures contracts and other

derivative instruments with relatively short maturities may tend to

exaggerate the portfolio turnover rate for the Fund. Trading in fixed

income securities does not generally involve the payment of brokerage

commissions, but does involve indirect transaction costs. The use of

futures contracts and other derivative instruments may involve the

payment of commissions to futures commission merchants or other

intermediaries. Higher portfolio turnover involves correspondingly

greater expenses to the Fund, including brokerage commissions or

dealer mark-ups and other transaction costs on the sale of securities

and reinvestments in other securities. The higher the rate of portfolio

turnover of the Fund, the higher these transaction costs borne by the

Fund generally will be. Such sales may result in realization of taxable

capital gains (including short-term capital gains, which are generally

taxed to shareholders at ordinary income tax rates when distributed net

of short-term capital losses and net long-term capital losses), and may

adversely impact the Fund’s after-tax returns. See “Tax Matters.”

An investment in the Fund, like any fund, can involve operational risks

arising from factors such as processing errors, human errors, inadequate

or failed internal or external processes, failures in systems and

technology, changes in personnel and errors caused by third-party

service providers. The occurrence of any of these failures, errors or

breaches could result in a loss of information, regulatory scrutiny,

reputational damage or other events, any of which could have a

23  Base Prospectus

When investing in an investment company, the Fund will bear its ratable

share of that investment company’s expenses and would remain subject

to payment of the Fund’s management fees and other expenses with

respect to assets so invested. Common Shareholders would therefore be

subject to duplicative expenses to the extent the Fund invests in other

investment companies. In addition, the securities of other investment

companies may also be leveraged and will therefore be subject to same

leverage risks.

The Fund may invest in risk retention tranches of CMBS or other eligible

securitizations, if any (“risk retention tranches”), which are eligible

residual interests typically held by the sponsors of such securitizations

pursuant to the final rules implementing the credit risk retention

requirements of Section 941 of the Dodd-Frank Act (the “U.S. Risk

Retention Rules”). In the case of CMBS transactions, for example, the

U.S. Risk Retention Rules permit all or a portion of the retained credit

risk associated with certain securitizations (i.e., retained risk) to be held

by an unaffiliated “third party purchaser,” such as the Fund, if, among

other requirements, the third-party purchaser holds its retained interest,

unhedged, for at least five years following the closing of the CMBS

transaction, after which it is entitled to transfer its interest in the

securitization to another person that meets the requirements for a

third-party purchaser. Even after the required holding period has

expired, due to the generally illiquid nature of such investments, no

assurance can be given as to what, if any, exit strategies will ultimately

be available for any given position.

In addition, there is limited guidance on the application of the final

U.S. Risk Retention Rules to specific securitization structures. There can

be no assurance that the applicable federal agencies charged with the

implementation of the final U.S. Risk Retention Rules (the Federal

Deposit Insurance Corporation, the Comptroller of the Currency, the

Federal Reserve Board, the SEC, the Department of Housing and Urban

Development, and the Federal Housing Finance Agency) could not take

positions in the future that differ from the interpretation of such rules

taken or embodied in such securitizations, or that the final U.S. Risk

Retention Rules will not change.

Furthermore, in situations where the Fund invests in risk retention

tranches of securitizations structured by third parties, the Fund may be

required to execute one or more letters or other agreements, the exact

form and nature of which will vary (each, a “Risk Retention

Agreement”) under which it will make certain undertakings designed to

ensure such securitization complies with the final U.S. Risk Retention

Rules. Such Risk Retention Agreements may include a variety of

representations, warranties, covenants and other indemnities, each of

which may run to various transaction parties. If the Fund breaches any

undertakings in any Risk Retention Agreement, it will be exposed to

As the use of technology has become more prevalent in the course of

business, the Fund has become potentially more susceptible to

operational and information security risks resulting from breaches in

cyber security. A breach in cyber security refers to both intentional and

unintentional cyber events from outside threat actors or internal

resources that may, among other things, cause the Fund to lose

proprietary information, suffer data corruption and/or destruction, lose

operational capacity, result in the unauthorized release or other misuse

of confidential information, or otherwise disrupt normal business

operations. Cyber security breaches may involve unauthorized access to

the Fund’s digital information systems (e.g., through “hacking” or

malicious software coding), and may come from multiple sources,

including outside attacks such as denial-of-service attacks (i.e., efforts to

make network services unavailable to intended users) or cyber extortion,

including exfiltration of data held for ransom and/or “ransomware”

attacks that renders systems inoperable until ransom is paid, or insider

actions. In addition, cyber security breaches involving the Fund’s third

party service providers (including but not limited to advisers,

sub-advisers, administrators, transfer agents, custodians, vendors,

suppliers, distributors and other third parties), trading counterparties or

issuers in which the Fund invests can also subject the Fund to many of

the same risks associated with direct cyber security breaches or

extortion of company data. Moreover, cyber security breaches involving

trading counterparties or issuers in which the Fund invests could

adversely impact such counterparties or issuers and cause the Fund’s

investments to lose value. In addition, work-from-home arrangements

by the Fund, the Investment Manager or their service providers could

increase all of the above risks, create additional data and information

accessibility concerns, and make the Fund, the Investment Manager or

their service providers susceptible to operational disruptions, any of

which could adversely impact their operations.

Cyber security failures or breaches may result in financial losses to the

Fund and its shareholders. These failures or breaches may also result in

disruptions to business operations, potentially resulting in financial

losses; interference with the Fund’s ability to calculate its NAV, process

shareholder transactions or otherwise transact business with

shareholders; impediments to trading; violations of applicable privacy

and other laws; regulatory fines; penalties; third party claims in

litigation; reputational damage; reimbursement or other compensation

costs; additional compliance and cyber security risk management costs

and other adverse consequences. In addition, substantial costs may be

incurred in order to prevent any cyber incidents in the future.

Like with operational risk in general, the Fund has established business

continuity plans and risk management systems designed to reduce the

risks associated with cyber security. However, there are inherent

limitations in these plans and systems, including that certain risks may

not have been identified, in large part because different or unknown

threats may emerge in the future. As such, there is no guarantee that

[], 2024 |

  

The Gramm-Leach-Biley Act (“GLBA”) and other laws limit the

disclosure of certain non-public personal information about a consumer

to non- affiliated third parties and require financial institutions to

disclose certain privacy policies and practices with respect to

information sharing with both affiliates and non- affiliated third parties.

Many states and a number of non-U.S. jurisdictions have enacted

privacy and data security laws requiring safeguards on the privacy and

security of consumers’ personally identifiable information. Other laws

deal with obligations to safeguard and dispose of private information in

a manner designed to avoid its dissemination. Privacy rules adopted by

the U.S. Federal Trade Commission and SEC implement GLBA and other

requirements and govern the disclosure of consumer financial

information by certain financial institutions, ranging from banks to

private investment funds. U.S. platforms following certain models

generally are required to have privacy policies that conform to these

GLBA and other requirements. In addition, such platforms typically have

policies and procedures intended to maintain platform participants’

personal information securely and dispose of it properly.

The Fund generally does not intend to obtain or hold borrowers’

non-public personal information, and the Fund has implemented

procedures reasonably designed to prevent the disclosure of borrowers’

non-public personal information to the Fund. However, service providers

to the Fund including their custodians and the platforms acting as loan

servicers for the Fund may obtain, hold or process such information. The

Fund cannot guarantee the security of non-public personal information

in the possession of such a service provider and cannot guarantee that

service providers have been and will continue to comply with the GLBA,

other data security and privacy laws and any other related regulatory

requirements. Violations of GLBA and other laws could subject the Fund

to litigation and/or fines, penalties or other regulatory action, which,

individually or in the aggregate, could have an adverse effect on the

Fund. The Fund may also face regulations related to privacy and data

security in the other jurisdictions in which the Fund invests.

The Investment Manager and its affiliates are involved worldwide with a

broad spectrum of financial services and asset management activities

and may engage in the ordinary course of business in activities in which

their interests or the interests of their clients may conflict with those of

The Fund may enter into repurchase agreements, in which the Fund

purchases a security from a bank or broker-dealer, which agrees to

repurchase the security at the Fund’s cost plus interest within a specified

time. If the party agreeing to repurchase should default, the Fund will

seek to sell the securities which it holds. This could involve costs or

delays in addition to a loss on the securities if their value should fall

below their repurchase price. Repurchase agreements may be or

become illiquid. These events could also trigger adverse tax

consequences for the Fund.

Holders of structured products, including structured notes, credit-linked

notes and other types of structured products, bear the risks of the

underlying investments, index or reference obligation and are subject to

counterparty risk. The Fund may have the right to receive payments only

from the structured product, and generally does not have direct rights

against the issuer or the entity that sold the assets to be securitized.

While certain structured products enable the investor to acquire

interests in a pool of securities without the brokerage and other

expenses associated with directly holding the same securities, investors

in structured products generally pay their share of the structured

product’s administrative and other expenses. Although it is difficult to

predict whether the prices of indices and securities underlying

structured products will rise or fall, these prices (and, therefore, the

prices of structured products) are generally influenced by the same types

of political and economic events that affect issuers of securities and

capital markets generally. If the issuer of a structured product uses

shorter term financing to purchase longer term securities, the issuer may

be forced to sell its securities at below market prices if it experiences

difficulty in obtaining such financing, which may adversely affect the

value of the structured products owned by the Fund. Structured

products generally entail risks associated with derivative instruments.

A Fund may invest in CLOs and other similarly structured investments. A

CLO is a trust typically collateralized by a pool of loans, which may

include, among others, domestic and foreign senior secured loans,

senior unsecured loans and subordinate corporate loans, including loans

that may be rated below investment grade or equivalent unrated loans.

25  Base Prospectus

The cash flows from a CLO are split into two or more portions, called

tranches, varying in risk and yield. The riskiest portion is the “equity”

tranche which bears the bulk of defaults from the bonds or loans in the

trust and serves to protect the other, more senior tranches from default

in all but the most severe circumstances. Since they are partially

protected from defaults, senior tranches from a CLO typically have

higher ratings and lower yields than their underlying securities, and can

be rated investment grade. Despite the protection from the equity

tranche, CLO tranches can experience substantial losses due to actual

defaults, increased sensitivity to defaults due to collateral default and

disappearance of protecting tranches, market anticipation of defaults, as

well as aversion to CLO securities as a class. The risks of an investment

in a CLO depend largely on the type of the collateral securities and the

class of the instrument in which the Funds invests. Typically, CLOs are

privately offered and sold, and thus, are not registered under the

securities laws.

The Fund is subject to investment and operational risks associated with

financial, economic and other global market developments and

disruptions, including those arising from war, terrorism, market

manipulation, government interventions, defaults and shutdowns,

political changes or diplomatic developments, public health

emergencies (such as the spread of infectious diseases, pandemics and

epidemics) and natural/environmental disasters, which can all negatively

impact the securities markets, interest rates, auctions, secondary trading,

ratings, credit risk, inflation, deflation and other factors relating to the

Fund’s investments or the Investment Manager’s operations and the

value of an investment in the Fund, its distributions and its returns.

These events can also impair the technology and other operational

systems upon which the Fund’s service providers, including PIMCO as

the Fund’s investment adviser, rely, and could otherwise disrupt the

Fund’s service providers’ ability to fulfill their obligations to the Fund.

Furthermore, events involving limited liquidity, defaults,

non-performance or other adverse developments that affect financial

institutions or the financial services industry generally, or concerns or

rumors about any events of these kinds or other similar risks, have in the

past and may in the future lead to market-wide liquidity problems.

Zero-Coupon Bond, Step-Ups and Payment-In-Kind Securities

Risk

The market prices of zero-coupon, step-ups and payment-in-kind

securities are generally more volatile than the prices of securities that

pay interest periodically and in cash, and are likely to respond to

changes in interest rates to a greater degree than other types of debt

securities with similar maturities and credit quality. Because

zero-coupon securities bear no interest, their prices are especially

volatile. And because zero-coupon bondholders do not receive interest

payments, the prices of zero-coupon securities generally fall more

dramatically than those of bonds that pay interest on a current basis

when interest rates rise. The market for zero-coupon and

payment-in-kind securities may suffer decreased liquidity. In addition, as

these securities may not pay cash interest, the Fund’s investment

exposure to these securities and their risks, including credit risk, will

increase during the time these securities are held in the Fund’s portfolio.

Further, to maintain its qualification for treatment as a RIC and to avoid

Fund-level U.S. federal income and/or excise taxes, the Fund is required

to distribute to its shareholders any income it is deemed to have

received in respect of such investments, notwithstanding that cash has

not been received currently, and the value of paid-in-kind interest.

Consequently, the Fund may have to dispose of portfolio securities

under disadvantageous circumstances to generate the cash, or may

have to leverage itself by borrowing the cash to satisfy this distribution

requirement. The required distributions, if any, would result in an

increase in the Fund’s exposure to these securities. Zero coupon bonds,

step-ups and payment-in-kind securities allow an issuer to avoid or

delay the need to generate cash to meet current interest payments and,

as a result, may involve greater credit risk than bonds that pay interest

currently or in cash. The Fund would be required to distribute the

income on these instruments as it accrues, even though the Fund will

not receive the income on a current basis or in cash. Thus, the Fund may

sell other investments, including when it may not be advisable to do so,

to make income distributions to its shareholders.

Debt securities are generally subject to the risks described below and

further herein:

 

The value of fixed income securities may decline for a

number of reasons that directly relate to the issuer, such as

management performance, financial leverage, reduced demand for the

issuer’s goods and services, historical and prospective earnings of the

issuer and the value of the assets of the issuer. A change in the financial

condition of a single issuer may affect securities markets as a whole.

These risks can apply to the Common Shares issued by the Fund and to

the issuers of securities and other instruments in which the Fund

invests.

 

The market value of debt securities changes in

response to interest rate changes and other factors. Interest rate risk is

the risk that prices of debt securities will increase as interest rates fall

and decrease as interest rates rise, which would be reflected in the

Fund’s NAV. The Fund may lose money if short-term or long-term

[], 2024 |

  

 

During periods of declining interest rates, borrowers

may prepay principal. This may force the Fund to reinvest in lower

yielding securities, resulting in a possible decline in the Fund’s income

and distributions.

 

Credit risk is the risk that one or more debt securities in

the Fund’s portfolio will decline in price or fail to pay interest or

principal when due because the issuer of the security experiences a

decline in its financial status. Credit risk is increased when a portfolio

security is downgraded or the perceived creditworthiness of the issuer

deteriorates.

 

Reinvestment risk is the risk that income from the

Fund’s portfolio will decline if the Fund invests the proceeds from

matured, traded or called fixed income securities at market interest rates

that are below the portfolio’s current earnings rate.

 

The Fund may seek to adjust the

duration or maturity of its investments in debt securities based on its

assessment of current and projected market conditions. The Fund may

incur costs in seeking to adjust the average duration or maturity of its

portfolio of debt securities. There can be no assurances that the Fund’s

assessment of current and projected market conditions will be correct or

that any strategy to adjust duration or maturity will be successful.

In addition, from time to time, uncertainty regarding the status of

negotiations in the U.S. government to increase the statutory debt

ceiling could impact the creditworthiness of the United States and could

impact the liquidity and value of U.S. Government and other securities

and ultimately the Fund.

In addition to the other risks applicable to debt investments, sovereign

debt (debt issued by a foreign government) may decline in value as a

result of default or other adverse credit event resulting from an issuer’s

inability or unwillingness to make principal or interest payments in a

timely fashion. A sovereign entity’s failure to make timely payments on

its debt can result from many factors, including, without limitation,

insufficient foreign (non-U.S.) currency reserves or an inability to

sufficiently manage fluctuations in relative currency valuations, an

inability or unwillingness to satisfy the demands of creditors and/or

relevant supranational entities regarding debt service or economic

reforms, the size of the debt burden relative to economic output and tax

revenues, cash flow difficulties, and other political and social

considerations. The risk of loss to the Fund in the event of a sovereign

debt default or other adverse credit event is heightened by the

unlikelihood of any formal recourse or means to enforce its rights as a

To the extent that the Fund invests in real estate investments, including

investments in equity or debt securities issued by private and public

REITs, real estate operating companies (“REOCs”), private or public real

estate-related loans and real estate-linked derivative instruments, it will

be subject to the risks associated with owning real estate and with the

real estate industry generally. These risks include, but are not limited to:

the burdens of ownership of real property; general and local economic

conditions(such as an oversupply of space or a reduction in demand for

space); the supply and demand for properties (including competition

based on rental rates); energy and supply shortages; fluctuations in

average occupancy and room rates; the attractiveness, type and location

of the properties and changes in the relative popularity of commercial

properties as an investment; the financial condition and resources of

tenants, buyers and sellers of properties; increased mortgage defaults;

the quality of maintenance, insurance and management services;

changes in the availability of debt financing which may render the sale

or refinancing of properties difficult or impracticable; changes in

building, environmental and other laws and/or regulations (including

those governing usage and improvements), fiscal policies and zoning

laws; changes in real property tax rates; changes in interest rates and

the availability of mortgage funds which may render the sale or

refinancing of properties difficult or impracticable; changes in operating

costs and expenses; energy and supply shortages; uninsured losses or

delays from casualties or condemnation; negative developments in the

economy that depress travel or leasing activity; environmental liabilities;

contingent liabilities on disposition of assets; uninsured or uninsurable

casualties; acts of God, including earthquakes, hurricanes and other

natural disasters; social unrest and civil disturbances, epidemics,

pandemics or other public crises; terrorist attacks and war; risks and

operating problems arising out of the presence of certain construction

materials, structural or property level latent defects, work stoppages,

shortages of labor, strikes, union relations and contracts, fluctuating

prices and supply of labor and/or other labor-related factor; and other

factors which are beyond the control of PIMCO and its affiliates.

In addition, the Fund’s investments will be subject to various risks which

could cause fluctuations in occupancy, rental rates, operating income

and expenses or which could render the sale or financing of its

properties difficult or unattractive. For example, following the

termination or expiration of a tenant’s lease, there may be a period of

time before receiving rental payments under a replacement lease.

During that period, the Fund would continue to bear fixed expenses

such as interest, real estate taxes, maintenance and other operating

expenses. In addition, declining economic conditions may impair the

ability to attract replacement tenants and achieve rental rates equal to

or greater than the rents paid under previous leases. Increased

competition for tenants may require capital improvements to properties

which would not have otherwise been planned.

27  Base Prospectus

Real estate values have historically been cyclical. As the general

economy grows, demand for real estate increases and occupancies and

rents may increase. As occupancies and rents increase, property values

increase, and new development occurs. As development may occur,

occupancies, rents and property values may decline. Because leases are

usually entered into for long periods and development activities often

require extended times to complete, the real estate value cycle often

lags the general business cycle. Because of this cycle, real estate

companies may incur large swings in their profits and the prices of their

securities. Developments following the onset of COVID-19 have

adversely impacted certain commercial real estate markets, causing the

deferral of mortgage payments, renegotiated commercial mortgage

loans, commercial real estate vacancies or outright mortgage defaults,

and potential acceleration of macro trends such as work from home and

online shopping which may negatively impact certain industries, such as

brick-and-mortar retail.

The total returns available from investments in real estate generally

depend on the amount of income and capital appreciation generated by

the related properties. The performance of real estate, and thereby the

Fund, will be reduced by any related expenses, such as expenses paid

directly at the property level and other expenses that are capitalized or

otherwise embedded into the cost basis of the real estate.

Separately, certain service providers to the Fund and/or its subsidiaries,

as applicable, with respect to its real estate or real estate-related

investments may be owned by, employed by, or otherwise related to,

PIMCO, Allianz SE, their affiliates and/or their respective employees,

consultants and other personnel. PIMCO may, in its sole discretion,

determine to provide, or engage or recommend an affiliate of PIMCO to

provide, certain services to the Fund, instead of engaging or

recommending one or more third parties to provide such services.

Subject to the governance requirements of a particular fund and

applicable law, PIMCO or its affiliates, as applicable, will receive

compensation in connection with the provision of such services. As a

result, PIMCO faces a conflict of interest when selecting or

recommending service providers for the Fund. Fees paid to an affiliated

service provider will be determined in PIMCO’s commercially reasonable

discretion. Although PIMCO has adopted various policies and

procedures intended to mitigate or otherwise manage conflicts of

interest with respect to affiliated service providers, there can be no

guarantee that such policies and procedures (which may be modified or

terminated at any time in PIMCO’s sole discretion) will be successful.

To the extent that the Fund focuses its investments in a particular sector,

it may be susceptible to loss due to adverse developments affecting that

sector, including (but not limited to): governmental regulation; inflation;

rising interest rates; cost increases in raw materials, fuel and other

operating expenses; technological innovations that may render existing

products and equipment obsolete; competition from new entrants; high

Although the Fund’s ARPS ordinarily would pay dividends at rates set at

periodic auctions, the weekly auctions for the ARPS (and auctions for

similar preferred shares issued by closed-end funds in the U.S.) have

failed since 2008. The dividend rates on the ARPS since that time have

been paid, and the Fund expects that they will continue to be paid for

the foreseeable future, at the “maximum applicable rate” under the

Fund’s Bylaws (i.e., the greater of a multiple of or a spread plus a

reference rate). An increase in market interest rates generally, therefore,

could increase substantially the dividend rate required to be paid by the

Fund to the holders of ARPS, which would increase the costs associated

with the Fund’s leverage and reduce the Fund’s net income available for

distribution to Common Shareholders.

In addition, the multiple used to calculate the maximum applicable rate

is based in part on the credit rating assigned to the ARPS by the

applicable rating agency (currently, Moody’s and Fitch), with the

multiple generally increasing as the rating declines below certain levels.

In September 2011, Moody’s, a ratings agency that provides ratings for

the Fund’s ARPS, downgraded its rating of the ARPS from “Aaa” to

“Aa2,” citing what it believed to be persistently thin asset coverage

levels, increased NAV volatility and concerns about secondary market

liquidity for some assets supporting rated obligations. Under the Bylaws,

the 2011 Moody’s downgrade resulted in an increase in the dividend

rate multiplier from 1.25 to 1.50, thereby increasing the dividend rate

payable to ARPS holders and increasing the costs to Common

Shareholders associated with the Fund’s leverage. See “Use of

Leverage” and “Description of Capital Structure.” In July 2012, Moody’s

downgraded its rating of the ARPS from “Aa2” to “Aa3” pursuant to a

revised ratings methodology adopted by Moody’s. In May 2020, Fitch

downgraded its rating of the ARPS from “AAA” to “AA,” indicating the

downgrades reflected recent extreme market volatility and reduced

asset liquidity, which it believed eroded asset coverage cushions for

closed-end funds and challenged fund managers’ ability to deleverage.

Under the Bylaws, the 2020 Fitch downgrade resulted in an increase in

the applicable spread over the reference rate from 125 bps to 150 bps,

thereby increasing the dividend rate payable to ARPS holders and

increasing the costs to Common Shareholders associated with the

Fund’s leverage. On December 4, 2020, Fitch published ratings criteria

[], 2024 |

  

Therefore, it is possible that a substantial rise in market interest rates

and/ or further ratings downgrades of the ARPS could, by reducing

income available for distribution to the Common Shareholders and

otherwise detracting from the Fund’s investment performance, make the

Fund’s continued use of Preferred Shares for leverage purposes less

attractive than such use is currently considered to be. In such case, the

Fund may elect to redeem some or all of the Preferred Shares

outstanding, which may require it to dispose of investments at

inopportune times and to incur losses on such dispositions. Such

dispositions may adversely affect the Fund’s investment performance

generally, and the resultant loss of leverage may materially and

adversely affect the Fund’s investment returns to Common

Shareholders. The Fund has previously been required to redeem a

portion of its ARPS due to market dislocations that caused the value of

the Fund’s portfolio securities and related asset coverage to decline and

could be required to do so again in the future.

Certain broker-dealers may be considered to be affiliated persons of the

Fund and/or the Investment Manager, or another Allianz entity. Allianz

Asset Management of America LP merged with Allianz Asset

Management, with the latter being the surviving entity, effective

January 1, 2023. Following the merger, Allianz Asset Management is

PIMCO LLC’s managing member and direct parent entity, due to their

possible affiliations with Allianz SE, the ultimate parent of the

Investment Manager. Absent an exemption from the SEC or other

regulatory relief, the Fund is generally precluded from effecting certain

principal transactions with affiliated brokers, and its ability to purchase

securities being underwritten by an affiliated broker or a syndicate

including an affiliated broker, or to utilize affiliated brokers for agency

transactions, is subject to restrictions. This could limit the Fund’s ability

to engage in securities transactions and take advantage of market

opportunities.

The Fund has received exemptive relief from the SEC that, to the extent

the Fund relies on such relief, permits it to (among other things)

co-invest with certain other persons, including certain affiliates of the

Investment Manager and certain public or private funds managed by the

Investment Manager and its affiliates, subject to certain terms and

conditions. The exemptive relief from the SEC with respect to co

investments imposes extensive conditions on any co-investments made

in reliance on such relief.

The Fund’s Amended and Restated Agreement and Declaration of Trust

(the “Declaration”) and the Fund’s Bylaws (the “Bylaws”) include

provisions that could limit the ability of other entities or persons to

acquire control of the Fund or to convert the Fund to open-end status.

See “Anti-Takeover and Other Provisions in the Agreement and

Declaration of Trust and Bylaws.” These provisions in the Declaration

29  Base Prospectus

Although the Fund may seek to maintain level distributions, the Fund’s

distribution rates may be affected by numerous factors, including but

not limited to changes in realized and projected market returns,

fluctuations in market interest rates, Fund performance, and other

factors. There can be no assurance that a change in market conditions or

other factors will not result in a change in the Fund’s distribution rate or

that the rate will be sustainable in the future.

For instance, during periods of low or declining interest rates, the Fund’s

distributable income and dividend levels may decline for many reasons.

For example, the Fund may have to deploy uninvested assets (whether

from sales of Fund shares, proceeds from matured, traded or called debt

obligations or other sources) in new, lower yielding instruments.

Additionally, payments from certain instruments that may be held by the

Fund (such as variable and floating rate securities) may be negatively

impacted by declining interest rates, which may also lead to a decline in

the Fund’s distributable income and dividend levels.

[], 2024 |

  

Summary of Fund Expenses

31  

Base Prospectus

Financial Highlights

The information in the table below for the fiscal year ended June 30, 2023, the fiscal period ended June 30, 2022

(1)

, the fiscal years ended July 31,

2021, July 31, 2020 and July 31, 2019, the fiscal years ended July 31, 2018, July 31, 2017, July 31, 2016, July 31, 2015, July 31, 2014, and July 31,

2013 is derived from the Fund’s financial statements for the fiscal year ended June 30, 2023 audited by PricewaterhouseCoopers LLP (“PwC”), whose

report on such financial statements is contained in the Fund’s June 30, 2023 Annual Report and is incorporated by reference into the Statement of

Additional Information. The information shown for the six months ended December 31, 2023 is unaudited.