N-CSR 1 dncsr.htm Legg Mason Pacific International Fund

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: 811-02351

 

 

Name of Fund: Pacific American Income Shares, Inc.

 

 

Address of Principal Executive Offices:

385 East Colorado Boulevard

Pasadena, CA 91101

 

Name and address of agent for service:

Richard M. Wachterman, Esq.

Legg Mason Wood Walker, Incorporated

100 Light Street

Baltimore, MD 21202

 

Registrant’s telephone number, including area code: (410) 539-0000

 

Date of fiscal year end: December 31, 2004

 

Date of reporting period: June 30, 2004

 

Item 1 – Report to Shareholders

 

 

 

 

Pacific American Income Shares, Inc.

 

Semi-Annual Report to Shareholders

 

June 30, 2004

 

Semi-Annual Report to Shareholders

 

STATISTICAL HIGHLIGHTS

(Amounts in Thousands, except per share amounts)

 

       Six Months
Ended
June 30, 2004		      Year Ended
December 31, 2003

Net Asset Value

      $ 150,586      $ 155,139

Per Share

      $ 16.04      $ 16.52

Net Investment Income

      $ 4,495      $ 8,663

Per Share

      $ 0.48      $ 0.92

Dividends Paid

      $ 4,448      $ 9,190

Per Share

      $ 0.47      $ 0.98

 

The Company

Pacific American Income Shares, Inc. (“PAI” or the “Company”) is a closed-end, diversified management investment company which seeks for its shareholders a high level of current income through investment in a diversified portfolio of debt securities. Substantially all of the net investment income is distributed to the shareholders. A Dividend Reinvestment Plan is available to those shareholders of record desiring it. The shares are listed on the New York Stock Exchange where they are traded under the symbol PAI, and price quotations can be found in publications under the abbreviation PacAmShrs.

 

Investment Policies

The Company’s investment policies provide that its portfolio be invested as follows:

 

  •   At least 75% in debt securities rated within the four highest grades, and in government securities, bank debt, commercial paper, cash or cash equivalents.

 

  •   Up to 25% in other fixed income securities, convertible bonds, convertible preferred and preferred stock.

 

  •   Not more than 25% in securities restricted as to resale.

 

Dividend Reinvestment Plan

PAI and EquiServe Trust Company, N.A. (“EquiServe” or the “Agent”), as the Transfer Agent and Registrar of the Company, offer two convenient ways to add shares of the Company to your account. First, PAI offers to all shareholders a Dividend Reinvestment Plan (“Plan”). Under the Plan, cash distributions (e.g., dividends and capital gains) are automatically invested in shares of PAI unless the shareholder elects otherwise. Second, the Company offers to registered shareholders (those who own shares in their own name on the Company’s records) the option to purchase additional whole and partial shares of PAI—the Optional Cash Investment Service (“Optional Cash Investment Service”).

 

As a participant in the Dividend Reinvestment Plan, you will automatically receive your dividend or net capital gains distribution in newly issued shares of PAI, if the market price of the shares on the date of the distribution is at or above the net asset value (“NAV”) of the shares. The number of shares to be issued to you will be determined by dividing the amount of the cash distribution to which you are entitled (net of any applicable withholding taxes) by the greater of the NAV per share on such date or 95% of the market price of a share on such date. If the market price of a share on such distribution date is below the NAV, the Agent will, as agent for the participants, buy shares of PAI stock through a broker on the open market. All shares of common stock acquired on your behalf through the Plan will be automatically credited to an account maintained on the books of the Agent. Full and fractional shares will be voted by State Street in accordance with your instructions.

 

Optional Cash Investment Service

Under the Optional Cash Investment Service (offered to registered shareholders only), funds received from shareholders for stock purchases will be pooled once per month. The Agent will then purchase shares of PAI stock through a broker on the open market. For the purposes of making purchases, the Agent will commingle each participant’s funds with those of all other participants in the Plan. The price per share of shares purchased for each participant’s account with respect to a particular dividend or other distribution shall be the average price (including brokerage commissions, transfer taxes and any other costs of purchase) of all shares purchased with respect to that dividend or other distribution. The Agent will hold the total shares purchased for all participants in its name or the name of its nominee and will have no responsibility for the value of such shares after their purchase.

 

1

Semi-Annual Report to Shareholders

STATISTICAL HIGHLIGHTS—Continued

 

Beneficial shareholders (those who own shares held in a brokerage, bank or other financial institution account) are not eligible to participate in this option because there is no way to make payments through a broker, bank or nominee. A beneficial shareholder may, however, have their shares taken out of “street name” and re-register such shares in their own name, becoming a registered shareholder in order to participate. If you wish to do so, please contact your broker, bank or nominee.

 

Additional Information Regarding the Plan and the Optional Cash Investment Service

PAI will pay all costs applicable to the Plan and Optional Cash Investment Service, with noted exceptions. Brokerage commissions, transfer taxes and any other costs of purchase or sale by the Agent under the Plan or Optional Cash Investment Service will be charged to participants. In the event PAI determines to no longer pay such costs, the Agent will terminate the Plan and Optional Cash Investment Service and may, but is not obligated to, offer a new plan under which it would impose a direct service charge on participants.

 

All shares acquired through the Plan or the Optional Cash Investment Service receive voting rights and are eligible for any stock split, stock dividend, or other rights accruing to shareholders that the Board of Directors may declare.

 

You may terminate participation in the Plan or the Optional Cash Investment Service at any time by giving written notice to the Agent. Such termination shall be effective prior to the record date next succeeding the receipt of such instructions or by a later date of termination specified in such instructions. Upon termination, a participant may request a certificate for the full shares credited to his or her account or may request the sale of all or part of such shares. If the participant instructs the Agent to sell the shares credited to the participant’s account, the Agent may accumulate such shares and those of any other terminating participants for purposes of such sale. Brokerage charges, transfer taxes, and any other costs of sale will be allocated pro rata among the selling participants. Any such sale may be made on any securities exchange where such shares are traded, in the over-the-counter market or in negotiated transactions, and may be subject to such terms of price, delivery, etc., as the Agent may agree to. Fractional shares credited to a terminating account will be paid for in cash at the current market price at the time of termination.

 

Dividends and other distributions invested in additional shares under the Plan are subject to income tax just as if they had been received in cash. After year end, dividends paid on the accumulated shares will be included in the Form 1099-DIV information return to the Internal Revenue Service (IRS) and only one Form 1099-DIV will be sent to participants each year.

 

Inquiries regarding the Plan and the Optional Cash Investment Service, as well as notices of termination, should be directed to EquiServe Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011—Investor Relations telephone number 1-866-290-4386.

 

Proxy Voting Policies and Procedures

You may request a free description of the policies and procedures that the Company uses to determine how proxies relating to the Company’s portfolio securities are voted by calling 1-800-799-4932 or by writing to the Company, or you may obtain a copy of these policies and procedures (and other information regarding the Company) from the Securities and Exchange Commission’s web site (http://www.sec.gov).

 

2

Semi-Annual Report to Shareholders

 

PORTFOLIO DIVERSIFICATION

June 30, 2004 (Unaudited)

 

LOGO

 

*EXPRESSED AS A PERCENTAGE OF THE PORTFOLIO

 

The pie chart and bar chart above represent the Company’s assets as of June 30, 2004. The Company’s portfolio is actively managed, and its portfolio composition, credit quality breakdown, and other portfolio characteristics will vary from time to time.

 

3

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS

June 30, 2004 (Unaudited)

(Amounts in Thousands)

 

Pacific American Income Shares, Inc.

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Long-Term Securities

    97.9%                          

Corporate Bonds and Notes

    66.0%                          

Aerospace/Defense

    2.5%                          

Northrop Grumman Corporation

         9.375%    10/15/24    $ 2,000    $     2,118  

Raytheon Company

         5.375%    4/1/13      420      419 A

Raytheon Company

         6.400%    12/15/18      610      635  

Systems 2001 Asset Trust

         6.664%    9/15/13      518      558 B
                          
                             3,730  
                          

Auto Parts and Equipment

    0.3%                          

American Axle & Manufacturing Inc.

         5.250%    2/11/14      300      288  

Lear Corporation

         8.110%    5/15/09      200      228  
                          
                             516  
                          

Automotive

    3.0%                          

Ford Motor Company

         7.450%    7/16/31      190      181  

Ford Motor Company

         8.900%    1/15/32      730      796  

Ford Motor Company

         7.700%    5/15/97      940      857  

General Motors Corporation

         8.250%    7/15/23      190      199  

General Motors Corporation

         8.375%    7/15/33      2,350      2,488 A
                          
                             4,521  
                          

Banking and Finance

    5.0%                          

Ford Motor Credit Company

         6.500%    1/25/07      790      830  

Ford Motor Credit Company

         5.800%    1/12/09      600      606  

Ford Motor Credit Company

         7.375%    10/28/09      590      630  

Ford Motor Credit Company

         7.250%    10/25/11      1,380      1,441  

Ford Motor Credit Company

         7.000%    10/1/13      580      585 A

Fuji Co., Ltd.

         9.870%    12/31/49      620      701 B

General Motors Acceptance Corporation

         6.125%    8/28/07      1,050      1,096 A

General Motors Acceptance Corporation

         6.875%    9/15/11      1,000      1,025  

SB Treasury Company LLC

         9.400%    12/29/49      600      675 ABC
                          
                             7,589  
                          

Banks

    3.2%                          

Bank of America Corporation

         6.250%    4/15/12      1,075      1,147  

Bank of America Corporation

         7.800%    9/15/16      250      294  

Bank One Corporation

         5.250%    1/30/13      845      831  

BankAmerica Capital III

         1.710%    1/15/27      215      207 D

CBA Capital Trust I

         5.805%    12/31/49      1,390      1,359 B

Chase Capital II

         1.679%    2/1/27      725      687 D

 

4

Semi-Annual Report to Shareholders

 

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Banks—Continued

                               

UnionBanCal Corporation

         5.250%    12/16/13    $ 295    $ 291  
                          
                             4,816  
                          

Building Materials

    0.4%                          

American Standard, Inc.

         8.250%    6/1/09      500      560  
                          

Cable

    1.9%                          

Comcast Corporation

         7.050%    3/15/33      160      166  

Cox Communications, Inc.

         7.125%    10/1/12      840      920  

CSC Holdings Inc.

         7.250%    7/15/08      700      707  

CSC Holdings Inc.

         7.625%    7/15/18      500      466  

TCI Communications, Inc.

         8.750%    8/1/15      160      193  

Tele-Communications, Inc.

         9.800%    2/1/12      375      470  
                          
                             2,922  
                          

Casino Resorts

    0.4%                          

Harrah’s Operating Company, Inc.

         5.500%    7/1/10      340      342 B

Park Place Entertainment Corporation

         8.125%    5/15/11      250      265  
                          
                             607  
                          

Chemicals

    1.3%                          

The Dow Chemical Company

         6.000%    10/1/12      1,000      1,033  

The Dow Chemical Company

         7.375%    11/1/29      800      871  
                          
                             1,904  
                          

Computer Services and Systems

    0.7%                          

Electronic Data Systems Corporation

         7.125%    10/15/09      600      628 A

Electronic Data Systems Corporation

         7.450%    10/15/29      420      412 A
                          
                             1,040  
                          

Diversified Financial Services

    1.3%                          

Boeing Capital Corporation

         5.800%    1/15/13      500      515 A

Capital One Financial Corporation

         8.750%    2/1/07      350      387  

Capital One Financial Corporation

         7.125%    8/1/08      90      97  

CIT Group Inc.

         3.875%    11/3/08      5      5  

CIT Group Inc.

         7.750%    4/2/12      400      456  

IBJ Preferred Capital Corp. LLC

         8.790%    12/29/49      110      121 B

Wells Fargo & Company

         5.000%    11/15/14      405      391  
                          
                             1,972  
                          

 

5

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS—Continued

 

Pacific American Income Shares, Inc.—Continued

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Electric

    2.2%                          

AEP Texas Central Company

         5.500%    2/15/13    $    420    $        420 A

American Electric Power Company, Inc.

         5.250%    6/1/15      490      470  

Dominion Resources, Inc.

         5.125%    12/15/09      210      213 A

FirstEnergy Corp.

         5.500%    11/15/06      60      62  

FirstEnergy Corp.

         7.375%    11/15/31      350      365  

General Electric Company

         5.000%    2/1/13      500      492  

Southern California Edison Company

         8.000%    2/15/07      375      414  

System Energy Resources, Inc.

         4.875%    10/1/07      380      385  

Tampa Electric Company

         6.375%    8/15/12      145      150 A

The AES Corporation

         9.500%    6/1/09      39      42  

The Cleveland Electric Illuminating Company

         5.650%    12/15/13      300      292 B
                          
                             3,305  
                          

Energy

    7.7%                          

Alabama Power Company

         3.125%    5/1/08      360      348 A

Calpine Corporation

         8.500%    2/15/11      258      168 A

Calpine Corporation

         8.750%    7/15/13      280      230 A,B

CenterPoint Energy, Inc.

         6.850%    6/1/15      750      762  

DTE Energy Company

         6.375%    4/15/33      630      590  

Duke Energy Corporation

         5.625%    11/30/12      70      70  

Exelon Corporation

         6.750%    5/1/11      1,500      1,631  

MidAmerican Energy Holdings Company

         5.875%    10/1/12      500      508  

Pacific Gas and Electric Company

         6.050%    3/1/34      1,570      1,477  

Progress Energy, Inc.

         7.100%    3/1/11      510      559  

Sempra Energy

         1.740%    5/21/08      635      634 D

Sithe Independence Funding Corporation

         9.000%    12/30/13      1,500      1,650  

TXU Corp.

         6.375%    6/15/06      1,500      1,580  

TXU Energy Co.

         6.125%    3/15/08      500      527  

TXU Energy Co.

         7.000%    3/15/13      370      403  

Xcel Energy, Inc.

         7.000%    12/1/10      350      387  
                          
                             11,524  
                          

Environmental Services

    0.7%                          

Allied Waste North America Incorporated

         8.875%    4/1/08      250      274  

Safety-Kleen Corp.

         9.250%    5/15/09      346      17 E

Waste Management, Inc.

         7.375%    5/15/29      715      775  
                          
                             1,066  
                          

Food, Beverage and Tobacco

    3.2%                          

Altria Group, Inc.

         6.375%    2/1/06      75      78  

Altria Group, Inc.

         7.000%    11/4/13      985      1,003  

 

6

Semi-Annual Report to Shareholders

 

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Food, Beverage and Tobacco—Continued

                               

Altria Group, Inc.

         7.750%    1/15/27    $    340    $        348  

Kraft Foods Inc.

         6.250%    6/1/12      75      79  

Nabisco Incorporated

         7.550%    6/15/15      1,250      1,436 A

R.J. Reynolds Tobacco Holdings, Inc.

         7.250%    6/1/12      1,360      1,319  

Tyson Foods, Inc.

         7.000%    1/15/28      500      500 A
                          
                             4,763  
                          

Gaming

    N.M.                          

Horseshoe Gaming Holding Corp.

         8.625%    5/15/09      53      55  
                          

Gas and Pipeline Utilities

    2.4%                          

CenterPoint Energy Resources Corp.

         7.875%    4/1/13      390      437  

Dynegy Holdings Inc.

         6.875%    4/1/11      1,300      1,120 A

Dynegy Holdings Inc.

         8.750%    2/15/12      735      698 A

The Williams Companies, Inc.

         7.500%    1/15/31      102      92  

The Williams Companies, Inc.

         8.750%    3/15/32      1,250      1,250  
                          
                             3,597  
                          

Health Care

    0.8%                          

Tenet Healthcare Corporation

         5.000%    7/1/07      200      199  

Tenet Healthcare Corporation

         7.375%    2/1/13      900      815 A

Tenet Healthcare Corporation

         6.875%    11/15/31      250      196  
                          
                             1,210  
                          

Homebuilding

    0.2%                          

Centex Corporation

         5.125%    10/1/13      160      151  

Pulte Homes, Inc.

         6.250%    2/15/13      145      148 A
                          
                             299  
                          

Insurance

    1.0%                          

Loews Corporation

         7.000%    10/15/23      1,000      992  

Oil Insurance Ltd

         5.150%    8/15/33      220      220 B

Provident Companies, Inc.

         7.000%    7/15/18      230      219 A
                          
                             1,431  
                          

Investment Banking/Brokerage

    0.7%                          

J.P. Morgan Capital Trust II

         7.950%    2/1/27      150      161  

J.P. Morgan Chase & Co.

         5.750%    1/2/13      145      148  

The Goldman Sachs Group, Inc.

         6.345%    2/15/34      755      709  
                          
                             1,018  
                          

 

7

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS—Continued

 

Pacific American Income Shares, Inc.—Continued

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Lodging/Hotels

    0.3%                          

Hilton Hotels Corporation

         7.625%    12/1/12    $    450    $        484  
                          

Media

    2.8%                          

AMFM Inc.

         8.000%    11/1/08      210      237  

AOL Time Warner Inc.

         6.875%    5/1/12      570      616  

AOL Time Warner Inc.

         7.700%    5/1/32      670      732  

Liberty Media Corporation

         3.020%    9/17/06      885      902 D

Liberty Media Corporation

         8.500%    7/15/29      330      382 A

Liberty Media Corporation

         8.250%    2/1/30      165      188 A

Time Warner Entertainment Company, L.P.

         8.375%    7/15/33      770      901  

Viacom Inc.

         5.625%    8/15/12      190      194 A
                          
                             4,152  
                          

Medical Care Facilities

    0.9%                          

HCA Inc.

         5.250%    11/6/08      105      104  

HCA Inc.

         7.875%    2/1/11      250      274 A

HCA Inc.

         6.300%    10/1/12      180      180  

HCA Inc.

         5.750%    3/15/14      395      376  

Health Care REIT, Inc.

         8.000%    9/12/12      370      416  
                          
                             1,350  
                          

Oil and Gas

    5.4%                          

Amerada Hess Corporation

         7.300%    8/15/31      1,140      1,157  

Conoco Inc.

         6.950%    4/15/29      90      99  

ConocoPhillips

         4.750%    10/15/12      250      244  

Devon Energy Corporation

         7.950%    4/15/32      350      404  

El Paso Corporation

         7.800%    8/1/31      1,000      803  

Occidental Petroleum Corporation

         6.750%    1/15/12      2,000      2,203  

Ocean Energy Inc.

         4.375%    10/1/07      430      435  

Panhandle Eastern Pipe Line Company

         4.800%    8/15/08      445      444  

Sonat Inc.

         7.625%    7/15/11      1,000      893  

Valero Energy Corporation

         6.875%    4/15/12      215      234  

Vintage Petroleum, Inc.

         7.875%    5/15/11      250      256  

XTO Energy, Inc.

         6.250%    4/15/13      980      1,019  
                          
                             8,191  
                          

Paper and Forest Products

    1.4%                          

Georgia-Pacific Corp.

         9.500%    12/1/11      70      82 A

International Paper Company

         5.500%    1/15/14      490      480 A

MeadWestvaco Corporation

         6.850%    4/1/12      530      569  

 

8

Semi-Annual Report to Shareholders

 

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Paper and Forest Products—Continued

                               

Weyerhaeuser Company

         6.750%    3/15/12    $    580    $        628 A

Weyerhaeuser Company

         7.375%    3/15/32      390      424  
                          
                             2,183  
                          

Pharmaceuticals

    0.3%                          

Eli Lilly and Company

         6.000%    3/15/12      400      427 A
                          

Photo Equipment and Supplies

    0.5%                          

Eastman Kodak Company

         3.625%    5/15/08      375      355  

Eastman Kodak Company

         7.250%    11/15/13      345      351  
                          
                             706  
                          

Real Estate

    0.1%                          

Socgen Real Estate Co. LLC

         7.64%    12/29/49      80      88 B
                          

Retail

    0.2%                          

Toys “R” Us, Inc.

         6.875%    8/1/06      350      366 A
                          

Special Purpose

    10.9%                          

Ahold Finance USA, Inc.

         8.250%    7/15/10      355      374  

BAE Systems Holdings Inc.

         6.400%    12/15/11      630      671 B

Conoco Funding Company

         6.350%    10/15/11      420      457  

DaimlerChrysler NA Holding Corporation

         7.300%    1/15/12      415      453  

DaimlerChrysler NA Holding Corporation

         6.500%    11/15/13      160      164  

Devon Financing Corporation ULC

         6.875%    9/30/11      520      566  

Duke Capital Corporation

         6.250%    2/15/13      1,200      1,217 A

H.J. Heinz Finance Company

         6.000%    3/15/12      300      318 A

NiSource Finance Corp.

         3.200%    11/1/06      375      371  

PNPP II Funding Corporation

         9.120%    5/30/16      2,457      2,825 A

Qwest Capital Funding, Inc.

         7.250%    2/15/11      2,000      1,710 A

Sprint Capital Corporation

         4.780%    8/17/06      470      479  

Sprint Capital Corporation

         8.375%    3/15/12      675      776  

Sprint Capital Corporation

         8.750%    3/15/32      730      850  

TCI Communications Financing III

         9.650%    3/31/27      3,000      3,529  

The Williams Companies, Inc. Credit Linked Certificates

         6.750%    4/15/09      1,740      1,710 B
                          
                             16,470  
                          

Telecommunications

    1.9%                          

AT&T Corp.

         6.000%    3/15/09      68      65  

 

9

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS—Continued

 

Pacific American Income Shares, Inc.—Continued

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Corporate Bonds and Notes—Continued

                               

Telecommunications—Continued

                               

AT&T Corp.

         8.050%    11/15/11    $    475    $        487  

Citizens Communications Company

         8.500%    5/15/06      540      575  

Qwest Corporation

         7.200%    11/1/04      300      302  

Qwest Corporation

         6.875%    9/15/33      1,000      833  

SBC Communications Inc.

         5.875%    8/15/12      260      267  

Verizon New York Inc.

         6.875%    4/1/12      340      364  
                          
                             2,893  
                          

Telecommunications (Cellular/Wireless)

    1.5%                          

AT&T Wireless Services Inc.

         7.500%    5/1/07      500      548  

AT&T Wireless Services Inc.

         8.125%    5/1/12      120      139  

AT&T Wireless Services Inc.

         8.750%    3/1/31      610      744  

Motorola, Inc.

         7.625%    11/15/10      350      394 A

Nextel Communications, Inc.

         7.375%    8/1/15      365      368  
                          
                             2,193  
                          

Transportation

    0.9%                          

Continental Airlines, Inc.

         6.545%    2/2/19      84      79  

Continental Airlines, Inc.

         7.256%    3/15/20      261      254  

Delta Air Lines, Inc.

         7.570%    11/18/10      160      148 A

Delta Air Lines, Inc.

         6.417%    7/2/12      400      414  

Delta Air Lines, Inc.

         6.718%    1/2/23      302      311  

Northwest Airlines Corporation

         7.575%    9/1/20      87      85  

United Airlines, Inc.

         7.783%    1/1/14      102      84  
                          
                             1,375  
                          

Total Corporate Bonds and Notes
(Identified Cost—$97,469)

                            99,323  

Mortgage-Backed Securities

    0.8%                          

Fixed Rate Securities

    0.8%                          

Glendale Federal Savings Bank 1978-A

         9.125%    1/25/08      13      13  

Nomura Asset Securities Corporation 1996-MD5

         7.120%    4/13/39      1,170      1,238  
                          

Total Mortgage-Backed Securities
(Identified Cost—$1,182)

                            1,251  

U.S. Government and Agency Obligations

    0.8%                          

Fixed Rate Securities

    0.8%                          

United States Treasury Bonds

         5.375%    2/15/31      1,155      1,165 A
                          

Total U.S. Government and Agency Obligations
(Identified Cost—$1,160)

                            1,165  

 

10

Semi-Annual Report to Shareholders

 

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

U.S. Government Agency Mortgage-
Backed Securities

    1.4%                          

Fixed Rate Securities

    1.4%                          

Fannie Mae

         8.000%    4/25/06    $ 79    $          82  

Fannie Mae

         10.500%    7/1/09      49      53  

Fannie Mae

         6.000%    4/1/14      4      5  

Fannie Mae

         11.500%    11/1/17      41      46  

Fannie Mae

         14.000%    2/1/18      46      54  

Freddie Mac

         10.250%    5/1/09      38      41  

Freddie Mac

         6.500%    2/1/29      1,090      1,139  

Government National Mortgage Association

         7.000%    8/15/25 to 6/15/28      477      508  

Government National Mortgage Association

         6.500%    8/15/28      21      22  

Government National Mortgage Association

         6.000%    12/15/28      151      156  
                          

Total U.S. Government Agency Mortgage-Backed Securities (Identified Cost—$1,988)

                            2,106  

Yankee BondsF

    28.9%                          

Banking and Finance

    1.4%                          

Corporacion Andina de Fomento

         1.520%    1/26/07      470      470 D

HBOS Treasury Services plc

         3.750%    9/30/08         380             374 B

HBOS Capital Funding LP

         6.071%    6/30/49      560      562 A,B

Mizuho Financial Group, Inc.

         5.790%    4/15/14      750      737 B
                          
                             2,143  
                          

Banks

    1.8%                          

ABN Amro Bank NV

         4.650%    6/4/18      580      516  

Korea Exchange Bank

         13.750%    6/30/10      1,000      1,100 B,C

Royal Bank of Scotland Group plc

         8.817%    3/31/49      1,000      1,045  
                          
                             2,661  
                          

Cable

    0.2%                          

British Sky Broadcasting Group plc

         6.875%    2/23/09      330      360  
                          

Electric

    0.5%                          

Empresa Nacional de Electricidad S.A.

         8.500%    4/1/09      670      732 A
                          

Foreign Governments

    8.6%                          

Federative Republic of Brazil

         14.500%    10/15/09      180      210  

Federative Republic of Brazil

         12.000%    4/15/10      210      224  

 

11

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS—Continued

 

Pacific American Income Shares, Inc.—Continued

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Yankee Bonds—Continued

                               

Foreign Governments—Continued

                               

Federative Republic of Brazil

         2.125%    4/15/12    $    169    $        142 D

Federative Republic of Brazil

         2.125%    4/15/12      264      220 D

Federative Republic of Brazil

         8.000%    4/15/14      387      353 A

Federative Republic of Brazil

         11.000%    8/17/40      260      245 A

Province of Manitoba

         9.500%    9/15/18      730      1,021  

Quebec Province

         7.220%    7/22/36      980      1,271 C

Republic of Bulgaria

         8.250%    1/15/15      20      23 B

Republic of Bulgaria

         8.250%    1/15/15      508      593  

Republic of Chile

         1.570%    1/28/08      320      323 D

Republic of Colombia

         10.500%    7/9/10      200      214  

Republic of Colombia

         11.750%    2/25/20      260      284  

Republic of Panama

         9.625%    2/8/11      170      188  

Republic of Panama

         9.375%    7/23/12      110      120  

Republic of Panama

         2.000%    7/17/16      80      68 D

Republic of Panama

         10.750%    5/15/20      100      112 A

Republic of Panama

         9.375%    1/16/23      40      41  

Republic of Peru

         9.125%    2/21/12      50      51  

Republic of Peru

         8.375%    5/3/16      40      37  

Republic of Peru

         5.000%    3/7/17      419      362 C

Republic of Peru

         8.750%    11/21/33      90      79 A

Republic of South Africa

         7.375%    4/25/12      250      271  

Republic of South Africa

         6.500%    6/2/14      260      262  

Republic of the Philippines

         9.875%    1/15/19      150      149 A

Russian Federation

         5.000%    3/31/30      1,280      1,169 C

Russian Ministry of Finance

         3.000%    5/14/06      80      77  

United Mexican States

         8.375%    1/14/11      1,460      1,650  

United Mexican States

         11.500%    5/15/26      2,260      3,169 A

United Mexican States

         7.500%    4/8/33      0.3      0.3  
                          
                             12,928  
                          

Insurance

    0.8%                          

Axa

         8.600%    12/15/30      550      673  

XL Capital plc

         6.500%    1/15/12      500      535  
                          
                             1,208  
                          

Investment Banking/Brokerage

    2.2%                          

Credit Suisse First Boston, London

         7.900%    5/29/49      3,000      3,305 B
                          

Manufacturing (Diversified)

    3.1%                          

Tyco International Group S.A.

         5.800%    8/1/06      280      292  

 

12

Semi-Annual Report to Shareholders

 

 

 

     % OF
NET ASSETS		    RATE    MATURITY
DATE		    PAR    VALUE  

Yankee Bonds—Continued

                               

Manufacturing (Diversified)—Continued

                               

Tyco International Group S.A.

         6.375%    10/15/11    $ 1,450    $     1,542  

Tyco International Group S.A.

         7.000%    6/15/28      1,364      1,448  

Tyco International Group S.A.

         6.875%    1/15/29      1,366      1,430  
                          
                             4,712  
                          

Oil and Gas

    1.3%                          

Gaz Capital S.A.

         8.625%    4/28/34      70      68  

Petrobras International Finance Company (PIFCO)

         9.750%    7/6/11      345      374  

Petroliam Nasional Berhad

         7.125%    8/15/05      150      156 B

Petroliam Nasional Berhad

         7.625%    10/15/26      1,260      1,343 B
                          
                             1,941  
                          

Special Purpose

    6.2%                          

Deutsche Telekom International Finance BV

         8.750%    6/15/30      1,000      1,217  

HSBC Capital Funding LP

         4.610%    12/29/49      780      707 B

HSBC Holdings plc

         5.250%    12/12/12      970      964  

Gemstone Investors Limited

         7.710%    10/31/04      375      378 B

PDVSA Finance Ltd. 1998-1

         7.400%    8/15/16      110      106  

Petrozuata Finance, Inc.

         8.220%    4/1/17      4,680      4,399 B

UFJ Finance Aruba AEC

         6.750%    7/15/13      1,500      1,551  
                          
                             9,322  
                          

Telecommunications

    2.5%                          

British Telecommunications plc

         8.875%    12/15/30      330      407  

France Telecom SA

         9.500%    3/1/31      1,060      1,331  

INTELSAT

         6.500%    11/1/13      355      314  

Tele Norte Leste Participacoes S.A.

         8.000%    12/18/13      410      367 B

Telecom Italia S.p.A.

         5.250%    11/15/13      750      726 B

Telecom Italia S.p.A.

         6.375%    11/15/33      335      323 B

Telus Corporation

         7.500%    6/1/07      250      272  
                          
                             3,740  
                          

Utilities

    0.3%                          

United Utilities plc

         5.375%    2/1/19      580      537  
                          

Total Yankee Bonds (Identified Cost—$41,112)

                            43,589  
                          

Total Long-Term Securities (Identified Cost—$142,911)

                            147,434  

 

13

Semi-Annual Report to Shareholders

PORTFOLIO OF INVESTMENTS—Continued

 

Pacific American Income Shares, Inc.—Continued

 

 

     % OF
NET ASSETS		      PAR/
SHARES		      VALUE  

Investment of Proceeds From Securities Lending

    13.7%                  

State Street Navigator Securities Lending Prime Portfolio

           20,704  shs    $ 20,704  
                  

Total Investment of Proceeds From Securities Lending
(Identified Cost—$20,704)

                    20,704  

Short-Term Securities

    0.6%                  

Repurchase Agreements

    0.6%                  

Deutsche Bank AG

                       

1.4%, dated 6/30/04, to be repurchased at $450 on 7/1/04 (Collateral: $455 Federal Home Loan Bank bonds, 5.25%, due 6/18/14, value $462)

           $450        450  

Goldman, Sachs & Company

                       

1.45%, dated 6/30/04, to be repurchased at $484 on 7/1/04 (Collateral: $465 Fannie Mae notes, 5.5%, due 2/15/06, value $504)

           484        484  
                  

Total Short-Term Securities (Identified Cost—$934)

                    934  

Total Investments (Identified Cost—$164,549)

    112.2%               169,072  

Obligation to Return Collateral for Securities Loaned

    (13.7)%               (20,704 )

Other Assets Less Liabilities

    1.5%               2,218  
                  

Net Assets

    100.0%             $ 150,586  
                  
                        
A   All or a portion of these securities are on loan. See Note 3 to the financial statements.
B   Rule 144a Security – A security purchased pursuant to Rule 144a under the Securities Act of 1933 which may not be resold subject to that rule except to qualified institutional buyers. These securities represent 13.8% of net assets.
C   Stepped coupon security – A security with a predetermined schedule of interest or dividend rate changes, at which time it begins to accrue interest or pay dividends.
D   Indexed security  – The rates of interest earned on these securities are tied to the London Interbank Offered Rate (“LIBOR”). The coupon rates are the rates as of June 30, 2004.
E   Bond is in default at June 30, 2004.
F   Yankee Bond – A dollar-denominated bond issued in the U.S. by foreign entities.

 

See notes to financial statements.

 

14

Semi-Annual Report to Shareholders

STATEMENT OF ASSETS AND LIABILITIES

June 30, 2004 (Unaudited)

(Amounts in Thousands)

 

Pacific American Income Shares, Inc.

 

 

Assets:

       

Investment securities at market value (cost—$163,615)

    $ 168,138

Repurchase agreement, at cost

      934

Cash

      6

Receivable for securities sold

      793

Receivable for accrued interest

      2,502

Other assets

      13
    
       172,386
    

Liabilities:

       

Obligation to return collateral for securities loaned

      20,704

Payable for securities purchased

      851

Advisory fees payable

      63

Accrued expenses

      182
    
       21,800
    

Net Assets—Equivalent to $16.04 per share on 9,389 outstanding shares of common stock

    $ 150,586
    

Summary of Stockholders’ Equity:

       

Common stock, par value $.01 per share: authorized 20,000 shares; 9,389 issued and outstanding shares

    $ 94

Additional paid-in capital

      141,896

Under/(over) distributed net investment income

      169

Accumulated net realized gain/(loss) on investments

      3,904

Unrealized appreciation/(depreciation) of investments

      4,523
    

Net assets applicable to outstanding common stock

    $ 150,586
    
        

 

See notes to financial statements.

 

15

Semi-Annual Report to Shareholders

STATEMENT OF OPERATIONS

(Amounts in Thousands) (Unaudited)

 

Pacific American Income Shares, Inc.

 

 

     FOR THE SIX
MONTHS ENDED
JUNE 30, 2004		  

Investment Income:

         

Interest income

    $ 5,136  
    

Expenses:

         

Advisory fees

      398  

Custodian fees

      50  

Audit and legal fees

      72  

Directors’ fees and expenses

      23  

Registration fees

      12  

Reports to shareholders

      50  

Taxes, other than federal income taxes

      25  

Transfer agent and shareholder serving expense

      19  

Other

      4  
    
       653  

Less fees waived

      (12 )
    

Total expenses, net of waivers

      641  
    

Net Investment Income

      4,495  
    

Realized and Unrealized Gain/(Loss) on Investments:

         

Net realized gain/(loss) on investments

      3,928  

Unrealized appreciation/(depreciation) of investments

      (8,434 )
    

Net Realized and Unrealized Gain/(Loss) on Investments

      (4,506)  
    

Change in Net Assets Resulting From Operations

    $ (11)  
    

 

 

See notes to financial statements.

 

16

Semi-Annual Report to Shareholders

STATEMENT OF CHANGES IN NET ASSETS

(Amounts in Thousands)

 

Pacific American Income Shares, Inc.

 

 

     FOR THE SIX
MONTHS ENDED
6/30/04		      FOR THE
YEAR ENDED
12/31/03		  
Operations:    (UNAUDITED)          

Net investment income

    $ 4,495      $ 8,663  

Net realized gain/(loss) on investments

      3,928        2,063  

Increase/(decrease) in unrealized appreciation of investments

      (8,434 )      12,365  
    
  

Change in net assets resulting from operations

      (11 )      23,091  

Distributions to shareholders from:

                  

Net investment income

      (4,448 )      (9,190 )

Net realized gains on investments

      (94 )      —  
    
  

Total increase/(decrease)

      (4,553 )      13,901  

Net Assets:

                  

Beginning of period

      155,139        141,238  
    
  

End of period (includes under/(over) distributed net
investment income of $169 and $122, respectively)

    $ 150,586      $ 155,139  
    
  

 

 

See notes to financial statements.

 

17

Semi-Annual Report to Shareholders

FINANCIAL HIGHLIGHTS

 

Contained below is per share operating performance data for a share of common stock outstanding throughout each period shown, total investment return, ratios to average net assets and other supplemental data. This information has been derived from information in the financial statements.

 

 

     FOR THE SIX
MONTHS ENDED
JUNE 30, 2004
     FOR THE YEARS ENDED DECEMBER 31,
  
       2003     2002     2001     2000     1999  
Per Share Operating Performance:    (UNAUDITED)                                     

Net asset value, beginning of period

    $ 16.52     $ 15.04     $ 15.12     $ 14.84     $ 14.54     $ 15.56  
    
 
 
 
 
 

Net investment income

      .48       .92       1.00       1.03       1.08       1.06  

Net realized and unrealized gain/(loss) on investments

      (.48 )     1.54       (.08 )     .31       .29       (.99 )
    
 
 
 
 
 

Total from investment operations

      —       2.46       .92       1.34       1.37       .07  
    
 
 
 
 
 

Distributions paid from:

                                                 

Net investment income

      (.47 )     (.98 )     (1.00 )     (1.06 )     (1.07 )     (1.05 )

Net realized gain/(loss) on investments

      (.01 )     —       —       —       —       (.04 )
    
 
 
 
 
 

Total distributions

      (.48 )     (.98 )     (1.00 )     (1.06 )     (1.07 )     (1.09 )
    
 
 
 
 
 

Net asset value, end of period

    $ 16.04     $ 16.52     $ 15.04     $ 15.12     $ 14.84     $ 14.54  
    
 
 
 
 
 

Market value per share, end of period

    $ 13.93     $ 15.35     $ 14.35     $ 14.56     $ 13.50     $ 11.88  
    
 
 
 
 
 

Total Return:

                                                 

Based on net asset value per share

      .24 %A     17.13 %     6.35 %     9.45 %     10.73 %     1.14 %

Based on market value per share

      (6.31 )%A     14.07 %     5.38 %     15.86 %     23.34 %     (18.39 )%

Ratios to Average Net Assets:

                                                 

Expenses

      .84 %B     .94 %     .80 %     .77 %     .78 %     .76 %

Net investment income

      5.87 %B     5.78 %     6.75 %     6.66 %     7.48 %     7.07 %

Supplemental Data:

                                                 

Portfolio turnover rate

      31 %A     47 %     43 %     116 %     78 %     242 %

Net assets at end of period (in thousands)

    $ 150,586     $ 155,139     $ 141,238     $ 141,932     $ 139,344     $ 136.485  
                                                  
A   Not annualized.
B   Annualized.

 

See notes to financial statements.

 

18

Semi-Annual Report to Shareholders

NOTES TO FINANCIAL STATEMENTS

(Amounts in Thousands) (Unaudited)

 

Note 1—Summary of Significant Accounting Policies:

Pacific American Income Shares, Inc. (the “Company”) is registered under the Investment Company Act of 1940, as amended (“1940 Act”), as a closed-end diversified investment company. The significant accounting policies of the Company, which are in accordance with accounting principles generally accepted in the United States of America, include the following:

 

(a) Cash—Cash includes demand deposits held with the Company’s custodian and does not include short-term investments.

 

(b) Investments—Security transactions are recorded on the trade date. Investment securities owned at June 30, 2004, are reflected in the accompanying Schedule of Investments at their value on June 30, 2004. In valuing portfolio securities, securities listed or traded on a national securities exchange are valued at the last sales price. Each security traded in the over-the-counter market, including listed debt securities whose primary market is believed to be over-the-counter, is generally valued at the mean of the bid and asked prices at the time of computation. Prices are obtained from at least two dealers regularly making a market in the security, unless such prices can be obtained from only a single market maker. The difference between cost and market value is reflected separately as unrealized appreciation or depreciation of investments. Short-term securities are generally stated at cost plus interest earned, which approximates market value.

 

The net realized gain or loss on investment transactions is determined for federal income tax and financial reporting purposes on the basis of identified cost. Purchases and sales of securities other than short-term and U.S. government securities for the year ended June 30, 2004, aggregated $48,500 and $43,108, respectively. Purchases and sales of U.S. government securities for the six months ended June 30, 2004, were $2,642 and $3,844, respectively.

 

(c) Recognition of income, expenses and distributions to shareholders—The Company accrues interest income and expenses on a daily basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date.

 

(d) Federal income taxes—No provision for federal income or excise taxes is required since the Company intends to continue to qualify as a regulated investment company and distribute substantially all of its taxable income and capital gains to its shareholders. Because federal income tax regulations differ from accounting principles generally accepted in the United States of America, income and capital gains distributions determined in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements.

 

The Company intends to retain realized capital gains that may be offset against available capital loss carryforwards for federal income tax purposes. As of June 30, 2004, the Company has no capital loss carryforwards.

 

(e) Use of estimates—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.

 

(f) Foreign currency translation—Assets and liabilities initially expressed in non-U.S. currencies are translated into U.S. dollars using currency exchange rates determined prior to the close of the Exchange, usually at 2:00 p.m. Eastern time. Purchases and sales of securities and income and expenses are translated into U.S. dollars at the prevailing market rates on the dates of such transactions. The effects of changes in non-U.S. currency exchange rates on investment securities and other assets and liabilities are included with the net realized and unrealized gain or loss on investment securities.

 

(g) Other—In the normal course of business, the Company enters into contracts that provide general indemnifications. The Company’s maximum exposure under these arrangements is dependent on claims that may be made against the Company in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote.

 

Note 2—Investment Advisory Agreement and Affiliated Persons:

The Company has entered into an investment advisory agreement with Western Asset Management Company (“Adviser”), which is a wholly owned subsidiary of Legg Mason, Inc., pursuant to which the Adviser provides investment advice and administrative services to the Company. In return for its services, the Company pays the Adviser a monthly fee at an annual rate of 0.7% of the average monthly net assets of the Company up to $60,000 and 0.4% of such net assets in excess of $60,000. If

 

19

Semi-Annual Report to Shareholders

NOTES TO FINANCIAL STATEMENTS—Continued

 

expenses (including the Adviser’s fee but excluding interest, taxes, brokerage fees, the expenses of any offering by the Company of its securities, and extraordinary expenses beyond the control of the Company) borne by the Company in any fiscal year exceed 1.5% of average net assets up to $30,000 and 1% of average net assets over $30,000, the Adviser will reimburse the Company for any excess. No expense reimbursement is due for the six months ended June 30, 2004.

 

Western Asset Management Company Limited (“WAML”) provides the Company with investment research, advice, management and supervision and a continuous investment program for the Company’s portfolio of non-dollar securities consistent with the Company’s investment objectives and policies. As compensation, the Adviser pays WAML a fee based on the pro rata assets of the Company managed by WAML during the month.

 

Under the terms of an Administrative Services Agreement among the Company, the Adviser, and Legg Mason Fund Adviser, Inc. (the “Administrator”), the Adviser (not the Company) pays the Administrator a monthly fee of $3,000, an annual rate of $36,000.

 

Note 3—Securities Loaned:

The Company lends its securities to approved brokers to earn additional income and receives cash and U.S. government securities as collateral against the loans. Cash collateral received is invested in a money market pooled account by the Company’s lending agent. Collateral is maintained over the life of the loan in an amount not less than 100% of the value of loaned securities. At June 30, 2004, the market value of the securities on loan to broker-dealers was $20,282, for which the Company received collateral of $20,704 in cash. Such collateral is in the possession of the Company’s custodian. The cash was invested in the State Street Navigator Securities Lending Prime Portfolio and is included in the Company’s schedule of investments. As with other extensions of credit, the Company may bear the risk of delay in recovery or even loss of rights to the collateral should the borrower of the securities fail financially.

 

Note 4—Forward Currency Exchange Contracts:

Forward foreign currency contracts are marked-to-market daily using foreign currency exchange rates supplied by an independent pricing service. The change in a contract’s market value is recorded by the Company as an unrealized gain or loss. When the contract is closed or delivery is taken, the Company records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.

 

The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the Company’s securities, but it does establish a rate of exchange that can be achieved in the future. These forward foreign currency contracts involve market risk in excess of amounts reflected in the financial statements. Although forward foreign currency contracts used for hedging purposes limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Company could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts.

 

At June 30, 2004, there were no open forward currency exchange contracts.

 

Note 5—Shareholder Meeting Results:

The Company’s annual meeting of shareholders was held on May 4, 2004. Of the 9,389 shares outstanding, the following shares were voted at the meeting:

 

     For
    Abstain

Election of six Directors:

          

Ronald J. Arnault

    7,664    74

John E. Bryson

    7,659    79

Anita L. Defrantz

    7,646    93

William G. McGagh

    7,641    97

William E.B. Siart

    7,658    80

Louis A. Simpson

    7,660    79

 

20

Pacific American Income Shares, Inc.

 

The Board of Directors

William G. McGagh, Chairman *

Ronald J. Arnault †

John E. Bryson *

Anita L. DeFrantz †

William E. B. Siart *†

Louis A. Simpson †

 

* Member of Executive Committee

† Member of Audit Committee

 

Officers

James W. Hirschmann, President

Scott F. Grannis, Vice President

Ilene S. Harker, Vice President

S. Kenneth Leech, Vice President

Stephen A. Walsh, Vice President

Marie K. Karpinski, Treasurer and Principal Financial and Accounting Officer

Erin K. Morris, Assistant Treasurer

Lisa G. Mrozek, Secretary

Investment Advisers

Western Asset Management Company

385 East Colorado Boulevard

Pasadena, CA 91105

 

Western Asset Management Company Limited

155 Bishopsgate

London, England EC2N3TY

 

Custodian

State Street Bank & Trust Company

P.O. Box 1031

Boston, MA 02103

 

Counsel

Ropes & Gray LLP

45 Rockefeller Plaza

New York, NY 10111

 

Independent Accountants

PricewaterhouseCoopers LLP

250 West Pratt Street

Baltimore, MD 21201

 

Transfer Agent

EquiServe Trust Company, N.A.

P.O. Box 43011

Providence, RI 02940-3011

 

Pacific American Income Shares, Inc.

P.O. Box 983

Pasadena, California 91105

 

In accordance with Section 23(c) of the Investment Company Act of 1940, the Company hereby gives notice that it may, from time to time, repurchase its shares in the open market at the option of the Board of Directors, and on such terms as the Board of Directors shall determine.

 

PACAM-SAR-04

Item 2 – Code of Ethics

 

Not applicable for semi-annual reports.

 

Item 3 – Audit Committee Financial Expert

 

Not applicable for semi-annual reports.

 

Item 4 – Principal Accountant Fees and Services

 

Not applicable for semi-annual reports.

Item 5 – Audit Committee of Listed Registrants

 

Not applicable for semi-annual reports.

 

Item 6 – Schedule of Investments

 

The schedule of investments in securities of unaffiliated issuers is included in the semi-annual report.

 

Item 7 – Disclosure of Proxy Voting Policies and Procedures

 

Not applicable for semi-annual reports.

 

Item 8 – Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers

 

Not applicable.

 

Item 9 – Submission of Matters to a Vote of Security Holders

 

The Governance and Nominating Committee will accept recommendations for nominees to the Registrant’s Board of Directors from shareholders. Shareholders may forward recommendations the Registrant’s Secretary at 385 East Colorado Boulevard, Pasadena, California 91101, Attn: Secretary. The Governance and Nominating Committee has approved the following procedures for shareholders to submit nominees to the Registrant’s Board of Directors:

 

Procedures for Shareholders to Submit Nominee Candidates

 

(As of February 10, 2004)

 

A Fund shareholder must follow the following procedures in order to properly submit a nominee recommendation for the Committee’s consideration.

 

  1. The shareholder must submit any such recommendation (a “Shareholder Recommendation”) in writing to the Fund, to the attention of the Secretary, at the address of the principal executive offices of the Fund.

 

  2. The Shareholder Recommendation must be delivered to or mailed and received at the principal executive offices of the Fund not less than one hundred and twenty (120) calendar days nor more than one hundred and thirty-five (135) calendar days prior to the date of the Board or shareholder meeting at which the nominee would be elected.

 

  3. The Shareholder Recommendation must include: (i) a statement in writing setting forth (A) the name, age, date of birth, business address, residence address and nationality of the person recommended by the shareholder (the “candidate”); (B) the class or series and number of all shares of the Fund owned of record or beneficially by the candidate, as reported to such shareholder by the candidate; (C) any other information regarding the candidate called for with respect to director/trustee nominees by paragraphs (a), (d), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of Item 22 of Rule 14a-101 (Schedule 14A) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), adopted by the Securities and Exchange Commission (or the corresponding provisions of any regulation or rule subsequently adopted by

the Securities and Exchange Commission or any successor agency applicable to the Fund); (D) any other information regarding the candidate that would be required to be disclosed if the candidate were a nominee in a proxy statement or other filing required to be made in connection with solicitation of proxies for election of trustees or directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (E) whether the recommending shareholder believes that the candidate is or will be an “interested person” of the Fund (as defined in the Investment Company Act of 1940, as amended) and, if not an “interested person,” information regarding the candidate that will be sufficient for the Fund to make such determination; (ii) the written and signed consent of the candidate to be named as a nominee and to serve as a director/trustee if elected; (iii) the recommending shareholder’s name as it appears on the Fund’s books; (iv) the class or series and number of all shares of the Fund owned beneficially and of record by the recommending shareholder; and (v) a description of all arrangements or understandings between the recommending shareholder and the candidate and any other person or persons (including their names) pursuant to which the recommendation is being made by the recommending shareholder. In addition, the Committee may require the candidate to furnish such other information as it may reasonably require or deem necessary to determine the eligibility of such candidate to serve on the Board.

 

Item 10 – Controls and Procedures

 

  (a) The registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

 

  (b) There were no changes in the registrant’s internal control over financial reporting during the registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

 

Item 11 – Exhibits

 

(a) File the exhibits listed below as part of this Form.

 

(a)(1) Not applicable for semi-annual reports.

 

(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto.

 

(a)(3) Not applicable.

 

(b) Certifications pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 is attached hereto.

SIGNATURES

 

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.

 

Pacific American Income Shares, Inc.

By:  

/s/ James W. Hirschmann

   

James W. Hirschmann

   

President

   

Pacific American Income Shares, Inc.

 

Date: 8/24/04

 

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/ James W. Hirschmann

    James W. Hirschmann
    President
    Pacific American Income Shares, Inc.

 

Date: 8/24/04

 

By:

  

/s/ Marie K. Karpinski

    Marie K. Karpinski
   

Treasurer and Principal Financial and Accounting Officer

    Pacific American Income Shares, Inc.

 

Date: 8/24/04