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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-10377
PIMCO Municipal Income Fund
 
(Exact name of registrant as specified in charter)
     
1345 Avenue of the Americas, New York, NY   10105
     
(Address of principal executive offices)   (Zip code)
Lawrence G. Altadonna—1345 Avenue of the Americas, New York, NY 10105
 
(Name and address of agent for service)
Registrant’s telephone number, including area code: 212-739-3371
Date of fiscal year end: April 30, 2011
Date of reporting period: October 31, 2010
     Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
     A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-2001. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 

 


 

 
Item 1.   Report to Shareholders
 
Allianz Semi-Annual Report

 
     October 31, 2010
 
PIMCO Municipal Income Fund
PIMCO California Municipal Income Fund
PIMCO New York Municipal Income Fund
 
             
    PMF   PCQ   PNF
    Listed NYSE   Listed NYSE   Listed NYSE
 


 

     
Contents    
 
Letter to Shareholders
  2-4
Fund Insights/Performance & Statistics
  6-8
Schedules of Investments
  10-27
Statements of Assets and Liabilities
  28
Statements of Operations
  29
Statements of Changes in Net Assets
  30-31
Notes to Financial Statements
  32-39
Financial Highlights
  40-42
Changes to the Board of Trustees/Proxy Voting Policies & Procedures   43
Matters Relating to the Trustees’ Consideration of the Investment Management and Portfolio Management Agreements   44-46
 
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 1


 

 
Dear Shareholder:
 
     
Municipal bonds rose in price during the fiscal six-month period ended October 31, 2010, as the U.S. economy continued to recover from the recession that ended in mid-2009. But the recovery has slowed from its pace of a year ago, and there are legitimate concerns about ongoing fiscal woes in many states and the impact this could have on the municipal bond market.   (HANS W. KERTESS PICTURE) Hans W. Kertess
Chairman
     
     
Six Months In Review
For the fiscal six-month period ended October 31, 2010:

• PIMCO Municipal Income Fund rose 8.32% on net asset value (“NAV”) and 7.96 % on market price.

• PIMCO California Municipal Fund rose 8.20% on NAV and 8.84% on market price.

• PIMCO New York Municipal Income Fund rose 7.16% NAV and 3.63% on market price.
  (BRIAN S. SHLISSEL PICTURE) Brian S. Shlissel
President & CEO
 
After growing at an annual rate of 5.0% during the fourth quarter of 2009, the U.S. economy slowed considerably in 2010: 3.7% in the first quarter, 1.7% in the second and 2.5% in the third. As it deaccelerated, the Federal Reserve (“the Fed”) decided to resume its purchase of U.S. Treasury bonds. The goal of this “quantitative easing II” was to lower interest rates and boost economic activity. But the Fed’s purchase program focused on short-to-medium term Treasuries and generally excluded bonds with longer maturities. Thus, long-term Treasuries fell in price. Since municipal bonds tend to move in tandem with Treasuries, the prices of longer-term municipal securities also fell.
 
The Road Ahead
Concerns about the fiscal situation at the state and local level – and the impact this could have on municipal bonds – are clearly justified. According to the non-partisan Center on Budget and Policy Priorities, for 2011 46 states face budget shortfalls. In 18 of these states, the default represents more than 20% of planned expenditures.
 
 
2 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

As the recession neared bottom in early 2009, the Obama administration unveiled its $787 billion stimulus plan to boost the economy. Part of the stimulus package was the “Build America Bonds” (“BAB”) program. The BAB program was designed to help cash-strapped states and cities cope with the downturn by subsidizing borrowing costs for important municipal projects. But after Republicans reclaimed the House of Representatives and made sizable gains in the Senate, it became clear that the BAB program – due to expire on December 31, 2010 – would not be extended. Realizing this, many state and city governments flooded the municipal market with BABs. So much supply came onto market that it could not be absorbed, thus putting sudden, downward pressure on municipal bond prices.
 
The afore-mentioned quantitative easing strategy has hurt many municipal bonds as well. The Fed’s purchase of Treasury securities generally excludes bonds with longer maturities. This in turn has led to lower prices for longer-term municipal bond prices, which correlate somewhat closely to Treasuries. As a result, investor interest in long-term municipal bonds has waned. As calendar year 2010 comes to an end, we anticipate a large supply of tax-exempt municipal bonds to come to market, which may have an adverse effect on prices.
 
The tax deal compromise between President Obama and Congress has also hurt municipal bond prices. The compromise preserves the Bush-era tax cuts for upper income earners, thus making tax-exempt securities somewhat less attractive. The bill’s provisions cover calendar years 2011 and 2012 and are due to expire on December 31, 2012.
 
All that aside, we believe these developments should be largely short-term in nature. From a longer perspective, the expectation of higher taxes at all levels of government and historically low default rates should continue to make municipal securities compelling investments for many people.
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 3


 

For specific information on the Funds and their performance, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources are available on our Web site, www.allianzinvestors.com/closedendfunds.
 
Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC (“PIMCO”), the Funds’ subadviser, we thank you for investing with us.
 
We remain dedicated to serving your investment needs.
 
Sincerely,
 
     
 
Hans W. Kertess   Brian S. Shlissel
Chairman   President & Chief Executive Officer
 
 
4 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
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10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 5


 

 
PIMCO Municipal Income Funds Insights
October 31, 2010 (unaudited)
 
 
 
For the fiscal six-month period ended October 31, 2010, PIMCO Municipal Income Fund rose 8.32% on NAV and 7.96 % on market price. PIMCO California Municipal Fund rose 8.20% on NAV and 8.84% on market price. PIMCO New York Municipal Income Fund rose 7.16% NAV and 3.63% on market price.
 
The high-quality segment of the municipal bond market produced positive returns during the reporting period, as yields moved lower across the curve. On longer maturities, municipal bonds underperformed the stronger taxable bond market, with the Barclays Capital Long Municipal Bond Index returning 4.70% while the Barclays Capital Long Government/Credit index returned 9.05%, and the Barclays Capital Long U.S. Treasury index returned 11%. The Barclays Capital Zero Coupon Municipal Bond Index returned 5.27% for the reporting period. Municipal to Treasury yield ratios – a measure of the relative attractiveness of municipal and Treasury bonds – ended higher as Treasuries outperformed municipals. The 10-year ratio – a measure of the relative attractiveness of Treasuries and municipal bonds – increased to 97% and the 30-year ratio decreased to 97%.
 
Not all of the Funds’ positions were beneficial for returns. The Funds’ holdings in higher-quality credits detracted from performance, as lower credit-quality securities outperformed the high-grade market.
 
PIMCO Municipal Income Fund
 
Holdings in the health care sector added to the Fund’s returns, as the sector significantly outperformed most other sectors of the municipal bond market. The Fund also benefited from its interest rate positioning during the reporting period. Exposure to longer-maturity zero coupon and nominal municipal bonds allowed the Fund to participate in the widespread decline in yields at the longer end of the municipal market. The Fund also gained from its positions in corporate-backed municipals, which significantly outperformed the general municipal market during the period.
 
Amid generally declining yields, the municipal yield curve steepened slightly during the reporting period, following the lead of the Treasury market. Over the period, 30-year maturity AAA General Obligation (“GO”) yields decreased by 18 basis points, while 2-year yields decreased by 24 basis points.
 
PIMCO California Municipal Income Fund
 
California municipal bonds outperformed the national index, with the Barclays Capital California Municipal Bond Index returning 4.28% versus 3.95% for the Barclays Capital Municipal Bond index over the period. In spite of this outperformance, continued volatility is expected as the state continues to struggle through their budget process, even with the budget balance agreement. Long California municipal bonds outperformed their peers in the national index, returning 5.16% versus the Barclays Capital Long Municipal Bond Index gain of 4.70% cited above. The California municipal curve steepened even more significantly than the national markets during the reporting period, with 30-year yields decreased by 17 basis point while 2-year yields decreased by 32 basis points.
 
Holdings in the health care sector contributed to the Fund’s returns, as the sector significantly outperformed the rest of the municipal bond market. Exposure to longer-maturity nominal and zero coupon municipals allowed the Fund to participate in the widespread decline in yields at the longer end of the municipal market. The Fund also gained from its positions in corporate-backed municipals, which significantly outperformed the general municipal market.
 
PIMCO New York Municipal Income Fund
 
Amid generally declining yields, the New York municipal yield curve steepened, following the lead of the national municipal and Treasury markets. During the period, 30-year maturity yields decreased by 20 basis points while 2-year yields decreased by 25 basis points. New York municipals, as measured by the Barclays Capital New York Municipal Bond Index, returned 3.79% for the period, slightly trailing the national market’s 3.95% gain, as measured by the Barclays Capital Municipal Bond Index. The long-maturity segment of the New York market also underperformed the long segment of the national municipal bond market, returning 4.30% versus the Barclays Capital Long Municipal Bond Index gain of 4.70% cited above.
 
Holdings in the health care sector contributed to the Fund’s returns, as the sector outperformed most sectors of the municipal bond market. The Fund also gained from its positions in transportation municipals, which outperformed the general municipal market. Exposure to corporate-backed municipals contributed significantly to returns. Exposure to longer-maturity nominal and zero coupon municipal bonds in New York allowed the Fund to participate in the decline in yields at the longer end of the New York municipal market.
 
 
6 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

PIMCO Municipal Income Fund Performance & Statistics
October 31, 2010 (unaudited)
 
                 
Total Return(1)   Market Price     NAV  
   
Six Month
    7.96%       8.32%  
 
 
1 Year
    24.54%       18.92%  
 
 
5 Year
    6.15%       4.43%  
 
 
Commencement of Operations (6/29/01) to 10/31/10
    6.62%       5.80%  
 
 
 
Market Price/NAV Performance:
Commencement of Operations (6/29/01)
to 10/31/10
(LINEGRAPH)
         
Market Price/NAV:      
   
Market Price
    $14.29  
 
 
NAV
    $12.23  
 
 
Premium to NAV
    16.84%  
 
 
Market Price Yield(2)
    6.82%  
 
 
 
Moody’s Ratings
(as a % of total investments)
 
(PIECHART)
PIMCO California Municipal Income Fund Performance & Statistics
October 31, 2010 (unaudited)
 
                 
Total Return(1)   Market Price     NAV  
   
Six Month
    8.84%       8.20%  
 
 
1 Year
    20.36%       16.48%  
 
 
5 Year
    5.41%       5.67%  
 
 
Commencement of Operations (6/29/01) to 10/31/10
    6.03%       6.20%  
 
 
 
Market Price/NAV Performance:
Commencement of Operations (6/29/01)
to 10/31/10
(LINEGRAPH)
         
Market Price/NAV:      
   
Market Price
    $13.97  
 
 
NAV
    $13.41  
 
 
Premium to NAV
    4.18%  
 
 
Market Price Yield(2)
    6.61%  
 
 
 
Moody’s Ratings
(as a % of total investments)
 
(PIECHART)
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 7


 

PIMCO New York Municipal Income Fund Performance & Statistics
October 31, 2010 (unaudited)
 
                 
Total Return(1)   Market Price     NAV  
   
 
Six Month
    3.63%       7.16%  
 
 
1 Year
    13.99%       15.50%  
 
 
5 Year
    0.95%       2.00%  
 
 
Commencement of Operations (6/29/01) to 10/31/10
    3.23%       3.61%  
 
 
 
 
Market Price/NAV Performance:
Commencement of Operations (6/29/01)
to 10/31/10
 
(LINEGRAPH)
         
Market Price/NAV:      
   
 
Market Price
    $11.23  
 
 
NAV
    $11.08  
 
 
Premium to NAV
    1.35%  
 
 
Market Price Yield(2)
    6.09%  
 
 
 
Moody’s Ratings
(as a % of total investments)
 
(PIECHART)
 
(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends, and capital gain distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.
 
Performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Funds, market conditions, supply and demand for each Fund’s shares, or changes in each dividends.
 
An investment in each Fund involves risk, including the loss of principal. Total return, market price, market yield and NAV asset will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a onetime public offering and once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
 
(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend (comprised of net investment income) payable to common shareholders by the market price per share at October 31, 2010.
 
 
8 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
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10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 9


 

PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
MUNICIPAL BONDS & NOTES–96.5%
       
Alabama–0.9%
           
$ 2,500    
Birmingham-Baptist Medical Centers Special Care Facs. Financing Auth. Rev., Baptist Health Systems, Inc., 5.875%, 11/15/24, Ser. A
  Baa2/NR   $ 2,517,750  
       
Huntsville-Redstone Village Special Care Facs. Financing Auth. Rev., Redstone Village Project,
           
  250    
5.50%, 1/1/28
  NR/NR     224,108  
  885    
5.50%, 1/1/43
  NR/NR     720,788  
  1,350    
Montgomery Medical Clinic Board Rev., Jackson Hospital & Clinic, 5.25%, 3/1/31
  Baa2/BBB−     1,323,459  
                     
                  4,786,105  
                     
       
Alaska–1.1%
           
  3,280    
Borough of Matanuska-Susitna Rev., Goose Creek Correctional Center, 6.00%, 9/1/32 (AGC)
  Aa2/AA+     3,771,541  
  900    
Industrial Dev. & Export Auth. Rev., Boys & Girls Home, 6.00%, 12/1/36
  NR/NR     529,254  
  2,400    
Northern Tobacco Securitization Corp. Rev., 5.00%, 6/1/46, Ser. A
  Baa3/NR     1,647,288  
                     
                  5,948,083  
                     
       
Arizona–5.1%
           
  5,000    
Apache Cnty. Industrial Dev. Auth. Rev., Tucson Electric Power Co. Project, 5.875%, 3/1/33, Ser. B
  Baa3/BBB−     5,019,450  
       
Health Facs. Auth. Rev.,
           
  2,050    
Banner Health, 5.50%, 1/1/38, Ser. D
  NR/A+     2,146,063  
  2,750    
Beatitudes Campus Project, 5.20%, 10/1/37
  NR/NR     2,235,750  
  2,500    
Maricopa Cnty. Pollution Control Corp. Rev., 5.00%, 6/1/35, Ser. A Pima Cnty. Industrial Dev. Auth. Rev.,
  A1/A     2,574,725  
       
Tucson Electric Power Co., Ser. A,
           
  4,150    
6.375%, 9/1/29
  Baa3/BBB−     4,304,006  
  750    
5.25%, 10/1/40
  Baa3/BBB−     753,413  
  5,000    
Salt River Project Agricultural Improvement & Power Dist. Rev., 5.00%, 1/1/39, Ser. A (h)
  Aa1/AA     5,312,750  
  4,200    
Salt Verde Financial Corp. Rev., 5.00%, 12/1/37
  A3/A     4,002,348  
                     
                  26,348,505  
                     
       
Arkansas–0.4%
           
  8,500    
Dev. Finance Auth. Rev., Arkansas Cancer Research Center Project, zero coupon, 7/1/36 (AMBAC)
  Aa2/NR     2,192,150  
                     
       
California–8.1%
           
  3,000    
Chula Vista Rev., San Diego Gas & Electric, 5.875%, 2/15/34, Ser. B
  Aa3/A+     3,473,340  
  6,000    
Golden State Tobacco Securitization Corp. Rev., 5.00%, 6/1/33, Ser. A-1
  Baa3/BBB     4,868,820  
  2,000    
Health Facs. Financing Auth. Rev., Catholic Healthcare West, 6.00%, 7/1/39, Ser. A
  A2/A     2,153,600  
 
 
10 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
California (continued)
           
                     
$ 4,175    
Montebello Unified School Dist., GO, 5.00%, 8/1/33 (AGM)
  Aa3/AA+   $ 4,340,414  
  5,000    
Orange Cnty. Airport Rev., 5.25%, 7/1/39, Ser. A State, GO,
  Aa3/AA−     5,211,550  
  300    
5.00%, 6/1/37
  A1/A−     300,654  
  4,200    
6.00%, 4/1/38
  A1/A−     4,677,372  
  1,000    
Statewide Communities Dev. Auth. Rev.,
           
       
Catholic Healthcare West, 5.50%, 7/1/31, Ser. E
  A2/A     1,039,440  
       
Methodist Hospital Project (FHA),
           
  2,600    
6.625%, 8/1/29
  Aa2/NR     3,022,084  
  9,500    
6.75%, 2/1/38
  Aa2/NR     11,000,525  
  4,000    
Whittier Union High School Dist., GO, zero coupon, 8/1/25
  NR/AA−     1,783,160  
                     
                  41,870,959  
                     
       
Colorado–0.6%
           
  500    
Confluence Metropolitan Dist. Rev., 5.45%, 12/1/34
  NR/NR     362,910  
  450    
Denver Health & Hospital Auth. Rev., 5.625%, 12/1/40
  NR/BBB     456,718  
  500    
Public Auth. for Colorado Energy Rev., 6.50%, 11/15/38
  A2/A     587,890  
  1,500    
Univ. of Colorado Rev., 5.375%, 6/1/38, Ser. A
  Aa2/AA−     1,621,305  
                     
                  3,028,823  
                     
       
Connecticut–0.2%
           
  1,000    
State Dev. Auth. Rev., Connecticut Light & Power Co., 5.85%, 9/1/28, Ser. A
  Baa1/BBB     1,013,100  
                     
       
Delaware–0.1%
           
  650    
State Economic Dev. Auth. Rev., Delmarva Power & Light Co., 5.40%, 2/1/31
  Baa2/BBB+     684,158  
                     
       
District of Columbia–1.3%
           
  2,500    
Dist. of Columbia Rev., Brookings Institution, 5.75%, 10/1/39
  Aa3/A+     2,794,625  
  3,895    
Tobacco Settlement Financing Corp. Rev., 6.25%, 5/15/24
  Baa3/BBB     3,945,869  
                     
                  6,740,494  
                     
       
Florida–4.0%
           
  895    
Beacon Lakes Community Dev. Dist., Special Assessment, 6.00%, 5/1/38, Ser. A
  NR/NR     799,351  
  4,000    
Broward Cnty. Water & Sewer Rev., 5.25%, 10/1/34, Ser. A (h)
  Aa2/AA     4,296,800  
  500    
Lee Cnty. Industrial Dev. Auth. Rev., Sara Lee Charter Foundation, 5.375%, 6/15/37, Ser. A
  NR/BB     421,995  
  3,000    
Miami-Dade Cnty. Airport Rev., 5.50%, 10/1/36, Ser. A
  A2/A−     3,132,960  
  1,250    
Miami-Dade Cnty. School Board, CP, 5.375%, 2/1/34, Ser. A (AGC)
  Aa3/AA+     1,321,900  
  3,900    
State Board of Education, GO, 5.00%, 6/1/38, Ser. D (h)
  Aa1/AAA     4,142,853  
  5,685    
State Board of Governors Rev., Florida Univ., 6.50%, 7/1/33
  Aa2/AA     6,587,096  
                     
                  20,702,955  
                     
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 11


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Georgia–0.4%
           
$ 2,300    
Medical Center Hospital Auth. Rev., Spring Harbor Green Island Project, 5.25%, 7/1/37
  NR/NR   $ 1,932,759  
                     
       
Illinois–6.0%
           
  5,000    
Chicago, GO, 5.00%, 1/1/34, Ser. C (h)
  Aa3/AA−     5,124,250  
  10,115    
Chicago Board of Education School Reform, GO, zero coupon, 12/1/31, Ser. A (FGIC-NPFGC)
  Aa2/AA−     2,903,511  
  1,250    
Chicago Motor Fuel Tax Rev., 5.00%, 1/1/38, Ser. A (AGC)
  Aa3/AA+     1,287,050  
       
Finance Auth. Rev.,
           
  1,000    
Memorial Health Systems, 5.50%, 4/1/39
  A1/A+     1,021,540  
  400    
OSF Healthcare System, 7.125%, 11/15/37, Ser. A Univ. of Chicago,
  A3/A     453,692  
  190    
5.25%, 7/1/41, Ser. 05-A
  Aa1/AA     193,412  
  15,000    
5.50%, 7/1/37, Ser. B (h)
  Aa1/AA     16,711,950  
  1,900    
Springfield Electric Rev., 5.00%, 3/1/36
  Aa3/AA−     1,921,945  
  1,495    
Univ. of Illinois Rev., 5.25%, 4/1/32, Ser. B (FGIC-NPFGC)
  Aa2/AA−     1,500,561  
                     
                  31,117,911  
                     
       
Indiana–0.7%
           
       
Finance Auth. Rev.,
           
  1,500    
Duke Energy Indiana, Inc., 6.00%, 8/1/39, Ser. B
  NR/A     1,670,235  
  1,000    
U.S. States Steel Corp., 6.00%, 12/1/26
  Ba2/BB     1,072,100  
  1,000    
Municipal Power Agcy. Rev., 6.00%, 1/1/39, Ser. B
  A1/A+     1,081,570  
                     
                  3,823,905  
                     
       
Iowa–1.8%
           
       
Finance Auth. Rev.,
           
  4,890    
Deerfield Retirement Community, Inc., 5.50%, 11/15/37, Ser. A Edgewater LLC Project,
  NR/NR     3,363,342  
  3,500    
6.75%, 11/15/37
  NR/NR     3,427,550  
  1,500    
6.75%, 11/15/42
  NR/NR     1,444,890  
  1,600    
Wedum Walnut Ridge LLC Project, 5.625%, 12/1/45, Ser. A
  NR/NR     1,010,752  
                     
                  9,246,534  
                     
       
Kansas–1.5%
           
  1,000    
Dev. Finance Auth. Rev., Adventist Health, 5.75%, 11/15/38
  Aa3/AA−     1,111,530  
  1,000    
Lenexa City, Tax Allocation, Center East Project, 6.00%, 4/1/27
  NR/NR     797,270  
  650    
Manhattan Rev., Meadowlark Hills Retirement, 5.125%, 5/15/42, Ser. B
  NR/NR     535,242  
  5,000    
Wichita Hospital Rev., Facs. Improvements, 5.625%, 11/15/31, Ser. III
  NR/A+     5,105,850  
                     
                  7,549,892  
                     
 
 
12 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Kentucky–1.0%
           
$ 700    
Dev. Finance Auth. Rev., St. Luke’s Hospital, 6.00%, 10/1/19, Ser. B
  A3/A   $ 702,548  
       
Economic Dev. Finance Auth. Rev.,
Baptist Healthcare Systems, Ser. A,
           
  1,000    
5.375%, 8/15/24
  Aa3/NR     1,104,050  
  1,200    
5.625%, 8/15/27
  Aa3/NR     1,321,668  
  1,000    
Owensboro Medical Healthcare Systems, 6.375%, 6/1/40, Ser. A
  Baa2/NR     1,077,540  
  1,000    
Ohio Cnty. Pollution Control Rev., Big Rivers Electric Corp., 6.00%, 7/15/31, Ser. A
  Baa1/BBB−     1,041,220  
                     
                  5,247,026  
                     
       
Louisiana–6.3%
           
       
Local Gov’t Environmental Facs. & Community Dev. Auth. Rev.,
           
  3,930    
Capital Projects & Equipment Acquisition, 6.55%, 9/1/25 (ACA)
  NR/NR     3,682,017  
  750    
Woman’s Hospital Foundation, 5.875%, 10/1/40, Ser. A
  A3/BBB+     778,778  
  27,895    
Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B
  Baa3/BBB     28,123,460  
                     
                  32,584,255  
                     
       
Maryland–0.3%
           
  1,500    
Economic Dev. Corp. Rev., 5.75%, 6/1/35, Ser. B
  Baa3/NR     1,562,700  
                     
       
Massachusetts–0.4%
           
  550    
Dev. Finance Agcy. Rev., Linden Ponds, Inc. Fac., 5.75%, 11/15/35, Ser. A
  NR/NR     402,616  
  1,500    
State College Building Auth. Rev., 5.50%, 5/1/39, Ser. A
  Aa2/AA−     1,658,415  
                     
                  2,061,031  
                     
       
Michigan–2.2%
           
  1,000    
Detroit, GO, 5.375%, 4/1/17, Ser. A-1 (NPFGC)
  Baa1/A     1,001,000  
  4,550    
Garden City Hospital Finance Auth. Rev., 5.00%, 8/15/38, Ser. A
  NR/NR     3,237,052  
       
Royal Oak Hospital Finance Auth. Rev., William Beaumont Hospital,
           
  50    
5.25%, 11/15/35, Ser. M (NPFGC)
  A1/A     48,509  
  1,500    
8.25%, 9/1/39
  A1/A     1,812,435  
  3,260    
State Hospital Finance Auth. Rev., Detroit Medical Center, 6.25%, 8/15/13, Ser. A
  Ba3/BB−     3,272,225  
  2,000    
Strategic Fund Rev., Detroit Edison Co. Pollution Control, 5.45%, 9/1/29, Ser. C
  A2/A−     2,015,300  
                     
                  11,386,521  
                     
       
Minnesota–0.4%
           
  95    
Agricultural & Economic Dev. Board Rev., Health Care Systems, 6.375%, 11/15/29, Ser. A
  A2/A     96,053  
  1,500    
St. Louis Park Rev., Nicollett Health Services, 5.75%, 7/1/39
  NR/A     1,555,770  
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 13


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Minnesota (continued)
           
                     
$ 500    
Washington Cnty. Housing & Redev. Auth. Rev., Birchwood & Woodbury Projects, 5.625%, 6/1/37, Ser. A
  NR/NR   $ 471,425  
                     
                  2,123,248  
                     
       
Missouri–0.2%
           
  1,000    
Joplin Industrial Dev. Auth. Rev., Christian Homes, Inc., 5.75%, 5/15/26, Ser. F
  NR/NR     968,080  
                     
       
Montana–0.2%
           
  1,000    
Forsyth Pollution Control Rev., 5.00%, 5/1/33, Ser. A
  A3/A−     1,064,170  
                     
       
Nevada–3.9%
           
       
Clark Cnty., GO,
           
  5,000    
4.75%, 6/1/30 (AGM)
  Aaa/AA+     5,090,500  
  5,230    
4.75%, 11/1/35 (FGIC-NPFGC)
  Aaa/AA+     5,300,657  
  9,755    
Washoe Cnty., Water & Sewer, GO, 5.00%, 1/1/35 (NPFGC)
  Aa1/AA     9,963,269  
                     
                  20,354,426  
                     
       
New Hampshire–0.6%
           
  3,000    
Business Finance Auth. Pollution Control Rev., Connecticut Light & Power Co., 5.85%, 12/1/22, Ser. A
  Baa1/BBB     3,039,300  
                     
       
New Jersey–5.5%
           
  2,000    
Economic Dev. Auth. Rev., School Facs. Construction, 5.50%, 12/15/34, Ser. Z (AGC)
  Aa3/AA+     2,206,080  
  16,550    
Economic Dev. Auth., Special Assessment, Kapkowski Road Landfill Project, 5.75%, 4/1/31
  Ba2/NR     16,768,129  
  1,000    
Health Care Facs. Financing Auth. Rev., Trinitas Hospital, 5.25%, 7/1/30, Ser. A
  Baa3/BBB−     986,660  
  2,000    
State Turnpike Auth. Rev., 5.25%, 1/1/40, Ser. E
  A3/A+     2,162,380  
  9,100    
Tobacco Settlement Financing Corp. Rev., 5.00%, 6/1/41, Ser. 1-A
  Baa3/BBB     6,578,117  
                     
                  28,701,366  
                     
       
New Mexico–1.5%
           
  1,000    
Farmington Pollution Control Rev., 5.90%, 6/1/40, Ser. D
  Baa3/BB+     1,039,990  
  6,400    
Hospital Equipment Loan Council Rev., Presbyterian Healthcare,
           
       
5.00%, 8/1/39
  Aa3/AA−     6,577,536  
                     
                  7,617,526  
                     
       
New York–6.8%
           
       
Liberty Dev. Corp. Rev., Goldman Sachs Headquarters,
           
  7,500    
5.25%, 10/1/35
  A1/A     7,786,875  
  3,000    
5.50%, 10/1/37
  A1/A     3,225,090  
  4,200    
Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside, 6.70%, 1/1/43, Ser. A
  NR/NR     4,254,180  
 
 
14 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
New York (continued)
           
                     
       
New York City Municipal Water Finance Auth. Water & Sewer Rev.,
           
$ 13,000    
5.00%, 6/15/26, Ser. E (h)
  Aa1/AAA   $ 13,265,070  
  670    
5.00%, 6/15/37, Ser. D (h)
  Aa1/AAA     699,460  
  3,000    
Second Generation Resolutions, 5.00%, 6/15/39, Ser. GG-1
  Aa2/AA+     3,207,690  
  1,000    
State Dormitory Auth. Rev., 5.00%, 3/15/38, Ser. A
  NR/AAA     1,063,880  
  1,625    
Westchester Cnty. Healthcare Corp. Rev., 5.875%, 11/1/25, Ser. A
  Baa1/BBB     1,625,422  
                     
                  35,127,667  
                     
       
North Carolina–1.3%
           
       
Capital Facs. Finance Agcy. Rev., Ser. A,
           
  2,750    
Duke Energy, 4.625%, 11/1/40
  A1/A     2,712,655  
  570    
Duke Univ. Project, 5.125%, 10/1/41
  Aa1/AA+     579,092  
       
Medical Care Commission Rev.,
           
  2,500    
Novant Health, 5.00%, 11/1/43, Ser. A (d)
  A1/A+     2,476,050  
  1,500    
Village at Brookwood, 5.25%, 1/1/32
  NR/NR     1,239,540  
                     
                  7,007,337  
                     
       
Ohio–1.9%
           
  11,000    
Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2
  Baa3/BBB     8,397,180  
  500    
Higher Educational Fac. Commission Rev., Univ. Hospital Health Systems, 6.75%, 1/15/39, Ser. 2009-A
  A2/A     535,660  
  500    
Montgomery Cnty. Rev., Miami Valley Hospital, 6.25%, 11/15/39, Ser. A
  Aa3/NR     528,540  
  250    
State Rev., Ashland Univ. Project, 6.25%, 9/1/24
  Ba1/NR     262,612  
                     
                  9,723,992  
                     
       
Oregon–0.5%
           
  2,000    
Oregon Health & Science Univ. Rev., 5.75%, 7/1/39, Ser. A
  A2/A     2,192,120  
  600    
State Department of Administrative Services, CP, 5.25%, 5/1/39, Ser. A
  Aa2/AA−     638,448  
                     
                  2,830,568  
                     
       
Pennsylvania–4.8%
           
  5,000    
Geisinger Auth. Rev., 5.25%, 6/1/39, Ser. A
  Aa2/AA     5,282,450  
  2,000    
Harrisburg Auth. Rev., Harrisburg Univ. of Science, 6.00%, 9/1/36, Ser. B
  NR/NR     1,873,060  
       
Higher Educational Facs. Auth. Rev.,
           
  500    
Edinboro Univ. Foundation, 6.00%, 7/1/43
  Baa3/BBB−     515,850  
  350    
Thomas Jefferson Univ., 5.00%, 3/1/40
  A1/AA−     360,500  
       
Lancaster Cnty. Hospital Auth. Rev., Brethren Village Project, Ser. A,
           
  750    
6.25%, 7/1/26
  NR/NR     753,158  
  85    
6.375%, 7/1/30
  NR/NR     84,473  
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 15


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Pennsylvania (continued)
           
                     
$ 1,100    
Luzerne Cnty. Industrial Dev. Auth. Rev., Pennsylvania American Water Co., 5.50%, 12/1/39
  A2/A   $ 1,143,758  
  7,000    
Philadelphia, GO, 5.25%, 12/15/32, Ser. A (AGM)
  Aa3/AA+     7,358,190  
  4,700    
Philadelphia Hospitals & Higher Education Facs. Auth. Rev., Temple Univ. Hospital, 6.625%, 11/15/23, Ser. A
  Baa3/BBB     4,703,196  
  500    
Philadelphia Water Rev., 5.25%, 1/1/36, Ser. A
  A1/A     520,150  
  2,000    
Turnpike Commission Rev., 5.125%, 12/1/40, Ser. D
  A3/A−     2,054,700  
                     
                  24,649,485  
                     
       
Puerto Rico–1.3%
           
  135    
Commonwealth of Puerto Rico, Public Improvements, GO, 5.00%, 7/1/35, Ser. B
  A3/BBB−     135,586  
       
Sales Tax Financing Corp. Rev.,
           
  32,550    
zero coupon, 8/1/54, Ser. A (AMBAC)
  Aa2/AA−     2,051,301  
  29,200    
zero coupon, 8/1/56, Ser. A
  Aa2/AA−     1,586,144  
  3,000    
5.375%, 8/1/38, Ser. C
  A1/A+     3,163,830  
                     
                  6,936,861  
                     
       
Rhode Island–4.6%
           
  23,800    
Tobacco Settlement Financing Corp. Rev., 6.25%, 6/1/42, Ser. A
  Baa3/BBB     23,700,992  
                     
       
South Carolina–1.4%
           
       
Greenwood Cnty. Hospital Rev., Self Memorial Hospital,
           
  3,500    
5.50%, 10/1/21
  A2/A     3,539,795  
  2,000    
5.50%, 10/1/26
  A2/A     2,015,520  
  450    
Jobs-Economic Dev. Auth. Rev., Lutheran Homes, 5.50%, 5/1/28
  NR/NR     409,941  
  1,000    
State Public Service Auth. Rev., 5.25%, 1/1/39, Ser. B
  Aa2/AA−     1,077,590  
                     
                  7,042,846  
                     
       
Tennessee–4.7%
           
  940    
Memphis Health Educational & Housing Fac. Board Rev., Wesley Housing Corp. Project, 6.95%, 1/1/20 (a)(b)(j)(k) (acquisition cost-$935,300; purchased 6/29/01)
  NR/NR     472,350  
  5,000    
Metropolitan Gov’t Nashville & Davidson Cnty. Health & Educational Facs. Board Rev., Vanderbilt Univ., 5.00%, 10/1/39, Ser. B (h) 
           
       
Tennessee Energy Acquisition Corp. Rev.,
  Aa2/AA     5,441,900  
  370    
5.00%, 2/1/21, Ser. C
  Baa1/A     385,951  
  5,000    
5.00%, 2/1/27, Ser. C
  Baa1/A     5,072,000  
  6,460    
5.25%, 9/1/17, Ser. A
  Ba3/BB+     6,922,019  
  600    
5.25%, 9/1/21, Ser. A
  Ba3/BB+     633,450  
  300    
5.25%, 9/1/22, Ser. A
  Ba3/BB+     317,055  
  5,000    
5.25%, 9/1/24, Ser. A
  Ba3/BB+     5,256,150  
                     
                  24,500,875  
                     
 
 
16 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Texas–8.6%
           
$ 10,000    
Coppell Independent School Dist., GO, zero coupon, 8/15/29 (PSF-GTD)
  Aaa/AAA   $ 4,497,200  
  1,200    
Dallas Rev., Dallas Civic Center, 5.25%, 8/15/38 (AGC)
  Aa3/AA+     1,243,464  
  20    
Duncanville Independent School Dist., GO, 5.25%, 2/15/32, Ser. B (PSF-GTD)
  Aaa/AAA     20,432  
       
Municipal Gas Acquisition & Supply Corp. I Rev.,
           
  6,500    
5.25%, 12/15/23, Ser. A
  A2/A     6,749,795  
  150    
5.25%, 12/15/25, Ser. A
  A2/A     153,456  
  6,500    
6.25%, 12/15/26, Ser. D
  A2/A     7,321,925  
       
North Harris Cnty. Regional Water Auth. Rev.,
           
  4,200    
5.25%, 12/15/33
  A1/A+     4,374,300  
  4,200    
5.50%, 12/15/38
  A1/A+     4,389,714  
       
North Texas Tollway Auth. Rev.,
           
  3,000    
5.25%, 1/1/44, Ser. C
  A2/A−     3,061,650  
  6,050    
5.625%, 1/1/33, Ser. A
  A2/A−     6,447,061  
  600    
5.75%, 1/1/33, Ser. F
  A3/BBB+     634,902  
  400    
State Public Finance Auth. Rev., Charter School Finance Corp., 5.875%, 12/1/36, Ser. A
  Baa3/BBB−     403,776  
  4,000    
Tarrant Cnty. Cultural Education Facs. Finance Corp. Rev., Baylor Health Care Systems Project, 6.25%, 11/15/29
  Aa2/AA−     4,536,640  
  1,000    
Uptown Dev. Auth., Tax Allocation, Infrastructure Improvement Facs., 5.50%, 9/1/29
  NR/BBB+     1,030,150  
                     
                  44,864,465  
                     
       
U.S. Virgin Islands–0.1%
           
  500    
Virgin Islands Public Finance Auth. Rev., 5.00%, 10/1/39, Ser. A-1
  Baa2/BBB     493,950  
                     
       
Utah–1.4%
           
  7,000    
Salt Lake Cnty. Rev., IHC Health Services, 5.125%, 2/15/33 (AMBAC)
  WR/AA+     7,133,630  
                     
       
Virginia–0.6%
           
  1,000    
Fairfax Cnty. Industrial Dev. Auth. Rev., Inova Health Systems, 5.50%, 5/15/35, Ser. A
  Aa2/AA+     1,095,410  
  2,000    
Peninsula Town Center Community Dev. Auth. Rev., 6.45%, 9/1/37
  NR/NR     2,009,620  
                     
                  3,105,030  
                     
       
Washington–1.1%
           
       
Health Care Facs. Auth. Rev.,
           
  700    
Multicare Health Systems, 6.00%, 8/15/39, Ser. B (AGC)
  Aa3/AA+     762,706  
  250    
Seattle Cancer Care Alliance, 7.375%, 3/1/38
  A3/NR     284,178  
  2,000    
Virginia Mason Medical Center, 6.125%, 8/15/37, Ser. A
  Baa2/BBB     2,091,640  
       
State Housing Finance Commission Rev., Skyline at First Hill Project, Ser. A,
           
  275    
5.25%, 1/1/17
  NR/NR     242,528  
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 17


 

 
PIMCO Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Washington (continued)
           
                     
$ 3,600    
5.625%, 1/1/38
  NR/NR   $ 2,317,140  
                     
                  5,698,192  
                     
       
Wisconsin–2.7%
           
       
Health & Educational Facs. Auth. Rev.,
           
  2,230    
Kenosha Hospital & Medical Center Project, 5.625%, 5/15/29
  NR/A     2,230,803  
  500    
Prohealth Care, Inc., 6.625%, 2/15/39
  A1/A+     552,720  
  10,000    
State Rev., 6.00%, 5/1/36, Ser. A
  Aa3/AA−     11,259,600  
                     
                  14,043,123  
                     
       
Total Municipal Bonds & Notes (cost–$473,259,958)
        500,554,995  
                     
                     
                     
VARIABLE RATE NOTES (a)(c)(e)(f)–3.5%
       
Illinois–1.5%
           
  5,950    
Cook Cnty., GO, 7.62%, 11/15/28, Ser. 458 (FGIC)
  Aa3/NR     5,959,282  
  2,000    
Metropolitan Pier & Exposition Auth. Rev., 11.97%, 6/15/50, Ser. 3217 (b)(j) (acquisition cost-$1,969,580; purchased 10/7/10)
  NR/AAA     2,089,080  
                     
                  8,048,362  
                     
       
Texas–0.4%
           
  1,000    
JPMorgan Chase Putters/Drivers Trust, GO, 7.824%, 2/1/17, Ser. 3480
  NR/AA+     1,152,120  
       
JPMorgan Chase Putters/Drivers Trust Rev.,
           
  200    
8.26%, 2/1/27, Ser. 3224
  Aa1/NR     248,342  
  600    
8.344%, 10/1/31, Ser. 3227
  NR/AAA     734,208  
                     
                  2,134,670  
                     
       
Washington–1.6%
           
  6,670    
JPMorgan Chase Putters/Drivers Trust, GO, 11.318%, 8/1/28, Ser. 3388
  NR/AA+     8,144,937  
                     
       
Total Variable Rate Notes (cost–$16,120,499)
        18,327,969  
                     
Shares                
COMMON STOCK–0.0%
       
Airlines–0.0%
           
  1,017    
Delta Air Lines, Inc. (g) (cost–$0)
        14,126  
                     
                     
       
Total Investments
(cost–$489,380,457)–100.0%
      $ 518,897,090  
                     
                     
 
 
18 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

PIMCO California Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
CALIFORNIA MUNICIPAL BONDS & NOTES–91.8%
$ 1,000    
Assoc. of Bay Area Gov’t Finance Auth. for Nonprofit Corps. Rev., Poway Housing, Inc. Project, 5.375%, 11/15/25, Ser. A (CA Mtg. Ins.)
  NR/A−   $ 1,000,700  
  10,000    
Bay Area Toll Auth. Rev., San Francisco Bay Area, 5.00%, 4/1/34, Ser. F-1
  Aa3/AA     10,511,100  
  5,000    
Chula Vista Rev., San Diego Gas & Electric, 5.875%, 2/15/34, Ser. B
  Aa3/A+     5,788,900  
  650    
City & Cnty. of San Francisco, Capital Improvement Projects, CP, 5.25%, 4/1/31, Ser. A
  Aa3/AA−     685,659  
  720    
City & Cnty. of San Francisco Redev. Agcy. Rev., Special Tax, 6.125%, 8/1/31, Ser. B
  NR/NR     706,255  
  350    
Contra Costa Cnty. Public Financing Auth., Tax Allocation, 5.85%, 8/1/33, Ser. A
  NR/BBB     350,752  
  3,635    
Cucamonga Valley Water Dist., CP, 5.125%, 9/1/35 (FGIC-NPFGC)
  Aa3/AA−     3,678,656  
  5,000    
Desert Community College Dist., GO, 5.00%, 8/1/37, Ser. C (AGM)
  Aa2/AA+     5,193,800  
  310    
Dublin Unified School Dist., GO, zero coupon, 8/1/23, Ser. E
  Aa2/AA−     163,367  
  6,300    
Eastern Municipal Water Dist., CP, 5.00%, 7/1/35, Ser. H
  Aa2/AA     6,614,244  
       
Educational Facs. Auth. Rev.,
           
       
Claremont McKenna College,
           
  1,400    
5.00%, 1/1/39
  Aa2/NR     1,478,610  
  10,200    
5.00%, 1/1/39 (h)
  Aa2/NR     10,772,730  
       
Univ. of Southern California, Ser. A
           
  5,000    
5.00%, 10/1/38
  Aa1/AA+     5,339,550  
  10,000    
5.00%, 10/1/39 (h)
  Aa1/AA+     10,637,200  
  2,975    
El Dorado Irrigation Dist. & El Dorado Water Agcy., CP, 5.75%, 8/1/39, Ser. A (AGC)
  Aa3/AA+     3,133,032  
       
El Monte, Department of Public Social Services Fac., CP (AMBAC)
           
  10,790    
4.75%, 6/1/30
  A2/A+     10,796,906  
  14,425    
Phase II, 5.25%, 1/1/34
  A2/NR     14,444,762  
  1,000    
Folsom Redev. Agcy., Tax Allocation, 5.50%, 8/1/36
  NR/A     990,390  
       
Fremont Community Facs. Dist. No. 1, Special Tax,
           
  165    
6.00%, 9/1/18
  NR/NR     166,696  
  505    
6.00%, 9/1/19
  NR/NR     509,777  
  3,500    
6.30%, 9/1/31
  NR/NR     3,527,090  
       
Golden State Tobacco Securitization Corp. Rev.,
           
  9,000    
5.00%, 6/1/33, Ser. A-1
  Baa3/BBB     7,303,230  
  3,000    
5.00%, 6/1/35, Ser. A (FGIC)
  A2/BBB+     2,905,020  
  6,000    
5.00%, 6/1/38, Ser. A (FGIC)
  A2/BBB+     5,757,180  
  1,600    
5.00%, 6/1/45 (AMBAC-TCRS)
  A2/A−     1,526,640  
  8,300    
5.125%, 6/1/47, Ser. A-1
  Baa3/BBB     5,966,206  
  9,225    
5.75%, 6/1/47, Ser. A-1
  Baa3/BBB     7,359,520  
  500    
Hartnell Community College Dist., GO, zero coupon, 8/1/34, Ser 2002-D (i)
  Aa2/AA−     271,145  
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 19


 

 
PIMCO California Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Health Facs. Financing Auth. Rev., Adventist Health System, Ser. A
           
$ 4,630    
5.00%, 3/1/33
  NR/A   $ 4,532,122  
  2,000    
5.75%, 9/1/39
  NR/A     2,085,540  
       
Catholic Healthcare West, Ser. A,
           
  1,765    
5.00%, 7/1/18
  A2/A     1,766,571  
  570    
5.00%, 7/1/28
  A2/A     570,046  
  2,000    
6.00%, 7/1/34
  A2/A     2,078,200  
  4,000    
6.00%, 7/1/39
  A2/A     4,307,200  
  750    
Children’s Hospital of Los Angeles, 5.25%, 7/1/38 (AGM)
  Aa3/AA+     759,015  
  1,000    
Children’s Hospital of Orange Cnty., 6.50%, 11/1/38, Ser. A
  NR/A     1,096,210  
  1,450    
Scripps Health, 5.00%, 11/15/36, Ser. A
  A1/AA−     1,472,098  
  1,600    
Sutter Health, 5.00%, 11/15/42, Ser. A (IBC-NPFGC)
  Aa3/A     1,577,328  
  10,590    
Kern Cnty., Capital Improvements Projects, CP, 5.75%, 8/1/35, Ser. A (AGC)
  Aa3/AA+     11,282,268  
  10,000    
La Quinta Redev. Agcy., Tax Allocation, 5.10%, 9/1/31 (AMBAC)
  WR/A+     9,987,800  
  500    
Lancaster Redev. Agcy. Rev., Capital Improvements Projects,
           
       
5.90%, 12/1/35
  NR/A     507,140  
  500    
Lancaster Redev. Agcy., Tax Allocation, 6.875%, 8/1/39
  NR/A     556,710  
  1,495    
Lincoln Public Financing Auth. Rev., Twelve Bridges, 6.125%, 9/2/27
  NR/NR     1,449,866  
       
Long Beach Bond Finance Auth. Rev., Long Beach Natural Gas, Ser. A
           
  1,000    
5.50%, 11/15/27
  A2/A     1,045,150  
  3,900    
5.50%, 11/15/37
  A2/A     3,949,452  
       
Los Angeles Department of Water & Power Rev.,(h)
           
  5,000    
4.75%, 7/1/30, Ser. A-2 (AGM)
  Aa3/AA+     5,114,100  
  3,000    
5.375%, 1/7/34, Ser. A
  NR/NR     3,286,830  
  7,000    
5.375%, 7/1/38, Ser. A
  Aa2/AA     7,593,110  
       
Los Angeles Unified School Dist., GO,
           
  10,000    
5.00%, 7/1/29, Ser. I (h)
  Aa2/AA−     10,575,300  
  13,000    
5.00%, 1/1/34, Ser. I
  Aa2/AA−     13,423,540  
  5,000    
5.00%, 1/1/34, Ser. I (h)
  Aa2/AA−     5,162,900  
  250    
5.30%, 1/1/34, Ser. D
  Aa2/AA−     263,465  
  700    
Malibu, City Hall Project, CP, 5.00%, 7/1/39, Ser. A
  NR/AA+     724,836  
  200    
M-S-R Energy Auth. Rev., 6.50%, 11/1/39, Ser. B
  NR/A     235,012  
  2,900    
Municipal Finance Auth. Rev., Biola Univ., 5.875%, 10/1/34
  Baa1/NR     3,102,420  
  5,000    
Orange Cnty. Sanitation Dist., CP, 5.00%, 2/1/39, Ser. A
  NR/AAA     5,222,800  
  2,145    
Patterson Public Financing Auth. Rev., Waste Water Systems Project, 5.50%, 6/1/39 (AGC)
  NR/AA+     2,249,462  
  1,250    
Peralta Community College Dist., GO, 5.00%, 8/1/39, Ser. C
  NR/AA−     1,290,125  
  1,250    
Pollution Control Financing Auth. Rev., American Water Capital Corp. Project, 5.25%, 8/1/40 (a)(c)
  Baa2/BBB+     1,279,588  
  2,000    
San Jose Water Co. Projects, 5.10%, 6/1/40
  NR/A     2,068,860  
 
 
20 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO California Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Riverside, Special Assessment, Riverwalk Assessment Dist.,
           
$ 500    
6.15%, 9/2/19
  NR/NR   $ 510,515  
  1,350    
6.375%, 9/2/26
  NR/NR     1,378,498  
  8,305    
Riverside Cnty., CP, 5.125%, 11/1/30 (NPFGC)
  A1/AA−     8,441,866  
  545    
San Diego Cnty., CP, 5.25%, 10/1/28
  A2/NR     550,919  
       
San Diego Cnty. Water Auth., CP,
           
  1,000    
5.00%, 5/1/32, Ser. A (NPFGC)
  Aa2/AA+     1,024,820  
  6,250    
5.00%, 5/1/38, Ser. 2008-A (AGM)
  Aa2/AA+     6,491,250  
  2,000    
San Diego Public Facs. Financing Auth. Rev., 5.25%, 5/15/39, Ser. A
  Aa3/A+     2,141,860  
  3,285    
San Diego Regional Building Auth. Rev., Cnty. Operations Center & Annex, 5.375%, 2/1/36, Ser. A
  Aa3/AA+     3,513,603  
  4,400    
San Diego Unified School Dist., GO, 4.75%, 7/1/27, Ser. D-2 (AGM)
  Aa1/AA+     4,567,816  
  880    
San Francisco Bay Area Rapid Transit Dist. Rev., 5.125%, 7/1/36 (AMBAC)
  Aa2/AA+     886,574  
  5,065    
San Joaquin Cnty., General Hospital Project, CP, 5.00%, 9/1/20 (NPFGC)
  A1/A     5,075,231  
       
San Joaquin Hills Transportation Corridor Agcy. Rev., Ser. A
           
  5,000    
5.50%, 1/15/28
  Ba2/BB−     4,682,650  
  5,000    
5.70%, 1/15/19
  Ba2/BB−     5,069,050  
  230    
San Jose, Special Assessment, 5.60%, 9/2/17, Ser. 24-Q
  NR/NR     236,813  
  600    
Santa Ana Financing Auth. Rev., 5.60%, 9/1/19, Ser. C
  NR/A     603,978  
  3,500    
Santa Clara Cnty. Financing Auth. Rev., 5.75%, 2/1/41, Ser. A (AMBAC)
  A1/A+     3,640,280  
  1,815    
Santa Clara, Central Park Library Project, CP, 5.00%, 2/1/32 (AMBAC)
  Aa2/AA     1,858,179  
  1,300    
Santa Cruz Cnty. Redev. Agcy., Tax Allocation, Live Oak/Soquel Community, 7.00%, 9/1/36, Ser. A
  A1/A     1,471,717  
       
State, GO,
           
  5,885    
5.00%, 9/1/35
  A1/A−     5,920,075  
  3,000    
5.00%, 12/1/37
  A1/A−     3,006,960  
  8,000    
6.00%, 4/1/38
  A1/A−     8,909,280  
  2,000    
State Public Works Board Rev., 5.75%, 10/1/30, Ser. G-1
  A2/BBB+     2,121,460  
  2,000    
California State Univ., 6.00%, 11/1/34, Ser. J
  Aa3/BBB+     2,161,500  
  2,000    
Regents Univ., 5.00%, 4/1/34, Ser. E
  Aa2/AA−     2,072,140  
       
Statewide Communities Dev. Auth. Rev.,
           
  1,000    
American Baptist Homes West, 6.25%, 10/1/39
  NR/BBB−     1,023,230  
  900    
California Baptist Univ., 5.50%, 11/1/38, Ser. A
  NR/NR     829,062  
  1,000    
Catholic Healthcare West, 5.50%, 7/1/31, Ser. D
  A2/A     1,039,440  
  13,050    
Henry Mayo Newhall Memorial Hospital, 5.125%, 10/1/30, Ser. A (CA Mtg. Ins.)
  NR/A−     12,960,869  
  1,000    
Kaiser Permanente, 5.25%, 3/1/45, Ser. B
  NR/A+     1,003,150  
  1,000    
Lancer Student Housing Project, 7.50%, 6/1/42
  NR/NR     1,057,490  
  3,000    
Los Angeles Jewish Home, 5.50%, 11/15/33 (CA St. Mtg.)
  NR/A−     2,984,430  
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 21


 

 
PIMCO California Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Methodist Hospital Project (FHA),
           
$ 2,100    
6.625%, 8/1/29
  Aa2/NR   $ 2,440,914  
  7,700    
6.75%, 2/1/38
  Aa2/NR     8,916,215  
       
St. Joseph,
           
  100    
5.125%, 7/1/24 (NPFGC)
  A1/AA−     105,331  
  3,200    
5.75%, 7/1/47, Ser. A (FGIC)
  A1/AA−     3,313,888  
  4,000    
Sutter Health, 5.50%, 8/15/34, Ser. B
  Aa3/A+     4,039,520  
  8,000    
The Internext Group, CP, 5.375%, 4/1/30
  NR/BBB     7,797,360  
  910    
Windrush School, 5.50%, 7/1/37
  NR/NR     778,041  
  2,000    
Turlock, Emanuel Medical Center, CP, 5.50%, 10/15/37, Ser. B
  NR/BBB     1,918,640  
       
Tustin Unified School Dist., Special Tax, Ser. B
           
  2,345    
5.50%, 9/1/22
  NR/NR     2,364,323  
  2,520    
5.60%, 9/1/29
  NR/NR     2,502,410  
  2,000    
5.625%, 9/1/32
  NR/NR     1,930,420  
       
Univ. of California Rev.,
           
  8,000    
4.75%, 5/15/35, Ser. F (AGM)(h)
  Aa1/AA+     8,095,760  
  10,000    
5.00%, 5/15/36, Ser. A (AMBAC)
  Aa1/AA     10,224,000  
  1,000    
Western Municipal Water Dist. Facs. Auth. Rev.,
           
       
5.00%, 10/1/39, Ser. B
  NR/AA+     1,051,330  
  1,000    
Westlake Village, CP, 5.00%, 6/1/39
  NR/AA+     1,034,350  
  1,000    
Whittier Union High School Dist., GO, zero coupon, 8/1/25
  NR/AA−     445,790  
                     
                     
       
Total California Municipal Bonds & Notes (cost–$368,170,102)
        392,387,178  
                     
                     
                     
OTHER MUNICIPAL BONDS & NOTES–5.8%
       
Iowa–1.8%
           
  8,700    
Tobacco Settlement Auth. Rev., 5.60%, 6/1/34, Ser. B
  Baa3/BBB     7,790,328  
                     
       
Louisiana–0.4%
           
  1,750    
Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B
  Baa3/BBB     1,764,333  
                     
       
New York–0.1%
           
  450    
New York City Municipal Water Finance Auth. Water & Sewer Rev., 5.00%, 6/15/37, Ser. D (h)
  Aa1/AAA     474,795  
                     
       
Ohio–0.4%
           
  2,250    
Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2
  Baa3/BBB     1,717,605  
                     
 
 
22 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO California Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Puerto Rico–3.0%
           
$ 1,000    
Electric Power Auth. Rev., 5.25%, 7/1/40, Ser. XX
  A3/BBB+   $ 1,043,040  
       
Sales Tax Financing Corp. Rev.,
           
  8,000    
5.25%, 8/1/41, Ser. C
  A1/A+     8,321,200  
  3,000    
5.50%, 8/1/42, Ser. A
  A1/A+     3,203,550  
                     
                  12,567,790  
                     
       
South Carolina–0.1%
           
  340    
Tobacco Settlement Rev. Management Auth. Rev., 6.375%, 5/15/30, Ser. B
  Baa3/BBB     438,389  
                     
       
Total Other Municipal Bonds & Notes (cost–$24,523,488)
        24,753,240  
                     
                     
                     
OTHER VARIABLE RATE NOTES (a)(c)(e)(f)–1.7%
       
Illinois–1.7%
           
  6,670    
Chicago Water Rev., 11.258%, 5/1/14, Ser. 1419 (AMBAC) (cost–$6,896,230)
  NR/AA−     7,166,781  
                     
CALIFORNIA VARIABLE RATE NOTES (a)(c)(e)(f)–0.7%
  1,000    
Health Facs. Financing Auth. Rev., 7.88%, 11/15/36, Ser. 3193
  NR/NR     1,029,200  
  1,670    
Sacramento Cnty. Sanitation Dists. Financing Auth. Rev., 11.289%, 8/1/13, Ser. 1034 (NPFGC)
  NR/AA     1,951,963  
                     
       
Total California Variable Rate Notes (cost–$2,774,719)
        2,981,163  
                     
       
Total Investments (cost–$402,364,539)–100.0%
      $ 427,288,362  
                     
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 23


 

PIMCO New York Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
NEW YORK MUNICIPAL BONDS & NOTES–87.1%
$ 1,600    
Erie Cnty. Industrial Dev. Agcy. Rev., Orchard Park, Inc. Project, 6.00%, 11/15/36, Ser. A
  NR/NR   $ 1,370,592  
       
Liberty Dev. Corp. Rev.,
           
  1,000    
6.375%, 7/15/49
  NR/BBB−     1,072,110  
       
Goldman Sachs Headquarters,
           
  120    
5.25%, 10/1/35
  A1/A     124,590  
  11,290    
5.25%, 10/1/35 (h)
  A1/A     11,721,842  
  1,925    
5.50%, 10/1/37
  A1/A     2,069,433  
       
Long Island Power Auth. Rev., Ser. A,
           
  750    
5.00%, 9/1/34, (AMBAC)
  A3/A−     768,570  
  4,500    
5.75%, 4/1/39
  A3/A−     4,969,620  
       
Metropolitan Transportation Auth. Rev.,
           
  7,150    
5.00%, 7/1/30, Ser. A (AMBAC)
  Aa3/AA−     7,395,030  
  1,375    
5.125%, 1/1/29, Ser. A
  Aa3/AA−     1,431,045  
  2,000    
5.25%, 11/15/31, Ser. E
  A2/A     2,074,060  
  1,600    
Nassau Cnty. Industrial Dev. Agcy. Rev., Amsterdam at Harborside, 6.70%, 1/1/43, Ser. A
  NR/NR     1,620,640  
  3,500    
New York City Health & Hospital Corp. Rev., 5.00%, 2/15/30, Ser. A
  Aa3/A+     3,702,160  
  1,000    
New York City Industrial Dev. Agcy. Rev., Liberty Interactive Corp., 5.00%, 9/1/35
  Ba2/BB+     942,970  
  900    
Queens Baseball Stadium, 6.50%, 1/1/46 (AGC)
  Aa3/AA+     1,008,045  
  1,820    
Vaughn College Aeronautics, 5.25%, 12/1/36, Ser. B
  NR/BB+     1,602,037  
  3,200    
Yankee Stadium, 7.00%, 3/1/49 (AGC)
  Aa3/AA+     3,723,680  
  3,595    
New York City Municipal Water Finance Auth. Rev., 5.25%, 6/15/25, Ser. D
  Aa1/AAA     3,711,190  
       
New York City Municipal Water Finance Auth. Water & Sewer Rev.,
           
  3,000    
5.00%, 6/15/32, Ser. A
  Aa1/AAA     3,053,340  
  2,500    
5.00%, 6/15/40, Ser. FF-2
  Aa2/AA+     2,641,375  
  5,000    
Second Generation Resolutions, 4.75%, 6/15/35, Ser. DD (h)
  Aa2/AA+     5,177,650  
       
New York City Transitional Finance Auth. Rev.,
           
  15    
4.75%, 11/1/23, Ser. B
  Aaa/AAA     15,115  
  5,000    
5.25%, 1/15/39, Ser. S-3
  Aa3/AA−     5,360,700  
  300    
New York City Trust for Cultural Res. Rev., Julliard School, 5.00%, 1/1/34, Ser. A
  Aa2/AA     324,168  
  5    
New York City, GO, 5.25%, 6/1/28, Ser. J
  Aa2/AA     5,597  
  1,000    
Niagara Falls Public Water Auth. Water & Sewer Rev., 5.00%, 7/15/34, Ser. A (NPFGC)
  Baa1/A     1,012,770  
       
Port Auth. of New York & New Jersey Rev., Ser. 132,
           
  2,000    
5.00%, 9/1/29
  Aa2/AA−     2,151,420  
  4,300    
5.00%, 9/1/38
  Aa2/AA−     4,464,991  
       
State Dormitory Auth. Rev.,
           
  500    
5.00%, 7/1/35, Ser. A
  Aa2/NR     532,285  
 
 
24 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO New York Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
$ 3,850    
Lenox Hill Hospital, 5.50%, 7/1/30
  Baa3/NR   $ 3,852,695  
  1,300    
Mount Sinai School of Medicine, 5.125%, 7/1/39
  A3/A−     1,329,562  
  4,500    
New York Univ., 5.00%, 7/1/38, Ser. C
  Aa3/AA−     4,739,535  
  1,500    
New York Univ. Hospitals Center, 5.00%, 7/1/26, Ser. A
  Baa2/BBB     1,535,520  
  300    
North Shore-Long Island Jewish Health System, 5.50%, 5/1/37, Ser. A
  Baa1/A−     316,434  
  4,995    
NY & Presbyterian Hospital, 4.75%, 8/1/27 (AMBAC-FHA)
  WR/NR     4,995,599  
  2,900    
Orange Regional Medical Center, 6.25%, 12/1/37
  Ba1/NR     2,968,034  
  1,000    
Pratt Institute, 5.125%, 7/1/39, Ser. C (AGC)
  Aa3/NR     1,065,780  
       
Sloan-Kettering Center Memorial,
           
  2,500    
4.50%, 7/1/35, Ser. A-1
  Aa2/AA     2,551,850  
  4,000    
5.00%, 7/1/34, Ser. 1
  Aa2/AA     4,086,640  
  1,500    
St. Francis College, 5.00%, 10/1/40
  NR/A−     1,510,425  
       
Teachers College,
           
  1,500    
5.00%, 7/1/32 (NPFGC)
  A1/NR     1,522,110  
  1,800    
5.50%, 3/1/39
  A1/NR     1,910,898  
  1,275    
Winthrop Univ. Hospital Assoc., 5.25%, 7/1/31, Ser. A (AMBAC)
  WR/NR     1,290,058  
  2,000    
State Environmental Facs. Corp. Rev.,
           
       
New York City Municipal Water Project, 5.125%, 6/15/31, Ser. D
  Aaa/AAA     2,087,160  
  1,800    
State Urban Dev. Corp. Rev., 5.00%, 3/15/36, Ser. B-1 (h)
  NR/AAA     1,912,356  
  250    
Suffolk Cnty. Industrial Dev. Agcy. Rev., New York Institute of Technology, 5.00%, 3/1/26
  Baa2/BBB+     266,582  
  3,000    
Triborough Bridge & Tunnel Auth. Rev., 5.25%, 11/15/34, Ser. A-2 (h)
  Aa2/AA−     3,268,350  
  800    
Troy Rev., Rensselaer Polytechnic Institute, 5.125%, 9/1/40, Ser. A
  A3/A     831,576  
  2,945    
Warren & Washington Cntys. Industrial Dev. Agcy. Rev., Glens Falls Hospital Project, 5.00%, 12/1/27, Ser. C (AGM)
  Aa3/AA+     3,046,661  
  400    
Yonkers Industrial Dev. Agcy. Rev., Sarah Lawrence College Project, 6.00%, 6/1/41, Ser. A
  NR/A     431,369  
                     
       
Total New York Municipal Bonds & Notes (cost–$114,513,650)
        119,566,219  
                     
                     
                     
OTHER MUNICIPAL BONDS & NOTES–12.9%
       
California–1.1%
           
  1,500    
Los Angeles Department of Water & Power Rev., 5.00%, 7/1/39, Ser. A-1 (AMBAC)
  Aa3/AA−     1,560,165  
                     
       
Louisiana–0.5%
           
  750    
Tobacco Settlement Financing Corp. Rev., 5.875%, 5/15/39, Ser. 2001-B
  Baa3/BBB     756,142  
                     
       
Ohio–1.1%
           
  2,000    
Buckeye Tobacco Settlement Financing Auth. Rev., 5.875%, 6/1/47, Ser. A-2
  Baa3/BBB     1,526,760  
                     
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 25


 

 
PIMCO New York Municipal Income Fund Schedule of Investments
October 31, 2010 (unaudited) (continued)
 
                     
Principal
               
Amount
        Credit Rating
     
(000s)         (Moody’s/S&P)   Value  
   
       
Puerto Rico–9.8%
           
       
Aqueduct & Sewer Auth. Rev., Ser. A,
           
$ 3,100    
6.00%, 7/1/38
  Baa1/BBB−   $ 3,362,756  
  1,000    
6.00%, 7/1/44
  Baa1/BBB−     1,066,850  
  1,000    
Electric Power Auth. Rev., 5.25%, 7/1/40, Ser. XX
  A3/BBB+     1,043,040  
       
Sales Tax Financing Corp. Rev.,
           
  4,000    
5.25%, 8/1/41, Ser. C
  A1/A+     4,160,600  
  2,000    
5.50%, 8/1/42, Ser. A
  A1/A+     2,135,700  
  1,500    
5.75%, 8/1/37, Ser. A
  A1/A+     1,628,550  
                     
                  13,397,496  
                     
       
U. S. Virgin Islands–0.4%
           
  500    
Virgin Islands Public Finance Auth. Rev., 5.00%, 10/1/39, Ser. A-1
  Baa2/BBB     493,951  
                     
       
Total Other Municipal Bonds & Notes (cost–$16,253,477)
        17,734,514  
                     
       
Total Investments (cost–$130,767,127)–100.0%
      $ 137,300,733  
                     
 
 
26 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

PIMCO Municipal Income Funds Notes to Schedule of Investments
October 31, 2010 (unaudited)
 
     
(a)
  Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $18,800,319, representing 3.6% of total investments in Municipal Income and $11,427,532, representing 2.7% of total investments in California Municipal Income.
(b)
  Illiquid.
(c)
  144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.
(d)
  When-issued. To be settled after October 31, 2010.
(e)
  Inverse Floater–The interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index. The interest rate disclosed reflects the rate in effect on October 31, 2010.
(f)
  Variable Rate Notes–Instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on October 31, 2010.
(g)
  Non-income producing.
(h)
  Residual Interest Bonds held in Trust–Securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which each Fund acquired the residual interest certificates. These securities serve as collateral in a financing transaction.
(i)
  Step Bond–Coupon is a fixed rate for an initial period then resets at a specific date and rate.
(j)
  Restricted. The aggregate acquisition cost of such securities is $2,904,880 in Municipal Income. The aggregate market value is 2,561,430, representing 0.5% of total investments in Municipal Income.
(k)
  In default.
 
Glossary:
 
ACA – insured by American Capital Access Holding Ltd.
AGC – insured by Assured Guaranty Corp.
AGM – insured by Assured Guaranty Municipal Corp.
AMBAC – insured by American Municipal Bond Assurance Corp.
CA Mtg. Ins. – insured by California Mortgage Insurance
CA St. Mtg. – insured by California State Mortgage
CP – Certificates of Participation
FGIC – insured by Financial Guaranty Insurance Co.
FHA – insured by Federal Housing Administration
GO – General Obligation Bond
GTD – Guaranteed
IBC – Insurance Bond Certificate
NPFGC – insured by National Public Finance Guarantee Corp.
NR – Not Rated
PSF – Public School Fund
TCRS – Temporary Custodian Receipts
WR – Withdrawn Rating
 
 
See accompanying Notes to Financial Statements ï 10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 27


 

 
PIMCO Municipal Income Funds Statements of Assets and Liabilities
October 31, 2010 (unaudited)
 
                         
          California
    New York
 
    Municipal     Municipal     Municipal  
Assets:
                       
Investments, at value (cost–$489,380,457, $402,364,539 and $130,767,127, respectively)
    $518,897,090       $427,288,362       $137,300,733  
                         
Cash
    1,656,811       931,673       1,666,098  
                         
Interest receivable
    9,118,478       6,964,578       1,963,577  
                         
Prepaid expenses and other assets
    3,512,592       1,132,634       1,522,879  
                         
Total Assets
    533,184,971       436,317,247       142,453,287  
                         
                         
Liabilities:
                       
Payable for floating rate notes issued
    30,990,403       35,911,418       10,476,876  
                         
Payable for investments purchased
    2,500,000       2,507,248        
                         
Dividends payable to preferred shareholders
    2,050,949       1,422,305       436,901  
                         
Investment management fees payable
    275,628       219,203       72,804  
                         
Interest payable
    105,210       112,243       24,382  
                         
Accrued expenses and other liabilities
    133,272       235,709       50,319  
                         
Total Liabilities
    36,055,462       40,408,126       11,061,282  
                         
Preferred Shares ($25,000 liquidation preference per share applicable to an aggregate of 7,600, 6,000 and 1,880 shares issued and outstanding, respectively)
    190,000,000       150,000,000       47,000,000  
                         
Net Assets Applicable to Common Shareholders
    $307,129,509       $245,909,121       $84,392,005  
                         
Composition of Net Assets Applicable to Common Shareholders:
                       
Common Shares (no par value):
                       
Paid-in-capital
    $356,333,345       $260,180,813       $107,062,216  
                         
Undistributed net investment income
    3,615,798       5,108,714       1,423,958  
                         
Accumulated net realized loss on investments
    (82,973,655 )     (44,233,516 )     (29,707,469 )
                         
Net unrealized appreciation of investments
    30,154,021       24,853,110       5,613,300  
                         
Net Assets Applicable to Common Shareholders
    $307,129,509       $245,909,121       $84,392,005  
                         
Common Shares Issued and Outstanding
    25,103,665       18,338,893       7,616,624  
                         
Net Asset Value Per Common Share
    $12.23       $13.41       $11.08  
                         
 
 
28 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10 ï See accompanying Notes to Financial Statements


 

 
PIMCO Municipal Income Funds Statements of Operations
Six Months ended October 31, 2010 (unaudited)
 
                         
          California
    New York
 
    Municipal     Municipal     Municipal  
Investment Income:
                       
Interest
    $16,079,501       $12,271,865       $3,832,603  
                         
                         
Expenses:
                       
Investment management fees
    1,607,648       1,277,696       425,752  
                         
Auction agent fees and commissions
    156,596       123,411       42,536  
                         
Interest expense
    155,102       168,645       39,327  
                         
Custodian and accounting agent fees
    54,803       47,729       27,926  
                         
Audit and tax services
    34,224       27,784       20,056  
                         
Trustees’ fees and expenses
    25,208       21,160       6,624  
                         
Shareholder communications
    24,656       29,624       7,728  
                         
Legal fees
    22,080       16,560       7,360  
                         
Transfer agent fees
    16,192       15,640       15,640  
                         
New York Stock Exchange listing fees
    13,115       13,010       12,874  
                         
Insurance expense
    6,303       5,319       1,995  
                         
Miscellaneous
    5,721       5,322       4,921  
                         
Total Expenses
    2,121,648       1,751,900       612,739  
                         
Less: custody credits earned on cash balances
    (155 )     (257 )     (326 )
                         
Net Expenses
    2,121,493       1,751,643       612,413  
                         
Net Investment Income
    13,958,008       10,520,222       3,220,190  
                         
                         
Realized and Change in Unrealized Gain:
                       
Net realized gain on investments
    939,350       478,790       1,130,109  
                         
Net change in unrealized appreciation/depreciation of investments
    9,602,401       8,266,830       1,440,399  
                         
Net realized and change in unrealized gain on investments
    10,541,751       8,745,620       2,570,508  
                         
Net Increase in Net Assets Resulting from
                       
Investment Operations
    24,499,759       19,265,842       5,790,698  
                         
Dividends on Preferred Shares from
                       
Net Investment Income
    (405,685 )     (320,195 )     (101,059 )
                         
Net Increase in Net Assets Applicable to Common
                       
Shareholders Resulting from Investment Operations
    $24,094,074       $18,945,647       $5,689,639  
                         
 
 
See accompanying Notes to Financial Statements ï 10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 29


 

 
PIMCO Municipal Income Funds
Statements of Changes in Net Assets
Applicable to Common Shareholders
 
                 
    Municipal
    Six Months
   
    ended
   
    October 31, 2010   Year ended
    (unaudited)   April 30, 2010
Investment Operations:
               
Net investment income
    $13,958,008       $29,300,454  
                 
Net realized gain on investments,
    939,350       603,647  
                 
Net change in unrealized appreciation/depreciation of investments
    9,602,401       54,536,158  
                 
Net increase in net assets resulting from investment operations
    24,499,759       84,440,259  
                 
                 
Dividends on Preferred Shares from Net Investment Income
    (405,685 )     (901,693 )
                 
Net increase in net assets applicable to common shareholders resulting from investment operations
    24,094,074       83,538,566  
                 
Dividends to Common Shareholders from Net Investment Income
    (12,226,024 )     (24,354,251 )
                 
                 
Common Share Transactions:
               
Reinvestment of dividends
    804,751       1,765,250  
                 
Total increase in net assets applicable to common shareholders
    12,672,801       60,949,565  
                 
                 
Net Assets Applicable to Common Shareholders:
               
Beginning of period
    294,456,708       233,507,143  
                 
End of period (including undistributed net investment income of $3,615,798 and $2,289,499; $5,108,714 and $3,372,324; $1,423,958 and $906,774; respectively)
    $307,129,509       $294,456,708  
                 
Common Shares Issued in Reinvestment of Dividends
    59,686       146,491  
                 
 
 
30 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10 ï See accompanying Notes to Financial Statements


 

 
PIMCO Municipal Income Funds
Statements of Changes in Net Assets
Applicable to Common Shareholders
(continued)
 
                             
California Municipal   New York Municipal
Six Months
      Six Months
   
ended
      ended
   
October 31, 2010
  Year ended
  October 31, 2010
  Year ended
(unaudited)   April 30, 2010   (unaudited)   April 30, 2010
  $10,520,222       $22,076,765       $3,220,190       $6,665,205  
                             
  478,790       1,327,677       1,130,109       178,676  
                             
 
8,266,830
      34,686,166       1,440,399       9,772,086  
                             
  19,265,842       58,090,608       5,790,698       16,615,967  
                             
                             
  (320,195 )     (712,775 )     (101,059 )     (223,823 )
                             
 
18,945,647
      57,377,833       5,689,639       16,392,144  
                             
  (8,463,637 )     (16,851,241 )     (2,601,947 )     (5,183,647 )
                             
                             
                             
  635,128       1,416,293       230,516       382,886  
                             
  11,117,138       41,942,885       3,318,208       11,591,383  
                             
                             
                             
  234,791,983       192,849,098       81,073,797       69,482,414  
                             
 

$245,909,121
      $234,791,983       $84,392,005       $81,073,797  
                             
  48,320       117,624       21,201       38,039  
                             
 
 
See accompanying Notes to Financial Statements ï 10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 31


 

PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
1. Organization and Significant Accounting Policies
PIMCO Municipal Income Fund (”Municipal”), PIMCO California Municipal Income Fund (”California Municipal”) and PIMCO New York Municipal Income Fund (”New York Municipal”), each a “Fund” and collectively referred to as the ”Funds” or ”PIMCO Municipal Income Funds”, were organized as Massachusetts business trusts on May 10, 2001. Prior to commencing operations on June 29, 2001, the Funds had no operations other than matters relating to their organization and registration as non-diversified, closed-end management investment companies registered under the Investment Company Act of 1940 and the rules and regulations thereunder, as amended. Allianz Global Investors Fund Management LLC (the “Investment Manager”) serves as the Investment Manager and is an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P. (“Allianz Global”). Allianz Global is an indirect, wholly-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. Each Fund has an unlimited amount of no par value per share of common shares authorized.
 
Under normal market conditions, Municipal invests substantially all of its assets in a portfolio of municipal bonds, the interest from which is exempt from federal income taxes. Under normal market conditions, California Municipal invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal and California state income taxes. Under normal market conditions, New York Municipal invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal, New York State and New York City income taxes. The Funds will generally seek to avoid investing in bonds generating interest income which could potentially subject individuals to alternative minimum tax. The issuers’ abilities to meet their obligations may be affected by economic and political developments in a specific state or region. There is no guarantee that the Funds will meet their stated objectives.
 
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the Funds’ financial statements. Actual results could differ from those estimates.
 
In the normal course of business, the Funds enter into contracts that contain a variety of representations that provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred.
 
The following is a summary of significant accounting policies consistently followed by the Funds:
 
(a) Valuation of Investments
Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services.
 
Portfolio securities and other financial instruments for which market quotations are not readily available or for which a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to procedures established by the Board of Trustees, or persons acting at their discretion pursuant to procedures established by the Board of Trustees. The Funds’ investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Securities purchased on a when-issued basis are marked to market daily until settlement at the forward settlement date. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.
 
The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and these differences could be material to the Funds’ financial statements. Each Fund’s net asset value is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.
 
(b) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:
 
•  Level 1 – quoted prices in active markets for identical investments that the Funds have the ability to access
 
•  Level 2 – valuations based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) or quotes from inactive exchanges
 
 
32 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
1. Organization and Significant Accounting Policies (continued)
 
 
•  Level 3 – valuations based on significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments)
 
An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation technique used.
 
The valuation techniques used by the Funds to measure fair value during the six months ended October 31, 2010 maximized the use of observable inputs and minimized the use of unobservable inputs.
 
The inputs or methodology used for valuing securities is not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities in accordance with Generally Accepted Accounting Principles (“GAAP”).
 
Municipal Bonds and Variable Rate Notes – Municipal bonds and variable rate notes are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds and variable rate notes are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.
 
Equity Securities (Common and Preferred Stock) – Equity securities traded in inactive markets and certain foreign equity securities are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable the values are categorized as Level 3.
 
The Funds’ policy is to recognize transfers between levels at the end of the reporting period.
 
A summary of the inputs used at October 31, 2010 in valuing each Fund’s assets and liabilities is listed below:
 
                                 
Municipal:
 
          Level 2 –
    Level 3 –
       
          Other Significant
    Significant
       
    Level 1 –
    Observable
    Unobservable
    Value at
 
    Quoted Prices     Inputs     Inputs     10/31/10  
   
 
Investments in Securities – Assets
                               
Municipal Bonds & Notes
        $ 500,082,645     $ 472,350     $ 500,554,995  
Variable Rate Notes
          18,327,969             18,327,969  
Common Stock
  $ 14,126                   14,126  
                                 
Total Investments
  $ 14,126     $ 518,410,614     $ 472,350     $ 518,897,090  
                                 
 
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 33


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
1. Organization and Significant Accounting Policies (continued)
 
                                 
California Municipal:
 
          Level 2 –
    Level 3 –
       
          Other Significant
    Significant
       
    Level 1 –
    Observable
    Unobservable
    Value at
 
    Quoted Prices     Inputs     Inputs     10/31/10  
   
 
Investments in Securities – Assets
                               
California Municipal Bonds & Notes
        $ 392,387,178           $ 392,387,178  
Other Municipal Bonds & Notes
          24,753,240             24,753,240  
Other Variable Rate Notes
          7,166,781             7,166,781  
California Variable Rate Notes
          2,981,163             2,981,163  
                                 
Total Investments
        $ 427,288,362           $ 427,288,362  
                                 
 
                                 
New York Municipal:
 
          Level 2 –
    Level 3 –
       
          Other Significant
    Significant
       
    Level 1 –
    Observable
    Unobservable
    Value at
 
    Quoted Prices     Inputs     Inputs     10/31/10  
   
 
Investments in Securities – Assets
                               
New York Municipal Bonds & Notes
        $ 119,566,219           $ 119,566,219  
Other Municipal Bonds & Notes
          17,734,514             17,734,514  
                                 
Total Investments
        $ 137,300,733           $ 137,300,733  
                                 
 
There were no significant transfers between Levels 1 and 2 during the six months ended October 31, 2010.
 
A roll forward of fair value measurements using significant unobservable inputs (Level 3) for Municipal for the six months ended October 31, 2010, was as follows:
 
                                         
Municipal:
 
          Net
                   
          Change
                   
    Beginning
    in Unrealized
    Transfers
    Transfers
    Ending
 
    Balance
    Appreciation/
    into
    out of
    Balance
 
    4/30/10     Depreciation     Level 3     Level 3     10/31/10  
   
 
Investments in Securities – Assets
                                       
Municipal Bonds & Notes
  $ 470,000     $ 2,350                 $ 472,350  
                                         
Total Investments
  $ 470,000     $ 2,350                 $ 472,350  
                                         
 
The net change in unrealized appreciation/depreciation of Level 3 investments which Municipal held at October 31, 2010 was $2,350. Net change in appreciation/depreciation is reflected on the Statements of Operations.
 
(c) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on an identified cost basis. Interest income adjusted for the accretion of discount and amortization of premium is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income over the lives of the respective securities.
 
 
34 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
1. Organization and Significant Accounting Policies (continued)
 
(d) Federal Income Taxes
The Funds intend to distribute all of their taxable income and to comply with the other requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.
 
Accounting for uncertainty in income taxes establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Funds’ management has determined that its evaluation has resulted in no material impact to the Funds’ financial statements at October 31, 2010. The Funds’ federal tax returns for the prior three years remain subject to examination by the Internal Revenue Service.
 
(e) Dividends and Distributions – Common Shares
The Funds declare dividends from net investment income monthly to common shareholders. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions to their respective shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book-tax” differences are considered either temporary or permanent in nature. To the extent that these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment. Temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions to shareholders from return of capital.
 
(f) Reverse Repurchase Agreements
In a reverse repurchase agreement, the Funds sell securities to a bank or broker-dealer and agree to repurchase the securities at a mutually agreed upon date and price. Generally, the effect of such a transaction is that the Funds can recover and reinvest all or most of the cash invested in portfolio securities involved during the term of the reverse repurchase agreement and still be entitled to the returns associated with those portfolio securities. Such transactions are advantageous if the interest cost to the Funds of the reverse repurchase transaction is less than the returns it obtains on investments purchased with the cash. To the extent a Fund does not cover its positions in reverse repurchase agreements (by segregating liquid assets at least equal in amount to the forward purchase commitment), the Fund’s uncovered obligations under the agreements will be subject to the Fund’s limitations on borrowings. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Funds are obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the agreement may be restricted pending determination by the other party, or their trustee or receiver, whether to enforce the Funds’ obligation to repurchase the securities.
 
(g) Inverse Floating Rate Transactions – Residual Interest Municipal Bonds (”RIBs”) / Residual Interest Tax Exempt Bonds (”RITEs”)
 
The Funds invest in RIBs and RITEs (”Inverse Floaters”), whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. In inverse floating rate transactions, the Funds sell a fixed rate municipal bond (”Fixed Rate Bond”) to a broker who places the Fixed Rate Bond in a special purpose trust (”Trust”) from which floating rate bonds (”Floating Rate Notes”) and Inverse Floaters are issued. The Funds simultaneously or within a short period of time purchase the Inverse Floaters from the broker. The Inverse Floaters held by the Funds provide the Funds with the right to: (1) cause the holders of the Floating Rate Notes to tender their notes at par, and (2) cause the broker to transfer the Fixed-Rate Bond held by the Trust to the Funds, thereby collapsing the Trust. The Funds account for the transaction described above as a secured borrowing by including the Fixed Rate Bond in their Schedules of Investments, and account for the Floating Rate Notes as a liability under the caption ”Payable for floating rate notes issued” in the Funds’ Statements of Assets and Liabilities. The Floating Rate Notes have interest rates that generally reset weekly and their holders have the option to tender their notes to the broker for redemption at par at each reset date.
 
The Funds may also invest in Inverse Floaters without transferring a fixed rate municipal bond into a special purpose trust, which are not accounted for as secured borrowings. The Funds may also invest in Inverse Floaters for the purpose of increasing leverage.
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 35


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
1. Organization and Significant Accounting Policies (continued)
 
The Inverse Floaters are created by dividing the income stream provided by the underlying bonds to create two securities, one short-term and one long-term. The interest rate on the short-term component is reset by an index or auction process typically every 7 to 35 days. After income is paid on the short-term securities at current rates, the residual income from the underlying bond(s) goes to the long-term securities. Therefore, rising short-term rates result in lower income for the long-term component and vice versa. The longer-term bonds may be more volatile and less liquid than other municipal bonds of comparable maturity. Investments in Inverse Floaters typically will involve greater risk than in an investment in Fixed Rate Bonds.
 
The Funds’ restrictions on borrowings do not apply to the secured borrowings deemed to have occurred for accounting purposes. Inverse Floaters held by the Funds are exempt from registration under Rule 144A of the Securities Act of 1933.
 
In addition to general market risks, the Funds’ investments in Inverse Floaters may involve greater risk and volatility than an investment in a fixed rate bond, and the value of Inverse Floaters may decrease significantly when market interest rates increase. Inverse Floaters have varying degrees of liquidity, and the market for these securities may be volatile. These securities tend to underperform the market for fixed rate bonds in a rising interest rate environment, but tend to outperform the market for fixed rate bonds when interest rates decline or remain relatively stable. Although volatile, Inverse Floaters typically offer the potential for yields exceeding the yields available on fixed rate bonds with comparable credit quality, coupon, call provisions and maturity. Trusts in which Inverse Floaters may be held could be terminated due to market, credit or other events beyond the Funds’ control, which could require the Funds to reduce leverage and dispose of portfolio investments at inopportune times and prices.
 
(h) When-Issued/Delayed-Delivery Transactions
When-issued or delayed-delivery transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Funds will set aside and maintain until the settlement date in a designated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed-delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations; consequently, such fluctuations are taken into account when determining the net asset value. The Funds may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a realized gain or loss. When a security is sold on a delayed-delivery basis, the Funds do not participate in future gains and losses with respect to the security.
 
(i) Custody Credits on Cash Balances
The Funds benefit from an expense offset arrangement with their custodian bank, whereby uninvested cash balances earn credits which reduce monthly custodian and accounting agent expenses. Had these cash balances been invested in income-producing securities, they would have generated income for the Funds. Cash overdraft charges, if any, are included in custodian and accounting agent fees.
 
(j) Interest Expense
Interest expense primarily relates to the Funds’ participation in floating rate notes held by third parties in conjunction with Inverse Floater transactions and reverse repurchase agreement transactions. Interest expense on reverse repurchase agreements is recorded as it is incurred.
 
2. Principal Risks
In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists due to, among other things, changes in the market (market risk) or failure of the other party to a transaction to perform (counterparty risk). The Funds also are exposed to various risks such as, but not limited to, interest rate and credit risks.
 
Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Funds are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is used primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements.
 
Variable and floating rate securities generally are less sensitive to interest rate changes but 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
 
 
36 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
2. Principal Risks (continued)
 
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 Funds hold 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 net asset value of the Funds’ shares.
 
The Funds are exposed to credit risk which is the risk of losing money if the issuer or guarantor of a fixed income security 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. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.
 
The Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financial assets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Funds’ Sub-Adviser, Pacific Investment Management Company LLC (the “Sub-Adviser”), an affiliate of the Investment Manager, seeks to minimize the Funds’ counterparty risks by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
 
3. Investment Manager/Sub-Adviser
Each Fund has an Investment Management Agreement (each an ”Agreement”) with the Investment Manager. Subject to the supervision of the Funds’ Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, each Fund’s investment activities, business affairs and administrative matters. Pursuant to each Agreement, the Investment Manager receives an annual fee, payable monthly, at an annual rate of 0.65% of each Fund’s average daily net assets, inclusive of net assets attributable to any Preferred Shares that may be outstanding.
 
The Investment Manager has retained the Sub-Adviser to manage each Fund’s investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. The Investment Manager, and not the Funds, pays a portion of the fee it receives as Investment Manager to the Sub-Adviser in return for its services.
 
4. Investments in Securities
Purchases and sales of investments, other than short-term securities, for the six months ended October 31, 2010, were:
 
                         
          California
    New York
 
    Municipal     Municipal     Municipal  
   
 
Purchases
  $ 28,784,994     $ 30,037,460     $ 20,758,235  
Sales
    21,867,374       25,906,893       21,281,959  
 
(a) Reverse repurchase agreements:
 
The weighted average daily balance of reverse repurchase agreements outstanding during the six months ended October 31, 2010 for Municipal, California Municipal and New York Municipal was $9,068,689, $7,157,724 and $2,629,920 at a weighted average interest rate of 0.67%, 0.67% and 0.67%, respectively. There were no open reverse repurchase agreements for Municipal, California Municipal and New York Municipal at October 31, 2010.
 
At October 31, 2010, Municipal, California Municipal and New York Municipal held $2,311, $149,905 and $112,429 in U.S. Government Agency securities as collateral for open reverse repurchase agreements, respectively. Collateral held in the form of securities will not be pledged and is not reflected in the Funds’ Schedule of Investments.
 
(b) Floating rate notes:
 
The weighted average daily balance of floating rate notes outstanding during the period ended October 31, 2010 for Municipal, California Municipal and New York Municipal was $28,999,343, $35,911,418 and $10,476,876 at a weighted average interest rate, including fees, of 0.46%, 0.42% and 0.32%, respectively.
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 37


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
5. Income Tax Information
The cost of investments for federal income tax purposes and gross unrealized appreciation and gross unrealized depreciation of investments at October 31, 2010 were:
 
                                 
          Gross Unrealized
    Gross Unrealized
    Net Unrealized
 
    Cost of Investments     Appreciation     Depreciation     Appreciation  
   
 
Municipal
  $ 463,247,529     $ 40,897,523     $ 12,849,895     $ 28,047,628  
California Municipal
    368,192,857       26,604,322       2,494,680       24,109,642  
New York Municipal
    121,966,627       7,785,295       1,448,215       6,337,080  
 
The difference between book and tax cost is attributable to Inverse Floater transactions.
 
6. Auction-Rate Preferred Shares
Municipal has 1,520 shares of Preferred Shares Series A, 1,520 shares of Preferred Shares Series B, 1,520 shares of Preferred Shares Series C, 1,520 shares of Preferred Shares Series D and 1,520 shares of Preferred Shares Series E outstanding, each with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
California Municipal has 2,000 shares of Preferred Shares Series A, 2,000 shares of Preferred Shares Series B and 2,000 shares of Preferred Shares Series C outstanding, each with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
New York Municipal has 1,880 shares of Preferred Shares Series A outstanding, with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.
 
Dividends are accumulated daily at an annual rate (typically re-set every seven days) through auction procedures. Distributions of net realized capital gains, if any, are paid annually.
 
For the six months ended October 31, 2010, the annualized dividend rates for each Fund ranged from:
 
                         
    High   Low   At October 31, 2010
 
 
Municipal:
                       
Series A
    0.472 %     0.350 %     0.442 %
Series B
    0.472 %     0.381 %     0.427 %
Series C
    0.472 %     0.350 %     0.427 %
Series D
    0.472 %     0.350 %     0.427 %
Series E
    0.487 %     0.350 %     0.442 %
California Municipal:
                       
Series A
    0.472 %     0.350 %     0.442 %
Series B
    0.472 %     0.350 %     0.427 %
Series C
    0.487 %     0.350 %     0.442 %
New York Municipal:
                       
Series A
    0.472 %     0.381 %     0.427 %
 
The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring or paying any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation preference, plus any accumulated, unpaid dividends.
 
Preferred shareholders, who are entitled to one vote per share, generally vote together with the common shareholders but vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares.
 
Since mid-February 2008, holders of auction-rate preferred shares (“ARPS”) issued by the Funds have been directly impacted by an unprecedented lack of liquidity, which has similarly affected ARPS holders in many of the nation’s closed-end funds. Since then, regularly scheduled auctions for ARPS issued by the Funds have consistently “failed” because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction. In a failed auction,
 
 
38 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10


 

 
PIMCO Municipal Income Funds Notes to Financial Statements
October 31, 2010 (unaudited)
 
6. Auction-Rate Preferred Shares (continued)
 
ARPS holders cannot sell all, and may not be able to sell any, of their shares tendered for sale. While repeated auction failures have affected the liquidity holders have continued to receive dividends at the defined “maximum rate”, the higher of the 30-day “AA” Composite Commercial Paper Rate multiplied by a minimum of 110% (depending on the credit rating of the ARPS) or the Taxable Equivalent of the Short-Term Municipal Obligations Rate-defined as 90% of the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&P 30-day High Grade Index divided by (B) 1.00 minus the Marginal Tax Rate (expressed as a decimal) multiplied by a minimum of 110% (depending on the credit rating of the ARPS) (which is a function of short-term interest rates and typically higher than the rate that would have otherwise been set through a successful auction). If the Funds’ ARPS auctions continue to fail and the “maximum rate” payable on the ARPS rises as a result of changes in short-term interest rates, returns for the Funds’ common shareholders could be adversely affected.
 
7. Legal Proceedings
In June and September 2004, the Investment Manager and certain of its affiliates (including PEA Capital LLC (“PEA”), Allianz Global Investors Distributors LLC and Allianz Global Investors of America, L.P.) agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (“SEC”) and the New Jersey Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. The settlements related to an alleged “market timing” arrangement in certain open-end funds formerly sub-advised by PEA. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, and consented to cease and desist orders and censures. Subsequent to these events, PEA deregistered as an investment adviser and dissolved. None of the settlements alleged that any inappropriate activity took place with respect to the Funds.
 
Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland (the “MDL Court”). After a number of claims in the lawsuits were dismissed by the MDL Court, the parties entered into a stipulation of settlement, which was publicly filed with the MDL Court in April 2010, resolving all remaining claims, but the settlement remains subject to the approval of the MDL Court.
 
In addition, the Sub-Adviser is the subject of a lawsuit in the Northern District of Illinois Eastern Division in which the complaint alleges that plaintiffs each purchased and sold a 10-year Treasury note futures contract and suffered damages from an alleged shortage when the Sub-Adviser held both physical and futures positions in 10-year Treasury notes for its client accounts. In July 2007, the court granted class certification of a class consisting of those persons who purchased futures contracts to offset short positions between May 9, 2005 and June 30, 2005. The Sub-Adviser currently believes that the complaint is without merit and the Sub-Adviser intends to vigorously defend against this action.
 
The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Funds or on their ability to perform their respective investment advisory activities relating to the Funds.
 
8. Subsequent Events
On November 1, 2010, the following dividends were declared to common shareholders payable December 1, 2010 to shareholders of record on November 12, 2010:
 
     
Municipal
  $0.08125 per common share
California Municipal
  $0.077 per common share
New York Municipal
  $0.057 per common share
 
On December 1, 2010, the following dividends were declared to common shareholders payable December 29, 2010 to shareholders of record on December 13, 2010:
 
     
Municipal
  $0.08125 per common share
California Municipal
  $0.077 per common share
New York Municipal
  $0.057 per common share
 
 
10.31.10 ï PIMCO Municipal Income Funds Semi-Annual Report 39


 

 
PIMCO Municipal Income Fund Financial Highlights
For a common share outstanding throughout each period:
 
                                                 
    Six Months
                   
    ended
  Year ended April 30
    October 31, 2010
 
    (unaudited)   2010   2009   2008   2007   2006
Net asset value, beginning of period
    $11.76       $9.38       $12.96       $14.85       $14.54       $14.84  
                                                 
                                                 
Investment Operations:
                                               
Net investment income
    0.56       1.18       1.13       1.12       1.07       1.10  
                                                 
Net realized and change in unrealized gain (loss) on investments, futures contracts, options written and swaps
    0.42       2.22       (3.53 )     (1.74 )     0.50       (0.21 )
                                                 
Total from investment operations
    0.98       3.40       (2.40 )     (0.62 )     1.57       0.89  
                                                 
                                                 
Dividends on Preferred Shares from Net Investment Income
    (0.02 )     (0.04 )     (0.20 )     (0.29 )     (0.28 )     (0.21 )
                                                 
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    0.96       3.36       (2.60 )     (0.91 )     1.29       0.68  
                                                 
                                                 
Dividends to Common Shareholders from Net Investment Income
    (0.49 )     (0.98 )     (0.98 )     (0.98 )     (0.98 )     (0.98 )
                                                 
Net asset value, end of period
    $12.23       $11.76       $9.38       $12.96       $14.85       $14.54  
                                                 
Market price, end of period
    $14.29       $13.72       $11.40       $16.46       $18.00       $16.22  
                                                 
Total Investment Return (1)
    7.96 %     30.34 %     (24.58 )%     (2.47 )%     17.77 %     18.13 %
                                                 
                                                 
RATIOS/SUPPLEMENTAL DATA:
                                               
Net assets applicable to common shareholders, end of period (000s)
    $307,130       $294,457       $233,507       $321,268       $365,984       $355,877  
                                                 
Ratio of expenses to average net assets, including interest expense (2)(3)(4)
    1.40 %*     1.46 %(5)     1.64 %(5)     1.51 %(5)     1.32 %(5)     1.18 %(5)
                                                 
Ratio of expenses to average net assets, excluding interest expense (2)(3)
    1.30 %*     1.34 %(5)     1.42 %(5)     1.20 %(5)     1.00 %(5)     0.98 %(5)
                                                 
Ratio of net investment income to average net assets (2)
    9.21 %*     10.77 %(5)     10.65 %(5)     8.07 %(5)     7.23 %(5)     7.41 %(5)
                                                 
Preferred shares asset coverage per share
    $65,409       $63,743       $55,722       $65,143       $70,727       $69,462  
                                                 
Portfolio turnover
    4 %     11 %     60 %     32 %     6 %     13 %
                                                 
 
     
*
  Annualized
(1)
  Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
(2)
  Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.
(3)
  Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank (See Note 1(i) in Notes to Financial Statements).
(4)
  Interest expense primarily relates to the liability for floating rate notes issued in connection with Inverse Floater transactions and/or investments in reverse repurchase agreement transactions.
(5)
  During the periods indicated above, the Investment Manager waived a portion of its investment management fee. The effect of such waivers relative to the average net assets of common shareholders were 0.01%, 0.10%, 0.17%, 0.24% and 0.32% for the years ended April 30, 2010, April 30, 2009, April 30, 2008, April 30, 2007 and April 30, 2006, respectively.
 
 
40 PIMCO Municipal Income Funds Semi-Annual Report ï 10.31.10 ï See accompanying Notes to Financial Statements


 

 
PIMCO California Municipal Income Fund Financial Highlights
For a common share outstanding throughout each period:
 
                                                 
    Six Months
                   
    ended
  Year ended April 30
    October 31, 2010
 
    (unaudited)   2010   2009   2008   2007   2006
Net asset value, beginning of period
    $12.84       $10.61       $13.62       $14.84       $14.48       $14.60  
                                                 
                                                 
Investment Operations:
                                               
Net investment income
    0.57       1.21       1.08       1.07       1.10       1.05  
                                                 
Net realized and change in unrealized gain (loss) on investments, futures contracts, options written and swaps
    0.48       1.98       (2.96 )     (1.09 )     0.44       (0.05 )
                                                 
Total from investment operations
    1.05       3.19       (1.88 )     (0.02 )     1.54       1.00  
                                                 
                                                 
Dividends on Preferred Shares from Net Investment Income
    (0.02 )     (0.04 )     (0.21 )     (0.28 )     (0.26 )     (0.20 )
                                                 
Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations
    1.03       3.15       (2.09 )     (0.30 )     1.28       0.80  
                                                 
                                                 
Dividends to Common Shareholders from Net Investment Income
    (0.46 )     (0.92 )     (0.92 )     (0.92 )     (0.92 )     (0.92 )
                                                 
Net asset value, end of period
    $13.41       $12.84       $10.61       $13.62       $14.84       $14.48  
                                                 
Market price, end of period
    $13.97       $13.29       $12.18       $15.83       $17.70       $15.87  
                                                 
Total Investment Return (1)
    8.84 %     17.72 %     (16.72 )%     (4.88 )%     18.20 %     18.93 %
                                                 
                                                 
RATIOS/SUPPLEMENTAL DATA:
                                               
Net assets applicable to common shareholders, end of period (000s)
    $245,909       $234,792       $192,849       $246,613       $267,061       $259,127  
                                                 
Ratio of expenses to average net assets, including interest expense (2)(3)(4)
    1.45 %*     1.49 %(5)     1.66 %(5)     1.41 %(5)     1.26 %(5)     1.08 %(5)
                                                 
Ratio of expenses to average net assets, excluding interest expense (2)(3)
    1.31 %*     1.34 %(5)     1.39 %(5)     1.15 %(5)     1.05 %(5)     0.99 %(5)
                                                 
Ratio of net investment income to average net assets (2)
    8.70 %*     10.15 %(5)     9.42 %(5)     7.57 %(5)     7.48 %(5)     7.19 %(5)
                                                 
Preferred shares asset coverage per share
    $65,982       $64,130       $57,140       $66,086       $69,491       $68,164  
                                                 
Portfolio turnover
    6 %     8 %     42 %     14 %     4 %     8 %
                                                 
 
     
*
  Annualized
(1)
  Total investment return is calculated assuming a purchase of a common share at the market price on the first day and a sale of a common share at the market price on the last day of each year reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.
(2)
  Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.
(3)
  Inclusive of expenses offset by custody credits earned on cash balances at the