<PAGE>
P I M C O
PIMCO Commercial Mortgage Securities Trust, Inc.
A Closed-End
Fund Specializing
in Investments
in Commercial
Mortgage-Backed
Securities
December 31, 1997
Annual Report
<PAGE>
Pacific Investment Management Company is responsible for the management and
administration of the PIMCO Commercial Mortgage Securities Trust, Inc. (the
"Fund"). Founded in 1971, Pacific Investment currently manages $118 billion on
behalf of mutual fund and institutional clients located around the world.
Renowned for its fixed income management expertise, Pacific Investment manages
assets for approximately 30% of the 200 largest U.S. pension funds.
Pacific Investment is one of seven investment advisory firms which form PIMCO
Advisors Holdings L.P., the nation's fourth largest publicly traded investment
management concern with combined assets under management totalling nearly $200
billion. Widely recognized for providing consistent performance and high-
quality client service, the seven affiliated firms are:
Pacific Investment Management Company/Newport Beach, California
Oppenheimer Capital/New York, New York
Columbus Circle Investors/Stamford, Connecticut
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
Blairlogie Capital Management/Edinburgh, Scotland
Units of PIMCO Advisors Holdings L.P. trade on the New York Stock Exchange under
the ticker symbol "PA".
<PAGE>
Letter to our
Shareholders
For fixed income investors, 1997 will be remembered as a year of solid
performance in which the overall bond market, as measured by the Lehman
Aggregate Bond Index, posted a 9.7% return. After moving higher in the first
quarter on inflation fears which never materialized, interest rates followed a
downward path for the balance of the year. This left year-end yields on
securities with maturities longer than two years 20 to 70 basis points lower
than their starting points established at the end of 1996.
Shareholders who stayed the course were rewarded with an above-market return of
11.27% based on the Fund's net asset value. Share price performance was an even
stronger 16.40%, boosted by a significant decline in the Fund's trading
discount, which finished the year near 2%. Longer term performance also
continued to standout, as the Fund's three-year return of 13.55% (based on net
asset value) led the Lehman benchmark by 3.13% on an annualized basis over the
same period.
We are also pleased to report that the Fund was able to pay a special dividend
of ten cents per share in 1997. This marked the second successive year in which
income generated by the Fund's investment portfolio exceeded the amount of its
regular monthly dividend distributions.
The following pages of this report include an interview with the Fund's
portfolio manager, Benjamin Trosky. In the interview, Ben describes several of
the factors that combined to boost both yield and total return performance.
While the recent dramatic decline in interest rates presents significant
challenges for a yield-focused investment like the Fund, we are optimistic that
1998 can be another successful year for Fund investors. As always, we appreciate
the trust you have placed in us and welcome your questions and comments
regarding the Fund and our annual report.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman of the Board
February 12, 1998
1
<PAGE>
About the Fund
Launched in September 1993, PIMCO Commercial Mortgage Securities Trust, Inc. is
unique in that it is the only closed-end fund that invests primarily in
commercial mortgage-backed securities. Commercial mortgage-backed securities
are fixed income instruments representing an interest in mortgage loans on
commercial real estate properties, such as office buildings, shopping malls,
hotels, apartment buildings, nursing homes, and industrial properties.
The Fund's primary investment objective is to achieve high current income.
Pacific Investment Management Company believes that yields on commercial
mortgage-backed securities are, and will continue to be for the foreseeable
future, higher than yields on corporate debt securities of comparable credit
ratings and maturities. Capital gain from the disposition of investments is a
secondary objective of the Fund.
Unlike an open-end fund, whose shares are bought and sold at their net asset
value ("NAV"), shares of most closed-end funds, including the Fund, are listed
on a stock exchange where they trade at market value. Closing market prices for
the Fund's shares are published in the New York Stock Exchange Composite
Transaction Section of newspapers each day. The Fund's NYSE trading symbol is
"PCM". Comparative NAV and market price information about the Fund is published
each Monday in The Wall Street Journal and each Saturday in The New York Times
and Barron's in a table titled "Closed-End Funds."
The Fund's Dividend Reinvestment Plan (the "Plan") provides automatic
reinvestment of dividend and capital gains distributions in additional shares of
the Fund. If your shares are registered in your own name, you are already
enrolled in the Plan unless you have elected otherwise. Shareholders whose
shares are held in the name of a broker or nominee should contact their broker
or nominee to request participation in the Plan. All distributions to
shareholders who elect not to participate in the Plan will be paid by check
mailed directly to the record holder of shares. For a copy of the Plan
Brochure, please call 800-213-3606.
The Fund issues a quarterly press release summarizing investment performance and
portfolio statistics. Should you wish to receive a copy, please call
800-213-3606 to be placed on the Fund's mailing list.
2
<PAGE>
Questions &
Answers with
Ben Trosky
Benjamin Trosky, a PIMCO Managing Director and fixed income portfolio manager,
has managed the PIMCO Commercial Mortgage Securities Trust, Inc. since its
inception in September of 1993. Ben is a Chartered Financial Analyst with over
18 years of investment experience, the past eight of which have been spent at
PIMCO as head of the firm's credit research team. In addition to his work on the
Fund, Ben oversees the use of commercial mortgage-backed securities and high
yield bonds in PIMCO's privately managed and mutual fund portfolios. The
following questions and answers are from a recent conversation with Ben.
Q: From start to finish, interest rates declined in 1997. Can you provide a
brief synopsis of what happened along the way?
A: The first quarter of 1997 was marked by a tight labor market, rising capacity
utilization and robust final demand. These factors, and the attendant threat of
rising inflation had a ripple effect in the bond market and yields on maturities
greater than one year rose roughly 0.50%. Finally, in a move characterized as a
preemptive strike on future inflation, the Fed increased the Fed Funds rate in
late March by 0.25%. These fears proved unfounded in the coming months as
inflationary pressures remained mild. While the path down was anything but
smooth, by the end of the second quarter, yields had fallen sufficiently to
retrace most of their first quarter gains. This trend continued throughout the
summer as economic growth remained moderate and producer price inflation edged
lower. This resulted in further declines of longer term interest rates and a
flatter yield curve.
Domestic economic growth and inflation concerns were swept into the background
in the fourth quarter by the unfolding Asian crisis that threatened emerging and
developed economies across the globe. The likelihood of dramatically reduced
exports to Asia placed a damper on U.S. growth prospects. At the same time,
already low inflation was poised to move lower on decreasing demand for
commodities and falling prices on a broad range of Asian import goods. These
factors, coupled with a flight to quality as investment dollars fled less stable
markets, pushed interest rates still lower as 1997 drew to a close. The
accompanying graph of quarterly yield curves illustrates the events as they
unfolded throughout the year.
Quarterly Yield Curves
Yield Curve Data Points
<TABLE>
<CAPTION>
Date 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 30 yr
---- ---- ---- ---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/31/96 5.19 5.30 5.48 5.87 6.00 6.20 6.33 6.41 6.64
3/31/97 5.31 5.53 6.00 6.40 6.56 6.74 6.85 6.89 7.09
6/30/97 5.16 5.26 5.64 6.07 6.20 6.38 6.46 6.49 6.78
9/30/97 5.08 5.26 5.44 5.77 5.83 5.98 6.08 6.10 6.39
12/31/97 5.33 5.44 5.48 5.64 5.66 5.71 5.74 5.74 5.92
</TABLE>
3
<PAGE>
Q: The Fund delivered strong investment performance in 1997 relative to other
fixed income investments. What factors were most responsible for its success?
A: Three factors contributed to the Fund's total return profile in 1997. For
most of the year, portfolio duration, or the degree of sensitivity of the Fund's
net asset value to changes in interest rates, was roughly one year longer than
in 1996. Since the price or principal value of a fixed income security moves in
the opposite direction from changes in interest rates, the value of many of the
Fund's investments increased as interest rates declined. The rate of increase
was enhanced by the Fund's longer duration. At the same time, total return was
boosted by the attractive average yield premium afforded by commercial mortgage-
backed securities ("CMBS"). Finally, investment performance benefited from the
appreciation garnered as yield spreads on CMBS narrowed versus treasuries.
Investment Performance For the Year Ended 12/31/97
<TABLE>
<CAPTION>
Since
Inception
1 Year 2 Years* 3 Years* 9/2/93*
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund Net Asset Value 11.27% 9.85% 13.55% 8.92%
Fund NYSE Market Value 16.40% 15.48% 17.57% 8.92%
Lehman Brothers
Aggregate Bond Index 9.65% 6.60% 10.42% 6.52%
</TABLE>
*Average annual total return
<TABLE>
<CAPTION>
PCM
NYSE
----
PIMCO COM. MTG PIMCO COM. MTG LBAG
MONTH NAV MKT VALUE
UNIT UNIT
VALUE VALUE
========== ============== ============== ===========
<S> <C> <C> <C>
08/31/93 10,000.00 10,000.00 10,000.00
09/30/93 9,992.83 10,000.00 10,027.47
12/31/93 10,043.01 9,946.24 10,033.40
03/31/94 9,897.95 9,421.55 9,745.85
06/30/94 9,801.99 9,165.02 9,645.31
09/30/94 9,916.23 9,666.23 9,704.14
12/31/94 9,881.78 8,909.53 9,740.76
03/31/95 10,515.93 9,739.69 10,232.11
06/30/95 11,245.64 10,798.55 10,855.53
09/30/95 11,407.12 10,400.16 11,068.65
12/31/95 11,989.26 10,856.85 11,540.33
03/31/96 11,796.58 11,375.59 11,335.68
06/30/96 11,931.47 11,123.65 11,400.11
09/30/96 12,378.91 11,771.16 11,611.03
12/31/96 13,002.57 12,438.43 11,959.28
03/31/97 13,099.19 12,894.14 11,892.47
06/30/97 13,694.71 13,798.66 12,329.22
09/30/97 14,192.79 14,085.82 12,738.85
12/31/97 14,468.38 14,478.50 13,113.88
</TABLE>
Growth of $10,000 Net Investment in the Fund Chart.
The line graph depicts the value of a net $10,000 investment made at the Fund's
inception on September 2, 1993 and held through December 31, 1997, compared to
the Lehman Brothers Aggregate Bond Index, an unmanaged market index. Investment
performance assumes the reinvestment of dividends and capital gains
distributions, if any. The PCM NYSE Market Value performance does not reflect
the effect of sales loads or broker commissions. The performance data quoted
represents past performance. Past performance is not an indication of future
results. Investment return and share value will fluctuate so that Fund shares,
when sold, may be worth more or less than their original cost.
4
<PAGE>
Q: How have CMBS credit spreads moved in general and in comparison to corporate
credit spreads?
A: The declining interest rate environment made higher yielding securities,
including CMBS, more attractive to many investors seeking income. Consequently,
yield spreads narrowed throughout most of 1997, before spiking late in the year
when investors fleeing volatile foreign markets flooded the Treasury market for
its safety and liquidity.
Overall, however, yield spreads offered by CMBS have narrowed considerably, both
relative to Treasury securities and comparably rated corporate bond
alternatives. For example, the yield premium over Treasuries offered by triple-B
CMBS has narrowed by approximately 0.70% since 1995, compared to a roughly 0.07%
narrowing for corporate bonds of comparable quality and duration. As noted in
the previous question, this spread narrowing contributed significantly to the
Fund's favorable investment performance during the past year.
Commercial Mortgage-Backed Securities and Corporate Bonds
Excess Yield over U.S. Treasuries*
<TABLE>
<CAPTION>
Rating CMBS
- ------ ----
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 115 95 90 70 70 65 63 63 78
AA 130 115 105 85 80 72 67 69 90
A 160 135 125 100 95 85 75 78 105
BBB 200 180 165 140 115 100 86 89 130
BB 540 500 475 425 375 235 185 190 240
B 800 800 790 750 700 650 475 475 525
</TABLE>
<TABLE>
<CAPTION>
Corporate
Rating Bonds
- ------ -----
12/31/95 3/31/96 6/30/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AAA 40 35 35 37 35 39 35 35 47
AA 55 40 40 46 40 46 40 37 50
A 65 55 55 58 55 57 48 58 57
BBB 95 90 90 93 88 85 75 72 88
BB 260 220 200 185 230 190 180 170 259
B 515 425 400 360 390 330 340 338 350
</TABLE>
*7 to 10 year U.S. Treasury Bonds as of December 31, 1997
5
<PAGE>
Q: Have narrowing yield spreads changed the way you manage the Fund?
A: Yes. As yield spreads have narrowed, it has been our view that investors
were not being adequately compensated to take significant credit risk. Thus,
portfolio average quality has migrated from the lower triple-B area to single-A.
At the same time, we continue to subject every portfolio holding to careful
scrutiny on a regular basis. This helps to assure that the credit we hold
retains the same characteristics as the credit we bought and that it still makes
sense for the Fund.
Portfolio Composition
By Quality Rating*
BBB 33.2%
- ----------------------------------
AAA 19.1%
- ----------------------------------
A 16.1%
- ---------------------------------- [PIE CHART APPEARS HERE]
BB 15.0%
- ----------------------------------
AA 8.6%
- ----------------------------------
B 8.0%
- ----------------------------------
*As rated by Standard & Poor's
or the equivalent by Moody's,
Duff & Phelps or Fitch
Q: Investors often associate declining interest rates with increased
refinancing of home mortgages and rapid prepayment of mortgage-backed securities
like GNMAs. How do CMBS respond to falling rates?
A: On balance, CMBS are less sensitive to prepayments arising from declining
interest rates than residential mortgage backed securities. Prepayment
protection is derived from lock-out and make whole provisions at the collateral
level. In other words, individual mortgage holders may either be prevented from
prepaying their mortgage for a specified period, or may face a substantial
financial penalty in the event they elect to retire their loan early. In
addition, the security structure of many CMBS provides a buffer against rapid,
unexpected prepayments. CMBS are typically issued in several tranches. The
tranches are structured sequentially so that principal payments are applied to
each successive tranche in order. For example, the third tranche in a particular
CMBS issue may not receive any principal payments until the first two tranches
are retired.
6
<PAGE>
Q: CMBS issuance has increased each year since 1993. What factors are behind
this growth and will it continue in 1998?
A: Growth in the CMBS market over the past four years derives from two primary
sources. First, commercial construction has grown throughout the period as a
result of the overall economic expansion. This growth has created a greater
supply of loans available for securitization.
A more important factor in the growth of the CMBS market, however, has been the
increasing acceptance of securitization in the commercial loan market in
general. This trend represents a response by the capital markets to the dearth
of commercial property financing alternatives available in the early 1990s, a
period when many traditional lenders left the market. CMBS have provided a more
liquid, rated alternative to traditional commercial mortgage loans. Investors
can now invest in more diversified pools of mortgages with the level of credit
risk at which they are most comfortable.
Commercial Mortgage-Backed
Securities Issuance ($ in billions)
<TABLE>
<CAPTION>
Year Issuance
- ---- --------
<S> <C>
1990 5.6
1991 8.6
1992 14.4
1993 17.4
1994 20.1
1995 18.8
1996 30.2
1997 44.0
</TABLE>
Commercial Mortgage-Backed Securities and Corporate Bonds
Excess Yield over U.S. Treasuries*
7
<PAGE>
Q: Has the structure of CMBS changed as the
market has matured?
A: Yes. We are seeing a greater variety of structures, and in a broad sense
more liberal underwriting standards. When the Fund started in 1993, investors
who had been burned on commercial property investments in the recent past were
extremely sensitive to the quality and structure of the fledgling CMBS market.
An extended period of economic expansion, a low default rate, and the maturation
of the market have opened the door for Wall Street investment bankers to create
a myriad of new CMBS structures. The deterioration in underwriting standards
accompanying this growth is part of the impetus behind our move toward a higher
average credit quality in the Fund.
Q: Entering 1998, what are your favorite
CMBS sectors and why?
A: We have increased our exposure to AAA-rated FHA/GNMA project loans. In our
view, these securities offer attractive relative value with yields closer to A-
rated CMBS and benefit from significant call protection. Otherwise, we are
comfortable with the current structure of the Fund's investment portfolio and do
not plan any wholesale changes.
Portfolio Composition
By Commercial Mortgage Type
Multi-Class* 31.5%
- ----------------------------------
Multi-Family 28.9%
- ----------------------------------
Healthcare 17.0%
- ----------------------------------
Hospitality 9.7%
- ----------------------------------
Gaming 3.5% [PIE CHART APPEARS HERE]
- ----------------------------------
Mobile
Home Parks 3.2%
- ----------------------------------
Industrial 1.3%
- ----------------------------------
Retail 0.8%
- ----------------------------------
Other 4.1%
- ----------------------------------
*A mix of all types of
commercial properties
8
<PAGE>
Q: What are your projections for economic growth
and inflation for the first half of 1998?
A: We expect that events in Asia will inhibit U.S. growth, but should not cause
a dramatic slowdown. Economic growth will continue to be bolstered by healthy
consumer spending, which comprises two-thirds of GDP. Consumers have benefited
significantly from an extended period of financial asset growth, and with lower
interest rates, a new wave of home mortgage refinancing will put additional
dollars in the pocketbooks of many homeowners. However, the rosy consumer
picture must be tempered by the likelihood of declining corporate profits.
Corporate profitability will come under increasing pressure from rising wage
costs and lower prices fostered by intensifying global competition.
At the same time, we expect inflation to remain subdued, under pressure from
global excess capacity and cheap imports, including commodities. Even tight
labor markets, with unemployment at 30-year lows, are unlikely to fuel
inflation. This is because the potential inflationary impact of higher wages is
being more than offset by productivity gains and the inability of corporations
to pass on wage increases in the form of higher prices.
Q: The Fund's dividend payout has been remarkably
stable for the past four years through a variety
of interest rate environments. Interest rates are
lower now than at any time during this period. How
do you expect this to affect the Fund's dividend
going forward?
A: The Fund's dividend has been considerably more stable than that offered by
conventional mortgage products. This is due in large part to the prepayment
protection afforded by CMBS which we discussed earlier in the interview. There
is considerable room to add income by moving portfolio quality back toward
triple-B as yield spreads widen, bolstering the Fund's income. However, we would
weigh any move to lower the Fund's average credit quality against the credit
risk of lower-rated securities in the event the economy slows.
While our turnover rate in the Fund is quite low, and prepayment protection
helps, over time we need to reinvest a portion of the portfolio at prevailing
lower yields. Obviously, a prolonged period of low interest rates would
eventually impact the dividend stream of the Fund.
9
<PAGE>
Financial
Highlights
<TABLE>
<CAPTION>
From commencement
For the year ended For the year ended For the year ended For the year ended of operations through
December 31, 1997 December 31, 1996 December 31, 1995 December 31, 1994 December 31, 1993 (a)
<S> <C> <C> <C> <C> <C>
Selected per share data:
Net asset value, beginning
of period $ 13.71 $ 13.84 $ 12.41 $ 13.76 $ 13.95
-----------------------------------------------------------------------------------------------------
Net investment income 1.20 1.23 1.16 1.16 0.20
Net realized and
unrealized gain (loss)
on investments 0.29 (0.13) 1.40 (1.38) (0.14)
-----------------------------------------------------------------------------------------------------
Total from investment
operations 1.49 1.10 2.56 (0.22) 0.06
Less dividends from net
investment income (1.23) (1.23) (1.13) (1.13) (0.25)
-----------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 13.97 $ 13.71 $ 13.84 $ 12.41 $ 13.76
-----------------------------------------------------------------------------------------------------
Per share market value,
end of period $ 13.69 $ 12.88 $ 12.38 $ 11.13 $ 13.63
-----------------------------------------------------------------------------------------------------
Total investment return
Per share market value (b) 16.40% 14.57% 21.86% (10.42%) (1.62%)*
Per share net asset
value (C) 11.27% 8.45% 21.33% (1.61%) 1.30%*
Ratios to average net
assets
Operating expenses
(excluding interest
expense) 0.97% 0.99% 1.04% 1.03% 1.00%*
Total operating expenses 3.69% 3.60% 3.94% 2.71% 1.11%*
Net investment income 8.63% 9.08% 8.93% 8.84% 5.59%*
Supplemental data
Net assets, end of period
(in thousands) $153,803 $150,929 $152,375 $136,595 $ 151,407
Portfolio turnover rate 8.74% 35.98% 47.79% 45.71% 17.43%
</TABLE>
* Annualized
(a) Commencement of operations, September 2, 1993.
(b) Total investment return on market value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in market price per share. Total investment returns exclude the effects of
sales loads.
(c) Total investment return on net asset value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in net asset value per share.
See Notes to Financial Statements
10
<PAGE>
Financial
Statements
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
Amounts in thousands, except per share amounts December 31, 1997
<S> <C>
Assets:
Investments in securities, at market value $ 227,070
(Identified cost: $224,246)
Interest receivable 2,083
Paydown receivable 1,796
Deferred organizational expense 4
Other assets 7
------------
Total assets $ 230,960
------------
Liabilities:
Reverse repurchase agreements $ 74,688
Dividends payable 2,133
Accrued investment manager's fee 280
Accrued administrator's fee 39
Other liabilities 17
------------
Total liabilities $ 77,157
------------
Net assets applicable to outstanding capital stock $ 153,803
============
Net assets consist of:
Capital stock - authorized 300 million shares,
$.001 par value; outstanding 11,007,169 shares 11
Additional paid-in capital 152,922
Overdistributed net investment income (210)
Accumulated net realized loss from investments (1,744)
Net unrealized appreciation of investments 2,824
------------
$ 153,803
============
Net asset value per share outstanding $ 13.97
============
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the year ended
Amounts in thousands December 31, 1997
<S> <C>
Interest income $ 18,728
Expenses:
Interest expense 4,143
Investment manager fee 1,101
Administration fee 152
Custodian and portfolio accounting fee 59
Directors' fee 36
Proxy expense 9
Legal fee 4
Audit fee 15
Organization expenses 6
Other expenses 87
------------
Total expenses 5,612
------------
Net investment income $ 13,116
Net realized and unrealized gain
Net realized gain on investments 376
Unrealized appreciation on investments 2,865
------------
Net gain on investments $ 3,241
------------
Net increase in assets resulting from operations $ 16,357
============
</TABLE>
See Notes to Financial Statements
11
<PAGE>
Financial
Statements
(cont.)
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the year ended For the year ended
Amounts in thousands December 31, 1997 December 31, 1996
<S> <C> <C>
Increase (decrease) in net assets from:
Operations
Net investment income $ 13,116 $ 13,489
Net realized gain (loss)
on investments 376 (584)
Unrealized appreciation
(depreciation) on investments 2,865 (867)
------------ ------------
Net increase
resulting from operations 16,357 12,038
Distributions to Shareholders from:
Net investment income (13,483) (13,484)
------------ ------------
Total increase (decrease)
in net assets 2,874 (1,446)
============ ============
Net assets
Beginning of period 150,929 152,375
------------ ------------
End of period* $ 153,803 $ 150,929
============ ============
*Including undistributed
(overdistributed) net
investment income of: $ (210) $ 229
------------ ------------
</TABLE>
Statement of Cash Flows
<TABLE>
<CAPTION>
For the year ended
Amounts in thousands December 31, 1997
<S> <C>
Net increase in net assets resulting from operations $ 16,357
Adjustments to reconcile to net cash
provided from operating activities
Increase in interest receivable (55)
Amortization of premium and discount, net (1,061)
Decrease in accrued expenses (39)
Decrease in other assets 4
Net gain on investments (3,241)
------------
Total adjustments (4,392)
------------
Net cash provided from operating activities 11,965
------------
Investing activities
Purchase of long-term portfolio investments (41,596)
Proceeds from disposition of long-term
portfolio investments 41,166
Purchase of short-term
portfolio investments (4,214)
------------
Net cash used in investing activities (4,644)
------------
Financing activities*
Cash dividends paid (12,933)
Net increase in reverse repurchase agreements 4,838
------------
Net cash used in financing activities (8,095)
------------
Net decrease in cash (774)
Cash at beginning of period 774
------------
Cash at end of period $ 0
============
</TABLE>
. Cash paid for interest for the year ended December 31, 1997,
amounted to $4,008.
See Notes to Financial Statements
12
<PAGE>
Schedule of
Investments
December 31, 1997
<TABLE>
<CAPTION>
Principal
Amount Value
(000s) (000s)
-------------------------
<S> <C> <C>
Commercial Mortgage-Backed Securities 139.7%
Multi-Class 46.5%
Aetna Commercial Trust
7.100% due 12/26/30 $ 1,000 $ 1,020
Asset Securitization Corp.
7.384% due 08/13/29 1,500 1,553
Blackrock Capital Financial
8.228% due 11/16/26 (b)(c) 2,000 2,032
8.480% due 09/25/28 (C) 3,000 2,999
Carolina First SBL Trust
7.888% due 03/18/27 (b)(c) 2,000 2,010
CBA Mortgage Corp.
7.760% due 12/25/03 (b) 1,000 1,003
Federal Deposit Insurance Corp.
6.938% due 11/25/26 (b) 1,260 1,265
First Boston Mortgage Securities Corp.
7.556% due 09/25/06 (b) 976 966
7.458% due 11/25/27 1,000 982
8.012% due 11/25/27 1,500 1,492
7.620% due 01/25/28 (b)(c) 1,319 980
7.624% due 01/25/28 (b) 2,500 2,366
Matterhorn Capital Corp.
7.850% due 01/20/06 (C) 2,000 2,020
Merrill Lynch Mortgage
8.189% due 06/15/21 (b) 1,103 1,127
7.120% due 06/18/29 2,000 1,994
Morgan Stanley
7.288% due 02/15/05 (b)(c) 2,000 2,048
8.240% due 12/15/23 (b)(c) 1,802 1,842
7.695% due 10/03/30 (C) 2,000 1,958
Mortgage Capital Funding, Inc.
7.531% due 07/20/27 1,000 1,028
NB Commercial Mortgage
8.031% due 10/20/23 (C) 500 509
8.730% due 10/20/23 (C) 1,000 1,027
Nomura Asset Securities Corp.
8.186% due 07/07/03 (b)(c) 3,260 3,385
9.732% due 09/11/19 (b) 3,000 3,449
Prudential Securities Secured Financing
7.610% due 12/26/22 $ 1,000 $ 1,010
Resolution Trust Corp.
7.150% due 06/25/23 292 292
9.250% due 06/25/23 5,455 5,511
8.835% due 12/25/23 1,600 1,682
9.450% due 05/25/24 4,842 4,906
9.500% due 05/25/24 1,237 1,235
9.200% due 06/25/24 737 736
8.000% due 07/25/24 1,613 1,618
7.100% due 12/25/24 (b) 948 951
8.000% due 04/25/25 2,500 2,524
8.000% due 04/25/25 1,855 1,885
8.000% due 06/25/26 2,285 2,309
6.900% due 02/25/27 (b) 341 333
6.900% due 02/25/27 (b) 1,829 1,587
7.000% due 05/25/27 2,021 1,979
Structured Asset Securities Corp.
7.750% due 02/25/28 3,841 3,958
---------
71,571
---------
Multi-Family 42.7%
Donaldson, Lufkin & Jenrette
7.350% due 12/18/03 (C) 3,000 3,081
Federal Housing Authority
8.360% due 01/01/12 1,297 1,353
7.977% due 04/25/15 746 765
7.750% due 01/01/16 421 434
8.350% due 04/01/16 1,478 1,502
6.875% due 12/01/16 832 808
7.625% due 12/01/16 499 516
6.430% due 12/01/19 2,756 2,784
7.430% due 12/20/20 1,189 1,233
7.430% due 07/01/21 1,663 1,700
7.439% due 08/01/21 708 724
7.484% due 02/25/23 1,777 1,815
7.430% due 03/29/23 372 387
6.875% due 11/01/23 1,996 1,983
8.250% due 02/01/28 2,595 2,674
7.750% due 05/01/28 973 980
8.875% due 06/01/35 5,963 6,097
</TABLE>
13
<PAGE>
Schedule of
Investments
(cont.)
December 31, 1997
<TABLE>
<CAPTION>
Principal
Amount Value
(000s) (000s)
-----------------------
<S> <C> <C>
Federal National Mortgage Assn.
7.900% due 12/01/15 (b)(c) $ 874 $ 599
7.900% due 12/25/15 (b)(c) 1,608 1,441
9.375% due 04/01/16 1,978 2,046
7.875% due 11/01/18 865 871
6.113% due 01/01/19 (b) 1,429 1,418
Government National Mortgage Assn.
9.500% due 09/15/30 4,309 4,406
8.625% due 10/15/34 3,473 3,551
JHM Acceptance Corp.
8.960% due 04/01/19 488 493
Merrill Lynch Mortgage
8.098% due 04/25/23 (b) 5,000 5,109
Multi-Family Capital Access One, Inc.
7.400% due 01/15/24 2,017 1,998
NationsBanc Mortgage Capital Corp.
8.138% due 05/25/28 (b) (c) 2,000 1,601
Resolution Trust Corp.
9.000% due 03/25/17 1,978 1,979
7.588% due 01/25/20 (b) 865 869
7.251% due 09/25/20 (b) 706 452
7.940% due 09/25/21 (b) 1,451 1,456
8.000% due 09/25/21 431 428
7.700% due 07/25/24 2,796 2,788
Structured Asset Securities Corp.
7.050% due 11/25/02 6,000 5,304
---------
65,645
---------
Healthcare 25.1%
Daiwa Mortgage Acceptance Corp.
6.023% due 09/25/06 (b) (c) 4,390 3,490
Federal Housing Authority
7.500% due 12/31/31 1,592 1,628
LTC Commercial Corp.
9.300% due 06/15/26 (C) 4,000 4,135
Nomura Asset Securities Corp.
6.680% due 12/15/01 (C) 7,100 7,030
6.680% due 12/15/01 5,000 5,021
Red Mountain Funding Corp.
7.072% due 01/15/19 (C) 2,000 2,043
7.471% due 01/15/19 (C) 1,000 983
8.926% due 01/15/19 (C) $ 1,000 $ 906
9.150% due 11/28/27 (C) 3,200 3,268
SC Commercial
7.050% due 11/28/13 (C) 5,000 5,038
7.800% due 11/28/13 (C) 5,000 5,148
---------
38,690
---------
Hospitality 14.3%
Cooper Hotel
7.500% due 07/15/13 (C) 8,646 8,976
Federal Housing Authority
7.500% due 09/01/34 768 784
Franchise Mortgage Acceptance Corp.
7.981% due 11/15/18 (C) 2,300 2,250
German American Capital Corp.
8.535% due 10/10/02 (C) 2,000 2,091
HMH Properties, Inc.
9.500% due 05/15/05 (C) 3,000 3,188
8.875% due 07/15/07 500 526
Hotel First
8.520% due 08/05/08 (C) 2,767 3,032
J.Q. Hammons Hotels
8.875% due 02/15/04 1,100 1,119
---------
21,966
---------
Gaming 5.2%
Griffin Gaming
8.638% due 06/30/00 (b) 2,500 2,600
Riviera Holdings Corp.
11.000% due 12/31/02 2,000 2,130
10.000% due 08/15/04 500 498
Showboat, Inc.
9.250% due 05/01/08 2,500 2,694
---------
7,922
---------
Mobile Home Parks 4.7%
First Boston Mortgage Securities Corp.
7.325% due 04/25/11 (b) 4,000 3,989
Manufacturers Hanover Corp.
7.536% due 12/16/25 (b) (c) 830 830
8.216% due 12/16/25 (b) (c) 2,491 2,366
---------
7,185
---------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
(000s) (000s)
------------------------
<S> <C> <C>
Retail 1.2%
American Southwest Financial
5.100% due 06/02/99 (C) $ 608 $ 602
Conseco Commercial Mortgage
9.700% due 07/15/04 120 120
Trizec Finance Limited
10.875% due 10/15/05 1,005 1,133
---------
1,855
---------
Total Commercial Mortgage-Backed Securities 214,834
---------
(Cost $211,958)
Corporate Bonds and Notes 1.9%
Industrials 1.9%
Building Materials Corp.
8.000% due 10/15/07 (C) 3,000 2,925
---------
Total Corporate Bonds and Notes 2,925
---------
(Cost $2,977)
Short-Term Instruments 6.0%
Commercial Paper 5.8%
Federal National Mortgage Assn.
5.450% due08/03/98 1,200 1,160
General Electric Capital Corp.
5.810% due 01/13/98 3,800 3,793
5.840% due 01/23/98 200 199
General Motors Acceptance Corp.
5.780% due 01/28/98 400 398
IBM Credit Corp.
6.240% due 01/08/98 900 899
KFW International Finance, Inc.
5.720% due 02/06/98 400 398
National Rural Utilities Cooperative
5.850% due 01/13/98 300 299
Proctor & Gamble Co.
5.830% due 01/16/98 100 100
Sara Lee Credit Corp.
6.100% due 01/07/98 1,700 1,699
---------
8,945
---------
Repurchase Agreements 0.2%
State Street Bank
5.000% due 01/02/98 $ 366 $ 366
(Dated 12/31/97. ----------
Collateralized by U.S.
Treasury Note 6.000% due
05/31/98 valued at $377,502.
Repurchase proceeds
are $366,107.)
Total Short-Term Instruments 9,311
(Cost $9,311) ---------
TOTAL INVESTMENTS (a) 147.6% $ 227,070
(Cost $224,246)
OTHER ASSETS AND LIABILITIES (NET) (47.6%) (73,267)
---------
NET ASSETS 100.0% $ 153,803
=========
</TABLE>
Notes to Schedule of Investments
(a) The identified cost of investments owned as of December 31, 1997
was the same for federal income tax and financial statement purposes.
(b) Variable rate security. The rate shown is as of December 31, 1997.
(c) Securities purchased under Rule 144A of the 1933 Securities Act and,
unless registered under the Act or exempt from registration, may only
be sold to qualified institutional investors.
15
<PAGE>
Notes to
Financial
Statements
December 31, 1997
1. General Information
The PIMCO Commercial Mortgage Securities Trust, Inc. commenced operations on
September 2, 1993. The Fund is registered under the Investment Company Act of
1940, as amended, as a closed-end, non-diversified, investment management
company organized as a Maryland corporation. The stock exchange symbol of the
Fund is PCM. Shares are traded on the New York Stock Exchange.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed in
preparation of the Fund's financial statements. The policies are in conformity
with generally accepted accounting principles.
Security valuation. It is the policy of the Fund to value portfolio
securities at market value. Market value is determined on the basis of last
reported sales prices, or if no sales are reported, as is the case for most
securities traded over-the-counter, the mean between representative bid and
asked quotations. Certain fixed income securities for which daily market
quotations are not readily available may be valued, pursuant to guidelines
established by the Board of Directors, with reference to fixed income securities
whose prices are more readily obtainable and whose durations are comparable to
the securities being valued. Short-term investments having a maturity of sixty
days or less are valued at amortized cost. Subject to the foregoing, other
securities for which market quotations are not readily available are valued at
fair value as determined in good faith by the Board of Directors.
Securities transactions and investment income. Securities transactions are
recorded as of the trade date. Securities purchased or sold on a when-issued or
delayed-delivery basis may be settled a month or more after the trade date.
Securities purchased on a when-issued basis are subject to market value
fluctuations during this period. On the commitment date of such purchases, the
Fund designates specific assets with a value at least equal to the commitment,
to be utilized to settle the commitment. The proceeds to be received from
delayed-delivery sales are included in the Fund's net assets on the date the
commitment is executed. Accordingly, any fluctuation in the value of such assets
is excluded from the Fund's net asset value while the commitment is in effect.
Realized gains and losses from securities sold are recorded on the identified
cost basis. Dividend income is recorded on the ex-dividend date. Interest income
is recorded on the accrual basis and includes the accretion of discounts and
amortization of premiums.
Dividends and distributions to shareholders. The Fund intends to distribute
all its net investment income monthly. Distributions, if any, of net realized
short-or long-term capital gains will be distributed no less frequently than
once each year. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to the accounting for
paydown gains and losses on mortgage-backed securities.
Federal income taxes. The Fund intends to qualify as a regulated investment
company and distribute all of its taxable income and net realized gains, if any,
to shareholders. Accord-ingly, no provision for Federal income taxes has been
made.
Reverse repurchase agreements. Reverse repurchase agreements involve the
sale of a portfolio-eligible security by the Fund, coupled with an agreement to
repurchase the security at a specified date and price. Reverse repurchase
agreements involve the risk that the market value of securities retained by the
Fund may decline below the repurchase price of the securities sold by the Fund
which it is obligated to repurchase. Reverse repurchase agreements are
considered to be borrowings by the Fund, and are subject to the Fund's overall
restriction on borrowing under which it must maintain asset coverage of at least
300%.
3. Investment Manager Fee, Administration Fee, and Directors' Fee
Investment Manager Fee. Pacific Investment Management Company serves as
investment manager to the Fund, pursuant to an investment management agreement.
Pacific Investment receives a quarterly fee from the Fund at an annual rate of
0.725% based on average weekly net assets of the Fund.
16
<PAGE>
Administration Fee. Pacific Investment also provides administrative services
to the Fund and receives from the Fund a quarterly administrative fee at the
annual rate of 0.10% of the Fund's average weekly net assets.
Directors' Fee. Each unaffiliated Director receives an annual retainer of
$6,000, plus $1,000 for each Board of Directors meeting attended, plus
reimbursement of related expenses.
4. Organization
The Fund assumed all costs in connection with its organization and offering
of shares, including the fees and expenses of registering and qualifying its
shares for distribution under federal and state securities regulations. Expenses
incurred in connection with the organization and offering of shares of the Fund
were $30,500 and are being amortized over a five year period.
5. Securities Transactions
Cost of purchases and proceeds from sales of securities (excluding U.S.
Government securities and short-term investments) for the year ended December
31, 1997, were $37,588,882 and $18,985,659, respectively. Purchases and sales of
U.S. Government securities were $1,500,769 and $0, respectively.
6. Federal Income Tax Matters
At December 31, 1997, the net unrealized appreciation of investments based
on cost for federal income tax purposes was as follows (Amounts in thousands):
Aggregate gross unrealized appreciation $ 5,604
Aggregate gross unrealized depreciation (2,780)
-------
Net unrealized appreciation $ 2,824
=======
The accumulated net realized loss on sales of investments for federal income
tax purposes at December 31, 1997, amounting to $1,744,524, is available to
offset future taxable gains. If not applied, $827,229, $229,745, and $687,550 of
the loss will expire in 1999, 2003, and 2004, respectively.
7. Borrowings under Reverse Repurchase Agreements
The average amount of borrowings outstanding during the year ended December
31, 1997 was $69,895,859 at a weighted average interest rate of 5.94%. On
December 31, 1997, securities valued at $75,113,359 were pledged as collateral
for reverse repurchase agreements.
The Fund is authorized to borrow funds and utilize leverage in amounts not
exceeding thirty-three and one-third percent of its total assets. The Fund's
ability to leverage creates an opportunity for increased net income, but at the
same time poses special risks. If the income from the securities purchased with
borrowed funds is not sufficient to cover the cost of borrowing, the net income
of the Fund will be less than if borrowing had not been used, reducing the
amount available for distribution to shareholders.
8. Impact of Year 2000 Problem (unaudited)
The Year 2000 Problem is the term generally applied to errors caused by a
computer system incorrectly processing dates beginning with the year 2000. Some
computer systems shorten date representations to specify a two-digit year. This
may cause a problem beginning in the year 2000 should the corresponding two-
digit year "00" be interpreted as the year 1900.
Pacific Investment has addressed the Year 2000 Problem and modified its
computer systems accordingly. Pacific Investment is requiring the other service
providers to the Fund to ensure that their systems are not susceptible to the
Year 2000 Problem. There can be no assurance, however, that steps taken by
Pacific Investment and the Fund's other service providers in preparation for the
year 2000 will be sufficient to avoid any adverse impact on the Fund.
17
<PAGE>
Report of
Independent
Auditors
The Shareholders and Board of Directors
PIMCO Commercial Mortgage Securities Trust, Inc.
We have audited the accompanying statement of assets and liabilities of PIMCO
Commercial Mortgage Securities Trust, Inc. (the Fund), including the schedule of
investments, as of December 31, 1997, and the related statements of operations
and cash flows for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the four years in the period then ended and for the period from
September 2, 1993 (commencement of operations) to December 31, 1993. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund at December 31, 1997, the results of its operations, its cash flows,
changes in its net assets and financial highlights for the periods indicated
above in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Kansas City, Missouri
February 6, 1998
18
<PAGE>
Dividend
Reinvestment
Plan
What is the Dividend Reinvestment Plan for PIMCO Commercial Mortgage Securities
Trust, Inc.?
The Dividend Reinvestment Plan offers shareholders in the Fund an efficient and
simple way to reinvest dividends and capital gains distributions, if any, in
shares of the Fund. Each month the Fund will distribute to shareholders
substantially all of its net investment income. The Fund expects to distribute
at least annually any net realized long-term or short-term capital gains.
Investors Fiduciary Trust Company ("IFTC") acts as Plan Agent for shareholders
in administering the Plan.
Who can participate in the Plan?
All shareholders in the Fund may participate in the Plan by following the
instructions for enrollment provided later in this section.
What does the Plan offer?
The Plan offers shareholders a simple and convenient means to reinvest
dividends and capital gains distributions in additional shares of the Fund.
How is the reinvestment of income dividends and capital gains
distributions accomplished?
If you are a participant in the Plan, your dividends and capital gains
distributions will be reinvested automatically for you, increasing your holding
in the Fund. If the Fund declares a dividend or capital gains distribution
payable either in cash or in shares of the Fund, you will automatically receive
shares of the Fund. If the market price of shares is equal to or exceeds the
net asset value per share on the Valuation Date (as defined below), Plan
participants will be issued shares valued at the net asset value most recently
determined or, if net asset value is less than 95% of the then current market
price, then at 95% of the market price.
If the market price is less than the net asset value on the Valuation Date,
the Plan Agent will buy shares in the open market, on the New York Stock
Exchange ("NYSE") or elsewhere, for the participants' accounts. If, following
the commencement of the purchase and before the Plan Agent has completed its
purchases, the market price exceeds the net asset value, the average per share
purchase price paid by the Plan Agent may exceed the net asset value, resulting
in the acquisition of fewer shares than if the dividend or capital gains
distribution had been paid in shares issued by the Fund at net asset value.
Additionally, if the market price exceeds the net asset value before the Plan
Agent has completed its purchases, the Plan Agent is permitted to cease
purchasing shares and the Fund may issue the remaining shares at a price equal
to the greater of net asset value or 95% of the then current market price. In a
case where the Plan Agent has terminated open market purchases and the Fund has
issued the remaining shares, the number of shares received by the participant
will be based on the weighted average of prices paid for shares purchased in the
open market and the price at which the Fund issues the remaining shares. The
Plan Agent will apply all cash received to purchase shares as soon as
practicable after the payment date of the dividend or capital gains
distribution, but in no event later than 30 days after that date, except when
necessary to comply with applicable provisions of the federal securities laws.
The Valuation Date is the dividend or capital gains distribution payment
date or, if that date is not a NYSE trading day, the immediately preceding
trading day. All reinvestments are in full and fractional shares, carried to
three decimal places.
Is there a cost to participate?
There is no direct charge to participants for reinvesting dividends and capital
gains distributions, since the Plan Agent's fees are paid by the Fund. There are
no brokerage charges for shares issued directly by the Fund. Whenever shares are
purchased on the NYSE or elsewhere in connection with the reinvestment of
dividends or capital gains distributions, each participant will pay a pro rata
portion of brokerage commissions. Brokerage charges for purchasing shares
through the Plan are expected to be less than the usual brokerage charges for
individual transactions, because the Plan Agent will purchase shares for all
participants in blocks, resulting in lower commissions for each individual
participant.
19
<PAGE>
Dividend
Reinvestment
Plan -- (cont.)
What are the tax implications for participants?
You will receive tax information annually for your personal records to help you
prepare your federal income tax return. The automatic reinvestment of dividends
and capital gains distributions does not affect the tax characterization of the
dividends and capital gains. Other questions should be directed to your tax
adviser.
How do participating shareholders benefit?
You will build holdings in the Fund easily and automatically at reduced costs.
You will receive a detailed account statement from the Plan Agent, showing
total dividends and distributions, dates of investments, shares acquired and
price per share, and total shares of record held by you and by the Plan Agent
for you. The proxy you receive in connection with the Fund's shareholder
meetings will include shares purchased for you by the Plan Agent according to
the Plan.
As long as you participate in the Plan, shares acquired through the Plan
will be held for you in safekeeping in non-certificated form by IFTC, the Plan
Agent. This convenience provides added protection against loss, theft or
inadvertent destruction of certificates.
Whom should I contact for additional information?
If you hold shares in your own name, please address all notices, correspondence,
questions or other communications regarding the Plan to:
PIMCO Commercial Mortgage Securities Trust, Inc.
c/o Investors Fiduciary Trust Company
P.O. Box 419338
Kansas City, MO 64141
Telephone: 800-213-3606
If your shares are not held in your name, you should contact your brokerage
firm, bank or other nominee for more information.
How do I enroll in the Plan?
If you hold shares of the Fund in your own name, you are already enrolled in
this Plan. Your reinvestments will begin with the first dividend after you
purchase your shares. If your shares are held in the name of a brokerage firm,
bank, or other nominee, you should contact your nominee to see if it will
participate in the Plan on your behalf. If your nominee is unable to
participate in the Plan on your behalf, you may want to request that your shares
be registered in your name so that you can participate in the Plan.
Once enrolled in the Plan, may I withdraw from it?
You may withdraw from the Plan without penalty at any time by providing written
notice to IFTC. Elections to withdraw from the Plan will be effective for
distributions with a Record Date of at least ten days after such elections are
received by the Plan Agent.
If you withdraw, you will receive, without charge, a share certificate
issued in your name for all full shares accumulated in your account from
dividend and capital gains distributions, plus a check for any fractional shares
based on market price.
Experience under the Plan may indicate that changes are desirable.
Accordingly, either the Fund or the Plan Agent may amend or terminate the Plan.
Participants will receive written notice at least 30 days before the effective
date of any amendment. In the case of termination, participants will receive
written notice at least 30 days before the record date of any dividend or
capital gains distribution by the Fund
20
<PAGE>
Board of
Directors
and Other Information
Directors and Officers
Brent R. Harris, Chairman of the Board and Director
R. Wesley Burns, President and Director
Guilford C. Babcock, Director
Vern O. Curtis, Director
Thomas P. Kemp, Sr., Director
William J. Popejoy, Director
Garlin G. Flynn, Secretary
John P. Hardaway, Treasurer
Investment Manager and Administrator
Pacific Investment Management Company
840 Newport Center Drive, Suite 360
Newport Beach, California 92660
Transfer Agent and Custodian
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105
Legal Counsel
Dechert Price & Rhoads
1500 K Street N.W.
Washington, D.C. 20005
Independent Auditors
Ernst & Young LLP
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105
<PAGE>
PIMCO Commercial Mortgage Securities Trust, Inc.
This report, including the financial statements herein,
is provided to the shareholders of PIMCO Commercial
Mortgage Securities Trust, Inc. for their information.
This is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund
or any securities mentioned in this report.
