• Federally tax-exempt municipal bonds may be an attractive alternative to taxable issues, particularly for investors in higher tax brackets.
• Focuses on high quality municipal debt; fund is limited to no more than 10% in non-investment grade bonds.
• Managed by Mark McCray, a municipal bond expert with longtime experience in the municipal debt market.

Attractive After-Tax Yields
Income taxes are one of the largest burdens on investment performance, eating away at both capital gains and dividends. Investors seeking protection from at least some of this tax liability can invest in tax-exempt bonds. Tax-exempt bonds are particularly attractive right now because the yields on these bonds are higher than those of equal-maturity Treasury bonds on an after-tax basis.

Expert Management
Of course it is possible for you to invest in tax-exempt bonds on your own. But this market has become increasingly complex over the years, and most investors would benefit from the expertise of an experienced manager who specializes in this field. Among PIMCO’s clients are more than half of the 100 largest U.S. corporations. PIMCO Managing Director Mark McCray is the portfolio manager of PIMCO Municipal Bond Fund. Mr. McCray previously held a position with Goldman, Sachs & Co. in New York, where he was Vice President and Co-Head of Municipal Bond Trading, with primary responsibility for the firm's proprietary municipal trading.

Extensive Research and Analysis
Staying one step ahead of conventional wisdom is vital to the management of PIMCO Municipal Bond Fund. Accordingly, the manager compiles and analyzes an abundance of information that can help determine the ongoing creditworthiness of individual securities.

High Quality Portfolio
The Fund invests primarily in high-quality municipal bonds to help protect and develop principal. In fact, the Fund is limited to no more than 10% below Baa-rated bonds.

Municipal Diversification
There is tremendous variety in the municipal bond market in terms of the issuer, credit worthiness, maturity and type of public project (e.g., water systems, highways, schools and hospitals). The Fund invests in a well diversified portfolio of municipal bonds.

Total Return Potential
Many tax-exempt funds concentrate solely on providing income. In addition to income, PIMCO Municipal Bond Fund has a secondary objective of seeking capital appreciation. It is this combination of income and appreciation that makes up a fund's total return. And focusing on total return has been a cornerstone of PIMCO's investment philosophy for over 30 years.

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. This helps set the basic portfolio parameters, including duration, yield-curve positioning, sector weightings and credit quality. Our municipal bond team seeks to add value in a number of ways. They believe that investments should be made from the point of view of maximizing total return as opposed to simply reaching for maximum yield. So the portfolio is scrutinized using a process that models the potential changes in yield and price as the underlying variables of the marketplace change. Yield-to-worst measures are carefully examined, as are the impact of a shifting municipal yield curve and the influence of yield volatility and credit shifts on the portfolio. The manager 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.

Mr. McCray is a managing director, portfolio manager, and senior member of PIMCO's investment strategy group. He joined the firm in 2000 from Goldman, Sachs, where he was vice president and co-head of municipal bond trading. Mr. McCray holds a B.A. in finance and real estate from Temple University and an M.B.A. from The Wharton School of the University of Pennsylvania.

Newport Beach, California

Led by Founder and 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.