UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21076      
 
PIMCO Municipal Income Fund II
(Exact name of registrant as specified in charter)
     
1345 Avenue of the Americas, New York, New York
10105
(Address of principal executive offices)
(Zip code)
 
Lawrence G. Altadonna - 1345 Avenue of the Americas, New York, New York 10105
(Name and address of agent for service)
     
Registrant’s telephone number,
including area code: 212-739-3371    
       
Date of fiscal year end: May 31, 2008    
       
Date of reporting period:  November 30, 2007    

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e -1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.




ITEM 1. REPORT TO SHAREHOLDERS

     
     
                 

PIMCO Municipal Income Fund II
PIMCO California Municipal Income Fund II
PIMCO New York Municipal Income Fund II

 

Semi-Annual Report
November 30, 2007

                 
 

 

                    Contents    
       
  Letter to Shareholders 1  
       
  Fund Insights/Performance & Statistics 2-4  
       
  Schedules of Investments 5-26  
       
  Statements of Assets and Liabilities 28  
       
  Statements of Operations 29  
       
  Statements of Changes in Net Assets 30-31  
       
  Statements of Cash Flows 32-34  
       
  Notes to Financial Statements 35-40  
       
  Financial Highlights 41-44  
       
  Matters Relating to the Trustees’ Consideration    
  of the Investment Management and Portfolio    
  Management Agreements 45-47  
       
  Annual Shareholder Meetings Results 48  
         
         
         
                                      



PIMCO Municipal Income Funds II Letter to Shareholders

 

 

January 10, 2008

 

Dear Shareholder:

We are pleased to provide you with the semi-annual report for PIMCO Municipal Income Fund II, PIMCO California Municipal Income Fund II and PIMCO New York Municipal Income Fund II (collectively, the “Funds”) for the six months ended November 30, 2007.

The U.S. bond market delivered flat to moderate returns during the six-month period, as economic growth slowed and weakness in the U.S. housing and mortgage markets spread to the bond market. The Lehman Municipal Bond Index was virtually flat for the period, posting a 0.06% return, underperforming indexes of corporate and Treasury securities. The Federal Reserve reduced the Federal Funds rate during the period and sought other methods to inject liquidity into the economy. Inflation levels continued to track somewhat higher than the central bank’s stated comfort level.

For specific information on the Funds, including performance during the reporting period, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 331-1710. In addition, a wide range of information and resources is available on our Web site, www.allianzinvestors.com/closedendfunds.

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC (“PIMCO”), the Funds’ sub-adviser, we thank you for investing with us.

Sincerely,


Hans W. Kertess
Chairman

Brian S. Shlissel
President & Chief Executive Officer

 

 

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 1


PIMCO Municipal Income Fund II Fund Insights/Performance & Statistics
November 30, 2007 (unaudited)
         
  • For the fiscal six months ended November 30, 2007, PIMCO Municipal Income Fund II returned -2.01% on net asset value (NAV) and -8.53% on market price, compared to -0.47% and -8.12%, respectively for the Lipper Analytical General Municipal Debt Funds (Leveraged) average.
  • Municipals underperformed Treasuries and the taxable debt sector during the period. The Lehman Brothers General Municipal Bond Index* returned 2.93%, while the Lehman Brothers Long-Term Aggregate and the
 
    Lehman Brothers Treasury Indices returned 5.63% and 7.84%, respectively.
  • The Fund’s average credit quality was A+ at the end of the six-month period, versus the benchmark’s average of AA1/AA2.
  • For the six-month period, 10-year AAA muni yields decreased 45 basis points, while 20- and 30-year AAA muni yields decreased 14 and 12 basis points, respectively.
  • Exposure to prerefunded bonds contributed to the Fund’s performance during the reporting period.
 
  • The Fund’s effective duration was managed below that of its benchmark throughout the period, which was negative for performance, as municipal yields decreased across all maturities.
  • Exposure to the healthcare sector detracted from performance, as spreads widened dramatically during the period.
  • Exposure to tobacco securitized municipals was negative for performance as the overall index declined -4.80% year-to-date.
   
*   

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. The Lehman Brothers Aggregate Bond Index is an unmanaged index of investment grade, U.S. dollar-denominated fixed income securities of domestic issuers having a maturity greater than one year. The Lehman Brothers Long-Term Treasury Index is an unmanaged index of U.S. Treasury issues with maturities greater than 10 years.

 
Total Return(1) :  
Market Price
  Net Asset Value (“NAV”)  
Six Months   (8.53)%  
(2.01)%
 
1 Year   (8.96)%  
(0.75)%
 
5 Year   5.79%  
6.92%
 
Commencement of Operations (6/28/02) to 11/30/07   4.90%  
6.67%
 

Common Share Market Price/NAV Performance:
Commencement of Operations (6/28/02) to 11/30/07
¢ Market Price
¢ NAV


Market Price/NAV:    
Market Price   $13.73
NAV   $14.36
Discount to NAV   (4.39)%
Market Price Yield(2)   5.68%

Moody’s Ratings
(as a % of total investments)


(1) Past performance is no guarantee of future results. Total return is determined by subtracting the initial investment from the value at the end of the period and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income dividends and capital gain distributions have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.
Returns are calculated by determining the percentage change in net asset value or market share price (as applicable) with all distributions reinvested. The Fund’s performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in Fund distributions.
An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend (comprised from net investment income) payable to common shareholders by the market price per common share at November 30, 2007.

2 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO California Municipal Income Fund II  Fund Insights/Performance
November 30, 2007 (unaudited)
& Statistics
         
  • For the fiscal six months ended November 30, 2007, PIMCO California Municipal Income Fund II returned
    -4.30% on net asset value (NAV) and -8.77% on market price, compared to 0.21% and -8.97%, respectively for the Lipper California Municipal Debt Funds (Leveraged) average.
  • Municipals underperformed Treasuries and the taxable debt sector during the period. The Lehman Brothers General Municipal Bond Index* returned 2.93%, while the Lehman Brothers Aggregate and the Lehman
 
    Brothers Long-Term Treasury Indices returned 5.63% and 7.84%, respectively.
  • The Fund’s average credit quality was AA- at the end of the six-month period, versus the benchmark’s average of AA1/AA2.
  • For the six-month period, 10-year California yields decreased 29 basis points, while 20- and 30-year yields increased 9 and 13 basis points, respectively.
  • Exposure to California prerefunded bonds contributed to the Fund’s performance during the reporting period.
 
  • The Fund’s effective duration was managed below that of its benchmark throughout the period, which was negative for performance, as California municipal yields decreased across all maturities.
  • Exposure to tobacco securitized municipals detracted from performance, as the overall index declined -4.80% year-to-date.
  • Municipal bonds within California underperformed the broader national market for the period, as issuance within the state was the largest nationwide.
         
*   

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. The Lehman Brothers Aggregate Bond Index is an unmanaged index of investment grade, U.S. dollar-denominated fixed income securities of domestic issuers having a maturity greater than one year. The Lehman Brothers Long-Term Treasury Index is an unmanaged index of U.S. Treasury issues with maturities greater than 10 years.

 
Total Return(1) :  
Market Price
  Net Asset Value (“NAV”)  
Six Months   (8.77)%  
(4.30)%
 
1 Year   (7.55)%  
(3.09)%
 
5 Year   6.25%  
6.30%
 
Commencement of Operations (6/28/02) to 11/30/07   5.32%  
5.82%
 

Common Share Market Price/NAV Performance:
Commencement of Operations (6/28/02) to 11/30/07
¢ Market Price
¢ NAV


Market Price/NAV:    
Market Price   $14.14
NAV   $13.84
Premium to NAV   2.17%
Market Price Yield(2)   5.51%

Moody’s Ratings
(as a % of total investments)


(1) Past performance is no guarantee of future results. Total return is determined by subtracting the initial investment from the value at the end of the period and dividing the remainder by the initial investment value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period of more than one year represents the average annual total return.
Returns are calculated by determining the percentage change in net asset value or market share price (as applicable) with all distributions reinvested. The Fund’s performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in Fund distributions.
An investment in the Fund involves risk, including the loss of principal. Total return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend (comprised from net investment income) payable to common shareholders by the market price per common share at November 30, 2007.

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 3


PIMCO New York Municipal Income Fund II  Fund Insights/Performance
November 30, 2007 (unaudited)
& Statistics
         
  • For the fiscal six months ended November 30, 2007, PIMCO New York Municipal Income Fund II returned -2.61% on net asset value (NAV) and
    -9.38% on market price, compared to 0.92% and
    -7.02%, respectively for the Lipper New York Municipal Debt Funds (Leveraged) average.
  • Municipals underperformed Treasuries and the taxable debt sector during the period. The Lehman Brothers General Municipal Bond Index* returned 2.93%, while the Lehman Brothers
 
    Aggregate and the Lehman Brothers Long-Term Treasury Indices returned 5.63% and 7.84%, respectively.
  • The Fund’s average credit quality was AA- at the end of the six-month period, versus the benchmark’s average of AA1/AA2.
  • For the six-month period, 10-year New York yields decreased 47 basis points, while 20- and 30-year New York yields decreased 16 and 14 basis points, respectively.
  • Exposure to New York prerefunded bonds contributed to the Fund’s
 
    performance during the reporting period.
  • The Fund’s effective duration was managed below that of its benchmark throughout the period, which was negative for performance, as municipal yields decreased across all maturities.
  • Exposure to tobacco securitized municipals detracted from performance as the overall index declined -4.80% year-to-date.
  • Municipal bonds within New York slightly outperformed the broader national market for the period.
         
*   

The Lehman Brothers General Municipal Bond Index is an unmanaged index of municipal bonds. The Lehman Brothers Aggregate Bond Index is an unmanaged index of investment grade, U.S. dollar-denominated fixed income securities of domestic issuers having a maturity greater than one year. The Lehman Brothers Long-Term Treasury Index is an unmanaged index of U.S. Treasury issues with maturities greater than 10 years.

 
Total Return(1) :  
Market Price
  Net Asset Value (“NAV”)  
Six Months   (9.38)%  
(2.61)%
 
1 Year   (8.44)%  
(2.63)%
 
5 Year   5.58%  
6.19%
 
Commencement of Operations (6/28/02) to 11/30/07   4.53%  
5.94%
 

Common Share Market Price/NAV Performance:
Commencement of Operations (6/28/02) to 11/30/07
¢ Market Price
¢ NAV


Moody’s Ratings
(as a % of total investments)

Market Price/NAV:    
Market Price   $13.65
NAV   $14.01
Discount to NAV   (2.57)%
Market Price Yield(2)   5.60%


(1) Past performance is no guarantee of future results. Total return is determined by subtracting the initial investment from the value at the end of the period and dividing the remainder by the initial investment value of the investment at the beginning of the period and expressing the result as a percentage. The calculation assumes that all income dividends have been reinvested. Total return does not reflect broker commissions or sales charges. Total return for a period of less than one year is not annualized. Total return for a period more than one year represents the average annual total return.
Returns are calculated by determining the percentage change in net asset value or market share price (as applicable) with all distributions reinvested. The Fund’s performance at market price will differ from its results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in Fund distributions.
An investment in the Fund involves risk, including the loss of principal. Investment return, price, yield and net asset value will fluctuate with changes in market conditions. This data is provided for information only and is not intended for trading purposes. A portion of the income generated by the Fund may be subject to federal, state and local taxes, and may at times be subject to the alternative minimum tax. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net asset value is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.
(2) Market Price Yield is determined by dividing the annualized current monthly per share dividend (comprised from net investment income) payable to common shareholders by the market price per common share at November 30, 2007.

4 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
 
Amount
                Credit Rating            
 
(000)
     
(Moody’s/S&P)
    Value  
  MUNICIPAL BONDS & NOTES—95.0%
      Alabama—4.2%            
$ 10,000   Birmingham Baptist Medical Centers Special Care Facs.            
         Financing Auth. Rev., 5.00%, 11/15/30, Ser. A  
Baa1/NR
  $       9,230,000  
      Birmingham Waterworks & Sewer Board Rev., Ser. B,            
         (Pre-refunded @ $100, 1/1/13) (MBIA) (b),            
  1,145          5.00%, 1/1/27   Aaa/AAA     1,231,871  
  10,000          5.00%, 1/1/37   Aaa/AAA     10,758,700  
  18,000          5.25%, 1/1/33 (h)   Aaa/AAA     19,573,920  
  1,750   Huntsville Health Care Auth. Rev.,            
         5.75%, 6/1/32, Ser. B, (Pre-refunded @ $101, 6/1/12) (b)   A2/NR     1,929,532  
  16,580   Jefferson Cnty. Sewer Rev.,            
         4.75%, 2/1/38, Ser. B, (Pre-refunded @ $100,            
         8/1/12) (FGIC) (b)   Aaa/AAA     17,608,955  
  2,650   Tuscaloosa Educational Building Auth. Rev., 5.00%, 6/1/26  
NR/BBB-
    2,474,093  
                62,807,071  
      Alaska—0.6%            
  5,900   Northern Tobacco Securitization Corp. Rev., 5.00%,            
         6/1/46, Ser. A  
Baa3/NR
    4,922,311  
  3,550   State Housing Finance Corp. Rev., 5.25%, 6/1/32,            
         Ser. C (MBIA)   Aaa/AAA     3,570,697  
                8,493,008  
      Arizona—3.0%            
      Health Facs. Auth. Rev.,            
  6,500      Beatitudes Project, 5.20%, 10/1/37   NR/NR     5,660,265  
  1,300      Hospital System, 5.75%, 12/1/32, (Pre-refunded @ $101,            
             12/1/12) (b)   NR/BBB     1,448,811  
  3,500   Pima Cnty. Industrial Dev. Auth. Rev., 5.50%, 7/1/37 (c)  
NR/BBB-
    3,385,760  
  33,000   Salt River Project Agricultural Improvement & Power Dist. Rev.,            
         5.00%, 1/1/37, Ser. A (h)  
Aa1/AA
    34,400,190  
         
    44,895,026  
      Arkansas—0.1%  
       
  13,000   Arkansas Dev. Finance Auth. Rev., zero coupon, 7/1/46 (AMBAC)  
Aaa/NR
    1,875,770  
      California—2.9%            
  9,610   Alameda Corridor Transportation Auth. Rev.,            
         zero coupon, 10/1/16, Ser. A (AMBAC)   Aaa/AAA     6,671,454  
      Golden State Tobacco Securitization Corp.,            
         Tobacco Settlement Rev.,            
  6,000          5.00%, 6/1/33  
Baa3/BBB
    5,256,900  
  3,300          6.25%, 6/1/33   Aaa/AAA     3,630,033  
  9,000          6.75%, 6/1/39, (Pre-refunded @ $100, 6/1/13) (b)   Aaa/AAA     10,458,900  
  1,000   Rancho Cucamonga Community Facs. Dist., Special Tax,            
         6.30%, 9/1/23, Ser. A   NR/NR     1,030,440  
  4,000   Southern California Public Power Auth., Transmission            
         Project Rev., zero coupon, 7/1/13  
Aa3/A+
    3,227,200   
  4,700   Statewide Community Dev. Auth. Rev., Baptist Univ.,            
         9.00%, 11/1/17, Ser. B (c)   NR/NR     4,944,541  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 5


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      California—(continued)  
       
      Univ. of California Rev.,  
       
$ 4,430      4.75%, 5/15/37, Ser. C (MBIA)  
Aaa/AAA
  $       4,437,177  
  2,900      4.75%, 5/15/38, Ser. B  
Aa2/AA-
    2,907,917  
         
    42,564,562  
      Colorado—5.1%  
       
  30,000   Dawson Ridge Dist. No. 1, GO, zero coupon, 10/1/22, Ser. A  
Aaa/NR
    15,489,300  
      E-470 Public Highway Auth. Rev., Ser. B (MBIA),  
       
  20,000      zero coupon, 9/1/35  
Aaa/AAA
    4,920,400  
  15,000      zero coupon, 9/1/37  
Aaa/AAA
    3,240,000  
      Health Facs. Auth. Rev.,  
       
  1,000      American Baptist Homes, 5.90%, 8/1/37, Ser. A  
NR/NR
    975,310  
  25,000      Catholic Health Initiatives, 5.50%, 3/1/32  
Aa2/AA
    26,769,250  
  18,305      Exempla, Inc., 5.625%, 1/1/33, Ser. A  
A1/A-
    18,794,659  
  6,500      Retirement Fac. Liberty Height, zero coupon, 7/15/22  
Aaa/AAA
    3,387,735  
  2,000   Housing & Finance Auth. Rev., Evergreen Country Day School,  
       
         5.875%, 6/1/37 (c)  
NR/BB
    1,971,040  
         
    75,547,694  
      District of Columbia—1.2%  
       
  17,500   Washington D.C. Convention Center Auth. Tax Rev.,  
       
         4.75%, 10/1/28, (Pre-refunded @ $100, 10/1/08)  
       
         (AMBAC) (b)  
Aaa/AAA
    17,711,925  
      Florida—3.5%  
       
  2,310   Dev. Finance Corp. Rev., Learning Gate Community School,  
       
         6.00%, 2/15/37  
NR/BBB-
    2,330,859  
  8,000   Highlands Cnty. Health Facs. Auth. Rev., Adventist/Sunbelt,  
       
         6.00%, 11/15/31, Ser. A, (Pre-refunded @ $101, 11/15/11) (b)  
A1/NR
    8,850,400  
  2,335   Hillsborough Cnty. Industrial Dev. Auth., Pollution Control Rev.,  
       
         Tampa Electric Co. Project, 5.50%, 10/1/23  
Baa2/BBB-
    2,394,356  
  635   Hillsborough Cnty. Industrial Dev. Auth. Rev., Health Fac.  
       
         Project, 5.625%, 8/15/23  
Baa2/BBB
    639,432  
  7,135   Jacksonville Health Facs. Auth. Rev., 5.25%, 11/15/32, Ser. A  
Aa2/AA
    7,254,868  
  11,500   Lakeland Hospital System Rev., Regional Health System,  
       
         5.50%, 11/15/32, (Pre-refunded @ $101, 11/15/12) (b)  
A2/NR
    12,715,320  
  3,000   Leesburg Hospital Rev., Leesburg Regional Medical Center  
       
         Project, 5.50%, 7/1/32  
Baa1/BBB+
    3,007,050  
      Orange Cnty. Health Facs. Auth. Rev., Adventist Health  
       
         System, (Pre-refunded @ $101, 11/15/12) (b),  
       
  2,550  
         5.625%, 11/15/32
 
A1/NR
    2,821,626  
  5,000  
         6.25%, 11/15/24
 
A1/NR
    5,631,300  
  500   Sarasota Cnty. Health Fac. Auth. Rev., 5.75%, 7/1/37  
NR/NR
    480,100  
  5,000   Sumter Landing Community Dev. Dist. Rev.,  
       
         4.75%, 10/1/35, Ser. A (MBIA) (h)  
Aaa/AAA
    4,969,100  
  1,500   Winter Springs Water & Sewer Rev., zero coupon,  
        
         10/1/29 (FGIC)  
Aaa/AAA
    520,455  
         
    51,614,866  

6 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Georgia—0.6%  
       
$ 1,487   Grantor Trust Gov’t, CP, 4.75%, 6/1/28, Ser. A (MBIA)  
Aaa/AAA
  $       1,530,361  
  2,775   Medical Center Hospital Auth. Rev., 5.25%, 7/1/37  
NR/NR
    2,513,179  
  9,600   Richmond Cnty. Dev. Auth. Rev., zero coupon, 12/1/21  
Aaa/NR
    5,165,376  
         
    9,208,916  
      Hawaii—1.3%  
       
  19,170   Honolulu City & Cnty. Wastewater System Rev.,  
       
         First Board Resolution, 4.75%, 7/1/28 (FGIC)  
Aaa/NR
    19,321,635  
      Illinois—17.7%  
       
      Central Lake Cnty. Water Agcy. Rev., Ser. A (AMBAC),  
       
  2,935      5.125%, 5/1/28  
Aaa/NR
    3,038,312  
  675      5.125%, 5/1/28, (Pre-refunded @ $100, 11/1/12) (b)  
Aaa/NR
    730,350  
  8,150      5.125%, 5/1/32, (Pre-refunded @ $100, 11/1/12) (b)  
Aaa/NR
    8,818,300  
      Chicago, GO, Ser. A (FGIC),  
       
  1,635      5.125%, 1/1/29  
Aaa/AAA
    1,665,967  
  3,415      5.125%, 1/1/29, (Pre-refunded @ $101, 1/1/09) (b)  
Aaa/AAA
    3,517,040  
      Chicago, Lake Shore East, Special Assessment,  
       
  3,162      6.625%, 12/1/22  
NR/NR
    3,299,073  
  6,700      6.75%, 12/1/32  
NR/NR
    6,979,524  
      Chicago Board of Education School Reform, GO (FGIC),  
       
  15,535      zero coupon, 12/1/16, Ser. A  
Aaa/AAA
    10,786,261  
  5,000      zero coupon, 12/1/28, Ser. A  
Aaa/AAA
    1,788,000  
  4,500      zero coupon, 12/1/31  
Aaa/AAA
    1,369,845  
      Chicago City Colleges, GO (FGIC),  
       
  32,670      zero coupon, 1/1/37  
Aaa/AAA
    7,751,611  
  29,145      zero coupon, 1/1/38  
Aaa/AAA
    6,542,761  
  32,670      zero coupon, 1/1/39  
Aaa/AAA
    6,957,403  
  5,000   Cicero, GO, 5.25%, 12/1/31 (MBIA)  
Aaa/AAA
    5,237,700  
      Dev. Finance Auth. Retirement Housing Rev.,  
       
  2,500      Christian Homes, Inc., 5.75%, 5/15/31, Ser. A  
NR/NR
    2,394,525  
  10,000      Regency Park, zero coupon, 7/15/23  
NR/AAA
    4,954,200  
  134,650      Regency Park, zero coupon, 7/15/25  
NR/AAA
    59,721,314  
  1,500      Sedgebrook, Inc., 6.00%, 11/15/42, Ser. A  
NR/NR
    1,474,095  
  250   Finance Auth. Rev., 6.00%, 3/1/37, Ser. A  
NR/NR
    246,918  
      Health Facs. Auth. Rev.,  
       
  5,000      Condell Medical Center, 5.50%, 5/15/32  
Baa2/NR
    4,953,400  
  20,100      Elmhurst Memorial Healthcare, 5.625%, 1/1/28  
A2/NR
    20,865,408  
      Metropolitan Pier & Exposition Auth. Rev. (MBIA),  
       
  60,000      zero coupon, 12/15/30  
Aaa/AAA
    19,591,200  
  50,000      zero coupon, 12/15/33  
Aaa/AAA
    14,004,000  
  2,460      zero coupon, 6/15/38  
Aaa/AAA
    551,261  
  68,470   State Sports Facs. Auth. Rev.,  
       
         zero coupon, 6/15/30 (AMBAC)  
Aaa/AAA
    64,784,945  
         
    262,023,413   
      Indiana—0.6%  
       
      Brownsburg 1999 School Building Corp. Rev., Ser. A,  
       
         (Pre-refunded @ $100, 9/15/13) (FSA) (b),  
       
  1,000  
         5.00%, 9/15/25
 
Aaa/AAA
    1,085,430  
  2,000  
         5.25%, 3/15/25
 
Aaa/AAA
    2,196,900  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 7


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                         
 
Amount
      Credit Rating            
 
(000)
      (Moody’s/S&P)     Value  
      Indiana—(continued)            
$ 4,125   Fort Wayne Pollution Control Rev., 6.20%, 10/15/25  
Caa1/B-
  $       4,080,739  
  500   State Bank Rev., Hendricks,            
         5.25%, 4/1/30, Ser. D, (Pre-refunded @ $100,            
         4/1/12) (AMBAC) (b)   Aaa/AAA     538,950  
  990   Vigo Cnty. Hospital Auth. Rev., 5.80%, 9/1/47 (c)   NR/NR     919,967  
                8,821,986   
      Iowa—3.7%            
  1,000   Finance Auth. Rev., Wedum Walnut Ridge LLC, 5.625%,            
         12/1/45, Ser. A   NR/NR     921,810  
  2,300   Higher Education Loan Auth. Rev., Grandview College,            
         5.10%, 10/1/36   NR/NR     2,199,559  
      Tobacco Settlement Auth. of Iowa Rev., Ser. B,            
  46,000      zero coupon, 6/1/34  
Baa3/BBB
    41,869,660  
  8,850      5.60%, 6/1/35, (Pre-refunded @ $101, 6/1/11) (b)  
NR/AAA
    9,591,453  
                54,582,482  
      Kansas—0.2%            
  2,800   Univ. of Kansas Hospital Auth. Health Facs. Rev.,            
         5.625%, 9/1/32, (Pre-refunded @ $100, 9/1/12) (b)  
NR/AAA
    3,080,700  
      Kentucky—0.3%            
      Economic Dev. Finance Auth., Hospital Facs. Rev.,            
  2,500      Catholic Healthcare Partners, 5.25%, 10/1/30   A1/AA-     2,539,150  
  1,840      St. Luke’s Hospital, 6.00%, 10/1/19, Ser. B   A3/A     1,855,640  
                4,394,790  
      Louisiana—4.7%            
      Public Facs. Auth. Rev., Ochsner Clinic Foundation, Ser. B,            
  20,400      5.50%, 5/15/32, (Pre-refunded @ $100, 5/15/26) (b)  
Aaa/NR
    23,438,376  
  3,300      5.50%, 5/15/47   A3/NR     3,304,686  
      Tobacco Settlement Financing Corp. Rev., Ser. 2001-B,            
  36,395      5.875%, 5/15/39  
Baa3/BBB
    35,357,742  
  8,000      5.875%, 5/15/39 (h)  
Baa3/BBB
    7,772,000  
         
    69,872,804  
      Maryland—0.1%  
       
  1,000   State Health & Higher Educational Facs. Auth. Rev.,  
       
         Adventist Healthcare, 5.75%, 1/1/25, Ser. A  
Baa2/NR
    1,019,420  
      Massachusetts—2.4%            
  14,500   Bay Transportation Auth., Special Assessment,            
         4.75%, 7/1/34, Ser. A, (Pre-refunded @ $100, 7/1/15) (b)(h)   Aa1/AAA     15,686,100  
  4,610   State Dev. Finance Agcy. Rev., 6.75%, 10/15/37, Ser. A   NR/NR     4,499,729  
  4,295   State Turnpike Auth. Rev., 4.75%, 1/1/34, Ser. A (AMBAC)   Aaa/AAA     4,302,387  
  12,050   State Water Res. Auth. Rev., 4.75%, 8/1/37, Ser. A (FSA)   Aaa/AAA     12,056,266  
                36,544,482  
      Michigan—2.8%            
  8,500   Detroit City School Dist., GO,            
         5.00%, 5/1/32, Ser. A (Pre-refunded @ $100, 5/1/13)            
         (FGIC)(Q-SBLF) (b)   Aaa/AAA     9,183,570  
  4,545   Garden City Hospital Finance Auth. Rev., 5.00%,            
         8/15/38, Ser. A   NR/NR     3,893,611  

8 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Michigan—(continued)  
       
$ 800   Public Educational Fac. Auth. Rev., 6.50%, 9/1/37 (c)  
NR/NR
 
$
802,504   
  500   Star International Academy, CP, 6.125%, 3/1/37  
NR/BB+
    505,910  
  5,000   State Hospital Finance Auth. Rev.,  
       
         Ascension Health, 5.25%, 11/15/26, Ser. B  
Aa2/AA
          5,141,050  
         Oakwood Group, Ser. A,  
       
  13,500          5.75%, 4/1/32  
A2/A
    13,998,825  
  1,925          6.00%, 4/1/22  
A2/A
    2,055,476  
  6,000   Tobacco Settlement Finance Auth. Rev., 6.00%, 6/1/48, Ser. A  
NR/BBB
    5,822,700  
         
    41,403,646  
      Minnesota—0.5%  
       
  280   City of Minneapolis, Tax Allocation, Grant Park Project  
       
         5.35%, 2/1/30  
NR/NR
    256,228  
  1,300   Meeker Cnty. Rev., 5.75%, 11/1/37  
NR/NR
    1,283,464  
  1,500   Minneapolis Rev., Providence Project, 5.75%, 10/1/37, Ser. A  
NR/NR
    1,450,095  
      North Oaks, Presbyterian Homes Rev.,  
       
  2,640      6.00%, 10/1/33  
NR/NR
    2,666,057  
  1,530      6.125%, 10/1/39  
NR/NR
    1,545,009  
  500   Oronoco Multifamily Housing Rev., 5.40%, 6/1/41  
NR/NR
    479,845  
         
    7,680,698  
      Mississippi—0.3%  
       
  3,605   Business Finance Corp., Pollution Control Rev., 5.875%, 4/1/22  
Ba1/BBB
    3,611,850  
  740   Dev. Bank Special Obligation, Projects & Equipment  
       
         Acquisitions Rev., 5.00%, 7/1/24 (AMBAC)  
Aaa/AAA
    744,958  
         
    4,356,808  
      Missouri—0.3%  
       
  2,600   Branson Regional Airport Transportation Dev. Dist. Rev.,  
       
         6.00%, 7/1/37, Ser. A  
NR/NR
    2,522,910  
  820   Hanley Road & North of Folk Ave. Transportation Dist. Rev.,  
       
         5.00%, 10/1/25  
NR/NR
    778,196  
  1,500   St. Louis Parking Facs. Rev., Downtown Parking Fac.,  
       
         6.00%, 2/1/28, (Pre-refunded @ $100, 2/1/12) (b)  
NR/NR
    1,651,710  
         
    4,952,816  
      Nevada—1.7%  
       
      Clark Cnty., GO (FGIC),  
       
  1,450      5.00%, 6/1/31  
Aaa/AAA
    1,478,318  
  1,950      5.00%, 6/1/31, (Pre-refunded @ $100, 6/1/11) (b)  
Aaa/AAA
    2,062,359  
      Reno Transportation Project Rev.,  
       
         (Pre-refunded @ $100, 6/1/12) (AMBAC) (b),  
       
  3,960          5.125%, 6/1/27  
Aaa/AAA
    4,259,218  
  2,000          5.125%, 6/1/32  
Aaa/AAA
    2,151,120  
  3,500          5.125%, 6/1/37  
Aaa/AAA
    3,764,460  
  7,570          5.25%, 6/1/41  
Aaa/AAA
    8,181,202  
  3,290   Truckee Meadows Water Auth. Rev.,  
       
         5.125%, 7/1/30, Ser. A, (Pre-refunded @ $100, 7/1/11)  
       
         (FSA) (b)  
Aaa/AAA
    3,497,533  
         
    25,394,210  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 9


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
     
           
 
Amount
               
Credit Rating
       
 
(000)
     
(Moody’s/S&P)
    Value  
      New Hampshire—0.2%  
       
      Health & Education Facs. Auth. Rev., Catholic Medical Center,  
       
$ 360      6.125%, 7/1/32  
Baa1/BBB+
 
$
372,074   
  2,640      6.125%, 7/1/32, (Pre-refunded @ $101, 7/1/12) (b)  
Baa1/BBB+
    2,968,390  
         
    3,340,464  
      New Jersey—3.4%  
       
  1,250   Burlington Cnty. Bridge Commission Rev., 5.625%, 1/1/38  
NR/NR
          1,225,950  
      Economic Dev. Auth., Kapkowski Road Landfill, Special  
       
         Assessment,  
       
  4,000          5.75%, 10/1/21  
Baa3/NR
    4,225,400  
  11,405          5.75%, 4/1/31  
Baa3/NR
    11,840,785  
      Economic Dev. Auth. Rev.,  
       
         Arbor Glen,  
       
  525          6.00%, 5/15/28  
NR/NR
    529,027  
  225          6.00%, 5/15/28, Ser. A, (Pre-refunded @ $102, 5/15/09) (b)  
NR/NR
    237,919  
  1,300      Seabrook Village, 5.25%, 11/15/36  
NR/NR
    1,196,832  
  250      Seashore Gardens, 5.375%, 11/1/36  
NR/NR
    233,850  
  1,830   Health Care Facs. Financing Auth. Rev., Trinitas Hospital,  
       
         5.25%, 7/1/30, Ser. A  
Baa3/BBB-
    1,741,666  
  3,500   State Educational Facs. Auth. Rev., 6.00%, 7/1/25, Ser. D  
NR/NR
    3,611,615  
      Tobacco Settlement Financing Corp. Rev.,  
       
  13,150      5.00%, 6/1/41, Ser. 1A  
Baa3/BBB
    11,029,957  
  1,285      6.00%, 6/1/37, (Pre-refunded @ $100, 6/1/12) (b)  
Aaa/AAA
    1,424,692  
  3,095      6.125%, 6/1/42, (Pre-refunded @ $100, 6/1/12) (b)  
Aaa/AAA
    3,447,459  
  6,150      6.25%, 6/1/43, (Pre-refunded @ $100, 6/1/13) (b)  
Aaa/AAA
    7,011,000  
  2,500      6.75%, 6/1/39, (Pre-refunded @ $100, 6/1/13) (b)  
Aaa/AAA
    2,912,050  
         
    50,668,202  
      New Mexico—0.3%  
       
  5,000   Farmington Pollution Control Rev., 5.80%, 4/1/22  
Baa2/BBB
    5,019,450  
      New York—3.2%  
       
  1,200   Erie Cnty. Industrial Dev. Agcy., Orchard Park Rev., 6.00%,  
       
         11/15/36  
NR/NR
    1,172,256  
  10,000   Liberty Dev. Corp. Rev., 5.25%, 10/1/35 (h)  
Aa3/AA-
    10,622,500  
      Metropolitan Transportation Auth. Rev.,  
       
  10,600      5.00%, 11/15/30, Ser. A (FSA)  
Aaa/AAA
    10,893,832  
  10,000      5.25%, 11/15/32, Ser. B, (Pre-refunded @ $100, 11/15/13) (b)  
A2/AAA
    11,038,900  
  4,750   New York City Municipal Water Finance Auth.,  
       
         Water & Sewer System Rev.,  
       
             5.00%, 6/15/37, Ser. D (h)  
Aa2/AA+
    4,897,108  
  6,700   State Dormitory Auth. Rev., Sloan-Kettering Center Memorial,  
       
         5.00%, 7/1/34, Ser. 1  
Aa2/AA
    6,859,929  
  2,000   State Environmental Facs. Corp. Rev., 5.00%, 6/15/28  
Aaa/AAA
    2,081,180  
         
    47,565,705  
      North Carolina—0.0%  
       
  550   North Carolina Medical Care Commission Rev., Salemtowne,  
       
         5.10%, 10/1/30  
NR/NR
    504,829  

10 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
           
 
Amount
     
Credit Rating
       
 
(000)
     
(Moody’s/S&P)
    Value  
      Ohio—0.5%  
       
$ 7,500   Lorain Cnty. Hospital Rev., Catholic Healthcare,  
       
         5.375%, 10/1/30  
A1/AA-
  $       7,657,275   
      Pennsylvania—3.4%  
       
      Allegheny Cnty. Hospital Dev. Auth. Rev.,  
       
  22,600      5.375%, 11/15/40, Ser. A  
Ba2/BB
    20,580,690  
  505      9.25%, 11/15/15, Ser. B, (Pre-refunded @ $102, 11/15/10) (b)  
Ba3/AAA
    584,825  
  1,000      9.25%, 11/15/22, Ser. B, (Pre-refunded @ $102, 11/15/10) (b)  
Ba3/AAA
    1,183,160  
  5,700      9.25%, 11/15/30, Ser. B, (Pre-refunded @ $102, 11/15/10) (b)  
Ba3/AAA
    6,744,012  
  4,500   Cumberland Cnty. Auth., Retirement Community Rev.,  
       
         Wesley Affiliated Services,  
       
             7.25%, 1/1/35, Ser. A, (Pre-refunded @ $101, 1/1/13) (b)  
NR/NR
    5,320,215  
  3,250   Harrisburg Auth. Rev., 6.00%, 9/1/36  
NR/NR
    3,263,910  
      Montgomery Cnty. Higher Education & Health Auth. Hospital  
       
         Rev., Abington Memorial Hospital, Ser. A,  
       
  5,000          5.125%, 6/1/27  
NR/A
    5,065,550  
  3,750          5.125%, 6/1/32  
NR/A
    3,761,513  
  3,000   Philadelphia, GO, 5.25%, 9/15/25, Ser. 2001 (FSA)  
Aaa/AAA
    3,106,470  
  500   Pittsburgh & Allegheny Cnty. Public Auditorium Auth. Rev.,  
       
         5.00%, 2/1/29 (AMBAC)  
Aaa/AAA
    506,910  
         
    50,117,255  
      Puerto Rico—0.3%  
       
  4,200   Electric Power Auth. Power Rev.,  
       
         5.125%, 7/1/29, Ser. NN, (Pre-refunded @ $100, 7/1/13) (b)  
A3/BBB+
    4,580,436  
      Rhode Island—5.1%  
       
  76,200   Tobacco Settlement Financing Corp. Rev., 6.25%, 6/1/42, Ser. A  
Baa3/BBB
    76,257,912  
      South Carolina—5.3%  
       
  27,745   Greenville Cnty. School Dist. Rev., Building Equity Sooner  
       
         Tomorrow, 5.50%, 12/1/28, (Pre-refunded @ $101,  
       
         12/1/12) (b)  
Aaa/AA-
    30,767,263  
  18,120   Jobs Economic Dev. Auth. Rev., Bon Secours Health System,  
       
         5.625%, 11/15/30  
A3/A-
    18,706,182  
      Lexington Cnty., Health Services Dist. Hospital Rev. (b),  
       
  15,000      5.50%, 11/1/32, (Pre-refunded @ $100, 11/1/13)  
A2/A+
    16,604,400  
  3,500      5.50%, 5/1/37, (Pre-refunded @ $100, 5/1/14)  
A2/A+
    3,885,735  
  5,000      5.75%, 11/1/28, (Pre-refunded @ $100, 11/1/13)  
A2/A+
    5,601,000  
  3,250   Tobacco Settlement Rev. Management Auth. Rev.,  
       
         6.375%, 5/15/28, Ser. B  
Baa3/BBB
    3,289,227  
         
    78,853,807  
      Tennessee—0.3%  
       
  3,750   Knox Cnty. Health Educational & Housing Facs.,  
       
         Board Hospital Facs. Rev., Catholic Healthcare Partners,  
       
             5.25%, 10/1/30  
A1/AA-
    3,808,725  
  500   Sullivan Cnty. Health Educational & Housing Fac. Rev.,  
       
         5.25%, 9/1/36, Ser. C  
NR/BBB+
    488,360  
         
    4,297,085  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 11


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Texas—8.6%  
       
$ 10   Arlington Independent School Dist., GO, 5.00%, 2/15/24  
       
         (PSF-GTD)  
Aaa/NR
 
$
10,099   
      Aubrey Independent School Dist., GO (PSF-GTD),  
       
  130      5.50%, 2/15/33  
Aaa/NR
    140,395  
  4,350      5.50%, 2/15/33, (Pre-refunded @ $100, 8/15/14) (b)  
Aaa/NR
          4,881,527  
  6,500   Brazos Cnty. Health Facs. Dev. Corp., Franciscan Services  
       
         Corp. Rev., 5.375%, 1/1/32  
NR/A-
    6,609,005  
  2,700   Comal Cnty. Health Facs. Dev., McKenna Memorial Hospital  
       
         Project Rev., 6.25%, 2/1/32  
Baa2/BBB-
    2,785,941  
  20,000   Frisco Independent School Dist., GO, zero coupon,  
       
         8/15/34 (PSF-GTD)  
Aaa/NR
    5,324,000  
  19,750   Harris Cnty., GO, 5.125%, 8/15/31, (Pre-refunded @ $100,  
       
         8/15/12) (b)  
Aa1/AA+
    21,286,945  
  5,250   Harris Cnty. Health Facs. Dev. Corp. Rev., St. Luke’s Episcopal  
       
         Hospital, 5.375%, 2/15/26, Ser. A, (Pre-refunded @ $100,  
       
         8/15/11) (b)  
NR/AAA
    5,633,302  
  700   HFDC of Central Texas, Inc., Village at Gleannloch Farms Rev.,  
       
         5.50%, 2/15/37, Ser. A  
NR/NR
    626,430  
      Keller Independent School Dist., GO (PSF-GTD),  
       
  770      4.875%, 8/15/31  
Aaa/AAA
    773,989  
  6,730      4.875%, 8/15/31, (Pre-refunded @ $100, 8/15/09) (b)  
Aaa/AAA
    6,915,277  
  3,170   Little Elm Independent School Dist., GO,  
       
         5.30%, 8/15/29, Ser. A (PSF-GTD)  
NR/AAA
    3,343,145  
  6,250   North Dallas Thruway Auth. Rev., 4.75%, 1/1/29 (FGIC)  
Aaa/AAA
    6,267,937  
  2,000   Sabine River Auth. Rev., 5.20%, 5/1/28  
NR/CCC
    1,718,400  
      State, GO,  
       
  10,025      4.75%, 4/1/35, Ser. A (h)  
Aa1/AA
    10,073,621  
  17,500      4.75%, 4/1/36  
Aa1/AA
    17,582,600  
  1,000   State Public Finance Auth. Rev., 5.875%, 12/1/36, Ser. A  
Baa3/BBB-
    1,007,880  
      State Turnpike Auth. Central Turnpike System Rev., Ser. A  
       
         (AMBAC),  
       
  10,000  
       zero coupon, 8/15/19
 
Aaa/AAA
    6,018,000  
  8,880          5.00%, 8/15/42  
Aaa/AAA
    8,934,701  
      State Water Financial Assistance, GO,  
       
  3,250      5.00%, 8/1/36  
Aa1/AA
    3,326,960  
  1,650      5.25%, 8/1/35  
Aa1/AA
    1,711,446  
  8,000   Wichita Falls Water & Sewer Rev.,  
       
         5.00%, 8/1/27, (Pre-refunded @ $100, 8/1/11) (AMBAC) (b)  
Aaa/AAA
    8,481,360  
  4,150   Willacy Cnty. Rev., 6.875%, 9/1/28, Ser. A1  
NR/NR
    4,377,337  
         
    127,830,297  
      Utah—3.2%  
       
  44,150   Utah Transit Auth. Rev.,  
       
         4.75%, 6/15/35, Ser. B, (Pre-refunded @ $100, 12/15/15)  
       
         (FSA) (b)(h)  
Aaa/AAA
    47,950,873  

12 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
     
       
 
Amount
               
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Virginia—0.6%  
       
      Fredericksburg Industrial Dev. Auth.,  
       
         Medicorp Health System Rev., Ser. B,  
       
$
2,500          5.125%, 6/15/33  
A3/NR
  $       2,519,525   
  4,000          5.25%, 6/15/27  
A3/NR
    4,070,800  
  2,050   James City Cnty. Economic Dev. Auth. Rev., 5.50%,  
       
         7/1/37, Ser. A  
NR/NR
    1,914,167  
         
    8,504,492  
      Washington—2.1%  
       
  26,000   State Health Care Fac. Auth. Rev., 6.125%, 8/15/37, Ser. A (d)  
Baa2/BBB
    25,560,600  
  6,800   State Housing Finance Commission Rev., Skyline at First Hill,  
       
         5.625%, 1/1/38, Ser. A  
NR/NR
    6,528,612  
         
    32,089,212  
      Wisconsin—0.7%  
       
      Badger Tobacco Asset Securitization Corp. Rev.,  
       
  1,125      6.00%, 6/1/17  
Baa3/BBB
    1,168,357  
  7,750      6.125%, 6/1/27  
Baa3/BBB
    8,017,995  
      State Health & Educational Facs. Auth. Rev.,  
       
         Froedert & Community Health Oblig.,  
       
  90          5.375%, 10/1/30  
NR/AA-
    92,354  
  910          5.375%, 10/1/30, (Pre-refunded @ $101, 10/1/11) (b)  
NR/AA-
    983,228  
         
    10,261,934  
 
      Total Municipal Bonds & Notes (cost—$1,324,843,752)  
    1,413,667,956  
  VARIABLE RATE NOTES (f)—4.6%
 
       
      Alabama—0.4%  
       
  4,450   Jefferson Cnty. Sewer Rev., 10.47%, 2/1/36,  
       
         Ser. 352 (FGIC) (c)(e)  
Aaa/NR
    5,174,950  
  1,400   Montgomery Special Care Facs. Financing Auth. Rev.,  
       
         9.40%, 11/15/29, Ser. 435 (MBIA) (c)(e)  
Aaa/NR
    1,508,010  
         
    6,682,960  
      Colorado—0.2%  
       
  2,250   Denver City & Cnty. Airport Rev., 9.40%, 11/15/25,  
       
         Ser. 425 (FSA) (c)(e)  
Aaa/NR
    2,432,025  
      Florida—0.6%  
       
  2,830   Highlands Cnty. Health Facs. Auth. Rev., Adventist,  
       
         5.00%, 11/15/31, Ser. C  
A1/A+
    2,798,757  
  1,782   Orange Cnty. School Board, CP, 9.40%, 8/1/24,  
       
         Ser. 328 (MBIA) (c)(e)  
Aaa/NR
    2,119,867  
  3,241   State Governmental Utilities Auth. Rev., 9.40%, 10/1/29 (c)(e)  
Aaa/NR
    4,239,876  
         
    9,158,500  
      Illinois—0.6%  
       
      Chicago, GO (c)(e),  
       
  1,780      10.03%, 1/1/28, Ser. 332 (MBIA)  
Aaa/NR
    2,131,995  
  2,200      11.78%, 1/1/40, Ser. 426 (FGIC)  
Aaa/NR
    2,814,680  
  1,288   Cook Cnty., GO, 9.28%, 11/15/28, Ser. 403 (FGIC) (c)(e)  
Aaa/NR
    1,421,952  
  2,000   State, GO, 10.66%, 4/1/27, Ser. 783 (FSA) (c)(e)  
Aaa/NR
    2,430,600  
         
    8,799,227  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 13


PIMCO Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Massachusetts—1.4%  
        
$
1,400   Boston Water & Sewer Community Rev., 9.32%,  
       
         11/1/28, Ser. 434 (FGIC) (c)(e)  
Aaa/NR
  $       1,497,440  
  2,200   State, GO, 10.58%, 11/1/30, Ser. 785 (FGIC-TCRS) (c)(e)  
Aaa/NR
    3,153,480  
      State Turnpike Auth. Rev. (c)(e),  
       
  7,366      9.44%, 1/1/37, Ser. 334 (MBIA)  
Aaa/NR
    7,424,559  
  3,000      9.44%, 1/1/37, Ser. 489 (MBIA)  
NR/AAA
    3,023,850  
  5,668      9.44%, 1/1/39, Ser. 335 (AMBAC)  
Aaa/NR
    5,892,840  
         
    20,992,169  
      Nevada—0.2%  
       
  2,200   State, GO, 9.28%, 5/15/28, Ser. 344 (FGIC) (c)(e)  
Aaa/NR
    2,253,328  
      Ohio—0.1%  
       
  1,580   Hamilton Cnty. Sales Tax Rev., 9.40%, 12/1/27,  
       
         Ser. 356 (MBIA) (c)(e)  
Aaa/NR
    1,724,649  
      Pennsylvania—0.3%  
       
      Philadelphia School Dist., GO (MBIA) (c)(e),  
       
  1,670      8.15%, 4/1/27, Ser. 345  
Aaa/NR
    1,837,000  
  2,677      8.15%, 4/1/27, Ser. 496  
NR/AAA
    2,944,700  
         
    4,781,700  
      Texas—0.7%  
       
  2,460   Denton Utility System Rev., 10.03%, 12/1/29,  
       
         Ser. 428 (MBIA) (c)(e)  
Aaa/NR
    2,683,860  
  1,100   Houston Airport System Rev., 9.28%, 7/1/25,  
       
         Ser. 404 (FGIC) (c)(e)  
Aaa/NR
    1,121,945  
      Houston Water & Sewer System Rev. (c)(e),  
       
  2,200      9.40%, 12/1/28, Ser. 427 (FSA)  
Aaa/NR
    2,576,420  
  3,070      10.53%, 12/1/30, Ser. 495 (FGIC)  
NR/AAA
    3,951,090  
         
    10,333,315  
      Washington—0.1%  
       
  1,820   Central Puget Sound Regional Transit Auth. Sales Tax  
       
         & Motor Rev., 8.04%, 2/1/28, Ser. 360 (FGIC) (c)(e)  
Aaa/NR
    1,859,130  
 
      Total Variable Rate Notes (cost—$59,613,943)  
    69,017,003  
  U.S. TREASURY BILLS (g)—0.4%
 
       
  5,535   3.06%-5.60%, 12/13/07-2/28/08 (cost—$5,524,177)  
    5,524,177  
 
      Total Investments (cost—$1,389,981,872)—100.0%  
  $ 1,488,209,136  

14 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
           
 
Amount
     
Credit Rating
       
 
(000)
     
(Moody’s/S&P)
    Value  
  CALIFORNIA MUNICIPAL BONDS & NOTES—95.2%
 
       
$
2,000   ABC Unified School Dist., GO, zero coupon,  
       
         8/1/23, Ser. B (FGIC)  
Aaa/AAA
  $ 956,140  
  1,000   Alpine Union School Dist., GO, zero coupon,  
       
         8/1/24, Ser. B (FSA)  
Aaa/AAA
    474,220  
  8,115   Anaheim City School Dist., GO,  
       
         5.00%, 8/1/26, (Pre-refunded @ $101, 8/1/11) (FGIC) (b)  
Aaa/AAA
          8,689,948   
      Assoc. of Bay Area Gov’t Finance Auth. Rev., Odd Fellows Home,  
       
  5,300      5.20%, 11/15/22  
NR/A+
    5,493,556  
  26,000      5.35%, 11/15/32  
NR/A+
    26,934,180  
  23,000   Bakersfield, CP, zero coupon, 4/15/21  
NR/AAA
    12,724,520  
      Bay Area Gov’t Assoc.,  
       
  2,000      Lease Rev., 5.00%, 7/1/32, Ser. 2002-1 (AMBAC)  
Aaa/AAA
    2,059,660  
  1,945      Windmere Ranch Dist. 99-1, Special Assessment,  
       
             6.30%, 9/2/25, (Pre-refunded @ $102, 9/2/11) (b)  
NR/AAA
    2,191,198  
  1,085   Capistrano Unified School Dist., Community Fac. Dist., Special Tax,  
       
         5.70%, 9/1/20, (Pre-refunded @ $102, 9/1/09) (b)  
NR/NR
    1,150,805  
  2,300   Ceres Unified School Dist., GO, zero coupon, 8/1/27 (FGIC)  
Aaa/AAA
    762,404  
      Chula Vista Community Facs. Dist., Special Tax,  
       
  3,000      5.125%, 9/1/36  
NR/NR
    2,712,720  
  1,825      6.15%, 9/1/26  
NR/NR
    1,885,335  
  4,380      6.20%, 9/1/33  
NR/NR
    4,494,274  
      Chula Vista, Special Tax, (Pre-refunded @ $102, 9/1/10) (b),  
       
  1,160      6.05%, 9/1/25  
NR/NR
    1,266,592  
  2,500      6.10%, 9/1/32  
NR/NR
    2,732,975  
      Clovis Unified School Dist., GO, Ser. B (FGIC),  
       
  2,000      zero coupon, 8/1/23  
Aaa/AAA
    948,860  
  3,535      zero coupon, 8/1/25  
Aaa/AAA
    1,496,083  
  2,500      zero coupon, 8/1/27  
Aaa/AAA
    947,050  
  1,410   Community College Financing Auth. Lease Rev., 5.00%,  
       
         8/1/27, Ser. A (AMBAC)  
Aaa/AAA
    1,451,877  
      Corona-Norco Unified School Dist., Public Financing Auth.,  
       
         Special Tax,  
       
  1,110          5.10%, 9/1/25 (AMBAC)  
Aaa/AAA
    1,139,015  
  210          5.55%, 9/1/15, Ser. A  
NR/NR
    210,326  
  305          5.65%, 9/1/16, Ser. A  
NR/NR
    305,220  
  160          5.75%, 9/1/17, Ser. A  
NR/NR
    159,984  
  530          6.00%, 9/1/20, Ser. A  
NR/NR
    530,588  
  1,000          6.00%, 9/1/25, Ser. A  
NR/NR
    999,890  
  4,150          6.10%, 9/1/32, Ser. A  
NR/NR
    4,153,071  
  10,000   Coronado Community Dev. Agcy., Tax Allocation,  
       
         4.875%, 9/1/35 (AMBAC) (h)  
NR/AAA
    10,021,400  
  3,000   Dinuba Financing Auth. Lease Rev., 5.10%, 8/1/32 (MBIA)  
Aaa/AAA
    3,116,340  
      Educational Facs. Auth. Rev.,  
       
  3,475      Loyola Marymount Univ., zero coupon, 10/1/34 (MBIA)  
Aaa/NR
    909,616  
  2,000      Woodbury Univ., 5.00%, 1/1/36  
Baa3/BBB-
    1,896,020  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 15


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                         
 
Amount
      Credit Rating            
 
(000)
      (Moody’s/S&P)     Value  
      Empire Union School Dist., Special Tax (AMBAC),            
$ 1,560      zero coupon, 10/1/30  
Aaa/AAA
 
$
504,286  
  1,265      zero coupon, 10/1/32   Aaa/AAA     367,710  
  1,000   Escondido Union School Dist., GO, zero coupon, 8/1/27 (FSA)   Aaa/AAA     386,160  
  2,440   Eureka Union School Dist., GO, zero coupon, 8/1/27 (FSA)   Aaa/AAA     942,230  
      Foothill Eastern Corridor Agcy. Toll Road Rev.,            
  7,100      zero coupon, 1/1/25, Ser. A   Aaa/AAA           3,360,359   
  3,270      zero coupon, 1/1/26, Ser. A   Aaa/AAA     1,460,513  
  1,500      zero coupon, 1/15/27 (MBIA-IBC)   Aaa/AAA     1,472,820  
  3,780      zero coupon, 1/1/28, Ser. A   Aaa/AAA     1,520,165  
  17,860      zero coupon, 1/1/30, Ser. A   Aaa/AAA     6,447,103  
  400   Franklin-McKinley School Dist., GO,            
         5.00%, 8/1/27, Ser. B, (Pre-refunded @ $100, 8/1/13)            
             (FSA) (b)   Aaa/AAA     434,588  
  1,440   Fremont Community Facs. Dist. No. 1, Special Tax, 5.30%, 9/1/30   NR/NR     1,363,464  
      Golden State Tobacco Securitization Corp. Rev.,            
  2,000      zero coupon, 6/1/37, Ser. A-2  
Baa3/BBB
    1,263,200  
  8,000      5.00%, 6/1/33, Ser. A-1  
Baa3/BBB
    7,009,200  
  10,000      5.00%, 6/1/35, Ser. A (FGIC) (h)   Aaa/AAA     10,062,000  
  45,000      5.00%, 6/1/38 Ser. A (FGIC) (h)   Aaa/AAA     45,194,850  
  12,485      5.00%, 6/1/45 (AMBAC-TCRS) (h)   Aaa/AAA     12,500,357  
  6,000      5.00%, 6/1/45, Ser. A (FGIC-TCRS) (h)   Aaa/AAA     6,007,380  
  11,700      6.25%, 6/1/33, Ser. 2003-A-1   Aaa/AAA     12,870,117  
  36,200      6.75%, 6/1/39, Ser. 2003-A-1, (Pre-refunded @ $100,            
             6/1/13) (b)   Aaa/AAA     42,068,020  
      Health Facs. Finance Auth. Rev.,            
  4,000      Adventist Health System, 5.00%, 3/1/33  
NR/A
    3,893,440  
         Catholic Healthcare West (b),            
  495          5.00%, 7/1/28, (Partially pre-refunded @ $101, 7/1/08)   A2/A     496,757  
  70          5.00%, 7/1/28, (Pre-refunded @ $101, 7/1/08)   A2/A     71,390  
  2,115      Hope Rehabilitation, 5.375%, 11/1/20 (CA Mtg. Ins.)   NR/A+     2,206,981  
         Paradise VY Estates (CA Mtg. Ins.),            
  5,500          5.125%, 1/1/22   NR/A+     5,649,160  
  3,875          5.25%, 1/1/26   NR/A+     3,966,527  
  1,750   Huntington Beach Community Facs. Dist., Special Tax,            
         6.30%, 9/1/32   NR/NR     1,792,298  
  200   Infrastructure & Economic Dev. Bank Rev., Bay Area Toll Bridges,            
         5.00%, 7/1/36, (Pre-refunded @ $100, 1/1/28) (AMBAC) (b)   Aaa/AAA     219,258  
  7,000   Irvine Improvement Board Act 1915, Special Assessment,            
         5.70%, 9/2/26   NR/NR     7,063,140  
  1,000   Irvine Unified School Dist., Special Tax, 5.125%, 9/1/36, Ser. A   NR/NR     899,590  
  1,900   Jurupa Unified School Dist., GO, zero coupon, 5/1/27 (FGIC)   Aaa/AAA     726,693  
  2,450   Kings Canyon JT Unified School Dist., GO, zero coupon,            
         8/1/27 (FGIC)   Aaa/AAA     937,052  
  5,300   Livermore-Amador Valley Water Management Agcy. Rev.,            
         5.00%, 8/1/31, Ser. A (AMBAC)   Aaa/AAA     5,422,165  

16 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
 
Amount
                Credit Rating            
 
(000)
      (Moody’s/S&P)     Value  
      Los Angeles, CP (MBIA),            
$ 9,895      5.00%, 2/1/27   Aaa/AAA   $ 10,155,436  
  2,685      5.00%, 10/1/27, Ser. AU   Aaa/AAA           2,760,019   
      Los Angeles Department of Water & Power Rev., Ser. A (h),            
  15,000      4.75%, 7/1/30 (FSA)   Aaa/AAA     15,142,050  
  30,000      5.00%, 7/1/35 (FSA)   Aaa/AAA     31,226,100  
  16,950      5.125%, 7/1/41 (FGIC-TCRS)   Aaa/AAA     17,312,221  
  7,200   Los Angeles Wastewater System Rev., 5.00%, 6/1/30,            
         Ser. A (FGIC)   Aaa/AAA     7,385,976  
  1,000   Manhattan Beach Unified School Dist., GO, zero coupon,            
         9/1/25 (FGIC)   Aaa/AAA     425,170  
      Manteca Redev. Agcy., Tax Allocation,            
  7,295      5.00%, 10/1/32 (FSA)   Aaa/AAA     7,519,759  
  10,000      5.00%, 10/1/36 (AMBAC) (h)   Aaa/AAA     10,279,500  
      Manteca Unified School Dist., Special Tax (MBIA),            
  2,365      zero coupon, 9/1/25   Aaa/AAA     996,871  
  5,330      5.00%, 9/1/29, Ser. C   Aaa/AAA     5,433,135  
  4,000   Merced Cnty., CP, Juvenile Justice Correctional Fac.,            
         5.00%, 6/1/32 (AMBAC)  
Aaa/NR
    4,085,360  
      Modesto Elementary School Dist. Stanislaus Cnty., GO,            
         Ser. A (FGIC),            
  2,615          zero coupon, 8/1/23   Aaa/AAA     1,250,153  
  2,705          zero coupon, 8/1/24   Aaa/AAA     1,221,659  
  2,000          zero coupon, 5/1/27   Aaa/AAA     774,340  
  2,150   Modesto High School Dist. Stanislaus Cnty., GO,            
         zero coupon, 8/1/26, Ser. A (FGIC)   Aaa/AAA     868,256  
      Modesto Public Financing Auth. Lease Rev. (AMBAC),            
  55      5.00%, 9/1/29   Aaa/AAA     55,884  
  945      5.00%, 9/1/29, (Pre-refunded @ $101, 9/1/08) (b)   Aaa/AAA     966,574  
  2,385   Monrovia Financing Auth. Lease Rev., Hillside Wilderness            
         Preserve, 5.125%, 12/1/31 (AMBAC)   Aaa/AAA     2,486,601  
      Montebello Unified School Dist., GO,            
  1,500      zero coupon, 8/1/24 (FGIC)   Aaa/AAA     677,445  
  1,485      zero coupon, 8/1/24 (FSA)   Aaa/AAA     676,135  
  2,830      zero coupon, 8/1/25 (FGIC)   Aaa/AAA     1,208,070  
  2,775      zero coupon, 8/1/27 (FGIC)   Aaa/AAA     1,061,354  
  4,700   Moreno Valley Unified School Dist. Community Facs. Dist.,            
         Special Tax, 5.20%, 9/1/36   NR/NR     4,312,814  
  2,400   Morgan Hill Unified School Dist., GO, zero coupon,            
         8/1/23 (FGIC)   Aaa/AAA     1,208,640  
  1,500   Mountain View-Whisman School Dist., GO,            
         5.00%, 6/1/27, Ser. D, (Pre-refunded @ $101,            
             6/1/12) (MBIA) (b)   Aaa/AAA     1,621,800  
  3,245   Newark Unified School Dist., GO, zero coupon, 8/1/26,            
         Ser. D (FSA)   Aaa/AAA     1,310,461  
  19,805   Oakland, GO, 5.00%, 1/15/27, Ser. A (FGIC) (h)   NR/NR     20,313,988  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 17


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
           
 
Amount
     
Credit Rating
       
 
(000)
     
(Moody’s/S&P)
    Value  
      Oakland Redev. Agcy., Tax Allocation, (Pre-refunded @ $100,  
       
         3/1/13) (b),  
       
$ 1,395          5.25%, 9/1/27  
NR/A
  $       1,522,712   
  2,185          5.25%, 9/1/33  
NR/A
    2,387,244  
  1,000   Orange Cnty. Community Facs. Dist., Special Tax,  
       
         No. 01-1-Ladera Ranch, 6.00%, 8/15/25, Ser. A,  
       
         (Pre-refunded @ $101, 8/15/10) (b)  
NR/AAA
    1,082,210  
  12,000   Orange Cnty. Sanitation Dist., CP,  
       
         5.25%, 2/1/30, (Pre-refunded @ $100, 8/1/13) (FGIC) (b)  
Aaa/AAA
    13,191,240  
      Palmdale Community Redev. Agcy., Tax Allocation (AMBAC),  
       
  1,230      zero coupon, 12/1/30  
Aaa/AAA
    398,791  
  1,230      zero coupon, 12/1/31  
Aaa/AAA
    378,828  
  1,225      zero coupon, 12/1/32  
Aaa/AAA
    357,467  
  1,750   Paramount Unified School Dist., GO, zero coupon,  
       
         9/1/23, Ser. B (FSA)  
Aaa/AAA
    839,773  
      Perris Public Financing Auth. Rev., Tax Allocation, Ser. C,  
       
  780      5.375%, 10/1/20  
NR/BBB+
    814,999  
  1,800      5.625%, 10/1/31  
NR/BBB+
    1,884,330  
  10,000   Placentia-Yorba Linda Unified School Dist., CP,  
       
         5.00%, 10/1/32 (FGIC) (h)  
Aaa/AAA
    10,299,400  
  10,150   Placer Union High School Dist., GO, zero coupon, 8/1/33 (FSA)  
Aaa/AAA
    2,858,951  
      Poway Unified School Dist., Special Tax,  
       
         Community Facs. Dist. No. 6,  
       
  2,700          5.125%, 9/1/28  
NR/BBB
    2,611,089  
  2,300          5.125%, 9/1/28, Area B  
NR/NR
    2,204,849  
  1,500          5.50%, 9/1/25  
NR/BBB
    1,504,935  
  3,000          5.60%, 9/1/33  
NR/BBB
    2,919,990  
  1,000          6.05%, 9/1/25, Area A  
NR/NR
    1,021,710  
  5,500          6.125%, 9/1/33, Area A  
NR/NR
    5,584,865  
         Community Facs. Dist. No. 10,  
       
  1,000          5.65%, 9/1/25  
NR/NR
    1,004,040  
  2,200          5.70%, 9/1/32  
NR/NR
    2,171,356  
  2,000   Rancho Cucamonga Community Facs. Dist., Special Tax,  
       
         6.375%, 9/1/31, Ser. A  
NR/NR
    2,059,500  
  1,500   Richmond Wastewater Rev., zero coupon, 8/1/30 (FGIC)  
Aaa/AAA
    522,435  
  3,510   Riverside, CP, 5.00%, 9/1/33 (AMBAC)  
Aaa/AAA
    3,599,435  
      Riverside Unified School Dist., Community Facs., Dist. No. 15,  
       
         Special Tax, Ser. A,  
       
  1,000          5.15%, 9/1/25  
NR/NR
    959,490  
  1,000          5.25%, 9/1/30  
NR/NR
    939,870  
  1,000          5.25%, 9/1/35  
NR/NR
    931,000  
      Rocklin Unified School Dist., GO (FGIC),  
       
  5,000      zero coupon, 8/1/24  
Aaa/AAA
    2,221,700  
  4,000      zero coupon, 8/1/25  
Aaa/AAA
    1,678,360  
  4,000      zero coupon, 8/1/26  
Aaa/AAA
    1,586,200  
  4,500      zero coupon, 8/1/27  
Aaa/AAA
    1,688,445  

18 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                         
 
Amount
      Credit Rating            
 
(000)
      (Moody’s/S&P)     Value  
      Roseville Redev. Agcy., Tax Allocation (MBIA),            
$ 3,365      5.00%, 9/1/32   Aaa/AAA   $       3,447,880   
  2,075      5.00%, 9/1/33   Aaa/AAA     2,124,904  
  4,500   Sacramento City Financing Auth. Rev., Ser. A,            
         5.00%, 12/1/32, (Pre-refunded @ $100, 12/1/12) (FSA) (b)   Aaa/AAA     4,859,955  
  4,475      North Natomas CFD No. 2, 6.25%, 9/1/23   NR/NR     4,521,629  
  12,490   Sacramento Cnty., Airport System Rev., 5.00%, 7/1/32,            
         Ser. A (FSA)   Aaa/AAA     12,812,492  
  14,350   Sacramento Cnty., Sanitation Dist. Rev.,            
         5.00%, 12/1/35, (Pre-refunded @ $100, 12/1/14)            
         (AMBAC) (a)(b)(h)(i)   Aaa/AAA     15,776,964  
      San Diego Cnty. Water Auth., CP, Ser. A (MBIA),            
  8,285      5.00%, 5/1/28   Aaa/AAA     8,553,683  
  8,000      5.00%, 5/1/29   Aaa/AAA     8,251,680  
      San Diego Community Facs. Dist. No. 3, Special Tax, Ser. A,            
  1,200      5.60%, 9/1/21   NR/NR     1,179,588  
  800      5.70%, 9/1/26   NR/NR     777,592  
  2,300      5.75%, 9/1/36   NR/NR     2,205,056  
  1,000   San Diego Public Facs. Financing Auth. Lease Rev.,            
         5.00%, 5/15/29, Ser. A (FGIC)   Aaa/AAA     1,020,630  
  1,500          Fire & Life Safety Facs., 5.00%, 4/1/32 (MBIA)   Aaa/AAA     1,530,840  
  14,000   San Diego Public Facs. Financing Auth. Water Rev.,            
         5.00%, 8/1/32 (MBIA)   Aaa/AAA     14,396,760  
  7,775   San Diego Unified School Dist., GO, 5.00%, 7/1/27 (FGIC) (h)   Aaa/AAA     8,260,626  
      San Francisco City & Cnty. Airport Community, International            
         Airport Rev. (MBIA),            
  5,585          4.50%, 5/1/28, Ser. 2   Aaa/AAA     5,482,348  
  11,585          5.00%, 5/1/32   Aaa/AAA     11,920,965  
  8,715          5.00%, 5/1/32, Ser 28B, (Pre-refunded @ $100, 5/1/12) (b)   Aaa/AAA     9,336,031  
  10,405   San Joaquin Hills Transportation Corridor Agcy. Toll Road Rev.,            
         zero coupon, 1/1/25   Aaa/AAA     4,924,582  
      San Jose, Libraries & Parks, GO,            
  14,970      5.00%, 9/1/32 (MBIA) (h)   Aaa/AAA     15,394,549  
  10,190      5.125%, 9/1/31  
Aa1/AA+
    10,519,443  
      San Juan Unified School Dist., GO (FSA),            
  1,770      zero coupon, 8/1/23   Aaa/AAA     852,680  
  6,105      zero coupon, 8/1/26   Aaa/AAA     2,487,971  
  9,150      5.00%, 8/1/27, Ser. A (h)   Aaa/AAA     9,511,059  
  4,835   San Mateo Foster City School Dist., GO,            
         5.10%, 8/1/31, (Pre-refunded @ $101, 8/1/11) (FGIC) (b)   Aaa/AAA     5,194,144  
  2,300   San Mateo Union High School Dist., GO, zero coupon,            
         9/1/20 (FGIC)   Aaa/AAA     1,303,134  
  1,730   San Rafael City High School Dist., GO, 5.00%, 8/1/27,            
         Ser. B (FSA)   Aaa/AAA     1,784,184  
  3,280   San Rafael Elementary School Dist., GO, 5.00%, 8/1/27,            
         Ser. B (FSA)   Aaa/AAA     3,382,730  
      Santa Clara Unified School Dist., GO (MBIA),            
  2,755      5.00%, 7/1/25   Aaa/AAA     2,842,278  
  3,040      5.00%, 7/1/27   Aaa/AAA     3,121,046  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 19


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                         
 
Amount
      Credit Rating            
 
(000)
      (Moody’s/S&P)     Value  
$ 1,260   Santa Cruz Cnty. Rev., 5.25%, 8/1/32  
A3/NR
  $       1,327,082   
      Santa Margarita Water Dist., Special Tax,            
  2,000      6.00%, 9/1/30, (Pre-refunded @ $100, 9/1/13) (b)   NR/NR     2,271,160  
  2,185      6.25%, 9/1/29   NR/NR     2,241,854  
  815      6.25%, 9/1/29, (Pre-refunded @ $102, 9/1/09) (b)   NR/NR     871,952  
  2,000   Santa Monica Community College Dist., GO, zero coupon,            
         8/1/26, Ser. C (MBIA)   Aaa/AAA     778,800  
      Saugus Hart School Facs. Financing Auth., Special Tax,            
         Community Facs. Dist. 00-1,            
  1,140          6.10%, 9/1/32   NR/NR     1,147,079  
  2,195          6.125%, 9/1/33   NR/NR     2,206,809  
  1,000   Shasta Union High School Dist., GO, zero coupon, 8/1/24 (FGIC)   Aaa/AAA     447,970  
  2,745   South Tahoe JT Powers Parking Financing Auth. Rev.,            
         7.00%, 12/1/27, Ser. A   NR/NR     2,664,681  
  1,800   Southern Mono Health Care Dist., GO, zero coupon,            
         8/1/26 (MBIA)   Aaa/AAA     713,790  
  3,730   State Dev. Finance Agcy., Tax Allocation, 5.00%, 9/1/27 (MBIA)   Aaa/AAA     3,837,126  
  9,605   State Public Works Board Lease Rev., UCLA Replacement            
         Hospital,            
             5.00%, 10/1/22, Ser. A (FSA)   Aaa/AAA     9,991,985  
      Statewide Community Dev. Auth.,            
  1,600      Baptist Univ., 5.50%, 11/1/38, Ser. A   NR/NR     1,572,368  
  3,555      Bentley School, 6.75%, 7/1/32 (a)(i)   NR/NR     3,767,909  
  1,250      Huntington Park Chapter School, 5.25%, 7/1/42, Ser. A   NR/NR     1,165,575  
  9,700      Jewish Home Rev., 5.50%, 11/15/33 (CA St. Mtg.)  
NR/A+
    10,128,740  
  2,770      Kaiser Permanente Rev., 5.50%, 11/1/32, Ser. A  
NR/A+
    2,847,643  
  3,000      Live Oak School Rev., 6.75%, 10/1/30   NR/NR     3,076,290  
  500      Peninsula Project Rev., 5.00%, 11/1/29   NR/NR     458,835  
  1,170      Wildwood Elementary School, CP, 6.10%, 11/1/15 (a)(i)   NR/NR     1,177,196  
  1,365      Windrush School Rev., 5.50%, 7/1/37   NR/NR     1,351,159  
      Statewide Financing Auth. Tobacco Settlement Rev.,            
  1,665      5.625%, 5/1/29  
Baa3/NR
    1,641,474  
  20,000      6.00%, 5/1/37 (h)  
Baa3/NR
    19,864,200  
  7,750   Tamalpais Union High School Dist., GO, 5.00%, 8/1/27 (FSA)  
Aaa/AAA
    8,009,315  
      Tobacco Securitization Agcy. Rev.,  
       
  4,500      Alameda Cnty., 6.00%, 6/1/42  
Baa3/NR
    4,422,735  
         Fresno Cnty.,            
  3,750          5.625%, 6/1/23   Baa3/BBB     3,754,050  
  10,000          6.00%, 6/1/35   Baa3/BBB     9,946,600  
  6,875      Gold Cnty., zero coupon, 6/1/33  
NR/BBB
    1,297,519  
  1,800      Stanislaus Funding, 5.875%, 6/1/43, Ser. A  
Baa3/NR
    1,723,878  
  8,000   Tobacco Securitization Auth. of Southern California Rev.,            
         5.00%, 6/1/37, Ser. A-1   Baa3/BBB     6,764,480  
  995   Tracy Community Facs. Dist., Special Tax, No. 99-2            
         South Macarthur Area, 6.00%, 9/1/27   NR/NR     1,011,925  

20 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
      Univ. Rev. (h),  
       
$
5,500      4.75%, 5/15/35, Ser. F (FSA)  
Aaa/AAA
  $       5,533,220   
  5,000      4.75%, 5/15/35, Ser. G (FGIC)  
Aaa/AAA
    5,016,400  
  5,650      4.75%, 5/15/38, Ser. B  
Aa2/AA-
    5,665,424  
  10,000      5.00%, 9/1/27, Ser. O, (Pre-refunded @ $101,  
       
     
        9/1/10) (FGIC) (b)
 
Aaa/AAA
    10,573,100  
  10,000   Ventura Cnty. Community College Dist., GO, 5.00%,  
       
         8/1/27, Ser. A (MBIA)  
Aaa/AAA
    10,373,000  
  1,555   Ventura Unified School Dist., GO, 5.00%, 8/1/32, Ser. F (FSA)  
Aaa/AAA
    1,609,021  
  2,000   Vernon Electric System Rev., Malburg Generating Station,  
       
         5.50%, 4/1/33, (Pre-refunded @ $100, 4/1/08) (b)  
Aaa/NR
    2,014,540  
      Victor Elementary School Dist., GO, Ser. A (FGIC),  
       
  1,125      zero coupon, 8/1/24  
Aaa/AAA
    508,084  
  2,410      zero coupon, 8/1/26  
Aaa/AAA
    973,254  
  1,000   Vista Unified School Dist., GO, zero coupon,  
       
         8/1/26, Ser. A (FSA)  
Aaa/AAA
    407,530  
      West Contra Costa Unified School Dist., GO, Ser. A (MBIA),  
       
  2,740      5.00%, 8/1/26  
Aaa/AAA
    2,803,376  
  2,690      5.00%, 8/1/28  
Aaa/AAA
    2,748,830  
  1,890      5.00%, 8/1/31  
Aaa/AAA
    1,929,425  
  2,000   William S. Hart JT School Financing Auth. Rev., 5.625%, 9/1/34  
NR/BBB+
    2,062,200  
  2,110   Yuba City Unified School Dist., GO, zero coupon, 9/1/25 (FGIC)  
Aaa/AAA
    904,916  
 
      Total California Municipal Bonds & Notes (cost—$825,548,624)  
    858,735,747  
  OTHER MUNICIPAL BONDS & NOTES—3.6%
      Iowa—1.6%  
       
  16,100   Tobacco Settlement Auth. of Iowa Rev., zero coupon,  
       
         6/1/34, Ser. B  
Baa3/BBB
    14,654,381  
      New York—0.4%  
       
  3,235   State Dormitory Auth. Hospital Rev., 6.25%, 8/15/15 (FHA)  
Aa2/AAA
    3,566,782  
      Pennsylvania—0.5%  
       
  4,300   Allegheny Cnty. Hospital Dev. Auth. Rev., 5.375%,  
       
         11/15/40, Ser. A  
Ba2/BB
    3,915,795  
      Puerto Rico—1.1%  
       
  2,000   Electric Power Auth. Power Rev.,  
       
         5.125%, 7/1/29, Ser. NN, (Pre-refunded @ $100, 7/1/13) (b)  
A3/BBB+
    2,181,160  
  2,505   Public Building Auth. Rev., Gov’t Facs., 5.00%,  
       
         7/1/36, Ser. I (GTD)  
Baa3/BBB-
    2,493,577  
      Sales Tax Financing Corp., Rev., Ser. A (AMBAC),  
       
  32,600      zero coupon, 8/1/47  
Aaa/AAA
    4,323,412  
  12,500      zero coupon, 8/1/54  
Aaa/AAA
    1,139,500  
         
    10,137,649  
 
      Total Other Municipal Bonds & Notes (cost—$33,203,782)  
    32,274,607  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 21


PIMCO California Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                             
  Amount       Credit Rating        
  (000)       (Moody’s/S&P)     Value  
  CALIFORNIA VARIABLE RATE NOTES (c) (e) (f)—0.2%            
$
1,500   Modesto Public Financing Auth. Lease Rev.,            
         9.52%, 9/1/29, Ser. 354 (AMBAC) (cost—$1,481,552)  
Aaa/NR
  $       1,600,350   
  OTHER VARIABLE RATE NOTES (f)—0.6%            
      Puerto Rico—0.6%            
  5,300   Public Finance Corp. Rev., 5.75%, 8/1/27, Ser. A            
         (cost—$5,553,072)   Ba1/BBB-     5,558,428  
  U.S. TREASURY BILLS (g)—0.4%            
  3,920   3.20%-5.60%, 12/13/07-2/28/08 (cost—$3,907,611)   NR/NR     3,907,611  
 
      Total Investments (cost—$869,694,641)—100.0%       $ 902,076,743  

 

 

22 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO New York Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
       
 
Amount
     
Credit Rating
           
 
(000)
     
(Moody’s/S&P)
    Value  
  NEW YORK MUNICIPAL BONDS & NOTES—89.4%  
       
      Buffalo Municipal Water Finance Auth., Water System Rev.,  
       
         Ser. B, (Pre-refunded @ $100, 7/1/12) (FSA) (b),  
       
$ 250          5.00%, 7/1/27  
Aaa/AAA
 
$
268,443   
  1,000          5.125%, 7/1/32  
Aaa/AAA
          1,079,040  
  2,400   Erie Cnty. Industrial Dev. Agcy., Orchard Park Rev.,  
       
         6.00%, 11/15/36  
NR/NR
    2,344,512  
  10,000   Erie Cnty. Tobacco Asset Securitization Corp. Rev.,  
       
         6.50%, 7/15/32, (Pre-refunded @ $101, 7/15/10) (b)  
NR/AAA
    10,906,700  
      Liberty Dev. Corp. Rev.,  
       
  2,500      5.25%, 10/1/35 (h)  
Aa3/AA-
    2,655,625  
  1,700      5.50%, 10/1/37  
Aa3/AA-
    1,873,128  
      Metropolitan Transportation Auth. Rev.,  
       
  1,850      5.00%, 11/15/30, Ser. A (FSA)  
Aaa/AAA
    1,901,282  
  10,000      5.25%, 11/15/31, Ser. E  
A2/A
    10,355,800  
  7,000      5.35%, 7/1/31, Ser. B  
A1/AAA
    7,290,150  
  4,130   Mortgage Agcy. Rev., 4.75%, 10/1/27, Ser. 128 (h)  
Aa1/NR
    4,056,858  
  4,000   New York City, GO, 5.00%, 3/1/33, Ser. I  
Aa3/AA
    4,064,160  
      New York City Health & Hospital Corp. Rev., Ser. A,  
       
  1,100      5.375%, 2/15/26  
A1/A
    1,122,429  
  2,000      5.45%, 2/15/26  
A1/A
    2,051,760  
      New York City Industrial Dev. Agcy. Rev.,  
       
  975      Eger Harbor, 4.95%, 11/20/32 (GNMA)  
NR/AA+
    976,687  
  1,415      Liberty Interactive Corp., 5.00%, 9/1/35  
Baa3/BB
    1,347,646  
  1,220      Staten Island Univ. Hospital, 6.45%, 7/1/32  
B2/NR
    1,253,318  
  1,500      United Jewish Appeal Fed., 5.00%, 7/1/27  
Aa1/NR
    1,558,635  
      New York City Municipal Water Finance Auth.,  
       
         Water & Sewer System Rev. (h),  
       
  7,500          4.50%, 6/15/33, Ser. C  
Aa2/AA+
    7,310,925  
  5,000          5.00%, 6/15/32, Ser. A  
Aa2/AA+
    5,105,150  
  15,000          5.125%, 6/15/34, Ser. A  
Aa2/AA+
    15,491,550  
  10,000   New York City Transitional Finance Auth. Rev.,  
       
         5.00%, 11/1/27, Ser. B  
Aa1/AAA
    10,355,400  
  7,785   New York City Trust for Cultural Res. Rev., 5.00%,  
       
         2/1/34 (FGIC) (h)  
Aaa/AAA
    8,055,295  
  3,600   Port Auth. New York & New Jersey Rev., 5.00%,  
       
         4/15/32, Ser. 125 (FSA)  
Aaa/AAA
    3,746,448  
  7,500   State Dormitory Auth. Lease Rev., State Univ. Dormitory Facs.,  
       
         5.00%, 7/1/32, (Pre-refunded @ $100, 7/1/12) (b)  
Aa3/AA-
    8,046,675  
      State Dormitory Auth. Rev.,  
       
  5,000      5.00%, 12/1/35 (Radian)  
Aa3/AA
    4,775,400  
  1,320      5.25%, 9/1/28 (Radian)  
Aa3/AA
    1,321,214  
  80      5.25%, 9/1/28, (Pre-refunded @ $102, 9/1/09) (Radian) (b)  
Aa3/AA
    84,249  
  7,490      5.50%, 5/15/31, Ser. A (AMBAC) (h)  
Aaa/AAA
    8,639,266  
  1,000      5.625%, 7/1/37, Ser. B (d)  
Ba2/BB
    982,280  
  2,600      Catholic Health of Long Island, 5.10%, 7/1/34  
Baa1/BBB
    2,504,710  
  2,000      Kaleida Health Hospital, 5.05%, 2/15/25 (FHA)  
NR/AAA
    2,046,820  
  5,300      Lenox Hill Hospital, 5.50%, 7/1/30  
Ba2/NR
    5,094,572  

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 23


PIMCO New York Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
               
           
 
Amount
     
Credit Rating
       
 
(000)
     
(Moody’s/S&P)
    Value  
$
8,850      North General Hospital, 5.00%, 2/15/25  
NR/AA-
  $       9,040,009   
  8,600      State Personal Income Tax, 5.00%, 3/15/32,  
       
     
        (Pre-refunded @ $100, 3/15/13) (b)
 
Aa3/AAA
    9,298,062  
  1,250      Student Housing Corp., 5.125%, 7/1/34,  
       
     
        (Pre-refunded @ $100, 7/1/14) (FGIC) (b)
 
Aaa/AAA
    1,376,787  
  4,270      Teachers College, 5.00%, 7/1/32 (MBIA)  
Aaa/NR
    4,403,480  
  2,000      Yeshiva Univ., 5.125%, 7/1/34 (AMBAC)  
Aaa/NR
    2,097,040  
  2,000   State Environmental Facs. Corp., State Clean  
       
         Water & Drinking Rev., 5.125%, 6/15/31  
Aaa/AAA
    2,078,040  
  6,100   State Urban Dev. Corp., Personal Income Tax Rev.,  
       
         5.00%, 3/15/33, Ser. C-1, (Pre-refunded @ $100, 3/15/13) (b)  
Aa3/AAA
    6,595,137  
      Tobacco Settlement Asset Backed, Inc. Rev., Ser.1,  
       
  25,000      5.00%, 6/1/34  
NR/BBB
    22,973,750  
  25,000      5.75%, 7/15/32, (Pre-refunded @ $100, 7/15/12) (b)  
Aaa/AAA
    27,576,500  
  10,000      6.375%, 7/15/39, (Pre-refunded @ $101, 7/15/09) (b)  
Aaa/AAA
    10,587,700  
      Triborough Bridge & Tunnel Auth. Rev. (FGIC-TCRS),  
       
  710      5.00%, 1/1/32  
Aaa/AAA
    728,630  
  3,990      5.00%, 1/1/32, (Pre-refunded @ $100, 1/1/12) (b)  
Aaa/AAA
    4,254,218  
  1,815   Ulster Cnty. Industrial Dev. Agcy. Rev., 6.00%, 9/15/37, Ser. A  
NR/NR
    1,772,983  
  2,000   Warren & Washington Cntys. Industrial Dev. Agcy. Fac. Rev.,  
       
         Glens Falls Hospital, 5.00%, 12/1/35, Ser. A (FSA)  
Aaa/AAA
    2,049,860  
  750   Westchester Cnty. Industrial Dev. Agcy. Continuing Care  
       
         Retirement Rev., Kendal on Hudson, 6.50%, 1/1/34  
NR/NR
    776,400  
 
      Total New York Municipal Bonds & Notes (cost—$235,077,800)  
    244,274,723  
  OTHER MUNICIPAL BONDS & NOTES—6.8%  
       
      California—3.0%  
       
      Alameda Unified School Dist., Alameda Cnty., GO, Ser. A (FSA),  
       
  3,500      zero coupon, 8/1/24  
Aaa/AAA
    1,593,585  
  3,000      zero coupon, 8/1/25  
Aaa/AAA
    1,291,740  
  3,130   Covina Valley Unified School Dist., GO,  
       
         zero coupon, 6/1/25, Ser. B (FGIC)  
Aaa/AAA
    1,346,933  
  5,000   Tobacco Securitization Agcy. Rev., Los Angeles Cnty.,  
       
         zero coupon, 6/1/28  
Baa3/NR
    3,845,700  
         
    8,077,958  
      Colorado—0.0%  
       
  210   Dawson Ridge Dist. No. 1, GO, zero coupon, 10/1/22, Ser. A  
Aaa/NR
    108,425  
      Puerto Rico—3.8%  
       
  5,675   Children’s Trust Fund, Tobacco Settlement Rev.,  
       
         5.625%, 5/15/43  
Baa3/BBB
    5,593,280  
  1,500   Commonwealth Highway & Transportation Auth. Rev.,  
       
         5.25%, 7/1/38, Ser. D, (Pre-refunded @ $100, 7/1/12) (b)  
Baa3/AAA
    1,625,145  
  750   Electric Power Auth. Power Rev.,  
       
         5.125%, 7/1/29, Ser. NN, (Pre-refunded @ $100, 7/1/13) (b)  
A3/BBB+
    817,935  

24 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO New York Municipal Income Fund II Schedule of Investments
November 30, 2007 (unaudited)
 
Principal
                             
 
Amount
      Credit Rating        
 
(000)
      (Moody’s/S&P)     Value  
      Puerto Rico—(continued)            
      Sales Tax Financing Corp., Rev., Ser. A,            
$
14,250      zero coupon, 8/1/54 (AMBAC)  
Aaa/AAA
 
$
      1,299,030   
  12,900      zero coupon, 8/1/56   A1/A+     1,051,221  
                10,386,611  
                   
      Total Other Municipal Bonds & Notes (cost—$18,348,814)         18,572,994  
  NEW YORK VARIABLE RATE NOTES (c) (e) (f)—2.8%            
  5,595   Long Island Power Auth. Electric System Rev.,            
         10.74%, 12/1/26, Ser. 339 (MBIA-IBC)  
Aaa/NR
    6,147,506  
  1,300   State Urban Dev. Corp. Rev., 9.897%, 3/15/35  
NR/AAA
    1,548,430  
 
      Total New York Variable Rate Notes (cost—$7,016,192)         7,695,936  
  OTHER VARIABLE RATE NOTES—0.7%            
      Puerto Rico—0.7%            
  1,900   Public Finance Corp. Rev., 5.75%, 8/1/27, Ser. A            
         (cost—$1,990,724)   Ba1/BBB-     1,992,644  
  U.S. TREASURY BILLS (g)—0.3%            
  795   3.21%-5.60%, 12/13/07-2/28/08 (cost—$793,307)   NR/NR     793,307  
 
      Total Investments (cost—$263,226,837)—100.0%      
$
273,329,604  

 

 

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 25


PIMCO Municipal Income Funds II Schedule of Investments
November 30, 2007 (unaudited)

 

 
Notes to Schedules of Investments:
(a)   

Illiquid security.

(b)

Pre-refunded bonds are collateralized by U.S. Government or other eligible securities which are held in escrow and used to pay principal and interest and retire the bonds at the earliest refunding date (payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate).

(c)

144A Security—security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

(d)

When-issued or delayed-delivery security. To be settled/delivered after November 30, 2007.

(e)

Inverse Floater—interest rate shown bears an inverse relationship to the interest rate on another security or the value of an index.

(f)

Variable Rate Notes—instruments whose interest rates change on specified date (such as a coupon date or interest payment date) and/or whose interest rates vary with changes in a designated base rate (such as the prime interest rate). The interest rate disclosed reflects the rate in effect on November 30, 2007.

(g)

All or partial amount segregated as collateral for futures contracts.

(h)

Residual Interest Bonds held in trust—securities represent underlying bonds transferred to a separate securitization trust established in a tender option bond transaction in which the Funds acquired the residual interest certificates. These securities serve as collateral in a financing transaction.

(i)

Private Placement—restricted as to resale and may not have a readily available market. Securities with an aggregate value of $20,722,069, representing 2.30% of total investments in California Municipal Income II.

 

Glossary:
AMBAC — insured by American Municipal Bond Assurance Corp.
CA Mtg. Ins. — insured by California Mortgage Insurance
CA St. Mtg.—insured by California State Mortgage
CP — Certificates of Participation
FGIC — insured by Financial Guaranty Insurance Co.
FHA — insured by Federal Housing Administration
FSA — insured by Financial Security Assurance, Inc.
GNMA — insured by Government National Mortgage Association
GO — General Obligation Bond
GTD — Guaranteed
IBC — Insurance Bond Certificate
MBIA — insured by Municipal Bond Investors Assurance
NR — Not Rated
PSF — Public School Fund
Q-SBLF—Qualified School Bond Loan Fund
Radian — insured by Radian Guaranty, Inc.
TCRS — Temporary Custodian Receipts

 

 

 

26 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


 

 

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PIMCO Municipal Income Funds II Statements of Assets and Liabilities
November 30, 2007 (unaudited)
                               
          California      New York   
   
Municipal II
 
Municipal II
 
Municipal II
Assets:                  
Investments, at value (cost—$1,389,981,872, $869,694,641                  
   and $263,226,837, respectively)   $1,488,209,136     $902,076,743     $273,329,604  
Interest receivable   18,847,663     10,682,801     4,234,551  
Receivable for variation margin on futures contracts   1,746,875     1,264,375     261,569  
Receivable for investments sold   13,000          
Prepaid expenses and other assets   2,035,714     124,633     440,556  
   Total Assets   1,510,852,388     914,148,552     278,266,280  
 
Liabilities:                  
Payable for floating rate notes   115,540,000     220,964,639     36,847,780  
Payable for investments purchased   25,560,600         971,210  
Payable to custodian for cash overdraft   10,623,048     4,912,760     886,465  
Dividends payable to common and preferred shareholders   4,005,126     2,215,352     737,216  
Interest payable   1,645,474     763,863     171,560  
Investment management fees payable   608,629     308,710     107,222  
Accrued expenses and other payables   172,769     890,830     184,708  
   Total Liabilities   158,155,646     230,056,154     39,906,161  
Preferred shares ($0.00001 par value and $25,000 net                  
   asset and liquidation value per share applicable to                  
   an aggregate of 20,200, 10,400 and 3,600 shares                  
   issued and outstanding, respectively)   505,000,000     260,000,000     90,000,000  
Net Assets Applicable to Common Shareholders   $847,696,742     $424,092,398     $148,360,119  
 
Composition of Net Assets Applicable to                  
   Common Shareholders:                  
Common Stock:                  
   Par value ($0.00001 per share)   $590     $307     $106  
   Paid-in-capital in excess of par   839,548,318     435,674,520     150,349,620  
Dividends in excess of net investment income   (600,341 )   (2,860,552 )   (685,374 )
Accumulated net realized loss on investments   (89,069,595 )   (41,984,628 )   (11,636,645 )
Net unrealized appreciation of investments and                  
   futures contracts   97,817,770     33,262,751     10,332,412  
Net Assets Applicable to Common Shareholders   $847,696,742     $424,092,398     $148,360,119  
Common Shares Outstanding   59,029,006     30,650,629     10,591,830  
Net Asset Value Per Common Share   $14.36     $13.84     $14.01  

 

 

28 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


PIMCO Municipal Income Funds II Statements of Operations
Six months ended November 30, 2007 (unaudited)
                               
          California      New York   
    Municipal II  
Municipal II
 
Municipal II
Investment Income:                  
Interest   $39,142,486     $23,699,633     $7,377,789  
 
Expenses:                  
Investment management fees   4,436,791     2,268,892     783,628  
Interest expense   2,071,922     4,926,175     922,755  
Auction agent fees and commissions   645,178     335,430     119,972  
Custodian and accounting agent fees   422,310     193,088     27,263  
Shareholder communications   60,690     42,232     23,487  
Audit and tax services   43,077     35,977     25,623  
Trustees’ fees and expenses   40,739     28,897     12,869  
New York Stock Exchange listing fees   27,240     14,118     12,243  
Transfer agent fees   17,796     17,399     19,032  
Legal fees   16,953     9,695     8,468  
Insurance expense   10,924     5,780     2,282  
Miscellaneous   19,337     8,825     7,330  
   Total expenses   7,812,957     7,886,508     1,964,952  
   Less: investment management fees waived   (739,074 )   (378,085 )   (130,557 )
             custody credits earned on cash balances
  (22,233 )   (22,803 )   (16,655 )
   Net expenses   7,051,650     7,485,620     1,817,740  
 
Net Investment Income   32,090,836     16,214,013     5,560,049  
 
Realized and Change In Unrealized Gain (Loss):                  
Net realized gain (loss) on:                  
   Investments   3,952,107     531,914     375,613  
   Futures contracts   (5,505,482 )   (11,954,612 )   (1,722,170 )
Net change in unrealized appreciation/depreciation of:                  
   Investments   (28,461,750 )   (17,386,596 )   (5,471,730 )
   Futures contracts   (10,755,000 )   (2,620,425 )   (1,259,766 )
Net realized and change in unrealized loss on investments                  
   and futures contracts   (40,770,125 )   (31,429,719 )   (8,078,053 )
Net Decrease in Net Assets Resulting from                  
   Investment Operations   (8,679,289 )   (15,215,706 )   (2,518,004 )
Dividends on Preferred Shares from                  
   Net Investment Income   (8,965,712 )   (4,279,372 )   (1,514,346 )
Net Decrease in Net Assets Applicable to Common                  
   Shareholders Resulting from Investment Operations   $(17,645,001 )   $(19,495,078 )   $(4,032,350 )

 

 

See accompanying Notes to Financial Statements | 11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 29


PIMCO Municipal Income Funds II 
Statements of Changes in Net Assets
 
Applicable to Common Shareholders

 
 
Municipal II
   
Six months
     
   
ended
     
       
November 30, 2007
     
Year ended
   
(unaudited)
 
May 31, 2007
Investment Operations:            
Net investment income   $32,090,836     $65,691,345  
Net realized gain (loss) on investments and futures contracts   (1,553,375 )   87,615  
Net change in unrealized appreciation/depreciation of investments            
   and futures contracts   (39,216,750 )   19,514,662  
Net increase (decrease) in net assets resulting from investment operations   (8,679,289 )   85,293,622  
 
Dividends on Preferred Shares from Net Investment Income   (8,965,712 )   (17,388,694 )
Net increase (decrease) in net assets applicable to common shareholders            
   resulting from investment operations   (17,645,001 )   67,904,928  
 
Dividends to Common Shareholders from Net Investment Income   (23,006,036 )   (47,920,349 )
 
Capital Share Transactions:            
Reinvestment of dividends and distributions   1,533,019     3,998,399  
Total increase (decrease) in net assets applicable to common shareholders   (39,118,018 )   23,982,978  
 
Net Assets Applicable to Common Shareholders:            
Beginning of period   886,814,760     862,831,782  
End of period (including dividends in excess of net investment income of            
   $(600,341) and $(719,429); $(2,860,552) and $(1,935,976); $(685,374)            
   and $(524,386); respectively)   $847,696,742     $886,814,760  
 
Common Shares Issued in Reinvestment of Dividends   104,373     266,561  

 

 

30 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


California Municipal II
           
New York Municipal II
Six months
             
Six months
           
ended
         
ended
       
November 30, 2007
   
Year ended
   
November 30, 2007
   
Year ended
(unaudited)
   
May 31, 2007
 
(unaudited)
   
May 31, 2007
                     
$16,214,013     $33,005,824     $5,560,049     $11,516,932  
(11,422,698 )   (931,161 )   (1,346,557 )   138,535  
                     
(20,007,021 )   11,319,352     (6,731,496 )   1,022,067  
(15,215,706 )   43,394,015     (2,518,004 )   12,677,534  
                     
(4,279,372 )   (8,273,822 )   (1,514,346 )   2,954,143  
                     
(19,495,078 )   35,120,193     (4,032,350 )   9,723,391  
                     
(12,859,217 )   (25,618,929 )   (4,206,691 )   (8,378,638 )
 
                     
1,162,603     2,403,958     381,270     784,927  
(31,191,692 )   11,905,222     (7,857,771 )   2,129,680  
 
                     
455,284,090     443,378,868     156,217,890     154,088,210  
 
                     
$424,092,398     $455,284,090     $148,360,119     $156,217,890  
                     
80,100     158,649     26,456     52,337  

 

 


See accompanying Notes to Financial Statements | 11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 31


PIMCO Municipal Income Fund II Statement of Cash Flows
Six months ended November 30, 2007 (unaudited)
Cash Flows provided by Operating Activities:          
   Purchases of long-term investments   $ (141,662,025 )
   Proceeds from sales of long-term investments   154,167,711  
   Interest received   29,191,541  
   Operating expenses paid   (5,055,499 )
   Net cash used for futures transactions   (18,328,445 )
   Net increase in short-term investments   (189,384 )
Net cash provided by operating activities   18,123,899  
 
Cash Flows from Financing Activities:      
   Cash dividends paid (excluding reinvestment of dividends of $1,553,019)   (30,411,883 )
   Custody overdraft   10,623,048  
Net cash used for financing activities*   (19,788,835 )
 
Net decrease in cash   (1,664,936 )
Cash at beginning of period   1,664,936  
Cash at end of period    
 
Reconciliation of Net Increase in Net Assets From Investment      
   Operations to Net Cash Provided by Operating Activities:      
Net decrease in net assets resulting from investment operations   (8,679,289 )
Increase in interest receivable   (499,495 )
Decrease in receivable for investments sold   407,000  
Increase in payable for investments purchased   25,560,600  
Decrease in prepaid expenses and other assets   523  
Increase in investment management fees payable   15,472  
Decrease in variation margin payable on futures contracts   (355,219 )
Increase in variation margin receivable on futures contracts   (1,712,744 )
Decrease in accrued expenses and other payables   (91,766 )
Net decrease in investments   3,478,817  
 
Net cash provided by operating activities   $18,123,899  

*   

Supplemental Disclosure

 

Non-cash financing activity not included consists of interest expense on floating rate notes issued of $2,071,922.

 

 

32 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


PIMCO California Municipal Income Fund II Statement of Cash Flows
Six months ended November 30, 2007 (unaudited)
Cash Flows provided by Operating Activities:          
   Purchases of long-term investments   $ (23,498,795 )
   Proceeds from sales of long-term investments   36,732,288  
   Interest received   16,757,888  
   Operating expenses paid   (2,622,300 )
   Net cash used for futures transactions   (15,928,025 )
   Net increase in short-term investments   (479,428 )
Net cash provided by operating activities   10,961,628  
 
Cash Flows from Financing Activities:      
   Cash dividends paid (excluding reinvestment of dividends of $1,162,603)   (15,973,228 )
   Custody overdraft   4,912,760  
Net cash used for financing activities*   (11,060,468 )
 
Net decrease in cash   (98,840 )
Cash at beginning of period   98,840  
Cash at end of period    
 
Reconciliation of Net Increase in Net Assets From Investment      
   Operations to Net Cash Provided by Operating Activities:      
Net increase in net assets resulting from investment operations   (15,215,706 )
Decrease in interest receivable   183,907  
Decrease in receivable for investments sold   323,055  
Decrease in prepaid expenses and other assets   5,899  
Increase in investment management fees payable   4,181  
Decrease in variation margin payable on futures contracts   (138,925 )
Increase in variation margin receivable on futures contracts   (1,214,062 )
Decrease in accrued expenses and other payables   (72,935 )
Net decrease in investments   27,086,214  
 
Net cash provided by operating activities   $10,961,628  

*   

Supplemental Disclosure

 

Non-cash financing activity not included consists of interest expense on floating rate notes issued of $4,926,175

 

 

See accompanying Notes to Financial Statements | 11.30.07 | PIMCO Municipal Income Funds II Annual Report 33


PIMCO New York Municipal Income Fund II Statement of Cash Flows
Six months ended November 30, 2007 (unaudited)
Cash Flows provided by Operating Activities:          
   Purchases of long-term investments   $ (13,797,598 )
   Proceeds from sales of long-term investments   12,076,291  
   Interest received   6,259,697  
   Operating expenses paid   (918,901 )
   Net cash used for futures transactions   (3,257,505 )
   Net decrease in short-term investments   2,566,790  
Net cash provided by operating activities   2,928,774  
 
Cash Flows from Financing Activities:      
   Cash dividends paid (excluding reinvestment of dividends of $381,270)   (5,318,658 )
   Custody overdraft   886,465  
Net cash used for financing activities*   (4,432,193 )
 
Net decrease in cash   (1,503,419 )
Cash at beginning of period   1,503,419  
Cash at end of period    
 
Reconciliation of Net Increase in Net Assets From Investment      
   Operations to Net Cash Provided by Operating Activities:      
Net decrease in net assets resulting from investment operations   (2,518,004 )
Decrease in interest receivable   63,482  
Decrease in receivable for investments sold   10,000  
Increase in payable for investments purchased   971,210  
Increase in prepaid expenses and other assets   (9,007 )
Increase in investment management fees payable   2,256  
Decrease in variation margin payable on futures contracts   (17,719 )
Increase in variation margin receivable on futures contracts   (257,850 )
Decrease in accrued expenses and other payables   (17,165 )
Net decrease in investments   4,701,571  
 
Net cash provided by operating activities   $2,928,774  

*   

Supplemental Disclosure

 

Non-cash financing activity not included consists of interest expense on floating rate notes issued of $922,755.

 

 

34 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

1. Organization and Significant Accounting Policies
PIMCO Municipal Income Fund II (‘‘Municipal II’’), PIMCO California Municipal Income Fund II (‘‘California Municipal II’’) and PIMCO New York Municipal Income Fund II (‘‘New York Municipal II”), collectively referred to as the ‘‘Funds’’ or “PIMCO Municipal Income Funds II”, were organized as Massachusetts business trusts on March 29, 2002. Prior to commencing operations on June 28, 2002, the Funds had no operations other than matters relating to their organization and registration as non-diversified, closed-end management investment companies registered under the Investment Company Act of 1940 and the rules and regulations thereunder, as amended. Allianz Global Investors Fund Management LLC (the ‘‘Investment Manager’’), serves as the investment manager and is an indirect, wholly-owned subsidiary of Allianz Global Investors of America L.P. (‘‘Allianz Global”). Allianz Global is an indirect majority-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. The Funds have an unlimited amount of $0.00001 par value common stock authorized.

Under normal market conditions, Municipal II invests substantially all of its assets in a portfolio of municipal bonds, the interest from which is exempt from federal income taxes. Under normal market conditions, California Municipal II invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal and California state income taxes. Under normal market conditions, New York Municipal II invests substantially all of its assets in municipal bonds which pay interest that is exempt from federal, New York State and New York City income taxes. The Funds will seek to avoid bonds generating interest income which could potentially subject individuals to alternative minimum tax. The issuers’ abilities to meet their obligations may be affected by economic and political developments in a specific state or region.

The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

In the normal course of business the Funds enter into contracts that contain a variety of representations which provide general indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds based upon events that have not been asserted. However, the Funds expect the risk of any loss to be remote.

In July 2006, the Financial Accounting Standards Board issued interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109“ (the “Interpretation“). The Interpretation establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Funds’ management has determined that its evaluation of the Interpretation has resulted in no impact to the Funds’ financial statements at November 30, 2007.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS“) 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Funds are in the process of reviewing the Standard against its current valuation policies to determine future applicability.

The following is a summary of significant accounting policies consistently followed by the Funds:

(a) Valuation of Investments

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Portfolio securities and other financial instruments for which market quotations are not readily available or if a development/event occurs that may significantly impact the value of a security, are fair-valued, in good faith, pursuant to guidelines established by the Board of Trustees or persons acting at their discretion. The Funds’ investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the last quoted mean price for those securities for which the over-the-counter market is the primary market or for listed securities in which there were no sales. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Exchange traded options and futures are valued at the settlement price determined by the relevant exchange.

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 35


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

(a) Valuation of Investments (continued)
Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days. The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold and the differences could be material to the financial statements. Each Fund’s net asset value is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the New York Stock Exchange (“NYSE”) on each day the NYSE is open for business.

(b) Investment Transactions and Investment Income
Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on the identified cost basis. Interest income is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date.

(c) Federal Income Taxes
The Funds intend to distribute all of their taxable income and to comply with the other requirements of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.

(d) Dividends and Distributions — Common Stock
The Funds declare dividends from net investment income monthly to common shareholders. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions to its shareholders on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment; temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes; they are reported as dividends and/or distributions of paid-in capital.

(e) Futures Contracts
A futures contract is an agreement between two parties to buy and sell a financial instrument at a set price on a future date. Upon entering into such a contract, the Funds are required to pledge to the broker an amount of cash or securities, equal to the minimum “initial margin” requirements of the exchange. Pursuant to the contracts, the Funds agree to receive from or pay to the broker an amount of cash or securities equal to the daily fluctuation in the value of the contracts. Such receipts or payments are known as “variation margin” and are recorded by the Funds as unrealized appreciation or depreciation. When the contracts are closed, the Funds record a realized gain or loss equal to the difference between the value of the contracts at the time they were opened and the value at the time they were closed. Any unrealized appreciation or depreciation recorded is simultaneously reversed. The use of futures transactions involves the risk of an imperfect correlation in the movements in the price of futures contracts, interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the terms of their contracts.

(f) Option Transactions
The Funds may purchase and write (sell) put and call options on securities for hedging purposes, risk management purposes or as part of its investment strategy. The risk associated with purchasing an option is that the Funds pay a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premium and change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options is decreased by the premiums paid.

 

36 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

(f) Option Transactions (continued)
When an option is written, the premium received is recorded as an asset with an equal liability which is subsequently marked to market to reflect the current market value of the option written. These liabilities are reflected as options written in the Statements of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchased transactions, as a realized loss. If a call option written by the Funds is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a put option written by the Funds is exercised, the premium reduces the cost basis of the security. In writing an option, the Funds bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Funds purchasing a security at a price different from the current market value.

(g) Inverse Floating Rate Transactions — Residual Interest Municipal Bonds (“RIBs”) / Residual Interest Tax Exempt Bonds (“RITEs”)
The Funds invest in RIBs and RITEs (“Inverse Floaters”) whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index. In these transactions, the Funds sell a fixed rate municipal bond (“Fixed Rate Bond”) to a broker who places the Fixed Rate Bond in a special purpose trust (“Trust”) from which floating rate bonds (”Floating Rate Notes“) and Inverse Floaters are issued. The Funds simultaneously or within a short period of time purchase the Inverse Floaters from the broker. The Inverse Floaters held by the Funds provide the Funds with the right to: (1) cause the holders of the Floating Rate Notes to tender their notes at par, and (2) cause the broker to transfer the Fixed-Rate Bond held by the Trust to the Funds, thereby collapsing the Trust. Pursuant to Statement of Financial Accounting Standards No. 140 (“FASB Statement No. 140”), the Funds account for the transaction described above as a secured borrowing by including the Fixed-Rate Bond in their Schedules of Investments, and account for the Floating Rate Notes as a liability under the caption “Payable for floating rate notes” in the Funds’ Statements of Assets and Liabilities. The Floating Rate Notes have interest rates that generally reset weekly and their holders have the option to tender their notes to the broker for redemption at par at each reset date.

The Funds may also invest in inverse floaters without transferring a fixed rate municipal bond into a special purpose trust, which are not accounted for as secured borrowings.

The Inverse Floaters are created by dividing the income stream provided by the underlying bonds to create two securities, one short-term and one long-term. The interest rate on the short-term component is reset by an index or auction process typically every 7 to 35 days. After income is paid on the short-term securities at current rates, the residual income from the underlying bond(s) goes to the long-term securities. Therefore, rising short-term rates result in lower income for the long-term component and vice versa. The longer-term bonds may be more volatile and less liquid than other municipal bonds of comparable maturity. Investments in Inverse Floaters typically will involve greater risk than an in investment in Fixed Rate Bonds. The Funds may also invest in Inverse Floaters for the purpose of increasing leverage.

The Funds’ restrictions on borrowings do not apply to the secured borrowings deemed to have occurred for accounting purposes pursuant to FASB Statement No. 140. Inverse Floaters held by the Funds are exempt from registration under Rule 144A of the Securities Act of 1933.

(h) When-Issued/Delayed-Delivery Transactions
When-issued or delayed-delivery basis transactions involve a commitment to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery purchases are outstanding, the Funds will set aside and maintain until the settlement date in a designated account, liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed-delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations, consequently, such fluctuations are taken into account when determining its net asset value. The Funds may dispose of or renegotiate a delayed-delivery transaction after it is entered into, and may sell when-issued securities before they are delivered, which may result in a realized gain or loss. When a security on a delayed-delivery basis is sold, the Funds do not participate in future gains and losses with respect to the security.

 

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 37


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

(i) Custody Credits Earned on Cash Balances
The Funds benefit from an expense offset arrangement with its custodian bank whereby uninvested cash balances earn credits which reduce monthly custodian and accounting agent expenses. Had these cash balances been invested in income producing securities, they would have generated income for the Funds.

(j) Interest Expense
Relates to the Funds’ liability in connection with floating rate notes held by third parties in conjunction with Inverse Floater transactions. Interest expense is recorded as incurred.

2. Investment Manager/Sub-Adviser
Each Fund has entered into an Investment Management Agreement (collectively the “Agreements”) with the Investment Manager. Subject to the supervision by each Fund’s Board of Trustees, the Investment Manager is responsible for managing, either directly or through others selected by it, the Fund’s investment activities, business affairs and administrative matters. Pursuant to the Agreements, the Investment Manager receives an annual fee, payable monthly, at an annual rate of 0.65% of each Fund’s average daily net assets, inclusive of net assets attributable to any preferred shares that may be outstanding. In order to reduce each Fund’s expenses, the Investment Manager has contractually agreed to waive a portion of its investment management fee for each Fund at the annual rate of 0.15% of each Fund’s average daily net assets, including net assets attributable to any preferred shares that may be outstanding through June 30, 2007. On July 1, 2007, the contractual fee waiver was reduced to 0.10% of each Fund’s average daily net assets inclusive of net assets attributable to any preferred shares that may be outstanding through June 30, 2008, and for a declining amount thereafter through June 30, 2009.

The Investment Manager has retained its affiliate, Pacific Investment Management Company LLC (the “Sub-Adviser”), to manage each Fund’s investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all investment decisions for the Funds. The Investment Manager, not the Funds, pays a portion of the fees it receives to the Sub-Adviser in return for its services.

3. Investments in Securities
For the six months ended November 30, 2007, purchases and sales of investments, other than short-term securities and U.S. government obligations, were:

                        California                   New York
   
Municipal II
 
Municipal II
  Municipal II
 
Purchases  
$167,222,625
 
$23,498,795
 
$14,768,808
Sales  
153,760,711
  36,409,233   12,066,291

(a) Futures contracts outstanding at November 30, 2007:

            Market              
Unrealized
                        Value       Expiration  
Appreciation
Fund   Type  
Contracts
  (000)   Date  
(Depreciation)
Municipal II   Short: U.S. Treasury Bond Futures  
(2,795)
  $(327,539)   3/19/08   $(561,094)
California Municipal II   Short: U.S. Treasury Bond Futures  
(2,023)
 
 (237,070)
  3/19/08   867,750 
New York Municipal II   Short: U.S. Treasury Bond Futures  
  (426)
 
  (49,922)
  3/19/08   (67,508)

4. Income Tax Information
The cost basis of investments is substantially the same for both financial reporting purposes and federal income tax purposes. Gross unrealized appreciation and gross unrealized depreciation of investments at November 30, 2007 were:

        Gross   Gross   Net
   
Cost of
      Unrealized       Unrealized       Unrealized
   
Investments
 
Appreciation
  Depreciation   Appreciation
Municipal II  
$1,276,440,994
  $106,671,275  
$8,464,302
 
$98,206,973
California Municipal II  
649,284,922
  38,004,660  
6,883,970
  31,120,690
New York Municipal II  
228,773,374
  11,199,077  
3,193,876
  8,005,201

38 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

5. Auction Preferred Shares
Municipal II has issued 4,040 shares of Preferred Shares Series A, 4,040 shares of Preferred Shares Series B, 4,040 shares of Preferred Shares Series C, 4,040 shares of Preferred Shares Series D and 4,040 shares of Preferred Shares Series E, each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

California Municipal II has issued 2,080 shares of Preferred Shares Series A, 2,080 shares of Preferred Shares Series B, 2,080 shares of Preferred Shares Series C, 2,080 shares of Preferred Shares Series D, and 2,080 shares of Preferred Shares Series E, each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

New York Municipal II has issued 1,800 shares of Preferred Shares Series A and 1,800 shares of Preferred Shares Series B, each with a net asset and liquidation value of $25,000 per share plus accrued dividends.

Dividends are accumulated daily at an annual rate (typically re-set every seven days) through auction procedures. Distributions of net realized capital gains, if any, are paid annually.

For the six months ended November 30, 2007, the annualized dividend rates ranged from:

   
High
                  Low             At November 30, 2007
Municipal II:
           
   Series A  
4.20%
  3.00%   4.20%
   Series B  
4.00%
  3.30%   4.00%
   Series C  
4.15%
  3.15%   3.75%
   Series D  
4.00%
  2.85%   3.75%
   Series E  
4.15%
  3.10%   4.15%
California Municipal II:  
       
   Series A  
3.75%
  1.90%   3.75%
   Series B  
3.95%
  2.95%   3.00%
   Series C  
3.80%
  2.90%   3.50%
   Series D  
4.05%
  2.75%   3.50%
   Series E  
3.95%
  2.90%   2.90%
New York Municipal II:  
       
   Series A  
4.15%
  2.75%   4.15%
   Series B  
4.10%
  2.50%   4.10%

The Funds are subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Funds from declaring any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation value.

6. Subsequent Common Dividend Declarations

On December 3, 2007, the following dividends were declared to common shareholders payable December 31, 2007 to shareholders of record on December 13, 2007:

Municipal II                                     $0.065 per common share
California Municipal II   $0.07 per common share
New York Municipal II   $0.06625 per common share

On January 2, 2008 the following dividends were declared to common shareholders payable February 1, 2008 to shareholders of record on January 14, 2008:

Municipal II                                     $0.065 per common share
California Municipal II   $0.07 per common share
New York Municipal II   $0.06625 per common share

 


11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 39


PIMCO Municipal Income Funds II Notes to Financial Statements
November 30, 2007 (unaudited)

 

7. Legal Proceedings
In June and September 2004, the Investment Manager, certain of its affiliates (including Allianz Global Investors Distributors LLC, PEA Capital LLC and Allianz Global) agreed to settle, without admitting or denying the allegations, claims brought by the Securities and Exchange Commission (the “Commission”), the New Jersey Attorney General and the California Attorney General alleging violations of federal and state securities laws with respect to certain open-end funds for which the Investment Manager serves as investment adviser. Two settlements related to an alleged “market timing” arrangement in certain open-end funds formerly sub-advised by PEA Capital LLC. The Investment Manager and its affiliates agreed to pay a total of $68 million to settle the claims related to shelf space. In addition to monetary payments, the settling parties agreed to undertake certain corporate governance, compliance and disclosure reforms related to market timing, and consented to cease and desist orders and censures. Subsequent to these events, PEA Capital LLC deregistered and dissolved. None of the settlements allege that any inappropriate activity took place with respect to the Funds.

Since February 2004, the Investment Manager and certain of its affiliates and their employees have been named as defendants in a number of pending lawsuits concerning “market timing,” and “revenue sharing/shelf-space/directed brokerage,” which allege the same or similar conduct underlying the regulatory settlements discussed above. The market timing lawsuits have been consolidated in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland. Any potential resolution of these matters may include, but not be limited to judgments or settlements for damages against the Investment Manager, the Sub-Adviser or their affiliates or related injunctions.

The Investment Manager and the Sub-Adviser believe that these matters are not likely to have a material adverse effect on the Funds or on their ability to perform their respective investment advisory activities relating to the Funds.

The foregoing speaks only as of the date hereof.

 

 

 

 

40 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Fund II Financial Highlights
For a share of common stock outstanding throughout each period:
                                                 
                                           
Period
                                           
June 28,
       
Six Months
                                                     
2002*
   
ended
                                 
through
   
November 30, 2007
 
Year Ended May 31,
 
May 31,
   
(unaudited)
    2007       2006       2005       2004    
2003
Net asset value, beginning of period     $15.05       $14.71       $14.81       $14.01       $14.66       $14.33 **
Investment Operations:                                                
Net investment income     0.54       1.13       1.08       1.11       1.17       0.93  
Net realized and change in unrealized                                                
   gain (loss) on investments and                                                
   futures contracts     (0.69 )     0.33       0.01       0.84       (0.77 )     0.53  
Total from investment operations     (0.15 )     1.46       1.09       1.95       0.40       1.46  
Dividends and Distributions                                                
   on Preferred Shares from:                                                
Net investment income     (0.15 )     (0.30 )     (0.23 )     (0.14 )     (0.08 )     (0.08 )
Net realized gains                                   (0.01 )
Total dividends and distributions                                                
   on preferred shares     (0.15 )     (0.30 )     (0.23 )     (0.14 )     (0.08 )     (0.09 )
Net increase (decrease) in net assets                                                
   applicable to common shareholders                                                
   resulting from investment operations     (0.30 )     1.16       0.86       1.81       0.32       1.37  
Dividends and Distributions to                                                
   Common Shareholders from:                                                
Net investment income     (0.39 )     (0.82 )     (0.96 )     (1.01 )     (0.97 )     (0.84 )
Net realized gains                                   (0.09 )
Total dividends and distributions                                                
   to common shareholders     (0.39 )     (0.82 )     (0.96 )     (1.01 )     (0.97 )     (0.93 )
Capital Share Transactions:                                                
Common stock offering costs charged                                                
   to paid-in capital                                   (0.02 )
Preferred shares offering                                                
   costs/underwriting discounts                                                
   charged to paid-in capital                                                
   in excess of par                                   (0.09 )
Total capital share transactions                                   (0.11 )
Net asset value, end of period     $14.36       $15.05       $14.71       $14.81       $14.01       $14.66  
Market price, end of period     $13.73       $15.42       $14.45       $15.02       $13.31       $14.80  
Total Investment Return (1)     (8.53 )%     12.64 %     2.63 %     21.00 %     (3.69 )%     5.19 %
RATIOS/SUPPLEMENTAL DATA:                                                
Net assets applicable to common                                                
   shareholders, end of period (000)     $847,697       $886,815       $862,832       $862,290       $812,670       $846,885  
Ratio of expenses to average net                                                
   assets including interest                                                
   expense (2)(3)(4)(5)     1.64 %#     1.50 %     1.30 %     1.05 %     1.08 %     0.97 %#
Ratio of expenses to average                                                
   net assets, excluding interest                                                
   expense (2)(3)(5)     1.16 %#     1.01 %     1.05 %     1.02 %     1.03 %     0.95 %#
Ratio of net investment income                                                
   to average net assets (2)(5)     7.46 %#     7.45 %     7.31 %     7.71 %     8.16 %     6.99 %#
Preferred shares asset coverage                                                
   per share     $66,951       $68,889       $67,701       $67,676       $65,224       $66,920  
Portfolio turnover     10 %     4 %     20 %     9 %     26 %     27 %

 

See accompanying Notes to Financial Statements | 11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 41


PIMCO California Municipal Income Fund II Financial Highlights
For a share of common stock outstanding throughout each period:
                                             
                                           
Period
                                           
June 28,
   
Six Months
                                 
2002*
       
ended
                                 
through
   
November 30, 2007
      Year Ended May 31,  
May 31,
   
(unaudited)
    2007           2006           2005           2004        
2003
Net asset value, beginning of period     $14.89       $14.58       $14.61       $13.53       $14.66       $14.33 **
Investment Operations:                                                
Net investment income     0.53       1.08       1.06       1.05       1.13       0.86  
Net realized and change in unrealized                                                
   gain (loss) on investments and                                                
   futures contracts     (1.02 )     0.34       0.05       1.13       (1.26 )     0.47  
Total from investment operations     (0.49 )     1.42       1.11       2.18       (0.13 )     1.33  
Dividends on Preferred Shares                                                
   from Net Investment Income     (0.14 )     (0.27 )     (0.21 )     (0.12 )     (0.07 )     (0.07 )
Net increase (decrease) in net assets                                                
   applicable to common shareholders                                                
   resulting from investment operations     (0.63 )     1.15       0.90       2.06       (0.20 )     1.26  
Dividends to Common Shareholders                                                
   from Net Investment Income     (0.42 )     (0.84 )     (0.93 )     (0.98 )     (0.93 )     (0.81 )
Capital Share Transactions:                                                
Common stock offering costs charged                                                
   to paid-in capital                                   (0.02 )
Preferred shares offering                                                
   costs/underwriting discounts                                                
   charged to paid-in capital in excess                                                
   of par                                   (0.10 )
Total capital share transactions                                   (0.12 )
Net asset value, end of period     $13.84       $14.89       $14.58       $14.61       $13.53       $14.66  
Market price, end of period     $14.14       $15.96       $14.62       $14.76       $13.27       $14.78  
Total Investment Return (1)     (8.77 )%     15.35 %     5.50 %     19.14 %     (3.92 )%     4.23 %
RATIOS/SUPPLEMENTAL DATA:                                                
Net assets applicable to common                                                
   shareholders, end of period (000)     $424,092       $455,284       $443,379       $441,596       $407,659       $439,970  
Ratio of expenses to average net                                                
   assets including interest                                                
   expense (2)(3)(4)(6)     3.43 %#     2.89 %     2.02 %     1.36 %     1.60 %     1.10 %#
Ratio of expenses to average net                                                
   assets, excluding interest                                                
   expense (2)(3)(6)     1.18 %#     1.01 %     1.06 %     1.06 %     1.07 %     0.97 %#
Ratio of net investment income                                                
   to average net assets (2)(6)     7.40 %#     7.28 %     7.24 %     7.37 %     8.05 %     6.51 %#
Preferred shares asset coverage                                                
   per share     $65,767       $68,765       $67,620       $67,451       $64,191       $67,301  
Portfolio turnover     3 %     3 %     12 %     5 %     20 %     39 %

 

42 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


PIMCO New York Municipal Income Fund II Financial Highlights
For a share of common stock outstanding throughout each period:
                                             
                                           
Period
                                           
June 28,
   
Six Months
                                 
2002*
   
ended
                                 
through
   
November 30, 2007
  Year Ended May 31,  
May 31,
       
(unaudited)
        2007           2006           2005           2004        
2003
Net asset value, beginning of period     $14.79       $14.66       $14.62       $13.54       $14.45       $14.33 **
Investment Operations:                                                
Net investment income     0.52       1.10       1.07       1.07       1.06       0.86  
Net realized and change in unrealized                                                
   gain (loss) on investments and                                                
   futures contracts     (0.76 )     0.11       0.11       1.12       (0.97 )     0.28  
Total from investment operations     (0.24 )     1.21       1.18       2.19       0.09       1.14  
Dividends on Preferred Shares from                                                
   net investment income     (0.14 )     (0.28 )     (0.23 )     (0.13 )     (0.07 )     (0.08 )
Net increase (decrease) in net assets                                                
   applicable to common shareholders                                                
   resulting from investment operations     (0.38 )     0.93       0.95       2.06       0.02       1.06  
Dividends to Common Shareholders                                                
   from net investment income     (0.40 )     (0.80 )     (0.91 )     (0.98 )     (0.93 )     (0.81 )
Capital Share Transactions:                                                
Common stock offering costs charged                                                
   to paid-in capital                                   (0.03 )
Preferred shares offering                                                
   costs/underwriting discounts                                                
   charged to paid-in capital                                                
   in excess of par                                   (0.10 )
Total capital share transactions                                   (0.13 )
Net asset value, end of period     $14.01       $14.79       $14.66       $14.62       $13.54       $14.45  
Market price, end of period     $13.65       $15.49       $14.14       $14.80       $13.05       $14.71  
Total Investment Return (1)     (9.38 )%     15.51 %     1.65 %     21.45 %     (5.15 )%     3.76 %
RATIOS/SUPPLEMENTAL DATA:                                                
Net assets applicable to common                                                
   shareholders, end of period (000)     $148,360       $156,218       $154,088       $152,812       $140,958       $149,606  
Ratio of expenses to average net                                                
   assets including interest                                                
   expense (2)(3)(4)(7)     2.43 %#     2.13 %     1.89 %     1.25 %     1.16 %     1.02 %#
Ratio of expenses to average net                                                
   assets, excluding interest                                                
   expense (2)(3)(7)     1.21 %#     1.14 %     1.13 %     1.14 %     1.15 %     1.02 %#
Ratio of net investment income                                                
   to average net assets (2)(7)     7.36 %#     7.33 %     7.29 %     7.53 %     7.58 %     6.47 %#
Preferred shares asset coverage                                                
   per share     $66,195       $68,386       $67,785       $67,439       $64,148       $66,552  
Portfolio turnover     4 %     3 %     26 %     11 %     14 %     27 %

 

See accompanying Notes to Financial Statements | 11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 43


PIMCO Municipal Income Funds II Financial Highlights

 
*

Commencement of operations.

**

Initial public offering price of $15.00 per share less underwriting discount of $0.675 per share.

# Annualized.
(1)   

Total investment return is calculated assuming a purchase of a share of common stock at the current market price on the first day of each period and a sale of a share of common stock at the current market price on the last day of each period reported. Dividends and distributions are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges. Total investment return for a period of less than one year is not annualized.

(2)

Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.

(3)

Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank. (See note 1(i) in Notes to Financial Statements).

(4)

Interest expense relates to the liability for floating rate notes issued in connection with inverse floater transactions.

(5)

During the periods indicated above, the Investment Manager waived a portion of its investment management fee. The effect of such waiver relative to the average net assets of common shareholders was 0.17% (annualized), 0.24%, 0.24%, 0.24%, 0.25% and 0.23% (annualized) for the six months ended November 30, 2007, the years ended May 31, 2007, May 31, 2006, May 31, 2005, May 31, 2004 and for the period June 28, 2002 (commencement of operations) through May 31, 2003, respectively.

(6)

During the periods indicated above, the Investment Manager waived a portion of its investment management fee. The effect of such waiver relative to the average net assets of common shareholders was 0.17% (annualized), 0.24%, 0.24%, 0.24%, 0.24% and 0.23% (annualized) for the six months ended November 30, 2007, the years ended May 31, 2007, May 31, 2006, May 31, 2005, May 31, 2004 and for the period June 28, 2002 (commencement of operations) through May 31, 2003, respectively.

(7)

During the periods indicated above, the Investment Manager waived a portion of its investment management fee. The effect of such waiver relative to the average net assets of common shareholders was 0.17% (annualized), 0.24%, 0.24%, 0.24%, 0.24% and 0.23% (annualized) for the six months ended November 30, 2007, the years ended May 31, 2007, May 31, 2006, May 31, 2005, May 31, 2004 and for the period June 28, 2002 (commencement of operations) through May 31, 2003, respectively.

 

 

 

 

 

44 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07 | See accompanying Notes to Financial Statements


PIMCO Municipal Income Funds II  Matters Relating to the Trustees’
  Consideration of the Investment
  Management and Portfolio Management
  Agreements

The Investment Company Act of 1940 requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested (“Independent”) Trustees, voting separately, approve the Funds’ Management Agreements (the “Advisory Agreements”) with the Investment Manager and Portfolio Management Agreements (the “Sub-Advisory Agreements”, and together with the Advisory Agreements, the “Agreements”) between the Investment Manager and the Sub-Adviser. The Trustees met on June 13, 2007 (the “contract review meeting”) for the specific purpose of considering whether to approve the continuation of the Advisory Agreements and the Sub-Advisory Agreements. The Independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting.

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Board of Trustees, including a majority of the Independent Trustees, concluded that the continuation of the Funds’ Advisory Agreements and the Sub-Advisory Agreements should be approved for a one-year period commencing July 1, 2007.

In connection with their deliberations regarding the continuation of the Agreements, the Trustees, including the Independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services performed by the Investment Manager and the Sub-Adviser under the Agreements.

In connection with their contract review meeting, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. (“Lipper”) on the total return investment performance (based on net assets) of the Funds for various time periods and the investment performance of a group of funds with substantially similar investment classifications/objectives identified by Lipper, (ii) information provided by Lipper on the Funds’ management fees and other expenses and the management fees and other expenses of comparable funds identified by Lipper, (iii) information regarding the investment performance and management fees of comparable portfolios of other clients of the Sub-Adviser, including institutional separate accounts and other clients, (iv) an estimate of the profitability to the Investment Manager from its relationship with the Funds for the twelve months ended March 31, 2007, (v) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Funds, such as portfolio management, compliance monitoring and portfolio trading practices, and (vi) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Funds.

The Trustees’ conclusions as to the continuation of the Agreements were based on a comprehensive consideration of all information provided to the Trustees and not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors.

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s ability to provide high quality investment management and other services to the Funds. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Funds; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and the Sub-Adviser; and the level of skill required to manage the Funds. In addition, the Trustees reviewed the quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Funds; the nature and quality of certain administrative services the Investment Manager is responsible for providing to the Funds; and conditions that might affect the Investment Manager’s or the Sub-Adviser’s ability to provide high quality services to the Funds in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Funds given their investment objectives and policies, and that the Investment Manager and the Sub-Adviser would be able to continue to meet any reasonably foreseeable obligations under the Agreements.

Based on information provided by Lipper, the Trustees also reviewed each Fund’s total return investment performance as well as the performance of comparable funds identified by Lipper. In the course of their deliberations, the Trustees took

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 45


PIMCO Municipal Income Funds II  Matters Relating to the Trustees’
  Consideration of the Investment
  Management and Portfolio Management
  Agreements

into account information provided by the Investment Manager in connection with the contract review meeting, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding each Fund’s performance.

In assessing the reasonableness of each Fund’s fees under the Agreements, the Trustees considered, among other information, each Fund’s management fee and the total expense ratio as a percentage of average net assets attributable to common shares and the management fee and total expense ratios of comparable funds identified by Lipper.

For each of the Funds, the Trustees specifically took note of how each Fund compared to its Lipper peers as to performance and total expense ratio. The Trustees noted that, while the Funds are not charged a separate administration fee, it was not clear whether the peer funds in the Lipper categories were charged such a fee by their investment managers. Thus, the Trustees, at the recommendation of the Investment Manager, considered the total expenses of the Funds compared to the total expenses of the peer funds, recognizing that the fees for management and administrative services would be subsumed within the total expense ratio.

Municipal II

The Trustees noted that Municipal II had outperformed the median for its peer group for the one-year and three-year periods ended March 31, 2007. The Trustees noted that for the one-year period ended March 31, 2007, Municipal II total return ranked second among fifty-five funds in its Lipper category for its asset class. The Trustees also noted that Municipal II’s expense ratio (after taking into account waivers) was less than the median for its peer group.

California Municipal II

The Trustees noted that California Municipal II had outperformed the median for its peer group for the one-year and three-year periods ended March 31, 2007. The Trustees noted that for the one- and three-year periods, California Municipal II ranked first and third, respectively, among twenty-two funds in its Lipper category for its asset class. The Trustees also noted that California Municipal II’s expense ratio (after taking into account waivers) was in line with the median for its peer group.

New York Municipal II

The Trustees noted that New York Municipal II had outperformed the median for its peer group for the one-year and three-year periods ended March 31, 2007. The Trustees noted that in the one-year and three-year periods, New York Municipal II’s total return was ranked second among sixteen funds in its Lipper category for its asset class. The Trustees also noted that New York Municipal II’s expense ratio (after taking into account waivers) was more than the median for its peer group and ranked in the third quintile in its lipper category for its asset class.

After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with the Investment Manager’s and the Sub-Adviser’s responses and efforts relating to investment performance and the comparative positioning of each Fund with respect to the management fee paid to the Investment Manager.

The Trustees also considered the management fees charged by the Sub-Adviser to other clients, including institutional separate accounts with investment strategies similar to those of the Funds. Regarding the institutional separate accounts, they noted that the management fees paid by the Funds are generally higher than the fees paid by these other clients of the Sub-Adviser, but were advised that the administrative burden for the Investment Manager and the Sub-Adviser with respect to the Funds is also relatively higher, due in part to the more extensive regulatory regime to which the Funds are subject in comparison to institutional separate accounts. The Trustees noted that the management fees paid by the Funds are generally higher than the fees paid by the open-end funds but were advised that there are additional portfolio management challenges in managing the Funds, such as the use of leverage and meeting a regular dividend.

The Trustees also took into account that the Funds have preferred shares outstanding, which increases the amount of fees received by the Investment Manager and the Sub-Adviser under the Agreements (because the fees are calculated based on either the Funds’ net assets or total managed assets, including assets attributable to preferred shares and other forms of leverage outstanding but not deducting any liabilities connected to the leverage). In this regard, the Trustees took into account that the Investment Manager and the Sub-Adviser have a financial incentive for the Funds to continue to have

46 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


PIMCO Municipal Income Funds II  Matters Relating to the Trustees’
  Consideration of the Investment
  Management and Portfolio Management
  Agreements

preferred shares outstanding, which may create a conflict of interest between the Investment Manager and the Sub-Adviser, on the one hand, and the Funds’ common shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and the Sub-Adviser indicating that each Fund’s use of leverage through preferred shares continues to be appropriate and in the interests of the Funds’ common shareholders.

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the profitability of the Investment Manager from its relationship with each Fund and determined that such profitability was not excessive in light of the nature, scope and quality of services provided to each Fund.

The Trustees also took into account that, as closed-end investment companies, the Funds do not currently intend to raise additional assets, so the assets of the Funds will grow (if at all) only through investment performance. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and the Sub-Adviser, such as reputational value derived from serving as Investment Manager and Sub-Adviser to the Funds.

After reviewing these and other factors described herein, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services being provided by the Investment Manager and Sub-Adviser to the Funds.

 

 

 

11.30.07 | PIMCO Municipal Income Funds II Semi-Annual Report 47


PIMCO Municipal Income Funds II  Annual Shareholder Meetings Results
  (unaudited)

Annual Shareholder Meetings Results:
The Funds held their annual meetings of shareholders on December 18, 2007. Common/Preferred shareholders of each fund voted to re-elect Paul Belica and John J. Dalessandro II as class II Trustees to serve until 2010 and John C. Maney as Class II Trustee to serve until 2008. The resulting vote count is indicated below:

                        Withheld            
    Affirmative   Authority  
 
Municipal II:          
Re-Election of Paul Belica   54,828,248   904,846  
Re-Election of John C. Maney   54,911,557   821,537  
Re-Election of John J. Dalessandro II*   18,457   77  
 
California Municipal II:          
Re-Election of Paul Belica   28,142,982   355,981  
Re-Election of John C. Maney   28,109,346   389,617  
Re-Election of John J. Dalessandro II*   7,914   5  
 
New York Municipal II:          
Re-Election of Paul Belica   10,031,161   256,715  
Re-Election of John C. Maney   10,023,683   264,193  
Re-Election of John J. Dalessandro II*   3,392   169  

Messrs. Robert E. Connor, Hans W. Kertess*, William B. Ogden IV and R. Peter Sullivan III continue to serve as Trustees of the Funds.

__________________________

* Preferred Shares Trustee

 

 

 

 

48 PIMCO Municipal Income Funds II Semi-Annual Report | 11.30.07


 

 

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Trustees and Principal Officers

Hans W. Kertess
    Trustee, Chairman of the Board of Trustees
Paul Belica
    Trustee
Robert E. Connor
    Trustee
John J. Dalessandro II
    Trustee
John C. Maney
    Trustee
William B. Ogden, IV
    Trustee
R. Peter Sullivan III
    Trustee

Brian S. Shlissel
    President & Chief Executive Officer
Lawrence G. Altadonna
    Treasurer, Principal & Accounting Officer
Thomas J. Fuccillo
    Vice President, Secretary & Chief Legal Officer
Scott Whisten
    Assistant Treasurer
Youse E. Guia
    Chief Compliance Officer
William V. Healey
    Assistant Secretary
Richard H. Kirk
    Assistant Secretary
Kathleen A. Chapman
    Assistant Secretary
Lagan Srivastava
    Assistant Secretary


Investment Manager
Allianz Global Investors Fund Management LLC
1345 Avenue of the Americas
New York, NY 10105
Sub-Adviser
Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660
Custodian & Accounting Agent
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
Transfer Agent, Dividend Paying Agent and Registrar
PFPC Inc.
P.O. Box 43027
Providence, RI 02940-3027
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017
Legal Counsel
Ropes & Gray LLP
One International Place
Boston, MA 02210-2624

This report, including the financial information herein, is transmitted to the shareholders of PIMCO Municipal Income Fund II, PIMCO California Municipal Income Fund II and PIMCO New York Municipal Income Fund II for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.

The financial information included herein is taken from the records of the Funds without examination by an independent registered accounting firm, who did not express an opinion hereon.

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Fund may purchase shares of its common stock in the open market.

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarter of its fiscal year on Form N-Q. The Funds’ Form N-Qs are available on the SEC’s website at www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.

On January 2, 2008, the Funds submitted a CEO annual certification to the New York Stock Exchange (‘‘NYSE’’) on which the Funds’ principal executive officer certified that he was not aware, as of that date, of any violation by the Fund of the NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules each Fund’s principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q, relating to, among other things, the Funds’ disclosure controls and procedures and internal control over financial reporting, as applicable.

Information on the Funds is available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 331-1710.


 

 






ITEM 2. CODE OF ETHICS

      Not required in this filing.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

      Not required in this filing.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Not required in this filing.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT

      Not required in this filing.

ITEM 6. SCHEDULE OF INVESTMENTS Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.

Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES

      Not required in this filing.

Item 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

      Not required in this filing.

Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED COMPANIES.

           
 
           
TOTAL NUMBER
   
   
 
 
OF SHARES PURCHASED
 
MAXIMUM NUMBER OF
   
TOTAL NUMBER
 
AVERAGE
 
AS PART OF PUBLICLY
 
SHARES THAT MAY YET BE
   
OF SHARES
 
PRICE PAID
 
ANNOUNCED PLANS OR
 
PURCHASED UNDER
PERIOD  
PURCHASED
 
PER SHARE
 
PROGRAMS
 
THE PLANS OR PROGRAMS
                 
JUNE '07  
N/A
 
15.01
 
26,017
 
N/A
JULY '07  
N/A
 
N/A
 
N/A
 
N/A
AUGUST '07  
N/A
 
14.74
 
25,908
 
N/A
SEPT. '07  
N/A
 
14.32
 
26,579
 
N/A
OCT '07  
N/A
 
14.69
 
25,869
 
N/A
NOV 07  
N/A
 
N/A
 
N/A
 
N/A

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.

ITEM 11. CONTROLS AND PROCEDURES

(a)      The registrant’s President and Chief Executive Officer and Principal Financial Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act (17CFR 270.3a-3(c)), as amended are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.

(b)      There were no significant changes in the registrant’s internal controls (over financial reporting as defined in Rule 30a-3(c)) under the Act (17 CFR 270.30a -3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting.

 



ITEM 12. EXHIBITS

(a) (1) Exhibit 99.302 Cert. - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

(b) Exhibit 99.906 Cert. - Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 


Signature

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant)  PIMCO Municipal Income Fund II  
     
     

By /s/ Brian S. Shlissel   
  President and Chief Executive Officer   
     
Date  February 6, 2008   
     
     
By 
/s/ Lawrence G. Altadonna
 
  Treasurer, Principal Financial & Accounting Officer   
     
Date 
February 6, 2008 
 
     
     
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  
     
By 
/s/ Brian S. Shlissel 
 
  President and Chief Executive Officer  
     
Date 
February 6, 2008 
 
     
     
By 
/s/ Lawrence G. Altadonna 
 
  Treasurer, Principal Financial & Accounting Officer   
     
Date 
February 6, 2008