Fitch: Pimco Closed-End Funds Get New Management; Preferred Ratings Stable

Following Bill Gross' departure, Pacific Investment Management Company (PIMCO) has designated two portfolio managers Alfred T. Murata and Mohit Mittal to assume portfolio manager (PM) responsibilities over four multi-sector closed-end funds (CEFs) that issue Fitch-rated preferred shares (ARPS):

--PIMCO High Income Fund (NYSE: PHK)

--PIMCO Corporate & Income Strategy Fund (NYSE: PCN)

--PIMCO Income Strategy Fund (NYSE: PFL)

--PIMCO Income Strategy Fund II (NYSE: PFN)

The four funds manage approximately $3.3 billion of assets as of Aug. 31, 2014 and have $700 million of Fitch-rated ARPS outstanding. The funds also draw on $460 million of reverse repurchase agreements as a senior form of borrowing and utilize derivatives to reference foreign currency and interest rate exposures. The funds continue to test with ample asset coverage for the rated ARPS, and Fitch does not expect any rating action as a result of the change in management. However, Fitch will continue to monitor the situation and how the new leadership performs.

The two new managers, Murata and Mittal, are both senior portfolio managers and managing directors at PIMCO focusing on income and credit strategies, with a particular focus on mortgage credit and corporate credit, respectively. Mr. Murata manages or co-manages PIMCO Income Opportunity Fund (PKO), PIMCO Dynamic Credit Income Fund (PCI), PIMCO Dynamic Income Fund (PDI), Canadian-domiciled PIMCO Global Income Opportunities Fund (PGI.UN) and PIMCO Income Fund (PONAX). Mr. Mittal manages a variety of portfolios focused on investment grade credit, total return and unconstrained bond portfolios. Murata has been with PIMCO since 2001, while Mittal joined the firm in 2007. Previous performance of funds managed by Murata ranges between the mid- and high-end of Fitch's multi-sector closed-end fund peer group. The broad investment process of the funds is expected to remain largely unchanged.

Fitch expects fund NAVs to experience minimal impact and closed-end funds are shielded from direct investor withdrawals, protecting the funds from any forced selling. So far NAVs have trended down 0.63% on average (inline with the broader market), while secondary market common stock prices fell by 6.88%, on average, before rebounding by 3.48% as of close yesterday.

Additional information is available on www.fitchratings.com.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts:

Fitch Ratings
Yuriy Layvand, CFA, +1-212-908-9191
Director
Fund and Asset Management
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Ian Rasmussen, +1-212-908-0232
Senior Director
Fund and Asset Management
or
Brian Bertsch, +1-212-908-0549
Media Relations, New York
brian.bertsch@fitchratings.com

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