PIMCO Income Strategy Fund II · NYSE:PFN
PIMCO Income Strategy Fund II — Proxy Contest (July 2013)
15 slides from PIMCO Income Strategy Fund II's proxy contest presentation, Jul 11, 2013
Slide 1: PIMCO Income Strategy Fund II Proxy Contest for Preferred Shares Trustee
PIMCO Income Strategy Fund II Proxy Contest for Preferred Shares Trustee July 10, 2013 Presentation to ISS Brigade Capital Management, LLC
Slide 2: PIMCO Fund
PIMCO Fund PIMCO Income Strategy Fund II (PFN) – (“Fund”) Description: Seeks high current income, consistent with capital preservation. Fund Highlights: Ordinarily invests in a diversified portfolio of floating and/or fixed-rate debt instruments. Flexibility: Has the flexibility to allocate assets i
Slide 3: Brigade Capital Management, LLC ("Brigade")
Brigade Capital Management, LLC (“Brigade”) Brigade is an asset management firm specializing in high yield and distressed debt investing with over $14 billion of assets under management. Brigade specializes in credit investing. It seeks long term growth of capital throughout market environments with
Slide 4: Background
Background Brigade is seeking one seat, i.e. minority representation, at PFN, which has an eight-member board. Brigade’s nomination is for the Preferred Shares trustee only. The Preferred Shares holders are entitled to two seats on the board of PFN. At the last annual meeting, Brigade’s nominee, Nea
Slide 5: Background (contd.)
Background (contd.) Timeline (contd.): Nov. 11 & 17, 2011 - Brigade sends letters to the Funds stating that the 19-month gap between annual meetings of shareholders violates the Funds’ Bylaws and requests that the 7-month delay be reconsidered. Nov. 21, 2011 - The Funds respond that the July 31, 201
Slide 6: Reason for Solicitation
Reason for Solicitation Despite attractive alternative sources of financing, PFN has NOT taken ANY steps to redeem the Preferred Shares. PFN’s failure to redeem Preferred Shares is in stark contrast to ARP redemptions effected by other taxable closed end funds. (See slides 8-10) PFN’s 3-year and 5-y
Slide 7: Reason for Solicitation (contd.)
Reason for Solicitation (contd.) PFN has poor corporate governance as evidenced by, among other things, the fact that PFN has a classified board and plurality voting without a director resignation policy and that the PFN board reappointed the director who lost the election to the board last year. Br
Slide 8: Overall ARPs Redemptions
Overall ARPs Redemptions Source: The Investor’s Guide to Closed-End Funds (June, 2013), Thomas J. Herzfeld Advisors, Inc. *
Slide 9: Closed-End Fund ARPs Redemptions
Closed-End Fund ARPs Redemptions Source: The Investor’s Guide to Closed-End Funds (June, 2013), Thomas J. Herzfeld Advisors, Inc. *
Slide 10: ARPs redemptions - Investment Advisor
ARPs redemptions - Investment Advisor Source: The Investor’s Guide to Closed-End Funds (June, 2013), Thomas J. Herzfeld Advisors, Inc. As of May 2013, more than 89% of ARPs issued by taxable closed-end funds have been redeemed or are pending. In comparison, on average only 35% of ARPs in funds manag
Slide 11: ARPs redemptions - Changing Economic Environment
ARPs redemptions - Changing Economic Environment ISS supported the nomination of Mr. Goldman at the last annual meeting on the basis that the nomination of Mr. Goldman would further influence the Funds’ boards to provide liquidity for the holders of ARPs and that the Funds have failed to provide liq
Slide 12: Fund Performance
Fund Performance PFN has underperformed its peers over 3-year and 5-year periods. Source: Bloomberg. Data as of 7/2/2013 *
Slide 13: Fund's Nominee
Fund’s Nominee Mr. Jacobson served for more than 15 years as a senior executive at a New York Stock Exchange (the “NYSE”) specialist firm. He has also served on the NYSE Board of Directors, including terms as Vice Chair. As such, he provides significant expertise on matters relating to portfolio bro
Slide 14: Brigade Nominee
Brigade Nominee Mr. Miller co-founded and built the largest bankruptcy, finance and restructuring legal practice in the U.S. during the years between 1969 and 2005 and retired from his position as Senior Partner of Weil, Gotshal & Manges LLP in 2005. He led the restructuring efforts of large cases i
Slide 15: Conclusion
Conclusion The incumbent Preferred Shares nominee has failed to take steps to address ARP liquidity concerns. Other closed-end funds have taken advantage of alternative financing sources to redeem ARPs, especially in this current historically low interest rate environment. However, there is no evide
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