PIMCO Income Strategy Fund II · NYSE:PFN
PIMCO Income Strategy Fund II — Proxy Contest (July 2012)
18 slides from PIMCO Income Strategy Fund II's proxy contest presentation, Jul 10, 2012
Slide 1: Schedule 14A Information Required in Proxy Statement
SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant ¨ Filed by a Party other than the Registrant þ Check the appropriate box: ¨ Prelimina
Slide 2: Presentation to Institutional Shareholder Services
On July 10, 2012, Brigade Capital Management, LLC gave a presentation to Institutional Shareholder Services (ISS). Slides for the presentation to ISS are attached hereto.
Slide 3: Proxy Contest for Preferred Shares Trustee
PIMCO Income Strategy Fund PIMCO Income Strategy Fund II Proxy Contest for Preferred Shares Trustee July 10, 2012 Presentation to ISS Brigade Capital Management, LLC.
Slide 4: PIMCO Funds
PIMCO Funds q PIMCO Income Strategy Fund (PFL) and PIMCO Income Strategy Fund II (PFN) - (“Funds”) – Description: Seek high current income, consistent with capital preservation. – Fund Highlights: Ordinarily invests in a diversified portfolio of floating and/or fixed- rate debt instruments. – Flexib
Slide 5: Brigade Capital Management, LLC ("Brigade")
Brigade Capital Management, LLC (“Brigade”) q Brigade is an asset management firm specializing in high yield and distressed debt investing with over $9 billion of assets under management. q Brigade specializes in credit investing. It seeks long term growth of capital throughout market environments w
Slide 6: Background
Background q Brigade is seeking one seat, i.e. minority representation at PFL and PFN - both with seven-member boards. q The nomination is for the Preferred Shares trustee only. The Preferred Shares class of holders are entitled to two seats on each of the boards of PFL and PFN. q The Timeline - Del
Slide 7: Background (contd.)
Background (contd.) q 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 Nov.7-month delay 22, 2011 be reconsidered. - Funds respond that the July 31, 20
Slide 8: Reason for Solicitation
Reason for Solicitation q Neither Fund has held a shareholder meeting since Dec. 2010. The Funds’ unexplained and unilateral delay tactics violate shareholder rights. Trial court found violation of Bylaws (case on appeal). q Despite attractive alternative sources of financing, neither PFL nor PFN ha
Slide 9: Reason for Solicitation (contd.)
Reason for Solicitation (contd.) q Poor corporate governance - classified board and plurality voting with no director resignation policy. q The Funds stated in their definitive proxy statement that even if Brigade were to succeed, they may consider expanding the size of the board and adding the losi
Slide 10: Overall ARPs Redemptions
Overall ARPs Redemptions Source: The Investor’s Guide to Closed-End Funds (June, 2012), Thomas J. Herzfeld Advisors, Inc. 8
Slide 11: Closed-End Fund ARPs Redemptions
Closed-End Fund ARPs Redemptions Source: The Investor’s Guide to Closed-End Funds (June, 2012), Thomas J. Herzfeld Advisors, Inc. 9
Slide 12: ARPs redemptions - Investment Advisor
ARPs redemptions - Investment Advisor q As of May 28, 2012, more than 85% of ARPs issued by taxable closed-end funds have been redeemed or are pending. q In comparison, only 43% of ARPs in funds managed by Allianz Global Investors have been redeemed, with NO redemptions of PFL and PFN. 10 Source: Th
Slide 13: Funds Performance - PFL
Funds Performance - PFL Source: Bloomberg. Data as of 6/18/2012 11
Slide 14: Funds Performance - PFN
Funds Performance - PFN q PFN’s 1-year and 5-year track records place them toward the bottom quartile on performance relative to peers. 12 Source: Bloomberg. Data as of 6/18/2012
Slide 15: Funds Nominees
Funds Nominees q James A. Jacobson: 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 rela
Slide 16: Brigade Nominee
Brigade Nominee – Neal P. Goldman is one of the founding partners of Brigade Capital Management, LLC. - a $9 billion asset management firm. – Previously, Mr. Goldman was a Managing Director at MacKay Shields, LLC working in the high yield division from 2001-2006. Prior to joining MacKay Shields, Mr.
Slide 17: Conclusion
Conclusion q The incumbent Preferred Shares nominees have 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 e
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