Product Focus:

PIMCO Pathnder

Strategy
Anne Guden and Charles Lahr Discuss
PIMCOs Global Deep Value Equity Strategy
PIMCO recently introduced the PIMCO Pathnder Strategy, an actively managed global
deep value equity approach focused on steeply discounted stocks of fundamentally
strong companies. In the interview below, portfolio managers Anne Guden and Charles
Lahr discuss the global deep value investment process, supplemental strategies they
may use in their effort to enhance results, their risk management style, and how equity
investing integrates with PIMCOs established process and platform.
Q: What is the PIMCO Pathnder Strategy?
Guden: PIMCO Pathnder Strategy is a global deep value equity approach which
focuses on stocks trading at signicant discounts to their intrinsic value as an
illustration, were looking for securities trading for 60 cents that we believe are actually
worth a dollar. Our fundamental bottom-up analysis looks for these mispriced securities
and seeks to outperform the broad global equity markets over the long term, and do so
with lower volatility.
PIMCO Pathnder Strategy is an actively managed go anywhere global strategy: we
look for undervalued companies around the world, without benchmark constraints,
targeting attractive returns across full market cycles. We may also make tactical
investments in distressed debt, merger arbitrage and other opportunistic situations.
Guarding against downside risk is a key objective of the strategy. Together, Charles and
I have 36 years of experience investing in deep value equities using this approach.
Q: Can you tell us a bit more about PIMCOs deep value equity investment process?
Lahr: Markets can overreact to new information or shorter-term cyclical trends and
punish companies that have solid fundamentals and long-term potential. Perhaps
there has been a disappointing earnings report, a restructuring or a lawsuit. Our task
as deep value investors is to evaluate all factors of the business, estimate the gains it
can reasonably be expected to deliver over time, and compare the market price of that
company with our assessment of the intrinsic value of the business. To achieve this depth
of understanding, we visit companies worldwide so that we can engage face-to-face
with senior management and get a rsthand view of operations.
We invest where we see a wide discount between the price in the market and our
estimate of intrinsic value. This deep discount provides the opportunity for capital
appreciation; yet, it also provides us with a margin of safety which can help insulate the
portfolio in equity market downturns. We typically endeavor to buy a security at a large
discount (for example, 60% or 70% of intrinsic value) and sell when its price approaches
Anne Guden, CFA
Executive Vice
President
Portfolio Manager
Charles Lahr, CFA
Executive Vice
President
Portfolio Manager
Product Focus: PIMCO Pathnder Strategy
2
what we have determined to be its intrinsic value. We are generally long-term investors and our typical holding period
is three to ve years.
To nd attractive companies we study annual reports and company lings, sift through information on corporate
actions, investigate restructurings, spin-offs, mergers and acquisitions, and speak with industry contacts. To
determine intrinsic value, we analyze the companys fundamentals its capital structure, its competitive positioning,
industry trends, and the global economic environment and determine its intrinsic value based upon either an
asset-based valuation or its free cash ow generation. Ideal companies are likely to have solid earnings power,
sustainable business models, competitive advantages, the exibility to restructure inefciencies, and shareholder-
friendly management.
In addition, desirable securities often have identiable triggers which may help us unlock underlying value.
Understanding the equity as a business thinking like an owner is critical to the deep value approach. We also
strive to stay in touch with top-level management to advise them about shareholder value creation and to pursue the
activation of those triggers to unlock hidden value.
Our capabilities in bottom-up security selection mesh well with and are enhanced by PIMCOs proven credit research
resources and analytical processes.
Q: How is the PIMCO Pathnder Strategy different from other deep value equity strategies?
Guden: PIMCO Pathnder Strategy is unique in the extent to which it seeks capital appreciation while emphasizing
downside mitigation. The defensive orientation of the strategy seeks to provide outperformance across full market
cycles and it may demonstrate especially strong relative performance during poor equity market environments. As
a result, the PIMCO Pathnder Strategy may offer a more attractive risk/return prole over the long term than other
value-oriented strategies and the passive broad global equity market index.
Another difference is the strategy can opportunistically invest in merger arbitrage, distressed debt and other
tactical situations.
The merger arbitrage element of the strategy seeks equity-like returns with less volatility and relatively low
correlation to the overall market by capturing the spread between the current price of the target company and
the ultimate takeover price upon acquisition. Our dedicated team has broad expertise and focus on announced
deals; a less risky way to invest in merger arbitrage. The PIMCO Pathnder Strategy also does not use leverage
in these investments.
In distressed debt investing, we seek to purchase bonds and bank debt at notable discounts to par with meaningful
collateral backing. Our distressed debt specialists along with our team of global credit analysts, focus on rms in
distressed situations (bankruptcies, reorganizations, coercive tenders) and on seniority in the capital structure. If and
when a distressed company regains health, the debt we purchased at a discount may appreciate towards par value
or even be swapped into equities.
When appropriate, PIMCO Pathnder Strategy can also include other select tactical opportunities currency
hedging, for example that benet from PIMCOs depth and expertise.
3
Q: You mentioned PIMCO Pathnder Strategy is a go anywhere strategy what are some advantages of this global
approach, and how do you target consistent value across all economic environments?
Lahr: The strategys global reach allows us to pursue the best deep value opportunities anywhere they may be found
and to diversify among regions, sectors and capital structures, helping us target attractive returns in most market
environments. This can be an especially compelling strategy in an environment of shifting growth and wealth drivers,
heightened market volatility and global economic rebalancing. Such economic dynamics can obscure underlying
security value, presenting additional opportunities for the strategy.
The PIMCO Pathnder Strategy aims to provide consistent added value across full market cycles. Our active
management style encourages both strategic and tactical decision making, potentially limiting downside risk while
capturing positive market movements.
While PIMCO Pathnder Strategy is benchmarked to the MSCI World Index, our investment process is not
constrained by any adherence to benchmark characteristics or holdings, nor do we strive to limit tracking error.
The strategy gives us the exibility to manage risk and seek returns in any environment.
Q: PIMCO is known primarily as a xed income investment manager why is PIMCO introducing a deep value
equity strategy?
Guden: Equity investing along with commodities, real estate, currencies, alternatives and multi-asset offerings
has been a part of PIMCOs platform for many years. The rm was a pioneer in portable alpha equity investing
which does not involve traditional active stock selection. For example, PIMCO introduced the StocksPLUS

equity
derivatives-based strategies in 1986.
The rms success since its founding in 1971 has been grounded in its disciplined investment process, which
combines expertise in economic forecasting and risk management with extensive resources and understanding
of security selection. This investment process naturally produces thought leadership and strategies applicable to
economies and the entire capital structure of individual companies.
Deep value equity investing at PIMCO now allows us to access another part of the capital structure of a rm its
equity and is another investment tool to complement our thinking in xed income, asset allocation and other
strategies. Simply put, the PIMCO Pathnder Strategy is enhanced by inputs from PIMCOs extensive global resources
and expertise.
Q: How does PIMCOs investment style and process apply to a deep value equity approach?
Lahr: The strategys deep value equity approach focuses on bottom-up fundamental security analysis and stock
selection. The rms economic views help inform the security valuation process. PIMCOs experience and investment
process provide a framework for evaluating the best opportunities among the full spectrum of economies, industries,
rms and individual securities around the world.
Also, PIMCOs proven credit research capabilities, market risk hedging strategies and experience in distressed debt
enhance our deep value bottom-up process. We also tap into the other benets of the PIMCO platform, including
extensive resources in cash and currency management, highly evolved proprietary analytical tools, policy research,
Product Focus: PIMCO Pathnder Strategy
4
derivatives management and operational execution. PIMCOs size and reach in the marketplace may also offer unique
trading opportunities and access to top-level company management.
The strengths of PIMCOs proven credit and global economic research, and its knowledge-based investment platform,
helps us focus our efforts on uncovering the best deep value opportunities and producing attractive risk-managed
returns for investors.
Q: How do you evaluate and manage risk in the strategy?
Guden: The strategys risk management philosophy can focus on mitigation of downside potential in all market
environments. Sources of risk in a deep value equity strategy can include overestimating intrinsic value, excessive
leverage, awed business models and inadequate company management. Our risk management techniques include
thorough fundamental research, a disciplined buy-sell strategy focused on signicant discount targets, and selective
tactical hedging of currency and other risks via derivatives and other instruments.
Downside risks exist in every market environment, and we are continually mindful of the equity market risk embedded
in the strategys equity-oriented portfolio. We may also use market risk hedging when appropriate.
In addition to a rigorous risk management discipline, we also have access to PIMCOs advanced proprietary analytical
tools to monitor the portfolios risk sensitivities and characteristics. These tools are important in managing active
equity strategies, as their exibility facilitates analysis at the regional, sector and security level.
Q: How will your deep value approach face the challenges inherent in PIMCOs secular outlook, such as shifting
growth dynamics (subdued growth in the developed markets, higher growth in emerging economies), private sector
deleveraging, diminished corporate prots and increasing regulation?
Lahr: All of those factors are likely to create notable gaps between short-term trends and longer-term structural
realities, which, in turn, may obscure the underlying value of many securities. Also, the recent crisis may have hurt
the prices of fundamentally healthy companies. In this investment atmosphere, we anticipate discovering many
attractively priced opportunities.
We believe the sustained period of slower growth we expect to see over the secular horizon can support effective
deep value equity selection. In particular, the strategys focus on fundamental analysis and mitigation of downside
potential is likely to provide investors with a margin of safety in a sideways or downward trending equity market.
Thank you both for your time.
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Past performance is not a guarantee or a reliable indicator of future results. Equities may decline in value due to both real and perceived general
market, economic, and industry conditions. Investments in value securities involve the risk the markets value assessment may differ from the manager
and the performance of the securities may decline. Investing in securities of smaller companies tends to be more volatile and less liquid than securities
of larger companies. Investing in distressed companies (both debt and equity) is speculative and may be subject to greater levels of credit, issuer
and liquidity risks, and the repayment of default obligations contains signicant uncertainties; such companies may be engaged in restructurings
or bankruptcy proceedings. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency uctuations,
and economic and political risks, which may be enhanced in emerging markets. Investments in companies engaged in mergers, reorganizations or
liquidations may involve special risks as pending deals may not be completed on time or on favorable terms. High-yield, lower-rated, securities involve
greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that
do not. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not
be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversication does not ensure against loss.
Margin of safety is the difference between the intrinsic value of a stock and its market price.
The MSCI World Index is a free oat-adjusted market capitalization weighted index that is designed to measure the equity market performance of
developed markets. Since June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, the United Kingdom, and the United States. The index represents the unhedged performance of the constituent stocks, in US
dollars. It is not possible to invest directly in an unmanaged index.
Registered trademarks or trademarks contained herein are the property of Pacic Investment Management Company LLC and/or Allianz Global Investors
of America L.P. in the United States and/or other countries.
This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed
for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or
investment product.
About the Portfolio Managers
Anne Guden, CFA, is an executive vice president in the London ofce and a global equity portfolio manager. Prior to
joining PIMCO in January 2010, she was a senior vice president, portfolio manager and research analyst at the Mutual
Series Group of Franklin Templeton Investments; she served as a co-portfolio manager for the Franklin Mutual Global
Discovery Fund from 2005 to 2009 and as portfolio manager for the Franklin Mutual Quest Fund from 2003 to 2009. In
total, Ms. Guden helped oversee more than $25 billion in investment assets. Earlier in her career, she was a research
analyst covering European equities at Perry Capital. In July 2009, Ms. Guden was named as one of The Worlds
Greatest Investors by SmartMoney Magazine. She has 20 years of investment and nancial services experience and
holds a bachelors degree from IEP Paris and an MBA from Columbia Business School.
Charles Lahr, CFA, is an executive vice president in the New York ofce and a global equity portfolio manager. Prior
to joining PIMCO in December 2009, he was a portfolio manager at the Mutual Series Group of Franklin Templeton
Investments; he served as a co-portfolio manager for the Franklin Mutual Global Discovery Fund from 2007 to 2009,
an analyst for Franklin Mutual Advisors LLC (Mutual Series) and portfolio manager for the Franklin Mutual Financial
Services Fund from 2004 to 2009. In total, Mr. Lahr helped oversee more than $20 billion in investment assets. Earlier in
his career, he was an international equities research analyst with the State of Wisconsin Investment Board, as well
as a member of the fund management team for the Mutual European and Mutual Beacon Funds. He has 16 years of
investment and nancial services experience and holds an MBA and a bachelors degree in business administration
from the University of Iowa.
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