Market environMent ChartsPutting today’s Markets in Perspective

With data through March 31, 2010

Drawing upon the insight of our specialized investment managers, Allianz Global Investors provides this analysis of the financial markets.

Defensive

interest rates: stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Fed Rate Hike May Actually Help Stocks

interest rates: Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Over the Long Term, Interest Rate Hikes Have Limited Effect on Bond Returns

inflation: tiPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5TIPS: Attractive Inflation-Adjusted Returns, Lower Volatility

opportunistic

non U.s. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6PIMCO’s “Ring of Fire”

emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Emerging Markets Likely to Grow Faster Than Developed Markets

high-Quality investment Grade Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Investors May Benefit More from a High-Quality Intermediate Bond Portfolio

Consumer spending: stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Rise in Consumer Spending May Be a Good Sign for Stocks

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Over the Long Term, Dividend Payers Outperform Non-Dividend Payers

stocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Decline in TED Spread May Be Positive for Stocks

risk smart investing

Today’s investors are facing a uniquely challenging investment environment.

Understanding and managing risk in this “New Normal” can make all

the difference in how successfully investors reach their financial goals.

Allianz Global Investors has developed an innovative allocation strategy

to help investors take control. We call it Risk Smart Investing. Risk Smart

encourages investors to tackle risk head-on — proactively taking steps to

minimize risk with a “Defensive Allocation” and then going after return

potential with an “Opportunistic Allocation.” In keeping with this Risk

Smart Strategy, we have divided our Market Environment Charts into two

categories: “Defensive” and “opportunistic,” and highlighted changes,

trends or areas of potential in each.

Defensive: stocks

Fed rate hike May actually help stocks

Source: Haver, Datastream. Morgan Stanley Research Equities are represented by the S&P 500 Index. Past performance is no guarantee of future results. This chart is not indicative of the past or future performance of any Allianz Global Investors product. The target federal funds rate is the interest rate published by the Federal Open-Market Committee (FOMC) of the Federal Reserve Board as a target for overnight, inter-bank loans. The rate is a leading economic indicator of interest rate movements and Federal Reserve monetary policies. Gross Domestic Product (GDP) is the value of all final goods and services produced in a specific country. It is the broadest measure of economic activity and the principal indicator of economic performance. Equities have tended to be volatile, involve risk to principal and, unlike bonds, do not offer a fixed rate of return.

What the table showsContrary to what many may think, hikes in the Fed Funds rate are not necessarily a negative sign for equities. In fact, as the table shows, since 1971, in periods where real GDP growth has been positive, the return on equities has been solid when the Fed has either held rates steady or raised rates.

What it Means for investorsWith the Fed Funds rate at an all-time low, many investors expect, in the not-to-distant future, to see rates coming up. However, the table suggests that investors should not view this as a negative sign for stocks, but, instead, may want to consider adding to their equity allocations now.

Market Environment Charts | 3

real GDP Growth Fed Funds rate average Quarterly return Median Quarterly return

Up Flat/Down 10.0% 12.2%

Up Up 8.2% 8.2%

Down Flat/Down -3.8% -9.9%

Down Up 4.0% 4.0%

Inflection Point GDP Flat/Down 10.0% 12.2%

Defensive: interest rates

over the Long term, interest rate hikes have Limited effect on Bond returns

Source: Citigroup Yield Book.Note: The simulation assumes that rates change on day one and then stay constant for the next thirty years. hypothetical example for illustrative purposes only. 1Based on the Citigroup Broad Investment Grade (BIG) Bond Index, which is a market capitalization-weighted index and includes fixed-rate Treasury, government-sponsored, mortgage, asset-backed and investment-grade issues (BBB- or Baa3) with a maturity of one year or longer. Citigroup Bond Index benchmark analysis as of 12/31/09; index composition as of 12/31/09; index prices, yield to maturity (3.489%) and duration (4.52 years) as of 12/31/09. The indexes and illustrations do not reflect fees that will be charged by Allianz Global Investors Distributors . 2Assumes that with no change in interest rates, index return equals initial yields plus estimated impact of “roll down.”No representation is being made that any account, product or strategy will or is likely to achieve profits, losses, or results similar to those shown. Hypothetical or simulated performance results have several inherent limitations. Unlike an actual performance record, simulated results do not represent actual performance and are generally prepared with the benefit of hindsight. There are frequently sharp differences between simulated performance results and the actual results subsequently achieved by any particular account, product or strategy. In addition, since trades have not actually been executed, simulated results cannot account for the impact of certain market risks such as lack of liquidity. There are numerous other factors related to the markets in general or the implementation of any specific investment strategy, which cannot be fully accounted for in the preparation of simulated results and all of which can adversely affect actual results. The simulation assumes the index portfolio is static despite interest rate movements.

What the Chart showsThis hypothetical example shows that if interest rates rise, bond returns will fall in the short term. For example, a 200-basis-point increase in interest rates, over one year, yields a -3.66% return. However, more importantly, the chart shows that over somewhat longer time periods, interest rate hikes have only a modest effect on bond returns when you take into account the impact of reinvesting and compounding. In fact, over even longer time periods (10+ years), in this hypothetical example, returns may outperform in the event of interest rate hikes.

What it Means for investorsBond investors who are concerned that interest rates might rise in the near future should consider the following: Fleeing from bonds in the event of rising interest rates may, in the long run, be counterproductive, as, over the long term, interest rates hikes have had little effect on returns.

Hypothetical illustration of Annualized Index Returns over various time horizons (%)1

Change in interest rates 1-Year 2-Year 3-Year 4-Year 5-Year 7-Year 10-Year 30-Year

+200 bps -3.66 1.02 2.56 3.29 3.70 4.12 4.36 4.56

+100 bps 0.32 2.59 3.31 3.64 3.82 3.98 4.06 4.09

0 bps2 4.18 4.01 3.96 3.91 3.88 3.81 3.75 3.62

-100 bps 7.55 5.32 4.64 4.31 4.13 3.92 3.79 3.61

-200 bps 10.19 6.24 5.16 4.66 4.36 4.04 3.84 3.60

Market Environment Charts | 4

Defensive: tiPs

tiPs: attractive inflation-adjusted returns, Lower volatility

Past performance is no guarantee of future results. This chart is not indicative of the past or future performance of any Allianz Global Investors product. Standard deviation is an absolute measure of volatility measuring dispersion about an average which, for an index, depicts how widely the returns varied over a certain period of time. The greater the degree of dispersion, the greater the risk. Neither the current market value of inflation-indexed bonds nor the share value of a fund that invests in them is guaranteed, and either or both may fluctuate. Stocks are represented by the Standard & Poor’s 500 Composite Index (S&P 500) which is an unmanaged index that is generally representa-tive of the U.S. stock market. TIPS are represented by the Barclays Capital U.S. TIPS Index which is an unmanaged index comprised of all U.S. Treasury Inflation Protected Securities rated investment grade (Baa3 or better), have at least one year to final maturity, and at least $250 million par amount outstanding. Inflation is represented by the Consumer Price Index (CPI) which is an unmanaged index representing the rate of inflation of the U.S. consumer prices as determined by the U.S. Department of Labor Statistics. There can be no guarantee that the CPI or other indexes will reflect the exact level of inflation at any given time. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index.

What the Charts showThese charts show that, since 1997, when TIPS were first introduced, Treasury Inflation-Protected Securities (TIPS) have provided better inflation-adjusted returns than stocks with much less volatility than stocks.

What it Means for investorsWhile stocks have sometimes outpaced inflation, especially during low inflation and high-growth periods, they are subject to a fair amount of volatility — more, perhaps, than many retirees can tolerate. People in or nearing retirement might consider investing in TIPS, which are an explicit inflation hedge and can help preserve purchasing power over the long term.

2.39

2.41

Stocks

2.39

4.11

TIPS

0

2

1

5

4

3

6

7

8% … with lower volatilityAttractive inflation-adjusted returns

16.44

Stocks

5.99

TIPS

0

10

5

15

20%

■ Inflation■ After-Inflation

Market Environment Charts | 5

Market Environment Charts | 6

opportunistic: non U.s. Markets

PiMCo’s “ring of Fire”

Source: Reuters EcoWinPast performance is no guarantee of future results. This chart is not representative of any Allianz Global Investors product. This material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.Gross Domestic Product (GDP) is the value of all final goods and services produced in a specific country. It is the broadest measure of economic activity and the principal indicator of economic performance.

What the Chart showsThe vertical axis of the chart plots a country’s overall deficit (or surplus in the case of Norway) as a percentage of GDP. Countries that fall below zero are spending more than they are taking in, meaning they will likely have to issue more debt to operate. The horizontal axis shows a country’s overall debt as a percentage of GDP. A higher debt to GDP ratio can slow economic growth. The countries in the red zone, or the “ring of fire” have public debt that exceeds 90% of GDP or have the potential to pass this threshold within a few years’ time (given their deficit). The countries in the yellow and green zones are potentially more solvent.

What it Means for investorsA higher deficit and escalating government debt can slow economic growth, which in turn can lower returns on investments. Investors may want to direct their growth-oriented assets toward less levered countries.

Publ

ic S

ecto

r Def

icit

(% o

f GDP

)

0 25 50 75 100 125 150 175 200%

Public Sector Debt (% of GDP)

10.0%

-12.5

-10.0

-7.5

-5.0

-2.5

0.0

2.5

5.0

7.5

FinlandDenmark

Australia

France

U.S.

Italy

Greece

Japan

Spain

Ireland

UK

Norway

Sweden

Germany

CanadaNetherlands

-15.0

Market Environment Charts | 7

opportunistic: emerging Markets

emerging Markets Likely to Grow Faster than Developed Markets

Source: Bloomberg Financial Markets, PIMCO, JPMorgan. Data as of 1/31/10. Past performance is no guarantee of future results. *Figures based on PIMCO’s latest cyclical forecast for developed countries and JPMorgan for EM countries. Investing in non-U.S. securities entails additional risks, including political and economic risk and the risk of currency fluctuations; these risks may be enhanced in emerging markets.

What the Chart showsMany observers believe that there has been a “handoff” of the global engine of growth from developed nations to emerging economies. An example of this is the fact that growth rates from 2007-2009 have been greater in emerging markets, particularly in China and India, than in developed countries, and the trend is widely predicted to continue. PIMCO’s forecast of GDP growth rates for the BRIC nations (Brazil, Russia, India, China) and Mexico is 5.9%, while its forecast for the developed nations of the U.S., Japan and the Eurozone is only 0.7%.

What it Means for investorsInvestors who have yet to consider allocating assets to emerging markets, or have only allocated a very small amount to emerging markets, may want to consider increasing their allocation given the predictions of robust growth in this sector.

Year

ove

r Yea

r Gro

wth

(%)

Brazil Russia India Mexico China U.S. Japan Eurozone

14%

12

10

8

6

4

2

0

-2

-4

-6

-8

-10

2010 simple average = 5.9

2010 simple average = 0.7

■ 2007■ 2008■ 2009■ 2010 Forecast*

Market Environment Charts | 8

opportunistic: high Quality investment Grade Bonds

investors May Benefit More from a high-Quality intermediate Bond Portfolio

Source: Factset and U.S. Treasury. Data as of 3/31/10.Past performance is no guarantee of future results. This chart is not indicative of the past or future performance of any Allianz Global Investors product.Money market funds are not insured or guaranteed by the FDIC or any other government agency, and although these funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in money market funds. Short-term bonds are considered more stable than longer-term, higher-yielding bonds, but less stable than lower-yielding savings accounts and CDs. U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. The intermediate-term core bond portfolio is represented by the Barclays Capital U.S. Aggregate Index. The Barclays Capital U.S. Aggregate Index is composed of securities from the Barclays Capital Government/Credit Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index. It is generally considered to be representative of the domestic, investment-grade, fixed-rate, taxable bond market. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. It is not possible to invest directly in an index.

What the Chart showsThe chart shows that while investors have plowed billions of dollars into money market funds in the wake of the financial market crisis, they are getting almost no return for their investment (as represented by the 3-month T-bill yield). Meanwhile, a high-quality intermediate-term bond portfolio is currently providing an attractive yield.

What it means for investorsInvestors, who are currently receiving almost nothing for their cash investments, should seriously consider moving out of cash and into a high-quality intermediate-term bond portfolio, which can provide higher potential return with modest additional risk.

0

4,000,000

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

Mon

ey M

arke

t Fun

d As

sets

in M

illion

s ($)

01/0503/05

05/0507/05

09/0511/05

01/0603/06

05/0607/06

09/0611/06

01/0703/07

05/0707/07

09/0711/07

01/0803/08

05/0807/08

09/0811/08

01/0903/09

01/1003/10

05/0907/09

09/0911/09

Yield (%)

6

1

2

3

5

0

4

Money Market Assets (LHS)

3 Month T-Bill Yield % (RHS)

Intermediate-Term Bond Yield % (RHS)

Market Environment Charts | 9

opportunistic: Consumer spending: stocks

rise in Consumer spending May Be a Good sign for stocks

Source: U.S. Bureau of Economic Analysis. Data as of 3/31/10. Past performance is no guarantee of future results. This chart is not indicative of the past or future performance of any Allianz Global Investors product.

What the Chart showsU.S. consumer spending, which accounts for roughly two-thirds of GDP, plummeted during the recent recession. However, in recent months, U.S. consumer spending has shown a marked upward trend. During a recession, equity investors tend to look for corroborative signs that point to possibly higher profits and a recovery.

What it Means for investorsA marked rebound in U.S. consumer spending, as seen in the current chart, may be a sign that an economic rebound is in the offing and that it may be a good time for investors to raise their equity holdings.

(%1y

r cha

nge)

Per

sona

l Con

sum

ptio

n Ex

pend

iture

s

-4

10%

6

8

4

2

0

-2

’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10

Market Environment Charts | 10

opportunistic: Dividends

over the Long term, Dividend Payers have outperformed non-Dividend Payers

Source: Russell, FactSet, Zephyra. Data as of 3/31/10. Past performance is no guarantee of future results. This chart is not indicative of the past or future performance of any Allianz Global Investors product. There is no guarantee that dividend-paying stocks will continue to pay dividends.

What the Chart showsBetween 1986 and 2009, dividend paying stocks significantly outperformed non-dividend-paying stocks. In addition, it should be noted that dividends can contribute significantly to a stock’s total return, can help temper volatility, and can help impose discipline on corporate management since a company will likely need to generate real profits to pay its shareholders.

What it Means for investorsInvestors who are currently not allocated to dividend-paying stocks should consider reallocating some of their equity holdings to dividend-paying stocks, as these have historically outperformed over the long term with less risk.

Cum

ulat

ive R

etur

ns

0

$1,400

1,000

900

1,200

1,300

1,100

800

700

600

500

400

300

200

100

03/8603/87

03/8803/89

03/9003/91

03/9203/93

03/9403/95

03/9603/97

03/9803/99

03/0003/01

03/0203/03

03/0403/05

03/0603/07

03/0803/09

03/10

Non-Dividend Payers

Dividend Payers

Market Environment Charts | 11

opportunistic: Default rates

Decline in teD spread May Be Positive For stocks

Source: FactSet Data as of 3/31/10. Past performance is no guarantee of future results. LIBOR is the interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.

What the Chart showsThe TED spread is the difference between the interest rate on interbank loans (3-month Eurodollar contracts as represented by the London Interbank Offered Rate, or LIBOR) and short-term U.S. government debt, or T-bills. It is an indicator of perceived credit risk in the general economy. When the TED spread increases it is a sign that lenders believe the risk of default on interbank loans is greater. As the chart shows, however, the TED spread has recently decreased dramatically.

What it Means for investorsThe TED spread currently indicates that there is a much lower perceived risk of defaults in the economy. This should be a good sign for stocks, and investors who were scared away from the market during the recent recession may want to consider increasing their allocations to stocks as a result.

TED

Spre

ad B

asis

Poin

ts

-100

500

400

300

200

100

03/8603/87

03/8803/89

03/9003/91

03/9203/93

03/9403/95

03/9603/97

03/9803/99

03/0003/01

03/0203/03

03/0403/05

03/0603/07

03/0803/09

03/10

0

*Assets under management are for Allianz Global Investors AG as of March 31, 2010.

Investors should consider the investment objectives, risks, charges and expenses of any mutual fund carefully before investing. This and other information are contained in the fund’s prospectus, which may be obtained by contacting your financial advisor. Please read the prospectus carefully before you invest. Diversification does not ensure against loss.

Allianz Global Investors Fund Management LLC serves as the closed-end funds’ investment manager. Managed accounts are available through Allianz Global Investors Managed Accounts LLC, 1345 Avenue of the Americas, New York, NY 10105-4800. The PIMCO and Allianz Funds are distributed by Allianz Global Investors Distributors LLC, 1345 Avenue of the Americas, New York, NY 10105-4800, ©2010. For information about any product, contact your financial advisor.

AC03

8_29

043

about allianz Global investors

Allianz Global Investors has more than $1 trillion in assets

under management for our clients worldwide.* Our investment

managers — including PIMCO, RCM and NFJ Investment

Group — offer their own distinctive philosophy and culture,

and provide clients with a comprehensive and constantly

evolving range of investment styles and products.

For more information about any of our innovative investment

solutions, visit www.allianzinvestors.com.