<PAGE>
[LOGO]
PIMCO COMMERCIAL MORTGAGE SECURITIES TRUST, INC.
A CLOSED-END
FUND SPECIALIZING
IN INVESTMENTS
IN COMMERCIAL
MORTGAGE-BACKED
SECURITIES
JUNE 30, 2000
SEMI-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 $199 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 many of the largest corporations, foundations, endowments, and
governmental bodies in the United States and the world.
PIMCO Advisors L.P. is one of the largest investment management companies in the
United States with assets under management of more than $264 billion as of June
30, 2000 and is a member of the Allianz Group of Companies. Allianz AG is a
European based multi-national insurance and financial services holding company.
PIMCO Advisors is recognized for providing consistent performance and
high-quality service to mutual fund and institutional clients worldwide.
Its investment firms are:
Pacific Investment Management Company LLC/
Newport Beach, California
Oppenheimer Capital/New York, New York
Cadence Capital Management/Boston, Massachusetts
NFJ Investment Group/Dallas, Texas
Parametric Portfolio Associates/Seattle, Washington
PIMCO Equity Advisors/New York, New York,
a division of PIMCO Advisors L.P.
PIMCO/Allianz International Advisors LLC/
New York, New York
--------------------------------------------------------------------------------
Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of
the outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO
Advisors"), of which PIMCO is a subsidiary partnership. As a result of this
transaction, PIMCO Advisors, and its subsidiaries, are now controlled by
Allianz AG, a leading provider of financial services, particularly in Europe.
PIMCO remains operationally independent, continues to operate under its
existing name, and now leads the global fixed income investment efforts of
Allianz AG. Key employees at each of PIMCO Advisors' investment units,
including PIMCO's Bill Gross, have signed long-term employment contracts and
have significant profit-sharing and retention arrangements to ensure
continuity of the investment process and staff. With the addition of PIMCO
Advisors, the Allianz Group manages assets of approximately $650 billion,
including more than 300 mutual funds for retail and institutional clients
around the world.
--------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
For the six-month period ended June 30, 2000, the Fund returned 5.85% based on
its NYSE share price, outperforming the broad bond market as measured by the
Lehman Brothers Aggregate Bond Index, which rose 3.99%. Longer-term performance
has been strong, with the Fund posting an 8.31% five-year, annualized return
based on NYSE share price, versus a return of 6.25% for the Index.
The short and long ends of the U.S Treasury market diverged during the first
half of 2000. Short- and intermediate-term yields increased in anticipation of
U.S. Federal Reserve tightening. In marked contrast, the 30-year Treasury yield
fell, as investors grew concerned that the U.S. government's debt buy-back
program would create a scarcity of long-term Treasuries. These changes resulted
in an inverted yield curve.
Confirming market expectations, the Federal Reserve raised the federal funds
rate three times over the past six months to 6.50%, the highest level in nine
years. It was the central bank's sixth rate increase since June 1999. The size
of the latest increase confirmed that the Fed's recent policy of gradual, 0.25%
rate hikes was insufficient to cool an economy that grew by more than 5%
annually in each of the past three quarters. That pace is faster than the Fed
believes is possible without triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices. Nevertheless, the Fed suggested that more tightening
might be needed. Rising energy prices, especially for retail gasoline, were one
reason for concern. Risks posed by economic imbalances such as the tight labor
market, an expanding U.S. trade deficit and high levels of consumer and
corporate debt also remained firmly in place.
In this uncertain economic environment and amid continued Fed tightening, the
Fund maintained an uninterrupted and constant dividend. The monthly dividend per
share has remained steady at $0.09375 with total dividends declared of $0.5625
per share over the six-month period ended June 30, 2000. These dividend pay-outs
equate to an annualized dividend yield of 9.28% based on the Fund's NYSE trading
price as of June 30, 2000.
On the following pages you will find specific details as to the Fund's portfolio
and total return investment performance in light of economic and financial
market activities.
We are optimistic that the remainder of 2000 will be a successful period for
Fund investors. As always, we appreciate the trust you have placed in us, and
welcome your questions and comments regarding the Fund and this semi-annual
report.
Sincerely,
/s/ Brent R. Harris
Brent R. Harris
Chairman of the Board
July 31, 2000
1
SEMI-ANNUAL REPORT
June 30, 2000
<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.
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
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SIX MONTHS IN REVIEW
Economic and Market Review
The short and long ends of the Treasury market diverged during the first quarter
of 2000. Short-term Treasury yields rose in anticipation of more tightening by
the Federal Reserve, with the 3-month Treasury yield increasing 0.57% to end the
quarter at 5.89%. In marked contrast, the 30-year Treasury yield fell 0.64%,
closing the first quarter at 5.84%, as investors grew concerned that the U.S.
government's debt buyback would create a scarcity of long-term Treasuries. An
inverted yield curve resulted, with 30-year Treasuries offering no yield
advantage over their 3-month counterparts.
The market correctly anticipated the Fed's intentions, as the central bank
raised the federal funds rate twice in 0.25% increments during the first quarter
in its continuing effort to temper the high-flying U.S. economy and combat the
prospect of rising inflation. In a press release accompanying the second action,
the Fed suggested that more rate hikes were in the offing because "increases in
demand will continue to exceed the growth in potential supply, which could
foster inflationary imbalances that would undermine the record economic
expansion."
--------------------------------------------------------------------------------
TREASURY YIELD CURVES
--------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
12/31/1999 6/30/2000
<S> <C> <C>
3 Mos. 5.312 5.860
6 Mos. 5.726 6.215
1 Yr. 5.962 6.062
2 Yrs. 6.235 6.358
3 Yrs. 6.289 6.269
5 Yrs. 6.342 6.179
10 Yrs. 6.435 6.023
30 Yrs. 6.479 5.896
</TABLE>
Those "imbalances" included the record U.S. trade deficit, high corporate and
individual debt levels and tight labor markets. Strong equity and housing
markets also represented a potential threat because they created a wealth effect
that fueled consumer demand. Still, actual inflation remained relatively subdued
during the period. While effects of increased energy prices showed up in higher
headline consumer price inflation, the core rate, outside of energy and food
costs, was little changed.
3
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SIX MONTHS IN REVIEW (cont.)
--------------------------------------------------------------------------------
Federal Open Market Committee Federal Funds Rate Changes
--------------------------------------------------------------------------------
Fed Funds Target Rate (%)
[GRAPH]
<TABLE>
<CAPTION>
Fed Funds
Date Target Rate (%)
=====================================
<S> <C>
Start 1994 3.00
4-Feb-94 3.25
22-Mar-94 3.50
18-Apr-94 3.75
17-May-94 4.25
6-Jul-94 4.25
16-Aug-94 4.75
27-Sep-94 4.75
15-Nov-94 5.50
20-Dec-94 5.50
1-Feb-95 6.00
28-Mar-95 6.00
23-May-95 6.00
6-Jul-95 5.75
22-Aug-95 5.75
26-Sep-95 5.75
15-Nov-95 5.75
19-Dec-95 5.50
31-Jan-96 5.25
26-Mar-96 5.25
21-May-96 5.25
3-Jul-96 5.25
20-Aug-96 5.25
24-Sep-96 5.25
13-Nov-96 5.25
17-Dec-96 5.25
5-Feb-97 5.25
25-Mar-97 5.50
20-May-97 5.50
2-Jul-97 5.50
19-Aug-97 5.50
30-Sep-97 5.50
12-Nov-97 5.50
16-Dec-97 5.50
4-Feb-98 5.50
31-Mar-98 5.50
19-May-98 5.50
30-Jun-98 5.50
18-Aug-98 5.50
29-Sep-98 5.25
15-Oct-98 5.00
17-Nov-98 4.75
22-Dec-98 4.75
3-Feb-99 4.75
30-Mar-99 4.75
18-May-99 4.75
30-Jun-99 5.00
24-Aug-99 5.25
5-Oct-99 5.25
16-Nov-99 5.50
21-Dec-99 5.50
2-Feb-00 5.75
21-Mar-00 6.00
16-May-00 6.50
28-Jun-00 6.50
</TABLE>
During the second quarter, short and intermediate interest rates fell modestly
amid cautious optimism that Federal Reserve tightening was beginning to cool the
economy and contain inflation. Yields declined an average of 0.15% on 1-year,
2-year and 5-year Treasuries over the second quarter. In contrast, the 30-year
Treasury yield increased 0.06%, closing the second quarter at 5.90%. The yield
curve continued to be inverted, with 5-year Treasuries yielding 6.18% and
30-year Treasuries offering only a slight 0.04% yield advantage over 3-month
Treasuries.
The Federal Reserve raised the federal funds rate by 0.50% to 6.50% on May 16,
2000, the highest level in nine years. The size of the increase confirmed that
the central bank's previous policy of gradual, 0.25% rate hikes was insufficient
to cool an economy that grew by more than 5% annually in each of the past three
quarters. That pace is faster than the Fed believes is possible without
triggering an increase in inflation.
The Fed left rates unchanged in late June at their regularly scheduled meeting
amid signs that higher rates were starting to have the desired effect. Economic
reports in April and May showed the first back-to-back declines in retail sales
in two years, falling employment, reduced new home construction and little
change in consumer prices.
4
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Nevertheless, the Fed said, "signs that growth in demand is moving to a
sustainable pace are still tentative and preliminary." The central bank also
warned of "heightened inflation pressures in the foreseeable future," suggesting
that more tightening may be needed. Rising energy prices, especially for retail
gasoline, were one reason for concern. Risks posed by economic imbalances such
as the tight labor market, an expanding U.S. trade deficit and high levels of
consumer and corporate debt also remained firmly in place.
--------------------------------------------------------------------------------
Movements of Core CPI and Core PPI during the Past Two Years
--------------------------------------------------------------------------------
CPI & PPI Y/Y Percent Change (%)
[GRAPH]
Core CPI Core PPI
Jun-98 1.6 -0.7
Jul-98 1.7 -0.2
Aug-98 1.7 -0.8
Sep-98 1.4 -0.9
Oct-98 1.4 -0.7
Nov-98 1.5 -0.6
Dec-98 1.6 0.0
Jan-99 1.7 0.8
Feb-99 1.7 0.5
Mar-99 1.8 0.8
Apr-99 2.3 1.2
May-99 2.1 1.4
Jun-99 2.0 1.5
Jul-99 2.1 1.5
Aug-99 2.3 2.3
Sep-99 2.6 3.1
Oct-99 2.6 2.8
Nov-99 2.6 3.1
Dec-99 2.7 2.9
Jan-00 2.7 2.5
Feb-00 3.2 4.0
Mar-00 3.7 4.5
Apr-00 3.0 3.9
May-00 3.1 3.9
Jun-00 3.7 4.3
--------------------------------------------------------------------------------
Movements of GDP during the Past Two Years
--------------------------------------------------------------------------------
Annualized Quarterly Percent Change (%)
[GRAPH]
Jun-1998 2.2%
Sep-1998 3.8%
Dec-1998 5.9%
Mar-1999 3.7%
Jun-1999 1.9%
Sep-1999 5.7%
Dec-1999 7.3%
Mar-2000 5.5%
Jun-2000 1.3%
5
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SIX MONTHS IN REVIEW (cont.)
Performance
For the six-month period ended June 30, 2000, the Fund delivered a total return
investment performance of 3.61% based on net asset value and a 5.85% return
based on its NYSE share price. The Fund's total return based on NYSE share price
outperformed the 3.99% return of the Lehman Brothers Aggregate Bond Index over
the fiscal period. Fund performance was helped when the Moody's and Fitch IBCA,
two national rating agencies, upgraded several of the Fund's holdings.
--------------------------------------------------------------------------------
Growth of $10,000 Net Investment in the Fund
--------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
Month Net Asset NYSE Lehman Brothers
Value Market Value Aggregate Bond Index
<S> <C> <C> <C>
08/31/1993 10,000 10,000 10,000
09/30/1993 9,993 10,000 10,027
10/31/1993 10,014 10,484 10,065
11/30/1993 10,022 9,767 9,979
12/31/1993 10,043 9,946 10,033
01/31/1994 10,131 9,672 10,169
02/28/1994 9,970 9,399 9,992
03/31/1994 9,898 9,422 9,746
04/30/1994 9,786 8,955 9,668
05/31/1994 9,853 9,328 9,667
06/30/1994 9,802 9,165 9,645
07/31/1994 9,893 9,260 9,837
08/31/1994 10,023 9,547 9,849
09/30/1994 9,916 9,666 9,704
10/31/1994 9,803 8,983 9,695
11/30/1994 9,780 8,690 9,674
12/31/1994 9,882 8,910 9,741
01/31/1995 10,068 9,285 9,934
02/28/1995 10,408 9,663 10,170
03/31/1995 10,516 9,740 10,232
04/30/1995 10,739 10,124 10,375
05/31/1995 11,143 10,408 10,777
06/30/1995 11,246 10,799 10,856
07/31/1995 11,166 10,668 10,831
08/31/1995 11,286 10,852 10,962
09/30/1995 11,407 10,400 11,069
10/31/1995 11,631 10,802 11,213
11/30/1995 11,771 10,775 11,381
12/31/1995 11,989 10,857 11,540
01/31/1996 12,122 11,378 11,617
02/29/1996 11,943 11,682 11,415
03/31/1996 11,797 11,376 11,336
04/30/1996 11,844 11,179 11,272
05/31/1996 11,856 11,038 11,249
06/30/1996 11,931 11,124 11,400
07/31/1996 12,134 11,714 11,431
08/31/1996 12,219 11,917 11,412
09/30/1996 12,379 11,771 11,611
10/31/1996 12,697 12,154 11,868
11/30/1996 12,990 12,421 12,072
12/31/1996 13,003 12,438 11,959
01/31/1997 12,968 12,771 11,996
02/28/1997 13,144 12,618 12,026
03/31/1997 13,099 12,894 11,892
04/30/1997 13,287 13,048 12,070
05/31/1997 13,554 13,142 12,185
06/30/1997 13,695 13,799 12,329
07/31/1997 14,024 13,956 12,662
08/31/1997 13,939 14,051 12,554
09/30/1997 14,193 14,083 12,739
10/31/1997 14,297 14,051 12,924
11/30/1997 14,342 14,472 12,983
12/31/1997 14,468 14,479 13,114
01/31/1998 14,607 14,644 13,282
02/28/1998 14,694 15,010 13,272
03/31/1998 14,740 14,909 13,318
04/30/1998 14,723 14,943 13,387
05/31/1998 14,971 14,705 13,514
06/30/1998 15,265 14,876 13,629
07/31/1998 15,387 15,324 13,658
08/31/1998 15,380 15,359 13,880
09/30/1998 15,559 15,114 14,205
10/31/1998 15,475 14,939 14,130
11/30/1998 15,480 15,186 14,210
12/31/1998 15,528 15,907 14,253
01/31/1999 15,668 15,943 14,355
02/28/1999 15,559 15,688 14,104
03/31/1999 15,712 15,505 14,182
04/30/1999 15,832 15,542 14,227
05/31/1999 15,790 15,727 14,103
06/30/1999 15,654 16,439 14,058
07/31/1999 15,776 16,100 13,998
08/31/1999 15,840 15,910 13,991
09/30/1999 15,808 15,566 14,153
10/31/1999 15,753 15,681 14,205
11/30/1999 15,878 14,788 14,204
12/31/1999 15,907 15,203 14,136
01/31/2000 15,862 15,084 14,090
02/29/2000 15,954 15,204 14,260
03/31/2000 16,159 16,049 14,448
04/30/2000 16,214 16,170 14,407
05/31/2000 15,990 15,558 14,400
06/30/2000 16,482 16,093 14,699
</TABLE>
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 June 30, 2000, 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 Fund's NYSE Market Value performance does not reflect
the effect of sales loads or broker commissions. The performance data quoted
represents past performance. Investment return and share value will fluctuate so
that Fund shares, when sold, may be worth more or less than their original cost.
--------------------------------------------------------------------------------
Investment Performance for the Periods Ended 6/30/2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Since
6 Month Inception
Period 1 Year 3 Years* 5 Years* 9/2/93*
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fund Net Asset Value 3.61% 5.29% 6.37% 7.95% 7.59%
Fund NYSE Market Value 5.85% -2.11% 5.26% 8.31% 7.21%
Lehman Brothers
Aggregate Bond Index 3.99% 4.56% 6.04% 6.25% N/A
</TABLE>
* Average annual total return
6
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Share price performance was significantly boosted over the first quarter as the
Fund's trading discount to its net asset value narrowed from (6.90)% to (3.40)%.
However, during the second quarter the trend reversed [(3.40)% to (5.13)%] and a
widening discount caused the Fund's NYSE share price performance to lag. Towards
the end of the six-month period, the discount to net asset value temporarily
spiked to more than 10% in early June as concerns about potential inflation
permeated the marketplace.
--------------------------------------------------------------------------------
Premium/(Discount) to Net Asset Value
--------------------------------------------------------------------------------
[GRAPH]
06/25/1998 -4.25%
07/02/1998 -3.44%
07/09/1998 -3.95%
07/16/1998 -3.07%
07/23/1998 -2.84%
07/30/1998 -2.08%
08/06/1998 -3.24%
08/13/1998 -3.74%
08/20/1998 -4.32%
08/27/1998 -1.39%
09/03/1998 -2.18%
09/10/1998 -3.47%
09/17/1998 -3.54%
09/24/1998 -5.57%
10/01/1998 -3.85%
10/08/1998 -12.43%
10/15/1998 -8.68%
10/22/1998 -6.00%
10/29/1998 -5.60%
11/05/1998 -3.81%
11/12/1998 -4.33%
11/19/1998 -4.36%
11/27/1998 -3.88%
12/03/1998 -3.92%
12/10/1998 -3.09%
12/17/1998 -3.74%
12/24/1998 -2.54%
12/31/1998 0.15%
01/07/1999 -2.27%
01/14/1999 -0.82%
01/21/1999 -1.41%
01/28/1999 -0.98%
02/04/1999 -0.22%
02/11/1999 -0.91%
02/18/1999 -2.06%
02/25/1999 -1.44%
03/04/1999 -2.21%
03/11/1999 -0.81%
03/18/1999 -0.86%
03/25/1999 -0.55%
04/01/1999 -2.65%
04/08/1999 -2.09%
04/15/1999 -3.60%
04/22/1999 -3.60%
04/29/1999 -3.95%
05/06/1999 -3.88%
05/13/1999 -3.88%
05/20/1999 -4.06%
05/27/1999 -2.24%
06/03/1999 -1.73%
06/10/1999 -0.02%
06/17/1999 -0.19%
06/24/1999 1.05%
07/01/1999 1.35%
07/08/1999 3.55%
07/15/1999 -0.65%
07/22/1999 -1.88%
07/29/1999 -0.77%
08/05/1999 0.15%
08/12/1999 -1.84%
08/19/1999 -1.56%
08/26/1999 -1.61%
09/02/1999 -1.54%
09/09/1999 -0.97%
09/16/1999 -2.21%
09/23/1999 -3.85%
09/30/1999 -3.92%
10/07/1999 -5.61%
10/16/1999 -6.56%
10/21/1999 -7.65%
10/28/1999 -3.70%
11/04/1999 -5.94%
11/11/1999 -5.13%
11/18/1999 -6.01%
11/24/1999 -8.80%
12/02/1999 -9.27%
12/09/1999 -11.54%
12/16/1999 -11.19%
12/23/1999 -12.02%
12/30/1999 -7.76%
01/06/2000 -6.13%
01/13/2000 -4.86%
01/20/2000 -6.81%
01/27/2000 -7.02%
02/03/2000 -7.64%
02/10/2000 -4.98%
02/17/2000 -1.78%
02/24/2000 -6.40%
03/02/2000 -8.69%
03/09/2000 -8.48%
03/16/2000 -8.49%
03/23/2000 -7.46%
03/30/2000 -5.67%
04/06/2000 -7.34%
04/13/2000 -5.79%
04/20/2000 -4.82%
04/27/2000 -5.88%
05/04/2000 -6.47%
05/11/2000 -9.15%
05/18/2000 -6.15%
05/22/2000 -6.03%
06/01/2000 -5.90%
06/08/2000 -13.10%
06/15/2000 -5.20%
06/22/2000 -3.88%
06/29/2000 -4.07%
06/30/2000 -5.13%
7
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SIX MONTHS IN REVIEW (cont.)
Credit Spreads
Treasuries generally outperformed other fixed income sectors during the first
quarter. During this period, yields on mortgages and corporate bonds did not
fall in line with long-term Treasuries, which caused yield premiums on
non-Treasury bonds to widen. Falling 10- and 30-year Treasury yields and concern
about credit deterioration in the midst of Fed tightening lured investors away
from other bond market sectors. Yield spreads between CMBS and 10-year
Treasuries increased over the first quarter with spreads on AAA-rated CMBS
widening 0.44% and spreads on A-rated CMBS increasing 0.35%.
During the second quarter, Treasuries and agency mortgages outperformed as
investors continued to favor securities with superior credit quality. Yield
spreads between CMBS and 10-year Treasuries leveled-off over the second quarter
with spreads on both AAA-rated and A-rated CMBS remaining around 1.63% and
1.96%, respectively.
--------------------------------------------------------------------------------
Comparative Changes in Yield Spreads Over 10-Year Treasuries*
--------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
AAA - A - AAA - A -
Rated CMBS Rated CMBS Rated Rated
Corporates Corporates
<S> <C> <C> <C> <C>
12/31/1996 70 95 35 55
3/31/1997 65 85 39 57
6/30/1997 63 75 35 48
9/30/1997 63 78 35 58
12/31/1997 78 105 47 57
3/31/1998 80 105 55 80
6/30/1998 85 110 56 84
9/30/1998 145 190 65 119
12/31/1998 136 186 62 107
3/31/1999 122 150 68 99
6/30/1999 123 158 85 123
9/30/1999 142 190 78 119
12/31/1999 120 160 67 115
3/31/2000 164 195 115 153
6/30/2000 163 196 109 149
*7 to 10 year U.S. Treasury Bonds as of June 30, 2000
</TABLE>
8
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Quality Ratings
Throughout the six-month period, the portfolio's average quality has remained
firmly anchored around a BBB rating. We regularly scrutinize and evaluate every
portfolio holding in an effort to assure that each security retains healthy
characteristics and that each remains a viable holding in relation to the
portfolio. We also focus our security selection process on the potential that a
particular bond may be upgraded in the future. As highlighted below, this
strategy was rewarded over the course of the six-month period.
--------------------------------------------------------------------------------
Upgraded Securities during the Past Six Months
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
New Prior Rating % of Net
Security Description Rating Rating Service Assets
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Structured Asset Securities Corp.
7.750% due 02/25/2028 A+ BBB+ Fitch 2.7%
Structured Asset Securities Corp.
7.201% due 04/25/2003 Baa2 Ba1 Moody's 1.7%
First Boston Mortgage Securities Corp.
7.182% due 01/25/2028 BBB B+ Fitch 0.9%
Hotel First
8.520% due 08/05/2008 AA+ AA Fitch 1.8%
-------
7.1%
</TABLE>
--------------------------------------------------------------------------------
Portfolio Composition
By Quality Rating*
--------------------------------------------------------------------------------
[GRAPH]
AAA 14.4%
AA 9.6%
A 9.9%
BBB 35.0%
BB 23.3%
B 7.8%
* As rated by Standard & Poor's or the equivalent by Moody's, Duff & Phelps or
Fitch IBCA
Geographic Distribution
The geographic distribution of the Fund's investment portfolio did not change
significantly over the six-month period ended June 30, 2000. While loans on
properties in nearly every state are held in the portfolio, the three largest
contributors, California, Texas and Florida remained unchanged. This is
consistent with the Fund's low turnover rate that limits significant shifts in
portfolio composition. It also reflects the overall diversity of CMBS issuance,
which is closely linked to commercial development.
9
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SIX MONTHS IN REVIEW (cont.)
Sector Allocations
The Fund features its greatest sector concentrations in multi-class and
multi-family CMBS. Multi-class CMBS provides diversification benefits and
multi-family CMBS is selected due to the traditional and stable nature of the
property type. Over the past several years, real estate fundamentals have
remained solid with all sectors performing relatively well. We do not see any
major change in the near term, however, we will continue to monitor the
portfolio with regards to changes in the real estate market and make adjustments
when appropriate.
--------------------------------------------------------------------------------
Portfolio Composition
By Commercial Mortgage Type
--------------------------------------------------------------------------------
[GRAPH]
Multi-Class* 36.3%
Multi-Family 25.3%
Healthcare 15.8%
Hospitality 8.9%
Real Estate
Asset-Backed Securities 7.5%
Corporate Bonds 5.0%
Other 1.2%
* A mix of all types of commercial properties
Secular Outlook
PIMCO's secular outlook is bullish based on expectations of a slowing U.S.
economy, leading to U.S. and global growth of 3% over the next couple of years.
This deceleration will gradually lower interest rates on high quality bonds by
capping inflation near 3% in the U.S. and 2% in Europe.
The U.S. expansion will slow amid a correction of unsustainable imbalances such
as the shrinking pool of available labor and a swelling trade deficit financed
with a large share of the world's savings. Restrictive policies by central
bankers worldwide, in contrast to liquidity infusions of the past few years,
will also inhibit growth.
There is a greater than 50% chance that the global economy will dip into a
recession over the secular horizon. Five forces could produce this outcome:
Central Bank Overreach: The Fed and other central banks could tighten too much
for too long. Monetary authorities may be forced to sustain restrictive policies
to deflate bubbles in housing and stock markets that stimulate consumption and,
ultimately, inflation.
Emerging Market Contagion: Emerging economies are stronger than two years ago,
with higher currency reserves, less short-term debt and financial reforms under
way. Even so, countries with fixed currency regimes remain vulnerable to rising
interest rates brought on by central bank tightening.
10
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
Japanese Economic Drag: Large fiscal deficits and tentative economic and
political reforms could undermine confidence in Japan, pushing interest rates
higher and depressing the already sluggish Japanese economy. Further weakness in
Japan, the economic center of Asia, would reverberate elsewhere.
The U.S. Equity Bubble: Rising stock markets have recently generated wealth
gains that fueled consumer and investment spending. With equity markets now off
their peaks, consumption and investment could follow.
Flight From The Dollar: A falling dollar due to the rising U.S. trade deficit or
lower stock prices would unsettle bond markets worldwide. Investors would flee
to safe havens in local markets, driving up yields on riskier assets and curbing
growth.
In contrast with recent financial crises, investors will not be able to count on
rescue by the Fed or the International Monetary Fund in the event of a slowdown
and/or recession. Fed Chairman Greenspan has said he "would anticipate
appropriate discounts or `haircuts' for other than federally guaranteed
liabilities" if borrowers get into trouble. In other words, investors will be
"bailed in" instead of "bailed out." This absence of support will increase risk
and raise the cost of capital for all but AAA-rated sovereign borrowers.
--------------------------------------------------------------------------------
30 Year and 3 Month Treasury Yields
--------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
Month 3 -Month 30 - Year
Treasury Bill Treasury Bill
<S> <C> <C>
Jun-1980 6.995 9.810
Jul-1980 8.126 10.240
Aug-1980 9.259 11.000
Sep-1980 10.321 11.340
Oct-1980 11.580 11.590
Nov-1980 13.888 12.370
Dec-1980 15.661 11.980
Jan-1981 14.724 12.280
Feb-1981 14.905 12.970
Mar-1981 13.478 12.650
Apr-1981 13.635 13.650
May-1981 16.295 13.060
Jun-1981 14.557 13.300
Jul-1981 14.699 13.960
Aug-1981 15.612 14.780
Sep-1981 14.951 15.190
Oct-1981 13.873 14.360
Nov-1981 11.269 12.910
Dec-1981 10.926 13.650
Jan-1982 12.412 13.910
Feb-1982 13.780 13.830
Mar-1982 12.493 13.680
Apr-1982 12.821 13.390
May-1982 12.148 13.390
Jun-1982 12.108 13.910
Jul-1982 11.914 13.420
Aug-1982 9.006 12.500
Sep-1982 8.196 11.790
Oct-1982 7.750 11.010
Nov-1982 8.042 10.700
Dec-1982 8.013 10.430
Jan-1983 7.810 10.990
Feb-1983 8.130 10.510
Mar-1983 8.304 10.690
Apr-1983 8.252 10.380
May-1983 8.185 10.960
Jun-1983 8.820 10.980
Jul-1983 9.120 11.820
Aug-1983 9.390 11.930
Sep-1983 9.050 11.410
Oct-1983 8.710 11.790
Nov-1983 8.710 11.640
Dec-1983 8.960 11.870
Jan-1984 8.930 11.750
Feb-1984 9.030 12.170
Mar-1984 9.440 12.480
Apr-1984 9.690 12.840
May-1984 9.900 13.740
Jun-1984 9.940 13.640
Jul-1984 10.130 12.770
Aug-1984 10.490 12.510
Sep-1984 10.410 12.250
Oct-1984 9.970 11.560
Nov-1984 8.790 11.530
Dec-1984 8.160 11.530
Jan-1985 7.760 11.210
Feb-1985 8.220 11.880
Mar-1985 8.570 11.640
Apr-1985 8.000 11.460
May-1985 7.560 10.560
Jun-1985 7.010 10.440
Jul-1985 7.050 10.660
Aug-1985 7.180 10.470
Sep-1985 7.080 10.560
Oct-1985 7.170 10.250
Nov-1985 7.200 9.840
Dec-1985 7.070 9.270
Jan-1986 7.040 9.320
Feb-1986 7.030 8.280
Mar-1986 6.590 7.440
Apr-1986 6.060 7.450
May-1986 6.120 7.750
Jun-1986 6.210 7.230
Jul-1986 5.840 7.420
Aug-1986 5.570 7.200
Sep-1986 5.190 7.590
Oct-1986 5.180 7.610
Nov-1986 5.350 7.400
Dec-1986 5.490 7.490
Jan-1987 5.450 7.470
Feb-1987 5.590 7.460
Mar-1987 5.560 7.910
Apr-1987 5.760 8.440
May-1987 5.750 8.640
Jun-1987 5.690 8.490
Jul-1987 5.780 8.900
Aug-1987 6.000 9.150
Sep-1987 6.320 9.740
Oct-1987 6.400 9.030
Nov-1987 5.810 9.100
Dec-1987 5.800 8.980
Jan-1988 5.900 8.420
Feb-1988 5.690 8.340
Mar-1988 5.690 8.760
Apr-1988 5.920 9.100
May-1988 6.270 9.240
Jun-1988 6.500 8.910
Jul-1988 6.730 9.210
Aug-1988 7.020 9.300
Sep-1988 7.230 9.050
Oct-1988 7.340 8.740
Nov-1988 7.680 9.070
Dec-1988 8.090 8.990
Jan-1989 8.290 8.820
Feb-1989 8.480 9.110
Mar-1989 8.830 9.090
Apr-1989 8.700 8.930
May-1989 8.400 8.600
Jun-1989 8.220 8.040
Jul-1989 7.920 7.920
Aug-1989 7.910 8.200
Sep-1989 7.720 8.240
Oct-1989 7.590 7.910
Nov-1989 7.650 7.890
Dec-1989 7.640 7.980
Jan-1990 7.640 8.450
Feb-1990 7.760 8.540
Mar-1990 7.870 8.630
Apr-1990 7.780 8.990
May-1990 7.780 8.580
Jun-1990 7.740 8.400
Jul-1990 7.660 8.410
Aug-1990 7.440 8.980
Sep-1990 7.380 8.950
Oct-1990 7.190 8.760
Nov-1990 7.070 8.490
Dec-1990 6.810 8.250
Jan-1991 6.300 8.200
Feb-1991 5.950 8.200
Mar-1991 5.910 8.250
Apr-1991 5.670 8.180
May-1991 5.510 8.270
Jun-1991 5.600 8.410
Jul-1991 5.580 8.340
Aug-1991 5.390 8.060
Sep-1991 5.250 7.810
Oct-1991 5.030 7.910
Nov-1991 4.600 7.940
Dec-1991 4.120 7.400
Jan-1992 3.800 7.760
Feb-1992 3.840 7.790
Mar-1992 4.040 7.960
Apr-1992 3.750 8.040
May-1992 3.630 7.840
Jun-1992 3.660 7.780
Jul-1992 3.210 7.460
Aug-1992 3.130 7.410
Sep-1992 2.910 7.380
Oct-1992 2.860 7.630
Nov-1992 3.130 7.600
Dec-1992 3.220 7.400
Jan-1993 3.060 7.200
Feb-1993 2.930 6.900
Mar-1993 2.950 6.930
Apr-1993 2.870 6.930
May-1993 2.960 6.980
Jun-1993 3.070 6.670
Jul-1993 3.040 6.560
Aug-1993 3.020 6.090
Sep-1993 2.950 6.030
Oct-1993 3.020 5.970
Nov-1993 3.100 6.300
Dec-1993 3.060 6.350
Jan-1994 2.980 6.240
Feb-1994 3.250 6.660
Mar-1994 3.500 7.090
Apr-1994 3.680 7.310
May-1994 4.140 7.430
Jun-1994 4.140 7.610
Jul-1994 4.330 7.400
Aug-1994 4.480 7.450
Sep-1994 4.760 7.820
Oct-1994 4.950 7.970
Nov-1994 5.290 8.000
Dec-1994 5.600 7.880
Jan-1995 5.710 7.700
Feb-1995 5.770 7.440
Mar-1995 5.730 7.430
Apr-1995 5.650 7.340
May-1995 5.670 6.650
Jun-1995 5.470 6.620
Jul-1995 5.420 6.850
Aug-1995 5.400 6.650
Sep-1995 5.280 6.500
Oct-1995 5.490 6.330
Nov-1995 5.470 6.130
Dec-1995 5.080 5.950
Jan-1996 5.050 6.030
Feb-1996 5.030 6.470
Mar-1996 5.140 6.670
Apr-1996 5.150 6.910
May-1996 5.180 6.990
Jun-1996 5.160 6.870
Jul-1996 5.310 6.970
Aug-1996 5.280 7.120
Sep-1996 5.030 6.920
Oct-1996 5.150 6.640
Nov-1996 5.130 6.350
Dec-1996 5.170 6.640
Jan-1997 5.150 6.790
Feb-1997 5.220 6.800
Mar-1997 5.320 7.100
Apr-1997 5.230 7.140
May-1997 4.940 6.910
Jun-1997 5.170 6.740
Jul-1997 5.230 6.450
Aug-1997 5.220 6.610
Sep-1997 5.100 6.400
Oct-1997 5.200 6.150
Nov-1997 5.200 6.050
Dec-1997 5.350 5.920
Jan-1998 5.183 5.805
Feb-1998 5.308 5.919
Mar-1998 5.125 5.932
Apr-1998 4.978 5.951
May-1998 5.007 5.803
Jun-1998 5.093 5.626
Jul-1998 5.080 5.714
Aug-1998 4.830 5.256
Sep-1998 4.356 4.965
Oct-1998 4.323 5.150
Nov-1998 4.488 5.072
Dec-1998 4.457 5.092
Jan-1999 4.457 5.091
Feb-1999 4.664 5.575
Mar-1999 4.470 5.621
Apr-1999 4.530 5.661
May-1999 5.007 5.803
Jun-1999 4.763 5.969
Jul-1999 4.740 6.103
Aug-1999 4.961 6.067
Sep-1999 4.846 6.053
Oct-1999 5.083 6.161
Nov-1999 5.295 6.289
Dec-1999 5.312 6.479
Jan-2000 5.687 6.492
Feb-2000 5.776 6.146
Mar-2000 5.886 5.837
Apr-2000 5.813 5.963
May-2000 5.613 6.013
Jun-2000 5.860 5.896
</TABLE>
Cyclical Outlook
While the Fed's tightening cycle is almost over, monetary policy will remain
restrictive until a slowdown is confirmed. Fed tightening will continue until
growth slows to a pace that is sustainable without fueling inflation. Given the
direction of Fed policy and higher levels of risk for non-sovereign debt,
protecting principal will be the key to earning superior relative returns.
11
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------------------
For the six months For the year ended For the year ended
ended June 30, 2000 December 31, 1999 December 31, 1998
(Unaudited)
-------------------------------------------------------------
<S> <C> <C> <C>
Selected Per Share Data:
Net asset value, beginning of period $ 12.89 $ 13.74 $ 13.97
Net investment income 0.58 1.08 1.24
Net realized and unrealized gain (loss) on investments (0.13) (0.75) (0.25)
Total from investment operations 0.45 0.33 0.99
Less dividends from net investment income (0.56) (1.18) (1.22)
Net asset value, end of period $ 12.78 $ 12.89 $ 13.74
---------- ---------- ----------
Per share market value, end of period $ 12.13 $ 12.00 $ 13.75
---------- ---------- ----------
Total investment return
Per share market value (a) 5.85% (4.42)% 9.86%
Per share net asset value (b) 3.61% 2.44% 7.33%
Ratios to average net assets
Operating expenses (excluding interest expense) 1.02%* 1.01% 0.99%
Total operating expenses 3.95%* 3.16% 3.61%
Net investment income 9.08%* 7.97% 8.81%
Supplemental data
Net assets, end of period (amounts in thousands) $ 140,690 $ 141,860 $ 151,222
Amount of borrowings outstanding,
end of period (in thousands) $ 66,382 $ 52,233 $ 59,990
Asset coverage ratio (c) 312% 372% 352%
Portfolio turnover rate 9.18% 1.86% 7.92%
<CAPTION>
------------------------------------------------------------
For the year ended For the year ended For the year ended
December 31, 1997 December 31, 1996 December 31, 1995
------------------------------------------------------------
<S> <C> <C> <C>
Selected Per Share Data:
Net asset value, beginning of period $ 13.71 $ 13.84 $ 12.41
Net investment income 1.20 1.23 1.16
Net realized and unrealized gain (loss) on investments 0.29 (0.13) 1.40
Total from investment operations 1.49 1.10 2.56
Less dividends from net investment income (1.23) (1.23) (1.13)
Net asset value, end of period $ 13.97 $ 13.71 $ 13.84
---------- ---------- ----------
Per share market value, end of period $ 13.69 $ 12.88 $ 12.38
---------- ---------- ----------
Total investment return
Per share market value (a) 16.40% 14.57% 21.86%
Per share net asset value (b) 11.27% 8.45% 21.33%
Ratios to average net assets
Operating expenses (excluding interest expense) 0.97% 0.99% 1.04%
Total operating expenses 3.69% 3.60% 3.94%
Net investment income 8.63% 9.08% 8.93%
Supplemental data
Net assets, end of period (amounts in thousands) $ 153,803 $ 150,929 $ 152,375
Amount of borrowings outstanding,
end of period (in thousands) $ 74,688 $ 69,850 $ 67,134
Asset coverage ratio (c) 306% 316% 327%
Portfolio turnover rate 8.74% 35.98% 47.79%
</TABLE>
* Annualized
(a) 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.
(b) 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.
(c) Represents net assets, plus borrowings, at end of period divided by
borrowings outstanding at end of period.
12
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
-------------
Amounts in thousands, except per share amounts June 30, 2000
(Unaudited)
-------------
Assets:
Investments in securities, at market value
(Identified cost: $215,365) $ 206,319
Cash 0
Interest receivable 2,428
Paydown receivable 532
Receivable for investment sold 263
Other assets 86
---------
Total assets $ 209,628
---------
Liabilities:
Reverse repurchase agreements $ 66,382
Payable for investments purchased 663
Dividends payable 1,032
Accrued investment manager's fee 253
Accrued administrator's fee 35
Accrued trustees' fee 52
Written options 180
Other liabilities 341
Total liabilities $ 68,938
---------
Net assets applicable to outstanding stock $ 140,690
---------
Net Assets consist of:
Capital stock - authorized 300 million shares,
$.001 par value; outstanding 11,009,587 shares $ 11
Additional paid-in capital 152,271
Accumulated net investment loss (678)
Accumulated net realized loss from investments (1,951)
Net unrealized depreciation of investments (8,963)
$ 140,690
---------
Net asset value per share outstanding $ 12.78
---------
STATEMENT OF OPERATIONS
-------------------
For the six months
ended June 30, 2000
Amounts in thousands (Unaudited)
-------------------
Interest income $ 9,090
---------
Expenses:
Interest expense 2,043
Investment manager fee 507
Administration fee 70
Custodian and portfolio accounting fee 37
Directors' fee 33
Proxy expense 9
Legal fee 3
Audit fee 7
Other expenses 49
Total expenses 2,758
---------
Net investment income $ 6,332
---------
Net realized and unrealized loss
Net realized loss on investments (996)
Unrealized depreciation on investments (312)
Net loss on investments $ (1,308)
---------
Net increase in assets resulting from operations $ 5,024
---------
13
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
----------------------------------------
For the six months For the year ended
Amounts in thousands ended June 30, 2000 December 31, 1999
(Unaudited)
----------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations
Net investment income $ 6,332 $ 11,781
Net realized gain (loss) on investments (996) 66
Unrealized (depreciation) on investments (312) (8,307)
Net increase resulting from operations 5,024 3,540
Distributions to Shareholders from:
From net investment income (6,194) (12,934)
Fund Share Transactions:
Issued as reinvestment of distributions (0 and 2,418 shares, respectively) 0 32
-------- ---------
Total Decrease in Net Assets (1,170) (9,362)
-------- ---------
Net Assets
Beginning of period 141,860 151,222
End of period * $ 140,690 $ 141,860
*Including accumulated net investment loss of: $ (678) $ (817)
<CAPTION>
STATEMENT OF CASH FLOWS
--------------------
For the six months
Amounts in thousands ended June 30, 2000
(Unaudited)
--------------------
<S> <C>
Net increase in net assets resulting from operations $ 6,332
---------
Adjustments to reconcile to net cash provided from operating activities:
Increase in interest receivable (248)
Amortization of premium and discount, net (548)
Increase in accrued expenses 430
Increase in other assets (86)
Net loss on investments 996
Total adjustments 544
Net cash provided from operating activities 6,876
Investing activities:
Purchase of long-term portfolio investments 47,502)
Proceeds from disposition of long-term portfolio investments 23,163
Proceeds from disposition of short-term portfolio investments, net 9,892
Net cash used in investing activities (14,447)
Financing activities*:
Cash dividends paid (6,743)
Net increase in reverse repurchase agreements 14,149
Net cash provided by financing activities 7,406
Net decrease in cash: (165)
Cash at beginning of period 165
---------
Cash at end of period $ 0
---------
</TABLE>
* Cash paid for interest for the six months ended June 30, 2000, amounted to
$2,217.
14
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SCHEDULE OF INVESTMENTS
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
COMMERCIAL MORTGAGE-BACKED SECURITIES 128.3%
--------------------------------------------------------------------------------
Multi-Class 53.3%
Aetna Commercial Trust
7.100% due 12/26/2030 $ 1,000 $ 970
Airplanes Pass Through Trust
10.875% due 03/15/2019 1,975 1,784
Asset Securitization Corp.
7.384% due 08/13/2029 1,500 1,399
Blackrock Capital Financial
8.480% due 10/25/2026 (e) 3,000 2,319
CBA Mortgage Corp.
6.670% due 12/25/2003 (b) 415 387
Commercial Mortgage Acceptance
6.942% due 11/15/2009 1,500 1,350
Federal Deposit Insurance Corp.
7.860% due 11/25/2026 (b)(d) 1,260 1,260
First Boston Mortgage Securities Corp.
7.182% due 01/25/2028 (b)(e) 1,299 1,229
First Chicago Lennar Trust
8.090% due 04/29/2006 (e) 5,000 4,650
Forest City Enterprises
8.500% due 03/15/2008 4,000 3,640
General Electric Capital Mortgage Services, Inc.
7.250% due 08/25/2029 (d) 2,768 2,545
General Motors Acceptance Corp.
7.080% due 05/15/2030 (b) 1,500 1,059
GMAC Commercial Mortgage Securities, Inc.
6.500% due 03/15/2012 2,000 1,659
Green Tree Financial Corp.
8.000% due 07/15/2018 (d) 3,087 2,709
7.510% due 07/15/2028 4,000 3,543
J.P. Morgan Commercial Mortgage Finance Corp.
8.540% due 11/25/2027 (e) 2,284 1,946
Keystone Owner Trust
8.500% due 01/25/2029 (e) 5,000 2,942
Merrill Lynch Mortgage
7.120% due 06/18/2029 2,000 1,781
7.427% due 06/15/2021 (b) 627 609
Morgan Stanley Capital
8.112% due 02/15/2005 (b)(e) 2,000 1,993
7.695% due 10/03/2030 (e) 2,000 1,670
6.850% due 02/15/2020 (e) 1,000 747
Mortgage Capital Funding, Inc.
7.531% due 04/20/2007 1,000 950
Nationslink Funding Corp.
7.050% due 02/20/2008 (e) 2,000 1,518
7.105% due 01/20/2013 (e) 2,500 1,873
7.100% due 01/20/2009 (d) 2,000 1,825
7.648% due 01/20/2009 (d) 2,500 2,434
NB Commercial Mortgage
8.031% due 10/20/2023 (e) 188 188
8.730% due 10/20/2023 (e) 1,000 1,001
Nomura Asset Securities Corp.
9.917% due 09/11/2019 (b) 3,000 3,127
Prudential Securities Secured Financing Corp.
7.610% due 12/26/2022 1,000 930
6.755% due 08/15/2011 (e) 1,989 1,434
Resolution Trust Corp.
6.900% due 02/25/2027 (b) 1,487 1,365
8.000% due 04/25/2025 (d) 962 937
9.450% due 05/25/2024 1,161 1,148
8.835% due 12/25/2023 (d) 1,600 1,601
7.000% due 05/25/2027 1,759 1,681
8.000% due 06/25/2026 2,098 2,070
Saco I, Inc.
7.702% due 03/01/2030 (e) 2,501 2,292
Salomon Brothers Mortgage Securities VII
7.500% due 05/25/2026 239 212
Structured Asset Securities Corp.
7.201% due 04/25/2003 (b)(e) 2,500 2,357
7.750% due 02/25/2028 (d) 3,841 3,788
-------
74,922
Multi-Family 37.1%
Aames Mortgage Trust
7.821% due 06/15/2028 2,000 1,853
Chase Commercial Mortgage Securities Corp.
6.900% due 11/19/2006 (e) 1,500 1,340
6.900% due 11/19/2028 5,500 4,508
Donaldson, Lufkin & Jenrette
7.350% due 12/18/2003 (d) 3,000 2,940
Federal Housing Administration
8.360% due 01/01/2012 867 857
6.430% due 12/01/2019 2,603 2,535
6.875% due 11/01/2023 1,921 1,741
8.250% due 02/01/2028 2,544 2,506
7.500% due 12/31/2031 1,566 1,437
8.875% due 06/01/2035 5,912 5,679
7.380% due 04/01/2041 676 621
7.380% due 04/01/2041 1,824 1,691
Federal National Mortgage Assn.
7.864% due 12/25/2015 (b)(e) 874 619
7.865% due 12/25/2015 (b)(e) 1,608 1,282
9.375% due 04/01/2016 (d) 1,160 1,186
7.875% due 11/01/2018 247 247
First Boston Mortgage Securities Corp.
7.554% due 09/25/2006 (b) 976 963
Government National Mortgage Assn.
9.500% due 09/15/2030 (d) 4,255 4,282
8.625% due 10/15/2034 (d) 3,439 3,478
ICI Funding Corp. Secured Assets Corp.
7.750% due 03/25/2028 1,014 915
Merrill Lynch Mortgage Investors, Inc.
9.448% due 11/25/2020 (d)(e) 2,500 2,503
Multi-Family Capital Access One, Inc.
7.400% due 01/15/2024 1,591 1,570
Nationsbanc Mortgage Capital
8.048% due 05/25/2028 2,000 1,606
Resolution Trust Corp.
7.407% due 09/25/2020 (b) 167 161
Structured Asset Securities Corp.
7.050% due 11/25/2007 6,000 5,663
-------
52,183
Healthcare 23.1%
Daiwa Mortgage Acceptance Corp.
6.063% due 09/25/2006 510 501
LTC Commercial Corp.
9.200% due 11/28/2012 (e) 1,500 1,486
9.300% due 06/15/2026 (d)(e) 4,000 4,009
Nomura Asset Securities Corp.
6.680% due 12/15/2001 (d)(e) 12,100 11,660
Red Mountain Funding Corp.
8.926% due 01/15/2019 (e) 1,000 515
7.471% due 01/15/2019 (e) 1,000 660
7.072% due 01/15/2019 (e) 2,000 1,590
9.150% due 11/28/2027 (e) 3,200 2,161
SC Commercial
7.050% due 11/28/2013 (d)(e) 5,000 4,967
7.800% due 11/28/2013 (d)(e) 5,000 4,971
-------
32,520
15
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
SCHEDULE OF INVESTMENTS (CONT.)
Principal
Amount Value
(000s) (000s)
--------------------------------------------------------------------------------
Hospitality 13.0%
Cooper Hotel
7.500% due 07/15/2013 (d)(e) $ 7,445 $ 7,295
Franchise Mortgage Acceptance Corp.
7.981% due 11/15/2018 (e) 2,300 1,886
German American Capital Corp.
8.535% due 10/10/2002 (e) 2,000 1,921
Host Marriott Pool Trust
8.310% due 08/03/2009 (e) 2,000 1,973
Hotel First
8.520% due 08/05/2008 (e) 2,583 2,549
J.Q. Hammons Hotels
8.875% due 02/15/2004 450 399
Starwood Commercial Mortgage Trust
6.920% due 02/03/2009 2,500 2,331
---------
18,354
Retail 1.8%
Trizec Finance Ltd.
10.875% due 10/15/2005 2,505 2,533
---------
Total Commercial Mortgage-Backed Securities 180,512
=========
(Cost $188,786)
--------------------------------------------------------------------------------
CORPORATE BONDS & NOTES 7.3%
--------------------------------------------------------------------------------
Banking & Finance 1.2%
Mercury Finance Co.
10.000% due 03/23/2001 (e) 1,602 1,631
---------
Industrials 4.0%
Building Materials Corp.
8.000% due 10/15/2007 3,000 2,558
Container Corp. of America
11.250% due 05/01/2004 1,500 1,530
Nuevo Grupo Iusacell
10.000% due 07/15/2004 750 731
U.S. Air, Inc.
9.330% due 01/01/2006 902 829
---------
5,648
Utilities 2.1%
Calpine Corp.
8.750% due 07/15/2007 1,680 1,694
Flag Ltd.
8.250% due 01/30/2008 1,400 1,246
---------
2,940
---------
Total Corporate Bonds & Notes 10,219
=========
(Cost $10,935)
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 10.9%
--------------------------------------------------------------------------------
First International Bank Business Loan Trust
9.665% due 04/15/2026 3,250 3,007
Firstplus Global Issuance
7.690% due 09/11/2023 (e) 5,000 4,370
Keystone Owner Trust
8.500% due 01/25/2029 (e) 5,000 4,145
Life Financial Home Loan Owner Trust
9.090% due 04/25/2024 (d) 4,373 3,868
---------
Total Asset-Backed Securities 15,390
(Cost $15,446) =========
--------------------------------------------------------------------------------
SHORT-TERM INSTRUMENTS 0.1%
--------------------------------------------------------------------------------
Commercial Paper 0.1%
Federal Home Loan Mortgage
6.420% due 08/17/2000 200 198
---------
Total Short-Term Instruments 198
(Cost $198) =========
Total Investments (a) 146.6% 206,319
(Cost $215,365)
Written Options (c) (0.1%) (180)
(Premium $263)
Other Assets and Liabilities (Net) (46.5%) (65,449)
---------
Net Assets 100.0% $ 140,690
=========
Notes to Schedule of Investments (amounts in thousands):
(a) The identified cost of investments owned as of June 30, 2000, was the same
for federal income tax and financial statement purposes.
(b) Variable rate security. The rate listed is as of June 30, 2000.
(c) Premiums received on written options:
# of
Type Contracts Premium Value
--------------------------------------------------------------------------------
Call - OTC 3 Month LIBOR Interest Rate Swap
Strike @ 7.00 Exp. 09/15/2000 2,150 $ 263 $ 180
(d) Securities pledged as collateral for reverse repurchase agreements.
(e) 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.
16
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 accounting principles generally accepted in the United States.
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.
17
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
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 accounting principles generally
accepted in the United States. 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. Accordingly, 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%.
Repurchase Agreements. The Fund may engage in repurchase transactions. Under the
terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time. The
market value of the collateral must be equal at all times to the total amount of
the repurchase obligations, including interest. Generally, in the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred.
Written Options. When a Fund writes an option, the premium received by the Fund
is presented in the Fund's Statement of Assets and Liabilities as an asset and
equivalent liability. The amount of the liability is subsequently
"market-to-market" to reflect the current market value of the option written.
Written options are valued at the last sale price or, in absence of a sale, the
last offering price on the market on which it is principally traded. If an
option expires on its stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a written
call option is exercised, the Fund realizes a gain or loss from the sale of the
underlying security and the proceeds of the sale are increased by the premium
originally received. If a written put option is exercised, the amount of the
premium originally received reduces the cost of the security which the Fund
purchases upon exercise of the option.
18
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
The risk in writing a call option is that the Fund relinquishes the opportunity
to profit if the market price of the underlying security increases and the
option is exercised. In writing a put option, the Fund assumes the risk of
incurring a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is a risk the Fund may not be able
to enter into a closing transaction because of an illiquid secondary market, or
if the counterparties do not perform under the contracts' terms.
3. Investment Manager Fee, Administration Fee, and Directors' Fee
Investment Manager Fee. Pacific Investment Management Company (PIMCO) serves as
investment manager to the Fund, pursuant to an investment management agreement.
(PIMCO) receives a quarterly fee from the Fund at an annual rate of 0.725% based
on average weekly net assets of the Fund.
Administration Fee. PIMCO 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. Securities Transactions
Cost of purchases and proceeds from sales of securities (excluding short-term
investments) for the period ended June 30, 2000, were as follows:
U.S. Government/Agency All Other
--------------------------------------------------------------------------------
Purchases Sales Purchases Sales
--------------------------------------------------------------------------------
$ 0 $ 7,432,718 $ 44,450,537 $ 10,786,468
5. Transaction in Written Call and Put Options
Transaction in written call and put options were as follows:
# of Contracts Premium
---------------------------------------
Balance at 12/31/1999 0 $ 0
Sales 2,650 441,109
Closing Buys (500) (177,734)
Expirations 0 0
Exercised 0 0
Balance at 6/30/2000 2,150 $ 263,375
19
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONT.)
6. Federal Income Tax Matters
At June 30, 2000, the net unrealized depreciation of investments based on cost
for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation $ 1,456,104
Aggregate gross unrealized depreciation (10,502,693)
--------------
Net unrealized depreciation $ (9,046,589)
==============
The accumulated net realized loss on sales of investments for federal income tax
purposes at December 31, 1999, amounting to $955,439, is available to offset
future taxable gains. If not applied, $229,745, $687,550, and $38,144 of the
loss will expire in 2003, 2004, and 2007, respectively.
7. Borrowings under Reverse Repurchase Agreements
The average amount of borrowings outstanding during the period ended June 30,
2000 was $61,511,090 at a weighted average interest rate of 6.60%. On June 30,
2000, securities valued at $76,809,223 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. Acquisition by Allianz AG
On May 5, 2000, Allianz AG completed the acquisition of approximately 70% of the
outstanding partnership interests in PIMCO Advisors L.P. ("PIMCO Advisors"), of
which PIMCO is a subsidiary partnership. As a result of this transaction, PIMCO
Advisors, and its subsidiaries, are now controlled by Allianz AG, a leading
provider of financial services, particularly in Europe. PIMCO remains
operationally independent, continues to operate under its existing name, and now
leads the global fixed income efforts of Allianz AG. Key employees at each PIMCO
Advisors' investment units, including PIMCO's Bill Gross, have signed long-term
employment contracts and have significant profit-sharing and retention
arrangements to ensure continuity of the investment process and staff. With the
addition of PIMCO Advisors, the Allianz Group manages assets of approximately
US$650 billion, including more than 300 mutual funds for retail and
institutional clients around the world.
20
SEMI-ANNUAL REPORT
June 30, 2000
<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. State
Street Bank & Trust Co. 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
21
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
DIVIDEND REINVESTMENT PLAN (CONT.)
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.
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 State Street Bank &
Trust Co., the Plan Agent. This convenience provides added protection against
loss, theft or inadvertent destruction of certificates.
22
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
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 State Street Bank & Trust Co.
150 Royalle Street
Canton, MA 02021
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 State Street Bank & Trust Co.. 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.
23
SEMI-ANNUAL REPORT
June 30, 2000
<PAGE>
PROXY VOTING RESULTS
A special meeting of the Funds shareholders was held on March 3, 2000. The
result of votes taken among shareholders on proposals are listed below.
1. To elect Directors to the Board of Directors of the Fund.
# of % of
Shares Voted Shares Voted
------------------------------------
R. Wesley Burns
For 10,390,736 98.742%
Withheld 132,414 1.258%
Total 10,523,150 100.000%
E. Philip Cannon
For 10,390,736 98.742%
Withheld 132,414 1.258%
Total 10,523,150 100.000%
J. Michael Hagan
For 10,390,736 98.742%
Withheld 132,414 1.258%
Total 10,523,150 100.000%
Brent R. Harris
For 10,390,736 98.742%
Withheld 132,414 1.258%
Total 10,523,150 100.000%
2. To approve a new investment management agreement.
# of % of
Shares Voted Shares Voted
------------------------------------
For 10,135,755 96.319%
Against 169,908 1.615%
Abstain 217,484 2.067%
Total 10,523,147 100.000%
3. To ratify selection of Ernst & Young LLP as independent public accountant
of the Fund for its fiscal year ending December 31, 2000.
# of % of
Shares Voted Shares Voted
------------------------------------
For 10,355,626 98.408%
Against 48,900 0.465%
Abstain 118,624 1.127%
Total 10,523,150 100.000%
24
SEMI-ANNUAL REPORT
June 30, 2000
<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
E. Philip Cannon, Director
Vern O. Curtis, Director
J. Michael Hagan, 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 300
Newport Beach, California 92660
Transfer Agent
State Street Bank & Trust Co.
150 Royalle Street
Canton, MA02021
Custodian
State Street Bank & Trust Co.
801 Pennsylvania
Kansas City, Missouri 64105
Legal Counsel
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006-2401
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.
