• Invests primarily in government-guaranteed GNMA securities, a unique sector of the mortgage-backed securities market that offers a blend of low risk and the potential for solid returns.
• Managed by Scott Simon, senior member of PIMCO's portfolio management and strategy groups and head of mortgage- and asset-backed securities teams.
• Mortgage-related securities have the potential to offer investors higher yields than equal maturity Treasuries.

Treasury-Like Risk
Most mortgage-backed securities are issued and/or insured by government agencies or government-sponsored enterprises. All offer high credit quality.

Greater Return Potential
Mortgage-backed securities tend to yield more than comparable Treasuries. That extra yield compensates investors for prepayment risk, which can shorten the bonds' average lives.

Expert Management
Because of their complexity and high investment cost, mortgage securities are best bought through a mutual fund managed by a seasoned professional. PIMCO's mortgage specialist, Scott Simon, manages PIMCO GNMA Fund. Mr. Simon is Managing Director, a senior member of PIMCO's portfolio management and investment strategy groups, and head of PIMCO's mortgage team. He joined the firm in 2000 from Bear Stearns & Co. in New York, where he was a Senior Managing Director and co-head of MBS pass-through trading. He also managed overall department MBS risk, traded a proprietary MBS book, and authored the Daily MBS Commentary. Mr. Simon was named seven times to positions on the Institutional Investor All-America Fixed Income Research Team, including first place honors in MBS pass-throughs and overall MBS strategies. He holds a B.A. and master's degrees in industrial engineering from Standford University.

A Foundation Investment
With its high average credit quality and intermediate duration, PIMCO GNMA Fund makes a solid addition to virtually any investor's bond portfolio. In particular, the PIMCO GNMA Fund can be an excellent complement to stock investments, since mortgage securities have a low correlation with the equity markets.

The top-down investment process begins with PIMCO's annual secular forum at which the firm develops a 3- to 5-year outlook for the global economy and interest rates. Quarterly meetings are then held to discuss how the outlook applies to upcoming 3- to 12-month periods and to forecast specific influencing factors, including interest rate volatility, yield curve movements and credit trends. Taken together, these sessions set the basic portfolio parameters, including duration, yield-curve positioning, sector weightings and credit quality. Bottom-up strategies, including credit analysis, quantitative research and individual issue selection, are then meshed with the top-down strategies to create value. PIMCO may at times use futures to replicate bond positions.** This strategy can offer the opportunity to outperform physical bond securities due to the relative pricing of the futures contracts and PIMCO's active management of the collateral backing the futures.

** Futures may also be used to manage the Fund portfolio's overall duration and sector exposure.

Scott Simon is a Managing Director, a senior member of PIMCO's portfolio management and investment strategy groups, and head of PIMCO's mortgage and ABS team.

Newport Beach, California

Led by Founder and Co-Chief Investment Officer Bill Gross, PIMCO is widely recognized as one of the premier bond managers in the world. PIMCO applies this expertise to a range of core and specialized investment portfolios.