DOW JONES NEWSWIRES 
 

A trio of closed-end funds at Pacific Investment Management Co. also won't make monthly dividend payments due in April because of the falling value of auction-rate preferred shares.

Five Pimco funds late Friday said they wouldn't make their payments due Monday as planned because closed-end funds can't announce or distribute dividends if their auction-rate leverage is more than 50% of total assets.

As a result, the giant money manager is being forced to buy back some of the auction-rate preferred securities issued by its closed-end funds. That is a reversal for Pimco, which had refused to redeem these securities for months after the auction-rate market froze up a year ago. But deteriorating markets and legal requirements are forcing Pimco to do so after all.

The purchases will push the company's asset coverage of the auction-rate preferreds back above the 200% level required for the funds to pay dividends.

The Pimco funds announcing Monday they won't make an April payment are the Corporate Income (PCN), Corporate Opportunity (PTY) and High Income (PHK) funds. They intend to resume dividend payments "as soon as possible."

Pimco's closed-end funds, like dozens of others, have for years issued auction-rate preferreds to borrow money and add leverage to the funds. Such securities are long-term debt with lower, short-term rates that are set at periodic auctions.

When the auction-preferred market froze, auction-preferred holders wanted their money back, so most closed-end fund shops started redeeming some securities or worked on plans to do so. But Pimco balked, pointing out that redeeming the preferreds would reduce leverage in its funds, which in turn would shrink income for closed-end fund shareholders. The firm's preference for its common shareholders incensed brokers and preferred holders.

-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136; kevin.kingsbury@dowjones.com and Shefali Anand, The Wall Street Journal; shefali.anand@wsj.com

Order free Annual Report for PIMCO Corporate Income Fund (PCN)

Visit http://djnewswires.ar.wilink.com/?link=PCN or call 1-888-301-0513

Order free Annual Report for PIMCO High Income Fund (PHK)

Visit http://djnewswires.ar.wilink.com/?link=PHK or call 1-888-301-0513

Order free Annual Report for PIMCO Corp. Opp Fund (PTY)

Visit http://djnewswires.ar.wilink.com/?link=PTY or call 1-888-301-0513