PIMCO Global StocksPlus & Income 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: 811-21734

PIMCO Global StocksPlus® & Income Fund

(Exact name of registrant as specified in charter)

1633 Broadway, New York, NY 10019

(Address of principal executive offices)

William G. Galipeau

Treasurer (Principal Financial & Accounting Officer)

650 Newport Center Drive

Newport Beach, CA 92660

(Name and address of agent for service)

Copies to:

David C. Sullivan

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

Registrant’s telephone number, including area code: (844) 337-4626

Date of fiscal year end: June 30

Date of reporting period: June 30, 2017

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.


Item 1. Reports to Shareholders.

The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1).


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PIMCO Closed-End Funds

 

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Annual Report

 

June 30, 2017

 

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PCM Fund, Inc.

PIMCO Global StocksPLUS® & Income Fund

PIMCO Income Opportunity Fund

PIMCO Strategic Income Fund, Inc.

PIMCO Dynamic Credit and Mortgage Income Fund

PIMCO Dynamic Income Fund

 

 

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Table of Contents

 

            Page  
     

Letter from the Chairman of the Board & President

        2  

Important Information About the Funds

        4  

Financial Highlights

        16  

Statements of Assets and Liabilities

        18  

Consolidated Statements of Assets and Liabilities

        19  

Statements of Operations

        20  

Consolidated Statements of Operations

        21  

Statements of Changes in Net Assets

        22  

Consolidated Statements of Changes in Net Assets

        24  

Statements of Cash Flows

        25  

Consolidated Statements of Cash Flows

        26  

Notes to Financial Statements

        95  

Report of Independent Registered Public Accounting Firm

        119  

Glossary

        120  

Federal Income Tax Information

        121  

Shareholder Meeting Results

        122  

Changes to Boards of Trustees/Changes to Portfolio Managers

        124  

Investment Strategy Updates

        125  

Dividend Reinvestment Plan

        126  

Management of the Funds

        128  

Approval of Investment Management Agreement

        131  

Privacy Policy

        137  
     
Fund    Fund
Summary
     Schedule of
Investments
 
     

PCM Fund, Inc.

     10        27  

PIMCO Global StocksPLUS® & Income Fund

     11        35  

PIMCO Income Opportunity Fund

     12        46  

PIMCO Strategic Income Fund, Inc.

     13        58  

PIMCO Dynamic Credit and Mortgage Income Fund(1)

     14        68  

PIMCO Dynamic Income Fund(1)

     15        83  

 

  (1) 

Consolidated Schedule of Investments


Letter from the Chairman of the Board & President

 

Dear Shareholder,

 

The global equity markets generated strong results during the reporting period against a backdrop of solid corporate profits and signs of improving global growth. Meanwhile, the global fixed income market generated weak results as U.S. monetary policy tightened, whereas many international central banks maintained accommodative monetary policies.

 

For the 12-month reporting period ended June 30, 2017

 

The U.S. economy continued to expand at a relatively modest pace during the reporting period. U.S. gross domestic product (“GDP”), which represents the value of goods and services produced in the country, the broadest measure of economic activity and the principal indicator of economic performance, expanded at a revised 2.8% annual pace during the third quarter of 2016 — the strongest reading since the first quarter of 2015. GDP growth then moderated, growing at a revised annual pace of 1.8% during the fourth quarter of 2016 and 1.2% for the first quarter of 2017, respectively. Finally, the Commerce Department’s initial reading — released after the reporting period had ended — showed that second quarter 2017 GDP grew at an annual pace of 2.6%.

 

The Federal Reserve (“Fed”) continued to normalize monetary policy, with three interest rate hikes during the reporting period. The first occurrence was in December 2016, followed by rate hikes at its meetings in March and June 2017. The second move put the federal funds rate between 1.00% and 1.25%. In its official statement following the Fed’s June meeting, the Fed said, “The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” The Fed also indicated that it expects to begin reducing its balance sheet later this year.

 

Economic activity outside the U.S. generally improved during the reporting period. Nevertheless, a number of central banks, including the European Central Bank, Bank of England and Bank of Japan, maintained their highly accommodative monetary policies. However, toward the end of the reporting period, several central banks indicated that they may pare back their quantitative easing programs should growth improve and inflation increase.

 

Commodity prices fluctuated during the 12 months ended June 30, 2017. In June 2016, crude oil was approximately $48 a barrel, and was roughly $54 a barrel at the end of 2016. Prices then declined on elevated supplies and crude oil ended the reporting period at approximately $46. Finally, there were gyrations in foreign exchange markets, possibly due at least in part to changing expectations for global growth, decoupling central bank policy, Brexit, the surprise outcome from the November U.S. elections and a number of geopolitical events.

 

Outlook

 

PIMCO’s baseline view is that the U.S. economy is likely to grow at about 2% per year, with inflation running close to the Fed’s target of 2%. PIMCO’s forecast for the federal funds rate at the end of it secular horizon is anchored in a “New Neutral” range of 2% to 3%, but with the risks skewed to the downside on rates. In PIMCO’s view, of real concern for the U.S. outlook, as well as the global outlook, is the “driving-without-a-spare-tire risk” at this late stage of the business cycle. In the next recession, whenever it occurs, PIMCO believes the Fed and other central banks will have less room to cut rates than in past cycles. Some countries — for example, the U.S., China, Germany — will likely have some “fiscal space” to deploy in the next downturn, but with sovereign debt levels already elevated, fiscal policy is unlikely to fully offset the constraints on monetary policy in the next global downturn.

 

For the eurozone, under PIMCO’s baseline secular scenario, there would be trend growth of 1.25% on average over the next five years, with inflation hovering between 1% and 2%. PIMCO sees risk to its outlook as roughly balanced for the eurozone in the near term, but with risk increasing and tilting to the downside toward the end of its secular horizon. For Japan, PIMCO’s base case secular outlook is for 0% to 1% inflation, with the Bank of Japan only

 

2   PIMCO CLOSED-END FUNDS     


gradually being able to raise the 10-year yield target. Finally, for China, PIMCO’s baseline scenario is that growth slows gradually to about 5.5%.

 

In the following pages of this PIMCO Closed-End Funds Annual Report, please find specific details regarding investment performance and a discussion of factors that most affected the Funds’ performance over the 12 months ended June 30, 2017.

 

Thank you for investing with us. We value your trust and will continue to work diligently to meet your investment needs. If you have questions regarding any of your PIMCO Closed-End Funds investments, please contact your financial advisor or call the Funds’ shareholder servicing agent at (844) 33-PIMCO or (844) 337-4626. We also invite you to visit our website at www.pimco.com to learn more about our views.

 

Sincerely,

 

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Hans W. Kertess   Peter G. Strelow
Chairman of the Board   President

 

  ANNUAL REPORT   JUNE 30, 2017   3


Important Information About the Funds

 

 

We believe that bond funds have an important role to play in a well-diversified investment portfolio. It is important to note, however, that in an environment where interest rates trend upward, rising rates would negatively impact the performance of most bond funds, and fixed-income securities held by a Fund are likely to decrease in value. A wide variety of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions). This risk may be particularly acute in the current market environment because market interest rates are currently near historically low levels. This, combined with recent economic recovery, the Federal Reserve Board’s conclusion of its quantitative easing program, and increases in federal funds interest rates in 2015, 2016 and 2017, which had not occurred since 2006, could potentially increase the probability of an updated interest rate environment in the near future. To the extent the Federal Reserve Board continues to raise interest rates, there is a risk that rates across the financial system may rise. Further, while the U.S. bond market has steadily grown over the past three decades, dealer inventories of corporate bonds have remained relatively stagnant. As a result, there has been a significant reduction in the ability of dealers to “make markets” in corporate bonds. All of the factors mentioned above, individually or collectively, could lead to increased volatility and/or lower liquidity in the fixed income markets, which could result in increased losses to a Fund. Bond funds and individual bonds with a longer duration (a measure of the sensitivity of a security’s price to changes in interest rates) tend to be more sensitive to changes in interest rates, usually making them more volatile than securities or funds with shorter durations. In addition, in the current low interest rate environment, the market price of the Funds’ common shares may be particularly sensitive to changes in interest rates or the perception that there will be a change in interest rates.

 

The use of derivatives may subject the Funds to greater volatility than investments in traditional securities. The Funds may use derivative instruments for hedging purposes or as part of an investment strategy. Use of these instruments may involve certain costs and risks such as liquidity risk, interest rate risk, market risk, call risk, credit risk, management risk and the risk that a Fund could not close out a position when it would be most advantageous to do so. Certain derivative transactions may have a leveraging effect on a Fund. For example, a small investment in a derivative instrument may have a significant impact on a Fund’s exposure to interest rates, currency exchange rates or other investments. As a result, a relatively small price movement in a derivative instrument may cause an immediate and substantial loss or gain, which translates into heightened volatility in a Fund’s net asset value (“NAV”). A Fund may engage in such transactions regardless of whether the Fund owns the asset, instrument or components of the index underlying a derivative instrument. A Fund may invest a significant portion of its assets in these types of

instruments. If it does, a Fund’s investment exposure could far exceed the value of its portfolio securities and its investment performance could be primarily dependent upon securities it does not directly own. The regulation of the derivatives markets has increased over the past several years, and additional future regulation of the derivatives markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives, or may otherwise adversely affect the value or performance of derivatives. Any such adverse future developments could impair the effectiveness of a Fund’s derivative transactions and cause a Fund to lose value. For instance, in December 2015, the SEC proposed new regulations applicable to a registered investment company’s use of derivatives and related instruments. If adopted as proposed, these regulations could significantly limit or impact a Fund’s ability to invest in derivatives and other instruments, limit a Fund’s ability to employ certain strategies that use derivatives and/or adversely affect a Fund’s performance, efficiency in implementing its strategy, liquidity and/or ability to pursue its investment objectives.

 

PIMCO Global StocksPLUS® & Income Fund’s (“PGP”) monthly distributions are expected to include, among other possible sources, interest income from its debt portfolio and payments and premiums (characterized as capital for financial accounting purposes and as ordinary income for tax purposes) generated by certain types of interest rate derivatives.

 

Strategies involving interest rate derivatives may attempt to capitalize on differences between short-term and long-term interest rates as part of the PGP’s duration and yield curve active management strategies. For instance, in the event that long-term interest rates are higher than short-term interest rates, the Fund may elect to pay a floating short-term interest rate and to receive a long-term fixed interest rate for a stipulated period of time, thereby generating payments as a function of the difference between current short-term interest rates and long-term interest rates, so long as the floating short-term interest rate (which may rise) is lower than the fixed long-term interest rate.

 

PGP and other Funds may also enter into opposite sides of multiple interest rate swaps or other derivatives with respect to the same underlying reference instrument (e.g., a 10-year U.S. treasury) that have different effective dates with respect to interest accrual time periods for the principal purpose of generating distributable gains (characterized as ordinary income for tax purposes) and that are not part of the Fund’s duration or yield curve management strategies (“paired swap transactions”). In a paired swap transaction, a Fund would generally enter into one or more interest rate swap agreements whereby the Fund agrees to make regular payments starting at the time the Fund enters into the agreements equal to a floating interest rate in return for payments equal to a fixed interest rate (the “initial

 

 

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leg”). The Fund would also enter into one or more interest rate swap agreements on the same underlying instrument, but take the opposite position (i.e., in this example, the Fund would make regular payments equal to a fixed interest rate in return for receiving payments equal to a floating interest rate) with respect to a contract whereby the payment obligations do not commence until a date following the commencement of the initial leg (the “forward leg”).

 

A Fund’s income- and gain-generating strategies may generate current income and gains taxable as ordinary income sufficient to support monthly distributions even in situations when the Fund has experienced a decline in net assets due to, for example, adverse changes in the broad U.S. or non-U.S. equity markets or the Fund’s debt investments, or arising from its use of derivatives. For instance, a significant portion of PGP’s monthly distributions may be sourced from paired swap transactions utilized to produce current distributable ordinary income for tax purposes on the initial leg, with a substantial possibility that the Fund will later realize a corresponding capital loss and potential decline in its net asset value with respect to the forward leg (to the extent there are not corresponding offsetting capital gains being generated from other sources). Because some or all of these transactions may generate capital losses without corresponding offsetting capital gains, portions of a Fund’s distributions recognized as ordinary income for tax purposes (such as from paired swap transactions) may be economically similar to a taxable return of capital when considered together with such capital losses.

 

PGP’s index option strategy, to the extent utilized, seeks to generate payments and premiums from writing options that may offset some or all of the capital losses incurred as a result of paired swaps transactions. However, the Fund may use paired swap transactions to support monthly distributions where the index option strategy does not produce an equivalent amount of offsetting gains, including without limitation when such strategy is not being used to a significant extent.

 

In addition, gains (if any) generated from the index option strategy may be offset by the Fund’s realized capital losses, including any available capital loss carryforwards. PGP currently has significant capital loss carryforwards, some of which will expire at particular dates, and to the extent that the Fund’s capital losses exceed capital gains, the Fund cannot use its capital loss carryforwards to offset capital gains.

 

The notional exposure of a Fund’s interest rate derivatives may represent a multiple of the Fund’s total net assets. There can be no assurance a Fund’s strategies involving interest rate derivatives will work as intended and such strategies are subject to the risks related to the use of derivatives generally, as discussed above (see also Notes 6 and 7 in the Notes to Financial Statements for further discussion on the use of derivative instruments and certain of the risks associated therewith).

A Fund’s use of leverage creates the opportunity for increased income for the Fund’s common shareholders, but also creates special risks. Leverage is a speculative technique that may expose a Fund to greater risk and increased costs. If shorter-term interest rates rise relative to the rate of return on a Fund’s portfolio, the interest and other costs of leverage to the Fund could exceed the rate of return on the debt obligations and other investments held by the Fund, thereby reducing return to the Fund’s common shareholders. In addition, fees and expenses of any form of leverage used by a Fund will be borne entirely by its common shareholders (and not by preferred shareholders, if any) and will reduce the investment return of the Fund’s common shares.

 

There can be no assurance that a Fund’s use of leverage will result in a higher yield on its common shares, and it may result in losses. Leverage creates several major types of risks for a Fund’s common shareholders, including: (1) the likelihood of greater volatility of net asset value and market price of the Fund’s common shares, and of the investment return to the Fund’s common shareholders, than a comparable portfolio without leverage; (2) the possibility either that the Fund’s common share dividends will fall if the interest and other costs of leverage rise, or that dividends paid on the Fund’s common shares will fluctuate because such costs vary over time; and (3) the effects of leverage in a declining market or a rising interest rate environment, as leverage is likely to cause a greater decline in the net asset value of the Fund’s common shares than if the Fund were not leveraged and may result in a greater decline in the market value of the Fund’s common shares.

 

A Fund’s investments in and exposure to foreign securities involve special risks. For example, the value of these investments may decline in response to unfavorable political and legal developments, unreliable or untimely information or economic and financial instability. Foreign securities may experience more rapid and extreme changes in value than investments in securities of U.S. issuers. The securities markets of certain foreign countries are relatively small, with a limited number of companies representing a small number of industries. Issuers of foreign securities are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, auditing and custody standards of foreign countries differ, in some cases significantly, from U.S. standards. Also, nationalization, expropriation or other confiscation, currency blockage, political changes or diplomatic developments could adversely affect a Fund’s investments in foreign securities. In the event of nationalization, expropriation or other confiscation, a Fund could lose its entire investment in foreign securities. Risks associated with investing in foreign securities may be increased when a Fund invests in emerging markets. For example, if a Fund invests in emerging market debt, it may face increased exposure to interest rate, liquidity, volatility, and redemption risk due to the specific economic, political, geographical, or legal background of the emerging market.

 

 

  ANNUAL REPORT   JUNE 30, 2017   5


Important Information About the Funds (Cont.)

 

 

Investments in loans are generally subject to risks similar to those of investments in other types of debt obligations, including, among others, credit risk, interest rate risk, variable and floating rate securities risk, and, as applicable, risks associated with mortgage-related securities. In addition, in many cases loans are subject to the risks associated with below-investment grade securities. In the case of a loan participation or assignment, a Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, a Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. In the event of the insolvency of the lender selling a loan participation, a Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. A Fund may be subject to heightened or additional risks and potential liabilities and costs by investing in mezzanine and other subordinated loans or, with respect to certain Funds, acting as an originator of loans, including those arising under bankruptcy, fraudulent conveyance, equitable subordination, lender liability, environmental and other laws and regulations, and risks and costs associated with debt servicing and taking foreclosure actions associated with the loans. To the extent that a Fund originates a loan, it may be responsible for all or a substantial portion of the expenses associated with initiating the loan, irrespective of whether the loan transaction is ultimately consummated or closed. This may include significant legal and due diligence expenses, which will be indirectly borne by a Fund and its shareholders.

 

Mortgage-related and other asset-backed securities represent interests in “pools” of mortgages or other assets such as consumer loans or receivables held in trust and often involve risks that are different from or possibly more acute than risks associated with other types of debt instruments. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, if a Fund holds mortgage-related securities, it may exhibit additional volatility since individual mortgage holders are less likely to exercise prepayment options, thereby putting additional downward pressure on the value of these securities and potentially causing the Fund to lose money. This is known as extension risk. Mortgage-backed securities can be highly sensitive to rising interest rates, such that even small movements can cause an investing Fund to lose value. Mortgage-backed securities, and in particular those not backed by a government guarantee, are subject to credit risk. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of the Funds because the Funds may have to reinvest that money at the lower prevailing interest rates. The Funds’ investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related

securities, as well as additional risks associated with the nature of the assets and the servicing of those assets. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities, and asset-backed securities may not have the benefit of any security interest in the related assets. Additionally, investments in subordinate mortgage-backed and other asset-backed securities will be subject to risks arising from delinquencies and foreclosures, thereby exposing a Fund’s investment portfolio to potential losses. Subordinate securities of mortgage-backed and other asset-backed securities are also subject to greater credit risk than those mortgage-backed or other asset-backed securities that are more highly rated.

 

A Fund may also invest in the residual or equity tranches of mortgage-related and other asset-backed securities, which may be referred to as subordinate mortgage-backed or asset-backed securities and interest-only mortgage-backed or asset-backed securities. Subordinate mortgage-backed or asset-backed securities are paid interest only to the extent that there are funds available to make payments. To the extent the collateral pool includes a large percentage of delinquent loans, there is a risk that interest payment on subordinate mortgage-backed or asset-backed securities will not be fully paid. There are multiple tranches of mortgage-backed and asset backed-securities, offering investors various maturity and credit risk characteristics. Tranches are categorized as senior, mezzanine, and subordinated/equity or “first loss,” according to their degree of risk. The most senior tranche of a mortgage-backed or asset-backed security has the greatest collateralization and pays the lowest interest rate. If there are defaults or the collateral otherwise underperforms, scheduled payments to senior tranches take precedence over those of mezzanine tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. Lower tranches represent lower degrees of credit quality and pay higher interest rates intended to compensate for the attendant risks. The return on the lower tranches is especially sensitive to the rate of defaults in the collateral pool. The lowest tranche (i.e., the “equity” or “residual” tranche) specifically receives the residual interest payments (i.e., money that is left over after the higher tranches have been paid and expenses of the issuing entities have been paid) rather than a fixed interest rate. Each Fund expects that investments in subordinate mortgage-backed and other asset-backed securities will be subject to risks arising from delinquencies and foreclosures, thereby exposing its investment portfolio to potential losses. Subordinate securities of mortgage-backed and other asset-backed securities are also subject to greater credit risk than those mortgage-backed or other asset-backed securities that are more highly rated.

 

 

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The risk of investing in collateralized loan obligations (“CLOs”), include prepayment risk, credit risk, liquidity risk, market risk, structural risk, legal risk and interest rate risk. CLOs may carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the possibility that the investments in CLOs are subordinate to other classes or tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

 

High-yield bonds (commonly referred to as “junk bonds”) typically have a lower credit rating than other bonds. Lower-rated bonds generally involve a greater risk to principal than higher-rated bonds. Further, markets for lower-rated bonds are typically less liquid than for higher-rated bonds, and public information is usually less abundant in such markets. Thus, high yield investments increase the chance that a Fund will lose money on its investment. The Funds may also invest in bonds and other instruments that are not rated, but which PIMCO considers to be equivalent to high-yield investments. The Funds may hold defaulted securities that may involve special considerations including bankruptcy proceedings, other regulatory and legal restrictions affecting the Funds’ ability to trade, and the availability of prices from independent pricing services or dealer quotations. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments. Defaulted securities are often illiquid and may not be actively traded. Sale of securities in bankrupt companies at an acceptable price may be difficult and differences compared to the value of the securities used by the Funds could be material.

 

Variable and floating rate securities generally are less sensitive to interest rate changes but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline. Inverse floating rate securities may decrease in value if interest rates increase. Inverse floating rate securities may also exhibit greater price volatility than a fixed rate obligation with similar credit quality. When a Fund holds variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Funds’ shares.

 

The global economic crisis brought several small economies in Europe to the brink of bankruptcy and many other economies into recession and weakened the banking and financial sectors of many European countries. For example, the governments of Greece, Spain, Portugal, and the Republic of Ireland have all experienced large public budget deficits, the effects of which are still yet unknown and may slow the

overall recovery of the European economies from the global economic crisis. In addition, due to large public deficits, some European countries may be dependent on assistance from other European governments and institutions or other central banks or supranational agencies such as the International Monetary Fund. Assistance may be dependent on a country’s implementation of reforms or reaching a certain level of performance. Failure to reach those objectives or an insufficient level of assistance could result in a deep economic downturn which could significantly affect the value of a Fund’s European investments. It is possible that one or more Economic and Monetary Union of the European Union member countries could abandon the euro and return to a national currency and/or that the euro will cease to exist as a single currency in its current form. The exit of any country out of the euro may have an extremely destabilizing effect on other eurozone countries and their economies and a negative effect on the global economy as a whole. Such an exit by one country may also increase the possibility that additional countries may exit the euro should they face similar financial difficulties. In June 2016, the United Kingdom approved a referendum to leave the European Union. Significant uncertainty remains in the market regarding the ramifications of that development, and the range and potential implications of possible political, regulatory, economic and market outcomes are difficult to predict.

 

As the use of technology has become more prevalent in the course of business, the Funds have become potentially more susceptible to operational and information security risks resulting from breaches in cyber security. A breach in cyber security refers to both intentional and unintentional cyber events that may, among other things, cause a Fund to lose proprietary information, suffer data corruption and/or destruction or lose operational capacity, result in the unauthorized release or other misuse of confidential information, or otherwise disrupt normal business operations. Cyber security breaches may involve unauthorized access to a Fund’s digital information systems (e.g., through “hacking” or malicious software coding), but may also result from outside attacks such as denial-of-service attacks (i.e., efforts to make network services unavailable to intended users). In addition, cyber security breaches involving a Fund’s third party service providers (including but not limited to advisers, sub-advisers, administrators, transfer agents, custodians, distributors and other third parties), trading counterparties or issuers in which a Fund invests can also subject a Fund to many of the same risks associated with direct cyber security breaches. Moreover, cyber security breaches involving trading counterparties or issuers in which a Fund invests could adversely impact such counterparties or issuers and cause the Fund’s investment to lose value.

 

Cyber security failures or breaches may result in financial losses to a Fund and its shareholders. These failures or breaches may also result in disruptions to business operations, potentially resulting in financial

 

 

  ANNUAL REPORT   JUNE 30, 2017   7


Important Information About the Funds (Cont.)

 

losses; interference with a Fund’s ability to calculate its net asset value, process shareholder transactions or otherwise transact business with shareholders; impediments to trading; violations of applicable privacy and other laws; regulatory fines; penalties; reputational damage; reimbursement or other compensation costs; additional compliance and cyber security risk management costs and other adverse consequences. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future.

 

Like with operational risk in general, the Funds have established business continuity plans and risk management systems designed to reduce the risks associated with cyber security. However, there are inherent limitations in these plans and systems, including that certain risks may not have been identified, in large part because different or unknown threats may emerge in the future. As such, there is no guarantee that such efforts will succeed, especially because the Funds do not directly control the cyber security systems of issuers in which a Fund may invest, trading counterparties or third party service providers to the Funds. There is also a risk that cyber security breaches may not be detected. The Funds and their shareholders could be negatively impacted as a result.

 

The Funds may invest in securities and instruments that are economically tied to Russia. Investments in Russia are subject to various risks such as political, economic, legal, market and currency risks. The risks include uncertain political and economic policies, short-term market volatility, poor accounting standards, corruption and crime, an inadequate regulatory system, and unpredictable taxation. Investments in Russia are particularly subject to the risk that economic sanctions may be imposed by the United States and/or other countries. Such sanctions — which may impact companies in many sectors, including energy, financial services and defense, among others — may negatively impact the Funds’ performance and/or ability to achieve their investment objectives. The Russian securities market is characterized by limited volume of trading, resulting in difficulty in obtaining accurate prices. The Russian securities market, as compared to U.S. markets, has significant price volatility, less liquidity, a smaller market capitalization and a smaller number of traded securities. There may be little publicly available information about issuers. Settlement, clearing and registration of securities transactions are subject to risks because of registration systems that may not be subject to effective government supervision. This may result in significant delays or problems in registering the transfer of securities. Russian securities laws may not recognize foreign nominee accounts held with a custodian bank, and therefore the custodian may be considered the ultimate owner of securities they hold for their clients. Ownership of securities issued by Russian companies is recorded by companies themselves and by registrars instead of through a central registration system. It is possible that the ownership rights of the Funds could be lost through fraud or

negligence. While applicable Russian regulations impose liability on registrars for losses resulting from their errors, it may be difficult for the Funds to enforce any rights it may have against the registrar or issuer of the securities in the event of loss of share registration. Adverse currency exchange rates are a risk and there may be a lack of available currency hedging instruments. Investments in Russia may be subject to the risk of nationalization or expropriation of assets. Oil, natural gas, metals, and timber account for a significant portion of Russia’s exports, leaving the country vulnerable to swings in world prices.

 

The common shares of the Funds trade on the New York Stock Exchange. As with any stock, the price of a Fund’s common shares will fluctuate with market conditions and other factors. If you sell your common shares of a Fund, the price received may be more or less than your original investment. Shares of closed-end management investment companies frequently trade at a discount from their net asset value.

 

The common shares of a Fund may trade at a price that is less than the initial offering price and/or the net asset value of such shares. Further, if a Fund’s shares trade at a price that is more than the initial offering price and/or the net asset value of such shares, including at a substantial premium and/or for an extended period of time, there is no assurance that any such premium will be sustained for any period of time and will not decrease, or that the shares will not trade at a discount to net asset value thereafter.

 

The Funds may be subject to various risks, including, but not limited to, the following: asset allocation risk, credit risk, stressed securities risk, distressed and defaulted securities risk, corporate bond risk, market risk, issuer risk, liquidity risk, equity securities and related market risk, mortgage-related and other asset-backed securities risk, extension risk, prepayment risk, privately issued mortgage-related securities risk, mortgage market/ subprime risk, foreign (non-U.S.) investment risk, emerging markets risk, currency risk, redenomination risk, non-diversification risk, management risk, municipal bond risk, inflation-indexed security risk, senior debt risk, loans, participations and assignments risk, reinvestment risk, real estate risk, U.S. Government securities risk, foreign (non-U.S.) government securities risk, valuation risk, segregation and cover risk, focused investment risk, credit default swaps risk, event-linked securities risk, counterparty risk, preferred securities risk, confidential information access risk, other investment companies risk, private placements risk, inflation/deflation risk, regulatory risk, tax risk, recent economic conditions risk, market disruptions and geopolitical risk, potential conflicts of interest involving allocation of investment opportunities, repurchase agreements risk, securities lending risk, zero-coupon bond and payment-in-kind securities risk, portfolio turnover risk, smaller company risk, short sale risk and convertible securities risk. A description of certain of these risks is available in the Notes to Financial Statements of this Report.

 

 

8   PIMCO CLOSED-END FUNDS     


 

 

On each Fund Summary page in this Shareholder Report, the Average Annual Total Return table measures performance assuming that all dividend and capital gain distributions were reinvested. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions. Total return for a period of more than one year represents the average annual total return. Performance at market price will differ from results at NAV. Although market price returns tend to reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about a Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends. Performance shown is net of fees and expenses.

 

The following table discloses the commencement of operations and diversification status of each Fund:

 

Fund Name         Commencement
of Operations
    Diversification
Status

PCM Fund, Inc.

      09/02/93     Diversified

PIMCO Global StocksPLUS® & Income Fund

      05/31/05     Diversified

PIMCO Income Opportunity Fund

      11/30/07     Diversified

PIMCO Strategic Income Fund, Inc.

      02/24/94     Diversified

PIMCO Dynamic Credit and Mortgage Income Fund

      01/31/13     Diversified

PIMCO Dynamic Income Fund

      05/30/12     Diversified

 

An investment in a Fund is not a deposit of a bank and is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. It is possible to lose money on investments in the Funds.

 

The Trustees/Directors1 are responsible generally for overseeing the management of the Funds. The Trustees authorize the Funds to enter into service agreements with the Investment Manager and other service providers in order to provide, and in some cases authorize service providers to procure through other parties, necessary or desirable services on behalf of the Funds. Shareholders are not parties to or third-party beneficiaries of such service agreements. Neither a Fund’s original or any subsequent prospectus or Statement of Additional Information (SAI), any press release or shareholder report, any contracts filed as exhibits to a Fund’s registration statement, nor any other communications, disclosure documents or regulatory filings from or on behalf of a Fund creates a contract between or among any shareholders of a Fund, on the one hand, and the Fund, a service provider to the Fund, and/or the Trustees or officers of the Fund, on the other hand.

 

The Trustees (or the Funds and their officers, service providers or other delegates acting under authority of the Trustees) may amend its most

recent or use a new prospectus or SAI with respect to a Fund, adopt and disclose new or amended policies and other changes in press releases and shareholder reports and/or amend, file and/or issue any other communications, disclosure documents or regulatory filings, and may amend or enter into any contracts to which a Fund is a party, and interpret the investment objective(s), policies, restrictions and contractual provisions applicable to any Fund, without shareholder input or approval, except in circumstances in which shareholder approval is specifically required by law (such as changes to fundamental investment policies) or where a shareholder approval requirement was specifically disclosed in a Fund’s prospectus, SAI or shareholder report and is otherwise still in effect.

 

PIMCO has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Investment Advisers Act of 1940. The Proxy Policy has been adopted by the Funds as the policies and procedures that PIMCO will use when voting proxies on behalf of the Funds. A description of the policies and procedures that PIMCO uses to vote proxies relating to portfolio securities of each Fund, and information about how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, are available without charge, upon request, by calling the Funds at (844) 33-PIMCO (844-337-4626), on the Funds’ website at www.pimco.com, and on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

Each Fund files a complete schedule of its portfolio holdings with the SEC for the first and third quarters of its fiscal year on Form N-Q. A copy of each Fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and is available without charge, upon request by calling the Funds at (844) 33-PIMCO (844-337-4626) and on the Funds’ website at www.pimco.com.

 

Updated portfolio holdings information about a Fund will be available at www.pimco.com approximately 15 calendar days after such Fund’s most recent fiscal quarter end, and will remain accessible until such Fund files a Form N-Q or a shareholder report for the period which includes the date of the information. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

 

 

1  Hereinafter, the terms “Trustee” or “Trustees” used herein shall refer to a Director or Directors of applicable Funds.

 

  ANNUAL REPORT   JUNE 30, 2017   9


PCM Fund, Inc.

 

  Symbol on NYSE - PCM

 

Allocation Breakdown as of 06/30/2017§

 

Asset-Backed Securities

    40.4%  

Non-Agency Mortgage-Backed Securities

    38.0%  

Corporate Bonds & Notes

    10.7%  

Short-Term Instruments

    3.9%  

U.S. Government Agencies

    2.7%  

Loan Participations and Assignments

    2.1%  

Preferred Securities

    1.2%  

Other

    1.0%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $11.23  

NAV

    $10.15  

Premium/(Discount) to NAV

    10.64%  

Market Price Distribution Yield(2)

    8.55%  

NAV Distribution Yield(2)

    9.46%  

Total Effective Leverage(3)

    42%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     5 Year     10 Year     Commencement
of Operations
(09/02/93)
 
Market Price     33.80%       11.49%       12.44%       9.17%  
NAV     21.15%       11.08%       11.04%       9.27%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

PCM Fund, Inc.’s primary investment objective is to achieve high current income. Capital gains from the disposition of investments is a secondary objective of the Fund.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

Exposure to non-agency Residential MBS (mortgage-backed securities) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to high yield corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to Commercial MBS contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to investment grade corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to asset-backed securities (ABS) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to USD interest rates detracted from absolute performance, as interest rates rose.

 

10   PIMCO CLOSED-END FUNDS     


PIMCO Global StocksPLUS® & Income Fund

 

  Symbol on NYSE - PGP

 

Allocation Breakdown as of 06/30/2017§

 

Non-Agency Mortgage-Backed Securities

    36.8%  

Corporate Bonds & Notes

    33.4%  

Short-Term Instruments

    11.5%  

Asset-Backed Securities

    9.2%  

U.S. Government Agencies

    3.3%  

Municipal Bonds & Notes

    1.5%  

Preferred Securities

    1.4%  

Sovereign Issues

    1.0%  

Other

    1.9%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $18.40  

NAV

    $11.18  

Premium/(Discount) to NAV

    64.58%  

Market Price Distribution Yield(2)

    9.57%  

NAV Distribution Yield(2)

    15.74%  

Total Effective Leverage(3)

    35%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     5 Year     10 Year     Commencement
of Operations
(05/31/05)
 
Market Price     5.06%       9.55%       11.67%       11.97%  
NAV     37.48%       18.07%       11.59%       12.78%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

PIMCO Global StocksPLUS® & Income Fund’s primary investment objective is to seek total return comprised of current income, current gains and long-term capital appreciation.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

The Fund’s exposure to equity index derivatives linked to the S&P 500 Index contributed to absolute returns over the twelve months ended June 30, 2017, as the S&P 500 Index returned 17.90% during the period.

 

»  

The Fund’s exposure to equity index derivatives linked to the MSCI EAFE Index contributed to absolute returns over the twelve months ended June 30, 2017, as the MSCI EAFE Index returned 20.27% during the period.

 

»  

The Fund’s bond alpha strategy added to returns. Drivers of performance included the following:

 

»  

Holdings of non-agency mortgages added to returns, as this sector generated positive returns.

 

»  

An allocation to high yield corporate bonds enhanced performance, as these holdings generated positive performance.

 

»  

A defensive option strategy involving written calls and purchased puts on the S&P 500 index detracted from performance, as the S&P 500 Index returned 17.90% during the period.

 

»  

The Fund’s use of paired swap transactions during the reporting period supported the Fund’s monthly distributions, but generally resulted in a decline in the Fund’s net asset value.

 

  ANNUAL REPORT   JUNE 30, 2017   11


PIMCO Income Opportunity Fund

 

  Symbol on NYSE - PKO

 

Allocation Breakdown as of 06/30/2017§

 

Corporate Bonds & Notes

    28.7%  

Asset-Backed Securities

    28.3%  

Non-Agency Mortgage-Backed Securities

    26.0%  

Short-Term Instruments

    6.4%  

Loan Participations and Assignments

    2.8%  

Other

    7.8%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $26.85  

NAV

    $25.17  

Premium/(Discount) to NAV

    6.67%  

Market Price Distribution Yield(2)

    8.49%  

NAV Distribution Yield(2)

    9.06%  

Total Effective Leverage(3)

    39%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     5 Year     Commencement
of Operations
(11/30/07)
 
Market Price     30.30%       12.38%       12.93%  
NAV     24.48%       12.35%       12.70%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

PIMCO Income Opportunity Fund’s investment objective is to seek current income as a primary focus and also capital appreciation.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

Exposure to non-agency Residential mortgage-backed securities (MBS) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to high yield corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to investment grade corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to structured products contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to emerging market debt contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to Commercial MBS contributed to absolute returns, as the sector generated positive total returns.

 

»  

Exposure to USD interest rates detracted from absolute performance, as interest rates rose.

 

»  

Exposure to GBP interest rates detracted from absolute performance, as interest rates rose.

 

12   PIMCO CLOSED-END FUNDS     


PIMCO Strategic Income Fund, Inc.

 

  Symbol on NYSE - RCS

 

Allocation Breakdown as of 06/30/2017§

 

U.S. Government Agencies

    61.9%  

Non-Agency Mortgage-Backed Securities

    14.0%  

Corporate Bonds & Notes

    7.3%  

U.S. Treasury Obligations

    7.0%  

Asset-Backed Securities

    6.4%  

Short-Term Instruments

    1.5%  

Loan Participations and Assignments

    1.2%  

Other

    0.7%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $10.19  

NAV

    $7.75  

Premium/(Discount) to NAV

    31.48%  

Market Price Distribution Yield(2)

    8.48%  

NAV Distribution Yield(2)

    11.15%  

Total Effective Leverage(3)

    25%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     5 Year     10 Year     Commencement
of Operations
(02/24/94)
 
Market Price     17.12%       9.14%       12.34%       9.67%  
NAV     10.61%       9.22%       11.16%       8.71%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

The primary investment objective of PIMCO Strategic Income Fund, Inc. is to generate a level of income that is higher than that generated by high quality, intermediate-term U.S. debt securities. The Fund also seeks capital appreciation to the extent consistent with this objective.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

Exposure to non-Agency Residential mortgage-backed securities (MBS) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to 30-year conventional MBS contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to high yield corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to investment grade corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to emerging market debt contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to Commercial MBS contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to USD interest rates detracted from absolute performance, as interest rates rose.

 

  ANNUAL REPORT   JUNE 30, 2017   13


PIMCO Dynamic Credit and Mortgage Income Fund

 

  Symbol on NYSE - PCI

 

Allocation Breakdown as of 06/30/2017§

 

Asset-Backed Securities

    45.2%  

Non-Agency Mortgage-Backed Securities

    29.6%  

Corporate Bonds & Notes

    16.4%  

Short-Term Instruments

    3.0%  

U.S. Government Agencies

    1.8%  

Other

    4.0%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $22.32  

NAV

    $22.91  

Premium/(Discount) to NAV

    (2.58)%  

Market Price Distribution Yield(2)

    8.82%  

NAV Distribution Yield(2)

    8.59%  

Total Effective Leverage(3)

    46%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     Commencement
of Operations
(01/31/13)
 
Market Price     32.10%       8.82%  
NAV     26.47%       8.59%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

PIMCO Dynamic Credit and Mortgage Income Fund’s primary investment objective is to seek current income and capital appreciation as a secondary objective.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

Exposure to non-agency Residential mortgage-backed securities (MBS) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to high yield corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to emerging market debt contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to structured products contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to Commercial MBS contributed to absolute returns, as the sector generated positive total returns.

 

»  

Exposure to USD interest rates detracted from absolute performance, as interest rates rose.

 

»  

Exposure to GBP interest rates detracted from absolute performance, as interest rates rose.

 

14   PIMCO CLOSED-END FUNDS     


PIMCO Dynamic Income Fund

 

  Symbol on NYSE - PDI

 

Allocation Breakdown as of 06/30/2017§

 

Non-Agency Mortgage-Backed Securities

    48.0%  

Asset-Backed Securities

    26.6%  

Corporate Bonds & Notes

    15.0%  

Short-Term Instruments

    6.1%  

U.S. Government Agencies

    2.2%  

Loan Participations and Assignments

    1.3%  

Other

    0.8%  
   

% of Investments, at value.

 

  § 

Allocation Breakdown and % of investments exclude securities sold short and financial derivative instruments, if any.

Fund Information (as of June 30, 2017)(1)

 

Market Price

    $30.18  

NAV

    $28.32  

Premium/(Discount) to NAV

    6.57%  

Market Price Distribution Yield(2)

    8.77%  

NAV Distribution Yield(2)

    9.34%  

Total Effective Leverage(3)

    47%  
 

 

Average Annual Total Return(1) for the period ended June 30, 2017  
    1 Year     5 Year     Commencement
of Operations
(05/30/12)
 
Market Price     27.07%       18.41%       18.54%  
NAV     24.22%       17.79%       18.31%  

 

All Fund returns are net of fees and expenses.

 

(1) 

Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO.

 

(2) 

Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or market price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of the estimated composition of such distribution through a Section 19 Notice. Please refer to the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Please visit www.pimco.com for most recent Section 19 Notice, if applicable. Final determination of a distribution’s tax character will be made on Form 1099 DIV sent to shareholders each January.

 

(3) 

Represents total effective leverage outstanding, as a percentage of total managed assets. Total effective leverage consists of preferred shares, reverse repurchase agreements and other borrowings, credit default swap notional and floating rate notes issued in tender option bond transactions, as applicable (collectively “Total Effective Leverage”). The Fund may engage in other transactions not included in Total Effective Leverage disclosed above that may give rise to a form of leverage, including certain derivative transactions. For the purpose of calculating Total Effective Leverage outstanding as a percentage of total managed assets, total managed assets refer to total assets (including assets attributable to Total Effective Leverage that may be outstanding) minus accrued liabilities (other than liabilities representing Total Effective Leverage).

 

Investment Objective and Strategy Overview

 

PIMCO Dynamic Income Fund’s primary investment objective is to seek current income, and capital appreciation is a secondary objective.

 

Fund Insights at NAV

 

The following affected performance during the reporting period:

 

»  

Exposure to non-agency Residential mortgage-backed securities (MBS) contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to high yield corporate bonds contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to structured products contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to Commercial MBS contributed to absolute returns, as the sector generated positive total returns.

 

»  

Exposure to emerging market debt contributed to absolute performance, as the sector generated positive total returns.

 

»  

Exposure to USD interest rates detracted from absolute performance, as interest rates rose.

 

»  

Exposure to GBP interest rates detracted from absolute performance, as interest rates rose.

 

  ANNUAL REPORT   JUNE 30, 2017   15


Financial Highlights

 

          Investment Operations           Less  Distributions(b)  
                                                       
    Net Asset
Value
Beginning
of Year
or Period
    Net
Investment
Income(a)
    Net
Realized/
Unrealized
Gain (Loss)
    Total            From Net
Investment
Income
    From Net
Realized
Capital Gains
    Tax Basis
Return of
Capital
    Total  

PCM Fund, Inc.

                 

06/30/2017

  $ 9.71     $ 0.98     $ 0.92     $ 1.90             $ (1.46   $ 0.00     $ 0.00     $ (1.46

06/30/2016

    10.68       1.22       (1.23     (0.01             (0.96     0.00       0.00       (0.96

01/01/2015 - 06/30/2015(e)

    10.72       0.44       0.00 ^      0.44               (0.48     0.00       0.00       (0.48 )(i) 

12/31/2014

    11.17       0.94       (0.34     0.60               (1.05     0.00       0.00       (1.05

12/31/2013

    11.35       1.12       (0.20     0.92               (1.10     0.00       0.00       (1.10

12/31/2012

    9.48       1.06       1.93       2.99               (1.12     0.00       0.00       (1.12

PIMCO Global StocksPLUS® & Income Fund

                 

06/30/2017

  $ 9.76     $ 1.15     $ 2.14     $ 3.29             $ (1.67   $ 0.00     $ (0.20   $ (1.87

06/30/2016

    12.88       1.15       (2.07     (0.92             (2.02     0.00       (0.18     (2.20

04/01/2015 - 06/30/2015(f)

    12.82       0.34       0.27       0.61               (0.55     0.00       0.00       (0.55 )(i) 

03/31/2015

    14.72       1.15       (0.85     0.30               (2.20     0.00       0.00       (2.20

03/31/2014

    14.32       1.39       1.21       2.60               (2.20     0.00       0.00       (2.20

03/31/2013

    12.57       1.38       2.57       3.95               (2.20     0.00       0.00       (2.20

PIMCO Income Opportunity Fund

                 

06/30/2017

  $ 22.59     $ 2.28     $ 2.92     $ 5.20             $ (2.56   $ 0.00     $ (0.06   $ (2.62

06/30/2016

    25.94       2.33       (2.89     (0.56             (2.28     (0.51     0.00       (2.79

11/01/2014 - 06/30/2015(g)

    28.38       1.54       (0.86     0.68               (2.34     (0.77       (0.01     (3.12 )(i) 

10/31/2014

    28.67       2.71       (0.12     2.59               (2.88     0.00       0.00       (2.88

10/31/2013

    27.86       2.87       0.77       3.64               (2.83     0.00       0.00       (2.83

10/31/2012

    24.62       2.61       3.69       6.30               (3.06     0.00       0.00       (3.06

PIMCO Strategic Income Fund, Inc.

                 

06/30/2017

  $ 7.89     $ 0.70     $ 0.08     $ 0.78             $ (0.80   $ 0.00     $ (0.12   $ (0.92

06/30/2016

    8.58       0.76       (0.45     0.31               (1.00     0.00       0.00       (1.00

02/01/2015 - 06/30/2015(h)

    8.57       0.30       0.11       0.41               (0.40     0.00       0.00       (0.40 )(i) 

01/31/2015

    9.24       0.90       (0.55     0.35               (1.02     0.00       0.00       (1.02

01/31/2014

    9.66       0.99       (0.30     0.69               (1.11     0.00       0.00       (1.11

01/31/2013

    8.91       1.05       0.95       2.00               (1.25     0.00       0.00       (1.25

PIMCO Dynamic Credit and Mortgage Income Fund (Consolidated)

                 

06/30/2017

  $ 20.43     $ 1.62     $ 3.46     $ 5.08             $ (2.60   $ 0.00     $ 0.00     $ (2.60

06/30/2016

    23.00       2.01       (2.40       (0.39             (2.18     0.00       0.00       (2.18

01/01/2015 - 06/30/2015(e)

    22.83       0.76       0.35       1.11               (0.94     0.00       0.00       (0.94 )(i) 

12/31/2014

    24.04       1.79       (0.53     1.26               (2.47     0.00       0.00       (2.47

01/31/2013 -12/31/2013

    23.88       1.33       0.76       2.09               (1.68       (0.24     0.00       (1.92

PIMCO Dynamic Income Fund (Consolidated)

                 

06/30/2017

  $   26.56     $   2.60     $ 3.18     $ 5.78             $   (4.10   $ 0.00     $ 0.00     $   (4.10

06/30/2016

    31.38       3.87         (3.45     0.42               (4.25     (0.99     0.00       (5.24

04/01/2015 - 06/30/2015(f)

    30.74       0.80       0.47       1.27               (0.63     0.00       0.00       (0.63

03/31/2015

    32.11       3.25       (0.49     2.76               (4.13     0.00       0.00       (4.13

03/31/2014

    30.69       3.70       1.24       4.94               (3.29     (0.23     0.00       (3.52

05/30/2012 - 03/31/2013

    23.88       2.79       6.50       9.29               (2.18     (0.27     0.00       (2.45

 

* Annualized
^ 

Reflects an amount rounding to less than one cent.

(a) 

Per share amounts based on average number of shares outstanding during the year or period.

(b) 

The tax characterization of distributions is determined in accordance with federal income tax regulations. See Note 2, Distributions—Common Shares, in the Notes to Financial Statements for more information.

(c) 

Total investment return is calculated assuming a purchase of a share at the market price on the first day and a sale of a share at the market price on the last day of each year reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Funds’ dividend reinvestment plan. Total investment return does not reflect brokerage commissions in connection with the purchase or sale of Fund shares.

(d) 

Interest expense primarily relates to participation in borrowing and financing transactions. See Note 5, Borrowings and Other Financing Transactions, in the Notes to Financial Statements for more information.

(e) 

Fiscal year end changed from December 31st to June 30th.

(f) 

Fiscal year end changed from March 31st to June 30th.

(g) 

Fiscal year end changed from October 31st to June 30th.

(h) 

Fiscal year end changed from January 31st to June 30th.

(i) 

Total distributions for the period ended June 30, 2015 may be lower than prior fiscal years due to fiscal year end changes resulting in a reduction of the amount of days in the period ended June 30, 2015.

 

16   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


      Common Share           Ratios/Supplemental Data  
                                          Ratios to Average Net Assets        
Increase
resulting  from
at-the-market
offering
    Offering
Cost
Charged to
Paid in Capital
    Net Assets
Value End of
Year or
Period
    Market Price
End of Year
or Period
    Total
Investment
Return(c)
           Net Assets
End of Year or
Period (000s)
    Expenses(d)     Expenses
Excluding
Waivers(d)
    Expenses
Excluding
Interest
Expense(d)
    Expenses
Excluding
Interest
Expense and
Waivers(d)
    Net
Investment
Income (Loss)
    Portfolio
Turnover
Rate
 
                       
$ N/A     $ N/A     $ 10.15     $ 11.23       33.80           $ 117,402       3.05     3.05     1.54     1.54     9.81     13
  N/A       N/A       9.71       9.72       6.91               112,099       2.69       2.69       1.58       1.58       12.25       12  
  N/A       N/A       10.68       10.05       (1.28             123,235       2.26     2.26     1.54     1.54     8.32     20  
  N/A       N/A       10.72       10.65       0.34               123,633       1.89       1.89       1.40       1.40       8.38       11  
  N/A       N/A       11.17       11.65       6.49               128,672       2.05       2.05       1.52       1.52       9.75       6  
  N/A       N/A       11.35       12.02       23.34               130,461       2.59       2.59       1.76       1.76       10.05       13  
                       
$ N/A     $ N/A     $ 11.18     $ 18.40       5.06           $ 119,538       3.20     3.20     1.88     1.88     11.09     25
  N/A       N/A       9.76       19.53       31.38               103,627       2.75       2.75       1.82       1.82       10.56       26  
  N/A       N/A       12.88       16.92       (21.82             135,468       2.34     2.34     1.72     1.72     10.35     3  
  N/A       N/A       12.82       22.27       4.05               134,594       2.30       2.30       1.78       1.78       8.29       92  
  N/A       N/A       14.72       23.67       19.44               153,393       1.94       1.94       1.67       1.67       9.62       197  
  N/A       N/A       14.32       21.95       21.57               148,170       2.64       2.64       2.10       2.10       10.75       33  
                       
$   N/A     $ N/A     $ 25.17     $ 26.85       30.30           $ 378,706       2.94     2.94     1.72     1.72     9.57     28
  N/A       N/A       22.59       23.00       7.87               338,292       2.63       2.63       1.73       1.73       9.99       16  
  N/A       N/A       25.94       24.20       0.22               388,353       2.43     2.43     1.79     1.79     8.93     14  
  N/A       N/A       28.38       27.26       4.39               424,632       2.01       2.01       1.65       1.65       9.44       175  
  N/A       N/A       28.67       28.90       6.81               426,561       1.93       1.93       1.66       1.66       10.03       65  
  N/A       N/A       27.86       29.85       26.98               411,976       2.29       2.29       1.86       1.86       10.38       57  
                       
$ N/A     $ N/A     $ 7.75     $ 10.19       17.12           $ 329,673       1.52     1.52     0.97     0.97     8.94     8
  N/A       N/A       7.89       9.61       24.14               332,051       1.27       1.27       0.96       0.96       9.43       39  
  N/A       N/A       8.58       8.69       (5.81             357,692       1.16     1.16     0.96     0.96     8.58     17  
  N/A       N/A       8.57       9.65       5.92               355,942       1.18       1.18       0.98       0.98       10.01       90  
  N/A       N/A       9.24       10.12       (4.58             379,762       1.39       1.39       1.00       1.00       10.48       208  
  N/A       N/A       9.66       11.84       12.21               392,317       1.55       1.55       1.00       1.00       11.14       293  
                       
$ N/A     $ N/A     $ 22.91     $ 22.32       32.10           $ 3,144,154       3.80     3.80     2.09     2.09     7.41     32
  N/A       N/A       20.43       19.13       6.69               2,804,003       3.20       3.20       2.03       2.03       9.63       26  
  N/A       N/A       23.00       20.18       2.23               3,155,689       2.63     2.63     1.97     1.97     6.71     31  
  N/A       (0.00 )^      22.83       20.65       2.68               3,132,146       2.36       2.36       1.91       1.91       7.29       35  
  N/A       (0.01     24.04       22.48       (2.79             3,298,673       1.52     1.52     1.42     1.42     6.06     76  
                       
$   0.08     $ 0.00 ^    $   28.32     $   30.18       27.07           $   1,372,674       4.08     4.08     2.14     2.14     9.58     20
  N/A       N/A       26.56       27.57       13.75               1,222,499       3.60       3.60       2.12       2.12       13.67       13  
  N/A       N/A       31.38       29.21       2.87               1,426,891       2.83     2.83     2.01     2.01     10.23     5  
  N/A       N/A       30.74       29.00       9.04               1,397,987       3.12       3.12       2.12       2.12       9.98       10  
  N/A       N/A       32.11       30.32       9.62               1,458,961       3.15       3.15       2.17       2.17       11.90       18  
  N/A         (0.03     30.69       31.10       35.21               1,393,099       2.91     2.91     2.04     2.04     12.04     16  

 

  ANNUAL REPORT   JUNE 30, 2017   17


Statements of Assets and Liabilities

 

June 30, 2017

 

(Amounts in thousands, except per share amounts)   PCM
Fund, Inc.
    PIMCO
Global
StocksPLUS® &
Income
Fund
    PIMCO
Income
Opportunity
Fund
    PIMCO
Strategic
Income Fund,
Inc.
 

Assets:

       

Investments, at value

                               

Investments in securities*

  $ 183,505     $ 153,842     $ 579,240     $ 917,690  

Financial Derivative Instruments

                               

Exchange-traded or centrally cleared

    94       894       476       697  

Over the counter

    0       328       743       618  

Cash

    1       3       516       0  

Deposits with counterparty

    1,408       23,207       7,340       579  

Receivable for investments sold

    8,369       2,934       18,127       1,099  

Receivable for mortgage dollar rolls

    0       0       0       496,724  

Interest and/or dividends receivable

    835       1,422       3,544       2,989  

Other assets

    1       1       1       2  

Total Assets

    194,213       182,631       609,987       1,420,398  

Liabilities:

       

Borrowings & Other Financing Transactions

                               

Payable for reverse repurchase agreements

  $ 73,354     $ 56,076     $ 212,123     $ 84,359  

Payable for sale-buyback transactions

    0       0       0       37,170  

Payable for mortgage dollar rolls

    0       0       0       496,724  

Financial Derivative Instruments

                               

Exchange-traded or centrally cleared

    151       1,152       567       86  

Over the counter

    1,811       1,688       5,136       2,864  

Payable for investments purchased

    394       2,014       9,516       3,821  

Payable for investments purchased on a delayed-delivery basis

    0       4       12       10  

Payable for TBA investments purchased

    0       0       0       461,766  

Deposits from counterparty

    0       260       141       302  

Distributions payable to common shareholders

    925       1,569       2,859       3,063  

Overdraft due to custodian

    2       143       354       17  

Accrued management fees

    144       173       540       277  

Other liabilities

    30       14       33       266  

Total Liabilities

    76,811       63,093       231,281         1,090,725  

Net Assets

  $ 117,402     $ 119,538     $   378,706     $ 329,673  

Net Asset Consist of:

       

Shares:

                               

Par value ($0.001 per share), ($0.00001 per share), ($0.00001 per share), ($0.00001 per share)

  $ 0     $ 0     $ 0     $ 0  

Paid in capital in excess of par

    112,052       142,045       344,027       353,084  

Undistributed (overdistributed) net investment income

    1,113         (2,155     (2,777     (3,133

Accumulated undistributed net realized gain (loss)

    (4,892     (30,076     (8,475     (38,832

Net unrealized appreciation (depreciation)

    9,129       9,724       45,931       18,554  

Net Assets Applicable to Common Shareholders

  $ 117,402     $   119,538     $ 378,706     $ 329,673  

Common Shares Issued and Outstanding

    11,563       10,694       15,045       42,535  

Net Asset Value Per Common Share

  $ 10.15     $ 11.18     $ 25.17     $ 7.75  

Cost of investments in securities

  $   174,541     $ 143,735     $ 536,038     $ 907,061  

Cost or premiums of financial derivative instruments, net

  $ (2,041   $ (1,509   $ (4,955   $ (2,276

* Includes repurchase agreements of:

  $ 5,317     $ 15,999     $ 32,499     $ 13,129  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

18   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Consolidated Statements of Assets and Liabilities

 

June 30, 2017

 

(Amounts in thousands, except per share amounts)   PIMCO
Dynamic
Credit and
Mortgage
Income Fund
    PIMCO
Dynamic
Income Fund
 

Assets:

   

Investments, at value

               

Investments in securities*

  $ 5,467,274     $
2,520,402
 

Financial Derivative Instruments

               

Exchange-traded or centrally cleared

    3,612       1,291  

Over the counter

    3,966       1,429  

Cash

    12,594       1,311  

Deposits with counterparty

    107,709       19,920  

Receivable for investments sold

    314,976       51,149  

Receivable for Fund shares sold

    0       841  

Interest and/or dividends receivable

    25,603       12,292  

Other assets

    8       250  

Total Assets

    5,935,742       2,608,885  

Liabilities:

   

Borrowings & Other Financing Transactions

               

Payable for reverse repurchase agreements

  $ 2,580,482     $ 1,137,401  

Financial Derivative Instruments

               

Exchange-traded or centrally cleared

    5,173       1,676  

Over the counter

    27,111       19,217  

Payable for investments purchased

    130,474       53,152  

Payable for investments purchased on a delayed-delivery basis

    100       44  

Deposits from counterparty

    10,472       6,844  

Distributions payable to common shareholders

    22,513       10,617  

Overdraft due to custodian

    9,365       4,359  

Accrued management fees

    5,685       2,486  

Other liabilities

    213       415  

Total Liabilities

    2,791,588       1,236,211  

Net Assets

  $ 3,144,154     $ 1,372,674  

Net Asset Consist of:

   

Shares:

               

Par value ($0.00001 per share)

  $ 1     $ 0  

Paid in capital in excess of par

    3,274,390       1,170,856  

Undistributed (overdistributed) net investment income

    (10,953     (5,329

Accumulated undistributed net realized gain (loss)

    (164,458     (20,044

Net unrealized appreciation (depreciation)

    45,174       227,191  

Net Assets Applicable to Common Shareholders

  $ 3,144,154     $ 1,372,674  

Common Shares Issued and Outstanding

    137,221       48,460  

Net Asset Value Per Common Share

  $ 22.91     $ 28.32  

Cost of investments in securities

  $   5,330,504     $   2,283,949  

Cost or premiums of financial derivative instruments, net

  $ (16,484   $ (33,326

* Includes repurchase agreements of:

  $ 142,200     $ 136,982  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

  ANNUAL REPORT   JUNE 30, 2017   19


Statements of Operations

 

Year Ended June 30, 2017                        
(Amounts in thousands)   PCM
Fund, Inc.
    PIMCO
Global
StocksPLUS® &
Income
Fund
    PIMCO
Income
Opportunity
Fund
    PIMCO
Strategic
Income Fund,
Inc.
 

Investment Income:

       

Interest, net of foreign taxes*

  $ 14,822     $ 15,731     $ 43,711     $ 34,451  

Dividends

    5       62       1,084       15  

Miscellaneous income

    2       0       0       6  

Total Income

    14,829       15,793       44,795       34,472  

Expenses:

       

Management fees

    1,757       2,045       6,078       3,144  

Trustee fees and related expenses

    22       18       62       60  

Interest expense

    1,745       1,464       4,372       1,808  

Miscellaneous expense

    1       13       9       0  

Total Expenses

    3,525       3,540       10,521       5,012  

Net Investment Income (Loss)

    11,304       12,253       34,274       29,460  

Net Realized Gain (Loss):

       

Investments in securities

    (445     3,426       3,582       2,395  

Exchange-traded or centrally cleared financial derivative instruments

    80       9,275       (2,714     (1,760

Over the counter financial derivative instruments

    76       10,065       3,588       2,127  

Foreign currency

    0       29       (17     128  

Net Realized Gain (Loss)

    (289     22,795       4,439       2,890  

Net Change in Unrealized Appreciation (Depreciation):

       

Investments in securities

    10,906       3,158       37,288         (15,808

Exchange-traded or centrally cleared financial derivative instruments

    (145     (3,044     5,639       17,334  

Over the counter financial derivative instruments

    182       13       (1,897     (1,111

Foreign currency assets and liabilities

    0       (704     (1,627     (37

Net Change in Unrealized Appreciation (Depreciation)

    10,943       (577     39,403       378  

Net Increase (Decrease) in Net Assets Resulting from Operations

  $   21,958     $   34,471     $   78,116     $ 32,728  

* Foreign tax withholdings

  $ 0     $ 0     $ 1     $ 0  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

20   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Consolidated Statements of Operations

 

Year Ended June 30, 2017            
(Amounts in thousands)   PIMCO
Dynamic
Credit and
Mortgage
Income Fund
    PIMCO
Dynamic
Income Fund
 

Investment Income:

   

Interest, net of foreign taxes*

  $ 334,318     $ 172,595  

Dividends

    1,337       93  

Total Income

    335,655       172,688  

Expenses:

   

Management fees

    62,050       26,759  

Trustee fees and related expenses

    478       220  

Interest expense

    51,259       24,551  

Miscellaneous expense

    103       36  

Total Expenses

    113,890       51,566  

Net Investment Income (Loss)

    221,765       121,122  

Net Realized Gain (Loss):

   

Investments in securities

    35,796       375  

Exchange-traded or centrally cleared financial derivative instruments

    98,699       16,555  

Over the counter financial derivative instruments

    17,204       11,823  

Foreign currency

    1,409       2,919  

Net Realized Gain (Loss)

    153,108       31,672  

Net Change in Unrealized Appreciation (Depreciation):

   

Investments in securities

    465,468       135,753  

Exchange-traded or centrally cleared financial derivative instruments

    (92,065     (8,051 )  

Over the counter financial derivative instruments

    (18,910     (6,374

Foreign currency assets and liabilities

    (32,610     (3,029

Net Change in Unrealized Appreciation (Depreciation)

    321,883       118,299  

Net Increase (Decrease) in Net Assets Resulting from Operations

  $   696,756     $   271,093  

* Foreign tax withholdings

  $ 12     $ 0  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

  ANNUAL REPORT   JUNE 30, 2017   21


Statements of Changes in Net Assets

 

    PCM Fund, Inc.     PIMCO Global StocksPLUS® &
Income Fund
 
(Amounts in thousands)   Year Ended
June 30, 2017
    Year Ended
June 30, 2016
    Year Ended
June 30, 2017
    Year Ended
June 30, 2016
 

Increase (Decrease) in Net Assets from:

       

Operations:

       

Net investment income (loss)

  $ 11,304     $ 14,041     $ 12,253     $ 12,107  

Net realized gain (loss)

    (289     4,847       22,795       (4,285

Net change in unrealized appreciation (depreciation)

    10,943       (18,989     (577     (18,012

Net Increase (Decrease) in Net Assets Resulting from Operations

    21,958       (101     34,471       (10,190

Distributions to Common Shareholders:

       

From net investment income

    (16,862     (11,077     (17,812     (21,340

From net realized capital gains

    0       0       0       0  

Tax basis return of capital

    0       0       (2,117     (1,918

Total Distributions to Common Shareholders(a)

    (16,862     (11,077     (19,929     (23,258

Common Share Transactions**:

       

Issued as reinvestment of distributions

    207       42       1,369       1,607  

Total Increase (Decrease) in Net Assets

    5,303       (11,136     15,911       (31,841

Net Assets Applicable to Common Shareholders:

       

Beginning of year

    112,099       123,235       103,627       135,468  

End of year*

  $   117,402     $   112,099     $   119,538     $   103,627  

* Including undistributed (overdistributed) net investment income of:

  $ 1,113     $ 4,244     $ (2,155   $ (2,326

** Common Share Transactions:

       

Shares issued as reinvestment of distributions

    21       4       80       96  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(a) 

The tax characterization of distributions is determined in accordance with federal income tax regulations. See Note 2, Distributions—Common Shares, in the Notes to Financial Statements for more information.

 

22   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

    
PIMCO Income Opportunity Fund
    PIMCO Strategic Income Fund, Inc.  
Year Ended
June 30, 2017
    Year Ended
June 30, 2016
    Year Ended
June 30, 2017
    Year Ended
June 30, 2016
 
     
     
$ 34,274     $ 34,942     $ 29,460     $ 31,977  
  4,439       5,713       2,890       (14,799
  39,403       (49,146     378       (4,489
  78,116       (8,491     32,728       12,689  
     
  (38,429     (34,129     (33,902     (41,907
  0       (7,634     0       0  
  (899     0       (5,051     0  
  (39,328     (41,763     (38,953     (41,907
     
  1,626       193       3,847       3,577  
  40,414       (50,061     (2,378     (25,641
     
  338,292       388,353       332,051       357,692  
$   378,706     $   338,292     $   329,673     $   332,051  
$ (2,777   $ (4,500   $ (3,133   $ (1,926
     
  68       9       419       416  

 

  ANNUAL REPORT   JUNE 30, 2017   23


Consolidated Statements of Changes in Net Assets

 

    PIMCO
Dynamic Credit and
Mortgage Income Fund
    PIMCO
Dynamic
Income Fund
 
(Amounts in thousands)   Year Ended
June 30, 2017
    Year Ended
June 30, 2016
    Year Ended
June 30, 2017
    Year Ended
June 30, 2016
 

Increase (Decrease) in Net Assets from:

       

Operations:

       

Net investment income (loss)

  $ 221,765     $ 276,227     $ 121,122     $ 176,980  

Net realized gain (loss)

    153,108       (88,323     31,672       (197

Net change in unrealized appreciation (depreciation)

    321,883       (240,018     118,299       (157,227

Net Increase (Decrease) in Net Assets Resulting from Operations

    696,756       (52,114     271,093       19,556  

Distributions to Common Shareholders:

       

From net investment income

    (356,605     (299,572     (190,382     (193,676

From net realized capital gains

    0       0       0       (45,024

Total Distributions to Common Shareholders(a)

    (356,605     (299,572     (190,382     (238,700

Common Share Transactions**:

       

Net proceeds from at-the-market offering

    0       0       51,315       0  

Net at-the-market offering costs

    0       0       96       0  

Issued as reinvestment of distributions

    0       0       18,053       14,752  

Net increase (decrease) resulting from common share transactions

    0       0       69,464       14,752  

Total Increase (Decrease) in Net Assets

    340,151       (351,686     150,175       (204,392

Net Assets Applicable to Common Shareholders:

       

Beginning of year

    2,804,003       3,155,689       1,222,499       1,426,891  

End of year*

  $   3,144,154     $   2,804,003     $   1,372,674     $   1,222,499  

* Including undistributed (overdistributed) net investment income of:

  $ (10,953   $ 40,338     $ (5,329   $ 35,233  

** Common Share Transactions:

       

Shares sold

    0       0       1,768       0  

Shares issued as reinvestment of distributions

    0       0       667       546  

Net increase (decrease) in common share transactions

    0       0       2,435       546  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(a) 

The tax characterization of distributions is determined in accordance with federal income tax regulations. See Note 2, Distributions—Common Shares, in the Notes to Financial Statements for more information.

 

24   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Statements of Cash Flows

 

Year Ended June 30, 2017  
(Amounts in thousands)   PCM
Fund, Inc.
    PIMCO
Global
StocksPLUS® &
Income
Fund
    PIMCO
Income
Opportunity
Fund
    PIMCO
Strategic
Income Fund,
Inc.
 

Cash Flows Provided by (Used for) Operating Activities:

       

Net increase (decrease) in net assets resulting from operations

  $ 21,958     $ 34,471     $ 78,116     $ 32,728  

Adjustments to Reconcile Net Increase in Net Assets from Operations to Net Cash Provided by (Used for) Operating Activities:

       

Purchases of long-term securities

    (57,408     (47,398     (200,580     (227,940

Proceeds from sales of long-term securities

    71,042       61,163       239,576       145,545  

(Purchases) Proceeds from sales of short-term portfolio investments, net

    6,850       3,756       (15,539     (1,126

(Increase) decrease in deposits with counterparty

    188       (4,006     (4,861     1,575  

(Increase) decrease in receivable for investments sold

    (2,816     (589     (12,951     (1,088

(Increase) decrease in interest and/or dividends receivable

    216       (197     (54     (63

Proceeds from (Payments on) exchange-traded or centrally cleared financial derivative instruments

    3       6,509       3,227       15,737  

Proceeds from (Payments on) over the counter financial derivative instruments

    489       10,174       3,183       3,702  

(Increase) decrease in other assets

    1       1       2       1  

Increase (decrease) in payable for investments purchased

    394       418       7,254       95,042  

Increase (decrease) in deposits from counterparty

    0       240       (2,420     (5,699

Increase (decrease) in accrued management fees

    1       8       61       19  

Proceeds from (Payments on) foreign currency transactions

    0       32       109       91  

Increase (Decrease) in other liabilities

    0       8       20       (38

Net Realized (Gain) Loss

                               

Investments in securities

    445       (3,426     (3,582     (2,395

Exchange-traded or centrally cleared financial derivative instruments

    (80     (9,275     2,714       1,760  

Over the counter financial derivative instruments

    (76     (10,065     (3,588     (2,127

Foreign currency

    0       (29     17       (128

Net Change in Unrealized (Appreciation) Depreciation

                               

Investments in securities

    (10,906     (3,158     (37,288     15,808  

Exchange-traded or centrally cleared financial derivative instruments

    145       3,044       (5,639     (17,334

Over the counter financial derivative instruments

    (182     (13     1,897       1,111  

Foreign currency assets and liabilities

    0       704       1,627       37  

Net amortization (accretion) on investments

    (518     (166     (4,061     1,311  

Net Cash Provided by (Used for) Operating Activities

    29,746       42,206       47,240       56,529  

Cash Flows Received from (Used for) Financing Activities:

       

Increase (decrease) in overdraft due to custodian

    2       143       354       17  

Cash distributions paid*

    (16,654     (18,937     (37,689     (35,412

Proceeds from reverse repurchase agreements

    244,763       274,046       878,948       554,316  

Payments on reverse repurchase agreements

      (258,278       (297,510       (888,771     (573,289

Proceeds from sale-buyback transactions

    0       0       0       1,627,514  

Payments on sale-buyback transactions

    0       0       0         (1,630,239

Proceeds from mortgage dollar rolls

    0       0       0       5,595,226  

Payments on mortgage dollar rolls

    0       0       0       (5,595,226

Net Cash Received from (Used for) Financing Activities

    (30,167     (42,258     (47,158     (57,093

Net Increase (Decrease) in Cash and Foreign Currency

    (421     (52     82       (564

Cash and Foreign Currency:

       

Beginning of year

    422       55       434       564  

End of year

  $ 1     $ 3     $ 516     $ 0  

* Reinvestment of distributions

  $ 207     $ 1,369     $ 1,626     $ 3,847  

Supplemental Disclosure of Cash Flow Information:

       

Interest expense paid during the year

  $ 1,610     $ 1,564     $ 4,273     $ 1,759  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

A Statement of Cash Flows is presented when a Fund had a significant amount of borrowing during the year, based on the average total borrowing outstanding in relation to total assets or when substantially all of a Fund’s investments were not classified as Level 1 or 2 in the fair value hierarchy.

 

  ANNUAL REPORT   JUNE 30, 2017   25


Consolidated Statements of Cash Flows

 

Year Ended June 30, 2017            

(Amounts in thousands)

  PIMCO
Dynamic
Credit and
Mortgage
Income Fund
    PIMCO
Dynamic
Income Fund
 

Cash Flows Provided by (Used for) Operating Activities:

   

Net increase (decrease) in net assets resulting from operations

  $ 696,756     $ 271,093  

Adjustments to Reconcile Net Increase (Decrease) in Net Assets from Operations to Net Cash Provided by (Used for) Operating Activities:

   

Purchases of long-term securities

    (2,449,387     (776,519

Proceeds from sales of long-term securities

    2,467,153       692,265  

(Purchases) Proceeds from sales of short-term portfolio investments, net

    118,256       (25,982

(Increase) decrease in deposits with counterparty

    (4,497     9,790  

(Increase) decrease in receivable for investments sold

    (248,094     (45,685

(Increase) decrease in interest and/or dividends receivable

    1,003       (2,404

Proceeds from (Payments on) exchange-traded or centrally cleared financial derivative instruments

    10,755       10,237  

Proceeds from (Payments on) over the counter financial derivative instruments

    27,418       13,978  

(Increase) decrease in other assets

    4       (245

Increase (decrease) in payable for investments purchased

    101,381       33,897  

Increase (decrease) in deposits from counterparty

    (8,904     (5,255

Increase (decrease) in accrued management fees

    854       362  

Proceeds from (Payments on) foreign currency transactions

    2,102       3,181  

Increase (decrease) in other liabilities

    106       366  

Net Realized (Gain) Loss

               

Investments in securities

    (35,796     (375

Exchange-traded or centrally cleared financial derivative instruments

    (98,699     (16,555

Over the counter financial derivative instruments

    (17,204     (11,823

Foreign currency

    (1,409     (2,919

Net Change in Unrealized (Appreciation) Depreciation

               

Investments in securities

    (465,468     (135,753

Exchange-traded or centrally cleared financial derivative instruments

    92,065       8,051  

Over the counter financial derivative instruments

    18,910       6,374  

Foreign currency assets and liabilities

    32,610       3,029  

Net amortization (accretion) on investments

    (46,568     (17,017

Net Cash Provided by (Used for) Operating Activities

    193,347       12,091  

Cash Flows Received from (Used for) Financing Activities:

   

Net proceeds from at-the-market offering

    0       50,474  

Net at-the-market offering costs

    0       96  

Increase (decrease) in overdraft due to custodian

    8,772       4,247  

Cash distributions paid*

    (356,605     (171,860

Proceeds from reverse repurchase agreements

    9,117,003       3,252,589  

Payments on reverse repurchase agreements

      (8,950,660       (3,146,479

Net Cash Received from (Used for) Financing Activities

    (181,490     (10,933

Net Increase (Decrease) in Cash and Foreign Currency

    11,857       1,158  

Cash and Foreign Currency:

   

Beginning of year

    737       153  

End of year

  $ 12,594     $ 1,311  

* Reinvestment of distributions

  $ 0     $ 18,053  

Supplemental Disclosure of Cash Flow Information:

   

Interest expense paid during the year

  $ 49,807     $ 23,074  

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

A Statement of Cash Flows is presented when a Fund had a significant amount of borrowing during the year, based on the average total borrowing outstanding in relation to total assets or when substantially all of a Fund’s investments were not classified as Level 1 or 2 in the fair value hierarchy.

 

26   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Schedule of Investments PCM Fund, Inc.

 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 156.3%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 3.2%  

Cactus Wellhead LLC

 

7.226% due 07/31/2020

  $     486     $     470  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      340         341  

Forbes Energy Services LLC

 

5.000% - 7.000% due 04/13/2021

      431         438  

iHeartCommunications, Inc.

 

7.976% due 01/30/2019

      3,000         2,460  

Sequa Mezzanine Holdings LLC

 

6.672% due 11/28/2021

      40         40  

10.172% due 04/28/2022

      20         21  
       

 

 

 

Total Loan Participations and Assignments
(Cost $4,252)

 

        3,770  
       

 

 

 
CORPORATE BONDS & NOTES 16.7%  
BANKING & FINANCE 4.4%  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

      20         20  

4.700% due 06/22/2047

      20         20  

Cantor Fitzgerald LP

 

7.875% due 10/15/2019 (k)

      740         815  

CyrusOne LP

 

5.000% due 03/15/2024

      7         7  

5.375% due 03/15/2027

      4         4  

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

      23         23  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      800         780  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      14         14  

Jefferies Finance LLC

 

7.500% due 04/15/2021 (k)

      187         195  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020 (k)

      1,000         1,010  

Navient Corp.

 

5.875% due 03/25/2021

      465         493  

OneMain Financial Holdings LLC

 

6.750% due 12/15/2019

      9         9  

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

      10         10  

Provident Funding Associates LP

 

6.375% due 06/15/2025

      6         6  

Springleaf Finance Corp.

 

5.250% due 12/15/2019

      14         15  

6.125% due 05/15/2022

      133         141  

7.750% due 10/01/2021

      150         168  

8.250% due 12/15/2020 (k)

      900         1,013  

Toll Road Investors Partnership LP

 

0.000% due 02/15/2045 (g)

      1,836         445  
       

 

 

 
          5,188  
       

 

 

 
INDUSTRIALS 11.4%  

BMC Software Finance, Inc.

 

8.125% due 07/15/2021

      72         75  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

 

9.000% due
10/15/2019 (d)(k)

      1,017         1,021  

Caesars Entertainment Operating Co., Inc.

 

8.500% due 02/15/2020 ^(h)(k)

      3,091         3,988  

9.000% due 02/15/2020 ^(h)

      179         232  

10.000% due 12/15/2018 ^

      60         56  

CDK Global, Inc.

 

4.875% due 06/01/2027

      4         4  

Charter Communications Operating LLC

 

5.375% due 05/01/2047

      13         14  

Chemours Co.

 

5.375% due 05/15/2027

      8         8  

Chesapeake Energy Corp.

 

4.408% due 04/15/2019

      10         10  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Community Health Systems, Inc.

 

6.250% due 03/31/2023

  $     32     $     33  

CVS Pass-Through Trust

 

5.880% due 01/10/2028 (k)

      1,277         1,432  

Diamond Resorts International, Inc.

 

10.750% due 09/01/2024 (k)

      500         533  

Dynegy, Inc.

 

8.034% due 02/02/2024

      515         489  

EW Scripps Co.

 

5.125% due 05/15/2025

      5         5  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      7         7  

Fresh Market, Inc.

 

9.750% due 05/01/2023 (k)

      350         294  

HCA, Inc.

 

5.500% due 06/15/2047

      20         21  

Hexion, Inc.

 

13.750% due 02/01/2022

      11         10  

Intrepid Aviation Group Holdings LLC

 

6.875% due 02/15/2019 (k)

      1,700         1,657  

KFC Holding Co.

 

4.750% due 06/01/2027

      13         13  

Molina Healthcare, Inc.

 

4.875% due 06/15/2025

      4         4  

PetSmart, Inc.

 

5.875% due 06/01/2025

      31         30  

Prime Security Services Borrower LLC

 

9.250% due 05/15/2023

      118         129  

Scientific Games International, Inc.

 

10.000% due 12/01/2022

      158         174  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      19         19  

5.000% due 08/01/2027 (c)

      7         7  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

      4         4  

Tenet Healthcare Corp.

 

4.625% due 07/15/2024

      55         55  

THC Escrow Corp.

 

4.625% due 07/15/2024

      10         10  

UAL Pass-Through Trust

 

6.636% due 01/02/2024 (k)

      539         586  

UCP, Inc.

 

8.500% due 10/21/2017

      1,300         1,292  

VeriSign, Inc.

 

4.750% due 07/15/2027

      4         4  

Westmoreland Coal Co.

 

8.750% due 01/01/2022

      1,264         1,119  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027

      28         29  
       

 

 

 
          13,364  
       

 

 

 
UTILITIES 0.9%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      17         17  

4.850% due 07/15/2047

      13         13  

Sprint Corp.

 

7.125% due 06/15/2024

      379         423  

TerraForm Power Operating LLC

 

6.375% due 02/01/2023 (k)

      600         627  
       

 

 

 
          1,080  
       

 

 

 

Total Corporate Bonds & Notes
(Cost $17,735)

 

        19,632  
       

 

 

 
MUNICIPAL BONDS & NOTES 1.1%  
ARKANSAS 0.4%  

Little Rock Municipal Property Owners Multipurpose Improvement District No. 10, Arkansas Special Tax Bonds, Series 2007

 

7.200% due 03/01/2032

      425         424  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
WEST VIRGINIA 0.7%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

7.467% due 06/01/2047

  $     825     $     809  
       

 

 

 

Total Municipal Bonds & Notes
(Cost $1,199)

 

      1,233  
       

 

 

 
U.S. GOVERNMENT AGENCIES 4.2%  

Fannie Mae

 

4.216% due 10/25/2029

      100         103  

4.766% due 07/25/2029

      170         180  

6.066% due 10/25/2029

      60         64  

6.966% due 07/25/2029

      230         262  

Freddie Mac

 

0.000% due 04/25/2045 - 08/25/2046 (b)(g)

      2,172         1,677  

0.100% due 05/25/2020 - 08/25/2046 (a)

      22,195         67  

0.200% due 04/25/2045 (a)

      1,136         3  

0.714% due 01/25/2021 (a)

      2,630         46  

0.824% due 10/25/2020 (a)

      8,549         163  

3.615% due
06/25/2041 (a)(k)

      10,500         1,297  

6.366% due 10/25/2029

      500         546  

8.766% due 12/25/2027

      449         524  
       

 

 

 

Total U.S. Government Agencies
(Cost $4,672)

 

        4,932  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 59.5%  

Adjustable Rate Mortgage Trust

 

3.411% due 01/25/2036 ^

      215         199  

Banc of America Alternative Loan Trust

 

6.146% due 04/25/2037 ^

      261         233  

Banc of America Commercial Mortgage Trust

 

5.695% due 07/10/2046

      79         79  

Banc of America Funding Trust

 

3.005% due 12/20/2034

      366         291  

3.567% due 03/20/2036

      120         108  

5.806% due 03/25/2037 ^

      135         120  

7.000% due 10/25/2037 ^

      792         526  

Banc of America Mortgage Trust

 

3.385% due 11/25/2034

      235         236  

3.549% due 06/20/2031

      430         438  

4.018% due 06/25/2035

      131         129  

Barclays Commercial Mortgage Securities Trust

 

3.550% due 08/15/2027

      900         877  

BCAP LLC Trust

 

1.210% due 07/26/2036

      87         68  

Bear Stearns ALT-A Trust

 

1.386% due 04/25/2037

      979         864  

3.133% due 09/25/2034

      105         103  

3.219% due 05/25/2036

      51         40  

3.250% due 11/25/2036 ^

      926         766  

3.267% due 05/25/2036 ^

      343         299  

3.444% due 08/25/2036 ^

      692         746  

3.471% due 08/25/2036 ^

      372         279  

3.697% due 01/25/2047

      60         45  

6.585% due 07/25/2035 ^

      169         142  

Bear Stearns Asset-Backed Securities Trust

 

5.500% due 12/25/2035

      62         53  

Bear Stearns Commercial Mortgage Securities Trust

 

5.657% due 10/12/2041

      1,254         1,183  

5.897% due 04/12/2038

      40         31  

BRAD Resecuritization Trust

 

2.182% due 03/12/2021

      2,218         132  

6.550% due 03/12/2021

      415         417  

CBA Commercial Small Balance Commercial Mortgage

 

5.540% due 01/25/2039 ^

      492         415  

Chase Mortgage Finance Trust

 

6.000% due 03/25/2037 ^

      285         248  

Citigroup Mortgage Loan Trust, Inc.

 

3.173% due 10/25/2035

      694         523  

3.301% due 11/25/2036 ^

      172         149  

3.452% due 08/25/2035 ^

      107         95  

3.800% due 11/25/2035

      1,880         1,071  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   27


Schedule of Investments PCM Fund, Inc. (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Citigroup Mortgage Loan Trust, Inc. Mortgage Pass-Through Certificates

 

3.230% due 09/25/2035 ^

  $     228     $     188  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049

      287         161  

5.688% due 10/15/2048

      1,555         836  

CitiMortgage Alternative Loan Trust

 

5.500% due 04/25/2022 ^

      46         46  

Commercial Mortgage Asset Trust

 

6.000% due 11/17/2032

      565         573  

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049

      748         470  

Commercial Mortgage Pass-Through Certificates

 

4.750% due 10/15/2045 (k)

      1,500         1,110  

Commercial Mortgage Trust

 

5.505% due 03/10/2039 (k)

      382         353  

5.844% due 06/10/2046

      156         106  

6.303% due 07/10/2046 (k)

      690         738  

Countrywide Alternative Loan Trust

 

1.496% due 02/25/2037

      304         257  

1.506% due 02/25/2036 ^

      988         797  

1.732% due 12/25/2035 (k)

      1,624         1,487  

1.766% due 10/25/2037

      5,615         1,826  

5.500% due 03/25/2035

      668         530  

6.000% due 11/25/2035 ^

      196         89  

6.000% due 04/25/2036 ^(k)

      3,876         3,263  

Countrywide Home Loan Mortgage Pass-Through Trust

 

1.856% due 03/25/2035

      209         180  

3.086% due 03/25/2046 ^(k)

      1,260         755  

3.128% due 09/20/2036 ^

      162         135  

3.174% due 09/25/2047 ^

      716         672  

3.309% due 02/20/2036 ^

      16         15  

6.000% due 05/25/2037 ^

      362         303  

Credit Suisse First Boston Mortgage Securities Corp.

 

7.000% due 02/25/2033

      80         87  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

 

5.896% due 04/25/2036

      307         216  

6.000% due 07/25/2036 (k)

      1,578         1,285  

6.500% due 05/25/2036 ^

      196         130  

6.500% due 11/25/2036

      1,709         1,466  

First Horizon Alternative Mortgage Securities Trust

 

3.104% due 08/25/2035 ^

      65         13  

First Horizon Mortgage Pass-Through Trust

 

3.173% due 04/25/2035

      85         87  

First Union National Bank Commercial Mortgage

 

6.750% due 10/15/2032

      1,237         1,215  

GE Commercial Mortgage Corp. Trust

 

5.606% due 12/10/2049 (k)

      1,700         1,715  

GS Mortgage Securities Trust

 

1.535% due 08/10/2043 (a)

      13,971         487  

2.429% due 05/10/2045 (a)

      4,553         324  

5.622% due 11/10/2039 (k)

      751         691  

6.201% due 08/10/2043 (k)

      1,670         1,737  

GSR Mortgage Loan Trust

 

3.298% due 03/25/2047 (k)

      1,775         1,668  

HarborView Mortgage Loan Trust

 

1.459% due 01/19/2036

      885         704  

IndyMac Mortgage Loan Trust

 

2.016% due 11/25/2034

      140         123  

3.300% due 05/25/2036

      212         166  

3.931% due 06/25/2037 (k)

      455         425  

JPMorgan Alternative Loan Trust

 

6.500% due 03/25/2036 (k)

      1,393         1,274  

JPMorgan Chase Commercial Mortgage Securities Corp.

 

1.638% due 03/12/2039 (a)

      420         3  

JPMorgan Chase Commercial Mortgage Securities Trust

 

0.608% due 02/15/2046 (a)

      59,516           1,103  

2.972% due 05/15/2045

      2,200         1,110  

4.000% due 08/15/2046

      1,000         652  

5.667% due 01/12/2043

      264         266  

6.450% due 05/12/2034 (k)

      528         532  

JPMorgan Commercial Mortgage-Backed Securities Trust

 

5.828% due 03/18/2051 (k)

      774         773  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

JPMorgan Mortgage Trust

 

3.454% due 07/25/2035

  $     107     $     108  

LB-UBS Commercial Mortgage Trust

 

5.350% due 09/15/2040

      1,200         1,184  

5.407% due 11/15/2038 (k)

      381         292  

5.562% due 02/15/2040 (k)

      528         380  

5.938% due 02/15/2040

      200         198  

Lehman Mortgage Trust

 

5.000% due 08/25/2021 ^

      295         289  

5.859% due 04/25/2036

      232         209  

6.000% due 05/25/2037 ^

      481         477  

MASTR Adjustable Rate Mortgages Trust

 

3.321% due 11/25/2035 ^

      571         465  

MASTR Asset Securitization Trust

 

6.000% due 06/25/2036 ^

      533         516  

Merrill Lynch Mortgage Investors Trust

 

1.636% due 07/25/2030

      215         204  

1.876% due 11/25/2029

      139         134  

3.020% due 11/25/2035

      220         222  

Merrill Lynch Mortgage Trust

 

6.018% due 06/12/2050 (k)

      1,800         1,809  

Morgan Stanley Capital Trust

 

0.502% due 11/12/2049 (a)

      6,616         36  

5.399% due 12/15/2043

      862         690  

5.809% due 12/12/2049

      166         167  

5.920% due 04/15/2049 (k)

      202         204  

6.128% due 06/11/2049

      500         501  

Morgan Stanley Mortgage Loan Trust

 

3.409% due 01/25/2035 ^

      287         112  

6.000% due 08/25/2037 ^

      288         245  

Morgan Stanley Resecuritization Trust

 

3.308% due 03/26/2037

      5,469         5,069  

Mortgage Equity Conversion Asset Trust

 

4.000% due 07/25/2060

      257         218  

Regal Trust

 

2.145% due 09/29/2031

      116         108  

Residential Accredit Loans, Inc. Trust

 

4.320% due 01/25/2036 ^

      466         391  

6.000% due 08/25/2035 ^

      307         286  

6.500% due 09/25/2037 ^

      312         276  

Residential Asset Securitization Trust

 

6.000% due 03/25/2037 ^

      256         172  

Residential Funding Mortgage Securities, Inc. Trust

 

6.000% due 06/25/2036 ^

      314         311  

Royal Bank of Scotland Capital Funding Trust

 

6.068% due 02/17/2051

      2,744         2,748  

Structured Adjustable Rate Mortgage Loan Trust

 

3.203% due 09/25/2036 ^

      249         221  

3.349% due 11/25/2036 ^

      74         73  

3.366% due 01/25/2036 ^

      394         302  

3.442% due 04/25/2036 ^(k)

      452         363  

Structured Asset Mortgage Investments Trust

 

1.426% due 08/25/2036 ^(k)

      1,029         900  

TBW Mortgage-Backed Trust

 

6.000% due 07/25/2036 ^

      175         142  

Wachovia Bank Commercial Mortgage Trust

 

1.062% due 10/15/2041 (a)

      1,165         0  

5.691% due 10/15/2048

      200         201  

5.720% due 10/15/2048

      2,400         2,350  

WaMu Mortgage Pass-Through Certificates Trust

 

1.706% due 06/25/2044

      605         543  

2.145% due 11/25/2046

      535         511  

2.953% due 12/25/2036 ^(k)

      470         449  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

6.500% due 08/25/2036 ^(k)

      1,682         1,291  

Wells Fargo Alternative Loan Trust

 

5.500% due 07/25/2022

      36         36  

Wells Fargo-RBS Commercial Mortgage Trust

 

0.984% due 02/15/2044 (a)(k)

      17,779         403  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $63,110)

      69,853  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
ASSET-BACKED SECURITIES 63.1%  

Airspeed Ltd.

 

1.429% due 06/15/2032

  $     648     $     552  

Asset-Backed Securities Corp. Home Equity Loan Trust

 

2.311% due 02/25/2035 (k)

      3,374           3,323  

2.941% due 12/25/2034 (k)

      1,888         1,886  

4.464% due 06/21/2029

      149         146  

Associates Manufactured Housing Pass-Through Certificates

 

7.150% due 03/15/2028

      418         506  

Bayview Financial Acquisition Trust

 

1.502% due 12/28/2036

      142         141  

Bear Stearns Asset-Backed Securities Trust

 

1.596% due 04/25/2036 (k)

      2,776         2,073  

1.596% due 06/25/2036

      17         17  

3.079% due 07/25/2036

      319         305  

Bombardier Capital Mortgage Securitization Corp.

 

7.830% due 06/15/2030

      1,185         529  

Centex Home Equity Loan Trust

 

1.966% due 01/25/2035 (k)

      1,643         1,358  

Citigroup Mortgage Loan Trust, Inc.

 

1.376% due 12/25/2036 (k)

      1,772         1,189  

1.436% due 12/25/2036

      935         501  

1.476% due 03/25/2037 (k)

      4,388         3,471  

1.666% due 11/25/2045 (k)

      5,300         5,233  

1.916% due 11/25/2046

      1,900         1,139  

Conseco Finance Securitizations Corp.

 

7.960% due 05/01/2031

      376         262  

9.163% due 03/01/2033

      921         856  

Countrywide Asset-Backed Certificates

 

1.346% due 12/25/2036 ^

      1,347         1,355  

1.356% due 06/25/2035 (k)

      2,821         2,263  

1.356% due 06/25/2047 ^(k)

      3,179         2,476  

1.366% due 04/25/2047 (k)

      1,298         1,266  

1.416% due 06/25/2037 ^(k)

      896         672  

1.456% due 05/25/2036 (k)

      8,779         4,651  

2.866% due 06/25/2035 (k)

      4,000         3,476  

Countrywide Asset-Backed Certificates Trust

 

1.486% due 09/25/2046 (k)

      5,000         2,620  

EMC Mortgage Loan Trust

 

2.074% due 05/25/2040

      675         604  

2.324% due 02/25/2041

      344         339  

Fremont Home Loan Trust

 

1.396% due 04/25/2036 (k)

      1,284         1,159  

GE Capital Mortgage Services, Inc. Trust

 

6.705% due 04/25/2029

      121         104  

GSAMP Trust

 

3.016% due 06/25/2035 (k)

      2,200         1,882  

HSI Asset Securitization Corp. Trust

 

1.326% due 04/25/2037 (k)

      4,185         2,425  

IndyMac Home Equity Mortgage Loan Asset-Backed Trust

 

1.456% due 04/25/2037 (k)

      5,339         3,573  

Lehman XS Trust

 

5.420% due 11/25/2035 ^

      226         227  

MASTR Asset-Backed Securities Trust

 

1.326% due 08/25/2036 (k)

      3,580         1,928  

Morgan Stanley ABS Capital, Inc. Trust

 

1.996% due 12/25/2034

      187         158  

National Collegiate Commutation Trust

 

0.000% due 03/25/2038

      3,500         1,610  

People’s Financial Realty Mortgage Securities Trust

 

1.346% due 09/25/2036

      1,589         490  

Renaissance Home Equity Loan Trust

 

7.238% due 09/25/2037 ^(k)

      4,202         2,477  

Residential Asset Mortgage Products Trust

 

1.956% due 09/25/2032

      42         40  

2.311% due 12/25/2033

      688         663  

Residential Asset Securities Corp. Trust

 

1.906% due 08/25/2035 (k)

      4,350         3,723  

Securitized Asset-Backed Receivables LLC Trust

 

1.666% due 10/25/2035 (k)

      5,500         5,095  

1.861% due 01/25/2035 (k)

      1,595         1,427  
 

 

28   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

SoFi Professional Loan Program LLC

 

0.000% due 03/25/2036 (g)

  $     10     $     306  

0.000% due 01/25/2039 (g)

      1,000         660  

0.000% due 05/25/2040 (g)

      1,000         520  

Southern Pacific Secured Asset Corp.

 

1.556% due 07/25/2029

      16         15  

Structured Asset Investment Loan Trust

 

2.941% due 10/25/2034 (k)

      1,986         1,859  

5.716% due 10/25/2033

      68         64  

UCFC Manufactured Housing Contract

 

7.900% due 01/15/2028 ^

      447         439  

UPS Capital Business Credit

 

4.239% due 04/15/2026

      1,856         37  
       

 

 

 

Total Asset-Backed Securities (Cost $71,392)

      74,090  
       

 

 

 
       
        SHARES            
COMMON STOCKS 0.6%  
ENERGY 0.6%  

Forbes Energy Services Ltd. (e)(i)

      35,625         606  

SemGroup Corp. ‘A’

      2,654         72  

Warren Resources, Inc.

      7,681         10  
       

 

 

 

Total Common Stocks (Cost $2,831)

    688  
       

 

 

 
        SHARES         MARKET
VALUE
(000S)
 
WARRANTS 0.1%  
INDUSTRIALS 0.1%  

Sequa Corp. - Exp. 04/28/2024

      118,000     $     56  
       

 

 

 
UTILITIES 0.0%  

Dynegy, Inc. - Exp. 02/02/2024

      18,207         3  
       

 

 

 

Total Warrants (Cost $48)

          59  
       

 

 

 
PREFERRED SECURITIES 1.8%  
INDUSTRIALS 1.8%  

Sequa Corp.

 

9.000%

      2,185         2,131  
       

 

 

 

Total Preferred Securities (Cost $2,185)

      2,131  
       

 

 

 
SHORT-TERM INSTRUMENTS 6.0%  
       
REPURCHASE AGREEMENTS (j) 4.5%  
          5,317  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
U.S. TREASURY BILLS 1.5%  

0.922% due 08/31/2017 (f)(g)(n)

  $     1,803     $     1,800  
       

 

 

 
Total Short-Term Instruments
(Cost $7,117)
        7,117  
       

 

 

 
Total Investments in Securities
(Cost $174,541)
        183,505  
       
Total Investments 156.3%
(Cost $174,541)
    $       183,505  

Financial Derivative
Instruments (l)(m) (1.6)%

(Cost or Premiums, net $(2,041))

    (1,868
Other Assets and Liabilities, net (54.7)%     (64,235
       

 

 

 
Net Assets 100.0%     $     117,402  
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.
(d) Payment in-kind security.
(e) Security did not produce income within the last twelve months.
(f) Coupon represents a weighted average yield to maturity.
(g) Zero coupon security.
(h) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(i)  RESTRICTED SECURITIES:

 

Issuer Description                Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Forbes Energy Services Ltd.

         07/29/2014       $    1,769     $     606       0.52%  
        

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(j)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
BCY     1.440     06/30/2017       07/03/2017     $     4,700     Fannie Mae 4.000% due 07/01/2037   $ (4,851   $ 4,700     $ 4,701  
SSB     0.050       06/30/2017       07/03/2017       617     U.S. Treasury Notes 3.500% due 05/15/2020(2)     (631     617       617  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

    $     (5,482   $     5,317     $     5,318  
           

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   29


Schedule of Investments PCM Fund, Inc. (Cont.)

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

    1.650     06/16/2017       TBD (4)    $ (2,307   $ (2,309
    2.400       04/05/2017       07/03/2017       (274     (276
    2.549       07/03/2017       10/03/2017       (258     (258
    2.648       04/03/2017       07/03/2017           (4,090     (4,117
    2.689       05/25/2017       08/23/2017       (911     (914
    2.718       06/02/2017       09/05/2017       (2,964     (2,971
    2.799       07/03/2017       10/03/2017       (4,299     (4,299

BPS

    2.884       01/11/2017       07/10/2017       (1,401     (1,420

DEU

    2.100       05/09/2017       08/09/2017       (231     (232
    2.110       05/24/2017       08/24/2017       (1,232     (1,235
    2.110       05/30/2017       08/30/2017       (1,120     (1,122

GSC

    2.389       06/13/2017       07/13/2017       (764     (765

JPS

    2.552       06/01/2017       09/01/2017       (425     (426

MSC

    2.160       04/19/2017       07/19/2017       (3,221     (3,236
    2.929       05/08/2017       11/08/2017       (1,381     (1,387

RBC

    2.644       02/07/2017       08/07/2017       (2,697     (2,726
    2.700       04/19/2017       10/18/2017       (382     (384
    2.720       05/26/2017       11/27/2017       (298     (299
    2.730       03/13/2017       09/13/2017       (1,526     (1,539
    2.730       03/20/2017       09/20/2017       (1,108     (1,117

RDR

    1.590       05/23/2017       08/23/2017       (733     (734

RTA

    2.345       07/26/2016       07/25/2017       (2,856     (2,920
    2.559       10/07/2016       10/06/2017       (2,678     (2,729
    2.568       11/09/2016       11/08/2017       (2,739     (2,785
    2.700       04/19/2017       10/18/2017       (261     (262
    2.719       05/26/2017       11/27/2017       (236     (237
    2.813       02/03/2017       01/31/2018       (1,715     (1,735
    2.879       05/08/2017       05/07/2018       (3,436     (3,451
    2.888       05/11/2017       05/07/2018       (4,415     (4,434
    2.889       04/13/2017       04/05/2018       (3,009     (3,029
    2.918       03/14/2017       03/08/2018       (2,261     (2,281

SAL

    2.050       04/05/2017       07/05/2017       (1,421     (1,428
    2.199       07/05/2017       10/05/2017       (1,366     (1,366

SOG

    1.750       05/30/2017       08/30/2017       (912     (914
    1.800       06/15/2017       09/15/2017       (1,070     (1,071
    2.805       01/10/2017       07/10/2017       (1,014     (1,020
    2.832       05/15/2017       11/15/2017       (494     (496

UBS

    2.100       04/21/2017       07/21/2017       (1,234     (1,239
    2.630       05/09/2017       08/09/2017       (2,903     (2,915
    2.642       05/23/2017       08/23/2017       (3,856     (3,868
    2.674       05/03/2017       08/03/2017       (1,634     (1,641
    2.692       05/23/2017       08/23/2017       (1,762     (1,767
         

 

 

 

Total Reverse Repurchase Agreements

 

    $     (73,354
         

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
     Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(5)  

Global/Master Repurchase Agreement

            

BCY

  $ 4,701     $ (15,144   $ 0      $ (10,443   $ 19,077     $ 8,634  

BPS

    0       (1,420     0        (1,420     2,073       653  

DEU

    0       (2,589     0        (2,589     3,106       517  

GSC

    0       (765     0        (765     1,038       273  

JPS

    0       (426     0        (426     532       106  

MSC

    0       (4,623     0        (4,623     5,441       818  

RBC

    0       (6,065     0        (6,065     7,489       1,424  

RDR

    0       (734     0        (734     771       37  

RTA

    0       (23,863     0            (23,863         34,303           10,440  

SAL

    0       (2,794     0        (2,794     3,493       699  

SOG

    0       (3,501     0        (3,501     4,201       700  

SSB

    617       0       0        617       (631     (14

UBS

    0       (11,430     0        (11,430     15,487       4,057  
 

 

 

   

 

 

   

 

 

        

Total Borrowings and Other Financing Transactions

  $     5,318     $     (73,354   $     0         
 

 

 

   

 

 

   

 

 

        

 

30   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

         

Corporate Bonds & Notes

  $ 0     $ (1,239   $ (5,308   $ (2,309   $ (8,856

U.S. Government Agencies

    0       0       (914     0       (914

Non-Agency Mortgage-Backed Securities

    0       (5,960     (8,779     (6,112     (20,851

Asset-Backed Securities

    0       (9,222     (10,191     (17,397     (36,810
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $     (16,421   $     (25,192   $     (25,818   $     (67,431
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements(6)

 

      $     (67,431
         

 

 

 

 

(k) Securities with an aggregate market value of $102,135 and cash of $19 have been pledged as collateral under the terms of under the terms of the above master agreements as of June 30, 2017.

 

(1) 

Includes accrued interest.

(2) 

Collateral is held in custody by the counterparty.

(3) 

The average amount of borrowings outstanding during the period ended June 30, 2017 was $(78,958) at a weighted average interest rate of 2.166%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

(4) 

Open maturity reverse repurchase agreement.

(5) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

(6) 

Unsettled reverse repurchase agreements liability of $(5,923) is outstanding at period end.

 

(l)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Sprint Communications, Inc.

    5.000     12/20/2021       2.033   $     300     $     9     $     29     $     38     $     0     $     0  
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
    Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset      Liability  

Receive

 

3-Month USD-LIBOR

    1.500     12/21/2021     $ 1,500     $ 22     $ (49   $ (27   $ 0      $ (2

Pay

 

3-Month USD-LIBOR

    1.750       12/21/2026       3,200       77       (220     (143     0        (9

Receive

 

3-Month USD-LIBOR

    1.750       12/21/2023           60,000       1,130           (2,338     (1,208     0        (140

Receive

 

3-Month USD-LIBOR

    2.500       06/15/2036       22,800       (2,274     2,310       36       87        0  

Receive

 

3-Month USD-LIBOR

    2.500       06/15/2046       1,600       (196     205       9       7        0  
         

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
          $ (1,241   $ (92   $ (1,333   $     94      $     (151
         

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total Swap Agreements

 

    $     (1,232   $ (63   $     (1,295   $ 94      $ (151
         

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation Margin
Asset
    Total           Market Value     Variation Margin
Liability
    Total  
     Purchased
Options
    Futures     Swap
Agreements
            Written
Options
    Futures     Swap
Agreements
   

Total Exchange-Traded or Centrally Cleared

  $     0     $     0     $     94     $     94       $     0     $     0     $     (151   $     (151
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

Cash of $1,389 has been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   31


Schedule of Investments PCM Fund, Inc. (Cont.)

 

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

 

(m)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty        Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(2)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements, at  Value(3)  
                Asset     Liability  
DUB    

CMBX.NA.BBB-.6 Index

    3.000     05/11/2063     $     300     $ (16   $ (19   $ 0     $ (35
   

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057         600       (69     (20     0       (89
   

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058         300       (38     3       0       (35
FBF    

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057         100       (16     1       0       (15
GST    

ABX.HE.AA.6-1 Index

    0.320       07/25/2045         6,136       (1,221     310       0       (911
   

ABX.HE.PENAAA.7-1 Index

    0.090       08/25/2037         1,530       (296     19       0       (277
   

CMBX.NA.A.6 Index

    2.000       05/11/2063         500       (25     9       0       (16
   

CMBX.NA.BB.6 Index

    5.000       05/11/2063         300       (41     (14     0       (55
   

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063         700       (39     (42     0       (81
   

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047         100       (5     (4     0       (9
   

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058         700       (87     5       0       (82
MYC    

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059         1,200       (126     (3     0       (129
   

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047         300       (13     (14     0       (27
   

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057         100       (12     (3     0       (15
   

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058         300       (37     2       0       (35
             

 

 

   

 

 

   

 

 

   

 

 

 
              $ (2,041   $ 230     $ 0     $ (1,811
             

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

        $     (2,041   $     230     $     0     $     (1,811
             

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged/(received) as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                     
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
     Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
     Net
Exposure(4)
 

DUB

  $ 0      $ 0      $ 0      $ 0       $ 0      $ 0      $ (159   $ (159   $ (159   $ 0      $   (159

FBF

    0        0        0        0         0        0        (15     (15     (15     0        (15

GST

    0        0        0        0         0        0        (1,431     (1,431       (1,431       1,524        93  

MYC

    0        0        0        0         0        0        (206     (206     (206     277        71  
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

   

 

 

        

Total Over the Counter

  $   0      $   0      $   0      $   0       $   0      $   0      $   (1,811   $   (1,811       
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

    

 

 

    

 

 

   

 

 

        

 

(n) Securities with an aggregate market value of $1,800 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1)

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2)

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(3)

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(4)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

32   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

           

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 0     $ 0     $ 0     $ 94     $ 94  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

           

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 0     $ 0     $ 0     $ 151     $ 151  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Swap Agreements

  $ 0     $ 1,811     $ 0     $ 0     $ 0     $ 1,811  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     1,811     $     0     $     0     $     151     $     1,962  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The effect of Financial Derivative Instruments on the Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain on Financial Derivative Instruments

 

         

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 8     $ 0     $ 0     $ 72     $ 80  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Swap Agreements

  $ 0     $ 76     $ 0     $ 0     $ 0     $ 76  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 84     $ 0     $ 0     $ 72     $ 156  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

   

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 29     $ 0     $ 0     $ (174   $     (145
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Swap Agreements

  $ 0     $ 182     $ 0     $ 0     $ 0     $ 182  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     211     $     0     $     0     $     (174   $ 37  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 0     $ 3,332     $ 438     $ 3,770  

Corporate Bonds & Notes

       

Banking & Finance

    0       4,408       780       5,188  

Industrials

    0       12,072       1,292       13,364  

Utilities

    0       1,080       0       1,080  

Municipal Bonds & Notes

       

Arkansas

    0       424       0       424  

West Virginia

    0       809       0       809  

U.S. Government Agencies

    0       4,932       0       4,932  

Non-Agency Mortgage-Backed Securities

    0       69,086       767       69,853  

Asset-Backed Securities

    0           70,957           3,133           74,090  

Common Stocks

       

Energy

        72       606       10       688  

Warrants

       

Industrials

    0       0       56       56  

Utilities

    3       0       0       3  

Preferred Securities

       

Industrials

    0       0       2,131       2,131  
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Short-Term Instruments

       

Repurchase Agreements

  $ 0     $ 5,317     $ 0     $ 5,317  

U.S. Treasury Bills

    0       1,800       0       1,800  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $ 75     $ 174,823     $ 8,607     $ 183,505  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

  $ 0     $ 94     $ 0     $ 94  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

    0       (151     0       (151

Over the counter

    0       (1,811     0       (1,811
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ (1,962   $ 0     $ (1,962
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ 0     $ (1,868   $ 0     $ (1,868
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     75     $     172,955     $     8,607     $     181,637  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   33


Schedule of Investments PCM Fund, Inc. (Cont.)

 

June 30, 2017

 

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held  at
06/30/2017(1)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 334     $ 385     $ (5   $ 4     $ 0     $ 190     $ 0     $ (470   $ 438     $ 51  

Corporate Bonds & Notes

                   

Banking & Finance

    2,089       0       (1,435     7       16       103       0       0       780       23  

Industrials

    1,309       0       0       2       (4     (15     0       0       1,292       (18

Non-Agency Mortgage-Backed Securities

    696       219       (39     1       (547     437       0       0       767       (61

Asset-Backed Securities

    73       2,969       0       81       (52     62       0       0       3,133       47  

Common Stocks

                   

Energy

    0       988       0       0       0       (978     0       0       10       (978

Warrants

                   

Industrials

    0       0       0       0       (11     67       0       0       56       56  

Preferred Securities

                   

Industrials

    0       2,185       0       0       0       (54     0       0       2,131       (54
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     4,501     $     6,746     $     (1,479   $     95     $     (598   $     (188   $     0     $     (470   $     8,607     $     (934
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
   Unobservable
Inputs
   Input Value(s)
(% Unless
Noted
Otherwise)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 438      Other Valuation Techniques(2)    —        —    

Corporate Bonds & Notes

          

Banking & Finance

    780      Reference Instrument    Spread movement      281.000 bps  

Industrials

    1,292      Proxy Pricing    Base Price      99.500  

Non-Agency Mortgage-Backed Securities

    767      Proxy Pricing    Base Price      5.970-100.780  

Asset-Backed Securities

    3,133      Proxy Pricing    Base Price      1.993-3,060.150  

Common Stocks

          

Energy

    10      Other Valuation Techniques(2)    —        —    

Warrants

          

Industrials

    56      Other Valuation Techniques(2)    —        —    

Preferred Securities

          

Industrials

    2,131      Fundamental Valuation    Company Assets    $ 551,000.000  
 

 

 

          

Total

  $     8,607           
 

 

 

          

 

(1) 

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2) 

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

34   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund

 

June 30, 2017

 

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 128.7%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 0.8%  

Avolon Holdings Ltd.

 

3.462% due 09/20/2020

  $     10     $     10  

3.962% due 03/20/2022

      70         71  

Drillships Ocean Ventures, Inc.

 

TBD% due 07/25/2021

      260         217  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      350         352  

Forbes Energy Services LLC

 

5.000% - 7.000% due 04/13/2021

      66         67  

iHeartCommunications, Inc.

 

7.976% due 01/30/2019

      200         164  

OGX

 

TBD% due 04/10/2049 ^

      133         36  

Sequa Mezzanine Holdings LLC

 

6.672% due 11/28/2021

      40         40  

10.172% due 04/28/2022

      20         20  

Sierra Hamilton LLC

 

9.045% due 07/03/2017

      8         8  
       

 

 

 

Total Loan Participations and Assignments
(Cost $1,101)

 

      985  
       

 

 

 
CORPORATE BONDS & NOTES 43.0%  
BANKING & FINANCE 19.1%  

AGFC Capital Trust

 

2.908% due 01/15/2067 (l)

      1,000         595  

Banco Bilbao Vizcaya Argentaria S.A.

 

6.750% due 02/18/2020 (h)

  EUR     400         474  

Banco do Brasil S.A.

 

9.000% due 06/18/2024 (h)(l)

  $     387         394  

Banco Espirito Santo S.A.

 

4.000% due 01/21/2019 ^

  EUR     700         256  

4.750% due 01/15/2018 ^

      100         37  

Barclays Bank PLC

 

14.000% due 06/15/2019 (h)

  GBP     100         159  

Barclays PLC

 

6.500% due 09/15/2019 (h)

  EUR     600         710  

7.875% due 09/15/2022 (h)(l)

  GBP     1,250         1,760  

BNP Paribas S.A.

 

7.375% due 08/19/2025 (h)(l)

  $     900         1,002  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

      20         20  

4.700% due 06/22/2047

      20         20  

Credit Agricole S.A.

 

7.500% due 06/23/2026 (h)(l)

  GBP     700           1,027  

7.875% due 01/23/2024 (h)

  $     200         220  

CyrusOne LP

 

5.000% due 03/15/2024

      7         7  

5.375% due 03/15/2027

      4         4  

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

      23         23  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      900         878  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      14         14  

HSBC Holdings PLC

 

6.000% due 09/29/2023 (h)

  EUR     200         257  

Jefferies Finance LLC

 

7.500% due 04/15/2021

  $     967         1,008  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020

      1,400         1,414  

KIRS Midco PLC

 

8.375% due 07/15/2023

  GBP     100         129  

Lloyds Banking Group PLC

 

7.625% due 06/27/2023 (h)(l)

      1,600         2,311  

Nationwide Building Society

 

10.250% due 06/29/2049 (h)

      4         708  

Navient Corp.

 

5.875% due 03/25/2021

  $     531         563  

OneMain Financial Holdings LLC

 

6.750% due 12/15/2019

      8         8  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

  $     10     $     10  

Pinnacol Assurance

 

8.625% due 06/25/2034 (j)

      1,100         1,190  

Provident Funding Associates LP

 

6.375% due 06/15/2025

      6         6  

6.750% due 06/15/2021

      200         207  

Rio Oil Finance Trust

 

9.250% due 07/06/2024 (l)

      1,404         1,432  

9.250% due 07/06/2024

      441         450  

Royal Bank of Scotland Group PLC

 

7.500% due 08/10/2020 (h)(l)

      1,930         1,997  

8.000% due 08/10/2025 (h)

      300         326  

Santander UK Group Holdings PLC

 

6.750% due 06/24/2024 (h)

  GBP     450         612  

7.375% due 06/24/2022 (h)(l)

      1,100         1,508  

Springleaf Finance Corp.

 

5.250% due 12/15/2019

  $     26         27  

6.125% due 05/15/2022

      135         143  

8.250% due 12/15/2020 (l)

      530         596  

Stichting AK Rabobank Certificaten

 

6.500% due 12/29/2049 (h)

  EUR     140         189  

Toll Road Investors Partnership LP

 

0.000% due 02/15/2045 (g)

  $     528         128  
       

 

 

 
            22,819  
       

 

 

 
INDUSTRIALS 20.3%  

Altice Financing S.A.

 

7.500% due 05/15/2026 (l)

      800         890  

BMC Software Finance, Inc.

 

8.125% due 07/15/2021

      89         93  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

 

9.000% due 10/15/2019 (d)(l)

      1,229         1,234  

Caesars Entertainment Operating Co., Inc.

 

8.500% due 02/15/2020 ^(i)(l)

      3,607         4,653  

9.000% due 02/15/2020 ^(i)

      180         233  

CDK Global, Inc.

 

4.875% due 06/01/2027

      4         4  

Charter Communications Operating LLC

 

5.375% due 05/01/2047

      13         14  

Chemours Co.

 

5.375% due 05/15/2027

      9         9  

Chesapeake Energy Corp.

 

4.408% due 04/15/2019

      10         10  

Community Health Systems, Inc.

 

6.250% due 03/31/2023

      32         33  

Corp. GEO S.A.B. de C.V.

 

9.250% due 06/30/2020 ^

      470         0  

CVS Pass-Through Trust

 

5.880% due 01/10/2028 (l)

      486         546  

Diamond Resorts International, Inc.

 

10.750% due 09/01/2024 (l)

      500         532  

DriveTime Automotive Group, Inc.

 

8.000% due 06/01/2021 (l)

      1,170         1,179  

Dynegy, Inc.

 

8.034% due 02/02/2024

      259         246  

EI Group PLC

 

6.875% due 05/09/2025

  GBP     10         14  

EW Scripps Co.

 

5.125% due 05/15/2025

  $     4         4  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      8         8  

Fresh Market, Inc.

 

9.750% due 05/01/2023 (l)

      1,200         1,009  

HCA, Inc.

 

5.500% due 06/15/2047

      20         21  

7.500% due 11/15/2095

      300         308  

Hexion, Inc.

 

13.750% due 02/01/2022

      11         10  

iHeartCommunications, Inc.

 

9.000% due 03/01/2021 (l)

      690         520  

9.000% due 09/15/2022 (l)

      1,000         744  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Intelsat Jackson Holdings S.A.

 

7.250% due 04/01/2019

  $     1,300     $     1,302  

7.250% due 10/15/2020

      848         806  

9.750% due 07/15/2025 (c)

      39         39  

Intelsat Luxembourg S.A.

 

7.750% due 06/01/2021

      1,310         727  

8.125% due 06/01/2023

      54         29  

Intrepid Aviation Group Holdings LLC

 

6.875% due 02/15/2019

      1,890         1,843  

KFC Holding Co.

 

4.750% due 06/01/2027

      13         13  

Kinder Morgan Energy Partners LP

 

6.950% due 01/15/2038 (l)

      100         120  

Kinder Morgan, Inc.

 

7.750% due 01/15/2032 (l)

      300         378  

Mallinckrodt International Finance S.A.

 

4.750% due 04/15/2023

      200         171  

5.500% due 04/15/2025

      200         176  

Molina Healthcare, Inc.

 

4.875% due 06/15/2025

      4         4  

NOVA Chemicals Corp.

 

4.875% due 06/01/2024

      2         2  

5.250% due 06/01/2027

      9         9  

OGX Austria GmbH

 

8.375% due 04/01/2022 ^

      2,050         0  

8.500% due 06/01/2018 ^

      1,400         0  

PetSmart, Inc.

 

5.875% due 06/01/2025

      31         30  

Prime Security Services Borrower LLC

 

9.250% due 05/15/2023

      118         128  

Safeway, Inc.

 

7.250% due 02/01/2031

      350         331  

Scientific Games International, Inc.

 

10.000% due 12/01/2022

      176         194  

SFR Group S.A.

 

7.375% due 05/01/2026 (l)

      1,327         1,445  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      19         19  

5.000% due 08/01/2027 (c)

      8         8  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

      5         5  

Tenet Healthcare Corp.

 

4.625% due 07/15/2024

      55         55  

THC Escrow Corp.

 

4.625% due 07/15/2024

      10         10  

UAL Pass-Through Trust

 

6.636% due 01/02/2024 (l)

      1,348         1,465  

Unique Pub Finance Co. PLC

 

5.659% due 06/30/2027

  GBP     639         941  

Valeant Pharmaceuticals International, Inc.

 

6.500% due 03/15/2022

  $     17         18  

7.000% due 03/15/2024

      33         35  

Venator Finance SARL

 

5.750% due 07/15/2025

      4         4  

VeriSign, Inc.

 

4.750% due 07/15/2027

      4         4  

Westmoreland Coal Co.

 

8.750% due 01/01/2022 (l)

      1,815         1,606  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027

      28         29  
       

 

 

 
            24,260  
       

 

 

 
       
UTILITIES 3.6%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      17         17  

4.850% due 07/15/2047

      13         13  

Odebrecht Drilling Norbe Ltd.

 

6.350% due 06/30/2022

      715         390  

Odebrecht Offshore Drilling Finance Ltd.

 

6.625% due 10/01/2023 ^(j)

      755         259  

Petrobras Global Finance BV

 

6.125% due 01/17/2022

      78         81  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   35


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

6.750% due 01/27/2041

  $     1,796     $     1,688  

6.850% due 06/05/2115

      263         233  

6.875% due 01/20/2040

      551         523  

7.250% due 03/17/2044

      49         48  

7.375% due 01/17/2027

      143         152  

Sierra Hamilton LLC

 

12.250% due 12/15/2018 ^(i)

      100         22  

Sprint Capital Corp.

 

6.900% due 05/01/2019

      50         54  

Sprint Communications, Inc.

 

7.000% due 08/15/2020 (l)

      750         827  
       

 

 

 
          4,307  
       

 

 

 

Total Corporate Bonds & Notes (Cost $51,374)

      51,386  
       

 

 

 
CONVERTIBLE BONDS & NOTES 0.6%  
INDUSTRIALS 0.6%  

DISH Network Corp.

 

3.375% due 08/15/2026

      600         731  
       

 

 

 

Total Convertible Bonds & Notes (Cost $600)

    731  
       

 

 

 
MUNICIPAL BONDS & NOTES 1.9%  
ILLINOIS 0.1%  

Chicago, Illinois General Obligation Bonds, Series 2015

 

7.375% due 01/01/2033

      40         41  

7.750% due 01/01/2042

      70         72  

Illinois State General Obligation Bonds, (BABs), Series 2010

 

6.725% due 04/01/2035

      10         10  

7.350% due 07/01/2035

      5         5  

Illinois State General Obligation Bonds, Series 2003

 

5.100% due 06/01/2033

      35         33  
       

 

 

 
          161  
       

 

 

 
       
WEST VIRGINIA 1.8%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

0.000% due 06/01/2047 (g)

      8,800         473  

7.467% due 06/01/2047

      1,655         1,623  
       

 

 

 
          2,096  
       

 

 

 

Total Municipal Bonds & Notes (Cost $2,124)

    2,257  
       

 

 

 
U.S. GOVERNMENT AGENCIES 4.3%  

Fannie Mae

 

4.216% due 10/25/2029

      100         103  

4.766% due 07/25/2029

      170         180  

4.834% due 03/25/2037 (a)

      442         64  

4.934% due 11/25/2039 (a)

      379         65  

5.084% due 01/25/2038 (a)

      559         81  

5.164% due 03/25/2037 (a)

      464         74  

5.184% due 12/25/2037 (a)(l)

      707         97  

5.194% due 06/25/2037 (a)

      203         26  

5.224% due 04/25/2037 (a)

      405         68  

5.234% due 04/25/2037 (a)(l)

      1,132         191  

5.384% due 11/25/2035 (a)

      180         25  

5.584% due 11/25/2036 (a)(l)

      2,243         444  

5.984% due 02/25/2037 (a)

      399         75  

6.066% due 10/25/2029

      70         75  

6.966% due 07/25/2029

      220         251  

7.000% due 12/25/2023

      113         124  

7.500% due 06/01/2032

      43         45  

7.800% due 06/25/2026

      3         3  

10.240% due 12/25/2042

      79         90  

12.497% due 08/25/2022

      128         155  

Freddie Mac

 

0.000% due 04/25/2045 - 08/25/2046 (b)(g)

      2,156         1,663  

0.100% due 04/25/2046 - 08/25/2046 (a)

      10,109         40  

0.200% due 04/25/2045 (a)

      1,129         3  

0.824% due 10/25/2020 (a)(l)

      10,241         195  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

5.281% due 03/15/2037 (a)

  $     774     $     126  

5.411% due 09/15/2036 (a)

      465         80  

5.421% due 09/15/2036 (a)(l)

      1,058         184  

6.366% due 10/25/2029

      500         546  

7.000% due 08/15/2023

      5         6  
       

 

 

 

Total U.S. Government Agencies (Cost $4,902)

    5,079  
       

 

 

 
U.S. TREASURY OBLIGATIONS 0.8%  

U.S. Treasury Notes

 

1.500% due 08/31/2018 (n)(p)

      1,000         1,002  
       

 

 

 

Total U.S. Treasury Obligations (Cost $997)

      1,002  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 47.4%  

Banc of America Alternative Loan Trust

 

14.265% due 09/25/2035 ^(l)

      1,671         2,013  

Banc of America Commercial Mortgage Trust

 

5.523% due 01/15/2049

      750         266  

Banc of America Funding Trust

 

3.005% due 12/20/2034

      366         291  

3.673% due 03/20/2036

      586         547  

5.846% due 01/25/2037 ^

      245         215  

Banc of America Mortgage Trust

 

6.000% due 07/25/2046 ^

      3         3  

Banc of America/Merrill Lynch Commercial Mortgage, Inc.

 

5.960% due 03/11/2041 (l)

      1,759         1,826  

Bear Stearns Adjustable Rate Mortgage Trust

 

3.621% due 07/25/2036 ^

      381         362  

Bear Stearns ALT-A Trust

 

3.162% due 04/25/2035

      313         278  

3.361% due 09/25/2035

      175         151  

3.393% due 11/25/2035 ^

      174         146  

Bear Stearns Asset-Backed Securities Trust

 

19.497% due 03/25/2036 ^(l)

      1,777         1,877  

Bear Stearns Commercial Mortgage Securities Trust

 

5.897% due 04/12/2038

      40         31  

6.214% due 02/11/2041 (l)

      847         800  

Bear Stearns Structured Products, Inc. Trust

 

3.063% due 12/26/2046

      379         328  

3.421% due 01/26/2036

      951         868  

BRAD Resecuritization Trust

 

2.182% due 03/12/2021

      1,859         111  

6.550% due 03/12/2021

      348         349  

CBA Commercial Small Balance Commercial Mortgage

 

5.540% due 01/25/2039 ^

      492         415  

Chevy Chase Funding LLC Mortgage-Backed Certificates

 

1.516% due 08/25/2035

      134         130  

1.556% due 10/25/2034

      10         10  

Citigroup Commercial Mortgage Trust

 

3.794% due 12/10/2049

      1,300         1,168  

Citigroup Mortgage Loan Trust, Inc.

 

3.670% due 03/25/2037 ^(l)

      570         460  

3.800% due 11/25/2035

      1,791         1,020  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049 (l)

      262         147  

5.688% due 10/15/2048

      1,660         892  

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049

      470         295  

Commercial Mortgage Trust

 

0.201% due 10/10/2046 (a)(l)

      77,000         654  

5.505% due 03/10/2039

      382         353  

5.844% due 06/10/2046

      246         167  

6.303% due 07/10/2046

      760         813  

Countrywide Alternative Loan Trust

 

1.456% due 12/25/2046 ^

      173         88  

1.546% due 10/25/2035 (l)

      925         743  

1.566% due 05/25/2036 ^

      1,925         952  

3.045% due 10/25/2035 ^

      197         165  

3.545% due 02/25/2037 ^

      252         232  

5.500% due 08/25/2034 (l)

      495         491  

5.500% due 02/25/2036 ^

      27         23  

5.500% due 03/25/2036 ^

      572         462  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

5.934% due 07/25/2036 (a)

  $     1,403     $     423  

6.250% due 09/25/2034

      81         83  

16.456% due 07/25/2035 (l)

      1,085           1,330  

Countrywide Home Loan Mortgage Pass-Through Trust

 

1.456% due 03/25/2036

      220         204  

1.856% due 03/25/2035 (l)

      1,012         996  

1.996% due 02/25/2035

      136         128  

3.051% due 10/20/2035

      386         341  

3.094% due 03/25/2037 ^(l)

      412         327  

3.124% due 10/20/2035 ^

      163         140  

3.142% due 10/20/2035 ^

      216         192  

3.309% due 02/20/2036 ^

      1,289         366  

3.399% due 08/25/2034

      221         213  

5.500% due 08/25/2035 ^

      35         32  

Credit Suisse Commercial Mortgage Trust

 

5.847% due 02/15/2039

      130         131  

5.869% due 09/15/2040

      1,070         1,047  

6.520% due 02/15/2041 (l)

      984         985  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

 

6.000% due 11/25/2036

      271         259  

DBUBS Mortgage Trust

 

4.652% due 11/10/2046

      700         500  

First Horizon Alternative Mortgage Securities Trust

 

3.136% due 11/25/2036 ^(l)

      490         387  

First Horizon Mortgage Pass-Through Trust

 

2.986% due 01/25/2037 ^(l)

      809         724  

GE Commercial Mortgage Corp. Trust

 

5.606% due 12/10/2049 (l)

      1,700         1,716  

GMAC Mortgage Corp. Loan Trust

 

3.778% due 06/25/2034

      67         66  

GS Mortgage Securities Trust

 

5.622% due 11/10/2039

      188         173  

6.201% due 08/10/2043 (l)

      730         759  

GSR Mortgage Loan Trust

 

3.337% due 04/25/2035

      353         352  

3.690% due 05/25/2035

      135         125  

5.500% due 06/25/2036 ^

      11         10  

HarborView Mortgage Loan Trust

 

1.809% due 04/19/2034

      28         26  

2.688% due 11/19/2034

      141         125  

3.519% due 02/25/2036 ^

      44         36  

3.732% due 08/19/2036 ^

      22         21  

HSI Asset Loan Obligation Trust

 

3.409% due 01/25/2037 ^

      416         350  

IndyMac Mortgage Loan Trust

 

1.294% due 06/25/2037 ^(l)

      1,589         1,202  

1.496% due 03/25/2035

      42         38  

3.029% due 06/25/2037 ^(l)

      657         546  

JPMBB Commercial Mortgage Securities Trust

 

0.305% due 11/15/2045 (a)(l)

      76,047         1,299  

JPMorgan Chase Commercial Mortgage Securities Trust

 

5.411% due 05/15/2047

      700         497  

JPMorgan Mortgage Trust

 

3.373% due 04/25/2037 ^(l)

      966         828  

5.500% due 01/25/2036 ^

      64         57  

5.500% due 06/25/2037 ^

      43         41  

Luminent Mortgage Trust

 

1.416% due 10/25/2046 (l)

      725         654  

MASTR Adjustable Rate Mortgages Trust

 

3.321% due 11/25/2035 ^(l)

      811         662  

3.455% due 10/25/2034

      237         223  

Merrill Lynch Alternative Note Asset Trust

 

1.286% due 01/25/2037

      912         456  

Merrill Lynch Mortgage Trust

 

6.018% due 06/12/2050 (l)

      1,600         1,608  

Morgan Stanley Capital Trust

 

5.569% due 12/15/2044 (l)

      807         811  

6.128% due 06/11/2049

      500         501  

Opteum Mortgage Acceptance Corp. Trust

 

1.486% due 07/25/2036

      306         190  

Prime Mortgage Trust

 

5.334% due 11/25/2036 (a)

      4,273         432  

Provident Funding Mortgage Loan Trust

 

3.596% due 10/25/2035

      104         104  
 

 

36   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

RBSSP Resecuritization Trust

 

5.000% due 09/26/2036 (l)

  $     2,377     $     1,758  

Residential Accredit Loans, Inc. Trust

 

0.000% due 12/26/2034 ^

      277         218  

4.320% due 01/25/2036 ^(l)

      957         804  

6.000% due 09/25/2035 (l)

      491         368  

6.000% due 08/25/2036 ^

      324         276  

Residential Asset Mortgage Products Trust

 

7.500% due 12/25/2031

      101         100  

Royal Bank of Scotland Capital Funding Trust

 

6.068% due 02/17/2051 (l)

      3,000         3,004  

Structured Adjustable Rate Mortgage Loan Trust

 

2.176% due 05/25/2035 ^(l)

      2,145         1,685  

3.165% due 09/25/2036 ^

      416         313  

3.349% due 11/25/2036 ^

      74         73  

3.366% due 01/25/2036 ^

      438         336  

3.442% due 04/25/2036 ^

      452         363  

3.489% due 09/25/2035

      97         79  

Structured Asset Mortgage Investments Trust

 

1.446% due 02/25/2036 (l)

      465         413  

1.496% due 02/25/2036 ^

      364         335  

Suntrust Adjustable Rate Mortgage Loan Trust

 

3.544% due 01/25/2037 ^

      149         142  

Theatre Hospitals PLC

 

3.336% due 10/15/2031 (l)

  GBP     1,012         1,294  

Wachovia Bank Commercial Mortgage Trust

 

6.174% due 02/15/2051 (l)

  $     650         650  

WaMu Mortgage Pass-Through Certificates Trust

 

1.462% due 01/25/2047

      120         113  

2.953% due 12/25/2036 ^(l)

      525         501  

4.001% due 07/25/2037 ^

      134         125  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

1.502% due 04/25/2047 ^

      415         19  

Wells Fargo Mortgage-Backed Securities Trust

 

6.000% due 03/25/2037 ^

      276         275  

Wells Fargo-RBS Commercial Mortgage Trust

 

0.506% due 12/15/2046 (a)

      30,000         576  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $47,885)

 

        56,678  
       

 

 

 
ASSET-BACKED SECURITIES 11.8%  

Apidos CLO

 

0.000% due 07/22/2026

      500         316  

Bear Stearns Asset-Backed Securities Trust

 

6.500% due 08/25/2036 ^(l)

      662         421  

Belle Haven ABS CDO Ltd.

 

1.400% due 07/05/2046

      35,032         750  

Bombardier Capital Mortgage Securitization Corp.

 

7.830% due 06/15/2030

      1,421         634  

Carrington Mortgage Loan Trust

 

1.366% due 08/25/2036

      100         72  

Centex Home Equity Loan Trust

 

1.891% due 06/25/2035

      236         230  

Citigroup Mortgage Loan Trust, Inc.

 

1.376% due 12/25/2036 (l)

      1,707         1,146  

1.376% due 01/25/2037

      204         131  

5.972% due 01/25/2037 ^(l)

      635         422  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Conseco Finance Securitizations Corp.

 

7.960% due 05/01/2031

  $     423     $     295  

Countrywide Asset-Backed Certificates

 

1.346% due 12/25/2036 ^

      1,497         1,505  

1.366% due 04/25/2047 (l)

      1,260         1,229  

2.316% due 09/25/2034

      99         97  

EMC Mortgage Loan Trust

 

2.156% due 05/25/2039

      291         280  

Highbridge Loan Management Ltd.

 

6.621% due 05/05/2027

      500         489  

Lehman XS Trust

 

4.888% due 05/25/2037 ^

      232         361  

5.420% due 11/25/2035 ^

      166         167  

Morgan Stanley ABS Capital, Inc. Trust

 

1.276% due 05/25/2037

      145         87  

Residential Asset Mortgage Products Trust

 

1.896% due 03/25/2033

      48         47  

5.572% due 06/25/2032

      72         71  

Soundview Home Loan Trust

 

1.276% due 11/25/2036

      201         83  

South Coast Funding Ltd.

 

1.410% due 01/06/2041 (l)

      13,570         4,078  

1.410% due 01/06/2041

      481         145  

Structured Asset Securities Corp. Mortgage Loan Trust

 

1.366% due 05/25/2036

      259         257  

1.516% due 06/25/2035 (l)

      372         337  

Symphony CLO Ltd.

 

5.758% due 07/14/2026

      400         385  

Washington Mutual Asset-Backed Certificates Trust

 

1.276% due 10/25/2036

      113         57  
       

 

 

 

Total Asset-Backed Securities (Cost $13,201)

      14,092  
       

 

 

 
SOVEREIGN ISSUES 1.3%  

Argentine Government International Bond

 

2.260% due 12/31/2038

  EUR     130         94  

7.820% due 12/31/2033

  $     574         701  

Republic of Greece Government International Bond

 

3.000% due 02/24/2023

      33         35  

3.000% due 02/24/2024

      33         35  

3.000% due 02/24/2025

      33         34  

3.000% due 02/24/2026

      33         34  

3.000% due 02/24/2027

      33         33  

3.000% due 02/24/2028

      33         32  

3.000% due 02/24/2029

      33         31  

3.000% due 02/24/2030

      33         31  

3.000% due 02/24/2031

      33         30  

3.000% due 02/24/2032

      33         30  

3.000% due 02/24/2033

      33         29  

3.000% due 02/24/2034

      33         29  

3.000% due 02/24/2035

      33         28  

3.000% due 02/24/2036

      33         28  

3.000% due 02/24/2037

      33         28  

3.000% due 02/24/2038

      33         28  

3.000% due 02/24/2039

      33         28  

3.000% due 02/24/2040

      33         28  

3.000% due 02/24/2041

      33         28  

3.000% due 02/24/2042

      33         28  

4.750% due 04/17/2019

      100         116  
       

 

 

 

Total Sovereign Issues (Cost $1,247)

 

      1,518  
       

 

 

 
        SHARES         MARKET
VALUE
(000S)
 
COMMON STOCKS 0.2%  
ENERGY 0.1%  

Forbes Energy Services Ltd. (e)(j)

    5,475     $     93  

OGX Petroleo e Gas S.A. SP - ADR (e)

      54,706         0  
       

 

 

 
          93  
       

 

 

 
       
FINANCIALS 0.1%  

TIG FinCo PLC (j)

      121,142         154  
       

 

 

 

Total Common Stocks (Cost $416)

 

      247  
       

 

 

 
WARRANTS 0.0%  
INDUSTRIALS 0.0%  

Sequa Corp. - Exp. 04/28/2024

      121,000         57  
       

 

 

 
       
UTILITIES 0.0%  

Dynegy, Inc. - Exp. 02/02/2024

      9,159         1  
       

 

 

 

Total Warrants (Cost $24)

 

      58  
       

 

 

 
PREFERRED SECURITIES 1.8%  
INDUSTRIALS 1.8%  

Sequa Corp.

 

9.000%

      2,235         2,180  
       

 

 

 

Total Preferred Securities (Cost $2,235)

    2,180  
       

 

 

 
SHORT-TERM INSTRUMENTS 14.8%  
REPURCHASE AGREEMENTS (k) 13.4%  
          15,999  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
           
U.S. TREASURY BILLS 1.4%  

0.948% due 08/31/2017 (f)(g)(p)

  $     1,632         1,630  
       

 

 

 
Total Short-Term Instruments
(Cost $17,629)
        17,629  
       

 

 

 
       
Total Investments in Securities
(Cost $143,735)
        153,842  
       
Total Investments 128.7%
(Cost $143,735)
    $     153,842  

Financial Derivative
Instruments (m)(o) (1.4)%

(Cost or Premiums, net $(1,509))

 

 

      (1,618
Other Assets and Liabilities, net (27.3)%         (32,686
       

 

 

 
Net Assets 100.0%       $       119,538  
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*, EXCEPT NUMBER OF CONTRACTS AND UNITS):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.
(d) Payment in-kind security.
(e) Security did not produce income within the last twelve months.
(f) Coupon represents a weighted average yield to maturity.
(g) Zero coupon security.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   37


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund (Cont.)

 

(h) Perpetual maturity; date shown, if applicable, represents next contractual call date.
(i) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(j)  RESTRICTED SECURITIES:

 

Issuer Description    Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Forbes Energy Services Ltd.

     03/11/2014 - 12/03/2014     $ 241     $ 93       0.08

Odebrecht Offshore Drilling Finance Ltd. 6.625% due 10/01/2023

     06/23/2015 - 06/24/2015       604       259       0.22  

Pinnacol Assurance 8.625% due 06/25/2034

     06/23/2014       1,100       1,190       1.00  

TIG FinCo PLC

     04/02/2015 - 02/24/2017       175       154       0.12  
    

 

 

   

 

 

   

 

 

 
     $     2,120     $     1,696       1.42
    

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(k)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
BCY     1.380     06/30/2017       07/03/2017     $     14,300     U.S. Treasury Notes 2.125% due 06/30/2022   $ (14,550   $ 14,300     $ 14,302  
SSB     0.050       06/30/2017       07/03/2017       1,699     U.S. Treasury Notes 1.625% due 12/31/2019(2)     (1,737     1,699       1,699  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

    $     (16,287   $     15,999     $     16,001  
           

 

 

   

 

 

   

 

 

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

    1.650     06/16/2017       TBD (4)      $    (2,912   $     (2,914
    1.906       04/24/2017       07/24/2017       (248     (249
    2.250       05/16/2017       08/16/2017       (451     (452
    2.250       05/17/2017       08/17/2017       (467     (468
    2.648       04/03/2017       07/03/2017       (886     (892
    2.656       04/24/2017       07/24/2017       (1,527     (1,535
    2.681       05/17/2017       08/17/2017       (1,351     (1,356
    2.799       07/03/2017       10/03/2017       (839     (839

BOS

    3.092       05/24/2017       08/24/2017       (2,228     (2,236
    3.196       06/15/2017       09/15/2017       (792     (793

BPS

    0.800       04/24/2017       07/24/2017       GBP       (577     (753
    0.950       04/24/2017       07/24/2017       (924     (1,205
    1.890       05/30/2017       08/30/2017       $       (668     (669
    1.960       05/01/2017       08/01/2017       (913     (916
    2.750       06/16/2017       09/18/2017       (754     (755

DBL

    3.378       06/12/2017       12/12/2017       (1,978     (1,982

DEU

    2.110       05/24/2017       08/24/2017       (2,270     (2,275

JPS

    2.250       04/06/2017       07/06/2017       (998     (1,004

MSC

    2.169       06/07/2017       09/07/2017       (830     (831
    2.269       06/07/2017       09/07/2017       (813     (814
    2.579       05/08/2017       08/08/2017       (1,628     (1,635

RBC

    2.700       05/23/2017       11/22/2017       (1,446     (1,450
    2.730       03/13/2017       09/13/2017       (1,357     (1,369
    2.750       05/23/2017       11/22/2017       (683     (685

RDR

    1.810       05/23/2017       08/23/2017       (2,314     (2,319

RTA

    2.813       02/03/2017       01/31/2018       (2,068     (2,092
    2.833       06/30/2017       06/28/2018       (1,276     (1,276
    2.874       05/05/2017       04/26/2018       (887     (891
    2.901       03/10/2017       03/08/2018       (1,283     (1,295

SAL

    2.058       04/17/2017       07/12/2017       (533     (535
    2.130       05/16/2017       08/16/2017       (596     (598

SOG

    1.750       05/22/2017       08/22/2017       (1,773     (1,777
    1.800       06/14/2017       09/14/2017       (485     (486
    1.800       06/15/2017       07/03/2017       (539     (540
    1.800       06/15/2017       09/15/2017       (493     (493

UBS

    0.900       04/13/2017       07/13/2017       GBP    (2,403     (3,136
    1.428       04/27/2017       10/27/2017       (770     (1,006

 

38   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 
    1.910 %       04/25/2017       07/25/2017       $    (1,723   $ (1,729
    1.990       05/26/2017       08/28/2017       (1,604     (1,607
    2.010       06/02/2017       09/05/2017       (1,112     (1,114
    2.060       06/02/2017       09/05/2017       (1,291     (1,293
    2.060       06/09/2017       09/05/2017       (857     (858
    2.160       06/02/2017       09/05/2017       (978     (980
    2.600       04/05/2017       07/05/2017       (1,016     (1,023
    2.650       04/05/2017       07/05/2017       (2,932     (2,951
         

 

 

 

Total Reverse Repurchase Agreements

 

    $     (56,076
         

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
     Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(5)  

Global/Master Repurchase Agreement

            

BCY

  $ 14,302     $ (8,705   $ 0      $ 5,597     $ (3,549   $ 2,048  

BOS

    0       (3,029     0        (3,029     4,762       1,733  

BPS

    0       (4,298     0        (4,298     5,390       1,092  

DBL

    0       (1,982     0            (1,982     4,078       2,096  

DEU

    0       (2,275     0        (2,275     2,550       275  

JPS

    0       (1,004     0        (1,004     985       (19

MSC

    0       (3,280     0        (3,280     4,143       863  

RBC

    0       (3,504     0        (3,504     6,097       2,593  

RDR

    0       (2,319     0        (2,319     650           (1,669

RTA

    0       (5,554     0        (5,554     7,735       2,181  

SAL

    0       (1,133     0        (1,133     1,413       280  

SOG

    0       (3,296     0        (3,296     3,599       303  

SSB

    1,699       0       0        1,699       (1,737     (38

UBS

    0       (15,697     0            (15,697         19,225           3,528  
 

 

 

   

 

 

   

 

 

        

Total Borrowings and Other Financing Transactions

  $     16,001     $     (56,076   $     0         
 

 

 

   

 

 

   

 

 

        

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

         

Corporate Bonds & Notes

  $ 0     $ (7,363   $ (12,720   $ (2,914   $ (22,997

U.S. Government Agencies

    0       (249     (669     0       (918

Non-Agency Mortgage-Backed Securities

    0       (7,939     (12,705     (5,713     (26,357

Asset-Backed Securities

    0       0       0       (4,965     (4,965
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $     (15,551   $     (26,094   $     (13,592   $ (55,237
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements(6)

          $     (55,237
         

 

 

 

 

(l) Securities with an aggregate market value of $70,943 and cash of $950 have been pledged as collateral under the terms of under the terms of the above master agreements as of June 30, 2017.

 

(1) 

Includes accrued interest.

(2) 

Collateral is held in custody by the counterparty.

(3) 

The average amount of borrowings outstanding during the period ended June 30, 2017 was $(72,952) at a weighted average interest rate of 1.943%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

(4) 

Open maturity reverse repurchase agreement.

(5) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

(6) 

Unsettled reverse repurchase agreements liability of $(839) is outstanding at period end.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   39


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund (Cont.)

 

 

(m)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

PURCHASED OPTIONS:

 

OPTIONS ON EXCHANGE-TRADED FUTURES CONTRACTS

 

Description    Strike
Price
    Expiration
Date
    # of
Contracts
    Cost     Market
Value
 

Put - CME S&P 500 July Futures

   $     2,300.000       07/21/2017       88     $ 143     $ 66  
        

 

 

   

 

 

 

Total Purchased Options

         $     143     $     66  
        

 

 

   

 

 

 

 

WRITTEN OPTIONS:

 

OPTIONS ON EXCHANGE-TRADED FUTURES CONTRACTS

 

Description    Strike
Price
    Expiration
Date
    # of
Contracts
    Premiums
(Received)
    Market
Value
 

Call - CME S&P 500 July Futures

   $     2,425.000       07/21/2017       88     $ (616   $ (389
        

 

 

   

 

 

 

Total Written Options

         $     (616   $     (389
        

 

 

   

 

 

 

 

FUTURES CONTRACTS:

 

LONG FUTURES CONTRACTS

 

Description   Expiration
Month
    # of
Contracts
    Notional
Amount
    Unrealized
Appreciation/
(Depreciation)
    Variation Margin  
          Asset     Liability  

E-mini S&P 500 Index September Futures

    09/2017       54     $ 6,536     $ (26   $ 2     $ 0  

S&P 500 Index September Futures

    09/2017       87           52,655       (187     20       0  
       

 

 

   

 

 

   

 

 

 
        $ (213   $ 22     $ 0  
       

 

 

   

 

 

   

 

 

 

Total Futures Contracts

        $     (213   $     22     $     0  
       

 

 

   

 

 

   

 

 

 

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Frontier Communications Corp.

    5.000%       06/20/2020       6.022%     $     600     $     (17   $     2     $     (15   $     1     $     0  
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
    Notional
Amount
    Premiums
Paid/(Received)
     Unrealized
Appreciation/
(Depreciation)
    Market
Value
   

 

Variation Margin

 
                 Asset      Liability  

Pay

 

1-Year BRL-CDI

    12.055     01/04/2021       BRL       3,600     $ 33      $ 2     $ 35     $ 2      $ 0  

Pay

 

3-Month CAD-Bank Bill

    3.300       06/19/2024       CAD       4,900       369        (9     360       0        (12

Receive

 

3-Month CAD-Bank Bill

    3.500       06/20/2044         1,600       (285      14       (271     15        0  

Pay

 

3-Month USD-LIBOR

    2.750       06/19/2023       $       308,500       13,060            (516     12,544       0        (668

Pay

 

3-Month USD-LIBOR

    3.000       06/18/2024         19,700       1,187        (36     1,151       0        (48

Receive(4)

 

3-Month USD-LIBOR

    2.500       12/20/2027         246,900       (4,164      755       (3,409     765        (9

Receive(4)

 

6-Month EUR-EURIBOR

    1.000       09/20/2027       EUR       1,400       (7      (1     (8     0        (1

Receive(4)

 

6-Month GBP-LIBOR

    1.500       09/20/2027       GBP       2,742       (40      (5     (45     0        (5
           

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
            $ 10,153      $ 204     $ 10,357     $ 782      $ (743
           

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total Swap Agreements

 

        $     10,136      $     206     $     10,342     $     783      $     (743
           

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

40   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation  Margin
Asset(5)
    Total           Market Value     Variation Margin
Liability(5)
    Total  
     Purchased
Options
    Futures     Swap
Agreements
            Written
Options
    Futures     Swap
Agreements
   

Total Exchange-Traded or Centrally Cleared

  $     66     $     22     $     806     $     894       $     (389   $     0     $     (763   $     (1,152
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

(n) Securities with an aggregate market value of $1,001 and cash of $22,257 have been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4) 

This instrument has a forward starting effective date. See Note 2, Securities Transactions and Investment Income, in the Notes to Financial Statements for further information.

(5) 

Unsettled variation margin asset of $23 and liability of $(20) for closed swap agreements is outstanding at period end.

 

(o)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

FORWARD FOREIGN CURRENCY CONTRACTS:

 

Counterparty    Settlement
Month
    Currency to
be Delivered
    Currency to
be Received
    Unrealized Appreciation/
(Depreciation)
 
         Asset     Liability  

BOA

     07/2017     EUR     3,164     $     3,556     $ 0     $ (57
     07/2017     GBP     479         616       0       (8

BPS

     07/2017     $     3,323     EUR     2,921       14       0  
     08/2017     EUR     2,921     $     3,327       0       (13

CBK

     07/2017     GBP     4,380         5,636       0       (69
     07/2017     $     125     EUR     111       2       0  

GLM

     07/2017     BRL     99     $     30       0       0  
     07/2017     CAD     40         30       0       (1
     07/2017     $     30     BRL     100       0       0  
     07/2017         65     EUR     58       1       0  
     07/2017         788     GBP     619       18       0  
     08/2017     CHF     70     $     70       0       (3
     08/2017     $     132     JPY     14,644       0       (2

HUS

     08/2017     JPY     19,900     $     175       0       (2

JPM

     07/2017     $     71     EUR     64       2       0  
     07/2017         909     GBP     715       22       0  
     08/2017         27     JPY     2,960       0       (1

RBC

     07/2017         112     GBP     88       3       0  
     08/2017         60     JPY     6,680       0       (1

SCX

     07/2017         11     EUR     10       0       0  
     08/2017     JPY     8,200     $     72       0       (1
     08/2017     $     31     CHF     30       0       0  

SOG

     08/2017         84     JPY     9,298       0       (1

UAG

     07/2017         4,405     GBP     3,437       72       0  
     08/2017     GBP     3,437     $     4,409       0       (72
            

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

        $     134     $     (231
            

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   41


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund (Cont.)

 

 

WRITTEN OPTIONS:

 

TRANSACTIONS IN WRITTEN CALL AND PUT OPTIONS FOR THE PERIOD ENDED JUNE 30, 2017:

 

     Balance at
Beginning of Period
    Sales     Closing Buys     Expirations     Exercised     Balance at
End of Period
 

# of Contracts

    95       1,093           (1,100     0       0       88  

Premiums

  $     (917   $     (7,379   $ 7,680     $     0     $     0     $     (616

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON ASSET-BACKED SECURITIES - SELL PROTECTION(1)

 

Counterparty   Reference Obligation   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(2)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value(3)
 
              Asset     Liability  
BOA  

Long Beach Mortgage Loan Trust 1-Month USD-LIBOR plus 5.250% due 07/25/2033

    6.250%       07/25/2033     $     384       $    0     $     19     $     19     $     0  
         

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty

  Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(2)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at  Value(3)
 
              Asset     Liability  
DUB  

CMBX.NA.BBB-.8 Index

    3.000     10/17/2057     $ 400       $         (46   $ (14   $ 0     $ (60
FBF  

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       100       (16     1       0       (15
GST  

ABX.HE.AA.6-1 Index

    0.320       07/25/2045           2,727       (543     138       0       (405
 

ABX.HE.PENAAA.7-1 Index

    0.090       08/25/2037       1,632       (316     21       0       (295
 

CMBX.NA.A.6 Index

    2.000       05/11/2063       500       (25     9       0       (16
 

CMBX.NA.BB.6 Index

    5.000       05/11/2063       100       (14     (4     0       (18
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       100       (6     (6     0       (12
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       100       (5     (4     0       (9
MYC  

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       700       (41         (40         0       (81
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       300       (13     (13     0       (26
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       100       (11     (4     0       (15
         

 

 

   

 

 

   

 

 

   

 

 

 
    $    (1,036   $ 84     $ 0     $     (952
         

 

 

   

 

 

   

 

 

   

 

 

 

 

TOTAL RETURN SWAPS ON EQUITY INDICES

 

Counterparty   Pay/Receive(4)   Underlying Reference   # of Units     Financing Rate   Maturity
Date
    Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value
 
                  Asset     Liability  

CBK

  Receive  

NDDUEAFE Index

    1,915    

3-Month USD-LIBOR plus a specified spread

    05/09/2018     $     10,438     $ 0     $ 175     $ 175     $ 0  

FBF

  Receive  

NDDUEAFE Index

    8,666    

3-Month USD-LIBOR plus a specified spread

    07/11/2018       48,572       0       (505     0       (505
             

 

 

   

 

 

   

 

 

   

 

 

 
              $ 0     $ (330   $ 175     $ (505
             

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

 

    $     (1,036   $     (227   $     194     $     (1,457
             

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged/(received) as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                    
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
    Net
Exposure(5)
 

BOA

  $ 0      $ 0      $ 19      $ 19       $ (65   $ 0      $ 0     $ (65   $ (46   $ 0     $ (46

BPS

    14        0        0        14         (13     0        0       (13     1       0       1  

CBK

    2        0          175          177           (69       0        0       (69     108       (260     (152

DUB

    0        0        0        0         0       0        (60     (60     (60     0       (60

FBF

    0        0        0        0         0       0          (520       (520       (520     254         (266

GLM

      19          0        0        19         (6     0        0       (6     13       0       13  

GST

    0        0        0        0         0       0        (755     (755     (755       1,075       320  

HUS

    0        0        0        0         (2     0        0       (2     (2     0       (2

 

42   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

    Financial Derivative Assets           Financial Derivative Liabilities                     
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
     Net
Exposure(5)
 

JPM

  $ 24      $ 0      $ 0      $ 24       $ (1   $ 0      $ 0     $ (1   $ 23     $ 0      $ 23  

MYC

    0        0        0        0         0       0        (122     (122       (122       0          (122

RBC

    3        0        0        3         (1     0        0       (1     2       0        2  

SCX

    0        0        0        0         (1     0        0       (1     (1     0        (1

SOG

    0        0        0        0         (1     0        0       (1     (1     0        (1

UAG

    72        0        0        72         (72     0        0       (72     0       0        0  
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

Total Over the Counter

  $   134      $   0      $   194      $   328       $   (231   $   0      $   (1,457   $   (1,688       
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

 

(p) Securities with an aggregate market value of $1,329 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(3) 

The prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(4) 

Receive represents that the Fund receives payments for any positive return on the underlying reference. The Fund makes payments for any negative return on such underlying reference. Pay represents that the Fund receives payments for any negative return on the underlying reference. The Fund makes payments for any positive return on such underlying reference.

(5) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

 

       

Exchange-traded or centrally cleared

           

Futures

  $ 0     $ 0     $ 88     $ 0     $ 0     $ 88  

Swap Agreements

    0       23       0       0       783       806  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 23     $ 88     $ 0     $ 783     $ 894  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 134     $ 0     $ 134  

Swap Agreements

    0       19       175       0       0       194  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 19     $ 175     $ 134     $ 0     $ 328  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 42     $ 263     $ 134     $ 783     $ 1,222  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

       

Exchange-traded or centrally cleared

           

Written Options

  $ 0     $ 0     $ 389     $ 0     $ 0     $ 389  

Swap Agreements

    0       0       0       0       763       763  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 0     $ 389     $ 0     $ 763     $ 1,152  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 231     $ 0     $ 231  

Swap Agreements

    0       952       505       0       0       1,457  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 952     $ 505     $ 231     $ 0     $ 1,688  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     952     $     894     $     231     $     763     $     2,840  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   43


Schedule of Investments PIMCO Global StocksPLUS® & Income Fund (Cont.)

 

 

The effect of Financial Derivative Instruments on the Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain (Loss) on Financial Derivative Instruments

 

     

Exchange-traded or centrally cleared

           

Purchased Options

  $ 0     $ 0     $ (2,031   $ 0     $ 0     $ (2,031

Written Options

    0       0       (3,088     0       0       (3,088

Futures

    0       0       8,804       0       0       8,804  

Swap Agreements

    0       0       0       0       5,590       5,590  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 0     $ 3,685     $ 0     $ 5,590     $ 9,275  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 347     $ 0     $ 347  

Swap Agreements

    0       114       9,608       0       (4     9,718  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 114     $ 9,608     $ 347     $ (4   $ 10,065  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 114     $     13,293     $ 347     $ 5,586     $     19,340  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

   

Exchange-traded or centrally cleared

           

Purchased Options

  $ 0     $ 0     $ 222     $ 0     $ 0     $ 222  

Written Options

    0       0       226       0       0       226  

Futures

    0       0       (271     0       0       (271

Swap Agreements

    0       2       0       0       (3,223     (3,221
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 2     $ 177     $ 0     $ (3,223   $ (3,044
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ (359   $ 0     $ (359

Swap Agreements

    0       103       253       0       16       372  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 103     $ 253     $ (359   $ 16     $ 13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     105     $ 430     $     (359   $     (3,207   $ (3,031
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

 

Loan Participations and Assignments

  $     0     $ 882     $ 103     $ 985  

Corporate Bonds & Notes

       

Banking & Finance

    0           20,751           2,068           22,819  

Industrials

    0       24,260       0       24,260  

Utilities

    0       4,285       22       4,307  

Convertible Bonds & Notes

       

Industrials

    0       731       0       731  

Municipal Bonds & Notes

       

Illinois

    0       161       0       161  

West Virginia

    0       2,096       0       2,096  

U.S. Government Agencies

    0       5,079       0       5,079  

U.S. Treasury Obligations

    0       1,002       0       1,002  

Non-Agency Mortgage-Backed Securities

    0       55,890       788       56,678  

Asset-Backed Securities

    0       14,092       0       14,092  

Sovereign Issues

    0       1,518       0       1,518  

Common Stocks

       

Energy

    0       93       0       93  

Financials

    0       0       154       154  

Warrants

       

Industrials

    0       0       57       57  

Utilities

    1       0       0       1  
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Preferred Securities

       

Industrials

  $ 0     $ 0     $ 2,180     $ 2,180  

Short-Term Instruments

       

Repurchase Agreements

    0       15,999       0       15,999  

U.S. Treasury Bills

    0       1,630       0       1,630  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $ 1     $ 148,469     $ 5,372     $ 153,842  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Assets

 

 

Exchange-traded or centrally cleared

    88       783       0       871  

Over the counter

    0       328       0       328  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 88     $ 1,111     $ 0     $ 1,199  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

 

Exchange-traded or centrally cleared

    (389     (743     0       (1,132

Over the counter

    0       (1,688     0       (1,688
 

 

 

   

 

 

   

 

 

   

 

 

 
  $     (389   $ (2,431   $ 0     $ (2,820
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ (301   $ (1,320   $ 0     $ (1,621
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     (300   $     147,149     $     5,372     $     152,221  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

44   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held  at
06/30/2017(1)
 

Investments in Securities, at Value

 

             

Loan Participations and Assignments

  $ 109     $ 59     $ 0     $ 1     $ 0     $     (66   $ 0     $ 0     $ 103     $ (66

Corporate Bonds & Notes

                   

Banking & Finance

    3,759       0       (1,817     8       20       98       0       0       2,068       (4

Industrials

    850       0       (821     6       13       (48     0       0       0       0  

Utilities

    0       0       0       0       0       0       22       0       22       0  

Non-Agency Mortgage-Backed Securities

    1,455       32       (229     6       29       (5     0       (500     788       3  

Common Stocks

                   

Financials

    66       22       0       0       0       66       0       0       154       66  

Warrants

                   

Industrials

    0       0       0       0           (15     72       0       0       57       57  

Preferred red Securities

                   

Industrials

    0       2,235       0       0       0       (55     0       0       2,180           (55
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     6,239     $     2,348     $     (2,867   $     21     $ 47     $ 62     $     22     $     (500   $     5,372     $ 1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
   Unobservable
Inputs
   Input Value(s)
(% Unless
Noted
Otherwise)
 

Investments in Securities, at Value

  

Loan Participations and Assignments

  $ 103      Other Valuation Techniques(2)    —        —    

Corporate Bonds & Notes

          

Banking & Finance

    1,190      Reference Instrument    OAS Spread      549.080 bps  
    878      Reference Instrument    Spread movement      281.000 bps  

Utilities

    22      Other Valuation Techniques(2)    —        —    

Non-Agency Mortgage-Backed Securities

    460      Proxy Pricing    Base Price      5.970-100.780  
    328      Third Party Vendor    Broker Quote      86.500  

Common Stocks

          

Financials

    154      Other Valuation Techniques(2)    —        —    

Warrants

          

Industrials

    57      Other Valuation Techniques(2)    —        —    

Preferred Securities

          

Industrials

    2,180      Fundamental Valuation    Company Assets    $ 551,000.000  
 

 

 

          

Total

  $     5,372           
 

 

 

          

 

(1) 

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2) 

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   45


Schedule of Investments PIMCO Income Opportunity Fund

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 152.9%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 4.3%  

Almonde, Inc.

 

8.459% due 06/13/2025

  $     800     $     817  

Ancestry.com Operations, Inc.

 

9.460% due 10/19/2024

      720         728  

Avolon Holdings Ltd.

 

3.462% due 09/20/2020

      30         30  

3.962% due 03/20/2022

      220         222  

CD&R Plumb Buyer LLC

 

TBD% due 06/25/2018

      100         100  

Dole Food Co., Inc.

 

4.076% - 4.296% due 04/06/2024

      340         341  

Drillships Ocean Ventures, Inc.

 

TBD% due 07/25/2021

      880         735  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      1,100         1,105  

4.295% due 06/30/2017

      7,707         7,723  

Forbes Energy Services LLC

 

5.000% - 7.000% due 04/13/2021

      359         364  

iHeartCommunications, Inc.

 

7.976% due 01/30/2019

      4,600         3,772  

OGX

       

TBD% due 04/10/2049 ^

      271         72  

Sequa Mezzanine Holdings LLC

 

6.672% due 11/28/2021

      140         141  

10.172% due 04/28/2022

      60         61  

Sierra Hamilton LLC

 

9.045% due 07/03/2017

      17         16  

UPC Financing Partnership

 

3.909% due 04/15/2025

      100         100  
       

 

 

 

Total Loan Participations and Assignments
(Cost $17,286)

      16,327  
       

 

 

 
CORPORATE BONDS & NOTES 43.9%  
BANKING & FINANCE 16.9%  

AGFC Capital Trust

 

2.908% due 01/15/2067 (m)

      2,300         1,368  

Ally Financial, Inc.

 

8.000% due 11/01/2031 (m)

      1,670         2,055  

Aviation Loan Trust

 

3.356% due 12/15/2022

      205         192  

Banco do Brasil S.A.

 

6.250% due 04/15/2024 (i)

      240         205  

Banco Espirito Santo S.A.

 

4.000% due 01/21/2019 ^

  EUR     3,100         1,133  

Barclays Bank PLC

 

7.625% due 11/21/2022 (m)

  $     400         458  

Barclays PLC

 

6.500% due 09/15/2019 (i)

  EUR     200         237  

7.250% due 03/15/2023 (i)

  GBP     400         551  

7.875% due 09/15/2022 (i)(m)

      1,970         2,774  

8.000% due 12/15/2020 (i)

  EUR     200         251  

8.250% due 12/15/2018 (i)

  $     200         213  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

      60         59  

4.700% due 06/22/2047

      62         61  

Cantor Fitzgerald LP

 

7.875% due 10/15/2019 (m)

      3,160         3,481  

Co-operative Group Holdings Ltd.

 

7.500% due 07/08/2026

  GBP     1,700         2,693  

Credit Agricole S.A.

 

7.500% due 06/23/2026 (i)(m)

      1,000         1,467  

7.875% due 01/23/2024 (i)(m)

  $     2,700         2,977  

Credit Suisse AG

 

6.500% due 08/08/2023

      200         225  

CyrusOne LP

 

5.000% due 03/15/2024

      22         23  

5.375% due 03/15/2027

      11         11  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

  $     74       $ 73  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      2,800         2,730  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      46         47  

HSBC Holdings PLC

 

6.000% due 09/29/2023 (i)(m)

  EUR     1,200         1,540  

Jefferies Finance LLC

 

7.500% due 04/15/2021 (m)

  $     2,285         2,382  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020 (m)

      1,450         1,464  

Lloyds Banking Group PLC

 

7.625% due 06/27/2023 (i)

  GBP     200         289  

MPT Operating Partnership LP

 

5.250% due 08/01/2026 (m)

  $     805         839  

Nationwide Building Society

 

10.250% due 06/29/2049 (i)

  GBP     9         1,711  

Navient Corp. CPI Linked Security

 

4.431% due 01/16/2018

      8,500         215  

Navient Corp.

 

5.500% due 01/15/2019 (m)

  $     845         882  

5.625% due 08/01/2033

      165         139  

8.000% due 03/25/2020 (m)

      1,100         1,232  

OneMain Financial Holdings LLC

 

6.750% due 12/15/2019

      288         303  

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

      28         28  

Pinnacol Assurance

 

8.625% due 06/25/2034 (k)

      2,900         3,137  

Provident Funding Associates LP

 

6.375% due 06/15/2025

      19         20  

6.750% due 06/15/2021 (m)

      1,000         1,035  

Rio Oil Finance Trust

 

9.250% due 07/06/2024

      1,339         1,367  

9.750% due 01/06/2027

      255         262  

Royal Bank of Scotland Group PLC

 

7.500% due 08/10/2020 (i)(m)

      3,250         3,362  

8.000% due 08/10/2025 (i)(m)

      1,900         2,068  

8.625% due 08/15/2021 (i)

      1,000         1,092  

Santander UK Group Holdings PLC

 

6.750% due 06/24/2024 (i)

  GBP     800         1,088  

7.375% due 06/24/2022 (i)(m)

      2,500         3,428  

Sberbank of Russia Via SB Capital S.A.

 

6.125% due 02/07/2022

  $     600         655  

6.125% due 02/07/2022 (m)

      3,400         3,709  

Springleaf Finance Corp.

 

5.250% due 12/15/2019

      84         88  

6.125% due 05/15/2022

      422         446  

8.250% due 12/15/2020 (m)

      2,100         2,362  

Stichting AK Rabobank Certificaten

 

6.500% due 12/29/2049 (i)

  EUR     370         501  

Tesco Property Finance PLC

 

6.052% due 10/13/2039

  GBP     1,736         2,573  

Toll Road Investors Partnership LP

 

0.000% due 02/15/2045 (g)

  $     7,645         1,853  

UBS Group AG

 

5.750% due 02/19/2022 (i)

  EUR     400         505  
       

 

 

 
            63,859  
       

 

 

 
INDUSTRIALS 21.2%  

Altice Financing S.A.

 

7.500% due 05/15/2026 (m)

  $     2,000         2,225  

BMC Software Finance, Inc.

 

8.125% due 07/15/2021

      239         249  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

 

9.000% due 10/15/2019 (d)(m)

      6,262         6,285  

Burger King Worldwide, Inc.

 

4.250% due 05/15/2024

      126         126  

Caesars Entertainment Operating Co., Inc.

 

8.500% due 02/15/2020 ^(j)(m)

      10,025         12,932  

9.000% due 02/15/2020 ^(j)

      573         742  

10.000% due 12/15/2018 ^

      190         176  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

CDK Global, Inc.

 

4.875% due 06/01/2027

    $ 12       $ 12  

Charter Communications Operating LLC

 

5.375% due 05/01/2047

      40         43  

Chemours Co.

 

5.375% due 05/15/2027

      27         28  

Cheniere Corpus Christi Holdings LLC

 

5.875% due 03/31/2025

      100         107  

Chesapeake Energy Corp.

 

4.408% due 04/15/2019

      29         29  

Community Health Systems, Inc.

 

6.250% due 03/31/2023

      100         104  

Continental Airlines Pass-Through Trust

 

7.707% due 10/02/2022 (m)

      386         419  

8.048% due 05/01/2022 (m)

      453         503  

Corp. GEO S.A.B. de C.V.

 

8.875% due 03/27/2022 ^

      200         0  

9.250% due 06/30/2020 ^

      1,800         0  

CVS Pass-Through Trust

 

7.507% due 01/10/2032 (m)

      2,462         3,046  

Delta Air Lines Pass-Through Trust

 

7.750% due 06/17/2021 (m)

      410         452  

Diamond Resorts International, Inc.

 

10.750% due 09/01/2024 (m)

      1,600         1,704  

DriveTime Automotive Group, Inc.

 

8.000% due 06/01/2021 (m)

      1,500         1,511  

Dynegy, Inc.

 

8.034% due 02/02/2024 (m)

      1,688         1,603  

EI Group PLC

 

6.875% due 05/09/2025

  GBP     20         29  

EW Scripps Co.

 

5.125% due 05/15/2025

  $     14         14  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      24         25  

Fresh Market, Inc.

 

9.750% due 05/01/2023 (m)

      3,490         2,936  

Frontier Finance PLC

 

8.000% due 03/23/2022

  GBP     2,900         3,692  

HCA, Inc.

 

4.500% due 02/15/2027

  $     600         619  

5.500% due 06/15/2047

      62         64  

Hexion, Inc.

 

13.750% due 02/01/2022

      25         22  

iHeartCommunications, Inc.

 

9.000% due 03/01/2021 (m)

      3,790         2,857  

Intelsat Jackson Holdings S.A.

 

7.250% due 04/01/2019

      4,200         4,206  

7.250% due 10/15/2020

      2,223         2,112  

9.750% due 07/15/2025 (c)

      124         124  

Intelsat Luxembourg S.A.

 

7.750% due 06/01/2021

      3,958         2,197  

8.125% due 06/01/2023

      966         517  

Intrepid Aviation Group Holdings LLC

 

6.875% due 02/15/2019

      6,181           6,026  

j2 Cloud Services LLC

 

6.000% due 07/15/2025

      24         25  

KFC Holding Co.

 

4.750% due 06/01/2027

      42         43  

Mallinckrodt International Finance S.A.

 

4.750% due 04/15/2023 (m)

      1,000         858  

5.500% due 04/15/2025

      490         431  

Molina Healthcare, Inc.

 

4.875% due 06/15/2025

      13         13  

NOVA Chemicals Corp.

 

4.875% due 06/01/2024

      2         2  

5.250% due 06/01/2027

      24         24  

OGX Austria GmbH

 

8.375% due 04/01/2022 ^

      3,300         0  

8.500% due 06/01/2018 ^

      3,700         0  

Ortho-Clinical Diagnostics, Inc.

 

6.625% due 05/15/2022 (m)

      688         660  

PetSmart, Inc.

 

5.875% due 06/01/2025

      98         95  
 

 

46   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Prime Security Services Borrower LLC

 

9.250% due 05/15/2023

  $     372     $     405  

Russian Railways via RZD Capital PLC

 

7.487% due 03/25/2031

  GBP     100         162  

Sabine Pass Liquefaction LLC

 

5.875% due 06/30/2026

  $     1,500         1,682  

Safeway, Inc.

 

7.250% due 02/01/2031

      140         132  

SFR Group S.A.

 

6.000% due 05/15/2022 (m)

      500         524  

7.375% due 05/01/2026 (m)

      2,938         3,199  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      60         61  

5.000% due 08/01/2027 (c)

      24         24  

Spirit Issuer PLC

 

6.582% due 12/28/2027

  GBP     2,175         3,103  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

  $     14         14  

Tenet Healthcare Corp.

 

4.625% due 07/15/2024

      170         171  

THC Escrow Corp.

 

4.625% due 07/15/2024

      30         30  

Times Square Hotel Trust

 

8.528% due 08/01/2026 (m)

      4,420         5,297  

UCP, Inc.

 

8.500% due 10/21/2017

      2,800         2,784  

Unique Pub Finance Co. PLC

 

5.659% due 06/30/2027

  GBP     1,290         1,900  

7.395% due 03/28/2024

      500         754  

UPCB Finance Ltd.

 

3.625% due 06/15/2029

  EUR     120         135  

Valeant Pharmaceuticals International, Inc.

 

6.500% due 03/15/2022

  $     55         58  

7.000% due 03/15/2024

      105         111  

Venator Finance SARL

 

5.750% due 07/15/2025

      12         12  

VeriSign, Inc.

 

4.750% due 07/15/2027

      12         12  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027

      89         91  
       

 

 

 
            80,548  
       

 

 

 
UTILITIES 5.8%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      54         54  

4.850% due 07/15/2047

      40         41  

Gazprom Neft OAO Via GPN Capital S.A.

 

4.375% due 09/19/2022

      200         204  

6.000% due 11/27/2023 (m)

      1,350         1,476  

Gazprom OAO Via Gaz Capital S.A.

 

5.999% due 01/23/2021

      381         412  

6.510% due 03/07/2022 (m)

      3,400         3,760  

6.605% due 02/13/2018

  EUR     100         118  

8.625% due 04/28/2034

  $     1,081         1,445  

9.250% due 04/23/2019

      100         111  

Odebrecht Drilling Norbe Ltd.

 

6.350% due 06/30/2022

      3,575         1,948  

Petrobras Global Finance BV

 

6.125% due 01/17/2022

      247         256  

6.250% due 03/17/2024

      20         20  

6.250% due 12/14/2026

  GBP     3,000         3,985  

6.625% due 01/16/2034

      200         254  

7.250% due 03/17/2044

  $     154         152  

7.375% due 01/17/2027 (m)

      1,831         1,942  

Sierra Hamilton LLC

 

12.250% due 12/15/2018 ^(j)

      200         44  

Sprint Capital Corp.

 

6.900% due 05/01/2019 (m)

      1,100         1,179  

Sprint Communications, Inc.

 

7.000% due 08/15/2020 (m)

      1,100         1,213  

Sprint Corp.

 

7.125% due 06/15/2024 (m)

      1,175         1,310  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

TerraForm Power Operating LLC

 

6.375% due 02/01/2023 (m)

    $ 1,900       $ 1,986  
       

 

 

 
          21,910  
       

 

 

 

Total Corporate Bonds & Notes (Cost $165,550)

      166,317  
       

 

 

 
CONVERTIBLE BONDS & NOTES 1.4%  
BANKING & FINANCE 1.4%  

SL Green Operating Partnership LP

 

3.000% due 10/15/2017 (m)

      3,800         5,168  
       

 

 

 

Total Convertible Bonds & Notes (Cost $3,799)

    5,168  
       

 

 

 
MUNICIPAL BONDS & NOTES 1.3%  
ILLINOIS 0.2%  

Chicago, Illinois General Obligation Bonds, Series 2014

 

6.314% due 01/01/2044

      50         46  

Chicago, Illinois General Obligation Bonds, Series 2015

 

7.375% due 01/01/2033

      120         124  

7.750% due 01/01/2042

      210         214  

Chicago, Illinois General Obligation Bonds, Series 2017

 

7.045% due 01/01/2029

      70         73  

Illinois State General Obligation Bonds, (BABs), Series 2010

 

6.725% due 04/01/2035

      25         25  

7.350% due 07/01/2035

      15         16  

Illinois State General Obligation Bonds, Series 2003

 

5.100% due 06/01/2033

      165         155  
       

 

 

 
          653  
       

 

 

 
IOWA 0.0%        

Iowa Tobacco Settlement Authority Revenue Bonds, Series 2005

 

6.500% due 06/01/2023

      130         130  
       

 

 

 
WEST VIRGINIA 1.1%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

0.000% due 06/01/2047 (g)

      28,100         1,510  

7.467% due 06/01/2047

      2,630         2,579  
       

 

 

 
          4,089  
       

 

 

 

Total Municipal Bonds & Notes (Cost $4,586)

    4,872  
       

 

 

 
U.S. GOVERNMENT AGENCIES 2.5%  

Fannie Mae

 

4.000% due 10/01/2040

      23         24  

4.216% due 10/25/2029

      330         339  

4.766% due 07/25/2029

      530         560  

6.066% due 10/25/2029

      200         214  

6.966% due 07/25/2029

      720         820  

Freddie Mac

 

0.000% due 04/25/2045 - 08/25/2046 (b)(g)(m)

      6,941         5,352  

0.100% due 05/25/2020 - 08/25/2046 (a)

      73,479         222  

0.200% due 04/25/2045 (a)

      3,595         10  

0.824% due 10/25/2020 (a)(m)

      27,523         523  

6.366% due 10/25/2029

      1,300         1,420  
       

 

 

 

Total U.S. Government Agencies (Cost $9,225)

    9,484  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 39.7%  

Adjustable Rate Mortgage Trust

 

3.411% due 01/25/2036

      167         154  

American Home Mortgage Investment Trust

 

1.486% due 03/25/2037

      4,802         2,843  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Auburn Securities PLC

 

0.652% due 10/01/2041

  GBP     197     $     254  

Banc of America Alternative Loan Trust

 

14.265% due 09/25/2035 ^

  $     1,415         1,704  

Banc of America Funding Trust

 

3.005% due 12/20/2034

      793         632  

3.166% due 12/20/2036

      136         137  

3.499% due 03/20/2036 ^(m)

      1,010         878  

3.580% due 10/20/2046 ^

      600         454  

Banc of America Mortgage Trust

 

3.210% due 09/25/2034

      167         165  

3.247% due 10/20/2046 ^

      151         95  

Barclays Commercial Mortgage Securities Trust

 

3.550% due 08/15/2027

      2,900         2,825  

Bayview Commercial Asset Trust

 

1.436% due 03/25/2037

      167         153  

BCAP LLC Trust

 

2.858% due 05/26/2037

      3,619         3,037  

Bear Stearns Adjustable Rate Mortgage Trust

 

3.017% due 09/25/2034

      105         99  

3.183% due 09/25/2034

      71         69  

3.287% due 08/25/2047 ^

      418         359  

3.542% due 10/25/2036 ^

      1,017         964  

3.581% due 03/25/2035

      309         301  

3.882% due 06/25/2047 ^

      292         280  

Bear Stearns ALT-A Trust

 

1.536% due 06/25/2046 ^(m)

      3,622         3,209  

1.916% due 01/25/2035

      572         562  

3.133% due 09/25/2034

      316         310  

3.225% due 04/25/2035

      343         284  

3.267% due 05/25/2036 ^

      943         821  

3.272% due 11/25/2035

      72         62  

3.392% due 11/25/2036 ^

      563         518  

3.444% due 08/25/2036 ^(m)

      2,768           2,985  

3.471% due 08/25/2036 ^(m)

      571         427  

3.573% due 05/25/2035

      530         480  

6.585% due 07/25/2035 ^

      362         304  

BRAD Resecuritization Trust

 

2.182% due 03/12/2021

      3,021         180  

6.550% due 03/12/2021

      565         568  

CBA Commercial Small Balance Commercial Mortgage

 

5.540% due 01/25/2039 ^

      1,497         1,262  

Chase Mortgage Finance Trust

 

5.500% due 11/25/2021 ^

      945         771  

6.000% due 03/25/2037 ^

      928         805  

Citigroup Commercial Mortgage Trust

 

3.794% due 12/10/2049

      400         360  

Citigroup Global Markets Mortgage Securities, Inc.

 

6.500% due 02/25/2029

      303         305  

Citigroup Mortgage Loan Trust, Inc.

 

3.670% due 03/25/2037 ^(m)

      1,865         1,505  

5.500% due 11/25/2035 ^

      694         661  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049 (m)

      939         527  

5.688% due 10/15/2048

      5,215         2,803  

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049

      2,068         1,299  

Commercial Mortgage Trust

 

6.303% due 07/10/2046 (m)

      2,170         2,320  

Countrywide Alternative Loan Trust

 

1.466% due 06/25/2037 ^

      1,149         821  

1.566% due 05/25/2036 ^

      1,925         952  

1.566% due 06/25/2036 ^(m)

      1,626         1,069  

5.500% due 10/25/2035 ^

      368         334  

5.500% due 12/25/2035 ^(m)

      1,650         1,455  

5.750% due 05/25/2036 ^

      335         262  

6.000% due 11/25/2035 ^

      392         179  

6.000% due 04/25/2036 ^

      353         302  

6.000% due 04/25/2037 ^

      669         466  

6.500% due 09/25/2032 ^

      447         438  

6.500% due 07/25/2035 ^

      627         456  

6.500% due 06/25/2036 ^

      541         431  

Countrywide Home Loan Mortgage Pass-Through Trust

 

1.856% due 03/25/2035 (m)

      676         665  

3.086% due 03/25/2046 ^

      3,805         2,280  

3.094% due 03/25/2037 ^

      1,262         1,000  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   47


Schedule of Investments PIMCO Income Opportunity Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

3.193% due 11/25/2035 ^(m)

  $     2,480     $       2,147  

3.206% due 08/20/2035 ^

      105         99  

3.272% due 06/20/2035

      227         219  

3.345% due 09/25/2047 ^

      1,240         1,203  

3.399% due 08/25/2034 ^

      58         54  

5.500% due 08/25/2035 ^

      94         85  

Credit Suisse Commercial Mortgage Trust

 

6.500% due 07/26/2036 ^

      503         303  

Credit Suisse First Boston Mortgage Securities Corp.

 

7.500% due 05/25/2032

      1,579         1,705  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

 

1.816% due 07/25/2036 ^

      587         214  

5.896% due 04/25/2036

      536         377  

6.500% due 05/25/2036 ^

      424         282  

Debussy PLC

 

5.930% due 07/12/2025 (m)

  GBP     7,000         9,144  

Deutsche ALT-A Securities, Inc.

 

1.366% due 02/25/2047

  $     682         557  

Deutsche ALT-B Securities, Inc.

 

6.250% due 07/25/2036 ^

      103         87  

Deutsche Mortgage Securities, Inc. Mortgage Loan Trust

 

5.500% due 09/25/2033

      154         160  

Downey Savings & Loan Association Mortgage Loan Trust

 

1.389% due 04/19/2047 ^

      407         163  

EMF-NL BV

 

0.668% due 07/17/2041

  EUR     800         814  

Epic Drummond Ltd.

 

0.000% due 01/25/2022

      87         99  

Eurosail PLC

 

1.890% due 09/13/2045

  GBP     1,814         1,895  

2.540% due 09/13/2045

      1,314         1,309  

4.140% due 09/13/2045

      1,126         1,282  

First Horizon Alternative Mortgage Securities Trust

 

3.070% due 05/25/2036 ^

  $     1,778         1,617  

3.104% due 08/25/2035 ^

      116         24  

3.136% due 11/25/2036 ^

      1,470         1,162  

3.427% due 02/25/2036

      166         136  

6.250% due 11/25/2036 ^

      118         90  

First Horizon Mortgage Pass-Through Trust

 

2.957% due 07/25/2037 ^

      120         101  

2.986% due 01/25/2037 ^(m)

      908         812  

First Union National Bank Commercial Mortgage

 

6.750% due 10/15/2032

      3,938         3,867  

GE Commercial Mortgage Corp. Trust

 

5.606% due 12/10/2049 (m)

      5,300         5,348  

GMAC Mortgage Corp. Loan Trust

 

3.778% due 06/25/2034

      87         85  

3.891% due 07/19/2035

      79         77  

3.957% due 06/25/2034

      171         168  

GreenPoint Mortgage Funding Trust

 

1.396% due 01/25/2037

      1,262         1,171  

GS Mortgage Securities Trust

 

1.535% due 08/10/2043 (a)

      7,930         277  

6.201% due 08/10/2043 (m)

      2,100         2,185  

GSR Mortgage Loan Trust

 

1.666% due 07/25/2037 ^

      428         237  

3.370% due 01/25/2036 ^(m)

      1,316         1,287  

3.908% due 12/25/2034

      32         31  

6.000% due 09/25/2034

      199         198  

HarborView Mortgage Loan Trust

 

1.399% due 02/19/2046 (m)

      1,970         1,739  

1.419% due 11/19/2036 (m)

      3,621         2,911  

1.769% due 06/19/2034

      284         268  

1.849% due 01/19/2035

      289         264  

3.334% due 08/19/2036 ^

      216         165  

HomeBanc Mortgage Trust

 

1.466% due 03/25/2035

      342         303  

IM Pastor Fondo de Titulizacion de Activos

 

0.000% due 03/22/2044

  EUR     695         676  

Impac CMB Trust

 

1.736% due 11/25/2035 ^

  $     360         297  

IndyMac Mortgage Loan Trust

 

1.446% due 04/25/2035

      199         178  

1.750% due 05/25/2037 ^

      19         4  

2.016% due 08/25/2034

      181         157  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

2.076% due 09/25/2034

  $     455     $     426  

2.988% due 06/25/2037 ^(m)

      385         345  

3.331% due 11/25/2036 ^

      1,171         1,058  

3.497% due 12/25/2036 ^

      1,412         1,325  

3.522% due 05/25/2037 ^(m)

      4,197         3,560  

JPMorgan Alternative Loan Trust

 

3.404% due 05/25/2036 ^

      503         390  

5.500% due 11/25/2036 ^

      7         5  

JPMorgan Chase Commercial Mortgage Securities Trust

 

5.667% due 01/12/2043 (m)

      805         810  

JPMorgan Commercial Mortgage-Backed Securities Trust

 

5.828% due 03/18/2051 (m)

      755         754  

JPMorgan Mortgage Trust

 

3.247% due 10/25/2036 ^

      55         49  

3.377% due 05/25/2036 ^

      802         747  

3.408% due 07/25/2035

      145         144  

6.000% due 08/25/2037 ^

      683         603  

Landmark Mortgage Securities PLC

 

0.000% due 06/17/2038

  EUR     250         276  

0.517% due 06/17/2038

  GBP     655         836  

Lehman Mortgage Trust

 

5.859% due 04/25/2036

  $     402         362  

6.000% due 05/25/2037 ^(m)

      1,677         1,662  

MASTR Adjustable Rate Mortgages Trust

 

1.472% due 01/25/2047 ^

      432         316  

3.455% due 10/25/2034

      758         714  

Merrill Lynch Mortgage Trust

 

6.018% due 06/12/2050 (m)

      5,400         5,427  

Morgan Stanley Capital Trust

 

5.920% due 04/15/2049 (m)

      109         110  

6.128% due 06/11/2049

      1,500         1,504  

Morgan Stanley Mortgage Loan Trust

 

3.237% due 07/25/2035 ^(m)

      1,905         1,728  

3.409% due 01/25/2035 ^

      287         112  

5.750% due 12/25/2035 ^

      480         464  

6.000% due 08/25/2037 ^

      288         245  

Mortgage Equity Conversion Asset Trust

 

4.000% due 07/25/2060

      814         689  

Prime Mortgage Trust

 

1.566% due 06/25/2036 ^

      3,798         2,431  

7.000% due 07/25/2034

      220         209  

Regal Trust

 

2.145% due 09/29/2031

      10         9  

Residential Accredit Loans, Inc. Trust

 

1.426% due 06/25/2037

      2,169         1,796  

5.500% due 04/25/2037

      126         112  

6.000% due 08/25/2035 ^

      634         591  

6.000% due 01/25/2037 ^(m)

      593         516  

Residential Asset Securitization Trust

 

6.000% due 03/25/2037 ^

      512         343  

6.000% due 07/25/2037 (m)

      8,014         6,145  

Residential Funding Mortgage Securities, Inc. Trust

 

4.828% due 07/27/2037 ^

      326         288  

6.000% due 06/25/2037 ^

      484         443  

Sequoia Mortgage Trust

 

3.487% due 01/20/2038 ^

      349         333  

Structured Adjustable Rate Mortgage Loan Trust

 

3.270% due 08/25/2034

      25         24  

3.349% due 11/25/2036 ^

      235         232  

3.366% due 01/25/2036 ^

      1,286         986  

Structured Asset Mortgage Investments Trust

 

1.426% due 08/25/2036 ^(m)

      2,574         2,251  

1.676% due 05/25/2045

      183         166  

Structured Asset Securities Corp. Mortgage Pass-Through Certificates

 

3.285% due 01/25/2034

      458         459  

TBW Mortgage-Backed Trust

 

6.000% due 07/25/2036 ^

      349         284  

Theatre Hospitals PLC

 

4.086% due 10/15/2031

  GBP     249         316  

WaMu Mortgage Pass-Through Certificates Trust

 

2.145% due 07/25/2046 (m)

  $     2,246           2,149  

2.716% due 11/25/2036 ^

      369         356  

2.733% due 03/25/2033

      97         98  

2.757% due 03/25/2037 ^(m)

      591         530  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

2.954% due 07/25/2037 ^

  $     1,421     $     1,304  

3.058% due 06/25/2037 ^(m)

      1,835         1,683  

3.206% due 07/25/2037 ^(m)

      3,536         3,038  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

1.582% due 10/25/2046 ^

      560         452  

2.600% due 06/25/2033

      67         68  

Wells Fargo Mortgage-Backed Securities Trust

 

1.716% due 07/25/2037 ^

      262         228  

3.036% due 09/25/2036 ^

      27         27  

3.075% due 10/25/2036 ^

      26         25  

3.194% due 04/25/2036 ^

      30         30  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $135,185)

 

        150,457  
       

 

 

 
ASSET-BACKED SECURITIES 43.3%  

Access Financial Manufactured Housing Contract Trust

 

7.650% due 05/15/2021

      207         55  

American Money Management Corp. CLO Ltd.

 

8.201% due 12/09/2026

      1,200         1,208  

Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Certificates

 

2.941% due 05/25/2034

      154         130  

4.066% due 08/25/2032

      1,079         1,077  

Asset-Backed Funding Certificates Trust

 

1.366% due 10/25/2036 (m)

      7,174         6,328  

1.776% due 10/25/2033

      167         155  

1.876% due 03/25/2035 (m)

      4,431         4,200  

Associates Manufactured Housing Pass-Through Certificates

 

7.150% due 03/15/2028 (m)

      1,571         1,902  

Bear Stearns Asset-Backed Securities Trust

 

1.302% due 09/25/2034

      752         723  

3.079% due 07/25/2036

      532         352  

Bombardier Capital Mortgage Securitization Corp.

 

7.830% due 06/15/2030

      3,549         1,584  

C-BASS CBO Corp.

 

1.350% due 09/06/2041

      7,861         904  

Conseco Finance Securitizations Corp.

 

7.770% due 09/01/2031

      892         982  

7.960% due 05/01/2031

      1,691         1,178  

8.060% due 09/01/2029 (m)

      3,013         1,727  

9.163% due 03/01/2033

      2,916         2,710  

Conseco Financial Corp.

 

6.220% due 03/01/2030

      99         106  

6.330% due 11/01/2029

      12         12  

6.530% due 02/01/2031

      1,229         1,216  

7.050% due 01/15/2027

      121         126  

7.140% due 03/15/2028

      103         105  

Countrywide Asset-Backed Certificates

 

1.356% due 06/25/2035 (m)

      8,873         7,118  

1.466% due 01/25/2037 (m)

      15,575         14,097  

1.556% due 12/25/2036 ^

      652         362  

1.776% due 08/25/2032 ^

      383         336  

2.491% due 02/25/2035 (m)

      3,471         3,508  

Countrywide Asset-Backed Certificates Trust

 

1.996% due 11/25/2034 (m)

      407         405  

4.693% due 10/25/2035

      15         15  

Credit Suisse First Boston Mortgage Securities Corp.

 

2.266% due 02/25/2031

      1,714         1,697  

Credit-Based Asset Servicing and Securitization LLC

 

2.536% due 12/25/2035

      1,377         1,240  

Euromax ABS PLC

 

0.011% due 11/10/2095

  EUR     5,000         4,107  

First Franklin Mortgage Loan Trust

 

1.666% due 11/25/2036 (m)

  $     10,000         9,646  

1.816% due 07/25/2035 (m)

      8,092         7,586  

Greenpoint Manufactured Housing

 

8.300% due 10/15/2026

      713         778  

Home Equity Asset Trust

 

3.616% due 10/25/2033

      23         21  

Home Equity Loan Trust

 

1.556% due 04/25/2037 (m)

      8,700         6,671  
 

 

48   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

IndyMac Home Equity Mortgage Loan Asset-Backed Trust

 

1.456% due 04/25/2037 (m)

  $     16,018     $     10,720  

1.536% due 04/25/2037 (m)

      5,316         4,906  

JPMorgan Mortgage Acquisition Trust

 

1.296% due 08/25/2036

      9         5  

1.406% due 03/25/2047 (m)

      1,849         1,786  

KGS Alpha SBA Trust

 

0.967% due 04/25/2038 (a)

      1,318         36  

Lehman ABS Mortgage Loan Trust

 

1.306% due 06/25/2037 (m)

      6,407         4,060  

Long Beach Mortgage Loan Trust

 

1.406% due 02/25/2036

      3,586         2,451  

1.486% due 05/25/2046

      3,754         1,771  

1.921% due 11/25/2035 (m)

      3,684         2,536  

3.691% due 03/25/2032

      259         238  

Morgan Stanley ABS Capital, Inc. Trust

 

2.251% due 01/25/2035

      645         293  

Morgan Stanley Dean Witter Capital, Inc. Trust

 

2.641% due 02/25/2033

      464         465  

Morgan Stanley Home Equity Loan Trust

 

2.266% due 12/25/2034 (m)

      4,445         4,391  

National Collegiate Commutation Trust

 

0.000% due 03/25/2038

      10,400         4,784  

NovaStar Mortgage Funding Trust

 

1.386% due 11/25/2036

      1,470         693  

Oakwood Mortgage Investors, Inc.

 

1.389% due 06/15/2032

      19         18  

Option One Mortgage Loan Trust

 

5.662% due 01/25/2037 ^

      17         17  

Origen Manufactured Housing Contract Trust

 

7.650% due 03/15/2032

      1,817         1,886  

Ownit Mortgage Loan Trust

 

3.439% due 10/25/2035

      2,318         1,501  

Park Place Securities, Inc. Asset-Backed Pass-Through Certificates

 

3.091% due 10/25/2034

      1,161         852  

Residential Asset Mortgage Products Trust

 

2.341% due 08/25/2033

      536         509  

2.941% due 09/25/2034 (m)

      3,239         2,648  

4.020% due 04/25/2033

      1         1  

5.220% due 07/25/2034 ^

      55         54  

5.690% due 11/25/2033

      850         900  

Residential Asset Securities Corp. Trust

 

1.656% due 10/25/2035 (m)

      3,526         3,142  

Saxon Asset Securities Trust

 

2.191% due 12/26/2034

      629         533  

Securitized Asset-Backed Receivables LLC Trust

 

1.446% due 02/25/2037 ^

      392         257  

1.891% due 01/25/2035

      37         36  

SLM Student Loan Trust

 

0.000% due 01/25/2042 (g)

      2         1,747  

SoFi Professional Loan Program LLC

 

0.000% due 01/25/2039 (g)

      2,540         1,676  

Soloso CDO Ltd.

 

1.470% due 10/07/2037

      1,300         741  

South Coast Funding Ltd.

 

1.410% due 01/06/2041

      43,143           12,965  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Specialty Underwriting & Residential Finance Trust

 

1.366% due 06/25/2037 (m)

  $     5,931     $     4,303  

Structured Asset Investment Loan Trust

 

1.436% due 01/25/2036 (m)

      6,287         5,002  

Structured Asset Securities Corp. Mortgage Loan Trust

 

1.516% due 06/25/2035

      372         337  

Talon Funding Ltd.

 

1.590% due 06/05/2035

      1,092         546  

UCFC Home Equity Loan Trust

 

7.750% due 04/15/2030 (m)

      734         693  
       

 

 

 

Total Asset-Backed Securities (Cost $143,439)

 

        163,866  
       

 

 

 
SOVEREIGN ISSUES 1.6%  

Argentine Government International Bond

 

2.260% due 12/31/2038

  EUR     1,300         942  

5.000% due 01/15/2027

      400         427  

7.820% due 12/31/2033

      1,872         2,286  

Republic of Greece Government International Bond

 

3.800% due 08/08/2017

  JPY     46,000         407  

4.500% due 07/03/2017

      40,000         357  

4.750% due 04/17/2019

  EUR     200         233  

Saudi Government International Bond

 

3.250% due 10/26/2026

  $     200         198  

4.500% due 10/26/2046

      1,000         1,021  

Sri Lanka Government International Bond

 

6.200% due 05/11/2027

      200         200  
       

 

 

 

Total Sovereign Issues (Cost $5,725)

    6,071  
       

 

 

 
        SHARES            
COMMON STOCKS 0.3%  
CONSUMER DISCRETIONARY 0.1%  

Tribune Media Co. ‘A’

      5,969         243  

tronc, Inc. (e)

      1,492         19  
       

 

 

 
          262  
       

 

 

 
ENERGY 0.1%  

Forbes Energy Services Ltd. (e)(k)

    29,625         504  

OGX Petroleo e Gas S.A. SP - ADR (e)

    110,823         0  
       

 

 

 
          504  
       

 

 

 
FINANCIALS 0.1%  

TIG FinCo PLC (k)

      386,567         491  
       

 

 

 

Total Common Stocks (Cost $2,370)

    1,257  
       

 

 

 
WARRANTS 0.0%  
INDUSTRIALS 0.0%  

Sequa Corp. - Exp. 04/28/2024

    279,000         131  
       

 

 

 
        SHARES         MARKET
VALUE
(000S)
 
UTILITIES 0.0%  

Dynegy, Inc. - Exp. 02/02/2024

      59,678     $     10  
       

 

 

 

Total Warrants (Cost $157)

 

      141  
       

 

 

 
CONVERTIBLE PREFERRED SECURITIES 3.4%  
BANKING & FINANCE 3.4%  

Wells Fargo & Co.

 

7.500% due 12/31/2049 (i)

      9,900         12,984  
       

 

 

 

Total Convertible Preferred Securities (Cost $6,293)

    12,984  
       

 

 

 
PREFERRED SECURITIES 1.3%  
INDUSTRIALS 1.3%  

Sequa Corp.

       

9.000%

      5,177         5,050  
       

 

 

 

Total Preferred Securities (Cost $5,177)

 

      5,050  
       

 

 

 
SHORT-TERM INSTRUMENTS 9.9%  
REPURCHASE AGREEMENTS (l) 8.6%  
          32,499  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
           
SHORT-TERM NOTES 0.1%  

Federal Home Loan Bank

 

0.924% due 07/19/2017 (g)(h)

  $     200         200  
       

 

 

 
U.S. TREASURY BILLS 1.2%  

0.920% due 08/31/2017 (f)(g)(p)

      4,554         4,547  
       

 

 

 
Total Short-Term Instruments (Cost $37,246)         37,246  
       

 

 

 
       
Total Investments in Securities (Cost $536,038)           579,240  
       
Total Investments 152.9% (Cost $536,038)     $     579,240  

Financial Derivative
Instruments (n)(o) (1.2)%

(Cost or Premiums, net $(4,955))

        (4,484
Other Assets and Liabilities, net (51.7)%           (196,050
       

 

 

 
Net Assets 100.0%       $     378,706  
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.
(d) Payment in-kind security.
(e) Security did not produce income within the last twelve months.
(f) Coupon represents a weighted average yield to maturity.
(g) Zero coupon security.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   49


Schedule of Investments PIMCO Income Opportunity Fund (Cont.)

 

(h) Coupon represents a yield to maturity.
(i) Perpetual maturity; date shown, if applicable, represents next contractual call date.
(j) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(k)  RESTRICTED SECURITIES:

 

Issuer Description                Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Forbes Energy Services Ltd.

         03/11/2014 - 07/31/2014     $ 1,470     $ 504       0.13

Pinnacol Assurance 8.625% due 06/25/2034

         06/23/2014       2,900       3,137       0.83  

TIG FinCo PLC

         04/02/2015 - 02/24/2017       560       491       0.13  
        

 

 

   

 

 

   

 

 

 
         $     4,930     $     4,132       1.09
        

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(l)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
BCY     1.440     06/30/2017       07/03/2017     $     31,000     Freddie Mac 3.500% due 03/01/2047   $ (31,997   $ 31,000     $ 31,004  
SSB     0.050       06/30/2017       07/03/2017       1,499     U.S. Treasury Notes 1.625% - 3.500% due 12/31/2019 - 05/15/2020(2)     (1,530     1,499       1,499  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

        $     (33,527   $     32,499     $     32,503  
           

 

 

   

 

 

   

 

 

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

    1.650     06/16/2017       TBD (4)      $    (7,362   $     (7,368
    2.250       06/02/2017       09/05/2017       (604     (605
    2.280       05/09/2017       08/09/2017       (414     (415
    2.648       04/03/2017       07/03/2017       (2,900     (2,919
    2.680       05/09/2017       08/09/2017       (8,504     (8,539
    2.681       05/17/2017       08/17/2017       (1,280     (1,284
    2.692       05/23/2017       08/23/2017       (3,945     (3,957
    2.780       06/21/2017       09/21/2017       (8,016     (8,023
    2.787       06/22/2017       09/21/2017       (3,460     (3,463

BPS

    0.600       06/08/2017       09/08/2017       GBP       (920     (1,198
    1.890       06/02/2017       08/31/2017       $    (1,192     (1,194
    1.970       05/25/2017       08/25/2017       (1,837     (1,841
    2.685       05/10/2017       08/10/2017       (7,634     (7,665

BRC

    3.293       06/27/2017       TBD (4)      (1,682     (1,683

DEU

    2.100       05/09/2017       08/09/2017       (1,116     (1,120
    2.110       05/24/2017       08/24/2017       (1,568     (1,572
    2.110       05/30/2017       08/30/2017       (1,227     (1,229

FOB

    2.850       06/19/2017       07/06/2017       (2,416     (2,419

JML

    2.000       06/16/2017       07/14/2017       (7,159     (7,166

JPS

    2.805       04/12/2017       07/13/2017       (6,249     (6,289

MSC

    1.880       05/18/2017       08/18/2017       (3,282     (3,290
    2.269       06/07/2017       09/07/2017       (1,082     (1,084
    3.250       09/16/2016       09/15/2017       (1,287     (1,289

RBC

    2.030       01/19/2017       07/18/2017       (3,770     (3,805
    2.120       06/07/2017       10/04/2017       (4,330     (4,337
    2.120       06/12/2017       12/12/2017       (3,336     (3,340
    2.730       03/13/2017       09/13/2017       (4,579     (4,618
    2.730       03/27/2017       09/20/2017       (5,550     (5,591

RDR

    1.550       04/07/2017       07/07/2017       (1,082     (1,086
    1.590       05/23/2017       08/23/2017       (2,095     (2,099
    1.710       07/07/2017       10/10/2017       (1,064     (1,064

RTA

    1.985       01/13/2017       07/13/2017       (480     (484
    2.432       08/03/2016       08/02/2017       (5,568     (5,694
    2.700       04/19/2017       10/18/2017       (342     (344
    2.786       01/04/2017       01/03/2018       (7,020     (7,118
    2.839       04/24/2017       04/23/2018       (776     (780

 

50   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 
    2.875     04/27/2017       04/26/2018       $    (4,621   $     (4,646
    2.889       04/13/2017       04/05/2018       (4,394     (4,423
    2.918       03/14/2017       03/08/2018       (2,309     (2,330

SAL

    2.050       04/05/2017       07/05/2017       (3,645     (3,663
    2.089       05/26/2017       08/28/2017       (326     (327
    2.199       07/05/2017       10/05/2017       (3,580     (3,580

SOG

    1.750       04/11/2017       07/11/2017       (1,078     (1,082
    1.750       05/16/2017       08/16/2017       (691     (693
    1.750       05/22/2017       08/22/2017       (1,140     (1,142
    1.750       05/24/2017       08/21/2017       (953     (955
    1.750       05/30/2017       08/30/2017       (4,020     (4,027
    1.750       06/07/2017       08/16/2017       (1,835     (1,837
    1.750       06/23/2017       08/21/2017       (1,185     (1,186
    1.780       06/05/2017       09/05/2017       (5,309     (5,316
    1.780       06/08/2017       09/07/2017       (1,119     (1,120
    1.780       06/09/2017       09/05/2017       (1,492     (1,494
    1.780       06/09/2017       09/07/2017       (4,225     (4,230
    1.800       06/14/2017       09/14/2017       (979     (980
    1.800       06/15/2017       09/15/2017       (3,407     (3,410
    2.871       06/09/2017       12/11/2017       (6,947     (6,960
    3.006       07/20/2016       07/20/2017       (6,558     (6,598

UBS

    0.150       04/20/2017       07/20/2017       EUR    (1,109     (1,267
    0.900       04/13/2017       07/13/2017       GBP    (1,743     (2,275
    0.900       04/18/2017       07/18/2017       (2,229     (2,908
    1.240       04/20/2017       07/20/2017       (5,152     (6,727
    1.910       04/25/2017       07/25/2017       $       (379     (380
    1.920       05/03/2017       08/03/2017       (199     (200
    2.010       06/02/2017       09/05/2017       (4,251     (4,258
    2.160       06/02/2017       09/05/2017       (1,532     (1,535
    2.555       04/07/2017       07/07/2017       (2,703     (2,720
    2.605       04/07/2017       07/07/2017       (8,016     (8,066
    2.650       04/05/2017       07/05/2017       (4,077     (4,104
    2.655       04/07/2017       07/07/2017       (1,701     (1,712
         

 

 

 

Total Reverse Repurchase Agreements

 

    $     (212,123
         

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
     Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(5)  

Global/Master Repurchase Agreement

            

BCY

  $ 31,004     $ (36,573   $ 0      $ (5,569   $ 23,288     $     17,719  

BPS

    0       (11,898     0            (11,898         17,499       5,601  

BRC

    0       (1,683     0        (1,683     2,536       853  

DEU

    0       (3,921     0        (3,921     4,177       256  

FOB

    0       (2,419     0        (2,419     4,060       1,641  

JML

    0       (7,166     0        (7,166     8,726       1,560  

JPS

    0       (6,289     0        (6,289     9,305       3,016  

MSB

    0       0       0        0       774       774  

MSC

    0       (5,663     0        (5,663     6,086       423  

RBC

    0       (21,691     0        (21,691     25,069       3,378  

RDR

    0       (4,249     0        (4,249     4,407       158  

RTA

    0       (25,819     0        (25,819     34,772       8,953  

SAL

    0       (7,570     0        (7,570     9,646       2,076  

SOG

    0       (41,030     0        (41,030     49,509       8,479  

SSB

    1,499       0       0        1,499       (1,530     (31

UBS

    0       (36,152     0        (36,152     46,947       10,795  
 

 

 

   

 

 

   

 

 

        

Total Borrowings and Other Financing Transactions

  $     32,503     $     (212,123   $     0         
 

 

 

   

 

 

   

 

 

        

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   51


Schedule of Investments PIMCO Income Opportunity Fund (Cont.)

 

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

 

Corporate Bonds & Notes

  $ 0     $ (20,455   $ (46,530   $ (10,708   $ (77,693

Convertible Bonds & Notes

    0       0       0       (4,337     (4,337

U.S. Government Agencies

    0       0       (3,878     0       (3,878

Non-Agency Mortgage-Backed Securities

    0       (16,206     (19,316     (14,837     (50,359

Asset-Backed Securities

    0       (29,011     (28,755     (13,446     (71,212
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $     (65,672   $     (98,479   $     (43,328   $     (207,479
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements(6)

 

  $ (207,479
         

 

 

 

 

(m) Securities with an aggregate market value of $279,306 and cash of $232 have been pledged as collateral under the terms of under the terms of the above master agreements as of June 30, 2017.

 

(1)

Includes accrued interest.

(2)

Collateral is held in custody by the counterparty.

(3)

The average amount of borrowings outstanding during the period ended 06/30/2017 was $(212,695) at a weighted average interest rate of 2.000%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

(4)

Open maturity reverse repurchase agreement.

(5)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

(6)

Unsettled reverse repurchase agreements liability of $(4,644) is outstanding at period end.

 

(n)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Frontier Communications Corp.

    5.000     06/20/2020       6.022   $     2,000     $ (57   $ 6     $ (51   $ 2     $ 0  

Sprint Communications, Inc.

    5.000       12/20/2021       2.033     1,000       22       103           125       0       (1
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
          $     (35   $     109     $     74     $     2     $     (1
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
     Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                 Asset      Liability  

Pay

 

1-Year BRL-CDI

    11.680     01/04/2021        BRL       71,100     $ (347   $ 695     $ 348     $ 50      $ 0  

Pay

 

1-Year BRL-CDI

    15.590       01/04/2021          20       1       0       1       0        0  

Pay

 

3-Month CAD-Bank Bill

    3.300       06/19/2024        CAD       13,300       618       358       976       0        (87

Receive

 

3-Month CAD-Bank Bill

    3.500       06/20/2044          4,400       (154     (591     (745     104        0  

Receive

 

3-Month USD-LIBOR

    1.500       12/21/2021        $       18,000       154       (470     (316     0        (28

Receive

 

3-Month USD-LIBOR

    1.750       12/21/2023          150,000       2,826       (5,845     (3,019     0        (349

Receive

 

3-Month USD-LIBOR

    2.250       06/15/2026          6,800       (414     393       (21     22        0  

Receive(4)

 

3-Month USD-LIBOR

    2.500       12/20/2027          21,900       304       (38     266       0        (38

Receive

 

3-Month USD-LIBOR

    2.500       06/15/2036          56,900       (5,675     5,764       89       217        0  

Receive

 

3-Month USD-LIBOR

    2.500       06/15/2046          17,600       (2,149     2,245       96       81        0  

Pay

 

6-Month AUD-BBR-BBSW

    3.500       06/17/2025        AUD       5,200       129       94       223       0        (40

Receive(4)

 

6-Month EUR-EURIBOR

    1.000       09/20/2027        EUR       4,800       (26     (2     (28     0        (2

Receive(4)

 

6-Month GBP-LIBOR

    1.500       09/20/2027        GBP       11,700       (170     (22     (192     0        (22
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
             $ (4,903   $ 2,581     $ (2,322   $ 474      $ (566
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total Swap Agreements

 

    $     (4,938   $     2,690     $     (2,248   $     476      $     (567
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

52   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation Margin
Asset
    Total           Market Value     Variation Margin
Liability
    Total  
     Purchased
Options
    Futures     Swap
Agreements
            Written
Options
    Futures     Swap
Agreements
   

Total Exchange-Traded or Centrally Cleared

  $     0     $     0     $     476     $     476       $     0     $     0     $     (567   $     (567
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

Cash of $7,108 has been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1)

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2)

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3)

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4)

This instrument has a forward starting effective date. See Note 2, Securities Transactions and Investment Income, in the Notes to Financial Statements for further information.

 

(o)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

FORWARD FOREIGN CURRENCY CONTRACTS:

 

Counterparty    Settlement
Month
    Currency to
be Delivered
    Currency to
be Received
    Unrealized Appreciation/
(Depreciation)
 
         Asset     Liability  

BOA

     07/2017     EUR     11,464     $     12,885     $ 0     $ (208
     07/2017     GBP     899         1,155       0       (16

BPS

     07/2017     $     13,610     EUR     11,965       56       0  
     07/2017         738     JPY     82,700       0       (3
     08/2017     EUR     11,965     $     13,630       0       (55
     08/2017     JPY     82,700         740       3       0  

CBK

     07/2017     BRL     1,797         546       4       0  
     07/2017     GBP     27,392         35,245       0       (432
     07/2017     $     543     BRL     1,797       0       (1

GLM

     07/2017     AUD     114     $     85       0       (3
     07/2017     EUR     100         112       0       (3
     07/2017     GBP     47         61       0       (1
     07/2017     JPY     82,700         745       10       0  
     07/2017     $     414     GBP     325       10       0  

HUS

     07/2017     GBP     428     $     553       0       (5

JPM

     07/2017     EUR     401         451       0       (7
     07/2017     $     266     EUR     233       0       0  
     07/2017         3,004     GBP     2,363       74       0  

NGF

     07/2017     BRL     1,797     $     543       1       0  
     07/2017     $     537     BRL     1,797       5       0  
     08/2017     BRL     1,797     $     534       0       (5

SCX

     07/2017     $     584     GBP     459       14       0  

SSB

     07/2017     GBP     59     $     74       0       (2

UAG

     07/2017     $     32,909     GBP     25,678       535       0  
     08/2017     GBP     25,678     $     32,938       0       (536
            

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

 

      $     712     $     (1,277
            

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   53


Schedule of Investments PIMCO Income Opportunity Fund (Cont.)

 

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE AND SOVEREIGN ISSUES - SELL PROTECTION(1)

 

Counterparty   Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value
 
                Asset     Liability  
BOA  

Russia Government International Bond

    1.000     06/20/2024       2.160   $     400     $ (40   $ 12     $ 0     $ (28
BRC  

Gazprom S.A.

    1.900       12/20/2017       0.381           1,250       0       10       10       0  
 

JSC VTB Bank

    2.340       12/20/2017       0.716       1,250       0       11       11       0  
 

Russia Government International Bond

    1.000       06/20/2024       2.160       400       (46     18       0       (28
 

Russia Government International Bond

    1.000       09/20/2024       2.193       300       (25     2       0       (23
CBK  

Russia Government International Bond

    1.000       06/20/2024       2.160       500       (53     17       0       (36
 

Russia Government International Bond

    1.000       09/20/2024       2.193       300       (26     3       0       (23
FBF  

TNK-BP Finance S.A.

    3.150       12/20/2017       2.113       1,500       0       9       9       0  
GST  

Petrobras Global Finance BV

    1.000       09/20/2020       2.229       110       (16     12       0       (4
 

Russia Government International Bond

    1.000       03/20/2020       0.918       100       (19     19       0       0  
 

Russia Government International Bond

    1.000       06/20/2024       2.160       200       (23     9       0       (14
HUS  

Russia Government International Bond

    1.000       06/20/2019       0.699       130       (5     6       1       0  
 

Russia Government International Bond

    1.000       06/20/2024       2.160       130       (13     4       0       (9
 

Russia Government International Bond

    1.000       09/20/2024       2.193       69       (10     5       0       (5
JPM  

Russia Government International Bond

    1.000       06/20/2024       2.160       200       (18     4       0       (14
           

 

 

   

 

 

   

 

 

   

 

 

 
            $     (294   $     141     $     31     $     (184
           

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty   Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements, at Value(4)  
              Asset     Liability  
DUB  

CMBX.NA.BBB-.6 Index

    3.000     05/11/2063     $ 100     $ (12   $ 0     $ 0     $ (12
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       100       (13     1       0       (12
FBF  

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       100       (12     0       0       (12
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       100       (10     1       0       (9
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       500       (78     4       0       (74
GST  

ABX.HE.AA.6-1 Index

    0.320       07/25/2045           17,556       (3,494     889       0       (2,605
 

ABX.HE.PENAAA.7-1 Index

    0.090       08/25/2037       4,742       (918     59       0       (859
 

CMBX.NA.A.6 Index

    2.000       05/11/2063       1,500       (76     29       0       (47
MYC  

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059       200       (24     3       0       (21
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       200       (24     0       0       (24
         

 

 

   

 

 

   

 

 

   

 

 

 
        $ (4,661   $ 986     $ 0     $ (3,675
         

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

    $     (4,955   $     1,127     $     31     $     (3,859
         

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged/(received) as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                     
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
     Net
Exposure(5)
 

BOA

  $ 0      $ 0      $ 0      $ 0       $ (224   $ 0      $ (28   $ (252   $ (252   $ 274      $ 22  

BPS

    59        0        0        59         (58     0        0       (58     1       0        1  

BRC

    0        0        21        21         0       0        (51     (51     (30     0        (30

CBK

    4        0        0        4         (433     0        (59     (492     (488     274          (214

DUB

    0        0        0        0         0       0        (24     (24     (24     0        (24

FBF

    0        0        9        9         0       0        (95     (95     (86     0        (86

GLM

    20        0        0        20         (7     0        0       (7     13       0        13  

GST

    0        0        0        0         0       0        (3,529     (3,529       (3,529       3,969        440  

HUS

    0        0        1        1         (5     0        (14     (19     (18     31        13  

JPM

    74        0        0        74         (7     0        (14     (21     53       0        53  

MYC

    0        0        0        0         0       0        (45     (45     (45     0        (45

NGF

    6        0        0        6         (5     0        0       (5     1       0        1  

SCX

    14        0        0        14         0       0        0       0       14       0        14  

SSB

    0        0        0        0         (2     0        0       (2     (2     0        (2

UAG

    535        0        0        535         (536     0        0       (536     (1     0        (1
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

Total Over the Counter

  $   712      $   0      $   31      $   743       $   (1,277   $   0      $   (3,859   $   (5,136       
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

 

54   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

(p) Securities with an aggregate market value of $4,547 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1)

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2)

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3)

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4)

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(5)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

           

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 2     $ 0     $ 0     $ 474     $ 476  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 712     $ 0     $ 712  

Swap Agreements

    0       31       0       0       0       31  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 31     $ 0     $ 712     $ 0     $ 743  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     33     $     0     $     712     $     474     $     1,219  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 1     $ 0     $ 0     $ 566     $ 567  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 1,277     $ 0     $ 1,277  

Swap Agreements

    0       3,859       0       0       0       3,859  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 3,859     $ 0     $ 1,277     $ 0     $ 5,136  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     3,860     $     0     $     1,277     $     566     $     5,703  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The effect of Financial Derivative Instruments on the Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain (Loss) on Financial Derivative Instruments

 

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 27     $ 0     $ 0     $ (2,741   $     (2,714
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 3,218     $ 0     $ 3,218  

Swap Agreements

    0       391       0       0       (21     370  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 391     $ 0     $ 3,218     $ (21   $ 3,588  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     418     $     0     $     3,218     $     (2,762   $ 874  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   55


Schedule of Investments PIMCO Income Opportunity Fund (Cont.)

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 109     $ 0     $ 0     $ 5,530     $ 5,639  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ (3,050   $ 0     $     (3,050

Swap Agreements

    0       1,008       0       0       145       1,153  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 1,008     $ 0     $ (3,050   $ 145     $ (1,897
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     1,117     $     0     $     (3,050   $     5,675     $     3,742  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 0     $ 15,891     $ 436     $ 16,327  

Corporate Bonds & Notes

       

Banking & Finance

    0       57,991       5,868       63,859  

Industrials

    0       74,072       6,476       80,548  

Utilities

    0       21,866       44       21,910  

Convertible Bonds & Notes

       

Banking & Finance

    0       5,168       0       5,168  

Municipal Bonds & Notes

       

Illinois

    0       653       0       653  

Iowa

    0       130       0       130  

West Virginia

    0       4,089       0       4,089  

U.S. Government Agencies

    0       9,484       0       9,484  

Non-Agency Mortgage-Backed Securities

    0           149,020           1,437           150,457  

Asset-Backed Securities

    0       155,623       8,243       163,866  

Sovereign Issues

    0       6,071       0       6,071  

Common Stocks

       

Consumer Discretionary

        262       0       0       262  

Energy

    0       504       0       504  

Financials

    0       0       491       491  

Warrants

       

Industrials

    0       0       131       131  

Utilities

    10       0       0       10  

Convertible Preferred Securities

       

Banking & Finance

    0       12,984       0       12,984  
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Preferred Securities

       

Industrials

  $ 0     $ 0     $ 5,050     $ 5,050  

Short-Term Instruments

       

Repurchase Agreements

    0       32,499       0       32,499  

Short-Term Notes

    0       200       0       200  

U.S. Treasury Bills

    0       4,547       0       4,547  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $     272     $     550,792     $     28,176     $     579,240  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

    0       476       0       476  

Over the counter

    0       743       0       743  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 1,219     $ 0     $ 1,219  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

    0       (567     0       (567

Over the counter

    0       (5,136     0       (5,136
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ (5,703   $ 0     $ (5,703
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ 0     $ (4,484   $ 0     $ (4,484
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $ 272     $ 546,308     $ 28,176     $ 574,756  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net Sales     Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held at
06/30/2017(1)
 

Investments in Securities, at Value

 

       

Loan Participations and Assignments

  $     222     $     320     $     0     $     2     $     0     $     (108   $     0     $     0     $     436     $     (108

Corporate Bonds & Notes

                   

Banking & Finance

    10,482       0       (4,972     24       54       280       0       0       5,868       2  

Industrials

    5,369       3,621       (2,461     21       39       (113     0       0       6,476       32  

Utilities

    0       0       0       0       0       0       44       0       44       0  

Non-Agency Mortgage-Backed Securities

    879       693       (52     5       2       (90     0       0       1,437       (85

Asset-Backed Securities

    66       8,118       0       175       0       (116     0       0       8,243       (117

Common Stocks

                   

Financials

    211       70       0       0       0       210       0       0       491       210  

Warrants

                   

Industrials

    0       0       0       0       (39     170       0       0       131       130  

Preferred Securities

                   

Industrials

    0       5,177       0       0       0       (127     0       0       5,050       (127
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     17,229     $     17,999     $     (7,485   $     227     $     56     $     106     $     44     $     0     $     28,176     $ (63
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

56   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
   Unobservable
Inputs
   Input Value(s)
(% Unless
Noted
Otherwise)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 436      Other Valuation Techniques(2)         —    

Corporate Bonds & Notes

          

Banking & Finance

    3,138      Reference Instrument    OAS Spread      549.080 bps  
    2,730      Reference Instrument    Spread movement      281.000 bps  

Industrials

    6,476      Proxy Pricing    Base Price      99.500-100.000  

Utilities

    44      Other Valuation Techniques(2)         —    

Non-Agency Mortgage-Backed Securities

    1,437      Proxy Pricing    Base Price      5.970-100.780  

Asset-Backed Securities

    8,243      Proxy Pricing    Base Price      2.703-88,000.000  

Common Stocks

          

Financials

    491      Other Valuation Techniques(2)         —    

Warrants

          

Industrials

    131      Other Valuation Techniques(2)         —    

Preferred Securities

          

Industrials

    5,050      Fundamental Valuation    Company Assets      $    551,000.000  
 

 

 

          

Total

  $     28,176           
 

 

 

          

 

(1)

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2)

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   57


Schedule of Investments PIMCO Strategic Income Fund, Inc.

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 278.4%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 3.2%  

Avolon Holdings Ltd.

 

3.462% due 09/20/2020

  $     30     $     31  

3.962% due 03/20/2022

      200         202  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      970         974  

4.295% due 06/30/2017

      7,338         7,353  

Forbes Energy Services LLC

 

5.000% - 7.000% due 04/13/2021

      54         55  

iHeartCommunications, Inc.

 

7.976% due 01/30/2019

      900         738  

Sequa Mezzanine Holdings LLC

 

6.672% due 11/28/2021

      120         121  

10.172% due 04/28/2022

      1,050         1,072  
       

 

 

 

Total Loan Participations and Assignments
(Cost $10,673)

    10,546  
       

 

 

 
CORPORATE BONDS & NOTES 20.4%  
BANKING & FINANCE 8.9%  

Barclays Bank PLC

 

7.625% due 11/21/2022 (k)

      800         917  

14.000% due 06/15/2019 (g)

  GBP     1,300         2,062  

BNP Paribas S.A.

 

7.375% due 08/19/2025 (g)

  $     1,400         1,559  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

      54         53  

4.700% due 06/22/2047

      56         55  

Cantor Fitzgerald LP

 

7.875% due 10/15/2019 (k)

      930         1,025  

CyrusOne LP

 

5.000% due 03/15/2024

      20         21  

5.375% due 03/15/2027

      10         10  

Deutsche Bank AG

 

4.250% due 10/14/2021 (k)

      3,200         3,354  

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

      65         64  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      2,400         2,340  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      40         41  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020 (k)

      1,000         1,010  

Navient Corp.

 

5.875% due 03/25/2021

      1,009         1,070  

Neuberger Berman Group LLC

 

4.875% due 04/15/2045 (k)

      1,200         1,171  

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

      26         26  

Pinnacol Assurance

 

8.625% due 06/25/2034 (i)

      2,600         2,813  

Royal Bank of Scotland Group PLC

 

8.625% due 08/15/2021 (g)

      1,000         1,092  

Sberbank of Russia Via SB Capital S.A.

 

6.125% due 02/07/2022 (k)

      2,000         2,182  

SL Green Realty Corp.

 

7.750% due 03/15/2020 (k)

      4,500         5,041  

Spirit Realty LP

 

4.450% due 09/15/2026 (k)

      3,300         3,142  

Springleaf Finance Corp.

 

6.125% due 05/15/2022

      210         222  
       

 

 

 
            29,270  
       

 

 

 
INDUSTRIALS 7.8%  

Caesars Entertainment Operating Co., Inc.

 

8.500% due 02/15/2020 ^(h)

      1,312         1,693  

9.000% due 02/15/2020 ^(h)

      65         84  

CDK Global, Inc.

 

4.875% due 06/01/2027

      11         11  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Charter Communications Operating LLC

 

5.375% due 05/01/2047

  $     36     $     38  

Chemours Co.

 

5.375% due 05/15/2027

      24         25  

CommScope Technologies LLC

 

5.000% due 03/15/2027

      2         2  

Community Health Systems, Inc.

 

6.250% due 03/31/2023

      91         94  

CVS Pass-Through Trust

 

7.507% due 01/10/2032

      821         1,015  

Dynegy, Inc.

 

8.034% due 02/02/2024

      78         75  

EI Group PLC

 

6.875% due 05/09/2025

  GBP     620         895  

EW Scripps Co.

 

5.125% due 05/15/2025

  $     13         13  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      21         22  

Frontier Finance PLC

 

8.000% due 03/23/2022

  GBP     2,600         3,310  

HCA, Inc.

 

5.500% due 06/15/2047

  $     56         58  

Hexion, Inc.

 

13.750% due 02/01/2022

      22         20  

iHeartCommunications, Inc.

 

9.000% due 03/01/2021

      2,470         1,862  

9.000% due 09/15/2022

      1,000         744  

Intelsat Jackson Holdings S.A.

 

7.250% due 10/15/2020

      2,570         2,442  

9.750% due 07/15/2025 (c)

      109         109  

j2 Cloud Services LLC

 

6.000% due 07/15/2025

      21         22  

KFC Holding Co.

 

4.750% due 06/01/2027

      37         38  

Kinder Morgan, Inc.

 

5.300% due 12/01/2034 (k)

      1,500         1,550  

7.750% due 01/15/2032 (k)

      4,500         5,672  

NOVA Chemicals Corp.

 

4.875% due 06/01/2024

      2         2  

5.250% due 06/01/2027

      21         21  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      53         54  

5.000% due 08/01/2027 (c)

      21         21  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

      13         13  

UAL Pass-Through Trust

 

6.636% due 01/02/2024

      1,618         1,757  

UCP, Inc.

 

8.500% due 10/21/2017

      3,700         3,679  

UPCB Finance Ltd.

 

3.625% due 06/15/2029

  EUR     110         124  

Valeant Pharmaceuticals International, Inc.

 

6.500% due 03/15/2022

  $     49         52  

7.000% due 03/15/2024

      244         257  

Venator Finance SARL

 

5.750% due 07/15/2025

      10         10  

VeriSign, Inc.

 

4.750% due 07/15/2027

      11         11  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027

      77         79  
       

 

 

 
            25,874  
       

 

 

 
UTILITIES 3.7%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      48         48  

4.850% due 07/15/2047

      36         36  

Gazprom Neft OAO Via GPN Capital S.A.

 

6.000% due 11/27/2023

      7,150         7,817  

Gazprom OAO Via Gaz Capital S.A.

 

8.625% due 04/28/2034 (k)

      2,600         3,476  

Petrobras Global Finance BV

 

6.125% due 01/17/2022

      224         232  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

7.250% due 03/17/2044

  $     138     $     136  

7.375% due 01/17/2027

      380         403  
       

 

 

 
          12,148  
       

 

 

 

Total Corporate Bonds & Notes (Cost $62,782)

      67,292  
       

 

 

 
MUNICIPAL BONDS & NOTES 1.0%  
ILLINOIS 0.1%  

Chicago, Illinois General Obligation Bonds, Series 2014

 

6.314% due 01/01/2044

      50         46  

Chicago, Illinois General Obligation Bonds, Series 2017

 

7.045% due 01/01/2029

      70         73  

Illinois State General Obligation Bonds, (BABs), Series 2010

 

6.725% due 04/01/2035

      15         15  

7.350% due 07/01/2035

      10         11  

Illinois State General Obligation Bonds, Series 2003

 

5.100% due 06/01/2033

      145         136  
       

 

 

 
          281  
       

 

 

 
WEST VIRGINIA 0.9%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

0.000% due 06/01/2047 (e)

      25,300         1,360  

7.467% due 06/01/2047

      1,655         1,623  
       

 

 

 
          2,983  
       

 

 

 

Total Municipal Bonds & Notes (Cost $3,004)

    3,264  
       

 

 

 
U.S. GOVERNMENT AGENCIES 172.3%  

Fannie Mae

 

1.803% due 08/25/2054 (a)(k)

      22,897         1,383  

2.500% due 12/25/2027 (a)

      4,751         380  

2.699% due 09/01/2028

      7         7  

2.862% due 11/01/2027

      48         49  

2.940% due 12/01/2030

      165         168  

2.950% due 04/01/2030

      1         1  

2.974% due 12/01/2028

      43         44  

3.000% due 03/01/2031

      58         59  

3.104% due 03/01/2032

      77         77  

4.216% due 10/25/2029

      300         308  

4.250% due 11/25/2024 - 03/25/2033

      564         591  

4.500% due 09/01/2023 - 08/01/2041

      274         295  

4.500% due 07/25/2040 - 04/01/2041 (k)

      2,054         2,178  

4.766% due 07/25/2029

      490         518  

5.000% due 12/01/2018 - 07/25/2038

      252         271  

5.000% due 01/25/2038 (k)

      9,589           10,518  

5.500% due 07/25/2024

      18         20  

5.500% due 11/25/2032 - 04/25/2035 (k)

      7,325         8,175  

5.542% due 12/25/2042

      36         39  

5.750% due 06/25/2033

      31         35  

5.807% due 08/25/2043

      1,892         2,088  

6.000% due 09/25/2031 - 01/25/2044

      2,042         2,315  

6.000% due 12/01/2032 - 06/01/2040 (k)

      7,040         8,013  

6.066% due 10/25/2029

      180         193  

6.104% due 02/25/2042

      578         656  

6.150% due 10/25/2042

      16         19  

6.424% due 09/25/2041

      546         596  

6.500% due 10/01/2018 - 11/01/2047

      7,528         8,550  

6.500% due 12/01/2036 - 07/01/2039 (k)

      696         788  

6.703% due 10/25/2042

      425         486  

6.850% due 12/18/2027

      15         18  

6.966% due 07/25/2029

      660         752  

7.000% due 11/01/2017 - 01/01/2047

      2,365         2,680  

7.500% due 12/01/2017 - 06/25/2044

      1,756         2,049  
 

 

58   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

7.700% due 03/25/2023

  $     18     $     20  

7.784% due 06/19/2041

      896         1,053  

8.000% due 09/25/2021 - 06/01/2032

      338         369  

8.500% due 09/25/2021 - 06/25/2030

      568         647  

9.432% due 05/15/2021

      40         43  

9.876% due 07/15/2027

      26         26  

Fannie Mae, TBA

 

3.000% due 01/01/2047 - 10/01/2047

      193,000           192,412  

3.500% due 03/01/2047 - 10/01/2047

      234,000         239,773  

4.000% due 03/01/2047

      3,000         3,153  

Freddie Mac

 

0.000% due 04/25/2045 - 08/25/2046 (b)(e)

      6,179         4,780  

0.100% due 04/25/2046 - 08/25/2046 (a)

      28,342         111  

0.200% due 04/25/2045 (a)

      3,268         9  

1.627% due 11/15/2038 (a)(k)

      42,359         2,579  

2.006% due 05/15/2038 (a)(k)

      20,355         1,119  

2.116% due 08/15/2036 (a)

      6,533         407  

2.691% due 12/01/2026

      6         6  

2.749% due 09/01/2031

      34         34  

3.533% due 04/01/2033

      3         3  

5.000% due 02/15/2024

      8         9  

5.500% due 04/01/2039 (k)

      2,892         3,263  

5.500% due 06/15/2041

      4,113         4,564  

5.662% due 07/25/2032

      124         135  

6.000% due 12/15/2028 - 03/15/2035

      3,020         3,445  

6.366% due 10/25/2029

      1,200         1,311  

6.500% due 08/01/2021 - 09/01/2047

      5,511         6,354  

6.500% due 06/15/2031 - 07/01/2037 (k)

      3,078         3,426  

6.900% due 09/15/2023

      288         313  

6.950% due 07/15/2021

      127         134  

7.000% due 08/01/2021 - 10/25/2043

      5,286         6,002  

7.000% due 10/01/2031 - 08/01/2036 (k)

      374         416  

7.500% due 05/15/2024 - 02/25/2042

      1,176         1,295  

7.500% due 04/01/2028 - 12/01/2030 (k)

      1,297         1,481  

8.000% due 08/15/2022 - 04/15/2030

      262         290  

8.766% due 12/25/2027

      1,598         1,864  

11.966% due 03/25/2025

      393         515  

Freddie Mac, TBA

 

4.000% due 11/01/2047

      3,000         3,155  

Ginnie Mae

 

6.000% due 04/15/2029 - 12/15/2038

      752         861  

6.000% due 07/15/2037 - 11/15/2038 (k)

      1,302         1,486  

6.500% due 11/20/2024 - 10/20/2038

      100         107  

6.500% due 04/15/2032 - 05/15/2032 (k)

      601         666  

7.000% due 04/15/2024 - 06/15/2026

      51         52  

7.500% due 06/15/2023 - 03/15/2029

      784         822  

8.000% due 11/15/2021 - 11/15/2022

      5         6  

8.500% due 05/15/2022 - 02/15/2031

      11         12  

9.000% due 12/15/2017 - 01/15/2020

      68         69  

Ginnie Mae, TBA

 

4.000% due 09/01/2047

      20,000         21,038  

Small Business Administration

 

4.625% due 02/01/2025

      127         133  

5.510% due 11/01/2027

      426         457  

5.780% due 08/01/2027

      40         43  

5.820% due 07/01/2027

      44         47  

6.300% due 06/01/2018

      14         15  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Vendee Mortgage Trust

 

6.500% due 03/15/2029

  $     171     $     193  

6.750% due 02/15/2026 - 06/15/2026

      117         132  

7.500% due 09/15/2030

      2,556         3,019  
       

 

 

 

Total U.S. Government Agencies
(Cost $570,626)

      567,993  
       

 

 

 
U.S. TREASURY OBLIGATIONS 19.6%  

U.S. Treasury Notes

 

2.000% due 08/15/2025 (k)(m)(o)

    65,700         64,582  
       

 

 

 

Total U.S. Treasury Obligations
(Cost $64,920)

      64,582  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 39.0%  

Adjustable Rate Mortgage Trust

 

3.176% due 07/25/2035

      705         649  

3.815% due 08/25/2035

      1,591         1,546  

Banc of America Mortgage Trust

 

3.475% due 02/25/2035

      23         23  

Bancorp Commercial Mortgage Trust

 

7.196% due 11/15/2033

      4,500         4,515  

Barclays Commercial Mortgage Securities Trust

 

3.550% due 08/15/2027

      2,700         2,630  

BCAP LLC Trust

 

1.210% due 07/26/2036

      211         165  

3.047% due 10/26/2036

      2,322         2,259  

3.132% due 10/26/2033

      130         113  

3.260% due 06/26/2035

      43         39  

Bear Stearns ALT-A Trust

 

3.471% due 08/25/2036 ^

      422         316  

Bear Stearns Commercial Mortgage Securities Trust

 

5.657% due 10/12/2041

      4,454         4,203  

5.793% due 12/11/2040

      5,728         5,457  

5.897% due 04/12/2038

      120         94  

7.000% due 05/20/2030

      679         689  

Citigroup Mortgage Loan Trust, Inc.

 

7.000% due 09/25/2033

      4         4  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049

      35         20  

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049

      1,932         1,214  

Commercial Mortgage Trust

 

5.505% due 03/10/2039

      1,146         1,060  

5.844% due 06/10/2046

      447         304  

Countrywide Alternative Loan Trust

 

1.426% due 07/25/2046 ^

      2,290         1,891  

5.500% due 05/25/2022 ^

      18         13  

6.500% due 07/25/2035 ^

      627         456  

Countrywide Home Loan Mortgage Pass-Through Trust

 

1.856% due 03/25/2035

      2,179         1,879  

3.086% due 03/25/2046 ^

      3,612         2,164  

3.179% due 08/25/2034

      610         580  

Countrywide Home Loan Reperforming REMIC Trust

 

7.500% due 11/25/2034

      1,203         1,191  

7.500% due 06/25/2035 ^

      217         221  

Credit Suisse Commercial Mortgage Trust

 

5.695% due 09/15/2040

      692         691  

Credit Suisse First Boston Mortgage Securities Corp.

 

2.366% due 03/25/2034 ^

      300         294  

Credit Suisse First Boston Mortgage-Backed Trust

 

7.000% due 02/25/2034

      505         556  

Credit Suisse Mortgage Capital Certificates

 

6.500% due 03/25/2036 ^

      1,163         690  

Epic Drummond Ltd.

 

0.000% due 01/25/2022

  EUR     82         94  

Eurosail PLC

 

1.890% due 09/13/2045

  GBP     1,751         1,829  

2.540% due 09/13/2045

      1,251         1,247  

4.140% due 09/13/2045

      1,063         1,210  

GC Pastor Hipotecario FTA

 

0.000% due 06/21/2046

  EUR     1,779         1,679  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

GE Commercial Mortgage Corp. Trust

 

5.606% due 12/10/2049

  $     5,000     $     5,046  

GMAC Mortgage Corp. Loan Trust

 

3.654% due 08/19/2034

      128         122  

GSAA Trust

 

6.000% due 04/01/2034

      1,134         1,187  

GSMPS Mortgage Loan Trust

 

6.139% due 06/19/2027

      43         42  

7.000% due 06/25/2043

      2,772           3,109  

8.000% due 09/19/2027

      595         607  

GSR Mortgage Loan Trust

 

1.546% due 12/25/2034

      408         373  

2.560% due 03/25/2033

      3         3  

6.500% due 01/25/2034

      271         286  

IM Pastor Fondo de Titluzacion Hipotecaria

 

0.000% due 03/22/2043

  EUR     611         578  

JPMorgan Chase Commercial Mortgage Securities Trust

 

5.411% due 05/15/2047

  $     1,900         1,348  

5.623% due 05/12/2045

      896         772  

JPMorgan Commercial Mortgage-Backed Securities Trust

 

5.828% due 03/18/2051

      755         754  

JPMorgan Mortgage Trust

 

3.175% due 10/25/2036 ^

      2,778         2,745  

5.500% due 08/25/2022 ^

      25         25  

5.500% due 06/25/2037 ^

      292         289  

LB-UBS Commercial Mortgage Trust

 

5.350% due 09/15/2040

      3,620         3,571  

Lehman XS Trust

 

1.874% due 09/25/2047

      6,237         5,845  

MASTR Adjustable Rate Mortgages Trust

 

3.455% due 10/25/2034

      947         893  

MASTR Alternative Loan Trust

 

6.250% due 07/25/2036

      472         412  

6.500% due 03/25/2034

      921         981  

7.000% due 04/25/2034

      64         69  

MASTR Reperforming Loan Trust

 

7.000% due 05/25/2035

      4,274         4,231  

7.500% due 07/25/2035

      2,279         2,307  

Merrill Lynch Mortgage Trust

 

6.018% due 06/12/2050

      5,100         5,125  

Morgan Stanley Capital Trust

 

5.920% due 04/15/2049

      598         606  

6.128% due 06/11/2049

      1,400         1,404  

Morgan Stanley Resecuritization Trust

 

2.778% due 12/26/2046

      7,980         5,911  

NAAC Reperforming Loan REMIC Trust

 

7.000% due 10/25/2034 ^

      1,186         1,188  

7.500% due 03/25/2034 ^

      3,037         2,965  

7.500% due 10/25/2034 ^

      3,558         3,748  

Newgate Funding PLC

 

0.919% due 12/15/2050

  EUR     2,342         2,477  

1.169% due 12/15/2050

      2,342         2,346  

1.289% due 12/15/2050

  GBP     3,225         4,031  

1.539% due 12/15/2050

      2,649         3,204  

RBSSP Resecuritization Trust

 

6.000% due 02/26/2037

  $     4,502         3,567  

6.250% due 12/26/2036

      6,191         3,717  

Residential Accredit Loans, Inc. Trust

 

6.000% due 08/25/2035 ^

      1,940         1,807  

Residential Asset Mortgage Products Trust

 

8.500% due 10/25/2031

      527         593  

8.500% due 11/25/2031

      779         831  

Structured Asset Mortgage Investments Trust

 

2.232% due 08/25/2047 ^

      3,442         3,201  

Structured Asset Securities Corp. Mortgage Loan Trust

 

7.500% due 10/25/2036 ^

      3,123         2,789  

WaMu Mortgage Pass-Through Certificates Trust

 

2.983% due 05/25/2035

      310         312  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

7.000% due 03/25/2034

      150         164  

7.500% due 04/25/2033

      418         450  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   59


Schedule of Investments PIMCO Strategic Income Fund, Inc. (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Wells Fargo Mortgage-Backed Securities Trust

 

3.152% due 06/25/2035

  $     312     $     319  

3.194% due 04/25/2036 ^

      37         37  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $121,386)

 

        128,372  
       

 

 

 
ASSET-BACKED SECURITIES 17.7%  

Access Financial Manufactured Housing Contract Trust

 

7.650% due 05/15/2021

      207         55  

Airspeed Ltd.

 

1.429% due 06/15/2032

      1,844         1,570  

Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Certificates

 

4.741% due 11/25/2032 ^

      251         8  

Bear Stearns Asset-Backed Securities Trust

 

1.302% due 09/25/2034

      632         608  

Citigroup Mortgage Loan Trust, Inc.

 

1.376% due 12/25/2036

      5,250         3,523  

1.436% due 12/25/2036

      2,734         1,465  

1.476% due 03/25/2037 (k)

      6,643         5,256  

Conseco Finance Securitizations Corp.

 

7.960% due 05/01/2031

      1,644         1,146  

Conseco Financial Corp.

 

6.530% due 02/01/2031

      144         143  

7.050% due 01/15/2027

      121         126  

Countrywide Asset-Backed Certificates

 

1.346% due 12/25/2036 ^

      3,612         3,631  

1.356% due 06/25/2047 ^

      9,310         7,250  

1.416% due 06/25/2037 ^

      2,631         1,973  

1.416% due 06/25/2047

      6,672         5,797  

1.506% due 06/25/2037 (k)

      8,449         6,225  

4.816% due 07/25/2036 (k)

      11,700         11,676  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Countrywide Asset-Backed Certificates Trust

 

2.866% due 11/25/2034

  $     2,297     $     1,210  

Credit-Based Asset Servicing and Securitization LLC

 

6.020% due 12/25/2037

      668         692  

Encore Credit Receivables Trust

 

1.951% due 07/25/2035

      576         480  

Greenpoint Manufactured Housing

 

8.300% due 10/15/2026

      713         778  

National Collegiate Commutation Trust

 

0.000% due 03/25/2038

      10,400         4,784  

Oakwood Mortgage Investors, Inc.

 

1.389% due 06/15/2032

      19         18  

Residential Asset Mortgage Products Trust

 

8.500% due 12/25/2031

      20         16  
       

 

 

 

Total Asset-Backed Securities (Cost $56,604)

      58,430  
       

 

 

 
SOVEREIGN ISSUES 0.8%  

Argentine Government International Bond

 

7.820% due 12/31/2033

  EUR     2,257         2,762  
       

 

 

 

Total Sovereign Issues (Cost $2,458)

 

      2,762  
       

 

 

 
        SHARES            
COMMON STOCKS 0.1%  
ENERGY 0.1%  

Forbes Energy Services Ltd. (d)(i)

    4,500         77  

SemGroup Corp. ‘A’

      7,966         215  
       

 

 

 

Total Common Stocks (Cost $444)

        292  
       

 

 

 
        SHARES         MARKET
VALUE
(000S)
 
WARRANTS 0.0%  
UTILITIES 0.0%  

Dynegy, Inc. - Exp. 02/02/2024

      2,774     $     0  
       

 

 

 

Total Warrants (Cost $7)

          0  
       

 

 

 
SHORT-TERM INSTRUMENTS 4.3%  
       
REPURCHASE AGREEMENTS (j) 4.0%  
          13,129  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
           
U.S. TREASURY BILLS 0.3%  

0.899% due 08/31/2017 (e)(f)

  $     1,030         1,028  
       

 

 

 
Total Short-Term Instruments
(Cost $14,157)
        14,157  
       

 

 

 
       
Total Investments in Securities
(Cost $907,061)
        917,690  
       
Total Investments 278.4%
(Cost $907,061)
      $     917,690  

Financial Derivative
Instruments (l)(n)(0.5)%

(Cost or Premiums, net $(2,276))

 

 

      (1,635
Other Assets and Liabilities, net (177.9)%       (586,382
       

 

 

 
Net Assets 100.0%       $     329,673  
       

 

 

 
 

NOTES TO SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*, EXCEPT NUMBER OF CONTRACTS):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.
(d) Security did not produce income within the last twelve months.
(e) Zero coupon security.
(f) Coupon represents a yield to maturity.
(g) Perpetual maturity; date shown, if applicable, represents next contractual call date.
(h) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(i)  RESTRICTED SECURITIES:

 

Issuer Description                Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Forbes Energy Services Ltd.

         03/11/2014     $ 222     $ 77       0.03

Pinnacol Assurance

8.625% due 06/25/2034

         06/23/2014       2,600       2,813       0.85  
        

 

 

   

 

 

   

 

 

 
         $     2,822     $     2,890       0.88
        

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(j)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
BCY     1.440     06/30/2017       07/03/2017     $     8,800     Fannie Mae 4.000% due 07/01/2037   $ (9,083   $ 8,800     $ 8,801  
SSB     0.050       06/30/2017       07/03/2017       4,329     U.S. Treasury Notes 3.500% due 05/15/2020(2)     (4,421     4,329       4,329  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

        $     (13,504   $     13,129     $     13,130  
           

 

 

   

 

 

   

 

 

 

 

60   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

BPS

    1.300     04/12/2017       07/13/2017     $ (9,572   $ (9,600
    1.400       05/15/2017       08/14/2017       (1,443     (1,446
    1.490       06/02/2017       08/01/2017       (3,040     (3,044
    1.520       06/12/2017       07/12/2017       (16,173     (16,187
    1.580       06/12/2017       07/12/2017       (3,568     (3,571
    1.600       04/12/2017       07/13/2017       (5,445     (5,465
    1.610       06/02/2017       08/31/2017       (3,181     (3,185
    1.850       06/08/2017       07/10/2017       (4,740     (4,746
    1.855       04/12/2017       07/13/2017           (12,982     (13,037
    1.960       05/01/2017       08/01/2017       (1,601     (1,607
    2.670       05/01/2017       08/01/2017       (9,371     (9,415
    2.692       05/26/2017       08/28/2017       (3,988     (3,999
    2.750       06/16/2017       09/18/2017       (4,376     (4,382

JML

    2.000       06/16/2017       07/14/2017       (4,670     (4,675
         

 

 

 

Total Reverse Repurchase Agreements

 

      $     (84,359
         

 

 

 

 

SALE-BUYBACK TRANSACTIONS:

 

Counterparty   Borrowing
Rate(3)
    Borrowing
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Sale-Buyback
Transactions(4)
 

GSC

    1.160     06/02/2017       07/05/2017     $ (11,335   $ (11,347
    1.320       06/13/2017       07/13/2017           (21,412     (21,427

TDM

    1.000       04/11/2017       07/11/2017       (196     (196

UBS

    1.220       06/08/2017       08/08/2017       (4,196     (4,200
         

 

 

 

Total Sale-Buyback Transactions

 

      $     (37,170
         

 

 

 

 

MORTGAGE DOLLAR ROLLS:

 

Counterparty   Borrowing
Rate(3)
    Borrowing
Date
    Maturity
Date
    Amount
Received
    Amount
Borrowed(3)
 

BOS

    1.781     08/14/2017       09/12/2017     $ 4,013     $ (4,013
    1.802       07/13/2017       08/13/2017       4,021       (4,021

FOB

    1.736       07/13/2017       08/13/2017       60,093       (60,093
    1.758       07/13/2017       08/13/2017       32,170       (32,170
    1.781       08/14/2017       09/12/2017       102,961       (102,961
    1.802       07/13/2017       08/13/2017       97,595       (97,595
    1.890       07/13/2017       08/13/2017       175,252       (175,252

GSC

    1.802       07/13/2017       08/13/2017       10,319       (10,319

MSC

    1.846       07/13/2017       08/13/2017       10,300       (10,300
       

 

 

   

 

 

 

Total Mortgage Dollar Rolls

 

    $     496,724     $     (496,724
       

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
    Receivable for
Mortgage
Dollar Rolls
    Payable for
Mortgage
Dollar Rolls
    Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(5)  

Global/Master Repurchase Agreement

               

BCY

  $ 8,801     $ 0     $ 0     $ 0     $ 0     $ 8,801     $ (9,083   $ (282

BPS

    0       (79,684     0       0       0       (79,684     91,852           12,168  

JML

    0       (4,675     0       0       0       (4,675     5,625       950  

SSB

    4,329       0       0       0       0       4,329       (4,421     (92

Master Securities Forward Transaction Agreement

 

             

BOS

    0       0       0       8,034       (8,034     0       0       0  

FOB

    0       0       0       468,071       (468,071     0       0       0  

GSC

    0       0       (32,774     10,319       (10,319         (32,774         32,340       (434

MSC

    0       0       0       10,300       (10,300     0       0       0  

TDM

    0       0       (196     0       0       (196     187       (9

UBS

    0       0       (4,200     0       0       (4,200     4,129       (71
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

Total Borrowings and Other Financing Transactions

  $     13,130     $     (84,359   $     (37,170   $     496,724     $     (496,724      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   61


Schedule of Investments PIMCO Strategic Income Fund, Inc. (Cont.)

 

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

         

Corporate Bonds & Notes

  $ 0     $ (18,457   $ (7,836   $ 0     $ (26,293

U.S. Government Agencies

    0       (38,824     (1,446     0       (40,270

Asset-Backed Securities

    0       0       (17,796     0       (17,796
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 0     $     (57,281   $     (27,078   $     0     $ (84,359

Sale-Buyback Transactions

         

U.S. Treasury Obligations

    0       (32,970     (4,200     0       (37,170
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 0     $ (32,970   $ (4,200   $ 0     $ (37,170
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $ (90,251   $ (31,278   $ 0     $     (121,529
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements and sale-buyback financing transactions

 

  $ (121,529
         

 

 

 

 

(k) Securities with an aggregate market value of $133,855 and cash of $320 have been pledged as collateral under the terms of under the terms of the above master agreements as of June 30, 2017.

 

(1)

Includes accrued interest.

(2)

Collateral is held in custody by the counterparty.

(3)

The average amount of borrowings outstanding during the period ended June 30, 2017 was $(145,335) at a weighted average interest rate of 1.205%. Average borrowings includes reverse repurchase agreements and sale-buyback transactions, of which there were none open at period end.

(4)

Payable for sale-buyback transactions includes $(14) of deferred price drop.

(5)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(l)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

FUTURES CONTRACTS:

 

LONG FUTURES CONTRACTS

 

Description   Expiration
Month
    # of
Contracts
    Notional
Amount
    Unrealized
Appreciation/
(Depreciation)
    Variation Margin  
          Asset     Liability  

U.S. Treasury 2-Year Note September Futures

    09/2017       138     $     29,823     $ (24   $ 0     $ (13
       

 

 

   

 

 

   

 

 

 

Total Futures Contracts

        $     (24   $     0     $     (13
       

 

 

   

 

 

   

 

 

 

 

SWAP AGREEMENTS:

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
    Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Pay

 

1-Year BRL-CDI

    15.590     01/04/2021       7,200     $ 238     $ 67     $ 305     $ 4     $ 0  

Pay

 

3-Month CAD-Bank Bill

    3.300       06/19/2024       11,200       520       302       822       0       (73

Receive

 

3-Month CAD-Bank Bill

    3.500       06/20/2044       3,800       (133     (510     (643     90       0  

Receive

 

3-Month USD-LIBOR

    1.750       12/21/2023       39,400       (1,065     1,825       760       92       0  

Receive

 

3-Month USD LIBOR

    1.750       12/21/2026       63,800       (1,259     3,996       2,737       200       0  

Receive(1)

 

3-Month USD-LIBOR

    2.500       12/20/2027       26,400       (746     410       (336     83       0  

Receive

 

3-Month USD-LIBOR

    2.250       12/21/2046       5,000       (455     756       301       22       0  

Receive

 

3-Month USD-LIBOR

    1.750       06/21/2047       12,500       2,153       68       2,221       48       0  

Receive(1)

 

3-Month USD-LIBOR

    2.750       12/20/2047       32,400       (2,136     1,001       (1,135     158       0  
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
          $ (2,883   $ 7,915     $ 5,032     $ 697     $ (73
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

 

      $     (2,883   $     7,915     $     5,032     $     697     $     (73
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

62   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation Margin
Asset
                Market Value     Variation Margin
Liability
       
     Purchased
Options
    Futures     Swap
Agreements
    Total           Written
Options
    Futures     Swap
Agreements
    Total  

Total Exchange-Traded or Centrally Cleared

  $     0     $     0     $     697     $     697       $     0     $     (13)     $     (73)     $     (86)  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

(m) Securities with an aggregate market value of $10,224 and cash of $259 have been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1)

This instrument has a forward starting effective date. See Note 2, Securities Transactions and Investment Income, in the Notes to Financial Statements for further information.

 

(n)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

FORWARD FOREIGN CURRENCY CONTRACTS:

 

Counterparty

   Settlement
Month
    Currency to
be Delivered
    Currency to
be Received
    Unrealized Appreciation/
(Depreciation)
 
         Asset     Liability  

BOA

     07/2017     EUR     8,854     $     9,952     $ 0     $ (161
     07/2017     GBP     45         58       0       (1

BPS

     07/2017     $     10,210     EUR     8,976           42       0  
     08/2017     EUR     8,976     $     10,225       0       (41

CBK

     07/2017     BRL     938         285       2       0  
     07/2017     EUR     122         137       0       (2
     07/2017     GBP     21,739         27,971       0           (343
     07/2017     $     284     BRL     939       0       0  

GLM

     07/2017     CAD     77     $     58       0       (1

HUS

     07/2017         70         53       0       (1
     07/2017     $     6,571     GBP     5,172       165       0  

JPM

     07/2017     GBP     27     $     34       0       (1
     07/2017     $     196     EUR     172       0       0  
     07/2017         3,860     GBP     3,046       108       0  

NGF

     07/2017     BRL     939     $     284       0       0  
     07/2017     $     280     BRL     939       3       0  
     08/2017     BRL     939     $     279       0       (3

RBC

     07/2017     GBP     55         70       0       (1

UAG

     07/2017     $     17,491     GBP     13,648       285       0  
     08/2017     GBP     13,648     $     17,507       0       (285
            

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

 

          $     605     $     (840
            

 

 

   

 

 

 

 

PURCHASED OPTIONS:

 

OPTIONS ON SECURITIES

 

Counterparty   Description   Strike
Price
    Expiration
Date
    Notional
Amount
    Cost     Market
Value
 
DUB  

Put - OTC Fannie Mae, TBA 3.000% due 07/01/2047

  $     74.219       07/06/2017       $      50,000     $ 2     $ 0  
FAR  

Put - OTC Fannie Mae, TBA 3.000% due 09/01/2047

    68.000       09/06/2017           127,000       5       0  
 

Put - OTC Fannie Mae, TBA 3.500% due 09/01/2047

    73.000       09/06/2017       185,000       7       0  
JPM  

Put - OTC Fannie Mae, TBA 3.500% due 08/01/2047

    73.000       08/07/2017       11,000       1       0  
         

 

 

   

 

 

 
        $ 15     $ 0  
         

 

 

   

 

 

 

Total Purchased Options

    $     15     $     0  
         

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   63


Schedule of Investments PIMCO Strategic Income Fund, Inc. (Cont.)

 

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE AND SOVEREIGN ISSUES - SELL PROTECTION(1)

 

Counterparty   Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value
 
                Asset     Liability  
BOA  

Indonesia Government International Bond

    1.000     06/20/2019       0.457     $       100     $ (3   $ 4     $ 1     $ 0  
BPS  

Petrobras Global Finance BV

    1.000       12/20/2019       1.744           3,100       (306     252       0       (54
DUB  

Indonesia Government International Bond

    1.000       06/20/2019       0.457       300       (11     14       3       0  
GST  

Petrobras Global Finance BV

    1.000       09/20/2020       2.229       10       (1     1       0       0  
HUS  

Petrobras Global Finance BV

    1.000       12/20/2019       1.744       3,400       (338     278       0       (60
JPM  

Indonesia Government International Bond

    1.000       06/20/2019       0.457       800       (27     36       9       0  
 

Russia Government International Bond

    1.000       12/20/2020       1.178       200       (23     22       0       (1
           

 

 

   

 

 

   

 

 

   

 

 

 
            $     (709   $     607     $     13     $     (115
           

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty   Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at  Value(4)
 
              Asset     Liability  
DUB  

CMBX.NA.BBB-.6 Index

    3.000     05/11/2063     $     1,100     $ (67   $ (61   $ 0     $ (128
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       1,400       (161     (48     0       (209
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       900       (113     7       0       (106
FBF  

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       100       (12     0       0       (12
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       100       (10     1       0       (9
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       400       (63     3       0       (60
GST  

CMBX.NA.A.6 Index

    2.000       05/11/2063       1,400       (71     27       0       (44
 

CMBX.NA.BB.6 Index

    5.000       05/11/2063       1,000       (135     (48     0       (183
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       2,200       (121     (134     0       (255
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       400       (20     (15     0       (35
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       2,200       (274     16       0       (258
MYC  

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059       2,750       (293     (2     0       (295
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       550       (29     (35     0       (64
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       700       (31     (31     0       (62
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       400       (46     (14     0       (60
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       1,100       (136     7       0       (129
         

 

 

   

 

 

   

 

 

   

 

 

 
          $ (1,582   $     (327   $ 0     $ (1,909
         

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

      $     (2,291   $ 280     $     13     $     (2,024
         

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                     
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged
     Net
Exposure(5)
 

BOA

  $ 0      $ 0      $ 1      $ 1       $ (162   $ 0      $ 0     $ (162   $  (161   $ 0      $  (161

BPS

    42        0        0        42         (41     0        (54     (95     (53     60        7  

CBK

    2        0        0        2         (345     0        0       (345     (343     294        (49

DUB

    0        0        3        3         0       0        (443     (443     (440      363        (77

FBF

    0        0        0        0         0       0        (81     (81     (81     0        (81

GLM

    0        0        0        0         (1     0        0       (1     (1     0        (1

GST

    0        0        0        0         0       0        (775     (775     (775     906        131  

HUS

    165        0        0        165         (1     0        (60     (61     104       0        104  

JPM

    108        0        9        117         (1     0        (1     (2     115       0        115  

MYC

    0        0        0        0         0       0        (610     (610     (610     581        (29

NGF

    3        0        0        3         (3     0        0       (3     0       0        0  

RBC

    0        0        0        0         (1     0        0       (1     (1     0        (1

UAG

    285        0        0        285         (285     0        0       (285     0       0        0  
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

Total Over the Counter

  $  605      $  0      $  13      $  618       $  (840   $  0      $  (2,024   $  (2,864       
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

        

 

64   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

(o) Securities with an aggregate market value of $2,204 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate or sovereign issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4) 

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(5) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same legal entity. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

           

Exchange-traded or centrally cleared

           

Swap Agreements

  $ 0     $ 0     $ 0     $ 0     $ 697     $ 697  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 605     $ 0     $ 605  

Swap Agreements

    0       13       0       0       0       13  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 13     $ 0     $ 605     $ 0     $ 618  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 13     $ 0     $ 605     $     697     $ 1,315  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

           

Exchange-traded or centrally cleared

           

Futures

  $ 0     $ 0     $ 0     $ 0     $ 13     $ 13  

Swap Agreements

    0       0       0       0       73       73  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 0     $ 0     $ 0     $ 86     $ 86  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 840     $ 0     $ 840  

Swap Agreements

    0       2,024       0       0       0       2,024  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 2,024     $ 0     $ 840     $ 0     $ 2,864  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     2,024     $     0     $     840     $ 86     $     2,950  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   65


Schedule of Investments PIMCO Strategic Income Fund, Inc. (Cont.)

 

 

The effect of Financial Derivative Instruments on the Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain (Loss) on Financial Derivative Instruments

 

       

Exchange-traded or centrally cleared

           

Futures

  $ 0     $ 0     $ 0     $ 0     $ (5   $ (5

Swap Agreements

    0       0       0       0       (1,755     (1,755
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 0     $ 0     $ 0     $ (1,760   $ (1,760
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 1,752     $ 0     $ 1,752  

Purchased Options

    0       0       0       0       (62     (62

Swap Agreements

    0       199       0       0       238       437  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 199     $ 0     $ 1,752     $ 176     $ 2,127  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 199     $ 0     $ 1,752     $ (1,584   $ 367  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

     

Exchange-traded or centrally cleared

           

Futures

  $ 0     $ 0     $ 0     $ 0     $ (234   $ (234

Swap Agreements

    0       0       0       0       17,568       17,568  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 0     $ 0     $ 0     $ 17,334     $ 17,334  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

           

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ (1,418   $ 0     $ (1,418

Purchased Options

    0       0       0       0       (6     (6

Swap Agreements

    0       543       0       0       (230     313  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 543     $ 0     $ (1,418   $ (236   $ (1,111
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     543     $     0     $     (1,418   $     17,098     $     16,223  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

   

Loan Participations and Assignments

  $ 0     $ 10,491     $ 55     $ 10,546  

Corporate Bonds & Notes

       

Banking & Finance

    0       24,117       5,153       29,270  

Industrials

    0       18,885           6,989       25,874  

Utilities

    0       12,148       0       12,148  

Municipal Bonds & Notes

       

Illinois

    0       281       0       281  

West Virginia

    0       2,983       0       2,983  

U.S. Government Agencies

    0           567,993       0           567,993  

U.S. Treasury Obligations

    0       64,582       0       64,582  

Non-Agency
Mortgage-Backed Securities

    0       128,372       0       128,372  

Asset-Backed Securities

    0       53,646       4,784       58,430  

Sovereign Issues

    0       2,762       0       2,762  

Common Stocks

       

Energy

    215       77       0       292  

Short-Term Instruments

       

Repurchase Agreements

    0       13,129       0       13,129  

U.S. Treasury Bills

    0       1,028       0       1,028  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $     215     $ 900,494     $ 16,981     $ 917,690  
 

 

 

   

 

 

   

 

 

   

 

 

 
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Financial Derivative Instruments - Assets

 

     

Exchange-traded or centrally cleared

  $ 0     $ 697     $ 0     $ 697  

Over the counter

    0       618       0       618  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 1,315     $ 0     $ 1,315  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

 

Exchange-traded or centrally cleared

    (13     (73     0       (86

Over the counter

    0       (2,864     0       (2,864
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ (13   $ (2,937   $ 0     $ (2,950
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ (13   $ (1,622   $ 0     $ (1,635
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     202     $     898,872     $     16,981     $     916,055  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

66   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held at
06/30/2017(1)
 

Investments in Securities, at Value

                   

Loan Participations and Assignments

  $ 0     $ 49     $ 0     $ 0     $ 0     $ 6     $ 0     $ 0     $ 55     $ 6  

Corporate Bonds & Notes

                   

Banking & Finance

    9,149       0       (4,303     20       47       240       0       0       5,153       (1

Industrials

    3,725       3,246       0       5       0       13       0       0       6,989       13  

Asset-Backed Securities

    0       4,524       0       169       0       91       0       0       4,784       91  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     12,874     $     7,819     $     (4,303   $     194     $     47     $     350     $     0     $     0     $     16,981     $     109  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
     Unobservable
Inputs
    

Input Value(s)
(% Unless

Noted
Otherwise)

 

Investments in Securities, at Value

 

        

Loan Participations and Assignments

  $ 55        Other Valuation Techniques(2)        —          —    

Corporate Bonds & Notes

          

Banking & Finance

    2,340        Reference Instrument        OAS Spread        549.080 bps  
    2,813        Reference Instrument        Spread movement        281.000 bps  

Industrials

    6,989        Proxy Pricing        Base Price        99.500-100.000  

Asset-Backed Securities

    4,784        Proxy Pricing        Base Price        46.000  
 

 

 

          

Total

  $     16,981           
 

 

 

          

 

(1) 

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2) 

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   67


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 173.9%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 2.8%  

Air Methods Corp.

 

4.796% due 04/21/2024

  $     295     $     292  

Almonde, Inc.

 

8.459% due 06/13/2025

      6,500         6,634  

Ancestry.com Operations, Inc.

 

9.460% due 10/19/2024

      6,390         6,457  

Ascend Learning LLC

 

TBD% due 07/05/2022

      250         250  

BMC Software Finance, Inc.

 

5.226% due 09/10/2022

      5,382         5,401  

CD&R Plumb Buyer LLC

 

TBD% due 06/25/2018

      900         896  

CenturyLink, Inc.

 

1.375% due 01/31/2025

      3,000         2,971  

CityCenter Holdings LLC

 

3.716% due 04/18/2024

      300         301  

Diaverum Holding SARL

 

TBD% due 05/31/2024

  EUR     1,100         1,261  

Drillships Ocean Ventures, Inc.

 

TBD% due 07/25/2021

  $     14,160         11,824  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      9,130         9,168  

Forbes Energy Services LLC

 

5.000% - 7.000% due 04/13/2021

      1,848         1,876  

iHeartCommunications, Inc.

 

7.976% due 01/30/2019

      24,775         20,315  

Klockner-Pentaplast of America, Inc.

 

TBD% due 06/13/2024

  EUR     350         399  

Moran Foods LLC

 

7.226% due 12/05/2023

  $     11,940         11,641  

Nielsen Finance LLC

 

3.096% due 10/04/2023

      425         426  

OGX

 

TBD% due 04/10/2049 ^

      2,107         559  

Sequa Mezzanine Holdings LLC

 

6.672% due 11/28/2021

      1,150         1,161  

10.172% due 04/28/2022

      2,580         2,635  

Sierra Hamilton LLC

 

9.045% due 07/03/2017

      2,540         2,464  

VFH Parent LLC

 

TBD% due 10/15/2021

      200         202  
       

 

 

 

Total Loan Participations and Assignments
(Cost $93,499)

 

        87,133  
       

 

 

 
CORPORATE BONDS & NOTES 28.4%  
BANKING & FINANCE 9.6%  

AGFC Capital Trust

 

2.908% due 01/15/2067 (l)

      20,300         12,079  

Aviation Loan Trust

 

3.356% due 12/15/2022

      1,832         1,714  

Banco Espirito Santo S.A.

 

4.000% due 01/21/2019 ^

  EUR     15,000         5,482  

Barclays PLC

 

6.500% due 09/15/2019 (h)

      100         118  

7.250% due 03/15/2023 (h)(l)

  GBP     29,490         40,645  

7.875% due 09/15/2022 (h)(l)

      2,000         2,817  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

  $     492         485  

4.700% due 06/22/2047

      520         513  

Credit Agricole S.A.

 

7.500% due 06/23/2026 (h)(l)

  GBP     10,900         15,989  

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

  $     618         612  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      21,900         21,356  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      384         394  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

HSBC Holdings PLC

 

6.000% due 05/22/2027 (h)

    $ 500       $ 518  

Intrum Justitia AB

 

2.750% due 07/15/2022

  EUR     300         345  

3.125% due 07/15/2024

      300         342  

Jefferies Finance LLC

 

6.875% due 04/15/2022 (l)

  $     1,200         1,203  

7.500% due 04/15/2021 (l)

      16,104         16,788  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020 (l)

      7,600         7,676  

Legg Mason PT

 

7.130% due 01/10/2021

      10,899         11,094  

Lloyds Banking Group PLC

 

7.875% due 06/27/2029 (h)(l)

  GBP     15,502         23,689  

Mercury Bondco PLC (8.250% Cash or 9.000% PIK)

 

8.250% due 05/30/2021 (d)

  EUR     2,035         2,446  

Nationwide Building Society

 

10.250% due 06/29/2049 (h)

  GBP     76         14,964  

Navient Corp.

 

5.875% due 03/25/2021

  $     132         140  

6.500% due 06/15/2022 (l)

      3,986         4,235  

7.250% due 01/25/2022 (l)

      3,400         3,727  

8.000% due 03/25/2020 (l)

      9,500         10,640  

Novo Banco S.A.

 

5.000% due 05/21/2019

  EUR     1,500         1,413  

OneMain Financial Holdings LLC

 

6.750% due 12/15/2019 (l)

  $     7,532         7,937  

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

      236         238  

Pinnacol Assurance

 

8.625% due 06/25/2034 (j)

      23,200         25,099  

Provident Funding Associates LP

 

6.375% due 06/15/2025 (l)

      162         167  

Rio Oil Finance Trust

 

9.250% due 07/06/2024 (l)

      16,237         16,566  

9.250% due 07/06/2024

      1,203         1,227  

9.750% due 01/06/2027

      3,072         3,149  

Royal Bank of Scotland Group PLC

 

7.500% due 08/10/2020 (h)(l)

      16,143         16,700  

8.000% due 08/10/2025 (h)(l)

      6,627         7,211  

8.625% due 08/15/2021 (h)

      1,500         1,639  

Santander UK Group Holdings PLC

 

6.750% due 06/24/2024 (h)

  GBP     5,560         7,561  

Springleaf Finance Corp.

 

7.750% due 10/01/2021 (l)

  $     3,650         4,097  

8.250% due 12/15/2020 (l)

      4,090         4,601  

UBS Group AG

 

5.750% due 02/19/2022 (h)(l)

  EUR     3,600         4,545  
       

 

 

 
            302,161  
       

 

 

 
       
INDUSTRIALS 16.7%  

Altice Luxembourg S.A.

 

7.250% due 05/15/2022 (l)

      14,527         17,613  

Banijay Group S.A.S.

 

4.000% due 07/01/2022 (c)

      230         266  

Belden, Inc.

 

3.375% due 07/15/2027 (c)

      280         320  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

 

9.000% due 10/15/2019 (d)(l)

  $     32,842         32,965  

Caesars Entertainment Operating Co., Inc.

 

8.500% due 02/15/2020 ^(i)(l)

      70,792         91,322  

9.000% due 02/15/2020 ^(i)

      4,457         5,769  

10.000% due 12/15/2018 ^

      3,820         3,534  

CDK Global, Inc.

 

4.875% due 06/01/2027

      102         105  

Charter Communications Operating LLC

 

5.375% due 05/01/2047

      335         356  

Chemours Co.

 

5.375% due 05/15/2027

      223         229  

Chesapeake Energy Corp.

 

4.408% due 04/15/2019

      134         132  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

CommScope Technologies LLC

 

5.000% due 03/15/2027

  $     12     $     12  

Community Health Systems, Inc.

 

6.250% due 03/31/2023 (l)

      825         855  

CSN Resources S.A.

 

6.500% due 07/21/2020 (l)

      2,430         1,816  

6.500% due 07/21/2020

      180         135  

Diamond Resorts International, Inc.

 

7.750% due 09/01/2023

      35         37  

10.750% due 09/01/2024 (l)

      13,000         13,845  

DriveTime Automotive Group, Inc.

 

8.000% due 06/01/2021 (l)

      6,500         6,549  

Dynegy, Inc.

 

6.750% due 11/01/2019 (l)

      1,264         1,310  

8.034% due 02/02/2024 (l)

      13,350         12,682  

EI Group PLC

 

6.875% due 05/09/2025 (l)

  GBP     2,210         3,192  

Endo Dac

 

5.875% due 10/15/2024

  $     490         507  

EW Scripps Co.

 

5.125% due 05/15/2025

      120         124  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      198         202  

Fresh Market, Inc.

 

9.750% due 05/01/2023 (l)

      20,506         17,251  

Frontier Finance PLC

 

8.000% due 03/23/2022 (l)

  GBP     24,200         30,812  

HCA, Inc.

 

5.500% due 06/15/2047

  $     519         538  

Hellenic Railways Organization S.A.

 

5.014% due 12/27/2017

  EUR     800         905  

Hexion, Inc.

 

13.750% due 02/01/2022 (l)

  $     226         200  

iHeartCommunications, Inc.

 

9.000% due 03/01/2021 (l)

      36,570         27,565  

11.250% due 03/01/2021

      8,430         6,396  

Intelsat Jackson Holdings S.A.

 

7.250% due 04/01/2019 (l)

      50,200         50,275  

7.250% due 10/15/2020 (l)

      24,691           23,456  

9.750% due 07/15/2025 (c)

      1,023         1,024  

Intelsat Luxembourg S.A.

 

7.750% due 06/01/2021

      15,815         8,777  

8.125% due 06/01/2023

      1,289         690  

Intrepid Aviation Group Holdings LLC

 

6.875% due 02/15/2019 (l)

      45,888         44,741  

8.250% due 07/15/2017 (l)

      17,200         17,179  

j2 Cloud Services LLC

 

6.000% due 07/15/2025

      195         202  

KFC Holding Co.

 

4.750% due 06/01/2027 (l)

      330         338  

Mallinckrodt International Finance S.A.

 

4.750% due 04/15/2023 (l)

      12,460         10,684  

5.500% due 04/15/2025 (l)

      4,000         3,520  

Melco Resorts Finance Ltd.

 

4.875% due 06/06/2025

      500         502  

Molina Healthcare, Inc.

 

4.875% due 06/15/2025

      105         106  

N&W Global Vending SpA

 

7.000% due 10/15/2023

  EUR     100         121  

NOVA Chemicals Corp.

 

4.875% due 06/01/2024

  $     10         10  

5.250% due 06/01/2027

      207         206  

OGX Austria GmbH

 

8.375% due 04/01/2022 ^

      6,000         1  

8.500% due 06/01/2018 ^

      48,450         1  

Ortho-Clinical Diagnostics, Inc.

 

6.625% due 05/15/2022 (l)

      5,449         5,231  

PetSmart, Inc.

 

5.875% due 06/01/2025

      802         777  

Prime Security Services Borrower LLC

 

9.250% due 05/15/2023

      953         1,038  

Russian Railways via RZD Capital PLC

 

7.487% due 03/25/2031

  GBP     100         162  
 

 

68   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Safeway, Inc.

 

7.250% due 02/01/2031 (l)

  $     1,200     $     1,134  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      499         505  

5.000% due 08/01/2027 (c)

      199         201  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

      118         120  

Tenet Healthcare Corp.

 

4.625% due 07/15/2024

      1,149         1,153  

THC Escrow Corp.

 

4.625% due 07/15/2024

      272         273  

UCP, Inc.

 

8.500% due 10/21/2017

      23,300         23,165  

Unique Pub Finance Co. PLC

 

5.659% due 06/30/2027 (l)

  GBP     7,476         11,007  

7.395% due 03/28/2024

      3,700         5,583  

UPCB Finance Ltd.

 

3.625% due 06/15/2029

  EUR     990         1,118  

Venator Finance SARL

 

5.750% due 07/15/2025

  $     100         101  

VeriSign, Inc.

 

4.750% due 07/15/2027

      100         102  

Westmoreland Coal Co.

 

8.750% due 01/01/2022 (l)

      32,972         29,180  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027 (l)

      728         747  

Yellowstone Energy LP

 

5.750% due 12/31/2026

      4,086         4,086  
       

 

 

 
            525,060  
       

 

 

 
       
UTILITIES 2.1%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      450         451  

4.850% due 07/15/2047

      333         339  

Frontier Communications Corp.

 

8.500% due 04/15/2020

      6,741         7,103  

Gazprom OAO Via Gaz Capital S.A.

 

7.288% due 08/16/2037

      1,388         1,647  

Odebrecht Drilling Norbe Ltd.

 

6.350% due 06/30/2022

      3,504         1,910  

Odebrecht Offshore Drilling Finance Ltd.

 

6.625% due 10/01/2023 ^(j)

      755         259  

6.750% due 10/01/2023 ^(j)

      23,007         7,880  

Petrobras Global Finance BV

 

5.375% due 10/01/2029 (l)

  GBP     2,320         2,850  

6.125% due 01/17/2022 (l)

  $     2,010         2,080  

6.250% due 12/14/2026 (l)

  GBP     6,398         8,498  

6.625% due 01/16/2034 (l)

      11,017         13,983  

7.250% due 03/17/2044 (l)

  $     1,285         1,268  

7.375% due 01/17/2027 (l)

      3,558         3,773  

Sierra Hamilton LLC

 

12.250% due 12/15/2018 ^(i)

      30,000         6,600  

Sprint Corp.

 

7.125% due 06/15/2024 (l)

      6,085         6,785  

Terraform Global Operating LLC

 

9.750% due 08/15/2022 (l)

      1,100         1,238  
       

 

 

 
          66,664  
       

 

 

 

Total Corporate Bonds & Notes
(Cost $945,317)

 

        893,885  
       

 

 

 
MUNICIPAL BONDS & NOTES 1.2%  
ILLINOIS 0.1%  

Chicago, Illinois General Obligation Bonds, Series 2014

 

6.314% due 01/01/2044

      350         325  

Chicago, Illinois General Obligation Bonds, Series 2017

 

7.045% due 01/01/2029

      580         601  

Illinois State General Obligation Bonds, (BABs), Series 2010

 

6.725% due 04/01/2035

      145         146  

7.350% due 07/01/2035

      115         123  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Illinois State General Obligation Bonds, Series 2003

 

5.100% due 06/01/2033

  $     1,360     $     1,275  
       

 

 

 
          2,470  
       

 

 

 
       
IOWA 0.1%  

Iowa Tobacco Settlement Authority Revenue Bonds, Series 2005

 

6.500% due 06/01/2023

      1,185         1,185  
       

 

 

 
       
NEW JERSEY 0.2%  

New Jersey Economic Development Authority Revenue Bonds, Series 2005

 

6.500% due 09/01/2036

      6,550         6,407  
       

 

 

 
       
VIRGINIA 0.0%  

Tobacco Settlement Financing Corp., Virginia Revenue Bonds, Series 2007

 

6.706% due 06/01/2046

      95         83  
       

 

 

 
       
WEST VIRGINIA 0.8%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

0.000% due 06/01/2047 (g)

      231,485         12,440  

7.467% due 06/01/2047

      14,095         13,825  
       

 

 

 
          26,265  
       

 

 

 

Total Municipal Bonds & Notes
(Cost $32,948)

 

        36,410  
       

 

 

 
U.S. GOVERNMENT AGENCIES 3.1%  

Fannie Mae

 

3.000% due 01/25/2042 (a)(l)

      1,312         110  

3.500% due 08/25/2032 (a)(l)

      2,871         388  

4.216% due 10/25/2029

      2,700         2,776  

4.766% due 07/25/2029

      4,480         4,737  

4.784% due 08/25/2038 (a)(l)

      1,478         199  

4.934% due 02/25/2043 (a)(l)

      5,887         859  

5.424% due 12/25/2036 (a)(l)

      4,634         801  

6.066% due 10/25/2029

      1,700         1,822  

6.262% due 10/25/2042 (l)

      2,795         2,986  

6.966% due 07/25/2029

      6,000         6,834  

Freddie Mac

 

0.000% due 04/25/2045 - 08/25/2046 (b)(g)

      59,071         45,286  

0.100% due 04/25/2046 - 08/25/2046 (a)

      291,773         1,164  

0.200% due 04/25/2045 (a)

      29,734         83  

4.000% due 03/15/2027 (a)(l)

      1,224         145  

5.041% due 09/15/2042 (a)(l)

      2,041         313  

5.341% due 12/15/2034 (a)

      2,161         138  

6.366% due 10/25/2029

      10,650         11,637  

10.216% due 03/25/2029

      4,800         5,432  

11.716% due 10/25/2028

      999         1,259  

11.966% due 03/25/2025

      7,220         9,459  

Ginnie Mae

 

3.500% due 06/20/2042 (a)(l)

      1,414         221  

4.908% due 08/20/2042 (a)(l)

      3,757         732  

5.038% due 12/20/2040 (a)(l)

      3,635         538  

5.528% due 08/16/2039 (a)(l)

      4,254         412  
       

 

 

 

Total U.S. Government Agencies
(Cost $93,013)

 

      98,331  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 51.5%  

Adjustable Rate Mortgage Trust

 

1.366% due 03/25/2037

      2,358         1,956  

1.476% due 03/25/2036

      6,846         4,907  

3.746% due 03/25/2037 (l)

      5,305         4,711  

5.167% due 11/25/2037 ^

      1,576         1,320  

American Home Mortgage Investment Trust

 

6.600% due 01/25/2037

      5,310         2,805  

ASG Resecuritization Trust

 

2.567% due 01/28/2037 (l)

      16,180         12,999  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

6.000% due 06/28/2037 (l)

  $     43,901     $       30,553  

Banc of America Alternative Loan Trust

 

6.000% due 07/25/2035 ^

      159         159  

6.000% due 04/25/2036

      1,615         1,509  

6.000% due 07/25/2046 ^

      1,995         1,774  

6.500% due 02/25/2036 ^

      3,588         3,501  

14.265% due 09/25/2035 ^

      460         554  

Banc of America Commercial Mortgage Trust

 

5.695% due 07/10/2046 (l)

      2,023         2,020  

5.734% due 07/10/2046 (l)

      6,086         6,097  

5.874% due 06/10/2049 (l)

      5,697         5,769  

Banc of America Funding Trust

 

1.426% due 04/25/2037 ^

      2,677         1,982  

3.096% due 09/20/2046

      3,710         3,393  

3.282% due 09/20/2047 ^

      642         494  

3.350% due 09/20/2037

      1,269         894  

3.589% due 04/20/2035 ^

      3,997         3,029  

4.871% due 08/26/2036

      6,145         4,712  

6.000% due 10/25/2037 ^

      6,376         4,416  

Banc of America Mortgage Trust

 

5.750% due 10/25/2036 ^

      2,362         2,032  

5.750% due 05/25/2037 ^(l)

      1,652         1,347  

6.000% due 10/25/2036 ^

      287         249  

Barclays Commercial Mortgage Securities Trust

 

3.550% due 08/15/2027 (l)

      24,090         23,467  

Bayview Commercial Asset Trust

 

1.436% due 03/25/2037

      278         256  

1.446% due 12/25/2036

      431         409  

1.646% due 08/25/2034

      203         194  

BCAP LLC Trust

 

1.204% due 05/26/2036

      6,139         3,633  

1.254% due 02/26/2037 (l)

      19,447         12,162  

1.392% due 02/26/2047 (l)

      21,746         13,845  

1.524% due 05/26/2035

      7,433         5,574  

1.702% due 07/26/2036

      5,573         5,250  

3.404% due 03/27/2037

      8,745         6,431  

3.496% due 03/26/2037

      2,890         2,423  

3.568% due 07/26/2036

      1,262         1,044  

5.500% due 12/26/2035 (l)

      14,870         12,943  

6.000% due 10/26/2037

      4,427         3,939  

6.534% due 06/26/2037

      8,339         7,927  

7.223% due 11/26/2035

      2,883         2,979  

7.814% due 07/26/2036

      806         792  

14.006% due 01/26/2036

      13,329         3,243  

Bear Stearns Adjustable Rate Mortgage Trust

 

3.282% due 02/25/2036 ^

      1,668         1,651  

Bear Stearns ALT-A Trust

 

1.556% due 08/25/2036 (l)

      40,445         35,780  

1.702% due 07/25/2036 (l)

      63,259         35,059  

1.716% due 01/25/2036 ^(l)

      13,063         13,088  

2.341% due 03/25/2035

      7,530         6,209  

3.024% due 04/25/2037 (l)

      8,625         7,555  

3.081% due 03/25/2036

      3,067         2,163  

3.241% due 08/25/2046

      6,009         5,429  

3.242% due 12/25/2046 ^

      7,483         5,566  

3.343% due 09/25/2035 ^

      8,915         6,728  

Bear Stearns Asset-Backed Securities Trust

 

6.000% due 12/25/2035 ^

      742         660  

Bear Stearns Commercial Mortgage Securities Trust

 

5.273% due 12/11/2038 (l)

      2,574         2,582  

5.897% due 04/12/2038

      1,120         879  

Bear Stearns Mortgage Funding Trust

 

7.500% due 08/25/2036 (l)

      5,672         5,543  

Citigroup Commercial Mortgage Trust

 

3.794% due 12/10/2049

      3,050         2,741  

Citigroup Mortgage Loan Trust, Inc.

 

2.937% due 08/25/2037

      5,254         3,959  

3.085% due 03/25/2037

      5,449         4,604  

3.203% due 04/25/2037 ^

      911         745  

3.264% due 07/25/2036 ^

      3,773         2,781  

3.482% due 08/25/2034

      6,115         4,723  

3.627% due 03/25/2037 ^

      3,291         3,123  

5.500% due 12/25/2035

      4,477         3,783  

6.000% due 07/25/2036

      5,607         4,011  

6.500% due 09/25/2036

      1,872         1,583  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049 (l)

      4,742         2,665  

5.688% due 10/15/2048 (l)

      18,932         10,176  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   69


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049 (l)

  $     17,467     $       10,972  

Commercial Mortgage Trust

 

4.000% due 07/10/2046 (l)

      8,000         6,442  

5.377% due 12/10/2046 (l)

      7,628         7,703  

5.505% due 03/10/2039 (l)

      1,194         1,105  

5.844% due 06/10/2046 (l)

      3,953         2,688  

5.951% due 07/10/2038 (l)

      10,700         10,122  

Countrywide Alternative Loan Resecuritization Trust

 

3.065% due 03/25/2047

      3,412         3,368  

7.000% due 01/25/2037

      6,569         3,258  

Countrywide Alternative Loan Trust

 

1.396% due 05/25/2036 (l)

      26,709         19,787  

1.402% due 03/20/2047

      1,009         853  

1.426% due 08/25/2047 ^(l)

      2,215         1,914  

1.436% due 05/25/2047 (l)

      20,453         13,075  

1.446% due 03/25/2036 (l)

      25,039         21,530  

1.476% due 07/25/2036 (l)

      11,186         8,541  

1.512% due 11/20/2035

      264         243  

1.916% due 10/25/2035 ^(l)

      1,507         1,195  

2.042% due 07/20/2035 ^(l)

      17,642         13,469  

3.377% due 05/25/2036 (l)

      9,918         8,070  

5.500% due 11/25/2035 (l)

      2,928         2,305  

5.500% due 02/25/2036

      2,226         2,035  

5.500% due 02/25/2036 ^

      1,969         1,701  

5.500% due 05/25/2036 ^(l)

      2,355         2,157  

5.500% due 05/25/2036 (l)

      7,254         6,644  

6.000% due 03/25/2035 ^(l)

      522         419  

6.000% due 04/25/2036 (l)

      909         709  

6.000% due 01/25/2037 ^

      1,684         1,630  

6.000% due 02/25/2037 ^

      2,308         1,635  

6.000% due 04/25/2037 ^

      7,671         6,004  

6.250% due 12/25/2036 ^

      836         626  

16.456% due 07/25/2035

      160         197  

Countrywide Asset-Backed Certificates

 

1.456% due 04/25/2036

      892         603  

Countrywide Home Loan Mortgage Pass-Through Trust

 

3.086% due 03/25/2046 ^(l)

      77,776         46,600  

3.283% due 09/20/2036

      6,172         5,040  

3.307% due 05/20/2036 ^

      3,374         2,733  

Credit Suisse Commercial Mortgage Trust

 

5.847% due 02/15/2039 (l)

      6,910         6,956  

Credit Suisse First Boston Mortgage Securities Corp.

 

4.952% due 07/15/2037 (l)

      4,620         4,616  

6.000% due 01/25/2036

      422         380  

Credit Suisse Mortgage Capital Certificates

 

0.000% due 11/25/2037

      10,569         6,167  

1.833% due 11/27/2037

      8,528         5,276  

2.810% due 12/29/2037

      5,389         3,866  

2.937% due 10/26/2036 (l)

      21,866         17,453  

3.108% due 05/27/2036 (l)

      12,691         9,786  

3.200% due 09/26/2047 (l)

      25,785         16,313  

3.267% due 05/26/2036

      9,296         6,023  

3.588% due 04/28/2037

      7,043         5,654  

5.750% due 05/26/2037 (l)

      31,583         28,865  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

 

6.000% due 07/25/2036

      2,677         2,178  

6.000% due 07/25/2036 (l)

      483         393  

6.500% due 05/25/2036 ^

      3,954         2,915  

DBUBS Mortgage Trust

 

4.652% due 11/10/2046 (l)

      19,203         13,716  

Debussy PLC

 

5.930% due 07/12/2025 (l)

  GBP     55,000         71,850  

8.250% due 07/12/2025

      10,000         12,232  

Deutsche ALT-A Securities, Inc.

 

1.516% due 04/25/2037

  $     9,576         6,048  

5.500% due 12/25/2035 ^

      961         856  

Epic Drummond Ltd.

 

0.000% due 01/25/2022 (l)

  EUR     3,514         4,003  

Eurosail PLC

 

0.000% due 06/13/2045

  GBP     4         7,779  

0.509% due 03/13/2045

  EUR     7,067         5,246  

0.590% due 06/13/2045

  GBP     1,594         1,587  

1.290% due 06/13/2045

      18,708         22,291  

1.540% due 06/13/2045

      19,303         21,903  

1.890% due 09/13/2045

      15,406         16,091  

2.040% due 06/13/2045

      11,881         12,776  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

2.540% due 09/13/2045

  GBP     10,990     $       10,954  

3.790% due 06/13/2045

      4,215         4,795  

4.140% due 09/13/2045

      9,132         10,395  

First Horizon Alternative Mortgage Securities Trust

 

0.000% due 02/25/2020 (b)(g)

  $     15         15  

0.000% due 05/25/2020 (b)(g)

      19         16  

0.000% due 06/25/2020 ^(b)(g)

      9         9  

0.000% due 03/25/2035 (b)(g)

      129         107  

First Horizon Mortgage Pass-Through Trust

 

3.316% due 05/25/2037 ^(l)

      9,054         7,520  

Fondo de Titulizacion de Activos UCI

 

0.000% due 06/16/2049

  EUR     3,760         3,738  

GC Pastor Hipotecario FTA

 

0.000% due 06/21/2046 (l)

      30,288         28,582  

GE Commercial Mortgage Corp. Trust

 

5.606% due 12/10/2049 (l)

  $     44,200         44,602  

Greenwich Capital Commercial Funding Corp. Trust

 

6.590% due 06/10/2036

      2,850         2,846  

Grifonas Finance PLC

 

0.042% due 08/28/2039

  EUR     11,410         11,192  

GSC Capital Corp. Mortgage Trust

 

1.396% due 05/25/2036 ^

  $     3,786         3,003  

HarborView Mortgage Loan Trust

 

2.495% due 06/19/2045 ^

      1,435         901  

Hipocat FTA

 

0.000% due 01/15/2050

  EUR     5,348         5,424  

HomeBanc Mortgage Trust

 

3.242% due 04/25/2037 ^

  $     7,352         6,017  

HSI Asset Loan Obligation Trust

 

6.000% due 06/25/2037 ^(l)

      13,685         12,052  

IM Pastor Fondo de Titluzacion Hipotecaria

 

0.000% due 03/22/2043 (l)

  EUR     37,183         35,216  

IM Pastor Fondo de Titulizacion de Activos

 

0.000% due 03/22/2044

      1,167         1,135  

Impac Secured Assets Trust

 

1.386% due 01/25/2037 (l)

  $     7,968         7,452  

IndyMac Mortgage Loan Trust

 

1.396% due 02/25/2037 (l)

      2,120         1,812  

1.426% due 11/25/2036

      319         296  

3.185% due 11/25/2035 ^

      5,563         4,691  

3.636% due 06/25/2036

      1,499         1,357  

Jefferies Resecuritization Trust

 

6.000% due 12/26/2036

      3,982         1,642  

JPMorgan Alternative Loan Trust

 

1.544% due 06/27/2037 (l)

      16,527         13,974  

3.038% due 11/25/2036 ^

      1,628         1,630  

3.404% due 05/25/2036 ^

      1,232         954  

6.000% due 12/25/2035 ^

      1,420         1,384  

13.213% due 06/27/2037 (l)

      15,295         11,429  

JPMorgan Chase Commercial Mortgage Securities Trust

 

2.972% due 05/15/2045

      4,227         2,133  

4.000% due 08/15/2046

      2,732         1,782  

5.010% due 07/15/2042

      3,195         3,218  

5.667% due 01/12/2043 (l)

      6,718         6,768  

6.220% due 06/12/2041 (l)

      10,975         11,051  

6.433% due 02/12/2051 (l)

      12,000         12,090  

JPMorgan Resecuritization Trust

 

3.033% due 03/21/2037

      5,881         5,069  

6.000% due 09/26/2036

      3,197         2,585  

6.500% due 04/26/2036

      7,077         4,261  

Lansdowne Mortgage Securities PLC

 

0.009% due 09/16/2048

  EUR     12,374         12,286  

Lavender Trust

 

6.250% due 10/26/2036

  $     5,446         4,404  

LB-UBS Commercial Mortgage Trust

 

5.938% due 02/15/2040 (l)

      6,683         6,618  

6.062% due 06/15/2038

      3,079         2,881  

Lehman Mortgage Trust

 

6.000% due 01/25/2038 ^

      3,768         3,719  

Lehman XS Trust

 

2.116% due 08/25/2047

      708         506  

Merrill Lynch Alternative Note Asset Trust

 

6.000% due 05/25/2037 ^(l)

      4,177         3,828  

Merrill Lynch Mortgage Investors Trust

 

3.231% due 03/25/2036 ^(l)

      13,751           10,105  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Mesdag Delta BV

 

0.000% due 01/25/2020 (l)

  EUR     15,731     $     17,581  

Morgan Stanley Capital Trust

 

5.399% due 12/15/2043 (l)

  $     6,975         5,584  

5.862% due 07/12/2044 (l)

      4,600         4,592  

5.920% due 04/15/2049 (l)

      6,711         6,801  

6.128% due 06/11/2049 (l)

      12,300         12,331  

6.245% due 08/12/2041 (l)

      7,225         7,212  

Morgan Stanley Mortgage Loan Trust

 

1.386% due 05/25/2036

      202         85  

3.264% due 11/25/2037

      3,033         2,600  

3.414% due 05/25/2036 ^(l)

      3,197         2,425  

5.962% due 06/25/2036

      2,412         1,233  

Morgan Stanley Re-REMIC Trust

 

0.685% due 02/26/2037

      6,279         5,060  

1.719% due 03/26/2037

      3,847         3,215  

Morgan Stanley Resecuritization Trust

 

3.533% due 06/26/2035

      10,918         5,866  

Mortgage Equity Conversion Asset Trust

 

4.000% due 07/25/2060

      6,616         5,604  

PHH Alternative Mortgage Trust

 

0.000% due 02/25/2037 ^(b)(g)

      10         8  

RBSSP Resecuritization Trust

 

3.527% due 09/26/2035

      7,708         5,589  

6.000% due 06/26/2037

      1,517         1,331  

8.502% due 06/26/2037

      730         561  

Residential Accredit Loans, Inc. Trust

 

1.366% due 02/25/2037 (l)

      861         723  

6.000% due 12/25/2035 ^(l)

      3,647         3,505  

6.000% due 11/25/2036 ^

      4,361         3,793  

6.250% due 02/25/2037 ^

      5,785         5,369  

6.500% due 09/25/2037 ^

      2,076         1,836  

Residential Asset Mortgage Products Trust

 

8.000% due 05/25/2032 (l)

      1,067         926  

Residential Asset Securitization Trust

 

6.000% due 05/25/2036 (l)

      1,303         1,229  

6.000% due 02/25/2037 ^

      266         208  

6.000% due 03/25/2037 ^

      3,445         2,309  

6.250% due 10/25/2036 ^

      169         154  

RiverView HECM Trust

 

1.720% due 05/25/2047 (l)

      20,530         17,091  

Sequoia Mortgage Trust

 

1.939% due 02/20/2034

      729         697  

2.857% due 09/20/2032

      730         701  

Structured Adjustable Rate Mortgage Loan Trust

 

3.661% due 04/25/2036 ^

      705         674  

Structured Asset Mortgage Investments Trust

 

1.426% due 05/25/2036

      42         33  

Structured Asset Securities Corp. Trust

 

5.500% due 10/25/2035 ^

      2,231         1,580  

Suntrust Adjustable Rate Mortgage Loan Trust

 

3.482% due 02/25/2037 ^

      7,723         6,625  

Theatre Hospitals PLC

 

3.336% due 10/15/2031 (l)

  GBP     38,614         49,357  

4.086% due 10/15/2031

      1,825         2,318  

Wachovia Bank Commercial Mortgage Trust

 

5.691% due 10/15/2048 (l)

  $     16,690         16,806  

5.720% due 10/15/2048

      600         587  

6.033% due 05/15/2043

      2,803         2,798  

WaMu Mortgage Pass-Through Certificates Trust

 

2.145% due 07/25/2046

      396         379  

2.833% due 08/25/2036 ^

      3,201         3,037  

Warwick Finance Residential Mortgages PLC

 

0.000% due 09/21/2049

  GBP     0         142,273  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

1.456% due 01/25/2047 ^

  $     2,845         2,394  

1.702% due 06/25/2046

      10,639         6,466  

5.750% due 11/25/2035 ^

      2,205         2,045  

5.967% due 05/25/2036 ^(l)

      9,258         7,823  

Wells Fargo Mortgage Loan Trust

 

3.298% due 03/27/2037 (l)

      8,064         7,078  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $1,581,388)

      1,619,007  
       

 

 

 
 

 

70   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
ASSET-BACKED SECURITIES 78.7%  

Aames Mortgage Investment Trust

 

2.206% due 07/25/2035 (l)

  $     19,113     $       16,563  

Accredited Mortgage Loan Trust

 

1.816% due 07/25/2035

      5,453         5,313  

ACE Securities Corp. Home Equity Loan Trust

 

1.326% due 12/25/2036 (l)

      26,755         11,351  

1.516% due 02/25/2036

      4,884         4,813  

1.836% due 02/25/2036 ^

      7,034         6,622  

2.191% due 07/25/2035

      2,900         2,893  

2.311% due 07/25/2035 ^(l)

      17,938         12,558  

2.716% due 11/25/2034

      1,249         1,248  

Aegis Asset-Backed Securities Trust

 

1.646% due 12/25/2035 (l)

      22,800         19,177  

1.696% due 06/25/2035 (l)

      12,094         10,219  

Airspeed Ltd.

 

1.429% due 06/15/2032

      16,999         14,470  

American Money Management Corp. CLO Ltd.

 

7.220% due 04/14/2029 (l)

      6,100         6,124  

8.201% due 12/09/2026 (l)

      10,000         10,070  

Ameriquest Mortgage Securities Trust

 

1.556% due 04/25/2036 (l)

      30,500         28,542  

Ameriquest Mortgage Securities, Inc. Asset-Backed Pass-Through Certificates

 

1.666% due 01/25/2036 (l)

      22,225         20,042  

1.826% due 09/25/2035 (l)

      13,750         11,845  

2.266% due 04/25/2035 (l)

      21,004         19,961  

2.281% due 11/25/2034

      5,526         5,129  

3.166% due 09/25/2032

      1,148         1,105  

4.583% due 05/25/2034 ^

      2,745         2,631  

Amortizing Residential Collateral Trust

 

2.341% due 08/25/2032

      695         654  

Anchorage Capital CLO Ltd.

 

6.158% due 10/15/2026 (l)

      7,000         6,865  

Arbor Realty Trust, Inc.

 

5.659% due 04/15/2027

      5,300         5,342  

Argent Securities Trust

 

1.316% due 06/25/2036

      2,173         911  

1.336% due 04/25/2036

      1,261         508  

1.366% due 06/25/2036

      4,559         1,929  

1.366% due 09/25/2036

      9,598         4,246  

1.406% due 03/25/2036 (l)

      13,861         7,423  

Argent Securities, Inc. Asset-Backed Pass-Through Certificates

 

1.536% due 01/25/2036 (l)

      18,884         16,140  

1.596% due 02/25/2036 (l)

      37,700         28,630  

1.676% due 11/25/2035

      5,851         3,439  

2.491% due 11/25/2034 (l)

      9,031         7,539  

Asset-Backed Funding Certificates Trust

 

1.766% due 07/25/2035

      7,400         6,249  

2.266% due 03/25/2034

      1,241         1,157  

Asset-Backed Securities Corp. Home Equity Loan Trust

 

4.159% due 08/15/2033

      748         748  

Banco Bilbao Vizcaya Argentaria, S.A.

 

0.321% due 03/22/2046

  EUR     1,400         1,039  

Bear Stearns Asset-Backed Securities Trust

 

1.356% due 12/25/2036 (l)

  $     19,966         18,178  

2.416% due 07/25/2035 (l)

      39,756         32,971  

2.716% due 10/27/2032

      379         371  

3.091% due 12/25/2034 (l)

      18,650         16,012  

3.345% due 10/25/2036

      727         674  

Benefit Street Partners CLO Ltd.

 

6.656% due 01/20/2028 (l)

      5,900         5,813  

BSPRT Issuer Ltd.

 

5.326% due 06/15/2027

      12,900         12,922  

C-BASS CBO Corp.

 

1.350% due 09/06/2041

      65,509         7,534  

Carlyle Global Market Strategies CLO Ltd.

 

6.470% due 04/27/2027

      1,750         1,754  

Carrington Mortgage Loan Trust

 

1.296% due 10/25/2036

      1,177         767  

1.476% due 02/25/2037 (l)

      8,300         7,391  

1.636% due 02/25/2037 (l)

      13,201         9,480  

2.266% due 05/25/2035

      4,400         3,801  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Cavendish Square Funding PLC

 

0.611% due 02/11/2055

  EUR     1,500     $     1,626  

1.521% due 02/11/2055

      3,500         3,763  

CIFC Funding Ltd.

 

0.000% due 05/24/2026 (g)

  $     3,390         2,243  

Citigroup Mortgage Loan Trust, Inc.

 

1.356% due 01/25/2037 (l)

      31,261         24,478  

1.366% due 12/25/2036 (l)

      25,389         13,433  

1.376% due 09/25/2036 (l)

      20,171         15,308  

1.416% due 05/25/2037

      752         567  

1.436% due 12/25/2036

      5,113         2,740  

1.626% due 10/25/2035 (l)

      8,200         7,953  

1.916% due 11/25/2046

      4,867         2,919  

6.351% due 05/25/2036 ^

      3,227         2,073  

Conseco Finance Securitizations Corp.

 

9.546% due 12/01/2033 (l)

      6,480         7,123  

Cork Street CLO Designated Activity Co.

 

0.000% due 11/27/2028

  EUR     2,667         2,661  

3.600% due 11/27/2028

      1,197         1,371  

4.500% due 11/27/2028

      1,047         1,200  

6.200% due 11/27/2028

      1,296         1,489  

Coronado CDO Ltd.

 

2.718% due 09/04/2038

  $     26,800         18,827  

6.000% due 09/04/2038

      4,300         3,462  

Countrywide Asset-Backed Certificates

 

1.346% due 12/25/2036 ^(l)

      34,584           34,770  

1.356% due 06/25/2035 (l)

      72,199         57,921  

1.356% due 03/25/2037 (l)

      25,252         21,429  

1.356% due 06/25/2037 (l)

      26,630         22,305  

1.356% due 07/25/2037 ^(l)

      13,174         11,388  

1.356% due 06/25/2047 ^(l)

      52,832         41,141  

1.366% due 04/25/2047

      2,196         2,141  

1.366% due 06/25/2047 ^(l)

      20,751         19,618  

1.376% due 05/25/2036 (l)

      11,764         9,478  

1.416% due 06/25/2037 ^(l)

      22,764         17,068  

1.436% due 05/25/2037 (l)

      25,000         20,963  

1.436% due 08/25/2037 (l)

      26,000         20,036  

1.436% due 05/25/2047 (l)

      17,951         13,649  

1.436% due 06/25/2047 ^(l)

      19,000         11,977  

1.446% due 04/25/2047 (l)

      35,000         26,680  

1.456% due 03/25/2036 (l)

      42,175         34,802  

1.506% due 10/25/2047 (l)

      59,229         51,581  

1.606% due 04/25/2036

      8,762         6,326  

1.656% due 04/25/2036 (l)

      10,000         9,750  

1.666% due 03/25/2047 ^

      2,302         1,338  

1.706% due 04/25/2036 (l)

      15,850         8,973  

1.766% due 05/25/2047

      4,621         3,105  

1.966% due 03/25/2034

      682         683  

2.416% due 06/25/2033

      128         113  

2.716% due 02/25/2035 (l)

      4,300         4,084  

4.856% due 10/25/2046 ^(l)

      774         730  

5.167% due 10/25/2032 ^(l)

      26,418         23,750  

Countrywide Asset-Backed Certificates Trust

 

1.366% due 03/25/2047 (l)

      14,751         13,929  

1.736% due 05/25/2036 (l)

      32,154         20,169  

1.946% due 07/25/2035 (l)

      6,900         6,847  

2.116% due 04/25/2035 (l)

      10,753         10,849  

2.941% due 11/25/2034 (l)

      13,611         12,354  

Credit-Based Asset Servicing and Securitization LLC

 

1.846% due 07/25/2035

      3,000         2,590  

Dekania Europe CDO PLC

 

0.189% due 09/27/2037

  EUR     6,200         6,373  

ECAF Ltd.

 

4.947% due 06/15/2040

  $     6,177         6,095  

Encore Credit Receivables Trust

 

1.906% due 07/25/2035 (l)

      421         381  

Euromax ABS PLC

 

0.011% due 11/10/2095

  EUR     1,000         821  

FAB UK Ltd.

 

0.000% due 12/06/2045 (g)

  GBP     9,932         6,314  

Fieldstone Mortgage Investment Trust

 

1.386% due 07/25/2036

  $     6,885         3,850  

First Franklin Mortgage Loan Trust

 

0.000% due 04/25/2036 (b)(g)(l)

      8,040         6,757  

1.456% due 04/25/2036

      6,825         5,055  

1.596% due 02/25/2036

      5,500         4,165  

1.666% due 11/25/2036

      2,066         1,993  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

1.846% due 09/25/2035

  $     6,502     $     3,625  

2.191% due 05/25/2036 (l)

      16,060         7,879  

Fremont Home Loan Trust

 

1.366% due 01/25/2037

      3,987         2,159  

1.456% due 02/25/2037

      1,647         953  

1.706% due 07/25/2035

      2,800         2,698  

Glacier Funding CDO Ltd.

 

1.442% due 08/04/2035

      26,385         7,098  

Greenpoint Manufactured Housing

 

9.230% due 12/15/2029 (l)

      10,132         8,710  

Greystone Commercial Real Estate Ltd.

 

5.739% due 03/15/2027

      25,000         25,047  

GSAA Trust

 

5.058% due 05/25/2035

      5,158         5,295  

GSAMP Trust

 

1.276% due 01/25/2037

      4,215         2,639  

1.294% due 04/25/2036 (l)

      25,823         18,930  

1.306% due 01/25/2037

      1,257         790  

1.376% due 05/25/2046 (l)

      929         907  

1.416% due 11/25/2036

      5,117         3,063  

1.466% due 12/25/2036

      5,428         3,099  

2.866% due 10/25/2034

      672         639  

3.766% due 10/25/2033

      571         546  

Halcyon Loan Advisors European Funding BV

 

0.000% due 01/15/2027

  EUR     1,400         1,498  

Hillcrest CDO Ltd.

 

1.576% due 12/10/2039

  $     53,992         23,551  

Home Equity Asset Trust

 

2.311% due 05/25/2035

      3,800         3,590  

2.416% due 07/25/2035

      4,000         3,385  

Home Equity Loan Trust

 

1.556% due 04/25/2037 (l)

      8,000         6,134  

House of Europe Funding PLC

 

0.000% due 11/08/2090

  EUR     5,600         5,783  

Hout Bay Corp.

 

1.326% due 07/05/2041

  $     89,018         28,486  

HSI Asset Securitization Corp. Trust

 

1.326% due 12/25/2036 (l)

      27,061         11,531  

1.376% due 10/25/2036

      10,325         5,743  

1.386% due 12/25/2036 (l)

      16,575         7,095  

1.406% due 01/25/2037 (l)

      48,294         35,430  

1.606% due 11/25/2035

      5,830         4,979  

IndyMac Home Equity Mortgage Loan Asset-Backed Trust

 

1.376% due 11/25/2036

      6,737         5,117  

1.456% due 04/25/2037 (l)

      4,357         2,916  

1.656% due 03/25/2036

      1,504         1,271  

IXIS Real Estate Capital Trust

 

2.191% due 09/25/2035 ^

      5,457         3,769  

JPMorgan Mortgage Acquisition Corp.

 

1.606% due 05/25/2035 (l)

      5,000         4,430  

JPMorgan Mortgage Acquisition Trust

 

1.356% due 03/25/2047 (l)

      7,344         7,306  

1.366% due 07/25/2036

      2,332         1,177  

1.376% due 07/25/2036 ^

      1,465         604  

1.466% due 07/25/2036 (l)

      18,262         16,362  

5.462% due 10/25/2036 ^

      4,641         3,590  

5.888% due 10/25/2036 ^(l)

      15,469         11,964  

Jubilee CLO BV

 

0.000% due 01/15/2028

  EUR     7,000         6,411  

Lehman XS Trust

 

4.931% due 05/25/2037 ^(l)

  $     15,209         12,041  

Long Beach Mortgage Loan Trust

 

1.406% due 02/25/2036 (l)

      55,309         37,814  

1.861% due 11/25/2035 (l)

      28,200         26,145  

1.866% due 09/25/2034 (l)

      1,216         1,131  

1.921% due 11/25/2035 (l)

      31,295         21,542  

2.191% due 04/25/2035 (l)

      38,750         35,083  

Magnetite Ltd.

 

6.108% due 04/15/2026 (l)

      4,900         4,866  

MASTR Asset-Backed Securities Trust

 

1.386% due 06/25/2036 (l)

      9,810         8,051  

1.386% due 10/25/2036

      3,539         3,423  

1.396% due 02/25/2036

      9,412         5,262  

1.456% due 06/25/2036

      4,122         2,377  

1.506% due 12/25/2035

      6,839         6,453  

1.576% due 12/25/2035

      11,886         5,991  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   71


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Morgan Stanley ABS Capital, Inc. Trust

 

1.276% due 09/25/2036

  $     4,238     $     2,035  

1.286% due 10/25/2036

      5         3  

1.356% due 10/25/2036

      10,809         6,003  

1.366% due 06/25/2036

      10,950         8,174  

1.366% due 09/25/2036

      8,514         4,169  

1.366% due 11/25/2036 (l)

      21,289         13,860  

1.436% due 10/25/2036

      5,209         2,925  

1.486% due 03/25/2036 (l)

      27,653         26,485  

1.861% due 09/25/2035 (l)

      6,500         6,332  

1.891% due 09/25/2035 (l)

      18,121         16,183  

2.216% due 07/25/2037 (l)

      30,710         29,743  

2.251% due 01/25/2035

      5,265         2,391  

3.166% due 05/25/2034

      2,449         2,325  

National Collegiate Commutation Trust

 

0.000% due 03/25/2038

      87,000         40,021  

New Century Home Equity Loan Trust

 

4.216% due 01/25/2033 ^

      634         595  

Nomura Home Equity Loan, Inc. Home Equity Loan Trust

 

1.546% due 10/25/2036 ^

      5,405         1,899  

1.636% due 02/25/2036 (l)

      30,900         22,202  

Ocean Trails CLO

 

6.482% due 08/13/2025 (l)

      3,500         3,533  

Option One Mortgage Loan Trust

 

1.346% due 07/25/2037 (l)

      19,173         12,298  

1.356% due 01/25/2037 (l)

      12,719         8,481  

1.436% due 01/25/2037 (l)

      2,594         1,748  

1.466% due 03/25/2037

      761         407  

1.546% due 04/25/2037

      3,033         1,994  

Option One Mortgage Loan Trust Asset-Backed Certificates

 

1.676% due 11/25/2035 (l)

      13,200         11,305  

Park Place Securities, Inc.

 

1.846% due 09/25/2035 (l)

      7,240         5,818  

Park Place Securities, Inc. Asset-Backed Pass-Through Certificates

 

1.706% due 08/25/2035 (l)

      8,350         7,411  

1.766% due 07/25/2035 (l)

      30,950         26,710  

2.251% due 03/25/2035 ^

      7,500         6,765  

2.341% due 10/25/2034 (l)

      10,000         8,817  

2.536% due 01/25/2036 ^(l)

      11,978           10,262  

2.941% due 02/25/2035 (l)

      29,447         26,082  

3.241% due 12/25/2034 (l)

      25,974         17,229  

Popular ABS Mortgage Pass-Through Trust

 

1.606% due 02/25/2036 (l)

      7,000         6,252  

1.906% due 06/25/2035

      626         523  

2.366% due 06/25/2035

      1,349         1,068  

Putnam Structured Product CDO Ltd.

 

9.092% due 02/25/2037

      327         330  

RAAC Trust

 

2.966% due 05/25/2046 (l)

      17,151         14,433  

Renaissance Home Equity Loan Trust

 

5.612% due 04/25/2037

      3,205         1,749  

Residential Asset Mortgage Products Trust

 

1.536% due 01/25/2036 (l)

      14,303         12,413  

1.596% due 01/25/2036

      4,360         4,191  

1.936% due 02/25/2035

      250         250  

1.966% due 04/25/2034

      4,657         4,507  

2.086% due 04/25/2034

      5,351         5,159  

2.791% due 04/25/2034 ^

      1,382         1,033  

3.196% due 04/25/2034 ^

      1,852         1,329  

Residential Asset Securities Corp. Trust

 

1.346% due 11/25/2036 (l)

      12,618         10,763  

1.386% due 10/25/2036 (l)

      15,134         10,928  

1.446% due 06/25/2036 (l)

      41,332         36,400  

1.456% due 09/25/2036 (l)

      16,080         15,032  

1.496% due 04/25/2036

      5,270         5,018  

1.546% due 12/25/2035 (l)

      19,621         14,772  

1.546% due 04/25/2036 (l)

      17,500         16,832  

1.546% due 04/25/2036

      9,267         4,216  

1.556% due 05/25/2037 (l)

      9,275         8,116  

2.341% due 02/25/2035

      1,900         1,663  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Saxon Asset Securities Trust

 

2.966% due 12/25/2037 (l)

  $     49,001     $     46,797  

Securitized Asset-Backed Receivables LLC Trust

 

1.356% due 07/25/2036 (l)

      26,311         20,955  

1.376% due 07/25/2036

      3,049         1,600  

1.466% due 05/25/2036 (l)

      20,041         12,097  

1.486% due 03/25/2036 (l)

      9,461         8,600  

1.616% due 11/25/2035 (l)

      11,540         6,750  

1.666% due 10/25/2035 (l)

      13,000         12,042  

1.876% due 08/25/2035 (l)

      5,316         3,439  

SLM Student Loan Trust

 

0.000% due 10/28/2029 (g)

      25         25,506  

0.000% due 01/25/2042 (g)

      20         17,470  

SoFi Professional Loan Program LLC

 

0.000% due 03/25/2036 (g)

      200         6,120  

0.000% due 01/25/2039 (g)

      21,280         14,045  

0.000% due 05/25/2040 (g)

      22,175         11,533  

0.000% due 07/25/2040 (g)

      110         6,159  

Soloso CDO Ltd.

 

1.470% due 10/07/2037

      11,318         6,451  

Sound Point CLO Ltd.

 

6.003% due 01/23/2027

      1,000         966  

Soundview Home Loan Trust

 

1.366% due 06/25/2037

      3,916         2,647  

1.376% due 11/25/2036 (l)

      10,800         10,181  

1.396% due 02/25/2037

      8,696         3,459  

1.476% due 02/25/2037

      10,092         4,080  

1.496% due 05/25/2036 (l)

      14,665         13,283  

1.566% due 03/25/2036 (l)

      7,933         6,841  

2.166% due 10/25/2037 (l)

      8,267         6,497  

2.316% due 09/25/2037

      2,642         2,391  

Specialty Underwriting & Residential Finance Trust

 

1.566% due 03/25/2037

      683         373  

2.191% due 12/25/2035

      4,664         4,290  

3.016% due 05/25/2035

      2,273         2,118  

3.894% due 02/25/2037 ^

      3,704         2,009  

Symphony CLO Ltd.

 

5.758% due 07/14/2026 (l)

      10,700         10,296  

6.058% due 10/15/2025 (l)

      9,850         9,887  

Taberna Preferred Funding Ltd.

 

1.511% due 05/05/2038

      15,777         14,120  

1.521% due 02/05/2037

      30,189         26,415  

1.551% due 08/05/2036 ^

      19,747         14,909  

1.551% due 08/05/2036

      4,909         3,706  

Tralee CLO Ltd.

 

6.806% due 04/20/2025 (l)

      6,500         6,540  

Trapeza CDO LLC

 

2.189% due 01/20/2034 (l)

      23,770         22,225  

Wachovia Mortgage Loan Trust

 

1.906% due 10/25/2035

      8,000         6,219  

Wells Fargo Home Equity Asset-Backed Securities Trust

 

1.546% due 05/25/2036

      5,000         4,527  
       

 

 

 

Total Asset-Backed Securities
(Cost $2,321,857)

 

        2,473,843  
       

 

 

 
SOVEREIGN ISSUES 1.2%  

Argentine Government International Bond

 

2.260% due 12/31/2038

  EUR     9,992         7,239  

3.875% due 01/15/2022

      1,000         1,139  

5.000% due 01/15/2027

      3,400         3,632  

7.820% due 12/31/2033

      15,067         18,397  

Ecuador Government International Bond

 

9.650% due 12/13/2026

  $     200         201  

Republic of Greece Government International Bond

 

3.800% due 08/08/2017

  JPY     347,000         3,074  

4.500% due 07/03/2017

      310,000         2,766  

4.750% due 04/17/2019

  EUR     1,900         2,210  

Sri Lanka Government International Bond

 

6.200% due 05/11/2027

  $     800         801  
       

 

 

 

Total Sovereign Issues (Cost $36,802)

 

      39,459  
       

 

 

 
        SHARES         MARKET
VALUE
(000S)
 
COMMON STOCKS 0.2%  
ENERGY 0.1%  

Forbes Energy Services Ltd. (e)(j)

    152,625     $     2,595  

OGX Petroleo e Gas S.A. SP - ADR (e)

    858,034         0  
       

 

 

 
          2,595  
       

 

 

 
       
FINANCIALS 0.1%        

TIG FinCo PLC (j)

      2,651,536         3,367  
       

 

 

 

Total Common Stocks (Cost $11,311)

 

      5,962  
       

 

 

 
WARRANTS 0.0%  
INDUSTRIALS 0.0%  

Sequa Corp. - Exp. 04/28/2024

    2,530,304         1,187  
       

 

 

 
       
UTILITIES 0.0%  

Dynegy, Inc. - Exp. 02/02/2024

      471,770         82  
       

 

 

 

Total Warrants (Cost $1,241)

 

      1,269  
       

 

 

 
PREFERRED SECURITIES 1.5%  
INDUSTRIALS 1.5%  

Sequa Corp.

 

9.000%

      46,953         45,800  
       

 

 

 

Total Preferred Securities (Cost $46,953)

    45,800  
       

 

 

 
SHORT-TERM INSTRUMENTS 5.3%  
REPURCHASE AGREEMENTS (k) 4.5%  
          142,200  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
           
U.S. TREASURY BILLS 0.8%  

0.932% due 08/31/2017 (f)(g)(o)

      24,011         23,975  
       

 

 

 
Total Short-Term Instruments
(Cost $166,175)
        166,175  
       

 

 

 
       
Total Investments in Securities
(Cost $5,330,504)
        5,467,274  
       
Total Investments 173.9%
(Cost $5,330,504)
    $     5,467,274  

Financial Derivative
Instruments (m)(n) (0.8)%

(Cost or Premiums, net $(16,484))

    (24,706
Other Assets and Liabilities, net (73.1)%       (2,298,414
       

 

 

 
Net Assets 100.0%     $       3,144,154  
       

 

 

 
 

 

72   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.
(d) Payment in-kind security.
(e) Security did not produce income within the last twelve months.
(f) Coupon represents a weighted average yield to maturity.
(g) Zero coupon security.
(h) Perpetual maturity; date shown, if applicable, represents next contractual call date.
(i) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(j)  RESTRICTED SECURITIES:

 

Issuer Description                Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Forbes Energy Services Ltd.

         02/27/2013 - 03/11/2014     $ 7,380     $ 2,595       0.08

Odebrecht Offshore Drilling Finance Ltd. 6.625% due 10/01/2023

         04/02/2015       621       259       0.01  

Odebrecht Offshore Drilling Finance Ltd. 6.750% due 10/01/2023

         04/01/2015 - 04/08/2015       18,905       7,880       0.25  

Pinnacol Assurance 8.625% due 06/25/2034

         06/23/2014       23,200       25,099       0.80  

TIG FinCo PLC

         04/02/2015       3,931       3,367       0.11  
        

 

 

   

 

 

   

 

 

 
         $     54,037     $     39,200       1.25
        

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(k)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
NOM     1.050     06/30/2017       07/03/2017     $ 15,700     U.S. Treasury Notes 1.750% due 09/30/2022   $ (16,006   $ 15,700     $ 15,701  
RDR     1.400       06/30/2017       07/03/2017           126,500     U.S. Treasury Notes 1.625% - 1.875% due 07/31/2019 - 01/31/2022     (129,036     126,500       126,515  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

        $     (145,042   $     142,200     $     142,216  
           

 

 

   

 

 

   

 

 

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(2)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(2)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

    1.650     06/16/2017       TBD (3)      $       (58,346   $     (58,391
    2.250       05/16/2017       08/16/2017         (5,406     (5,422
    2.250       06/02/2017       09/05/2017         (3,854     (3,861
    2.648       04/03/2017       07/03/2017         (6,793     (6,838
    2.650       04/05/2017       07/03/2017         (12,600     (12,683
    2.655       04/13/2017       07/13/2017         (63,867     (64,249
    2.670       04/27/2017       07/13/2017         (14,626     (14,699
    2.680       05/09/2017       08/09/2017         (20,415     (20,499
    2.718       06/02/2017       09/05/2017         (15,186     (15,222
    2.780       06/21/2017       09/21/2017         (8,348     (8,356
    2.799       07/03/2017       10/03/2017         (13,160     (13,160
    3.137       09/22/2016       09/22/2017         (4,391     (4,395

BPS

    0.400       06/20/2017       07/20/2017       EUR       (3,558     (4,064
    0.600       06/28/2017       07/26/2017       GBP       (5,093     (6,635
    0.800       04/28/2017       07/28/2017         (4,646     (6,060
    0.950       04/28/2017       07/28/2017         (1,903     (2,483
    1.890       06/02/2017       08/31/2017       $       (2,290     (2,294
    1.892       05/25/2017       08/25/2017         (2,837     (2,843
    1.960       04/18/2017       07/18/2017         (19,895     (19,977
    1.970       05/25/2017       08/25/2017         (4,973     (4,984
    2.655       04/11/2017       07/11/2017         (32,309     (32,507

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   73


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

Counterparty   Borrowing
Rate(2)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(2)
    Payable for
Reverse
Repurchase
Agreements
 
    2.685     05/10/2017       08/10/2017       $       (3,360   $ (3,374
    2.689       05/30/2017       08/30/2017         (8,246     (8,267
    2.718       06/02/2017       08/31/2017         (3,822     (3,831
    2.736       06/09/2017       09/11/2017         (14,375         (14,401
    2.750       06/16/2017       09/18/2017         (49,645     (49,709
    2.750       06/21/2017       09/21/2017         (6,069     (6,075
    2.969       08/19/2016       08/18/2017         (19,588     (20,102
    2.976       08/16/2016       08/16/2017         (32,944     (33,818
    2.976       03/15/2017       08/16/2017         (8,699     (8,778
    3.049       07/05/2017       07/05/2018         (37,570     (37,570

BRC

    0.000       06/07/2017       07/07/2017       EUR       (9,635     (11,005
    0.426       06/13/2017       07/13/2017         (12,970     (14,817
    0.576       06/13/2017       07/13/2017         (18,740     (21,411
    3.008       10/11/2016       10/11/2017       $       (20,946     (21,091
    3.020       11/02/2016       11/02/2017         (26,834     (26,974
    3.208       10/11/2016       04/11/2018         (36,757     (37,029
    3.293       06/27/2017       TBD (3)        (43,714     (43,738
    3.299       07/05/2017       07/05/2019         (33,613     (33,613

DBL

    0.900       04/18/2017       07/18/2017       EUR       (1,531     (1,752

DEU

    2.210       06/16/2017       09/15/2017       $       (15,993     (16,010

GLM

    0.730       04/11/2017       07/11/2017       EUR       (16,033     (18,342
    2.430       05/15/2017       08/15/2017       $       (7,105     (7,129
    2.492       05/24/2017       08/24/2017         (20,784     (20,842
    2.542       05/24/2017       08/24/2017         (8,068     (8,091
    2.650       06/15/2017       09/15/2017         (15,253     (15,273
    2.679       05/17/2017       08/17/2017         (15,887     (15,943
    2.729       05/17/2017       08/17/2017         (9,587     (9,621
    2.850       06/16/2017       09/18/2017         (5,966     (5,974

GSC

    2.389       06/13/2017       07/13/2017         (87,036     (87,152

JML

    0.268       04/26/2017       07/26/2017       EUR       (3,984     (4,552
    0.471       04/26/2017       07/26/2017         (3,961     (4,527
    0.700       06/13/2017       09/13/2017       GBP       (41,587     (54,186

JPS

    2.467       04/25/2017       07/25/2017       $       (14,984     (15,055

MSB

    2.905       01/13/2017       07/13/2017         (6,432     (6,474
    2.906       10/21/2016       10/23/2017         (29,543     (29,717
    2.920       05/01/2017       05/01/2018         (5,509     (5,537
    2.920       04/27/2017       04/27/2018         (20,280     (20,390
    2.952       12/01/2016       12/01/2017         (8,461     (8,482
    2.956       04/21/2017       10/23/2017         (26,195     (26,352
    2.968       06/05/2017       06/05/2018         (39,052     (39,142
    2.973       06/06/2017       06/05/2018         (7,223     (7,239
    3.018       06/05/2017       06/05/2018         (14,052     (14,085
    3.049       10/03/2016       10/03/2017         (2,632     (2,651

MSC

    2.929       05/08/2017       11/08/2017         (18,382     (18,466
    3.250       09/16/2016       09/15/2017         (27,499     (27,542

MYI

    1.472       02/06/2017       08/07/2017       EUR       (1,408     (1,617

NOM

    1.910       06/23/2017       07/20/2017       $       (13,852     (13,859
    1.920       05/01/2017       08/01/2017         (1,067     (1,071
    2.000       06/20/2017       07/11/2017         (16,226     (16,238
    2.805       04/13/2017       10/13/2017         (13,683     (13,769
    2.922       02/22/2017       08/22/2017         (27,778     (27,869
    2.922       02/03/2017       08/03/2017         (16,233     (16,313

RBC

    2.020       06/26/2017       07/13/2017         (7,763     (7,766
    2.030       02/13/2017       08/14/2017         (10,950     (11,036
    2.050       02/06/2017       08/07/2017         (3,758     (3,789
    2.120       04/04/2017       10/04/2017         (2,889     (2,904
    2.130       05/01/2017       11/01/2017         (13,881     (13,933
    2.540       04/24/2017       10/24/2017         (24,979     (25,102
    2.580       05/01/2017       11/01/2017         (7,708     (7,743
    2.580       05/04/2017       11/03/2017         (11,940     (11,991
    2.650       02/21/2017       08/21/2017         (12,181     (12,299
    2.662       01/27/2017       07/18/2017         (3,393     (3,432
    2.700       04/19/2017       10/18/2017         (17,491     (17,589
    2.700       04/24/2017       10/24/2017         (7,600     (7,640
    2.700       05/19/2017       11/20/2017         (22,204     (22,279
    2.720       06/08/2017       12/07/2017         (26,123     (26,172
    2.730       03/20/2017       09/20/2017         (29,065     (29,296
    2.730       03/27/2017       09/20/2017         (20,861     (21,021
    2.730       05/01/2017       11/01/2017         (11,074     (11,127
    2.730       05/03/2017       11/03/2017         (4,622     (4,643

 

74   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

Counterparty   Borrowing
Rate(2)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(2)
    Payable for
Reverse
Repurchase
Agreements
 
    2.730     05/04/2017       11/03/2017       $       (15,106   $     (15,175
    2.730       05/09/2017       11/08/2017         (9,644     (9,684
    2.730       06/22/2017       07/03/2017         (11,010     (11,019
    2.730       07/03/2017       09/13/2017         (2,532     (2,532
    2.740       05/15/2017       11/15/2017         (15,940     (15,999

RCE

    0.971       06/06/2017       10/06/2017       EUR       (469     (536
    1.050       06/01/2017       09/01/2017       GBP       (8,042     (10,483
    1.338       04/18/2017       07/18/2017         (1,958     (2,557

RDR

    1.800       05/23/2017       08/23/2017       $       (2,780     (2,786
    1.900       04/07/2017       07/07/2017         (682     (685
    2.150       07/07/2017       10/10/2017         (651     (651

RTA

    1.967       01/03/2017       07/03/2017         (10,382     (10,485
    2.007       02/22/2017       08/22/2017         (12,705     (12,798
    2.071       03/09/2017       09/11/2017         (44,249     (44,544
    2.081       05/01/2017       11/01/2017         (2,120     (2,128
    2.097       07/03/2017       01/03/2018         (10,842     (10,842
    2.298       07/19/2016       07/18/2017         (2,020     (2,065
    2.345       11/14/2016       07/25/2017         (5,190     (5,268
    2.417       01/03/2017       07/03/2017         (14,139     (14,311
    2.443       08/05/2016       08/04/2017         (12,699     (12,985
    2.519       08/15/2016       08/14/2017         (28,343     (28,982
    2.519       06/02/2017       12/04/2017         (9,075     (9,095
    2.547       07/03/2017       01/03/2018         (13,144     (13,144
    2.570       10/21/2016       10/20/2017         (18,547     (18,885
    2.571       10/25/2016       10/24/2017         (7,583     (7,719
    2.605       11/18/2016       11/16/2017         (12,170     (12,370
    2.610       11/17/2016       11/16/2017         (7,889     (8,019
    2.700       04/19/2017       10/18/2017         (3,914     (3,936
    2.719       05/30/2017       11/27/2017         (7,715     (7,735
    2.813       02/06/2017       02/05/2018         (11,110     (11,238
    2.821       01/25/2017       01/25/2018         (19,342     (19,583
    2.825       02/01/2017       01/31/2018         (8,147     (8,244
    2.836       06/15/2017       06/14/2018         (32,489     (32,535
    2.838       06/23/2017       06/14/2018         (3,180     (3,183
    2.839       04/24/2017       04/23/2018         (22,420     (22,544
    2.845       02/21/2017       02/08/2018         (7,229     (7,304
    2.898       04/12/2017       04/05/2018         (9,046     (9,106
    2.918       03/14/2017       03/08/2018         (32,760     (33,055
    2.923       03/16/2017       03/08/2018         (8,773     (8,851

RYL

    0.626       06/22/2017       07/24/2017       EUR       (3,620     (4,135

SOG

    0.600       06/05/2017       07/05/2017       GBP       (19,684     (25,649
    0.600       07/05/2017       08/07/2017         (19,884     (25,897
    0.721       06/02/2017       09/04/2017       EUR       (4,763     (5,444
    1.750       04/12/2017       07/11/2017       $       (3,514     (3,528
    1.750       05/01/2017       08/01/2017         (4,123     (4,136
    1.750       05/08/2017       08/08/2017         (35,961     (36,059
    1.750       05/16/2017       08/16/2017         (19,891     (19,937
    1.750       05/19/2017       08/21/2017         (12,175     (12,202
    1.750       05/22/2017       08/22/2017         (19,677     (19,717
    1.750       05/30/2017       08/30/2017         (12,254     (12,274
    1.750       06/07/2017       07/11/2017         (4,690     (4,696
    1.750       06/07/2017       08/16/2017         (2,624     (2,627
    1.750       06/09/2017       08/30/2017         (5,009     (5,015
    1.750       06/23/2017       07/11/2017         (688     (688
    1.780       06/08/2017       09/07/2017         (6,519     (6,527
    1.800       06/15/2017       09/15/2017         (6,990     (6,996
    2.800       04/07/2017       10/06/2017         (7,740     (7,792
    2.806       04/11/2017       10/12/2017         (10,361     (10,427
    2.817       01/26/2017       07/26/2017         (17,236     (17,327
    2.817       01/30/2017       07/26/2017         (20,474     (20,577
    2.871       06/09/2017       12/11/2017         (46,676     (46,765
    2.873       06/06/2017       12/06/2017         (40,666     (40,754
    2.892       06/14/2017       12/14/2017         (19,627     (19,657

UBS

    0.900       06/08/2017       07/24/2017       GBP       (9,442     (12,305
    1.050       04/25/2017       07/25/2017         (1,827     (2,385
    1.210       05/17/2017       08/17/2017         (41,381     (53,980
    1.428       04/27/2017       10/27/2017         (29,372     (38,355
    1.960       04/25/2017       07/25/2017       $       (2,955     (2,966
    2.130       05/15/2017       08/15/2017         (8,786     (8,811
    2.600       04/05/2017       07/05/2017         (11,721     (11,796

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   75


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

Counterparty   Borrowing
Rate(2)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(2)
    Payable for
Reverse
Repurchase
Agreements
 
    2.605     04/07/2017       07/07/2017       $       (9,122   $ (9,179
    2.630       05/09/2017       08/09/2017         (6,455     (6,481
    2.650       04/05/2017       07/05/2017         (22,399     (22,546
    2.653       04/21/2017       07/21/2017         (5,638     (5,668
    2.655       04/07/2017       07/07/2017         (20,553     (20,685
    2.853       04/24/2017       04/24/2018         (46,929     (47,189
           

 

 

 

Total Reverse Repurchase Agreements

 

        $     (2,580,482
           

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
     Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(4)  

Global/Master Repurchase Agreement

            

BCY

  $     0     $     (227,775   $     0      $     (227,775   $     315,133     $ 87,358  

BPS

    0       (267,772     0        (267,772     369,620           101,848  

BRC

    0       (209,678     0        (209,678     308,262       98,584  

DBL

    0       (1,752     0        (1,752     2,433       681  

DEU

    0       (16,010     0        (16,010     19,906       3,896  

GLM

    0       (101,215     0        (101,215     140,963       39,748  

GSC

    0       (87,152     0        (87,152     126,045       38,893  

JML

    0       (63,265     0        (63,265     74,820       11,555  

JPS

    0       (15,055     0        (15,055     21,498       6,443  

MSB

    0       (160,069     0        (160,069     216,458       56,389  

MSC

    0       (46,008     0        (46,008     75,591       29,583  

MYI

    0       (1,617     0        (1,617     2,141       524  

NOM

    15,701       (89,119     0        (73,418     95,886       22,468  

RBC

    0       (294,171     0        (294,171     378,440       84,269  

RCE

    0       (13,576     0        (13,576     16,556       2,980  

RDR

    126,515       (4,122     0        122,393           (123,675     (1,282

RTA

    0       (380,954     0        (380,954     498,216           117,262  

RYL

    0       (4,135     0        (4,135     4,219       84  

SOG

    0       (354,691     0        (354,691     437,813       83,122  

UBS

    0       (242,346     0            (242,346     320,927       78,581  
 

 

 

   

 

 

   

 

 

        

Total Borrowings and Other Financing Transactions

  $     142,216     $     (2,580,482   $     0         
 

 

 

   

 

 

   

 

 

        

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

         

Corporate Bonds & Notes

  $ 0     $ (157,479   $ (304,780   $ (77,356   $ (539,615

U.S. Government Agencies

    0       (685     (5,629     0       (6,314

Non-Agency Mortgage-Backed Securities

    0       (123,669     (274,885     (482,042     (880,596

Asset-Backed Securities

    0       (325,264     (248,642     (442,642     (1,016,548
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $     (607,097   $     (833,936   $     (1,002,040   $     (2,443,073
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements(5)

 

    $ (2,443,073
         

 

 

 

 

(l) Securities with an aggregate market value of $3,454,729 have been pledged as collateral under the terms of under the terms of the above master agreements as of June 30, 2017.

 

(1) 

Includes accrued interest.

(2) 

The average amount of borrowings outstanding during the period ended June 30, 2017 was $2,337,732 at a weighted average interest rate of 2.110%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

(3) 

Open maturity reverse repurchase agreement.

(4) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

(5) 

Unsettled reverse repurchase agreements liability of $(137,409) is outstanding at period end.

 

76   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

(m)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value(4)
    Variation Margin  
                Asset     Liability  

Banco Espirito Santo S.A.

    5.000     12/20/2020       15.477     EUR      2,500     $ (519   $ (102   $ (621   $ 0     $ (7

Frontier Communications Corp.

    5.000       06/20/2020       6.022       $    16,400       (465     47       (418     13       0  

Frontier Communications Corp.

    5.000       06/20/2022       9.253       2,800       (378     (57     (435     2       0  

Navient Corp.

    5.000       09/20/2020       1.682       200       8       13       21       0       0  

Navient Corp.

    5.000       12/20/2021       2.594       400       1       39       40       1       0  

Navient Corp.

    5.000       06/20/2022       2.914       2,200       146       63       209       8       0  

Sprint Communications, Inc.

    5.000       12/20/2021       2.033       13,300       249       1,412       1,661       0       (7
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
          $     (958   $     1,415       $    457     $     24     $     (14
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value(4)
    Variation Margin  
              Asset     Liability  

CDX.HY-28 5-Year Index

    5.000     06/20/2022     $     500     $     34     $     1     $     35     $     1     $     0  
       

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
     Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                 Asset      Liability  

Pay

 

3-Month CAD-Bank Bill

    3.300     06/19/2024        CAD       102,200     $ 4,747     $ 2,754     $ 7,501     $ 0      $ (665

Receive

 

3-Month CAD-Bank Bill

    3.500       06/20/2044          46,900       (1,671     (6,265     (7,936     1,110        0  

Receive

 

3-Month USD-LIBOR

    1.750       12/21/2023        $       509,000       9,591       (19,836     (10,245     0        (1,185

Receive(5)

 

3-Month USD-LIBOR

    2.500       12/20/2027          172,200       2,392       (300     2,092       0        (300

Pay

 

3-Month USD-LIBOR

    1.750       12/21/2026          801,000       19,386       (55,247     (35,861     0        (2,324

Receive

 

3-Month USD-LIBOR

    1.750       06/21/2037          204,000       25,102       574       25,676       740        0  

Receive

 

3-Month USD-LIBOR

    1.750       06/21/2047          450,900       87,402       (10,244     77,158       1,737        0  

Pay

 

6-Month  AUD-BBR-BBSW

    3.631       03/06/2019        AUD       150,000       0       3,670       3,670       0        (77

Pay

 

6-Month  AUD-BBR-BBSW

    3.635       03/06/2019          175,000       0       4,291       4,291       0        (90

Pay

 

6-Month  AUD-BBR-BBSW

    3.500       06/17/2025          41,800       1,036       754       1,790       0        (320

Receive(5)

 

6-Month EUR-EURIBOR

    1.000       09/20/2027        EUR       32,700       (176     (12     (188     0        (12

Receive(5)

 

6-Month GBP-LIBOR

    1.500       09/20/2027        GBP       96,400       (1,400     (185     (1,585     0        (186
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
             $ 146,409     $ (80,046   $ 66,363     $ 3,587      $ (5,159
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total Swap Agreements

 

    $     145,485     $     (78,630   $     66,855     $     3,612      $     (5,173
            

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation Margin
Asset
   

Total

          Market Value     Variation Margin
Liability
   

Total

 
     Purchased
Options
    Futures     Swap
Agreements
            Written
Options
    Futures     Swap
Agreements
   

Total Exchange-Traded or Centrally Cleared(6)

  $     0     $     0     $     3,612     $     3,612       $     0     $     0     $     (5,173)     $     (5,173)  
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

Cash of $107,709 has been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   77


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

(4) 

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(5) 

This instrument has a forward starting effective date. See Note 2, Securities Transactions and Investment Income, in the Notes to Financial Statements for further information.

(6) 

The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(n)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

FORWARD FOREIGN CURRENCY CONTRACTS:

 

Counterparty

   Settlement
Month
    Currency to
be Delivered
    Currency to
be Received
    Unrealized Appreciation/
(Depreciation)
 
         Asset     Liability  

BOA

     07/2017     EUR     141,536     $     159,088     $ 0     $ (2,567
     07/2017     GBP     18,563         23,857       0       (321

BPS

     07/2017         198,205         255,130       0       (3,022
     07/2017     $     5,886     JPY     658,983       0       (28
     08/2017     JPY     658,983     $     5,893       28       0  

CBK

     07/2017     EUR     2,209         2,485       0       (38

GLM

     07/2017     CAD     2,267         1,681       0       (67
     07/2017     EUR     2,957         3,326       0       (52
     07/2017     GBP     96,403         124,508       0       (1,052
     07/2017     JPY     658,983         5,952       93       0  
     07/2017     $     12,321     EUR     10,946       181       0  
     07/2017         54,884     GBP     43,136       1,298       0  
     08/2017     AUD     1,286     $     988       0       0  

HUS

     07/2017     GBP     219         283       0       (2

JPM

     07/2017     EUR     5,335         5,989       0       (104
     07/2017     GBP     3,190         4,090       0       (64
     07/2017     $     2,595     CAD     3,402       28       0  
     07/2017         35,684     EUR     31,772       604       0  
     07/2017         14,723     GBP     11,581       361       0  
     08/2017     CAD     3,402     $     2,597       0       (28
     08/2017     $     3,077     JPY     344,000       0       (14

RBC

     07/2017     CAD     1,135     $     858       0       (17
     07/2017     $     359,123     GBP     276,568       1,092       0  
     08/2017     GBP     276,568     $     359,441       0       (1,095

SCX

     07/2017         7,028         9,051       0       (103

SSB

     07/2017     EUR     703         794       0       (9

TOR

     07/2017     $     138,855     EUR     121,483       0       (103
     08/2017     EUR     121,483     $     139,058       107       0  

UAG

     07/2017         11,461         12,891       0       (199
     07/2017     GBP     7,677         9,850       0       (149
            

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

 

      $     3,792     $     (9,034
            

 

 

   

 

 

 

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Counterparty   Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value
 
                Asset     Liability  
GST  

Petrobras Global Finance BV

    1.000     09/20/2020       2.229   $     1,120     $     (163   $ 121     $ 0     $ (42
 

Springleaf Finance Corp.

    5.000       06/20/2022       2.972       1,900       105       69       174       0  
           

 

 

   

 

 

   

 

 

   

 

 

 
            $     (58   $     190     $     174     $     (42
           

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty

 

Index/Tranches

  Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements, at Value(4)  
              Asset     Liability  
BRC  

ABX.HE.AAA.6-2 Index

    0.110     05/25/2046     $     10,371       $    (2,304   $     1,424     $     0     $ (880
DUB  

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       9,700       (605     (521     0           (1,126
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       13,200       (1,520     (446     0       (1,966
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       8,300       (1,040     65       0       (975

 

78   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

Counterparty

 

Index/Tranches

  Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements, at Value(4)  
              Asset     Liability  
FBF  

CMBX.NA.BBB-.10 Index

    3.000     11/17/2059     $ 400     $ (45   $ 2     $ 0     $ (43
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       900       (108     3       0       (105
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       1,600       (146     4       0       (142
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       3,800       (594     28       0       (566
GST  

CMBX.NA.A.6 Index

    2.000       05/11/2063       13,000       (662     251       0       (411
 

CMBX.NA.BB.6 Index

    5.000       05/11/2063       8,500       (1,150     (405     0       (1,555
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       18,900       (1,042     (1,152     0       (2,194
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       3,300       (169     (123     0       (292
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       19,300       (2,404     137       0       (2,267
JPS  

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       400       (49     2       0       (47
MYC  

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059           21,800       (2,324     (18     0       (2,342
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       8,300       (447     (517     0       (964
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       6,500       (286     (290     0       (576
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       3,300       (382     (110     0       (492
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       9,300       (1,149     57       0       (1,092
         

 

 

   

 

 

   

 

 

   

 

 

 
        $ (16,426   $ (1,609   $ 0     $ (18,035
         

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

    $     (16,484   $     (1,419   $     174     $     (18,077
         

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged/(received) as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                    
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
     Swap
Agreements
     Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
    Net
Exposure(5)
 

BOA

  $ 0      $ 0      $ 0      $ 0       $ (2,888   $ 0      $ 0     $ (2,888   $ (2,888   $ 3,029     $ 141  

BPS

    28        0        0        28         (3,050     0        0       (3,050     (3,022     2,271       (751

BRC

    0        0        0        0         0       0        (880     (880     (880     981       101  

CBK

    0        0        0        0         (38     0        0       (38     (38     0       (38

DUB

    0        0        0        0         0       0        (4,067     (4,067     (4,067     4,107       40  

FBF

    0        0        0        0         0       0        (856     (856     (856     990       134  

GLM

    1,572        0        0        1,572         (1,171     0        0       (1,171     401       (570     (169

GST

    0        0        174        174         0       0        (6,761     (6,761     (6,587     6,640       53  

HUS

    0        0        0        0         (2     0        0       (2     (2     0       (2

JPM

    993        0        0        993         (210     0        0       (210     783       (790     (7

JPS

    0        0        0        0         0       0        (47     (47     (47     0       (47

MYC

    0        0        0        0         0       0        (5,466     (5,466       (5,466       4,848         (618

RBC

    1,092        0        0        1,092         (1,112     0        0       (1,112     (20     0       (20

SCX

    0        0        0        0         (103     0        0       (103     (103     0       (103

SSB

    0        0        0        0         (9     0        0       (9     (9     0       (9

TOR

    107        0        0        107         (103     0        0       (103     4       0       4  

UAG

    0        0        0        0         (348     0        0       (348     (348     365       17  
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

       

Total Over the Counter

  $   3,792      $   0      $   174      $   3,966       $   (9,034   $   0      $   (18,077   $   (27,111      
 

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

 

    

 

 

   

 

 

       

 

(o) Securities with an aggregate market value of $23,975 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4) 

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(5) 

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed under the same master agreement with the same legal entity. The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting agreements.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   79


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Consolidated Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 25     $ 0     $ 0     $ 3,587     $ 3,612  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 3,792     $ 0     $ 3,792  

Swap Agreements

    0       174       0       0       0       174  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 174     $ 0     $ 3,792     $ 0     $ 3,966  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 199     $ 0     $ 3,792     $ 3,587     $ 7,578  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 14     $ 0     $ 0     $ 5,159     $ 5,173  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 9,034     $ 0     $ 9,034  

Swap Agreements

    0       18,077       0       0       0       18,077  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 18,077     $ 0     $ 9,034     $ 0     $ 27,111  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     18,091     $     0     $     9,034     $     5,159     $     32,284  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The effect of Financial Derivative Instruments on the Consolidated Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain (Loss) on Financial Derivative Instruments

 

       

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 912     $ 0     $ 0     $ 97,787     $ 98,699  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 15,412     $ 0     $ 15,412  

Swap Agreements

    0       3,950       0       0       (2,158     1,792  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 3,950     $ 0     $ 15,412     $ (2,158   $ 17,204  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $     4,862     $ 0     $ 15,412     $ 95,629     $ 115,903  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

     

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 1,118     $ 0     $ 0     $ (93,183   $ (92,065
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ (20,484   $ 0     $ (20,484

Swap Agreements

    0       (749     0       0       2,323       1,574  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ (749   $ 0     $ (20,484   $ 2,323     $ (18,910
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $ 369     $     0     $     (20,484   $     (90,860   $     (110,975
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

80   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 0     $ 73,057     $ 14,076     $ 87,133  

Corporate Bonds & Notes

       

Banking & Finance

    0       244,612       57,549       302,161  

Industrials

    0       466,997       58,063       525,060  

Utilities

    0       60,064       6,600       66,664  

Municipal Bonds & Notes

       

Illinois

    0       2,470       0       2,470  

Iowa

    0       1,185       0       1,185  

New Jersey

    0       0       6,407       6,407  

Virginia

    0       83       0       83  

West Virginia

    0       26,265       0       26,265  

U.S. Government Agencies

    0       98,331       0       98,331  

Non-Agency Mortgage-Backed Securities

    0       1,596,312       22,695       1,619,007  

Asset-Backed Securities

    0         2,351,950         121,893         2,473,843  

Sovereign Issues

    0       39,459       0       39,459  

Common Stocks

       

Energy

    0       2,595       0       2,595  

Financials

    0       0       3,367       3,367  

Warrants

       

Industrials

    0       0       1,187       1,187  

Utilities

      82       0       0       82  
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Preferred Securities

       

Industrials

  $ 0     $ 0     $ 45,800     $ 45,800  

Short-Term Instruments

       

Repurchase Agreements

    0       142,200       0       142,200  

U.S. Treasury Bills

    0       23,975       0       23,975  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $ 82     $ 5,129,555     $ 337,637     $ 5,467,274  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

    0       3,612       0       3,612  

Over the counter

    0       3,966       0       3,966  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 7,578     $ 0     $ 7,578  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

    0       (5,173     0       (5,173

Over the counter

    0       (27,111     0       (27,111
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ (32,284   $ 0     $ (32,284
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ 0     $ (24,706   $ 0     $ (24,706
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $   82     $   5,104,849     $   337,637     $   5,442,568  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held at
06/30/2017(1)
 

Investments in Securities, at Value

 

       

Loan Participations and Assignments

  $ 1,726     $ 13,445     $ (218   $ 41     $ 3     $ (921   $ 0     $ 0     $ 14,076     $ (922

Corporate Bonds & Notes

                   

Banking & Finance

    103,051       0       (47,847     50       543       1,752       0       0       57,549       (315

Industrials

    44,189       34,575       (20,286     174       425       (1,012     0       (2     58,063       275  

Utilities

    4,493       0       (4,359     0       0       (134     6,600       0       6,600       0  

Municipal Bonds & Notes

                   

New Jersey

    6,944       0       (165     (4     0       (368     0       0       6,407       (363

Non-Agency Mortgage-Backed Securities

    18,261       23,036       (1,307     229       180       1,878       0       (19,582     22,695       652  

Asset-Backed Securities

    29,864       97,030       0       1,823       0       (6,824     0       0       121,893       (6,823

Common Stocks

                   

Financials

    1,694       0       0       0       0       1,673       0       0       3,367       1,673  

Warrants

                   

Industrials

    0       0       0       0       0       1,187       0       0       1,187       1,187  

Preferred Securities

                   

Industrials

    0       46,953       0       0       0       (1,153     0       0       45,800       (1,153
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $   210,222     $   215,039     $   (74,182   $   2,313     $   1,151     $   (3,922   $   6,600     $   (19,584   $   337,637     $   (5,789
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   81


Consolidated Schedule of Investments PIMCO Dynamic Credit and Mortgage Income Fund (Cont.)

 

June 30, 2017

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
   Unobservable
Inputs
   Input Value(s)
(% Unless
Noted
Otherwise)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 2,435      Other Valuation Techniques(2)         —    
    11,641      Third Party Vendor    Broker Quote      97.500-100.563  

Corporate Bonds & Notes

          

Banking & Finance

    11,094      Proxy Pricing    Base Price      102.000  
    25,099      Reference Instrument    OAS Spread      549.080 bps  
    21,356      Reference Instrument    Spread movement      281.000 bps  

Industrials

    58,063      Proxy Pricing    Base Price      99.500-100.000  

Utilities

    6,600      Other Valuation Techniques(2)         —    

Municipal Bonds & Notes

          

New Jersey

    6,407      Proxy Pricing    Base Price      98.862  

Non-Agency Mortgage-Backed Securities

    5,604      Proxy Pricing    Base Price      85.125  
    17,091      Third Party Vendor    Broker Quote      83.250  

Asset-Backed Securities

    121,893      Proxy Pricing    Base Price      46.000-100,000.000  

Common Stocks

          

Financials

    3,367      Other Valuation Techniques(2)         —    

Warrants

          

Industrials

    1,187      Other Valuation Techniques(2)         —    

Preferred Securities

          

Industrials

    45,800      Fundamental Valuation    Company Assets    $     551,000.000  
 

 

 

          

Total

  $     337,637           
 

 

 

          

 

(1) 

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2) 

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

82   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Consolidated Schedule of Investments PIMCO Dynamic Income Fund

 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 183.6%  
LOAN PARTICIPATIONS AND ASSIGNMENTS 2.4%  

Air Methods Corp.

 

4.796% due 04/21/2024

  $     98     $     97  

Almonde, Inc.

 

8.459% due 06/13/2025

      2,800         2,858  

Ancestry.com Operations, Inc.

 

9.460% due 10/19/2024

      2,790         2,819  

Ascend Learning LLC

 

TBD% due 07/05/2022

      100         100  

BMC Software Finance, Inc.

 

5.226% due 09/10/2022

      2,170         2,178  

CD&R Plumb Buyer LLC

 

TBD% due 06/25/2018

      350         348  

CenturyLink, Inc.

 

1.375% due 01/31/2025

      1,000         990  

CityCenter Holdings LLC

 

3.716% due 04/18/2024

      200         201  

Drillships Ocean Ventures, Inc.

 

TBD% due 07/25/2021

      6,160         5,144  

Energy Future Intermediate Holding Co. LLC

 

TBD% due 06/23/2018

      3,970         3,986  

Gartner, Inc.

 

3.226% due 04/05/2024

      53         53  

Klockner-Pentaplast of America, Inc.

 

TBD% due 06/13/2024

  EUR     100         114  

Moran Foods LLC

 

7.226% due 12/05/2023

  $     4,975         4,851  

Nielsen Finance LLC

 

3.096% due 10/04/2023

      200         200  

OGX

 

TBD% due 04/10/2049 ^

      646         172  

Sequa Mezzanine Holdings LLC

 

10.172% due 04/28/2022

      8,100         8,272  

UPC Financing Partnership

 

3.909% due 04/15/2025

      400         401  

VFH Parent LLC

 

TBD% due 10/15/2021

      100         101  
       

 

 

 

Total Loan Participations and Assignments (Cost $33,670)

      32,885  
       

 

 

 
CORPORATE BONDS & NOTES 27.5%  
BANKING & FINANCE 9.3%  

AGFC Capital Trust

 

2.908% due 01/15/2067 (l)

      12,900         7,676  

Aviation Loan Trust

 

3.356% due 12/15/2022

      720         674  

Barclays Bank PLC

 

7.625% due 11/21/2022 (l)

      10,100         11,571  

Barclays PLC

 

6.500% due 09/15/2019 (h)(l)

  EUR     2,300         2,721  

7.250% due 03/15/2023 (h)

  GBP     1,300         1,792  

7.875% due 09/15/2022 (h)

      600         845  

8.000% due 12/15/2020 (h)(l)

  EUR     2,400         3,015  

Brighthouse Financial, Inc.

 

3.700% due 06/22/2027

  $     216         213  

4.700% due 06/22/2047

      226         223  

Cantor Fitzgerald LP

 

7.875% due 10/15/2019 (l)

      6,540         7,205  

CyrusOne LP

 

5.000% due 03/15/2024

      76         78  

5.375% due 03/15/2027

      39         41  

Exela Intermediate LLC

 

10.000% due 07/15/2023 (c)

      267         264  

Exeter Finance Corp.

 

9.750% due 05/20/2019

      9,700         9,459  

Howard Hughes Corp.

 

5.375% due 03/15/2025

      166         170  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

HSBC Holdings PLC

 

6.000% due 05/22/2027 (h)

  $     300     $     311  

Intrum Justitia AB

 

2.750% due 07/15/2022

  EUR     200         230  

3.125% due 07/15/2024

      100         114  

Jefferies Finance LLC

 

6.875% due 04/15/2022 (l)

  $     700         702  

7.500% due 04/15/2021 (l)

      2,500         2,606  

Jefferies LoanCore LLC

 

6.875% due 06/01/2020 (l)

      3,800         3,838  

Lloyds Banking Group PLC

 

7.625% due 06/27/2023 (h)

  GBP     1,500         2,167  

7.875% due 06/27/2029 (h)(l)

      14,473         22,117  

Navient Corp.

 

6.500% due 06/15/2022 (l)

  $     1,594         1,694  

Oppenheimer Holdings, Inc.

 

6.750% due 07/01/2022

      104         105  

Pinnacol Assurance

 

8.625% due 06/25/2034 (j)

      10,200         11,035  

Preferred Term Securities Ltd.

 

1.626% due 09/23/2035

      762         663  

Provident Funding Associates LP

 

6.375% due 06/15/2025

      69         71  

Rio Oil Finance Trust

 

9.250% due 07/06/2024

      3,088         3,150  

Royal Bank of Scotland Group PLC

 

7.500% due 08/10/2020 (h)(l)

      7,189         7,437  

8.000% due 08/10/2025 (h)(l)

      4,575         4,978  

8.625% due 08/15/2021 (h)(l)

      2,720         2,972  

Santander UK Group Holdings PLC

 

6.750% due 06/24/2024 (h)

  GBP     2,300         3,128  

7.375% due 06/24/2022 (h)(l)

      1,700         2,331  

Springleaf Finance Corp.

 

6.125% due 05/15/2022 (l)

  $     1,489         1,575  

8.250% due 12/15/2020 (l)

      580         652  

Stichting AK Rabobank Certificaten

 

6.500% due 12/29/2049 (h)

  EUR     440         595  

Tesco Property Finance PLC

 

6.052% due 10/13/2039 (l)

  GBP     3,338         4,947  

Toll Road Investors Partnership LP

 

0.000% due 02/15/2045 (g)

  $     18,581         4,503  
       

 

 

 
            127,868  
       

 

 

 
INDUSTRIALS 14.8%  

Altice Luxembourg S.A.

 

7.250% due 05/15/2022

  EUR     4,600         5,577  

Banijay Group S.A.S.

 

4.000% due 07/01/2022 (c)

      100         115  

Belden, Inc.

 

3.375% due 07/15/2027 (c)

      100         114  

BMC Software Finance, Inc.

 

8.125% due 07/15/2021 (l)

  $     2,866         2,982  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

 

9.000% due 10/15/2019 (d)(l)

      10,200         10,238  

Buffalo Thunder Development Authority

 

0.000% due 11/15/2029 (j)

      2,483         1  

11.000% due 12/09/2022

      5,598         2,197  

Caesars Entertainment Operating Co., Inc.

 

9.000% due 02/15/2020 ^(i)

      18,491         23,853  

10.000% due 12/15/2018 ^

      23,535         21,770  

CDK Global, Inc.

 

4.875% due 06/01/2027

      43         44  

Charter Communications Operating LLC

 

5.375% due 05/01/2047 (l)

      140         149  

Chemours Co.

 

5.375% due 05/15/2027

      94         97  

Chesapeake Energy Corp.

 

4.408% due 04/15/2019

      57         56  

CommScope Technologies LLC

 

5.000% due 03/15/2027

      5         5  

Community Health Systems, Inc.

 

6.250% due 03/31/2023

      339         351  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

CSN Resources S.A.

 

6.500% due 07/21/2020 (l)

  $     770     $     576  

Diamond Resorts International, Inc.

 

10.750% due 09/01/2024 (l)

      5,500         5,858  

EW Scripps Co.

 

5.125% due 05/15/2025

      50         52  

First Quality Finance Co., Inc.

 

5.000% due 07/01/2025

      86         88  

Fresh Market, Inc.

 

9.750% due 05/01/2023 (l)

      8,060         6,780  

Frontier Finance PLC

 

8.000% due 03/23/2022

  GBP     10,000         12,732  

HCA, Inc.

 

5.500% due 06/15/2047 (l)

  $     225         233  

Hellenic Railways Organization S.A.

 

5.014% due 12/27/2017

  EUR     300         339  

Hexion, Inc.

 

13.750% due 02/01/2022

  $     90         80  

iHeartCommunications, Inc.

 

9.000% due 03/01/2021

      7,930         5,977  

9.000% due 09/15/2022

      4,000         2,975  

10.625% due 03/15/2023

      8,500         6,481  

11.250% due 03/01/2021

      3,550         2,694  

Intelsat Jackson Holdings S.A.

 

7.250% due 04/01/2019 (l)

      16,900         16,925  

7.250% due 10/15/2020

      7,817         7,426  

9.750% due 07/15/2025 (c)

      446         447  

Intelsat Luxembourg S.A.

 

7.750% due 06/01/2021

      6,000         3,330  

8.125% due 06/01/2023

      8,785         4,700  

Intrepid Aviation Group Holdings LLC

 

6.875% due 02/15/2019 (l)

      9,710         9,467  

8.250% due 07/15/2017

      7,220         7,211  

j2 Cloud Services LLC

 

6.000% due 07/15/2025

      85         88  

KFC Holding Co.

 

4.750% due 06/01/2027

      140         143  

Mallinckrodt International Finance S.A.

 

4.750% due 04/15/2023 (l)

      1,400         1,201  

Melco Resorts Finance Ltd.

 

4.875% due 06/06/2025

      200         201  

Molina Healthcare, Inc.

 

4.875% due 06/15/2025

      45         45  

NOVA Chemicals Corp.

 

4.875% due 06/01/2024

      4         4  

5.250% due 06/01/2027

      87         87  

OGX Austria GmbH

 

8.500% due 06/01/2018 ^

      16,700         0  

Ortho-Clinical Diagnostics, Inc.

 

6.625% due 05/15/2022

      172         165  

Petroleos de Venezuela S.A.

 

5.500% due 04/12/2037

      2,000         720  

PetSmart, Inc.

 

5.875% due 06/01/2025

      343         332  

Safeway, Inc.

 

7.250% due 02/01/2031 (l)

      510         482  

Sirius XM Radio, Inc.

 

3.875% due 08/01/2022 (c)

      217         220  

5.000% due 08/01/2027 (c)

      86         87  

Spirit Issuer PLC

 

5.472% due 12/28/2028 (l)

  GBP     12,120           16,710  

Surgery Center Holdings, Inc.

 

6.750% due 07/01/2025

  $     51         52  

Tenet Healthcare Corp.

 

4.625% due 07/15/2024

      525         527  

THC Escrow Corp.

 

4.625% due 07/15/2024

      106         107  

UCP, Inc.

 

8.500% due 10/21/2017

      10,600         10,539  

Unique Pub Finance Co. PLC

 

5.659% due 06/30/2027

  GBP     1,988         2,926  

6.542% due 03/30/2021

      3,805         5,451  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   83


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

UPCB Finance Ltd.

 

3.625% due 06/15/2029

  EUR     430     $     486  

Valeant Pharmaceuticals International, Inc.

 

6.500% due 03/15/2022

  $     188         198  

7.000% due 03/15/2024

      360         379  

Venator Finance SARL

 

5.750% due 07/15/2025

      44         45  

VeriSign, Inc.

 

4.750% due 07/15/2027

      43         44  

Wynn Las Vegas LLC

 

5.250% due 05/15/2027

      308         316  
       

 

 

 
          203,475  
       

 

 

 
UTILITIES 3.4%  

FirstEnergy Corp.

 

3.900% due 07/15/2027

      196         196  

4.850% due 07/15/2047

      145         148  

Frontier Communications Corp.

 

8.500% due 04/15/2020

      355         374  

Gazprom Neft OAO Via GPN Capital S.A.

 

4.375% due 09/19/2022 (l)

      2,000         2,037  

6.000% due 11/27/2023 (l)

      28,000         30,611  

Petrobras Global Finance BV

 

6.125% due 01/17/2022 (l)

      860         890  

6.250% due 12/14/2026

  GBP     1,500         1,992  

6.625% due 01/16/2034

      700         889  

6.750% due 01/27/2041 (l)

  $     6,246         5,871  

6.850% due 06/05/2115 (l)

      1,145         1,016  

6.875% due 01/20/2040

      113         107  

7.250% due 03/17/2044 (l)

      543         536  

7.375% due 01/17/2027 (l)

      1,486         1,576  
       

 

 

 
          46,243  
       

 

 

 

Total Corporate Bonds & Notes (Cost $366,110)

      377,586  
       

 

 

 
MUNICIPAL BONDS & NOTES 0.5%  
ILLINOIS 0.1%  

Chicago, Illinois General Obligation Bonds, Series 2015

 

7.375% due 01/01/2033

      430         443  

7.750% due 01/01/2042

      760         775  

Illinois State General Obligation Bonds, (BABs), Series 2010

 

6.725% due 04/01/2035

      70         71  

7.350% due 07/01/2035

      50         54  

Illinois State General Obligation Bonds, Series 2003

 

5.100% due 06/01/2033

      580         543  
       

 

 

 
          1,886  
       

 

 

 
WEST VIRGINIA 0.4%  

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

 

0.000% due 06/01/2047 (g)

      95,900         5,154  
       

 

 

 

Total Municipal Bonds & Notes (Cost $6,260)

    7,040  
       

 

 

 
U.S. GOVERNMENT AGENCIES 4.0%  

Fannie Mae

 

4.216% due 10/25/2029

      1,140         1,172  

4.704% due 07/25/2041 (a)(l)

      6,167         885  

4.766% due 07/25/2029

      1,830         1,935  

4.854% due 10/25/2040 (a)(l)

      9,581         1,213  

5.134% due 12/25/2037 (a)

      360         38  

5.224% due 03/25/2037 -
04/25/2037 (a)(l)

      20,969         3,561  

5.284% due 02/25/2037 (a)

      223         33  

5.304% due 09/25/2037 (a)(l)

      1,083         190  

5.434% due 11/25/2036 (a)

      167         24  

5.504% due 06/25/2037 (a)

      738         88  

5.534% due 10/25/2035 (a)(l)

      2,605         421  

5.764% due 03/25/2038 (a)(l)

      2,368         472  

5.784% due 02/25/2038 (a)(l)

      1,527         253  

5.884% due 06/25/2023 (a)(l)

      2,020         195  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

6.066% due 10/25/2029

  $     710     $     761  

6.966% due 07/25/2029

      2,460         2,802  

9.639% due 01/25/2041 (l)

      5,985         7,531  

Freddie Mac

 

0.000% due 04/25/2045 -
08/25/2046 (b)(g)(l)

      23,817         18,378  

0.100% due 04/25/2046 -
08/25/2046 (a)

      111,553         441  

0.200% due 04/25/2045 (a)

      12,268         34  

5.251% due 05/15/2037 (a)

      224         27  

5.311% due 07/15/2036 (a)(l)

      3,106         454  

5.421% due 09/15/2036 (a)(l)

      1,090         189  

5.541% due 04/15/2036 (a)(l)

      1,811         222  

6.366% due 10/25/2029

      4,500         4,917  

6.621% due 09/15/2036 (a)(l)

      1,863         452  

10.216% due 03/25/2029

      2,100         2,377  

11.398% due 09/15/2041

      602         783  

11.716% due 10/25/2028

      500         629  

11.966% due 03/25/2025

      3,242         4,247  

13.978% due 09/15/2034

      176         196  
       

 

 

 

Total U.S. Government Agencies
(Cost $54,577)

      54,920  
       

 

 

 
NON-AGENCY MORTGAGE-BACKED SECURITIES 88.1%  

Alba PLC

 

0.549% due 12/15/2038

  GBP     9,398         10,900  

American Home Mortgage Assets Trust

 

1.506% due 08/25/2037 ^(l)

  $     11,257         9,578  

1.756% due 11/25/2035 (l)

      2,635         2,401  

American Home Mortgage Investment Trust

 

1.816% due 09/25/2045 (l)

      6,941         6,519  

2.116% due 02/25/2044 (l)

      9,739         7,901  

Banc of America Alternative Loan Trust

 

1.616% due 05/25/2035 ^(l)

      911         748  

6.000% due 06/25/2037 (l)

      354         309  

6.000% due 06/25/2046

      142         125  

Banc of America Commercial Mortgage Trust

 

5.695% due 07/10/2046 (l)

      873         871  

5.734% due 07/10/2046 (l)

      2,640         2,645  

Banc of America Funding Trust

 

0.000% due 06/26/2035

      10,469         9,604  

0.000% due 07/26/2036

      13,581         6,914  

1.235% due 08/25/2047 ^

      7,605         6,155  

1.422% due 04/20/2047 ^(l)

      18,809         16,411  

1.662% due 02/20/2035 (l)

      4,612         3,704  

3.354% due 01/20/2047 ^

      258         227  

3.499% due 03/20/2036 ^(l)

      2,072         1,801  

3.545% due 01/25/2035 (l)

      460         395  

Banc of America Mortgage Trust

 

3.247% due 10/20/2046 ^

      346         219  

3.398% due 01/25/2036

      934         875  

Banc of America Re-REMIC Trust

 

5.952% due 02/17/2051 (l)

      35,725         35,849  

Bancaja Fondo de Titulizacion de Activos

 

0.000% due 10/25/2037

  EUR     2,327         2,620  

Barclays Commercial Mortgage Securities Trust

 

3.550% due 08/15/2027 (l)

  $     9,900         9,644  

Bayview Commercial Asset Trust

 

1.646% due 08/25/2034

      165         158  

BCAP LLC Trust

 

3.024% due 11/26/2035 (l)

      9,270         8,932  

3.090% due 10/26/2035

      6,052         5,758  

3.162% due 07/26/2035

      2,527         2,337  

3.173% due 07/26/2045

      7,018         6,254  

3.237% due 03/26/2035

      8,051         7,767  

3.310% due 02/26/2036

      7,601         5,592  

3.396% due 06/26/2036

      6,390         5,712  

3.400% due 04/26/2037 (l)

      18,244         15,944  

5.500% due 12/26/2035 (l)

      8,801         6,902  

6.000% due 08/26/2037

      4,994         4,333  

Bear Stearns Adjustable Rate Mortgage Trust

 

3.882% due 06/25/2047 ^(l)

      4,467         4,287  

Bear Stearns ALT-A Trust

 

1.416% due 02/25/2034 (l)

      7,436         6,349  

3.185% due 11/25/2035 ^(l)

      21,524         17,409  

3.343% due 09/25/2035 ^(l)

      12,117         9,145  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Bear Stearns Commercial Mortgage Securities Trust

 

5.273% due 12/11/2038 (l)

  $     1,133     $     1,136  

BRAD Resecuritization Trust

 

2.182% due 03/12/2021

      25,013         1,491  

6.550% due 03/12/2021

      4,675         4,700  

Chase Mortgage Finance Trust

 

3.165% due 01/25/2036 (l)

      12,610         11,820  

3.252% due 03/25/2037 ^(l)

      3,384         2,990  

Citigroup Commercial Mortgage Trust

 

3.794% due 12/10/2049 (l)

      1,200         1,079  

Citigroup Mortgage Loan Trust, Inc.

 

2.990% due 03/25/2036 ^

      671         643  

3.198% due 02/25/2036

      8,292         5,444  

3.667% due 09/25/2037 ^(l)

      8,956         8,191  

3.728% due 10/25/2035 ^(l)

      5,272         4,614  

Citigroup/Deutsche Bank Commercial Mortgage Trust

 

5.398% due 12/11/2049 (l)

      574         323  

5.688% due 10/15/2048 (l)

      8,000         4,300  

Commercial Mortgage Loan Trust

 

5.311% due 12/10/2049 (l)

      7,470         4,692  

Commercial Mortgage Pass-Through Certificates

 

4.750% due 10/15/2045 (l)

      1,668         1,235  

Commercial Mortgage Trust

 

5.377% due 12/10/2046 (l)

      1,718         1,734  

5.505% due 03/10/2039 (l)

      510         472  

Countrywide Alternative Loan Trust

 

0.777% due 12/25/2035 (a)

      16,743         603  

1.406% due 09/25/2046 ^(l)

      15,453         12,303  

1.466% due 06/25/2037 (l)

      19,318         13,295  

1.569% due 12/25/2035 (a)

      10,633         651  

1.946% due 11/25/2035 (l)

      18,904         18,447  

3.483% due 06/25/2047

      248         199  

5.500% due 02/25/2020

      116         116  

5.500% due 07/25/2035 ^(l)

      2,120         1,872  

5.500% due 11/25/2035 ^

      808         682  

5.500% due 01/25/2036 ^

      163         160  

5.500% due 04/25/2037 (l)

      3,101         2,614  

5.750% due 01/25/2036

      279         232  

5.750% due 01/25/2037 ^(l)

      9,798         8,549  

5.750% due 04/25/2037 ^(l)

      2,977         2,791  

5.934% due 07/25/2036 (a)

      12,998         3,923  

6.000% due 06/25/2036 ^

      473         403  

6.000% due 11/25/2036 ^

      487         432  

6.000% due 12/25/2036

      244         172  

6.000% due 01/25/2037 ^(l)

      2,205         2,001  

6.000% due 02/25/2037 ^

      1,287         911  

6.000% due 03/25/2037 ^(l)

      15,619         10,691  

6.000% due 04/25/2037 ^(l)

      7,314         5,098  

6.000% due 07/25/2037 ^(l)

      1,777         1,728  

31.703% due 05/25/2037 ^

      1,318         2,330  

Countrywide Home Loan Mortgage Pass-Through Trust

 

1.556% due 03/25/2036

      2,306         1,500  

1.816% due 03/25/2035

      228         202  

3.027% due 11/20/2035 (l)

      11,817         10,919  

3.086% due 03/25/2046 ^(l)

      13,755         8,241  

3.596% due 06/25/2047 ^(l)

      7,661         6,825  

5.000% due 11/25/2035 ^

      61         48  

5.500% due 12/25/2034

      157         149  

5.500% due 11/25/2035 ^

      73         66  

6.000% due 07/25/2037 ^

      301         261  

6.000% due 08/25/2037 ^

      4         3  

6.000% due 08/25/2037 (l)

      7,290         6,202  

Credit Suisse Commercial Mortgage Trust

 

6.500% due 07/26/2036 ^(l)

      13,191         7,944  

Credit Suisse Mortgage Capital Certificates

 

3.074% due 02/27/2047 (l)

      57,042         34,798  

3.272% due 07/26/2049 (l)

      9,334         7,468  

3.383% due 04/26/2035 (l)

      22,738         21,889  

4.001% due 07/26/2037 (l)

      12,524         11,441  

7.000% due 08/26/2036

      16,524         7,937  

7.000% due 08/27/2036

      4,213         2,658  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

 

5.896% due 04/25/2036 (l)

      9,297         6,537  

Debussy PLC

 

5.930% due 07/12/2025

  GBP     21,250           27,760  

8.250% due 07/12/2025

      5,000         6,116  
 

 

84   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Deutsche ALT-A Securities, Inc.

 

6.000% due 10/25/2021 ^(l)

  $     777     $     699  

Diversity Funding Ltd.

 

1.725% due 02/10/2046

  GBP     716         928  

2.225% due 02/10/2046

      1,170         1,142  

3.475% due 02/10/2046

      702         44  

3.975% due 02/10/2046 ^

      234         0  

Epic Drummond Ltd.

 

0.000% due 01/25/2022

  EUR     329         375  

Eurosail PLC

 

0.000% due 06/13/2045

  GBP     2         3,217  

1.290% due 06/13/2045

      7,707         9,184  

1.540% due 06/13/2045

      8,002         9,080  

2.040% due 06/13/2045

      4,935         5,306  

3.790% due 06/13/2045

      1,765         2,008  

First Horizon Alternative Mortgage Securities Trust

 

3.104% due 08/25/2035 ^

  $     3,135         643  

5.884% due 11/25/2036 (a)

      1,560         463  

First Horizon Mortgage Pass-Through Trust

 

5.500% due 08/25/2037 ^

      587         483  

Fondo de Titulizacion de Activos UCI

 

0.000% due 06/16/2049

  EUR     1,612         1,602  

GC Pastor Hipotecario FTA

 

0.000% due 06/21/2046

      6,720         6,342  

GreenPoint Mortgage Funding Trust

 

1.416% due 12/25/2046 ^

  $     4,617         3,566  

Grifonas Finance PLC

 

0.042% due 08/28/2039

  EUR     12,447         12,209  

GSR Mortgage Loan Trust

 

3.454% due 11/25/2035

  $     263         230  

6.500% due 08/25/2036 ^

      1,009         809  

HarborView Mortgage Loan Trust

 

1.449% due 03/19/2036 (l)

      20,574         16,067  

1.459% due 01/19/2036 (l)

      9,646         7,677  

1.862% due 06/20/2035 (l)

      11,597         10,507  

2.112% due 06/20/2035 (l)

      2,639         2,156  

Hipocat FTA

 

0.000% due 10/24/2039

  EUR     6,795         6,790  

0.000% due 01/15/2050

      8,927         8,651  

IM Pastor Fondo de Titluzacion Hipotecaria

 

0.000% due 03/22/2043

      2,361         2,236  

Impac CMB Trust

 

1.936% due 10/25/2034

  $     314         302  

Impac Secured Assets Trust

 

1.326% due 05/25/2037 ^

      18         14  

IndyMac Mortgage Loan Trust

 

1.416% due 11/25/2046 (l)

      8,526         7,654  

1.466% due 02/25/2037

      4,700         3,318  

1.516% due 07/25/2036 (l)

      728         606  

3.378% due 06/25/2037 ^(l)

      6,118         5,321  

3.427% due 02/25/2035

      399         356  

3.430% due 03/25/2037

      72         69  

JPMorgan Alternative Loan Trust

 

1.416% due 06/25/2037 (l)

      39,362           23,884  

3.038% due 11/25/2036 ^(l)

      2,980         3,043  

5.960% due 12/25/2036 ^(l)

      9,148         8,715  

JPMorgan Chase Commercial Mortgage Securities Trust

 

1.826% due 06/15/2045 (a)(l)

      50,270         2,649  

5.667% due 01/12/2043 (l)

      2,886         2,907  

5.824% due 12/15/2044 (l)

      6,379         6,364  

6.433% due 02/12/2051 (l)

      3,000         3,023  

JPMorgan Mortgage Trust

 

3.213% due 10/25/2036

      1,386         1,188  

3.465% due 06/25/2037 ^(l)

      6,140         6,007  

Lavender Trust

 

5.500% due 09/26/2035

      6,351         5,982  

6.000% due 11/26/2036 (l)

      14,665         12,940  

LB-UBS Commercial Mortgage Trust

 

0.458% due 02/15/2040 (a)

      21,855         2  

5.938% due 02/15/2040 (l)

      1,700         1,683  

6.062% due 06/15/2038 (l)

      3,947         3,947  

Lehman Mortgage Trust

 

5.500% due 11/25/2035 ^

      82         77  

6.000% due 08/25/2036 ^(l)

      1,265         1,232  

6.000% due 09/25/2036 ^

      840         715  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

6.500% due 09/25/2037 ^(l)

  $     4,982     $     3,678  

7.250% due 09/25/2037 ^(l)

      31,550         15,819  

Lehman XS Trust

 

1.496% due 07/25/2037 (l)

      23,935         10,294  

1.716% due 07/25/2047

      3,521         2,273  

MASTR Adjustable Rate Mortgages Trust

 

1.416% due 05/25/2047 (l)

      23,079         18,586  

1.556% due 05/25/2047 ^

      4,666         2,385  

MASTR Alternative Loan Trust

 

1.566% due 03/25/2036

      22,361         4,994  

1.616% due 03/25/2036

      29,557         6,694  

Merrill Lynch Mortgage Investors Trust

 

3.666% due 05/25/2036 (l)

      9,555         7,940  

Morgan Stanley Capital Trust

 

5.920% due 04/15/2049 (l)

      1,751         1,775  

6.128% due 06/11/2049 (l)

      5,100         5,113  

Morgan Stanley Re-REMIC Trust

 

3.083% due 09/26/2035 (l)

      4,998         5,067  

3.116% due 01/26/2035 (l)

      11,082         10,772  

3.116% due 02/26/2037

      6,285         6,358  

3.408% due 07/26/2035 (l)

      26,634         25,947  

6.000% due 04/26/2036

      7,969         7,719  

Mortgage Equity Conversion Asset Trust

 

4.000% due 07/25/2060

      2,913         2,467  

Newgate Funding PLC

 

0.489% due 12/15/2050

  GBP     1,861         2,169  

0.919% due 12/15/2050

  EUR     2,112         2,233  

1.169% due 12/15/2050

      4,031         4,038  

1.539% due 12/15/2050

  GBP     3,187         3,855  

Nomura Resecuritization Trust

 

8.931% due 09/26/2035

  $     4,202         3,212  

NovaStar Mortgage Funding Trust

 

1.214% due 09/25/2046 (l)

      661         562  

RBSSP Resecuritization Trust

 

2.993% due 07/26/2045 (l)

      20,150         19,380  

3.215% due 05/26/2037 (l)

      9,224         7,415  

6.000% due 03/26/2036 ^(l)

      9,020         7,708  

Residential Accredit Loans, Inc. Trust

 

1.396% due 07/25/2036 (l)

      12,449         8,194  

1.406% due 05/25/2037 (l)

      20,629         17,838  

1.732% due 01/25/2046 ^(l)

      7,731         6,507  

5.003% due 01/25/2036 (l)

      980         868  

6.000% due 08/25/2035 ^

      960         895  

6.000% due 06/25/2036

      436         396  

6.000% due 09/25/2036 ^(l)

      6,006         4,378  

7.000% due 10/25/2037 (l)

      12,256         10,597  

Residential Asset Securitization Trust

 

5.500% due 07/25/2035

      983         910  

6.250% due 08/25/2037 ^

      4,603         2,587  

Residential Funding Mortgage Securities, Inc. Trust

 

4.871% due 08/25/2036 ^(l)

      2,879         2,543  

5.850% due 11/25/2035 ^

      192         179  

6.000% due 04/25/2037 ^(l)

      1,926         1,720  

Rite Aid Pass-Through Certificates

 

6.788% due 01/02/2021

      10,159         10,530  

RiverView HECM Trust

 

1.720% due 05/25/2047 (l)

      8,643         7,195  

Sequoia Mortgage Trust

 

1.582% due 07/20/2036

      3,156         1,978  

2.412% due 10/20/2027

      1,095         1,027  

Southern Pacific Securities PLC

 

3.789% due 12/10/2042

  GBP     2,722         3,763  

Structured Adjustable Rate Mortgage Loan Trust

 

3.419% due 02/25/2037 ^(l)

  $     14,077           10,941  

3.511% due 04/25/2047 (l)

      3,153         2,488  

3.551% due 08/25/2036 (l)

      3,834         1,965  

Structured Asset Mortgage Investments Trust

 

1.386% due 03/25/2037 ^

      1,862         693  

1.406% due 07/25/2046 ^(l)

      21,913         18,387  

2.989% due 02/25/2036 (l)

      6,118         5,118  

SunTrust Alternative Loan Trust

 

5.934% due 04/25/2036 ^(a)

      5,533         1,882  

TBW Mortgage-Backed Trust

 

6.500% due 07/25/2036 (l)

      22,353         13,578  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Theatre Hospitals PLC

 

3.336% due 10/15/2031

  GBP     5,870     $     7,503  

3.336% due 10/15/2031 (l)

      11,892         15,200  

4.086% due 10/15/2031

      830         1,054  

Wachovia Bank Commercial Mortgage Trust

 

5.691% due 10/15/2048 (l)

  $     7,080         7,129  

WaMu Mortgage Pass-Through Certificates Trust

 

1.482% due 06/25/2047 ^

      7,742         2,628  

1.502% due 07/25/2047 (l)

      25,714         22,841  

1.612% due 10/25/2046 ^(l)

      584         526  

1.636% due 06/25/2044

      300         283  

1.776% due 07/25/2047 ^(l)

      882         702  

3.064% due 03/25/2037 ^(l)

      4,789         4,472  

3.141% due 02/25/2037 ^

      334         318  

Washington Mutual Mortgage Pass-Through Certificates Trust

 

1.456% due 01/25/2047 ^(l)

      14,134         11,894  

1.816% due 07/25/2036 ^(l)

      8,153         5,435  

6.000% due 04/25/2037 ^(l)

      4,524         4,289  

Wells Fargo Alternative Loan Trust

 

3.509% due 07/25/2037 ^(l)

      5,035         4,536  

5.750% due 07/25/2037 ^

      560         518  

Wells Fargo Mortgage Loan Trust

 

3.360% due 04/27/2036 (l)

      24,049         22,208  

Wells Fargo Mortgage-Backed Securities Trust

 

6.000% due 07/25/2036 ^

      237         239  

6.000% due 09/25/2036 ^

      452         435  

6.000% due 04/25/2037 ^

      164         167  

6.000% due 06/25/2037 ^

      358         361  
       

 

 

 

Total Non-Agency Mortgage-Backed Securities (Cost $1,026,300)

 

        1,210,085  
       

 

 

 
ASSET-BACKED SECURITIES 48.9%  

ACE Securities Corp. Home Equity Loan Trust

 

2.176% due 08/25/2035

      6,375         3,368  

Aegis Asset-Backed Securities Trust Mortgage Pass-Through Certificates

 

3.316% due 09/25/2034

      740         579  

Airspeed Ltd.

 

1.429% due 06/15/2032

      7,178         6,110  

American Money Management Corp. CLO Ltd.

 

8.201% due 12/09/2026 (l)

      4,200         4,229  

Anchorage Capital CLO Ltd.

 

6.158% due 10/15/2026 (l)

      3,000         2,942  

Asset-Backed Funding Certificates Trust

 

2.266% due 03/25/2034

      1,388         1,294  

Bear Stearns Asset-Backed Securities Trust

 

1.766% due 06/25/2036 (l)

      8,846         8,496  

2.388% due 10/25/2036

      5,279         3,819  

Benefit Street Partners CLO Ltd.

 

6.656% due 01/20/2028 (l)

      2,500         2,463  

BSPRT Issuer Ltd.

 

5.326% due 06/15/2027

      6,000         6,010  

C-BASS CBO Corp.

 

1.350% due 09/06/2041

      27,776         3,194  

Carlyle Global Market Strategies CLO Ltd.

 

6.470% due 04/27/2027

      1,500         1,503  

Citigroup Mortgage Loan Trust, Inc.

 

1.376% due 12/25/2036 (l)

      19,261         12,926  

1.436% due 12/25/2036 (l)

      10,754         5,763  

1.476% due 03/25/2037 (l)

      26,636         21,075  

1.916% due 11/25/2046

      2,100         1,259  

5.076% due 03/25/2036 ^

      2,515         1,886  

5.852% due 05/25/2036 ^

      555         357  

Conseco Finance Securitizations Corp.

 

9.163% due 03/01/2033 (l)

      9,253         8,596  

Conseco Financial Corp.

 

7.060% due 02/01/2031 (l)

      5,346         5,426  

7.500% due 03/01/2030 (l)

      8,912         6,905  

Cork Street CLO Designated Activity Co.

 

0.000% due 11/27/2028

  EUR     2,667         2,661  

3.600% due 11/27/2028

      1,197         1,371  

4.500% due 11/27/2028

      1,047         1,199  

6.200% due 11/27/2028

      1,296         1,489  
 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   85


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Coronado CDO Ltd.

 

2.718% due 09/04/2038

  $     11,700     $     8,219  

6.000% due 09/04/2038

      1,800         1,449  

Countrywide Asset-Backed Certificates

 

1.346% due
12/25/2036 ^(l)

      15,632         15,716  

1.386% due
06/25/2047 (l)

      5,041         4,983  

1.416% due
04/25/2036 (l)

      238         238  

1.416% due
06/25/2037 ^(l)

      10,523         7,890  

1.416% due
06/25/2047 (l)

      26,650         23,157  

1.476% due
01/25/2046 ^

      34,625         18,873  

1.636% due
06/25/2036 ^(l)

      8,000         6,657  

2.016% due 03/25/2033

      20         19  

2.566% due 11/25/2035

      4,937         1,524  

2.596% due 12/25/2032 ^

      109         109  

4.542% due 02/25/2036

      147         151  

4.816% due
07/25/2036 (l)

      963         982  

5.505% due
04/25/2036 (l)

      409         406  

5.588% due
08/25/2036 (l)

      416         414  

Countrywide Asset-Backed Certificates Trust

 

1.456% due
03/25/2047 (l)

      7,655         5,167  

1.946% due
04/25/2036 (l)

      21,300         18,745  

4.606% due 10/25/2046 ^

      3,548         3,191  

Countrywide Home Equity Loan Trust

 

5.657% due 03/25/2034

      429         2,027  

Credit-Based Asset Servicing and Securitization LLC

 

6.250% due
10/25/2036 (l)

      10,800         11,049  

CSAB Mortgage-Backed Trust

 

5.500% due
05/25/2037 ^(l)

      4,684         4,346  

Dekania Europe CDO PLC

 

0.189% due 09/27/2037

  EUR     2,682         2,757  

ECAF Ltd.

 

4.947% due 06/15/2040

  $     2,510         2,476  

EMC Mortgage Loan Trust

 

1.494% due
04/25/2042 (l)

      6,471         6,371  

1.666% due 12/25/2042

      93         91  

3.466% due 04/25/2042

      2,813         2,401  

First Franklin Mortgage Loan Trust

 

1.686% due
11/25/2036 (l)

      5,000         4,401  

1.716% due
12/25/2035 (l)

      23,487         17,791  

Glacier Funding CDO Ltd.

 

1.442% due 08/04/2035

      11,351         3,053  

GMAC Mortgage Corp. Home Equity Loan Trust

 

6.249% due
12/25/2037 (l)

      4,611         4,587  

GSAMP Trust

 

3.091% due
06/25/2034 (l)

      1,678         1,496  

Hout Bay Corp.

 

1.326% due 07/05/2041

      37,572         12,023  

IndyMac Home Equity Mortgage Loan Asset-Backed Trust

 

6.307% due 12/25/2031 ^

      914         390  

JPMorgan Mortgage Acquisition Corp.

 

1.836% due
12/25/2035 (l)

      16,459         15,173  

KGS Alpha SBA Trust

 

0.967% due
04/25/2038 (a)

      3,312         89  

Lehman XS Trust

 

6.170% due
06/24/2046 (l)

      4,434         4,226  

Long Beach Mortgage Loan Trust

 

1.406% due
02/25/2036 (l)

      12,908         8,825  

1.476% due
08/25/2045 (l)

      37,346         32,654  

1.921% due
11/25/2035 (l)

      13,180         9,073  

2.266% due 02/25/2034

      168         166  

2.266% due
06/25/2035 (l)

      32,300           28,328  

Magnetite Ltd.

 

6.108% due 04/15/2026

      2,100         2,085  
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

MASTR Asset-Backed Securities Trust

 

1.366% due 03/25/2036 (l)

  $     7,847     $     5,493  

1.596% due 01/25/2036 (l)

      400         346  

Mid-State Capital Corp. Trust

 

6.742% due 10/15/2040

      6,282         6,744  

Morgan Stanley ABS Capital, Inc. Trust

 

1.316% due 11/25/2036 (l)

      1,953         1,264  

1.546% due 02/25/2037

      6,637         4,062  

2.251% due 01/25/2035

      2,195         997  

Morgan Stanley Home Equity Loan Trust

 

1.446% due 04/25/2037 (l)

      33,658         21,374  

National Collegiate Commutation Trust

 

0.000% due 03/25/2038

      37,800         17,388  

Oakwood Mortgage Investors, Inc.

 

7.840% due 11/15/2029

      3,926         3,908  

8.490% due 10/15/2030 ^

      1,384         472  

Ocean Trails CLO

 

6.482% due 08/13/2025

      1,500         1,514  

Option One Mortgage Loan Trust

 

1.576% due 01/25/2036 (l)

      20,000         16,639  

Popular ABS Mortgage Pass-Through Trust

 

2.466% due 08/25/2035

      3,663         3,612  

Putnam Structured Product CDO Ltd.

 

9.092% due 02/25/2037

      133         134  

Residential Asset Mortgage Products Trust

 

2.191% due 04/25/2034 (l)

      9,442         9,169  

Residential Asset Securities Corp. Trust

 

1.456% due 08/25/2036 (l)

      11,000         8,344  

Saxon Asset Securities Trust

 

1.666% due 11/25/2037 (l)

      13,000         11,177  

SLM Student Loan Trust

 

0.000% due 10/28/2029 (g)

      11         11,158  

0.000% due 01/25/2042 (g)

      9         7,862  

SoFi Professional Loan Program LLC

 

0.000% due 03/25/2036 (g)

      80         2,448  

0.000% due 01/25/2039 (g)

      9,180         6,059  

0.000% due 05/25/2040 (g)

      9,300         4,837  

0.000% due 07/25/2040 (g)

      47         2,609  

Soloso CDO Ltd.

 

1.470% due 10/07/2037

      4,800         2,736  

Sorin Real Estate CDO Ltd.

 

1.702% due 10/28/2046

      7,400         6,934  

Sound Point CLO Ltd.

 

6.003% due 01/23/2027

      1,000         966  

Soundview Home Loan Trust

 

1.496% due 06/25/2037 (l)

      9,678         6,637  

1.716% due 03/25/2036 (l)

      16,905         15,310  

South Coast Funding Ltd.

 

1.410% due 01/06/2041 (l)

      152,817         45,922  

1.410% due 01/06/2041

      10,794         3,244  

Structured Asset Securities Corp.

 

5.794% due 05/25/2032 ^(l)

      6,855         5,828  

Symphony CLO Ltd.

 

5.758% due 07/14/2026 (l)

      4,400         4,234  

Tralee CLO Ltd.

 

6.806% due 04/20/2025 (l)

      2,675         2,692  

Tropic CDO Ltd.

 

1.478% due 07/15/2036

      5,975         4,571  

2.038% due 07/15/2034 (l)

      22,500         15,975  
       

 

 

 

Total Asset-Backed Securities (Cost $621,441)

      671,347  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
SOVEREIGN ISSUES 0.8%  

Argentine Government International Bond

 

2.260% due 12/31/2038

  EUR     5,816     $     4,214  

5.000% due 01/15/2027

      1,900         2,029  

7.820% due 12/31/2033

      3,363         4,108  

Sri Lanka Government International Bond

 

6.200% due 05/11/2027

  $     400         400  
       

 

 

 

Total Sovereign Issues (Cost $9,789)

    10,751  
       

 

 

 
       
        SHARES            
COMMON STOCKS 0.1%  
CONSUMER DISCRETIONARY 0.0%  

Desarrolladora Homex S.A.B. de C.V. (e)

      719,113         54  

Urbi Desarrollos Urbanos S.A.B. de C.V. (e)

      95,515         33  
       

 

 

 
          87  
       

 

 

 
ENERGY 0.0%  

OGX Petroleo e Gas S.A. SP - ADR (e)

      262,786         0  
       

 

 

 
FINANCIALS 0.1%  

TIG FinCo PLC (j)

      662,196         841  
       

 

 

 

Total Common Stocks (Cost $10,942)

    928  
       

 

 

 
SHORT-TERM INSTRUMENTS 11.3%  
       
REPURCHASE AGREEMENTS (k) 10.0%  
          136,982  
       

 

 

 
        PRINCIPAL
AMOUNT
(000S)
           
U.S. TREASURY BILLS 1.3%  

0.920% due
08/31/2017 (f)(g)(o)

    17,905         17,878  
       

 

 

 
Total Short-Term Instruments
(Cost $154,860)
        154,860  
       

 

 

 
       
Total Investments in Securities
(Cost $2,283,949)
    2,520,402  
       
Total Investments 183.6%
(Cost $2,283,949)
    $     2,520,402  

Financial Derivative
Instruments (m)(n) (1.3)%

(Cost or Premiums, net $(33,326))

    (18,173
Other Assets and Liabilities, net (82.3)%       (1,129,555
       

 

 

 
Net Assets 100.0%       $     1,372,674  
       

 

 

 
 

NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS (AMOUNTS IN THOUSANDS*):

 

* A zero balance may reflect actual amounts rounding to less than one thousand.
^ Security is in default.
(a) Interest only security.
(b) Principal only security.
(c) When-issued security.

 

86   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

(d) Payment in-kind security.
(e) Security did not produce income within the last twelve months.
(f) Coupon represents a weighted average yield to maturity.
(g) Zero coupon security.
(h) Perpetual maturity; date shown, if applicable, represents next contractual call date.
(i) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

 

(j)  RESTRICTED SECURITIES:

 

Issuer Description                Acquisition
Date
    Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

Buffalo Thunder Development Authority 0.000% due 11/15/2029

         12/08/2014     $ 0     $ 1       0.00

Pinnacol Assurance 8.625% due 06/25/2034

         06/23/2014       10,200       11,035       0.80  

TIG FinCo PLC

         04/02/2015       982       841       0.06  
        

 

 

   

 

 

   

 

 

 
           $    11,182     $     11,877       0.86
        

 

 

   

 

 

   

 

 

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

(k)  REPURCHASE AGREEMENTS:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
(Received)
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received(1)
 
IND     1.380     06/30/2017       07/03/2017     $     131,900     U.S. Treasury Notes 1.375% due 01/31/2020   $ (134,449   $ 131,900     $ 131,915  
SSB     0.050       06/30/2017       07/03/2017       5,082     U.S. Treasury Notes 3.500% due 05/15/2020(2)     (5,184     5,082       5,082  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

        $     (139,633   $     136,982     $     136,997  
           

 

 

   

 

 

   

 

 

 

 

REVERSE REPURCHASE AGREEMENTS:

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

    2.250     05/16/2017       08/16/2017       $       (4,145   $ (4,157
    2.650       04/05/2017       07/03/2017         (4,620     (4,650
    2.656       04/24/2017       07/24/2017             (27,868     (28,012
    2.680       05/09/2017       08/09/2017         (4,846     (4,866
    2.681       05/17/2017       08/17/2017         (7,409     (7,435
    2.718       06/02/2017       09/05/2017         (19,811     (19,857
    2.780       06/21/2017       09/21/2017         (22,077     (22,097
    2.787       06/22/2017       09/21/2017         (11,884     (11,894
    2.799       07/03/2017       10/03/2017         (4,752     (4,752
    3.137       09/22/2016       09/22/2017         (1,431     (1,432

BOS

    2.909       06/15/2017       07/18/2017         (11,329     (11,345

BPS

    0.600       06/26/2017       07/26/2017       GBP       (2,298     (2,993
    0.700       06/26/2017       07/26/2017         (1,455     (1,895
    1.892       05/25/2017       08/25/2017       $       (1,094     (1,096
    1.920       06/12/2017       07/12/2017         (2,524     (2,527
    1.970       05/25/2017       08/25/2017         (7,998     (8,015
    2.020       06/16/2017       09/18/2017         (9,231     (9,240
    2.655       04/11/2017       07/11/2017         (2,901     (2,919
    2.728       06/09/2017       09/11/2017         (17,587     (17,619
    2.736       06/09/2017       09/11/2017         (2,763     (2,768
    2.750       06/16/2017       09/18/2017         (17,208     (17,230
    2.996       09/01/2016       09/01/2017         (52,941     (54,285

BRC

    3.020       11/02/2016       11/02/2017         (5,655     (5,684
    3.293       06/27/2017       TBD (4)        (27,448     (27,463
    3.299       07/05/2017       TBD (4)        (2,091     (2,091

DBL

    3.378       06/12/2017       12/12/2017         (22,273     (22,317

DEU

    2.100       05/09/2017       08/09/2017         (2,372     (2,380

FOB

    2.850       06/19/2017       07/06/2017         (7,245     (7,253

GLM

    2.592       05/24/2017       08/24/2017         (13,787         (13,827
    2.689       05/26/2017       08/28/2017         (5,270     (5,285

JML

    0.700       05/24/2017       08/24/2017       GBP       (12,088     (15,756
    2.000       06/16/2017       07/14/2017       $       (26,298     (26,323

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   87


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

Counterparty   Borrowing
Rate(3)
    Settlement
Date
    Maturity
Date
    Amount
Borrowed(3)
    Payable for
Reverse
Repurchase
Agreements
 

JPS

    2.528 %       06/09/2017       09/11/2017       $       (11,329   $ (11,348
    2.652       06/01/2017       09/01/2017         (4,617     (4,628

MSB

    2.920       05/01/2017       05/01/2018         (43,588     (43,811
    2.939       08/25/2016       08/25/2017         (43,390     (43,528
    2.952       08/29/2016       08/29/2017         (76,014     (76,244
    2.952       12/01/2016       12/01/2017         (5,650     (5,665

NOM

    1.920       05/01/2017       08/01/2017         (3,031     (3,041
    2.922       02/03/2017       08/03/2017         (8,921     (8,965
    2.929       02/08/2017       08/07/2017         (14,744     (14,811

RBC

    1.710       07/07/2017       10/10/2017         (6,959     (6,959
    2.580       05/08/2017       11/08/2017         (7,212     (7,241
    2.650       02/21/2017       08/21/2017         (2,362     (2,385
    2.662       01/27/2017       07/18/2017         (1,369     (1,385
    2.720       06/08/2017       12/08/2017         (9,852     (9,871
    2.720       06/09/2017       12/11/2017         (2,515     (2,520
    2.730       03/27/2017       09/20/2017         (4,127     (4,158
    2.730       05/03/2017       11/03/2017         (1,176     (1,181
    2.730       05/09/2017       11/08/2017         (2,189     (2,198
    2.770       05/16/2017       11/15/2017         (10,248     (10,286
    2.776       04/04/2017       10/04/2017         (6,151     (6,194

RCE

    1.238       04/18/2017       07/18/2017       GBP       (3,018     (3,941
    1.288       04/18/2017       07/18/2017         (10,754     (14,044

RDR

    1.550       04/07/2017       07/07/2017       $       (7,075     (7,102
    1.900       05/08/2017       08/08/2017         (2,385     (2,392
    1.900       05/17/2017       08/17/2017         (3,475     (3,484
    1.970       05/02/2017       08/02/2017         (6,613     (6,635

RTA

    2.247       07/11/2016       07/10/2017         (10,836     (11,077
    2.273       07/14/2016       07/13/2017         (34,995     (35,777
    2.326       07/21/2016       07/20/2017         (4,292     (4,388
    2.359       07/27/2016       07/25/2017         (9,206     (9,412
    2.494       04/21/2017       10/23/2017         (1,611     (1,619
    2.526       04/05/2017       10/06/2017         (3,124     (3,144
    2.605       11/22/2016       11/21/2017         (14,085     (14,312
    2.645       12/08/2016       12/07/2017         (9,910     (10,061
    2.700       04/19/2017       10/18/2017         (5,598     (5,629
    2.714       05/22/2017       11/22/2017         (6,399     (6,419
    2.726       04/05/2017       10/06/2017         (2,987     (3,007
    2.731       05/01/2017       11/01/2017         (956     (961
    2.739       05/15/2017       11/15/2017         (3,833     (3,847
    2.790       12/22/2016       12/21/2017         (17,914     (18,182
    2.824       06/09/2017       06/08/2018         (8,072     (8,087
    2.827       05/30/2017       05/29/2018         (7,688     (7,709
    2.828       06/12/2017       06/11/2018         (9,546     (9,562
    2.875       04/27/2017       04/26/2018         (18,416     (18,515
    2.886       05/15/2017       05/14/2018         (35,535     (35,675
    2.888       05/11/2017       05/07/2018         (26,742     (26,856
    2.892       04/05/2017       04/05/2018         (6,548     (6,595
    2.892       04/06/2017       04/05/2018         (27,266     (27,460
    2.898       04/12/2017       04/05/2018         (6,857     (6,902

SBI

    2.056       04/24/2017       07/24/2017         (2,223     (2,232

SOG

    0.200       05/23/2017       08/23/2017       EUR       (4,330     (4,946
    1.750       04/12/2017       07/11/2017       $       (1,469     (1,475
    1.750       05/30/2017       08/30/2017         (8,362     (8,376
    1.780       05/24/2017       08/24/2017         (14,570     (14,599
    1.800       06/15/2017       09/15/2017         (16,809     (16,824
    2.806       04/11/2017       10/12/2017         (11,270     (11,342
    2.822       04/27/2017       10/27/2017         (7,344     (7,383
    2.829       02/06/2017       08/07/2017         (22,696     (22,799
    2.829       02/17/2017       08/10/2017         (9,622     (9,656
    2.829       05/16/2017       11/16/2017         (9,113     (9,147
    2.835       05/09/2017       11/09/2017         (3,076     (3,089
    2.839       05/30/2017       11/30/2017         (26,159     (26,178
    2.892       06/14/2017       12/14/2017             (15,110     (15,133

UBS

    1.428       04/27/2017       10/27/2017       GBP       (9,046     (11,812
    1.990       05/26/2017       08/28/2017       $       (5,974     (5,987
    2.130       05/15/2017       08/15/2017         (6,216     (6,234
    2.140       06/14/2017       09/14/2017         (4,040     (4,045
    2.600       04/05/2017       07/05/2017         (2,106     (2,120
    2.617       04/25/2017       07/25/2017         (2,175     (2,186
    2.630       05/09/2017       08/09/2017         (3,149     (3,162
           

 

 

 

Total Reverse Repurchase Agreements

 

        $     (1,137,401
           

 

 

 

 

88   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

BORROWINGS AND OTHER FINANCING TRANSACTIONS SUMMARY

 

The following is a summary by counterparty of the market value of Borrowings and Other Financing Transactions and collateral pledged/(received) as of June 30, 2017:

 

Counterparty   Repurchase
Agreement
Proceeds
to be
Received
    Payable for
Reverse
Repurchase
Agreements
    Payable for
Sale-Buyback
Transactions
     Total
Borrowings and
Other Financing
Transactions
    Collateral
Pledged/(Received)
    Net  Exposure(5)  

Global/Master Repurchase Agreement

            

BCY

  $ 0     $ (109,152   $ 0      $ (109,152   $ 154,681     $     45,529  

BOS

    0       (11,345     0        (11,345     16,381       5,036  

BPS

    0       (120,587     0        (120,587     166,399       45,812  

BRC

    0       (35,238     0        (35,238     53,847       18,609  

DBL

    0       (22,317     0        (22,317     43,712       21,395  

DEU

    0       (2,380     0        (2,380     2,972       592  

FOB

    0       (7,253     0        (7,253     8,596       1,343  

GLM

    0       (19,112     0        (19,112     26,189       7,077  

IND

    131,915       0       0        131,915           (134,449     (2,534

JML

    0       (42,079     0        (42,079     51,317       9,238  

JPS

    0       (15,976     0        (15,976     21,657       5,681  

MSB

    0       (169,248     0            (169,248     250,219       80,971  

NOM

    0       (26,817     0        (26,817     34,044       7,227  

RBC

    0       (54,378     0        (54,378     64,584       10,206  

RCE

    0       (17,985     0        (17,985     21,109       3,124  

RDR

    0       (19,613     0        (19,613     29,137       9,524  

RTA

    0       (275,196     0        (275,196     372,118       96,922  

SBI

    0       (2,232     0        (2,232     2,649       417  

SOG

    0       (150,947     0        (150,947     198,323       47,376  

SSB

    5,082       0       0        5,082       (5,184     (102

UBS

    0       (35,546     0        (35,546     45,433       9,887  
 

 

 

   

 

 

   

 

 

        

Total Borrowings and Other Financing Transactions

  $     136,997     $     (1,137,401   $     0         
 

 

 

   

 

 

   

 

 

        

 

CERTAIN TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS

 

Remaining Contractual Maturity of the Agreements

 

     Overnight and
Continuous
    Up to 30 days     31-90 days     Greater Than 90 days     Total  

Reverse Repurchase Agreements

 

Corporate Bonds & Notes

  $ 0     $ (60,300   $ (103,600   $ 0     $ (163,900

U.S. Government Agencies

    0       0       (25,501     0       (25,501

Non-Agency Mortgage-Backed Securities

    0       (95,387     (208,491     (294,776     (598,654

Asset-Backed Securities

    0       (27,369     (159,895     (148,280     (335,544
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Borrowings

  $     0     $     (183,056   $     (497,487   $     (443,056   $ (1,123,599
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross amount of recognized liabilities for reverse repurchase agreements(6)

 

        $     (1,123,599
         

 

 

 

 

(l) Securities with an aggregate market value of $1,574,235 and cash of $1,056 have been pledged as collateral under the terms of the above master agreements as of June 30, 2017.

 

(1)

Includes accrued interest.

(2)

Collateral is held in custody by the counterparty.

(3)

The average amount of borrowings outstanding during the period ended June 30, 2017 was $(1,043,750) at a weighted average interest rate of 2.266%. Average borrowings may include sale-buyback transactions and reverse repurchase agreements, if held during the period.

(4)

Open maturity reverse repurchase agreement.

(5)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from borrowings and other financing transactions can only be netted across transactions governed under the same master agreement with the same legal entity. The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

(6)

Unsettled reverse repurchase agreements liability of $(13,802) is outstanding at period end.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   89


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

 

(m)  FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Frontier Communications Corp.

    5.000     06/20/2020       6.022   $     7,200     $ (205   $ 21     $ (184   $ 6     $ 0  

Frontier Communications Corp.

    5.000       06/20/2022       9.253       1,200       (162     (24         (186     1       0  

Navient Corp.

    5.000       12/20/2021       2.594       4,600       230       233       463       6       0  
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
          $     (137   $     230     $     93     $     13     $     0  
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

INTEREST RATE SWAPS

 

Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
    Notional
Amount
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Market
Value
    Variation Margin  
                Asset     Liability  

Pay

      1.750     12/21/2026       303,000     $ 7,432     $ (20,997   $ (13,565   $ 0     $ (879

Receive

 

3-Month USD-LIBOR

    1.500       12/21/2021       117,200       (3,303     1,247       (2,056     0       (186

Receive

 

3-Month USD-LIBOR

    1.750       12/21/2023       177,200       3,327       (6,894     (3,567     0       (412

Receive(4)

 

3-Month USD-LIBOR

    2.500       12/20/2027       69,200       961       (120     841       0       (121

Receive

 

3-Month USD-LIBOR

    2.500       06/15/2036       110,300       (11,005     11,178       173       421       0  

Receive

 

3-Month USD-LIBOR

    2.750       03/20/2043       76,400       (255     (3,239     (3,494     331       0  

Receive

 

3-Month USD-LIBOR

    3.750       06/18/2044       12,200       (2,516     (454     (2,970     63       0  

Receive

 

3-Month USD-LIBOR

    3.500       12/17/2044       44,200       (6,956     (1,651     (8,607     222       0  

Receive

 

3-Month USD-LIBOR

    3.250       06/17/2045       45,600       (3,730     (2,872     (6,602     223       0  

Receive

 

3-Month USD-LIBOR

    2.750       12/16/2045       3,800       (52     (116     (168     18       0  

Receive(4)

 

6-Month EUR-EURIBOR

    1.000       09/20/2027       14,200       (76     (6     (82     0       (5

Receive(4)

 

6-Month GBP-LIBOR

    1.500       09/20/2027       37,750       (548     (73     (621     0       (73
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
          $ (16,721   $ (23,997   $ (40,718   $ 1,278     $ (1,676
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Total Swap Agreements       $     (16,858   $     (23,767   $     (40,625   $     1,291     $     (1,676
         

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: EXCHANGE-TRADED OR CENTRALLY CLEARED SUMMARY

 

The following is a summary of the market value and variation margin of Exchange-Traded or Centrally Cleared Financial Derivative Instruments as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities  
    Market Value     Variation Margin
Asset
    Total           Market Value     Variation Margin
Liability
    Total  
     Purchased
Options
    Futures     Swap
Agreements
            Written
Options
    Futures     Swap
Agreements
   

Total Exchange-Traded or Centrally Cleared(5)

  $     0     $     0     $     1,291     $     1,291       $     0     $     0     $     (1,676   $     (1,676
 

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

 

   

 

 

   

 

 

 

 

Cash of $18,864 has been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of June 30, 2017. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3) 

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4) 

This instrument has a forward starting effective date. See Note 2, Securities Transactions and Investment Income, in the Notes to Financial Statements for further information.

(5) 

The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting arrangements.

 

90   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

 

(n)  FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER

 

FORWARD FOREIGN CURRENCY CONTRACTS:

 

Counterparty    Settlement
Month
    Currency to
be Delivered
    Currency to
be Received
    Unrealized Appreciation/
(Depreciation)
 
         Asset     Liability  

BOA

     07/2017     EUR     66,171     $     74,376     $ 0     $ (1,201
     07/2017     GBP     1,680         2,159       0       (29

BPS

     07/2017         107,355         138,187       0       (1,637
     07/2017     $     75,127     EUR     66,308       607       0  
     08/2017     EUR     66,308     $     75,237       0       (605

CBK

     07/2017         4,888         5,499       0       (84

GLM

     07/2017         1,139         1,281       0       (21
     07/2017     GBP     242         312       0       (3

JPM

     07/2017         1,215         1,558       0       (25
     07/2017     $     7,049     EUR     6,301       148       0  
     07/2017         6,671     GBP     5,247       163       0  

RBC

     07/2017         138,184         106,418       420       0  
     08/2017     GBP     106,418     $     138,307       0       (421

SCX

     07/2017         1,174         1,512       0       (17

SSB

     07/2017     EUR     411         464       0       (5
            

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

 

  $     1,338     $     (4,048
            

 

 

   

 

 

 

 

SWAP AGREEMENTS:

 

CREDIT DEFAULT SWAPS ON CORPORATE ISSUES - SELL PROTECTION(1)

 

Counterparty   Reference Entity   Fixed
Receive Rate
    Maturity
Date
    Implied
Credit Spread at
June 30, 2017(2)
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at Value
 
                Asset     Liability  
BPS  

Petrobras Global Finance BV

    1.000     06/20/2021       2.697     $       4,600     $ (1,243   $ 956     $ 0     $ (287
 

Petrobras Global Finance BV

    1.000       12/20/2021       3.009         100       (15     7       0       (8
 

Royal Bank of Scotland PLC

    1.000       12/20/2018       0.333       EUR       800       (20     29       9       0  
BRC  

Petrobras Global Finance BV

    1.000       06/20/2021       2.697       $       800       (218     168       0       (50
GST  

Petrobras Global Finance BV

    1.000       06/20/2021       2.697         3,931           (1,070     824       0       (246
 

Petrobras Global Finance BV

    1.000       12/20/2021       3.009         500       (78     37       0       (41
 

Springleaf Finance Corp.

    5.000       06/20/2022       2.972         900       50       32       82       0  
HUS  

Petrobras Global Finance BV

    1.000       09/20/2020       2.229         240       (34     25       0       (9
 

Petrobras Global Finance BV

    1.000       06/20/2021       2.697         7,200       (1,968     1,518       0       (450
             

 

 

   

 

 

   

 

 

   

 

 

 
              $ (4,596   $     3,596     $     91     $     (1,091
             

 

 

   

 

 

   

 

 

   

 

 

 

 

CREDIT DEFAULT SWAPS ON CREDIT INDICES - SELL PROTECTION(1)

 

Counterparty   Index/Tranches   Fixed
Receive Rate
    Maturity
Date
    Notional
Amount(3)
    Premiums
Paid/(Received)
    Unrealized
Appreciation/
(Depreciation)
    Swap Agreements,
at  Value(4)
 
              Asset     Liability  
DUB  

CMBX.NA.BBB-.6 Index

    3.000     05/11/2063     $ 2,700     $ (178   $ (136   $ 0     $ (314
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       3,500       (439     28       0       (411
FBF  

ABX.HE.AA.6-2 Index

    0.170       05/25/2046           28,478       (25,312     15,207       0       (10,105
 

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059       100       (11     0       0       (11
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       400       (48     2       0       (46
 

CMBX.NA.BBB-.7 Index

    3.000       01/17/2047       600       (55     2       0       (53
 

CMBX.NA.BBB-.8 Index

    3.000       10/17/2057       1,500       (234     10       0       (224
GST  

CMBX.NA.A.6 Index

    2.000       05/11/2063       5,400       (275     104       0       (171
 

CMBX.NA.BB.6 Index

    5.000       05/11/2063       2,200       (294     (108     0       (402
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       6,600       (361     (405     0       (766
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       6,700       (839     52       0       (787
MYC  

CMBX.NA.BBB-.10 Index

    3.000       11/17/2059       700       (85     10       0       (75
 

CMBX.NA.BBB-.6 Index

    3.000       05/11/2063       2,200       (117     (138     0       (255
 

CMBX.NA.BBB-.9 Index

    3.000       09/17/2058       3,900       (482     24       0       (458
         

 

 

   

 

 

   

 

 

   

 

 

 
        $ (28,730   $ 14,652     $ 0     $ (14,078
         

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

    $     (33,326   $     18,248     $     91     $     (15,169
         

 

 

   

 

 

   

 

 

   

 

 

 

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   91


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

 

FINANCIAL DERIVATIVE INSTRUMENTS: OVER THE COUNTER SUMMARY

 

The following is a summary by counterparty of the market value of OTC financial derivative instruments and collateral pledged/(received) as of June 30, 2017:

 

    Financial Derivative Assets           Financial Derivative Liabilities                    
Counterparty   Forward
Foreign
Currency
Contracts
     Purchased
Options
    Swap
Agreements
    Total
Over the
Counter
           Forward
Foreign
Currency
Contracts
    Written
Options
     Swap
Agreements
    Total
Over the
Counter
    Net Market
Value of OTC
Derivatives
    Collateral
Pledged/
(Received)
    Net
Exposure(5)
 

BOA

  $ 0      $ 0     $ 0     $ 0       $ (1,230   $ 0      $ 0     $ (1,230   $ (1,230   $ 1,318     $ 88  

BPS

    607        0       9       616         (2,242     0        (295     (2,537     (1,921     1,531       (390

BRC

    0        0       0       0         0       0        (50     (50     (50     0       (50

CBK

    0        0       0       0         (84     0        0       (84     (84     0       (84

DUB

    0        0       0       0         0       0        (725     (725     (725     736       11  

FBF

    0        0       0       0         0       0        (10,439     (10,439         (10,439         10,750       311  

GLM

    0        0       0       0         (24     0        0       (24     (24     0       (24

GST

    0        0       82       82         0       0        (2,413     (2,413     (2,331     2,409       78  

HUS

    0        0       0       0         0       0        (459     (459     (459     400       (59

JPM

    311        0       0       311         (25     0        0       (25     286       (260     26  

MYC

    0        0       0       0         0       0        (788     (788     (788     624           (164

RBC

    420        0       0       420         (421     0        0       (421     (1     0       (1

SCX

    0        0       0       0         (17     0        0       (17     (17     0       (17

SSB

    0        0       0       0         (5     0        0       (5     (5     0       (5
 

 

 

    

 

 

   

 

 

   

 

 

     

 

 

   

 

 

    

 

 

   

 

 

       

Total Over the Counter

  $     1,338      $     0     $     91     $     1,429       $     (4,048   $     0      $     (15,169   $     (19,217      
 

 

 

    

 

 

   

 

 

   

 

 

     

 

 

   

 

 

    

 

 

   

 

 

       

 

(o) Securities with an aggregate market value of $17,878 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of June 30, 2017.

 

(1) 

If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.

(2) 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(3)

The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(4)

The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

(5)

Net Exposure represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed under the same master agreement with the same legal entity. The Fund and Subsidiary are recognized as two separate legal entities. As such, exposure cannot be netted. See Note 8, Master Arrangements, in the Notes to Financial Statements for more information regarding master netting agreements.

 

FAIR VALUE OF FINANCIAL DERIVATIVE INSTRUMENTS

 

The following is a summary of the fair valuation of the Fund’s derivative instruments categorized by risk exposure. See Note 7, Principal Risks, in the Notes to Financial Statements on risks of the Fund.

 

Fair Values of Financial Derivative Instruments on the Consolidated Statements of Assets and Liabilities as of June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 13     $ 0     $ 0     $ 1,278     $ 1,291  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 1,338     $ 0     $ 1,338  

Swap Agreements

    0       91       0       0       0       91  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 91     $ 0     $ 1,338     $ 0     $ 1,429  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     104     $     0     $     1,338     $     1,278     $     2,720  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

92   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


 

June 30, 2017

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 0     $ 0     $ 0     $ 1,676     $ 1,676  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 4,048     $ 0     $ 4,048  

Swap Agreements

    0       15,169       0       0       0       15,169  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 15,169     $ 0     $ 4,048     $ 0     $ 19,217  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     15,169     $     0     $     4,048     $     1,676     $     20,893  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The effect of Financial Derivative Instruments on the Consolidated Statements of Operations for the period ended June 30, 2017:

 

    Derivatives not accounted for as hedging instruments  
     Commodity
Contracts
    Credit
Contracts
    Equity
Contracts
    Foreign
Exchange
Contracts
    Interest
Rate Contracts
    Total  

Net Realized Gain on Financial Derivative Instruments

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 395     $ 0     $ 0     $ 16,160     $ 16,555  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ 11,066     $ 0     $ 11,066  

Swap Agreements

    0       757       0       0       0       757  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 757     $ 0     $ 11,066     $ 0     $ 11,823  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 1,152     $ 0     $ 11,066     $     16,160     $ 28,378  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Change in Unrealized Appreciation (Depreciation) on Financial Derivative Instruments

 

Exchange-traded or centrally cleared

 

Swap Agreements

  $ 0     $ 231     $ 0     $ 0     $ (8,282   $ (8,051
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Over the counter

 

Forward Foreign Currency Contracts

  $ 0     $ 0     $ 0     $ (11,613   $ 0     $ (11,613

Swap Agreements

    0       5,239       0       0       0       5,239  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 5,239     $ 0     $ (11,613   $ 0     $ (6,374
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $     0     $     5,470     $     0     $     (11,613   $ (8,282   $     (14,425
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

FAIR VALUE MEASUREMENTS

 

The following is a summary of the fair valuations according to the inputs used as of June 30, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 0     $ 27,809     $ 5,076     $ 32,885  

Corporate Bonds & Notes

 

Banking & Finance

    0       107,374       20,494       127,868  

Industrials

    0       180,204       23,271       203,475  

Utilities

    0       46,243       0       46,243  

Municipal Bonds & Notes

 

Illinois

    0       1,886       0       1,886  

West Virginia

    0       5,154       0       5,154  

U.S. Government Agencies

    0       54,920       0       54,920  

Non-Agency Mortgage-Backed Securities

    0       1,181,588       28,497       1,210,085  

Asset-Backed Securities

    0       618,897       52,450       671,347  

Sovereign Issues

    0       10,751       0       10,751  

Common Stocks

 

Consumer Discretionary

    87       0       0       87  

Financials

    0       0       841       841  

Short-Term Instruments

 

Repurchase Agreements

    0       136,982       0       136,982  

U.S. Treasury Bills

    0       17,878       0       17,878  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Investments

  $     87     $     2,389,686     $     130,629     $     2,520,402  
 

 

 

   

 

 

   

 

 

   

 

 

 
Category and Subcategory   Level 1     Level 2     Level 3     Fair
Value at
06/30/2017
 

Financial Derivative Instruments - Assets

 

Exchange-traded or centrally cleared

  $ 0     $ 1,291     $ 0     $ 1,291  

Over the counter

    0       1,429       0       1,429  
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ 2,720     $ 0     $ 2,720  
 

 

 

   

 

 

   

 

 

   

 

 

 

Financial Derivative Instruments - Liabilities

 

Exchange-traded or centrally cleared

    0       (1,676     0       (1,676

Over the counter

    0       (19,217     0       (19,217
 

 

 

   

 

 

   

 

 

   

 

 

 
  $ 0     $ (20,893   $ 0     $ (20,893
 

 

 

   

 

 

   

 

 

   

 

 

 

Total Financial Derivative Instruments

  $ 0     $ (18,173   $ 0     $ (18,173
 

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     87     $     2,371,513     $     130,629     $     2,502,229  
 

 

 

   

 

 

   

 

 

   

 

 

 
 

 

There were no significant transfers among Levels 1 and 2 during the period ended June 30, 2017.

 

See Accompanying Notes   ANNUAL REPORT   JUNE 30, 2017   93


Consolidated Schedule of Investments PIMCO Dynamic Income Fund (Cont.)

 

June 30, 2017

 

 

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended June 30, 2017:

 

Category and Subcategory   Beginning
Balance
at 06/30/2016
    Net
Purchases
    Net
Sales
    Accrued
Discounts/
(Premiums)
    Realized
Gain/(Loss)
    Net Change in
Unrealized
Appreciation/
(Depreciation)(1)
    Transfers into
Level 3
    Transfers out
of Level 3
    Ending
Balance
at 06/30/2017
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held  at
06/30/2017(1)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 529     $ 4,903     $ (25   $ 13     $ 1     $ (345   $ 0     $ 0     $ 5,076     $ (345

Corporate Bonds & Notes

 

Banking & Finance

    36,558       0       (17,308     83       188       973       0       0       20,494       3  

Industrials

    10,671       12,486       0       14       0       100       0       0       23,271       100  

Non-Agency Mortgage-Backed Securities

    29,243       9,851       (4,434     78       1,087           (1,883     0       (5,445     28,497       (781

Asset-Backed Securities

    28,781       41,618       0       716       0       208       0       (18,873     52,450       (3,044

Common Stocks

 

Financials

    423       0       0       0       0       418       0       0       841       418  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $     106,205     $     68,858     $     (21,767   $     904     $     1,276     $ (529   $     0     $     (24,318   $     130,629     $     (3,649
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory   Ending
Balance
at 06/30/2017
     Valuation
Technique
   Unobservable
Inputs
   Input Value(s)
(% Unless
Noted
Otherwise)
 

Investments in Securities, at Value

 

Loan Participations and Assignments

  $ 5022      Other Valuation Techniques(2)    —        —    
    54      Third Party Vendor    Broker Quote      100.563  

Corporate Bonds & Notes

 

Banking & Finance

    11,035      Reference Instrument    OAS Spread      549.080 bps  
    9,459      Reference Instrument    Spread movement      281.000 bps  

Industrials

    23,271      Proxy Pricing    Base Price      99.500-100.000  

Non-Agency Mortgage-Backed Securities

    21,302      Proxy Pricing    Base Price      5.000-103.875  
    7,195      Third Party Vendor    Broker Quote      83.250  

Asset-Backed Securities

    52,450      Proxy Pricing    Base Price      2.703-100,000.000  

Common Stocks

 

Financials

    841      Other Valuation Techniques(2)    —        —    
 

 

 

          

Total

  $     130,629           
 

 

 

          

 

(1) 

Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at June 30, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.

(2) 

Includes valuation techniques not defined in the Notes to Financial Statements as securities valued using such techniques are not considered significant to the Fund.

 

94   PIMCO CLOSED-END FUNDS        See Accompanying Notes  


Notes to Financial Statements

 

June 30, 2017

 

1. ORGANIZATION

 

PCM Fund, Inc., PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Strategic Income Fund, Inc., PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund (each a “Fund” and collectively the “Funds”) are organized as closed-end management investment companies registered under the Investment Company Act of 1940, as amended, and the rules and regulations thereunder (the “Act”). PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund were organized as Massachusetts business trusts on the dates shown in the table below. PCM Fund, Inc. and PIMCO Strategic Income Fund, Inc. were organized as Maryland corporations on the dates shown in the table below. Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) serves as the Funds’ investment manager.

 

Fund Name         Formation Date  

PCM Fund, Inc.

      June 23, 1993  

PIMCO Global StocksPLUS® & Income Fund

      February 16, 2005  

PIMCO Income Opportunity Fund

      September 12, 2007  

PIMCO Strategic Income Fund, Inc.

      December 9, 1993  

PIMCO Dynamic Credit and Mortgage Income Fund

      September 27, 2012  

PIMCO Dynamic Income Fund

      January 19, 2011  

 

PCM Fund, Inc. has the authority to issue 300 million shares of $0.001 par value common stock. PIMCO Strategic Income Fund, Inc. has the authority to issue 500 million shares of $0.00001 par value common stock. PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund have authorized an unlimited number of Common Shares at a par value of $0.00001 per share.

 

Hereinafter, the terms “Trustee” or “Trustees” shall refer to a Director or Directors of applicable Funds.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Each Fund is treated as an investment company under the reporting requirements of U.S. GAAP. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

(a) Securities Transactions and Investment Income  Securities transactions are recorded as of the trade date for financial reporting purposes. Realized gains (losses) from securities sold are recorded on the identified cost basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled beyond a standard settlement period for the security after the trade date. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as a Fund is informed of the ex-dividend date. Interest income, adjusted for the accretion of discounts and amortization of premiums, is recorded on the accrual basis from settlement date, with the exception of securities with a forward starting effective date, where interest income is recorded on the accrual basis from effective date. For convertible securities, premiums attributable to the conversion feature are not amortized. Estimated tax liabilities on certain foreign securities are recorded on an accrual basis and are reflected as components of interest income or net change in unrealized appreciation (depreciation) on investments on the Statements of Operations, as appropriate. Tax liabilities realized as a result of such security sales are reflected as a component of net realized gain (loss) on investments on the Statements of Operations. Paydown gains (losses) on mortgage-related and other asset-backed securities, if any, are recorded as components of interest income on the Statements of Operations. Income or short-term capital gain distributions received from registered investment companies, if any, are recorded as dividend income. Long-term capital gain distributions received from underlying funds, if any, are recorded as realized gains.

 

Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is probable.

 

(b) Cash and Foreign Currency  The functional and reporting currency for the Funds is the U.S. dollar. The market values of foreign securities, currency holdings and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the current exchange rates each business day. Purchases and sales of securities and income and expense items denominated in foreign currencies, if any, are translated into U.S. dollars at the exchange rate in effect on the transaction date. The Funds do not separately report the effects of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized gain (loss) and net change in unrealized appreciation (depreciation) from investments on the Statements of Operations. The Funds may invest in foreign currency-denominated securities and may engage in foreign

 

 

  ANNUAL REPORT   JUNE 30, 2017   95


Notes to Financial Statements (Cont.)

 

currency transactions either on a spot (cash) basis at the rate prevailing in the currency exchange market at the time or through a forward foreign currency contract. Realized foreign exchange gains (losses) arising from sales of spot foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid are included in net realized gain (loss) on foreign currency transactions on the Statements of Operations. Net unrealized foreign exchange gains (losses) arising from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period are included in net change in unrealized appreciation (depreciation) on foreign currency assets and liabilities on the Statements of Operations.

 

(c) Distributions — Common Shares  The following table shows the anticipated frequency of distributions from net investment income and gains from the sale of portfolio securities and other sources to common shareholders.

 

          Distribution Frequency  
Fund Name         Declared     Distributed  

PCM Fund, Inc.

      Monthly       Monthly  

PIMCO Dynamic Credit and Mortgage Income Fund

      Monthly       Monthly  

PIMCO Dynamic Income Fund

      Monthly       Monthly  

PIMCO Global StocksPLUS® & Income Fund

      Monthly       Monthly  

PIMCO Income Opportunity Fund

      Monthly       Monthly  

PIMCO Strategic Income Fund, Inc.

      Monthly       Monthly  

 

Net realized capital gains earned by each Fund, if any, will be distributed no less frequently than once each year.

 

A Fund may engage in investment strategies, including the use of derivatives, to, among other things, generate current, distributable income even if such strategies could potentially result in declines in the Fund’s net asset value (“NAV”). A Fund’s income and gain-generating strategies, including certain derivatives strategies, may generate current income and gains taxable as ordinary income sufficient to support monthly distributions even in situations when the Fund has experienced a decline in net assets due to, for example, adverse changes in the broad U.S. or non-U.S. equity markets or the Fund’s debt investments, or arising from its use of derivatives. A Fund may enter into opposite sides of interest rate swap and other derivatives for the principal purpose of generating distributable gains on the one side (characterized as ordinary income for tax purposes) that are not part of the Fund’s duration or yield curve management strategies (“paired swap transactions”), and with a substantial possibility that the Fund will experience a corresponding capital loss and decline in NAV with respect to the opposite side transaction (to the extent it does not have

corresponding offsetting capital gains). Consequently, common shareholders may receive distributions and owe tax at a time when their investment in a Fund has declined in value, which tax may be at ordinary income rates, and which may be economically similar to a taxable return of capital. The tax treatment of certain derivatives may be open to different interpretations. Any recharacterization of payments made or received by a Fund pursuant to derivatives potentially could affect the amount, timing or character of Fund distributions. In addition, the tax treatment of such investment strategies may be changed by regulation or otherwise.

 

PIMCO Strategic Income Fund, Inc. (“RCS”) accounts for mortgage dollar rolls as financing transactions. Please see “Federal Income Tax Matters” in the Notes to Financial Statements for information regarding such treatment by RCS and its impact on the Fund’s distributions and related tax consequences.

 

Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. Differences between tax regulations and U.S. GAAP may cause timing differences between income and capital gain recognition. Further, the character of investment income and capital gains may be different for certain transactions under the two methods of accounting. As a result, income distributions and capital gain distributions declared during a fiscal period may differ significantly from the net investment income (loss) and realized gains (losses) reported on each Fund’s annual financial statements presented under U.S. GAAP.

 

If a Fund estimates that a portion of one of its dividend distributions may be comprised of amounts from sources other than net investment income in accordance with its policies and good accounting practices, the Fund will notify shareholders of record of the estimated composition of such distribution through a Section 19 Notice. For these purposes, a Fund estimates the source or sources from which a distribution is paid, to the close of the period as of which it is paid, in reference to its internal accounting records and related accounting practices. If, based on such accounting records and practices, it is estimated that a particular distribution does not include capital gains or paid-in surplus or other capital sources, a Section 19 Notice generally would not be issued. It is important to note that differences exist between a Fund’s daily internal accounting records and practices, a Fund’s financial statements presented in accordance with U.S. GAAP, and recordkeeping practices under income tax regulations. For instance, a Fund’s internal accounting records and practices may take into account, among other factors, tax-related characteristics of certain sources of distributions that differ from treatment under U.S. GAAP. Examples of such differences may include, among others, the treatment of paydowns on mortgage-backed securities purchased at a discount and periodic payments under interest rate swap contracts. Accordingly,

 

 

96   PIMCO CLOSED-END FUNDS     


 

June 30, 2017

 

among other consequences, it is possible that a Fund may not issue a Section 19 Notice in situations where the Fund’s financial statements prepared later and in accordance with U.S. GAAP and/or the final tax character of those distributions might later report that the sources of those distributions included capital gains and/or a return of capital. Please visit www.pimco.com for the most recent Section 19 Notice, if applicable, for additional information regarding the estimated composition of distributions. Final determination of a distribution’s tax character will be reported on Form 1099 DIV sent to shareholders for the calendar year.

 

Distributions classified as a tax basis return of capital, if any, are reflected on the Statements of Changes in Net Assets and have been recorded to paid in capital. In addition, other amounts have been reclassified between undistributed (overdistributed) net investment income (loss), accumulated undistributed (overdistributed) net realized gain (loss) and/or paid in capital to more appropriately conform U.S. GAAP to tax characterizations of distributions.

 

(d) New Accounting Pronouncements  In August 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”), ASU 2014-15 requiring management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern. The ASU is effective prospectively for annual periods ending after December 15, 2016, and interim periods thereafter. The Funds have adopted the ASU. The implementation of the ASU did not have an impact on the Funds’ financial statements.

 

In May 2015, the FASB issued ASU 2015-07 which removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the NAV per share practical expedient. The ASU also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the NAV per share practical expedient. The ASU is effective for annual periods beginning after December 15, 2015 and interim periods within those annual periods. The Funds have adopted the ASU. The implementation of the ASU did not have an impact on the Funds’ financial statements.

 

In March 2016, the FASB issued ASU 2016-05 which provides guidance related to the impact of derivative contract novations on certain relationships under Accounting Standards Codification (“ASC”) 815. The ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

In August 2016, the FASB issued ASU 2016-15 which amends ASC 230 to clarify guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

 

In October 2016, the U.S. Securities and Exchange Commission (“SEC”) adopted new rules and forms, and amendments to certain current rules and forms, to modernize reporting and disclosure of information by registered investment companies. The amendments to Regulation S-X will require standardized, enhanced disclosure about derivatives in investment company financial statements, and will also change the rules governing the form and content of such financial statements. The compliance date for these amendments is August 1, 2017. Compliance is based on reporting period-end date. At this time, management is assessing the anticipated impact of these regulatory developments.

 

In November 2016, the FASB issued ASU 2016-18 which amends ASC 230 to provide guidance on the classification and presentation of changes in restricted cash and restricted cash equivalents on the Statement of Cash Flows. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the financial statements.

 

In March 2017, the FASB issued ASU 2017-08 which provides guidance related to the amortization period for certain purchased callable debt securities held at a premium. The ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. The Funds have adopted the ASU. The implementation of the ASU did not have an impact on the Funds’ financial statements.

 

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

 

(a) Investment Valuation Policies  The NAV of a Fund’s shares is determined by dividing the total value of portfolio investments and other assets attributable to that Fund less any liabilities by the total number of shares outstanding of that Fund.

 

On each day that the New York Stock Exchange (“NYSE”) is open, Fund shares are ordinarily valued as of the close of regular trading (“NYSE Close”). Information that becomes known to the Funds or their agents after the time as of which NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day. Each Fund reserves the right to change the time as of which its respective NAV is calculated if the Fund closes earlier, or as permitted by the SEC.

 

 

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Notes to Financial Statements (Cont.)

 

 

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from established market makers or prices (including evaluated prices) supplied by the Funds’ approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Funds will normally use pricing data for domestic equity securities received shortly after the NYSE Close and do not normally take into account trading, clearances or settlements that take place after the NYSE Close. If market value pricing is used, a foreign (non-U.S.) equity security traded on a foreign exchange or on more than one exchange is typically valued using pricing information from the exchange considered by PIMCO to be the primary exchange. A foreign (non-U.S.) equity security will be valued as of the close of trading on the foreign exchange, or the NYSE Close, if the NYSE Close occurs before the end of trading on the foreign exchange. Domestic and foreign (non-U.S.) fixed income securities, non-exchange traded derivatives, and equity options are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services using data reflecting the earlier closing of the principal markets for those securities. Prices obtained from Pricing Services may be based on, among other things, information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Certain fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Exchange-traded options, except equity options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services. A Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments.

 

If a foreign (non-U.S.) equity security’s value has materially changed after the close of the security’s primary exchange or principal market but before the NYSE Close, the security may be valued at fair value based on procedures established and approved by the Board of Trustees (the “Board”). Foreign (non-U.S.) equity securities that do not trade when the NYSE is open are also valued at fair value. With respect to foreign (non-U.S.) equity securities, a Fund may determine the fair value of investments based on information provided by Pricing Services and other third-party vendors, which may recommend fair value or adjustments with reference to other securities, indices or assets. In considering whether fair valuation is required and in determining fair values, a Fund may, among other things, consider significant events (which may be considered to include changes in the value of U.S.

securities or securities indices) that occur after the close of the relevant market and before the NYSE Close. A Fund may utilize modeling tools provided by third-party vendors to determine fair values of non-U.S. securities. Foreign exchanges may permit trading in foreign (non-U.S.) equity securities on days when a Fund is not open for business, which may result in a Fund’s portfolio investments being affected when shareholders are unable to buy or sell shares.

 

Senior secured floating rate loans for which an active secondary market exists to a reliable degree will be valued at the mean of the last available bid/ask prices in the market for such loans, as provided by a Pricing Service. Senior secured floating rate loans for which an active secondary market does not exist to a reliable degree will be valued at fair value, which is intended to approximate market value. In valuing a senior secured floating rate loan at fair value, the factors considered may include, but are not limited to, the following: (a) the creditworthiness of the borrower and any intermediate participants, (b) the terms of the loan, (c) recent prices in the market for similar loans, if any, and (d) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.

 

Investments valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from Pricing Services. As a result, the value of such investments and, in turn, the NAV of a Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that a Fund is not open for business. As a result, to the extent that a Fund holds foreign (non-U.S.) investments, the value of those investments may change at times when shareholders are unable to buy or sell shares and the value of such investments will be reflected in the Fund’s next calculated NAV.

 

Investments for which market quotes or market based valuations are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the fair valuation methods. In the event that market quotes or market based valuations are not readily available, and the security or asset cannot be valued pursuant to a Board approved valuation method, the value of the security or asset will be determined in good faith by the Valuation Oversight Committee of the Board (“Valuation Oversight Committee”), generally based on recommendations provided by the Manager. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, indicative market quotations (“Broker

 

 

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Quotes”), Pricing Services’ prices), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of a Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the values of a Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be reevaluated in light of such significant events.

 

When a Fund uses fair valuation to determine the value of a portfolio security or other asset for purposes of calculating its NAV, such investments will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair valuation may require subjective determinations about the value of a security. While the Funds’ policy is intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the Funds cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that a Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ from the value that would be realized if the securities were sold.

 

(b) Fair Value Hierarchy  U.S. GAAP describes fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to valuation methods and requires disclosure of the fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Level 1, 2, or 3). The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Levels 1, 2, and 3 of the fair value hierarchy are defined as follows:

 

   

Level 1 — Quoted prices in active markets or exchanges for identical assets and liabilities.

 

   

Level 2 — Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

   

Level 3 — Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

 

Assets or liabilities categorized as Level 2 or 3 as of period end have been transferred between Levels 2 and 3 since the prior period due to changes in the method utilized in valuing the investments. Transfers from Level 2 to Level 3 are a result of a change, in the normal course of business, from the use of methods used by Pricing Services (Level 2) to the use of a Broker Quote or valuation technique which utilizes significant unobservable inputs due to an absence of current or reliable market-based data (Level 3). Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by Pricing Services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers into and out of Level 3, if material, are disclosed in the Notes to Consolidated Schedule of Investments of each respective Fund.

 

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to realized gain (loss), unrealized appreciation (depreciation), purchases and sales, accrued discounts (premiums), and transfers into and out of the Level 3 category during the period. The end of period value is used for the transfers between Levels of a Fund’s assets and liabilities. Additionally, U.S. GAAP requires quantitative information regarding the significant unobservable inputs used in the determination of fair value of assets or liabilities categorized as Level 3 in the fair value hierarchy. In accordance with the requirements of U.S. GAAP, a fair value hierarchy, and if material, a Level 3 reconciliation and details of significant unobservable inputs, have been included in the Notes to Schedule of Investments for each respective Fund.

 

(c) Valuation Techniques and the Fair Value Hierarchy Level 1 and Level 2 trading assets and trading liabilities, at fair value  The valuation methods (or “techniques”) and significant inputs used in determining the fair values of portfolio securities or other assets and liabilities categorized as Level 1 and Level 2 of the fair value hierarchy are as follows:

 

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal

 

 

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Notes to Financial Statements (Cont.)

 

pricing models. The Pricing Services’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

 

Fixed income securities purchased on a delayed-delivery basis or as a repurchase commitment in a sale-buyback transaction are marked to market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

 

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

 

Common stocks, ETFs, exchange-traded notes and financial derivative instruments, such as futures contracts, rights and warrants, or options on futures that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.

 

Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the NYSE Close. These securities are valued using Pricing Services that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

 

Equity exchange-traded options and over the counter financial derivative instruments, such as forward foreign currency contracts, options contracts, or swap agreements, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. Other than swap agreements, which are valued using a broker-dealer bid quotation or on market-based prices provided by Pricing Services, these contracts are normally valued on the

basis of quotes obtained from a quotation reporting system, established market makers or Pricing Services (normally determined as of the NYSE Close). Depending on the product and the terms of the transaction, financial derivative instruments can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as quoted prices, issuer details, indices, bid/ask spreads, interest rates, implied volatilities, yield curves, dividends and exchange rates. Financial derivative instruments that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

 

Centrally cleared swaps and over the counter swaps derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. They are valued using a broker-dealer bid quotation or based on market-based prices provided by Pricing Services (normally determined as of the NYSE close). Centrally cleared swaps and over the counter swaps can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models may use inputs that are observed from actively quoted markets such as the overnight index swap rate (“OIS”), London Interbank Offered Rate (“LIBOR”) forward rate, interest rates, yield curves and credit spreads. These securities are categorized as Level 2 of the fair value hierarchy.

 

Level 3 trading assets and trading liabilities, at fair value  When a fair valuation method is applied by PIMCO that uses significant unobservable inputs, investments will be priced by a method that the Board or persons acting at their direction believe reflects fair value and are categorized as Level 3 of the fair value hierarchy. The valuation techniques and significant inputs used in determining the fair values of portfolio assets and liabilities categorized as Level 3 of the fair value hierarchy are as follows:

 

Proxy pricing procedures set the base price of a fixed income security and subsequently adjust the price proportionally to market value changes of a pre-determined security deemed to be comparable in duration, generally a U.S. Treasury or sovereign note based on country of issuance. The base price may be a broker-dealer quote, transaction price, or an internal value as derived by analysis of market data. The base price of the security may be reset on a periodic basis based on the availability of market data and procedures approved by the Valuation Oversight Committee. Significant changes in the unobservable inputs of the proxy pricing process (the base price) would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

 

If third-party evaluated vendor pricing is not available or not deemed to be indicative of fair value, the Manager may elect to obtain Broker

 

 

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Quotes directly from the broker-dealer or passed through from a third-party vendor. In the event that fair value is based upon a single sourced Broker Quote, these securities are categorized as Level 3 of the fair value hierarchy. Broker Quotes are typically received from established market participants. Although independently received, the Manager does not have the transparency to view the underlying inputs which support the market quotation. Significant changes in the Broker Quote would have direct and proportional changes in the fair value of the security.

 

Reference instrument valuation estimates fair value by utilizing the correlation of the security to one or more broad-based securities, market indices, and/or other financial instruments, whose pricing information is readily available. Unobservable inputs may include those used in algorithm formulas based on percentage change in the reference instruments and/or weights of each reference instrument. Significant changes in the unobservable inputs would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

 

Fundamental analysis valuation estimates fair value by using an internal model that utilizes financial statements of the non-public underlying company. Significant changes in the unobservable inputs would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

 

Short-term debt instruments (such as commercial paper) having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost value of such short-term debt instruments is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. These securities are categorized as Level 2 or Level 3 of the fair value hierarchy depending on the source of the base price.

 

4. SECURITIES AND OTHER INVESTMENTS

 

(a) Investments in Securities Delayed-Delivery Transactions  Certain Funds may purchase or sell securities on a delayed-delivery basis. These transactions involve a commitment by a Fund to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. When delayed-delivery transactions are outstanding, a Fund will designate or receive as collateral liquid assets in an amount sufficient to meet the purchase price or respective obligations. When purchasing a security on a delayed-delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its NAV. A Fund may dispose of or renegotiate a delayed-delivery transaction after it is entered into, which may result in a

realized gain (loss). When a Fund has sold a security on a delayed-delivery basis, a Fund does not participate in future gains (losses) with respect to the security.

 

Loan Participations, Assignments and Originations  Certain Funds may invest in direct debt instruments which are interests in amounts owed to lenders or lending syndicates by corporate, governmental, or other borrowers. A Fund’s investments in loans may be in the form of direct investments, participations in loans or assignments of all or a portion of loans from third parties or exposure to investments in or originations of loans through investments in a mutual fund or other pooled investment vehicle. A loan is often administered by a bank or other financial institution (the “agent”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. A Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. A Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, a Fund may be subject to the credit risk of both the borrower and the agent that is selling the loan agreement.

 

In the event of the insolvency of the agent selling a participation, a Fund may be treated as a general creditor of the agent and may not benefit from any set-off between the agent and the borrower. When a Fund purchases assignments from agents it acquires direct rights against the borrowers of the loans. These loans may include participations in bridge loans, which are loans taken out by borrowers for a short period (typically less than one year) pending arrangement of more permanent financing through, for example, the issuance of bonds, frequently high yield bonds issued for the purpose of acquisitions.

 

Investments in loans are generally subject to risks similar to those of investments in other types of debt obligations, including, among others, credit risk, interest rate risk, variable and floating rate securities risk, and risks associated with mortgage-related securities. In addition, in many cases loans are subject to the risks associated with below-investment grade securities. The Funds may be subject to heightened or additional risks and potential liabilities and costs by investing in mezzanine and other subordinated loans or acting as an originator of loans, including those arising under bankruptcy, fraudulent conveyance, equitable subordination, lender liability, environmental and other laws and regulations, and risks and costs associated with debt servicing and taking foreclosure actions associated with the loans. To the extent that a Fund originates a loan, it may be responsible for all or a substantial portion of the expenses associated with initiating the loan. This may include significant legal and due diligence expenses, which will be indirectly borne by a Fund and its shareholders. A Fund may pay fees and expenses associated with originating a loan, including significant legal and due diligence expenses, irrespective of whether the loan transaction is ultimately consummated or closed.

 

 

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Notes to Financial Statements (Cont.)

 

 

Additionally, because loans are not ordinarily registered with the SEC or any state securities commission or listed on any securities exchange, there is usually less publicly available information about such instruments. In addition, loans may not be considered “securities” for purposes of the anti-fraud provisions under the federal securities laws and, as a result, as a purchaser of these instruments, a Fund may not be entitled to the anti-fraud protections of the federal securities laws. In the course of investing in such instruments, a Fund may come into possession of material nonpublic information and, because of prohibitions on trading in securities of issuers while in possession of such information, the Fund may be unable to enter into a transaction in a publicly-traded security of that issuer when it would otherwise be advantageous for the Fund to do so. Alternatively, a Fund may choose not to receive material nonpublic information about an issuer of such loans, with the result that the Fund may have less information about such issuers than other investors who transact in such assets.

 

The types of loans and related investments in which the Funds may invest include, among others, senior loans, subordinated loans (including second lien loans, B-Notes and mezzanine loans), whole loans, commercial real estate and other commercial loans and structured loans. The Funds may originate loans or acquire direct interests in loans through primary loan distributions and/or in private transactions. In the case of subordinated loans, there may be significant indebtedness ranking ahead of the borrower’s obligation to the holder of such a loan, including in the event of the borrower’s insolvency. Mezzanine loans are typically secured by a pledge of an equity interest in the mortgage borrower that owns the real estate rather than an interest in a mortgage.

 

Investments in loans may include unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate a Fund to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation in full, even though a percentage of the committed amount may not be utilized by the borrower. When investing in a loan participation, a Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the agent selling the loan agreement and only upon receipt of payments by the agent from the borrower. Because investing in unfunded loan commitments creates a future obligation for a Fund to provide funding to a borrower upon demand in exchange for a fee, the Fund will segregate or earmark liquid assets with the Fund’s custodian in amounts sufficient to satisfy any such future obligations. A Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan. In certain circumstances, a Fund may receive a penalty fee upon the prepayment of a loan by a borrower. Fees earned or paid are recorded as a component of interest income or interest expense, respectively, on the Statements of Operations. As of June 30, 2017, the Funds had no unfunded loan commitments outstanding.

Mortgage-Related and Other Asset-Backed Securities  Certain Funds may invest in mortgage-related and other asset-backed securities that directly or indirectly represent a participation in, or are secured by and payable from, loans on real property. Mortgage-related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. These securities typically provide a monthly payment which consists of both principal and interest. Interest may be determined by fixed or adjustable rates. In times of declining interest rates, there is a greater likelihood that a Fund’s higher yielding securities will be pre-paid with the Fund being unable to reinvest the proceeds in an investment with as great a yield. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. Interest-only and principal-only securities are especially sensitive to interest rate changes, which can affect not only their prices but can also change the income flows and repayment assumptions about those investments. The timely payment of principal and interest of certain mortgage-related securities is guaranteed with the full faith and credit of the U.S. Government. Pools created and guaranteed by non-governmental issuers, including government-sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements. Many of the risks of investing in mortgage-related securities secured by commercial mortgage loans (“CMBS”) reflect the effects of local and other economic conditions on real estate markets, the ability of tenants to make lease payments, and the ability of a property to attract and retain tenants. These securities may be less liquid and may exhibit greater price volatility than other types of mortgage-related or other asset-backed securities. Other asset-backed securities are created from many types of assets, including without limitation, auto loans, credit card receivables, home equity loans, and student loans. The Funds may invest in any level of the capital structure of an issuer of mortgage-backed or asset-backed securities, including the equity or “first loss” tranche.

 

Collateralized Debt Obligations  (“CDOs”) include Collateralized Bond Obligations (“CBOs”), Collateralized Loan Obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust which is typically backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the “equity” tranche

 

 

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which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically has higher ratings and lower yields than the underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults and aversion to CBO or CLO securities as a class. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the collateral may decline in value or default, (iii) a Fund may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

 

Collateralized Mortgage Obligations  (“CMOs”) are debt obligations of a legal entity that are collateralized by whole mortgage loans or private mortgage bonds and divided into classes. CMOs are structured into multiple classes, often referred to as “tranches”, with each class bearing a different stated maturity and entitled to a different schedule for payments of principal and interest, including prepayments. CMOs may be less liquid and may exhibit greater price volatility than other types of mortgage-related or asset-backed securities.

 

As CMOs have evolved, some classes of CMO bonds have become more common. For example, a Fund may invest in parallel-pay and planned amortization class (“PAC”) CMOs and multi-class pass-through certificates. Parallel-pay CMOs and multi-class pass-through certificates are structured to provide payments of principal on each payment date to more than one class. These simultaneous payments are taken into account in calculating the stated maturity date or final distribution date of each class, which, as with other CMO and multi-class pass-through structures, must be retired by its stated maturity date or final distribution date but may be retired earlier. PACs generally require payments of a specified amount of principal on each payment date. PACs are parallel-pay CMOs with the required principal amount on such securities having the highest priority after interest has been paid to all classes. Any CMO or multi-class pass-through structure that includes PAC securities must also have support tranches — known as support bonds, companion bonds or non-PAC bonds — which lend or absorb principal cash flows to allow the PAC securities to maintain their stated maturities and final distribution dates within a range of actual prepayment experience. These support tranches are subject to a higher level of maturity risk compared to other mortgage-related securities, and usually provide a higher yield to compensate investors. If

principal cash flows are received in amounts outside a pre-determined range such that the support bonds cannot lend or absorb sufficient cash flows to the PAC securities as intended, the PAC securities are subject to heightened maturity risk. A Fund may invest in various tranches of CMO bonds, including support bonds and equity or “first loss” tranches (see “Collateralized Debt Obligations” below).

 

Stripped Mortgage-Backed Securities  (“SMBS”) are derivative multi-class mortgage securities. SMBS are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. An SMBS will have one class that will receive all of the interest (the interest-only or “IO” class), while the other class will receive the entire principal (the principal-only or “PO” class). IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. The yield to maturity on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on a Fund’s yield to maturity from these securities. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Funds may fail to recoup some or all of its initial investment in these securities even if the security is in one of the highest rating categories.

 

Payments received for IOs are included in interest income on the Statements of Operations. Because no principal will be received at the maturity of an IO, adjustments are made to the cost of the security on a monthly basis until maturity. These adjustments are included in interest income on the Statements of Operations. Payments received for POs are treated as reductions to the cost and par value of the securities.

 

Payment In-Kind Securities  Certain Funds may invest in payment in-kind securities (“PIKs”). PIKs may give the issuer the option at each interest payment date of making interest payments in either cash or additional debt securities. Those additional debt securities usually have the same terms, including maturity dates and interest rates, and associated risks as the original bonds. The daily market quotations of the original bonds may include the accrued interest (referred to as a dirty price) and require a pro rata adjustment from the unrealized appreciation (depreciation) on investments to interest receivable on the Statements of Assets and Liabilities.

 

Restricted Securities  Certain Funds may invest in securities that are subject to legal or contractual restrictions on resale. These securities

 

 

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Notes to Financial Statements (Cont.)

 

may generally be sold privately, but are required to be registered or exempted from such registration before being sold to the public. Private placement securities are generally considered to be restricted except for those securities traded between qualified institutional investors under the provisions of Rule 144A of the Securities Act of 1933. Disposal of restricted securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult to achieve. Restricted securities held by the Funds at June 30, 2017 are disclosed in the Notes to Schedules of Investments.

 

U.S. Government Agencies or Government-Sponsored Enterprises  Certain Funds may invest in securities of U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of and, in certain cases, guaranteed by, the U.S. Government, its agencies or instrumentalities. Some U.S. Government securities, such as Treasury bills, notes and bonds, and securities guaranteed by the Government National Mortgage Association (“GNMA” or “Ginnie Mae”), are supported by the full faith and credit of the U.S. Government; others, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Department of the Treasury (the “U.S. Treasury”); and others, such as those of the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations. U.S. Government securities may include zero coupon securities. Zero coupon securities do not distribute interest on a current basis and tend to be subject to a greater risk than interest-paying securities.

 

Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). FNMA is a government-sponsored corporation. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates (“PCs”), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. Government.

 

Certain Funds may engage in strategies where they seek to extend the expiration or maturity of a position, such as a To-Be-Announced (“TBA”) security on an underlying asset, by closing out the position before expiration and opening a new position with respect to the same

underlying asset with a later expiration date. TBA securities purchased or sold are reflected on the Statements of Assets and Liabilities as an asset or liability, respectively. Recently finalized FINRA rules include mandatory margin requirements for the TBA market that require the Funds to post collateral in connection with their TBA transactions. There is no similar requirement applicable to the Funds’ TBA counterparties. The required collateralization of TBA trades could increase the cost of TBA transactions to the Funds and impose added operational complexity.

 

Warrants  Certain Funds may receive warrants. Warrants are securities that are usually issued together with a debt security or preferred stock and that give the holder the right to buy a proportionate amount of common stock at a specified price. Warrants are freely transferable and are often traded on major exchanges. Warrants normally have a life that is measured in years and entitle the holder to buy common stock of a company at a price that is usually higher than the market price at the time the warrant is issued. Warrants may entail greater risks than certain other types of investments. Generally, warrants do not carry the right to receive dividends or exercise voting rights with respect to the underlying securities, and they do not represent any rights in the assets of the issuer. In addition, their value does not necessarily change with the value of the underlying securities, and they cease to have value if they are not exercised on or before their expiration date. If the market price of the underlying stock does not exceed the exercise price during the life of the warrant, the warrant will expire worthless. Warrants may increase the potential profit or loss to be realized from the investment as compared with investing the same amount in the underlying securities. Similarly, the percentage increase or decrease in the value of an equity security warrant may be greater than the percentage increase or decrease in the value of the underlying common stock. Warrants may relate to the purchase of equity or debt securities. Debt obligations with warrants attached to purchase equity securities have many characteristics of convertible securities and their prices may, to some degree, reflect the performance of the underlying stock. Debt obligations also may be issued with warrants attached to purchase additional debt securities at the same coupon rate. A decline in interest rates would permit a Fund to sell such warrants at a profit. If interest rates rise, these warrants would generally expire with no value.

 

When-Issued Transactions  Certain Funds may purchase or sell securities on a when-issued basis. These transactions are made conditionally because a security, although authorized, has not yet been issued in the market. Transactions to purchase or sell securities on a when-issued basis involve a commitment by a Fund to purchase or sell these securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. A Fund may sell when-issued securities before they are delivered, which may result in a realized gain (loss).

 

 

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5. BORROWINGS AND OTHER FINANCING TRANSACTIONS

 

The following disclosures contain information on a Fund’s ability to lend or borrow cash or securities to the extent permitted under the Act, which may be viewed as borrowing or financing transactions by a Fund. The location of these instruments in each Fund’s financial statements is described below. For a detailed description of credit and counterparty risks that can be associated with borrowings and other financing transactions, please see Note 7, Principal Risks.

 

(a) Repurchase Agreements  Certain Funds may engage in repurchase agreements. Under the terms of a typical repurchase agreement, a Fund purchases an underlying debt obligation (collateral) subject to an obligation of the seller to repurchase, and a Fund to resell, the obligation at an agreed-upon price and time. The underlying securities for all repurchase agreements are held by a Fund’s custodian or designated subcustodians under tri-party repurchase agreements and in certain instances will remain in custody with the counterparty. The market value of the collateral must be equal to or exceed the total amount of the repurchase obligations, including interest. Repurchase agreements, if any, including accrued interest, are included on the Statements of Assets and Liabilities. Interest earned is recorded as a component of interest income on the Statements of Operations. In periods of increased demand for collateral, a Fund may pay a fee for the receipt of collateral, which may result in interest expense to the Fund.

 

(b) Reverse Repurchase Agreements  Certain Funds may enter into reverse repurchase agreements. In a reverse repurchase agreement, a Fund delivers a security in exchange for cash to a financial institution, the counterparty, with a simultaneous agreement to repurchase the same or substantially the same security at an agreed upon price and date. In an open maturity reverse repurchase agreement, there is no pre-determined repurchase date and the agreement can be terminated by the Fund or counterparty at any time. A Fund is entitled to receive principal and interest payments, if any, made on the security delivered to the counterparty during the term of the agreement. Cash received in exchange for securities delivered plus accrued interest payments to be made by a Fund to counterparties are reflected as a liability on the Statements of Assets and Liabilities. Interest payments made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to the Fund. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, a Fund’s use of the proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities. Reverse repurchase agreements

involve leverage risk and also the risk that the market value of the securities to be repurchased may decline below the repurchase price, please see Note 7; Principal Risks.

 

(c) Sale-Buybacks  Certain Funds may enter into financing transactions referred to as ‘sale-buybacks’. A sale-buyback transaction consists of a sale of a security by a Fund to a financial institution, the counterparty, with a simultaneous agreement to repurchase the same or substantially the same security at an agreed-upon price and date. A Fund is not entitled to receive principal and interest payments, if any, made on the security sold to the counterparty during the term of the agreement. The agreed-upon proceeds for securities to be repurchased by a Fund are reflected as a liability on the Statements of Assets and Liabilities. A Fund will recognize net income represented by the price differential between the price received for the transferred security and the agreed-upon repurchase price. This is commonly referred to as the ‘price drop’. A price drop consists of (i) the foregone interest and inflationary income adjustments, if any, a Fund would have otherwise received had the security not been sold and (ii) the negotiated financing terms between a Fund and counterparty. Foregone interest and inflationary income adjustments, if any, are recorded as components of interest income on the Statements of Operations. Interest payments based upon negotiated financing terms made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to the Fund. Sale-buybacks involve leverage risk and also the risk that the market value of the securities to be repurchased may decline below the repurchase price; please see Note 7, Principal Risks.

 

(d) Mortgage Dollar Rolls  Certain Funds may enter into mortgage dollar roll transactions. Mortgage dollar rolls involve a Fund selling securities for delivery in the current month and simultaneously contracting to repurchase substantially similar (same type, same or similar interest rate and maturity) securities on a specified future date. The difference between the selling price and future purchase price is an adjustment to interest income on the Statements of Operations. During the roll period, a Fund forgoes principal and interest paid on the securities. A Fund’s dollar roll transactions are intended to enhance the Fund’s yield by earning a spread between the yield on the underlying mortgage securities and short-term interest rates. Dollar rolls involve leverage risk and also the risk that the market value of the securities to be repurchased may decline below the repurchase price, please see Note 7, Principal Risks. RCS accounts for mortgage dollar rolls as financing transactions. Please see “Federal Income Tax Matters” in the Notes to Financial Statements for information regarding such treatment by RCS and its impact on the Fund’s distributions and related tax consequences.

 

 

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Notes to Financial Statements (Cont.)

 

 

6. FINANCIAL DERIVATIVE INSTRUMENTS

 

The following disclosures contain information on how and why the Funds may use financial derivative instruments, the credit-risk-related contingent features in certain financial derivative instruments and how financial derivative instruments affect the Funds’ financial position, results of operations and cash flows. The location and fair value amounts of these instruments on the Statements of Assets and Liabilities and of the realized appreciation (depreciation) and changes in unrealized appreciation (depreciation) related to such instruments on the Statements of Operations, each categorized by type of financial derivative contract and related risk exposure, are included in a table in the Notes to Schedules of Investments. The financial derivative instruments outstanding as of period end and the amounts of realized and changes in unrealized appreciation (depreciation) on financial derivative instruments during the period, as disclosed in the Notes to Schedules of Investments, serve as indicators of the volume of financial derivative activity for the Funds.

 

PIMCO Global StocksPLUS® & Income Fund is subject to regulation as a commodity pool under the Commodity Exchange Act pursuant to recent rule changes by the Commodity Futures Trading Commission (the “CFTC”). The Manager has registered with the CFTC as a Commodity Pool Operator and a Commodity Trading Adviser with respect to the Fund, and is a member of the National Futures Association. As a result, additional CFTC-mandated disclosure, reporting and recordkeeping obligations apply to PIMCO Global StocksPLUS® & Income Fund. Compliance with the CFTC’s regulatory requirements could increase PIMCO Global StocksPLUS® & Income Fund’s expenses, adversely affecting its total return.

 

(a) Forward Foreign Currency Contracts  Certain Funds may enter into forward foreign currency contracts in connection with settling planned purchases or sales of securities, to hedge the currency exposure associated with some or all of a Fund’s securities or as a part of an investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily, and the change in value is recorded by a Fund as an unrealized gain (loss). Realized gains (losses) are 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 and are recorded upon delivery or receipt of the currency. The contractual obligations of a buyer or seller of a forward foreign currency contract may generally be satisfied by taking or making physical delivery of the underlying currency, establishing an opposite position in the contract and recognizing the profit or loss on both positions simultaneously on the delivery date or, in some instances,

paying a cash settlement before the designated date of delivery. These contracts may involve market risk in excess of the unrealized gain (loss) reflected on the Statements of Assets and Liabilities. Although forwards may be intended to minimize the risk of loss due to a decline in the value of the hedged currencies, at the same time, they tend to limit any potential gain which might result should the value of such currencies increase. In addition, a Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably to the U.S. dollar. To mitigate such risk, cash or securities may be exchanged as collateral pursuant to the terms of the underlying contracts.

 

(b) Futures Contracts  Certain Funds may enter into futures contracts. A Fund may use futures contracts to manage its exposure to the securities markets or to movements in interest rates and currency values or for other investment purposes. Generally, a futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the securities held by a Fund and the prices of futures contracts and the possibility of an illiquid market. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, a Fund is required to deposit with its futures broker an amount of cash, U.S. Government and Agency Obligations, or select sovereign debt, in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked to market daily and based on changes in the price of the contracts, a Fund pays or receives cash or other eligible assets equal to the daily change in the value of the contract (“variation margin”). Gains (losses) are recognized but not considered realized until the contracts expire or close. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin included within exchange traded or centrally cleared financial derivative instruments on the Statements of Assets and Liabilities.

 

(c) Options Contracts  Certain Funds may write call and put options on securities and financial derivative instruments they own or in which they may invest. An option on an instrument (or an index) is a contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the instrument underlying the option (or the cash value of the index) at a specified exercise price at any time during the term of the option. Writing put options tends to increase a Fund’s exposure to the underlying instrument. Writing call options tends to decrease a Fund’s exposure to the underlying instrument. When a Fund writes a call or put, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value

 

 

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June 30, 2017

 

of the option written. These liabilities are included on the Statements of Assets and Liabilities. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying futures, swap, security or currency transaction to determine the realized gain (loss). Certain options may be written with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. A Fund as a writer of an option has no control over whether the underlying instrument may be sold (“call”) or purchased (“put”) and as a result bears the market risk of an unfavorable change in the price of the instrument underlying the written option. There is the risk a Fund may not be able to enter into a closing transaction because of an illiquid market.

 

Certain Funds may also purchase put and call options. Purchasing call options tends to increase a Fund’s exposure to the underlying instrument. Purchasing put options tends to decrease a Fund’s exposure to the underlying instrument. A Fund pays a premium which is included as an asset on the Statements of Assets and Liabilities and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Certain options may be purchased with premiums to be determined on a future date. The premiums for these options are based upon implied volatility parameters at specified terms. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying investment transaction to determine the realized gain (loss) when the underlying transaction is executed.

 

Options on Exchange-Traded Futures Contracts  Certain Funds may write or purchase options on exchange-traded futures contracts (“Futures Option”) to hedge an existing position or future investment, for speculative purposes or to manage exposure to market movements. A Futures Option is an option contract in which the underlying instrument is a single futures contract.

 

Options on Securities  Certain Funds may write or purchase options on securities. An option uses a specified security as the underlying instrument for the option contract. A Fund may write or purchase options to enhance returns or to hedge an existing position or future investment.

 

(d) Swap Agreements  Certain Funds may invest in swap agreements. Swap agreements are bilaterally negotiated agreements between a Fund and a counterparty to exchange or swap investment cash flows, assets, foreign currencies or market-linked returns at specified, future intervals. Swap agreements may be privately negotiated in the over the counter market (“OTC swaps”) or may be cleared through a third party,

known as a central counterparty or derivatives clearing organization (“Centrally Cleared Swaps”). A Fund may enter into asset, credit default, cross-currency, interest rate, total return, variance and other forms of swap agreements to manage its exposure to credit, currency, interest rate, commodity, equity and inflation risk. In connection with these agreements, securities or cash may be identified as collateral or margin in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.

 

Centrally Cleared Swaps are marked to market daily based upon valuations as determined from the underlying contract or in accordance with the requirements of the central counterparty or derivatives clearing organization. Changes in market value, if any, are reflected as a component of net change in unrealized appreciation (depreciation) on the Statements of Operations. Daily changes in valuation of centrally cleared swaps, if any, are recorded as variation margin on the Statements of Assets and Liabilities. OTC swap payments received or paid at the beginning of the measurement period are included on the Statements of Assets and Liabilities and represent premiums paid or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). Upfront premiums received (paid) are initially recorded as liabilities (assets) and subsequently marked to market to reflect the current value of the swap. These upfront premiums are recorded as realized gain (loss) on the Statements of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain (loss) on the Statements of Operations. Net periodic payments received or paid by a Fund are included as part of realized gain (loss) on the Statements of Operations.

 

For purposes of applying a Fund’s investment policies and restrictions, swap agreements are generally valued by a Fund at market value. In the case of a credit default swap, in applying certain of a Fund’s investment policies and restrictions, the Funds will value the credit default swap at its notional value or its full exposure value (i.e., the sum of the notional amount for the contract plus the market value), but may value the credit default swap at market value for purposes of applying certain of a Fund’s other investment policies and restrictions. For example, a Fund may value credit default swaps at full exposure value for purposes of a Fund’s credit quality guidelines (if any) because such value in general better reflects a Fund’s actual economic exposure during the term of the credit default swap agreement. As a result, a Fund may, at times have notional exposure to an asset class (before netting) that is greater or lesser than the stated limit or restriction noted in a Fund’s prospectus. In this context, both the notional amount

 

 

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Notes to Financial Statements (Cont.)

 

and the market value may be positive or negative depending on whether a Fund is selling or buying protection through the credit default swap. The manner in which certain securities or other instruments are valued by a Fund for purposes of applying investment policies and restrictions may differ from the manner in which those investments are valued by other types of investors.

 

Entering into swap agreements involves, to varying degrees, elements of interest, credit, market and documentation risk in excess of the amounts recognized on the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements and that there may be unfavorable changes in interest rates or the asset upon which the swap is based.

 

A Fund’s maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty over the contract’s remaining life, to the extent that amount is positive. The risk may be mitigated by having a master netting arrangement between a Fund and the counterparty and by the posting of collateral to a Fund to cover a Fund’s exposure to the counterparty.

 

To the extent a Fund has a policy to limit the net amount owed to or to be received from a single counterparty under existing swap agreements, such limitation only applies to counterparties to over the counter swaps and does not apply to centrally cleared swaps where the counterparty is a central counterparty or derivatives clearing organization.

 

Credit Default Swap Agreements  Certain Funds may use credit default swaps on corporate, loan, sovereign, U.S. municipal or U.S. Treasury issues to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where a Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer’s default. Credit default swap agreements involve one party making a stream of payments (referred to as the buyer of protection) to another party (the seller of protection) in exchange for the right to receive a specified return in the event that the referenced entity, obligation or index, as specified in the swap agreement, undergoes a certain credit event. As a seller of protection on credit default swap agreements, a Fund will generally receive from the buyer of protection a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, a Fund would be subject to investment exposure on the notional amount of the swap.

 

If a Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a Fund will either

(i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If a Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, a Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event).

 

Credit default swap agreements on corporate or sovereign issues involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event).

 

Credit default swap agreements on asset-backed securities involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event that the referenced entity, obligation or index, as specified in the agreement, undergoes a certain credit event. Unlike credit default swaps on corporate, loan, sovereign, U.S. municipal or U.S. Treasury issues, deliverable obligations in most instances would be limited to the specific referenced obligation, as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap

 

 

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agreement will be adjusted by corresponding amounts. A Fund may use credit default swaps on asset-backed securities to provide a measure of protection against defaults of the referenced obligation or to take an active long or short position with respect to the likelihood of a particular referenced obligation’s default.

 

Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. Credit default swaps on credit indices may be used to hedge a portfolio of credit default swaps or bonds, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect or to take an active long or short position with respect to the likelihood of a particular referenced obligation’s default. Credit default swaps on indices are instruments often used to attempt to protect investors owning bonds against default, but may also be used for speculative purposes.

 

Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on corporate, loan, sovereign, U.S. municipal or U.S. Treasury issues as of period end, if any, are disclosed in the Notes to Schedules of Investments. They serve as an indicator of the current status of payment/performance risk and represent the likelihood or risk of default for the reference entity. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of the payment/performance risk. Increasing market values, in absolute terms

when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

The maximum potential amount of future payments (undiscounted) that a Fund as a seller of protection could be required to make under a credit default swap agreement equals the notional amount of the agreement. Notional amounts of each individual credit default swap agreement outstanding as of period end for which a Fund is the seller of protection are disclosed in the Notes to Schedules of Investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for the same referenced entity or entities.

 

Interest Rate Swap Agreements  Certain Funds are subject to interest rate risk exposure in the normal course of pursuing their investment objectives. The value of the fixed rate bonds that the Funds hold may decrease if interest rates rise. To help hedge against this risk and to maintain its ability to generate income at prevailing market rates, a Fund may enter into interest rate swap agreements. Interest rate swap agreements involve the exchange by a Fund with another party for their respective commitment to pay or receive interest on the notional amount of principal. Certain forms of interest rate swap agreements may include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”, (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”, (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels, (iv) callable interest rate swaps, under which the buyer pays an upfront fee in consideration for the right to early terminate the swap transaction in whole, at zero cost and at a predetermined date and time prior to the maturity date, (v) spreadlocks, which allow the interest rate swap users to lock in the forward differential (or spread) between the interest rate swap rate and a specified benchmark, or (vi) basis swaps, under which two parties can exchange variable interest rates based on different segments of money markets.

 

Total Return Swap Agreements  Certain Funds may enter into total return swap agreements to gain or mitigate exposure to the underlying reference asset. Total return swap agreements involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference asset and on a fixed or variable interest rate. Total return swap agreements may involve commitments to pay interest

 

 

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Notes to Financial Statements (Cont.)

 

in exchange for a market-linked return. One counterparty pays out the total return of a specific reference asset, which may include an underlying equity, index, or bond, and in return receives a fixed or variable rate. At the maturity date, a net cash flow is exchanged where the total return is equivalent to the return of the underlying reference less a financing rate, if any. As a receiver, a Fund would receive payments based on any net positive total return and would owe payments in the event of a net negative total return. As the payer, a Fund would owe payments on any net positive total return, and would receive payments in the event of a net negative total return. A Fund’s use of a total return swap exposes the Fund to credit loss in the event of nonperformance by the swap counterparty. Risk may also arise from the unanticipated movements in value of exchange rates, interest rates, securities, or the index.

 

Asset Segregation  Certain of the transactions described above can be viewed as constituting a form of borrowing or financing transaction by a Fund. In such event, a Fund may but is not required to cover its commitment under such transactions by segregating or “earmarking” assets in accordance with procedures adopted by the Board, in which case such transactions will not be considered “senior securities” by the Fund. With respect to forwards, futures contracts, options and swaps that are contractually permitted or required to cash settle (i.e., where physical delivery of the underlying reference asset is not required), a Fund (other than PIMCO Dynamic Income Fund) is permitted to segregate or earmark liquid assets equal to the Fund’s daily marked-to-market net obligation under the derivative instrument, if any, rather than the derivative’s full notional value. By segregating or earmarking liquid assets equal to only its net marked-to-market obligation under derivatives that are required to cash settle, a Fund will have the ability to employ leverage to a greater extent than if a Fund were to segregate or earmark liquid assets equal to the full notional value of the derivative. For PIMCO Dynamic Income Fund, with respect to forwards and futures contracts and interest rate swaps that are contractually required to cash settle (i.e., where physical delivery of the underlying reference asset is not permitted or physical settlement is not otherwise involved), the Fund is permitted to segregate or earmark liquid assets equal to the Fund’s daily marked-to-market net obligation under the derivative instrument, if any, rather than the derivative’s full notional value, but will segregate full notional value, as applicable, with respect to other derivative instruments (including written credit default swaps, written total return swaps and written options) that contractually require or permit physical delivery of securities or other underlying assets.

 

7. PRINCIPAL RISKS

 

In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential loss exists

due to such things as changes in the market (market risk) or failure or inability of the other party to a transaction to perform (credit and counterparty risk). See below for a detailed description of select principal risks. For a more comprehensive list of potential risks the Funds may be subject to, please see the Important Information About the Funds.

 

Market Risks  A Fund’s investments in financial derivative instruments and other financial instruments expose the Fund to various risks such as, but not limited to, interest rate, foreign (non-U.S.) currency, equity and commodity risks.

 

Interest rate risk is the risk that fixed income securities and other instruments held by a Fund will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by a Fund is likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. Interest rate changes can be sudden and unpredictable, and a Fund may lose money if these changes are not anticipated by the Fund’s management. A Fund may not be able to hedge against changes in interest rates or may choose not to do so for cost or other reasons. In addition, any hedges may not work as intended.

 

Fixed income securities with longer durations tend to be more sensitive to changes in interest rates, usually making them more volatile than securities with shorter durations. Duration is a measure used to determine the sensitivity of a security’s price to changes in interest rates that incorporates a security’s yield, coupon, final maturity and call features, among other characteristics. Duration is useful primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements. All other things remaining equal, for each one percentage point increase in interest rates, the value of a portfolio of fixed income investments would generally be expected to decline by one percent for every year of the portfolio’s average duration above zero. For example, the value of a portfolio of fixed income securities with an average duration of three years would generally be expected to decline by approximately 3% if interest rates rose by one percentage point. Convexity is an additional measure used to understand a security’s interest rate sensitivity. Convexity measures the rate of change of duration in response to changes in interest rates and may be positive or negative Securities with negative convexity may experience greater losses during periods of rising interest rates, and accordingly Funds holding such securities may be subject to a greater risk of losses in periods of rising interest rates. A wide variety of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions, etc.). Under current economic conditions, interest rates are near historically low levels. Thus, the Funds currently face a heightened level of interest rate risk, especially since the Federal Reserve Board has ended its quantitative

 

 

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June 30, 2017

 

easing program and has begun, and may continue, to raise interest rates. To the extent the Federal Reserve Board continues to raise interest rates, there is a risk that rates across the financial system may rise. During periods of very low or negative interest rates, a Fund may be unable to maintain positive returns. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in heightened market volatility and may detract from Fund performance to the extent a Fund is exposed to such interest rates. Rising interest rates may result in a decline in value of a Fund’s fixed-income investments and in periods of volatility. Further, while U.S. bond markets have steadily grown over the past three decades, dealer “market making” ability has remained relatively stagnant. As a result, dealer inventories of certain types of bonds and similar instruments, which provide a core indication of the ability of financial intermediaries to “make markets,” are at or near historic lows in relation to market size. Because market makers provide stability to a market through their intermediary services, the significant reduction in dealer inventories could potentially lead to decreased liquidity and increased volatility in the fixed income markets. Such issues may be exacerbated during periods of economic uncertainty. All of these factors, collectively and/or individually, could cause a Fund to lose value.

 

Foreign (non-U.S.) securities in this report are classified by the country of incorporation of a holding. In certain instances, a security’s country of incorporation may be different from its country of economic exposure. If a Fund invests directly in foreign (non-U.S.) currencies or in securities that trade in, and receive revenues in, foreign (non-U.S.) currencies, or in financial derivatives that provide exposure to foreign (non-U.S.) currencies, it will be subject to the risk that those currencies will decline in value relative to the base currency of the Fund, or, in the case of hedging positions, that the Fund’s base currency will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks or supranational entities such as the International Monetary Fund, or by the imposition of currency controls or other political developments in the United States or abroad. As a result, a Fund’s investments in foreign currency denominated securities may reduce the Fund’s returns.

 

The market values of a Fund’s investments may decline due to general market conditions which are not specifically related to a particular company or issuer, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. They may also decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and

competitive conditions within an industry. Equity securities and equity related investments generally have greater market price volatility than fixed income securities, although under certain market conditions fixed income securities may have comparable or greater price volatility. Credit ratings downgrades may also negatively affect securities held by a Fund. Even when markets perform well, there is no assurance that the investments held by a Fund will increase in value along with the broader market. In addition, market risk includes the risk that geopolitical events will disrupt the economy on a national or global level.

 

A Fund’s investments in commodity-linked financial derivative instruments may subject the Fund to greater market price volatility than investments in traditional securities. The value of commodity-linked financial derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.

 

Credit and Counterparty Risks  A Fund will be exposed to credit risk to parties with whom it trades and will also bear the risk of settlement default. A Fund seeks to minimize concentrations of credit risk by undertaking transactions with a large number of counterparties on recognized and reputable exchanges, where applicable. Over the counter (“OTC”) derivative transactions are subject to the risk that a counterparty to the transaction will not fulfill its contractual obligations to the other party, as many of the protections afforded to centrally cleared derivative transactions might not be available for OTC derivative transactions. For derivatives traded on an exchange or through a central counterparty, credit risk resides with the Fund’s clearing broker, or the clearinghouse itself, rather than with a counterparty in an OTC derivative transaction. A Fund could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a financial derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Securities are subject to varying degrees of credit risk, which are often reflected in credit ratings.

 

Similar to credit risk, a Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which a Fund has unsettled or open transactions will default. PIMCO, as the Manager, seeks to minimize counterparty risks to the Funds through a number of ways. Prior to entering into transactions with a new counterparty, the PIMCO Counterparty Risk Committee conducts an extensive credit review of such counterparty and must approve the use of such counterparty. Furthermore, pursuant to the terms of the underlying contract, to the extent that unpaid amounts owed to a Fund exceed a

 

 

  ANNUAL REPORT   JUNE 30, 2017   111


Notes to Financial Statements (Cont.)

 

predetermined threshold, such counterparty is required to advance collateral to the Fund in the form of cash or securities equal in value to the unpaid amount owed to the Fund. A Fund may invest such collateral in securities or other instruments and will typically pay interest to the counterparty on the collateral received. If the unpaid amount owed to a Fund subsequently decreases, the Fund would be required to return to the counterparty all or a portion of the collateral previously advanced. PIMCO’s attempts to minimize counterparty risk may, however, be unsuccessful.

 

All transactions in listed securities are settled/paid for upon delivery using approved counterparties. The risk of default is considered minimal, as delivery of securities sold is only made once a Fund has received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.

 

8. MASTER ARRANGEMENTS

 

The Funds may be subject to various netting arrangements with select counterparties (“Master Agreements”). Master Agreements govern the terms of certain transactions, and are intended to reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that is intended to improve legal certainty. Each type of Master Agreement governs certain types of transactions. Different types of transactions may be traded out of different legal entities or affiliates of a particular organization, resulting in the need for multiple agreements with a single counterparty. As the Master Agreements are specific to unique operations of different asset types, they allow a Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all the transactions governed under a single Master Agreement with a counterparty. For financial reporting purposes the Statements of Assets and Liabilities generally present derivative assets and liabilities on a gross basis, which reflects the full risks and exposures prior to netting.

 

Master Agreements can also help limit counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under most Master Agreements, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant Master Agreement with a counterparty in a given account exceeds a specified threshold, which typically ranges from zero to $250,000 depending on the counterparty and the type of Master Agreement. United States Treasury Bills and U.S. dollar cash are generally the preferred forms of collateral, although other forms of AAA rated paper or sovereign securities may be used depending on the terms outlined in the applicable Master Agreement. Securities and cash pledged as collateral are reflected as assets on the Statements of Assets and Liabilities as either a component of

Investments at value (securities) or Deposits with counterparty. Cash collateral received is not typically held in a segregated account and as such is reflected as a liability on the Statements of Assets and Liabilities as Deposits from counterparty. The market value of any securities received as collateral is not reflected as a component of NAV. A Fund’s overall exposure to counterparty risk can change substantially within a short period, as it is affected by each transaction subject to the relevant Master Agreement.

 

Master Repurchase Agreements and Global Master Repurchase Agreements (individually and collectively “Master Repo Agreements”) govern repurchase, reverse repurchase, and sale-buyback transactions between a Fund and select counterparties. Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral. The market value of transactions under the Master Repo Agreement, collateral pledged or received, and the net exposure by counterparty as of period end are disclosed in the Notes to Schedules of Investments.

 

Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern certain forward settling transactions, such as TBA securities, delayed-delivery or sale-buyback transactions by and between a Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, transaction initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral. The market value of forward settling transactions, collateral pledged or received, and the net exposure by counterparty as of period end is disclosed in the Notes to Schedules of Investments.

 

Customer Account Agreements and related addenda govern cleared derivatives transactions such as futures, options on futures, and cleared OTC derivatives. Cleared derivatives transactions require posting of initial margin as determined by each relevant clearing agency which is segregated at a broker account registered with the CFTC, or the applicable regulator. In the United States, counterparty risk may be reduced as creditors of a futures broker do not have a claim to Fund assets in the segregated account. Portability of exposure reduces risk to the Funds. Variation margin, or changes in market value, are exchanged daily, but may not be netted between futures and cleared OTC derivatives unless the parties have agreed to a separate arrangement in respect of portfolio margining. The market value or accumulated unrealized appreciation (depreciation), initial margin posted, and any unsettled variation margin as of period end is disclosed in the Notes to Schedule of Investments.

 

Prime Broker Arrangements may be entered into to facilitate execution and/or clearing of listed equity option transactions or short sales of equity securities between a Fund and selected counterparties. The

 

 

112   PIMCO CLOSED-END FUNDS     


 

June 30, 2017

 

arrangements provide guidelines surrounding the rights, obligations, and other events, including, but not limited to, margin, execution, and settlement. These agreements maintain provisions for, among other things, payments, maintenance of collateral, events of default, and termination. Margin and other assets delivered as collateral are typically in the possession of the prime broker and would offset any obligations due to the prime broker. The market values of listed options and securities sold short and related collateral are disclosed in the Notes to Schedule of Investments.

 

International Swaps and Derivatives Association, Inc. Master Agreements and Credit Support Annexes (“ISDA Master Agreements”) govern bilateral OTC derivative transactions entered into by a Fund with select counterparties. ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral posting and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements. In limited circumstances, the ISDA Master Agreement may contain additional provisions that add counterparty protection beyond coverage of existing daily exposure if the counterparty has a decline in credit quality below a predefined level. These amounts, if any, may be segregated with a third-party custodian. The market value of OTC financial derivative instruments, collateral received or pledged, and net exposure by counterparty as of period end are disclosed in the Notes to Schedules of Investments.

 

9. FEES AND EXPENSES

 

(a) Management Fee  Pursuant to the Investment Management Agreement with PIMCO (the “Agreement”), and subject to the supervision of the Board, PIMCO is responsible for providing to each Fund investment guidance and policy direction in connection with the management of the Fund, including oral and written research, analysis, advice, and statistical and economic data and information. In addition, pursuant to the Agreement and subject to the general supervision of the Board, PIMCO, at its expense, provides or causes to be furnished most other supervisory and administrative services the Funds require, including but not limited to, expenses of most third-party service providers (e.g., audit, custodial, legal, transfer agency, printing) and other expenses, such as those associated with insurance, proxy solicitations and mailings for shareholder meetings, New York Stock Exchange listing and related fees, tax services, valuation services and other services the Funds require for their daily operations.

Pursuant to the Agreement, PIMCO receives an annual fee, payable monthly, at the annual rates shown in the table below:

 

Fund Name          Annual
Rate
 

PCM Fund, Inc.

       0.900% (1) 

PIMCO Global StocksPLUS® & Income Fund

       1.105% (2) 

PIMCO Income Opportunity Fund

       1.055% (1) 

PIMCO Strategic Income Fund, Inc.

       0.955% (3) 

PIMCO Dynamic Credit and Mortgage Income Fund

       1.150% (4) 

PIMCO Dynamic Income Fund

       1.150% (4) 

 

(1) 

Management fees calculated based on the Fund’s average daily “total managed assets”. Total managed assets refer to the total assets of each Fund (including assets attributable to any reverse repurchase agreements, borrowings and preferred shares that may be outstanding) minus accrued liabilities (other than liabilities representing reverse repurchase agreements and borrowings).

(2) 

Management fees calculated based on the Fund’s average daily “total managed assets”. Total managed assets refer to the total assets of each Fund (including assets attributable to any preferred shares and borrowings that may be outstanding) minus accrued liabilities (other than liabilities representing borrowings).

(3) 

Management fees calculated based on the Fund’s average daily net asset value (including daily net assets attributable to any preferred shares of the Fund that may be outstanding).

(4) 

Management fees calculated based on the Fund’s average daily “total managed assets”. Total managed assets refer to the total assets of each Fund (including assets attributable to any reverse repurchase agreements, dollar rolls, borrowings and preferred shares that may be outstanding) minus accrued liabilities (other than liabilities representing reverse repurchase agreements, dollar rolls and borrowings).

 

(b) Fund Expenses  Each Fund bears other expenses, which may vary and affect the total level of expenses paid by shareholders, such as (i) salaries and other compensation or expenses, including travel expenses of any of the Fund’s executive officers and employees, if any, who are not officers, directors, shareholders, members, partners or employees of PIMCO or its subsidiaries or affiliates; (ii) taxes and governmental fees, if any, levied against the Fund; (iii) brokerage fees and commissions and other portfolio transaction expenses incurred by or for the Fund (including, without limitation, fees and expenses of outside legal counsel or third-party consultants retained in connection with reviewing, negotiating and structuring specialized loan and other investments made by the Fund, subject to specific or general authorization by the Fund’s Board); (iv) expenses of the Fund’s securities lending (if any), including any securities lending agent fees, as governed by a separate securities lending agreement; (v) costs, including interest expense, of borrowing money or engaging in other types of leverage financing, including, without limitation, through the use by the Fund of reverse repurchase agreements, tender option bonds, bank borrowings and credit facilities; (vi) costs, including dividend and/or interest expenses and other costs (including, without limitation, offering and related legal costs, fees to brokers, fees to auction agents, fees to transfer agents, fees to ratings agencies and fees to auditors associated with satisfying ratings agency requirements for preferred shares or other securities issued by the Fund and other related requirements in the Fund’s organizational documents) associated with the Fund’s issuance, offering, redemption and

 

 

  ANNUAL REPORT   JUNE 30, 2017   113


Notes to Financial Statements (Cont.)

 

maintenance of preferred shares, commercial paper or other senior securities for the purpose of incurring leverage; (vii) fees and expenses of any underlying funds or other pooled investment vehicles in which the Fund invests; (viii) dividend and interest expenses on short positions taken by the Fund; (ix) fees and expenses, including travel expenses, and fees and expenses of legal counsel retained for their benefit, of Trustees who are not officers, employees, partners, shareholders or members of PIMCO or its subsidiaries or affiliates; (x) extraordinary expenses, including extraordinary legal expenses, that may arise, including expenses incurred in connection with litigation, proceedings, other claims, and the legal obligations of the Fund to indemnify its Trustees, officers, employees, shareholders, distributors, and agents with respect thereto; (xi) organizational and offering expenses of the Fund, including with respect to share offerings, such as rights offerings and shelf offerings, following the Fund’s initial offering, and expenses associated with tender offers and other share repurchases and redemptions; and (xii) expenses of the Fund which are capitalized in accordance with U.S. GAAP.

 

Each of the Trustees of the Funds who is not an “interested person” under Section 2(a)(19) of the Act, (the “Independent Trustees”) also serves as a trustee of a number of other closed-end funds for which PIMCO serves as investment manager (together with the Funds, the “PIMCO Closed-End Funds”), as well as PIMCO Flexible Credit Income Fund, a closed end management investment company managed by PIMCO that is operated as an “interval fund” (“PFLEX”), and PIMCO Managed Accounts Trust, an open-end investment company with multiple series for which PIMCO serves as investment adviser and administrator (“PMAT” and, together with the PIMCO Closed-End Funds and PFLEX the “PIMCO-Managed Funds”). In addition, each of the Independent Trustees also serves as a trustee of certain investment companies (together, the “Allianz-Managed Funds”), for which Allianz Global Investors U.S. LLC (“AllianzGI U.S.”), an affiliate of PIMCO, serves as investment adviser. Prior to the close of business on September 5, 2014, a predecessor entity of AllianzGI U.S. served as investment manager of PMAT and the PIMCO Closed-End Funds.

 

Each Independent Trustee currently receives annual compensation of $225,000 for his or her service on the Boards of the PIMCO-Managed Funds, payable quarterly. The Independent Chairman of the Boards receives an additional $75,000 per year, payable quarterly. The Audit Oversight Committee Chairman receives an additional $50,000 annually, payable quarterly. Trustees are also reimbursed for meeting-related expenses.

 

Each Trustee’s compensation for his or her service as a Trustee on the Boards of the PIMCO Managed Funds and other costs in connection with joint meetings of such Funds are allocated among the PIMCO-Managed Funds, as applicable, on the basis of fixed percentages between PMAT, PFLEX and the PIMCO Closed-End Funds. Trustee

compensation and other costs will then be further allocated pro rata among the individual PIMCO-Managed Funds within each grouping based on each such PIMCO-Managed Fund’s relative net assets.

 

10. RELATED PARTY TRANSACTIONS

 

The Manager is a related party. Fees payable to this party are disclosed in Note 9, Fees and Expenses, and the accrued related party fee amounts are disclosed on the Statements of Assets and Liabilities.

 

Certain Funds are permitted to purchase or sell securities from or to certain related affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Funds from or to another fund or portfolio that are, or could be, considered an affiliate, or an affiliate of an affiliate, by virtue of having a common investment adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a-7 under the Act. Further, as defined under the procedures, each transaction is effected at the current market price. During the period ended June 30, 2017, the Funds below engaged in purchases and sales of securities pursuant to Rule 17a-7 under the Act (amounts in thousands):

 

Fund Name         Purchases     Sales  

PCM Fund, Inc.

    $ 179     $ 6,035  

PIMCO Global StocksPLUS® & Income Fund

      1,277       1,832  

PIMCO Income Opportunity Fund

      4,121       22,330  

PIMCO Strategic Income Fund, Inc.

      0       7,058  

PIMCO Dynamic Credit and Mortgage Income Fund

        49,925         577,321  

PIMCO Dynamic Income Fund

      11,452       114,737  

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

11. GUARANTEES AND INDEMNIFICATIONS

 

Under the organizational documents of PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund each Trustee and officer is indemnified, to the extent permitted by the Act, against certain liabilities that may arise out of performance of their duties to the Funds. Under the organizational documents of PCM Fund, Inc., and PIMCO Strategic Income Fund, Inc., each Director and officer is indemnified to the fullest extent permitted by Maryland law and the Act. For PCM Fund, Inc., employees and agents of the Fund are also indemnified to the maximum extent permitted by Maryland Law and the Act. For PIMCO Strategic Income Fund, Inc., employees and agents of the Fund may be indemnified to the extent determined by the Board and subject to the limitations of the Act. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds have not had prior claims or losses pursuant to these contracts.

 

 

114   PIMCO CLOSED-END FUNDS     


 

June 30, 2017

 

12. PURCHASES AND SALES OF SECURITIES

 

The length of time a Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by a Fund is known as “portfolio turnover.” Each Fund may engage in frequent and active trading of portfolio securities to achieve its investment objective, particularly during periods of volatile market movements. High portfolio turnover may involve correspondingly greater transaction costs to a Fund, including brokerage commissions

or dealer mark-ups and other transaction costs on the sale of securities and reinvestments in other securities. Such sales may also result in realization of taxable capital gains, including short-term capital gains (which are generally taxed at ordinary income tax rates). The transaction costs and tax effects associated with portfolio turnover may adversely affect a Fund’s performance. The portfolio turnover rates are reported in the Financial Highlights.

 

 

Purchases and sales of securities (excluding short-term investments) for the period ended June 30, 2017, were as follows (amounts in thousands):

 

          U.S. Government/Agency     All Other  
Fund Name         Purchases     Sales     Purchases     Sales  

PCM Fund, Inc.

    $ 3,077     $ 330     $ 45,528     $ 24,471  

PIMCO Global StocksPLUS® & Income Fund

      3,064       438       41,652       36,295  

PIMCO Income Opportunity Fund

      9,444       2,076       171,272       148,972  

PIMCO Strategic Income Fund, Inc.

          109,597       2,493       110,912       72,973  

PIMCO Dynamic Credit and Mortgage Income Fund

      84,273           15,150           2,214,529           1,607,390  

PIMCO Dynamic Income Fund

      34,756       12,645       707,197       423,576  

 

13. COMMON SHARES OFFERING

 

On March 23, 2017, the SEC declared effective a registration statement filed using the “shelf” registration process for PIMCO Dynamic Income Fund. Pursuant to the shelf registration, PIMCO Dynamic Income Fund may offer and sell, from time to time, in one or more offerings, up to 9,500,000 of its Common Shares, par value $0.00001 per share. The aggregate sale proceeds for the sales of the PIMCO Dynamic Income Fund Common Shares are subject to an aggregate cap of $275,685,250. The Fund may not sell any Common Shares at a price below the current NAV of such common shares, exclusive of any distributing commission or discount. Sales of the Common Shares, if any, may be made in negotiated transactions or transactions that are deemed to be “at the market”, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange. During the fiscal year ended June 30, 2017, the Fund sold 1,767,791 Common Shares. Proceeds from the offerings during the fiscal year ended June 30, 2017 (net of commissions and fees) were $51,314,917.

 

14. BASIS FOR CONSOLIDATION

 

PCILS I LLC and PDILS I LLC (each a “Subsidiary” and, collectively, the “Subsidiaries”), both Delaware LLC exempted companies, were formed as wholly owned subsidiaries acting as investment vehicles for PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund (for purposes of this section, each a “Fund” and, collectively, the “Funds”), respectively, in order to effect certain investments consistent with each Fund’s objectives and policies in effect from time to time. PCILS I LLC and PDILS I LLC were formed on March 7, 2013 and March 12, 2013, respectively. PIMCO Dynamic Income Credit and Mortgage Fund’s and PIMCO Dynamic Income

Fund’s investment portfolios have been consolidated and include the portfolio holdings of each Fund’s respective Subsidiary. Accordingly, the consolidated financial statements for each Fund include the accounts of each Fund’s respective subsidiary. All inter-company transactions and balances have been eliminated. This structure was established so that certain loans could be held by a separate legal entity from the Funds. As of June 30, 2017, the Subsidiaries had no investments outstanding.

 

15. REGULATORY AND LITIGATION MATTERS

 

The Funds are not named as defendants in any material litigation or arbitration proceedings and are not aware of any material litigation or claim pending or threatened against them.

 

The foregoing speaks only as of the date of the preparation of this report.

 

16. FEDERAL INCOME TAX MATTERS

 

Each Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and distribute all of its taxable income and net realized gains, if applicable, to shareholders. Accordingly, no provision for Federal income taxes has been made.

 

The Funds may be subject to local withholding taxes, including those imposed on realized capital gains. Any applicable foreign capital gains tax is accrued daily based upon net unrealized gains, and may be payable following the sale of any applicable investments.

 

In accordance with U.S. GAAP, the Manager has reviewed the Funds’ tax positions for all open tax years. As of June 30, 2017, the Funds have recorded no liability for net unrecognized tax benefits relating to

 

 

  ANNUAL REPORT   JUNE 30, 2017   115


Notes to Financial Statements (Cont.)

 

uncertain income tax positions they have taken or expect to take in future tax returns.

 

The Funds file U.S. tax returns. While the statute of limitations remains open to examine the Funds’ U.S. tax returns filed for the fiscal years

ending in 2013-2016, no examinations are in progress or anticipated at this time. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

 

 

As of June 30, 2017, the components of distributable taxable earnings are as follows (amounts in thousands):

 

          Undistributed
Ordinary
Income(1)
    Undistributed
Long-Term
Capital Gains
    Net Tax Basis
Unrealized
Appreciation/
(Depreciation)(2)
    Other
Book-to-Tax
Accounting
Differences(3)
    Accumulated
Capital
Losses(4)
    Qualified
Late-Year
Loss
Deferral -
Capital(5)
    Qualified
Late-Year
Loss
Deferral -
Ordinary(6)
 

PCM Fund, Inc.

    $   2,040     $   0     $ 9,129     $ (925   $ (4,894   $   0     $   0  

PIMCO Global StocksPLUS® & Income Fund

      0       0       8,729       (1,840     (29,396     0       0  

PIMCO Income Opportunity Fund

      0       0       45,918       (3,231     (8,008     0       0  

PIMCO Strategic Income Fund, Inc.

      0       0       18,476       (3,366     (38,521     0       0  

PIMCO Dynamic Credit and Mortgage Income Fund

      11,172       0       44,539         (25,695       (160,253     0       0  

PIMCO Dynamic Income Fund

      2,966       0         225,457       (11,579     (15,026     0       0  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(1) 

Includes undistributed short-term capital gains, if any.

(2) 

Adjusted for open wash sale loss deferrals and accelerated recognition of unrealized gain or loss on certain futures, options and forward contracts for federal income tax purposes. Also adjusted for differences between book and tax realized and unrealized gain/loss on swap contracts, partnership adjustments, passive foreign investment companies (PFICs), sale/buyback transactions, and Lehman securities.

(3) 

Represents differences in income tax regulations and financial accounting principles generally accepted in the United States of America, mainly for straddle loss deferrals and distributions payable at fiscal year-end.

(4) 

Capital losses available to offset future net capital gains expire in varying amounts as shown below.

(5) 

Capital losses realized during the period November 1, 2016 through June 30, 2017 which the Funds elected to defer to the following taxable year pursuant to income tax regulations.

(6) 

Specified losses realized during the period November 1, 2016 through June 30, 2017 and Ordinary losses realized during the period January 1, 2017 through June 30, 2017, which the Funds elected to defer to the following taxable year pursuant to income tax regulations.

 

As of June 30, 2017, the Funds had accumulated capital losses expiring in the following years (amounts in thousands).

 

The Funds will resume capital gain distributions in the future to the extent gains are realized in excess of accumulated capital losses.

 

           Expiration of Accumulated Capital Losses  
           06/30/2018      06/30/2019  

PCM Fund, Inc.

     $   1,419      $   0  

PIMCO Global StocksPLUS® & Income Fund

       5,575        0  

PIMCO Income Opportunity Fund

       0        0  

PIMCO Strategic Income Fund, Inc.

       0        0  

PIMCO Dynamic Credit and Mortgage Income Fund

       0        0  

PIMCO Dynamic Income Fund

       0        0  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

Under the Regulated Investment Company Modernization Act of 2010, a fund is permitted to carry forward any new capital losses for an unlimited period. Additionally, such capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term under previous law.

 

As of June 30, 2017, the Funds had the following post-effective capital losses with no expiration (amounts in thousands):

 

          Short-Term     Long-Term  

PCM Fund, Inc.

    $ 1,264     $ 2,211  

PIMCO Global StocksPLUS® & Income Fund

      23,821       0  

PIMCO Income Opportunity Fund

      5,893       2,115  

PIMCO Strategic Income Fund, Inc.

      38,521       0  

PIMCO Dynamic Credit and Mortgage Income Fund

        111,251         49,002  

PIMCO Dynamic Income Fund

      0       15,026  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

116   PIMCO CLOSED-END FUNDS     


 

June 30, 2017

 

 

As of June 30, 2017, the aggregate cost and the net unrealized appreciation/(depreciation) of investments for federal income tax purposes are as follows (amounts in thousands):

 

           Federal
Tax Cost
     Unrealized
Appreciation
     Unrealized
(Depreciation)
     Net Unrealized
Appreciation/
(Depreciation)(7)
 

PCM Fund, Inc.

     $ 174,502      $ 16,740      $ (7,737    $ 9,003  

PIMCO Global StocksPLUS® & Income Fund

       144,485        17,040        (7,683      9,357  

PIMCO Income Opportunity Fund

       536,534        65,083        (22,377      42,706  

PIMCO Strategic Income Fund, Inc.

       907,016        24,460        (13,786      10,674  

PIMCO Dynamic Credit and Mortgage Income Fund

         5,337,342          350,832          (220,900        129,932  

PIMCO Dynamic Income Fund

       2,286,050        312,343        (77,991      234,352  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(7) 

Primary differences, if any, between book and tax net unrealized appreciation/(depreciation) on investments are attributable to open wash sale loss deferrals, partnership adjustments, passive foreign investment companies (PFICs), swap contracts, sale/buyback transactions, convertible preferred securities, and Lehman securities for federal income tax purposes.

 

For the fiscal years ended June 30, 2017 and June 30, 2016, respectively, the Funds made the following tax basis distributions (amounts in thousands):

 

          June 30, 2017     June 30, 2016  
          Ordinary
Income
Distributions(8)
    Long-Term
Capital Gain
Distributions
    Return of
Capital(9)
    Ordinary
Income
Distributions(8)
    Long-Term
Capital Gain
Distributions
    Return of
Capital(9)
 

PCM Fund, Inc.

    $ 16,862     $   0     $ 0     $ 11,077     $ 0     $ 0  

PIMCO Global StocksPLUS® & Income Fund

      17,812       0         2,117       21,340       0         1,918  

PIMCO Income Opportunity Fund

      38,429       0       899       34,171         7,592       0  

PIMCO Strategic Income Fund, Inc.

      33,902       0       5,051       41,907       0       0  

PIMCO Dynamic Credit and Mortgage Income Fund

        356,605       0       0         299,572       0       0  

PIMCO Dynamic Income Fund

      190,382       0       0       200,209       38,491       0  
             

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

(8) 

Includes short-term capital gains, if any, distributed.

(9) 

A portion of the distributions made represents a tax return of capital. Return of capital distributions have been reclassified from undistributed net investment income to paid-in capital to more appropriately conform financial accounting to tax accounting.

 

RCS accounts for mortgage dollar rolls as financing transactions, such that the Fund treats the difference between the selling price and future purchase price on a mortgage dollar roll as interest income for U.S. federal income tax purposes. Such treatment determines RCS’s distributions relating thereto, and may increase the amount of distributions received by Fund shareholders that are taxed as ordinary income and cause shareholders to be taxed on distributions that effectively represent a return of the shareholder’s investment therein. The U.S. federal income tax rules governing the treatment of mortgage dollar roll transactions are complex, and the proper treatment of such transactions is unclear. If the Internal Revenue Service were to challenge or recharacterize RCS’s treatment of mortgage dollar rolls successfully, it would affect the amount, timing and character of distributions received by the Fund’s shareholders.

 

17. SUBSEQUENT EVENTS

 

In preparing these financial statements, the Funds’ management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

 

On July 3, 2017, the following distributions were declared to common shareholders payable August 1, 2017 to shareholders of record on July 14, 2017:

 

PCM Fund, Inc.

    $ 0.080000 per common share  

PIMCO Global StocksPLUS® & Income Fund

    $ 0.146680 per common share  

PIMCO Income Opportunity Fund

    $ 0.190000 per common share  

PIMCO Strategic Income Fund, Inc.

    $ 0.072000 per common share  

PIMCO Dynamic Credit and Mortgage Income Fund

    $   0.164063 per common share  

PIMCO Dynamic Income Fund

    $ 0.220500 per common share  

 

  ANNUAL REPORT   JUNE 30, 2017   117


Notes to Financial Statements (Cont.)

 

June 30, 2017

 

 

On August 1, 2017, the following distributions were declared to common shareholders payable September 1, 2017 to shareholders of record on August 11, 2017:

 

PCM Fund, Inc.

    $   0.080000 per common share  

PIMCO Global StocksPLUS® & Income Fund

    $ 0.146680 per common share  

PIMCO Income Opportunity Fund

    $ 0.190000 per common share  

PIMCO Strategic Income Fund, Inc.

    $ 0.072000 per common share  

PIMCO Dynamic Credit and Mortgage Income Fund

    $ 0.164063 per common share  

PIMCO Dynamic Income Fund

    $ 0.220500 per common share  

 

There were no other subsequent events identified that require recognition or disclosure.

 

118   PIMCO CLOSED-END FUNDS     


Report of Independent Registered Public Accounting Firm

 

To the Board of Directors/Trustees and Shareholders of the PCM Fund, Inc., PIMCO Global

StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Strategic Income

Fund, Inc., PIMCO Dynamic Credit and Mortgage Income Fund (formerly known as PIMCO

Dynamic Credit Income Fund), and PIMCO Dynamic Income Fund

 

In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of each of the PCM Fund, Inc., PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Strategic Income Fund, Inc., PIMCO Dynamic Credit and Mortgage Income Fund (formerly known as PIMCO Dynamic Credit Income Fund), and PIMCO Dynamic Income Fund (hereafter referred to as the “Funds”) as of June 30, 2017, the results of each of their operations and each of their cash flows for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and each of their financial highlights for the each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of June 30, 2017 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri

 

August 25, 2017

 

  ANNUAL REPORT   JUNE 30, 2017   119


Glossary: (abbreviations that may be used in the preceding statements)

 

(Unaudited)

 

Counterparty Abbreviations:

BCY

BOA

BOS

BPS

BRC

CBK

DBL

DEU

DUB

FAR

FBF

FOB

GLM

GSC

 

Barclays Capital, Inc.

Bank of America N.A.

Banc of America Securities LLC

BNP Paribas S.A.

Barclays Bank PLC

Citibank N.A.

Deutsche Bank AG London

Deutsche Bank Securities, Inc.

Deutsche Bank AG

Wells Fargo Bank National Association

Credit Suisse International

Credit Suisse Securities (USA) LLC

Goldman Sachs Bank USA

Goldman Sachs & Co.

  GST

HUS

IND

JML

JPM

JPS

MSB

MSC

MYC

MYI

NGF

NOM

RBC

 

Goldman Sachs International

HSBC Bank USA N.A.

Crédit Agricole Corporate and Investment Bank S.A.

JP Morgan Securities Plc

JPMorgan Chase Bank N.A.

JPMorgan Securities, Inc.

Morgan Stanley Bank, N.A

Morgan Stanley & Co., Inc.

Morgan Stanley Capital Services, Inc.

Morgan Stanley & Co. International PLC

Nomura Global Financial Products, Inc.

Nomura Securities International Inc.

Royal Bank of Canada

  RCE

RDR

RTA

RYL

SAL

SBI

SCX

SOG

SSB

TDM

TOR

UAG

UBS

 

Royal Bank of Canada Europe Limited

RBC Capital Markets

Bank of New York Mellon Corp.

Royal Bank of Scotland Group PLC

Citigroup Global Markets, Inc.

Citigroup Global Markets Ltd.

Standard Chartered Bank

Societe Generale

State Street Bank and Trust Co.

TD Securities (USA) LLC

Toronto Dominion Bank

UBS AG Stamford

UBS Securities LLC

         
         
         
         
         
         
         
         
         
         
         
         
         

Currency Abbreviations:

AUD  

Australian Dollar

  CHF  

Swiss Franc

  JPY  

Japanese Yen

BRL  

Brazilian Real

  EUR  

Euro

  USD (or $)  

United States Dollar

CAD  

Canadian Dollar

  GBP  

British Pound

   

Exchange Abbreviations:

CME  

Chicago Mercantile Exchange

  OTC  

Over the Counter

   

Index/Spread Abbreviations:

ABX.HE  

Asset-Backed Securities Index - Home Equity

  CMBX  

Commercial Mortgage-Backed Index

  PENAAA  

Penultimate AAA Sub-Index

CDX.HY  

Credit Derivatives Index - High Yield

  NDDUEAFE  

MSCI EAFE Index

  S&P 500  

Standard & Poor’s 500 Index

Other Abbreviations:

ABS  

Asset-Backed Security

  CDI  

Brazil Interbank Deposit Rate

  PIK  

Payment-in-Kind

ALT  

Alternate Loan Trust

  CDO  

Collateralized Debt Obligation

  REMIC  

Real Estate Mortgage Investment Conduit

BABs  

Build America Bonds

  CLO  

Collateralized Loan Obligation

  SP - ADR  

Sponsored American Depositary Receipt

BBR  

Bank Bill Rate

  EURIBOR  

Euro Interbank Offered Rate

  TBA  

To-Be-Announced

BBSW  

Bank Bill Swap Reference Rate

  JSC  

Joint Stock Company

  TBD  

To-Be-Determined

CBO  

Collateralized Bond Obligation

  LIBOR  

London Interbank Offered Rate

  TBD%  

Interest rate to be determined when loan settles

 

120   PIMCO CLOSED-END FUNDS     


Federal Income Tax Information

 

(Unaudited)

 

As required by the Internal Revenue Code (“Code”) and Treasury Regulations, if applicable, shareholders must be notified within 60 days of the Funds’ fiscal year end regarding the status of qualified dividend income and the dividend received deduction.

 

Dividend Received Deduction.  Corporate shareholders are generally entitled to take the dividend received deduction on the portion of a Fund’s dividend distribution that qualifies under tax law. The percentage of the following Funds’ fiscal 2017 ordinary income dividend that qualifies for the corporate dividend received deduction is set forth in the table below.

 

Qualified Dividend Income.  Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (the “Act”), the following percentage of ordinary dividends paid during the calendar year was designated as “qualified dividend income”, as defined in the Act, subject to reduced tax rates in 2017 is set forth in the table below.

 

Qualified Interest Income and Qualified Short-Term Capital Gain (for non-U.S. resident shareholders only).  Under the American Jobs Creation Act of 2004, the following amounts of ordinary dividends paid during the fiscal year ended June 30, 2017 are considered to be derived from “qualified interest income,” as defined in Section 871(k)(1)(E) of the Code, and therefore are designated as interest-related dividends, as defined in Section 871(k)(1)(C) of the Code. Further, the following amounts of ordinary dividends paid during the fiscal year ended June 30, 2017 are considered to be derived from “qualified short-term capital gain,” as defined in Section 871(k)(2)(D) of the Code, and therefore are designated as qualified short-term gain dividends, as defined by Section 871(k)(2)(C) of the Code are also set forth in the table below.

 

            Dividend
Received
Deduction %
     Qualified
Dividend
Income %
     Qualified
Interest
Income
(000s)
     Qualified
Short-Term
Capital Gain
(000s)
 

PCM Fund, Inc.

        0.00%        0.03%      $ 7,825      $ 0  

PIMCO Global StocksPLUS® & Income Fund

        0.00%        0.00%        6,680        0  

PIMCO Income Opportunity Fund

        0.00%        2.50%        15,492            0  

PIMCO Strategic Income Fund, Inc.

        0.00%        0.04%        19,418        0  

PIMCO Dynamic Credit and Mortgage Income Fund

        0.00%        0.00%            115,688        0  

PIMCO Dynamic Income Fund

        0.00%        0.05%        58,998        0  

 

 

A zero balance may reflect actual amounts rounding to less than one thousand.

 

Shareholders are advised to consult their own tax advisor with respect to the tax consequences of their investment in the Trust. In January 2018, you will be advised on IRS Form 1099-DIV as to the federal tax status of the dividends and distributions received by you in calendar year 2017.

 

  ANNUAL REPORT   JUNE 30, 2017   121


Shareholder Meeting Results

 

Annual Shareholder Meeting Results

 

PCM Fund, Inc., PIMCO Income Opportunity Fund and PIMCO Dynamic Credit and Mortgage Income Fund held their annual meetings of shareholders on April 28, 2017. Shareholders voted as indicated below:

 

PIMCO Income Opportunity Fund          Affirmative      Withheld
Authority
 

Re-election of Bradford K. Gallagher — Class III to serve until the annual Meeting held during the 2019-2020 fiscal year

       13,147,645        292,955  

Re-election of Alan Rappaport — Class III to serve until the annual Meeting held during the 2019-2020 fiscal year

       13,150,132        290,468  

Re-election of Craig A. Dawson† — Class III to serve until the annual Meeting held during the 2019-2020 fiscal year

       13,155,892        284,708  

 

The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. James A. Jacobson, Hans W. Kertess, John C. Maney and William B. Ogden, IV continued to serve as Trustees of the Fund.

 

Interested Trustee

 

PCM Fund, Inc.          Affirmative      Withheld
Authority
 

Re-election of Hans W. Kertess — Class II to serve until the annual meeting held during the 2019-2020 fiscal year

       9,680,134        317,601  

Re-election of Bradford K. Gallagher — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       9,697,077        300,658  

Re-election of John C. Maney† — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       9,699,426        298,309  

 

The other members of the Board of Directors at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Craig A. Dawson, James A. Jacobson, William B. Ogden, IV and Alan Rappaport continued to serve as Directors of the Fund.

 

Interested Trustee

 

PIMCO Dynamic Credit and Mortgage Income Fund          Affirmative      Withheld
Authority
 

Re-election of Hans W. Kertess — Class I to serve until the annual Meeting held during the 2019-2020 fiscal year

       114,830,372        2,243,477  

Re-election of Alan Rappaport — Class I to serve until the annual Meeting held during the 2019-2020 fiscal year

       114,967,497        2,106,352  

Re-election of William B. Ogden, IV — Class I to serve until the annual Meeting held during the 2019-2020 fiscal year

       114,828,630        2,245,219  

 

The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Bradford K. Gallagher, James A. Jacobson, John C. Maney and Craig A. Dawson continued to serve as Trustees of the Fund.

 

Annual Shareholder Meeting Results

 

PIMCO Strategic Income Fund, Inc., PIMCO Global StocksPLUS® & Income Fund and PIMCO Dynamic Income Fund held their annual meetings of shareholders on June 30, 2017. Shareholders voted as indicated below.

 

PIMCO Global StocksPLUS® & Income Fund          Affirmative      Withheld
Authority
 

Election of Deborah A. DeCotis — Class III to serve until the annual meeting held during the 2019-2020 fiscal year

       9,172,150        338,875  

Re-election of Alan Rappaport — Class III to serve until the annual meeting held during the 2019-2020 fiscal year

       9,172,649        338,376  

Election of John C. Maney† — Class II to serve until the annual Meeting held during the 2018-2019 fiscal year

       9,173,312        337,713  

 

The other members of the Board of Trustees at the time of the meeting, namely, Messrs. Hans W. Kertess, Craig A. Dawson, Bradford K. Gallagher, James A. Jacobson and William B. Ogden, IV continued to serve as Trustees of the Fund.

 

Interested Trustee

 

PIMCO Dynamic Income Fund          Affirmative      Withheld
Authority
 

Re-election of Bradford K. Gallagher — Class II to serve until the annual meeting held during the 2019-2020 fiscal year

       38,463,208        761,235  

Re-election of James A. Jacobson — Class II to serve until the annual meeting held during the 2019-2020 fiscal year

       38,314,096        910,347  

Re-election of Craig A. Dawson† — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       38,481,308        743,135  

 

The other members of the Board of Trustees at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Hans W. Kertess, John C. Maney, William B. Ogden, IV and Alan Rappaport continued to serve as Trustees of the Fund.

 

Interested Trustee

 

122   PIMCO CLOSED-END FUNDS     


(Unaudited)

 

 

PIMCO Strategic Income Fund, Inc.          Affirmative      Withheld
Authority
 

Re-election of Hans W. Kertess — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       35,548,667        1,207,974  

Re-election of Bradford K. Gallagher — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       35,638,224        1,118,416  

Re-election of John C. Maney† — Class II to serve until the annual Meeting held during the 2019-2020 fiscal year

       35,661,003        1,095,637  

 

The other members of the Board of Directors at the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Craig A. Dawson, James A. Jacobson, William B. Ogden, IV and Alan Rappaport continued to serve as Directors of the Fund.

 

Interested Trustee

 

  ANNUAL REPORT   JUNE 30, 2017   123


Changes to Boards of Trustees/Changes to Portfolio Managers

 

(Unaudited)

 

Changes to Boards of Trustees

 

Effective June 30, 2017, Ms. Deborah A. DeCotis, who was previously a Class II Trustee of PGP, became a Class III Trustee of PGP. Effective June 30, 2017, Mr. John C. Maney, who was previously a Class III Trustee of PGP, became a Class II Trustee of PGP.

 

Changes to Portfolio Managers

 

Effective as of June 19, 2017, Alfred Murata serves as co-Portfolio Manager of PIMCO Global StocksPLUS® & Income Fund, Alfred Murata and Bryan Tsu serves as co-Portfolio Managers of PIMCO Income Opportunity Fund, and Alfred Murata, Russ Gannaway and Bryan Tsu serves as co-Portfolio Managers of PCM Fund, Inc., in each case sharing responsibilities with current Portfolio Manager Daniel J. Ivascyn.

 

Mr. Murata is a managing director and portfolio manager in the Newport Beach office, managing income-oriented, multi-sector credit, opportunistic and securitized strategies. Morningstar named him Fixed-Income Fund Manager of the Year (U.S.) for 2013. Prior to joining PIMCO in 2001, he researched and implemented exotic equity and interest rate derivatives at Nikko Financials Technologies. He has 17 years of investment experience and holds a Ph.D. in engineering-economic systems and operations research from Stanford University. He also earned a J.D. from Stanford Law School and is a member of the State Bar of California.

 

Mr. Tsu is an executive vice president and portfolio manager in the New York office, focusing on commercial mortgage-backed securities (CMBS) and collateralized loan obligations (CLOs). Prior to joining PIMCO in 2008, he worked at Bear Stearns in New York, syndicating collateralized loan and collateralized debt obligations and other asset-backed transactions. He has 11 years of investment experience and holds a bachelor’s degree in economics and operations research from Columbia University.

 

Mr. Gannaway is an executive vice president and commercial credit portfolio manager in the Newport Beach office, focusing on commercial real estate and CMBS. Prior to joining PIMCO in 2009, he served as an associate with JER Partners in New York. He has focused predominantly on acquisitions of various commercial real estate debt products, including mezzanine loans, B notes and CMBS B pieces. He has 12 years of investment experience and holds an undergraduate degree in business administration from the University of Georgia.

 

The Morningstar Fixed-Income Fund Manager of the Year award is based on the strength of the manager, performance, strategy, and firm stewardship.

 

124   PIMCO CLOSED-END FUNDS     


Investment Strategy Updates

 

(Unaudited)

 

Effective July 29, 2016, PIMCO Dynamic Credit Income Fund changed its name to PIMCO Dynamic Credit and Mortgage Income Fund (for purposes of this section, the “Fund”). In connection with the name change, the Fund rescinded the following non-fundamental investment policy (the “Former Policy”):

 

The Fund will normally invest at least 80% of its net assets (plus any borrowings for investment purposes) in a portfolio of debt instruments of varying maturities (the “80% policy”).

 

For purposes of the 80% policy, debt instruments may include, without limitation, bonds, debentures, notes, and other debt securities of U.S. and foreign (non-U.S.) corporate and other issuers, including commercial paper; mortgage-related and any other type of asset-backed securities issued on a public or private basis; U.S. Government securities; obligations of foreign governments or their sub-divisions, agencies and government sponsored enterprises and obligations of international agencies and supranational entities; municipal securities and other debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises, including taxable municipal securities (such as Build America Bonds); payment-in-kind securities; zero-coupon bonds; inflation-indexed bonds issued by both governments and corporations; structured notes, including hybrid or indexed securities; catastrophe bonds and other event-linked bonds; credit-linked notes; structured credit products; bank loans (including, among others, senior loans, delayed funding loans, revolving credit facilities and loan participations and assignments); preferred securities; convertible debt securities (i.e., debt securities that may be converted at either a stated price or stated rate into underlying shares of common stock), including synthetic convertible debt securities (i.e., instruments created through a combination of separate securities that possess the two principal characteristics of a traditional convertible security, such as an income-producing security and the right to acquire an equity security); and bank certificates of deposit, fixed time deposits and bankers’ acceptances. The rate of interest on an income-producing security may be fixed, floating or variable. At any given time and from time to time substantially all of the Fund’s portfolio may consist of below investment grade securities. The Fund may invest in debt securities of stressed issuers. The Fund’s investments in derivatives and other synthetic instruments that have economic characteristics similar to debt instruments will be counted toward satisfaction of this 80% policy.

 

The Former Policy was replaced in its entirety with the following new non-fundamental investment policy (the “New Policy”):

 

The Fund will normally invest at least 80% of its net assets (plus any borrowings for investment purposes) in a portfolio of mortgage-related securities and other debt instruments of varying maturities (the “80% policy”). For purposes of the 80% policy, mortgage-related securities

may include, without limitation, mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial or residential mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property.

 

For purposes of the 80% policy, other debt instruments may include, without limitation, bonds, debentures, notes, and other debt securities of U.S. and foreign (non-U.S.) corporate and other issuers, including commercial paper; asset-backed securities issued on a public or private basis; U.S. Government securities; obligations of foreign governments or their sub-divisions, agencies and government sponsored enterprises and obligations of international agencies and supranational entities; municipal securities and other debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises, including taxable municipal securities (such as Build America Bonds); payment-in-kind securities; zero-coupon bonds; inflation-indexed bonds issued by both governments and corporations; structured notes, including hybrid or indexed securities; catastrophe bonds and other event-linked bonds; credit-linked notes; structured credit products; bank loans (including, among others, senior loans, delayed funding loans, revolving credit facilities and loan participations and assignments); preferred securities; convertible debt securities (i.e., debt securities that may be converted at either a stated price or stated rate into underlying shares of common stock), including synthetic convertible debt securities (i.e., instruments created through a combination of separate securities that possess the two principal characteristics of a traditional convertible security, such as an income-producing security and the right to acquire an equity security); and bank certificates of deposit, fixed time deposits and bankers’ acceptances. The rate of interest on an income-producing security may be fixed, floating or variable. At any given time and from time to time substantially all of the Fund’s portfolio may consist of below investment grade securities. The Fund may invest in debt securities of stressed issuers. The Fund’s investments in derivatives and other synthetic instruments that have economic characteristics similar to mortgage-related securities or other debt instruments will be counted toward satisfaction of this 80% policy.

 

The New Policy became effective on July 29, 2016 and may only be changed by the Board of Trustees of the Fund after providing at least 60 days’ written notice to the Fund’s shareholders pursuant to Rule 35d-1 under the Investment Company Act of 1940, as amended.

 

The following risks are associated with the policies described above:

 

To the extent that the Fund has increased exposure to mortgage-related securities, the Fund may be exposed to increased risks associated with such asset classes.

 

 

  ANNUAL REPORT   JUNE 30, 2017   125


Dividend Reinvestment Plan

 

Each Fund has adopted a Dividend Reinvestment Plan (the “Plan”) which allows common shareholders to reinvest Fund distributions in additional common shares of the Fund. American Stock Transfer & Trust Company, LLC (the “Plan Agent”) serves as agent for common shareholders in administering the Plan. It is important to note that participation in the Plan and automatic reinvestment of Fund distributions does not ensure a profit, nor does it protect against losses in a declining market.

 

Automatic enrollment/voluntary participation  Under the Plan, common shareholders whose shares are registered with the Plan Agent (“registered shareholders”) are automatically enrolled as participants in the Plan and will have all Fund distributions of income, capital gains and returns of capital (together, “distributions”) reinvested by the Plan Agent in additional common shares of a Fund, unless the shareholder elects to receive cash. Registered shareholders who elect not to participate in the Plan will receive all distributions in cash paid by check and mailed directly to the shareholder of record (or if the shares are held in street or other nominee name, to the nominee) by the Plan Agent. Participation in the Plan is voluntary. Participants may terminate or resume their enrollment in the Plan at any time without penalty by notifying the Plan Agent online at www.astfinancial.com, by calling (844) 33PIMCO (844-337-4626), by writing to the Plan Agent, American Stock Transfer & Trust Company, LLC, at P.O. Box 922, Wall Street Station, New York, NY 10269-0560, or, as applicable, by completing and returning the transaction form attached to a Plan statement. A proper notification will be effective immediately and apply to each Fund’s next distribution if received by the Plan Agent at least three (3) days prior to the record date for the distribution; otherwise, a notification will be effective shortly following the Fund’s next distribution and will apply to the Fund’s next succeeding distribution thereafter. If you withdraw from the Plan and so request, the Plan Agent will arrange for the sale of your shares and send you the proceeds, minus a transaction fee and brokerage commissions.

 

How shares are purchased under the Plan  For each Fund distribution, the Plan Agent will acquire common shares for participants either (i) through receipt of newly issued common shares from each Fund (“newly issued shares”) or (ii) by purchasing common shares of the Fund on the open market (“open market purchases”). If, on a distribution payment date, the net asset value per common share of a Fund (“NAV”) is equal to or less than the market price per common share plus estimated brokerage commissions (often referred to as a “market premium”), the Plan Agent will invest the distribution amount on behalf of participants in newly issued shares at a price equal to the greater of (i) NAV or (ii) 95% of the market price per common share on the payment date. If the NAV is greater than the

market price per common shares plus estimated brokerage commissions (often referred to as a “market discount”) on a distribution payment date, the Plan agent will instead attempt to invest the distribution amount through open market purchases. If the Plan Agent is unable to invest the full distribution amount in open market purchases, or if the market discount shifts to a market premium during the purchase period, the Plan Agent will invest any un-invested portion of the distribution in newly issued shares at a price equal to the greater of (i) NAV or (ii) 95% of the market price per share as of the last business day immediately prior to the purchase date (which, in either case, may be a price greater or lesser than the NAV per common shares on the distribution payment date). No interest will be paid on distributions awaiting reinvestment. Under the Plan, the market price of common shares on a particular date is the last sales price on the exchange where the shares are listed on that date or, if there is no sale on the exchange on that date, the mean between the closing bid and asked quotations for the shares on the exchange on that date.

 

The NAV per common share on a particular date is the amount calculated on that date (normally at the close of regular trading on the New York Stock Exchange) in accordance with each Fund’s then current policies.

 

Fees and expenses  No brokerage charges are imposed on reinvestments in newly issued shares under the Plan. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. There are currently no direct service charges imposed on participants in the Plan, although each Fund reserves the right to amend the Plan to include such charges. The Plan Agent imposes a transaction fee (in addition to brokerage commissions that are incurred) if it arranges for the sale of your common shares held under the Plan.

 

Shares held through nominees  In the case of a registered shareholder such as a broker, bank or other nominee (together, a “nominee”) that holds common shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of common shares certified by the nominee/record shareholder as representing the total amount registered in such shareholder’s name and held for the account of beneficial owners who are to participate in the Plan. If your common shares are held through a nominee and are not registered with the Plan Agent, neither you nor the nominee will be participants in or have distributions reinvested under the Plan. If you are a beneficial owner of common shares and wish to participate in the Plan, and your nominee is unable or unwilling to become a registered shareholder and a Plan participant on your behalf, you may request that your nominee arrange to have all name so that you may be enrolled as a participant in the Plan. Please

 

 

126   PIMCO CLOSED-END FUNDS     


(Unaudited)

 

contact your nominee for details or for other possible alternatives. Participants whose shares are registered with the Plan Agent in the name of one nominee firm may not be able to transfer the shares to another firm and continue to participate in the Plan.

 

Tax consequences  Automatically reinvested dividends and distributions are taxed in the same manner as cash dividends and distributions — i.e., automatic reinvestment in additional shares does not relieve shareholders of, or defer the need to pay, any income tax that may be payable (or that is required to be withheld) on Fund dividends and distributions. The Funds and the Plan Agent reserve the right to amend or terminate the Plan. Additional information about the Plan, as well as a copy of the full Plan itself, may be obtained from the Plan Agent, American Stock Transfer & Trust Company, LLC, at P.O. Box 922, Wall Street Station, New York, NY 10269-0560; telephone number: (844) 33-PIMCO (844-337-4626); www.astfinancial.com.

 

 

  ANNUAL REPORT   JUNE 30, 2017   127


Management of the Funds

 

The chart below identifies Trustees/Directors and Officers of the Funds. Unless otherwise indicated, the address of all persons below is c/o Pacific Investment Management Company LLC, 1633 Broadway, New York, New York 10019.

 

Trustees/Directors

 

Name And
Year of Birth
  Position(s)
Held
with the
Funds
  Term of
Office and
Length of
Time Served
 

Principal Occupation(s)

During the Past 5 Years

  Number
of Portfolios
in Fund
Complex
Overseen by
Trustee/
Director
   Other
Directorships
Held by
Trustee/Director
During the
Past 5 Years
Independent Trustees/Director

Hans W. Kertess

1939

 

Chairman of the

Board, Trustee/Director

  Director of PCM and RCS since 2008, Trustee of PCI since 2013, Trustee of PGP since 2005, Trustee of PKO since 2007 and Trustee of PDI since 2012, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for PKO and PGP, the 2018-2019 fiscal year for PDI, and the 2019-2020 fiscal year for PCM, PCI, and RCS.   President, H. Kertess & Co., a financial advisory company; and Senior Adviser (formerly Managing Director), Royal Bank of Canada Capital Markets (since 2004).   88    None

Deborah A. DeCotis

1952

  Trustee/Director   Trustee/Director of RCS, PGP, PCM and PKO since 2011, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for PCM, PKO, RCS and PDI, the 2018-2019 fiscal year for PCI, and the 2019-2020 fiscal year for PGP.   Advisory Director, Morgan Stanley & Co., Inc. (since 1996); Member, Circle Financial Group (since 2009); and Member, Council on Foreign Relations (since 2013); Trustee, Smith College (since 2017); and Director, Watford Re (since 2017). Formerly, Co-Chair Special Projects Committee, Memorial Sloan Kettering (2005-2015); Trustee, Stanford University (2010-2015); Principal, LaLoop LLC, a retail accessories company (1999-2014); Director, Helena Rubenstein Foundation (1997-2010); and Director, Armor Holdings (2002-2010).   88    None

Bradford K. Gallagher

1944

  Trustee/Director   Trustee/Director of RCS, PCM, PGP and PKO since 2010, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for PCI, the 2018-2019 fiscal year for PGP, and the 2019-2020 fiscal year for RCS, PKO, PDI and PCM.   Retired. Founder, Spyglass Investments LLC, a private investment vehicle (since 2001). Formerly, Chairman and Trustee, The Common Fund (2005-2014); Partner, New Technology Ventures Capital Management LLC, a venture capital fund (2011-2013); Chairman and Trustee, Atlantic Maritime Heritage Foundation (2007-2012); and Founder, President and CEO, Cypress Holding Company and Cypress Tree Investment Management Company (1995-2001).   88    Formerly, Chairman and Trustee of Grail Advisors ETF Trust (2009-2010); and Trustee of Nicholas- Applegate Institutional Funds (2007-2010).

James A. Jacobson

1945

  Trustee/Director   Trustee/Director of RCS, PCM, PGP and PKO since 2009, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for PCI, the 2018-2019 fiscal year for RCS, PGP, PCM and PKO, and the 2019-2020 fiscal year for PDI.   Retired. Trustee (since 2002) and Chairman of Investment Committee (since 2007), Ronald McDonald House of New York; and Trustee, New Jersey City University (since 2014). Formerly, Vice Chairman and Managing Director, Spear, Leeds & Kellogg Specialists, LLC, a specialist firm on the New York Stock Exchange (2003-2008).   88    Formerly, Trustee, Alpine Mutual Funds Complex consisting of 18 funds.

William B. Ogden, IV

1945

  Trustee/Director   Trustee/Director of PCM, RCS and PKO since 2008, Trustee of PGP since 2006, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for reelection at the annual meeting of shareholders held during the 2017-2018 fiscal year for PKO and PGP, the 2018-2019 fiscal year for RCS, PCM and PDI, and the 2019-2020 fiscal year for PCI.   Retired. Formerly, Asset Management Industry Consultant; and Managing Director, Investment Banking Division of Citigroup Global Markets Inc.   88    None

 

128   PIMCO CLOSED-END FUNDS     


 

(Unaudited)

 

Name And
Year of Birth
  Position(s)
Held
with the
Funds
  Term of
Office and
Length of
Time Served
 

Principal Occupation(s)

During the Past 5 Years

  Number
of Portfolios
in Fund
Complex
Overseen by
Trustee/
Director
   Other
Directorships
Held by
Trustee/Director
During the
Past 5 Years

Alan Rappaport

1953

  Trustee/Director   Trustee/Director of RCS, PCM, PGP and PKO since 2010, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for RCS and PCM, the 2018-2019 fiscal year for PDI, and the 2019-2020 fiscal year for PGP, PCI and PKO.   Advisory Director (formerly Vice Chairman), Roundtable Investment Partners (since 2009); Adjunct Professor, New York University Stern School of Business (since 2011); Lecturer, Stanford University Graduate School of Business (since 2013); and Director, Victory Capital Holdings, Inc., an asset management firm (since 2013). Formerly, Member of Board of Overseers, NYU Langone Medical Center (2015-2016); Trustee, American Museum of Natural History (2005-2015); Trustee, NYU Langone Medical Center (2007-2015); Vice Chairman (formerly Chairman and President), U.S. Trust (formerly Private Bank of Bank of America, the predecessor entity of U.S. Trust) (2001-2008).   88    None
Interested Trustees/Directors

Craig A. Dawson*

1968

  Trustee/Director   Trustee/Director of the Funds since 2014, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for RCS, PGP, PCI and PCM, and the 2019-2020 fiscal year for PDI and PKO.   Managing Director and Head of PIMCO Europe, Middle East and Africa (since 2016). Director of a number of PIMCO’s Europeans investment vehicles and affiliates (since 2008). Formerly, Head of Strategic Business Management, PIMCO (2014-2016), head of PIMCO’s Munich office and head of European product management for PIMCO.   26    None

John C. Maney**

1959

  Trustee/Director   Director of RCS and PCM since 2008, Trustee of PGP since 2006, Trustee of PKO since 2007, Trustee of PDI since 2012 and Trustee of PCI since 2013, expected to stand for re-election at the annual meeting of shareholders held during the 2017-2018 fiscal year for PDI, the 2018-2019 fiscal year for PCI, PKO and PGP, and the 2019-2020 fiscal year for PCM and RCS.   Managing Director of Allianz Asset Management of America L.P. (since January 2005) and a member of the Management Board and Chief Operating Officer of Allianz Asset Management of America L.P. (since November 2006). Formerly, Member of the Management Board of Allianz Global Investors Fund Management LLC (2007-2014) and Managing Director of Allianz Global Investors Fund Management LLC (2011-2014).   26    None

 

* Mr. Dawson is an “interested person” of the Funds, as defined in Section 2(a)(19) of the Act, due to his affiliation with PIMCO and its affiliates. Mr. Dawson’s address is 650 Newport Center Drive, Newport Beach, CA 92660.
** Mr. Maney is an “interested person” of the Funds, as defined in Section 2(a)(19) of the Act, due to his affiliation with Allianz Asset Management of America L.P. and its affiliates. Mr. Maney’s address is 680 Newport Center Drive, Suite 250, Newport Beach, CA 92660.

 

  ANNUAL REPORT   JUNE 30, 2017   129


Management of the Funds (Cont.)

 

(Unaudited)

 

 

Officers

 

Name, Address and
Year of Birth
   Position(s)
Held
with Fund
   Term of Office
and Length
of Time Served
   Principal Occupation(s) During the Past 5 Years

Peter G. Strelow1

1970

   President    Since 2014    Managing Director, Chief Administrative Officer and Co-Chief Operating Officer, PIMCO. President, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Youse Guia1

1972

   Chief Compliance Officer    Since 2014    Senior Vice President and Deputy Chief Compliance Officer, PIMCO. Chief Compliance Officer, PIMCO-Managed Funds. Formerly, Head of Compliance, Allianz Global Investors U.S. Holdings LLC and Chief Compliance Officer of the Allianz Funds, Allianz Multi-Strategy Trust, Allianz Global Investors Sponsored Closed-End Funds, Premier Multi-Series VIT and The Korea Fund, Inc.

Joshua D. Ratner2

1976

   Vice President, Secretary and Chief Legal Officer    Since 2014    Executive Vice President and Senior Counsel, PIMCO. Chief Legal Officer, PIMCO Investments LLC. Vice President, Secretary and Chief Legal Officer, PIMCO-Managed Funds. Vice President - Senior Counsel, Secretary, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Ryan Leshaw1

1980

   Assistant Secretary    Since 2014    Senior Vice President and Senior Counsel, PIMCO. Assistant Secretary, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT. Formerly, Associate, Willkie Farr & Gallagher LLP.

Wu-Kwan Kit1

1981

   Assistant Secretary    Since March 2017    Vice President and Counsel, PIMCO. Assistant Secretary, PIMCO-Managed Funds. Formerly, Assistant General Counsel, VanEck.

Stacie D. Anctil1

1969

   Vice President    Since 2015    Executive Vice President, PIMCO. Vice President, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Eric D. Johnson2

1970

   Vice President    Since 2014    Executive Vice President, PIMCO. Vice President, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Bijal Parikh1

1978

   Vice President    Since March 2017    Senior Vice President, PIMCO. Vice President, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust and PIMCO Equity Series.

William G. Galipeau1

1974

   Treasurer    Since 2014    Executive Vice President, PIMCO. Treasurer, PIMCO-Managed Funds. Vice President, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Erik C. Brown1

1967

   Assistant Treasurer    Since 2015    Executive Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Christopher M. Morin1

1980

   Assistant Treasurer    Since 2016    Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT. Formerly, Vice President of Operations, Standard Life Investments USA; Assistant Vice President, Brown Brothers Harriman.

Jason J. Nagler2

1982

   Assistant Treasurer    Since 2015    Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT. Formerly, Head of Mutual Fund Reporting, GMO, and Assistant Treasurer, GMO Trust and GMO Series Trust Funds.

Trent W. Walker1

1974

   Assistant Treasurer    Since 2014    Executive Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds. Treasurer, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Laura Melman2

1966

   Assistant Treasurer    Since March 2017    Senior Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT.

Colleen Miller2

1980

   Assistant Treasurer    Since March 2017    Vice President, PIMCO. Assistant Treasurer, PIMCO-Managed Funds, PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series and PIMCO Equity Series VIT. Formerly, Vice President Cohen & Steers Capital Management.

 

1 

The address of these officers is Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, California 92660.

2 

The address of these officers is Pacific Investment Management Company LLC, 1633 Broadway, New York, New York 10019.

 

130   PIMCO CLOSED-END FUNDS     


Approval of Investment Management Agreement

 

(Unaudited)

 

At an in-person meeting held on June 13, 2017 (the “Approval Meeting”), the Board of Trustees or Directors (for purposes of this disclosure, all Board members are hereinafter referred to as “Trustees”) of the Funds (the “Board”), including the Trustees who are not interested persons (as that term is defined in the Investment Company Act of 1940) of the Funds or PIMCO (the “Independent Trustees”), formally considered and unanimously approved the continuation of the Investment Management Agreement between each Fund and PIMCO (the “Agreement”) for an additional one-year period commencing on August 1, 2017. Prior to the Approval Meeting, the Contracts Review Committee of the Board of each Fund (together, the “Committee”) held an in-person meeting on June 13, 2017 (the “Committee Meeting”) and formally considered and recommended to the Board the continuation of the Agreement for each Fund. Prior to the Approval Meeting, on May 15, 2017, the Chair of the Committee participated in a conference call with members of management and PIMCO personnel and counsel to the Independent Trustees (“Independent Counsel”) to discuss the process for the Board’s review of the Agreement and to consider certain information relating to the Funds, including, among other information, information relating to PIMCO’s estimated profitability with respect to the Agreement, comparative fees and expenses and Fund performance. On May 16, 2017, PIMCO provided materials to the Committee for its consideration of the Agreement in response to a request from Independent Counsel (the “Manager Request Letter”), as well as other materials and information PIMCO believed was useful in evaluating the continuation of the Agreement.

 

On May 25, 2017, the Committee held a meeting via conference call (collectively with the May 15, 2017 conference call, the Committee Meeting and the Approval Meeting, the “Contract Renewal Meetings”), at which the members of the Committee, all of whom are Independent Trustees, considered the materials and information provided by PIMCO bearing on the continuation of the Agreement. The Committee also received and reviewed a memorandum from counsel to the Funds regarding the Trustees’ responsibilities in evaluating the Agreement, which they discussed with Independent Counsel.

 

Following the presentation at the Committee Meeting, the Independent Trustees met separately in executive session with Independent Counsel to review and discuss all relevant information, including, but not limited to, information provided in response to the Manager Request Letter and information presented and discussed at the prior Contract Renewal Meetings.

 

In connection with their deliberations regarding the proposed continuation of the Agreement for each Fund, the Trustees, including the Independent Trustees, considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The Trustees also considered

the nature, quality and extent of the various investment management, administrative and other services performed by PIMCO under the Agreement.

 

It was noted that, in connection with their Contract Renewal Meetings, the Trustees relied upon materials provided by PIMCO which included, among other items: (i) information provided by Broadridge Financial Solutions, Inc./Lipper Inc. (“Lipper”), an independent third party, on the total return investment performance (based on net asset value and common share market price) of the Funds for various time periods, the investment performance of a group of funds with investment classifications/objectives comparable to those of the Funds identified by Lipper (the “Lipper Performance Universe”), (ii) information provided by Lipper on each Fund’s management fees and other expenses under the Agreement and the management fees and other expenses of a smaller sample of comparable funds identified by Lipper (the “Lipper Expense Group”) as well as of a larger sample of comparable funds identified by Lipper (the “Lipper Expense Universe”), (iii) information regarding the market value performance of each Fund’s common shares and related share price premium and/or discount information, (iv) information regarding the investment performance and fees for other funds and accounts managed by PIMCO, if any, with similar investment strategies to those of the Funds, (v) the estimated profitability to PIMCO with respect to the Funds for the one-year period ended December 31, 2016, (vi) descriptions of various functions performed by PIMCO for the Funds, such as portfolio management, compliance monitoring and portfolio trading practices, (vii) information regarding PIMCO’s compliance policies applicable to the Funds, (viii) information regarding the Funds’ use of leverage, (ix) summaries assigning a quadrant placement to each Fund based on an average of certain measures of performance and fees/expenses versus Lipper peer group medians (the “Fund Scoring Summaries”), (x) fact cards for each Fund that included summary information regarding each Fund, (xi) information regarding the comparative yields of the Funds, (xii) information regarding the risk-adjusted returns of the Funds, (xiii) possible “fall-out” benefits to PIMCO from its relationship with the Funds, and (xiv) information regarding the overall organization of PIMCO, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative, compliance and other services to the Funds.

 

The Trustees’ conclusions as to the continuation of the Agreement were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, attributing different weights to various factors.

 

 

  ANNUAL REPORT   JUNE 30, 2017   131


Approval of Investment Management Agreement (Cont.)

 

 

As part of their review, the Trustees examined PIMCO’s abilities to provide high-quality investment management and other services to the Funds. Among other information, the Trustees considered the investment philosophy and research and decision-making processes of PIMCO; the experience of key advisory personnel of PIMCO responsible for portfolio management of the Funds; the ability of PIMCO to attract and retain capable personnel; and the capabilities of the senior management and staff of PIMCO. In addition, the Trustees reviewed the quality of PIMCO’s services with respect to regulatory compliance and compliance with the investment policies of the Funds; the nature and quality of the supervisory and administrative services PIMCO is responsible for providing to the Funds; and conditions that might affect PIMCO’s ability to provide high-quality services to the Funds in the future under the Agreement, including PIMCO’s financial condition and operational stability. Based on the foregoing, the Trustees concluded that PIMCO’s investment process, research capabilities and philosophy were well suited to the Funds given their investment objectives and policies, and that PIMCO would be able to continue to meet any reasonably foreseeable obligations under the Agreement.

 

In assessing the reasonableness of each Fund’s fees under the Agreement, the Trustees considered, among other information, the Fund’s management fee and its total expense ratio as a percentage of average net assets attributable to common shares and as a percentage of average managed assets (including assets attributable to common shares and leverage outstanding combined), and the management fee and total expense ratios of the Lipper Expense Group and Lipper Expense Universe for each Fund. In each case, the total expense ratio information was provided both inclusive and exclusive of interest and borrowing expenses. Fund-specific comparative fees/expenses reviewed by the Trustees are discussed below. The Fund-specific fee and expense results discussed below were prepared and provided by Lipper and were not independently verified by the Trustees.

 

The Trustees specifically took note of how each Fund compared to its Lipper peers as to performance, management fee expense and total expense ratio. The Trustees noted that, while the Funds are not currently charged a separate administration fee (recognizing that their management fees include a component for administrative services under the unitary fee arrangements), it was not clear in all cases whether the peer funds in the Lipper categories were separately charged such a fee by their investment managers, so that the total expense ratio, as opposed to any individual expense component, represented the most relevant comparison. The Trustees also considered that the total expense ratio seems to provide a more apt comparison than management fee expense because the Funds’ unitary fee arrangements cover Operating Expenses (defined below) that are typically paid for or incurred by peer funds directly in addition to their management fees as discussed below. It was noted that the total

expense ratio comparisons reflect the effect of expense waivers/reimbursements, if any. The Trustees considered total expense ratio comparisons both including and excluding interest and borrowing expenses. The Trustees noted that only leveraged closed-end funds were considered for inclusion in the Lipper Expense Groups and Lipper Expense Universes presented for comparison with the Funds.

 

The Trustees noted that, for each Fund, the contractual management fee rate for the Fund under its unitary fee arrangement was above the median contractual management fees of the other funds in its Lipper Expense Group, calculated both on average net assets and on average managed assets, with the exception of PCM, whose contractual management fee rate was below the median in both cases. However, in this regard, the Trustees took into account that each Fund’s unitary fee arrangement covers substantially all of the Fund’s other supervisory and administrative services required by the Fund that are typically paid for or incurred by closed-end funds directly in addition to a fund’s management fee (such fees and expenses, “Operating Expenses”) and therefore would tend to be higher than the contractual management fee rates of other funds in the Lipper peer groups, which generally do not have a unitary fee structure and bear Operating Expenses directly and in addition to the management fee. The Trustees determined that a review of each Fund’s total expense ratio with the total expense ratios of peer funds would generally provide more meaningful comparisons than considering contractual management fee rates in isolation.

 

In this regard, the Trustees noted PIMCO’s view that the unitary fee arrangements have benefited and will continue to benefit common shareholders because they provide a management fee expense structure (including Operating Expenses) that is essentially fixed as a percentage of either managed assets (including assets attributable to preferred shares and certain other forms of leverage) or net assets (including assets attributable to preferred shares), as applicable, making it more predictable under ordinary circumstances in comparison to fee and expense structures, such as the structure in place for the Funds prior to September 6, 2014, under which the Funds’ Operating Expenses (including certain third-party fees and expenses) can vary significantly over time. The Trustees also considered that the unitary fee arrangements generally insulate the Funds and common shareholders from increases in applicable third-party and certain other expenses because PIMCO, rather than the Funds, would bear the risk of such increases (though the Trustees also noted that PIMCO would benefit from any reductions in such expenses).

 

Fund-specific comparative performance results for the Funds reviewed by the Trustees are discussed below. The comparative performance information was prepared and provided by Lipper and was not independently verified by the Trustees. Due to the passage of time, these performance results may differ from the performance results for

 

 

132   PIMCO CLOSED-END FUNDS     


(Unaudited)

 

more recent periods. With respect to all Funds, the Trustees reviewed, among other information, comparative information showing performance of the Funds against the Lipper Performance Universes for the one-year, three-year, five-year and ten-year periods (to the extent each such Fund had been in existence) ended December 31, 2016. The Trustees also reviewed the Fund Scoring Summaries prepared by PIMCO at the Independent Trustees’ request comparing each Fund’s fees/expenses against those of its Lipper Expense Universe and performance against that of its Lipper Performance Universe, by identifying a quadrant designation based on the average of six different measures of fees/expenses versus performance (one-year, three-year and five-year performance for the period ended December 31, 2016, in each case, versus a Fund’s management fees or total expense ratio). The Fund Scoring Summaries were based on net assets, one showing total expenses inclusive of interest and borrowing expenses and the other showing total expenses exclusive of interest and borrowing expenses. In addition, the Trustees also reviewed fact cards for each Fund that included summary information regarding each Fund, including investment objective and strategy, portfolio managers, assets under management, outstanding leverage, net asset value and market performance comparisons, comparative fee and expense information, premium/discount information and information regarding PIMCO’s estimated profitability.

 

In addition, it was noted that the Trustees considered matters bearing on the Funds and their advisory arrangements at their meetings throughout the year, including a review of performance data at each regular meeting.

 

Among other information, the Trustees took into account the following regarding particular Funds.

 

PGP

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of two funds, the Trustees noted that the Fund ranked first out of two funds for the one-year, three-year and five-year periods ended December 31, 2016. For the ten-year period, the Trustees noted that the Fund was the only fund within its Lipper Performance Universe.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of eight funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in the Lipper Expense Group ranged from $88.8 million to $177.8 million, and that four of the funds in the group were larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 17 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including

interest and borrowing expenses) calculated on both average managed assets and average net assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was below the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

PKO

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of 12 funds for one-year and three-year performance, and eight funds for five-year performance, the Trustees noted that the Fund had first quintile performance for the one-year, three-year, and five-year periods ended December 31, 2016.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of six funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in the Lipper Expense Group ranged from $81.6 million to $349.8 million, and that no funds in the group were larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 12 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on both average managed assets and average net assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was below the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

PCM

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of 27 funds for one-year and three-year performance, 21 funds for five-year performance and 17 funds for ten-year performance, the Trustees noted that the Fund had third

 

 

  ANNUAL REPORT   JUNE 30, 2017   133


Approval of Investment Management Agreement (Cont.)

 

quintile performance for the one-year and three-year periods, second quintile performance for the five-year period, and first quintile performance for the ten-year period ended December 31, 2016.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of four funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in the Lipper Expense Group ranged from $114.6 million to $344.3 million, and that each fund in the group was larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 27 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on average managed assets was below the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on average managed assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was below the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

RCS

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of 12 funds for one-year and three-year performance, eight funds for five-year performance and six funds for ten-year performance, the Trustees noted that the Fund had fourth quintile performance for the one-year period, second quintile performance for the three-year period, and first quintile performance for the five-year and ten-year periods ended December 31, 2016.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of six funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in

the Lipper Expense Group ranged from $81.6 million to $339.1 million, and that no funds in the group were larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 12 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on both average managed assets and average net assets was below the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on both average managed assets and average net assets was below the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

PCI

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of 12 funds, the Trustees noted that the Fund had first quintile performance for the one-year and three-year periods ended December 31, 2016 and first quintile performance for the period from the Fund’s inception on January 31, 2013 until December 31, 2016.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of five funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in the Lipper Expense Group ranged from $185.7 million to $2.868 billion, and that no funds in the group were larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 12 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on both average managed assets and average net assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was at the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

 

134   PIMCO CLOSED-END FUNDS     


(Unaudited)

 

 

PDI

 

With respect to the Fund’s common share total return performance (based on net asset value) relative to its respective Lipper Performance Universe, consisting of 12 funds for the one-year and three-year performance, and 11 funds for the since inception performance, the Trustees noted that the Fund had third quintile performance for the one-year period, first quintile performance for the three-year period ended December 31, 2016 and first quintile performance for the period from the Fund’s inception on May 30, 2012 until December 31, 2016.

 

The Trustees noted that the Lipper Expense Group for the Fund consisted of a total of five funds, including the Fund. The Trustees also noted that the average net assets of the common shares of the funds in the Lipper Expense Group ranged from $185.7 million to $1.295 billion, and that no funds in the group were larger in asset size than the Fund. The Trustees noted that the Lipper Expense Universe for the Fund consisted of a total of 12 funds, including the Fund. The Trustees noted that the Fund’s total expense ratio (including interest and borrowing expenses) calculated on both average managed assets and average net assets was above the median total expense ratio (including interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was at the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average managed assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Universe. The Trustees noted that the Fund’s total expense ratio (excluding interest and borrowing expenses) calculated on average net assets was above the median total expense ratio (excluding interest and borrowing expenses) of the funds in its Lipper Expense Group and Lipper Expense Universe.

 

In addition to their review of Fund performance based on net asset value, the Trustees also considered the market value performance of each Fund’s common shares and related share price premium and/or discount information based on the materials provided by Lipper and PIMCO. The Trustees also considered information provided by PIMCO regarding the dividend yields of each Fund in comparison to funds in the following Lipper groupings as of December 31, 2016: Lipper Options Arbitrage/Option Strategies Funds (PGP), Lipper Global Income Funds (PKO, RCS, PDI and PCI), and Lipper General Bond Funds (PCM).

 

The Trustees considered the management fees charged by PIMCO to other funds and accounts with similar strategies to those of the Funds, if any. The Trustees considered information provided by PIMCO

indicating that, in comparison to certain other products managed by PIMCO, including open-end funds and exchange traded funds, there are additional portfolio management challenges in managing closed-end funds such as the Funds, such as those associated with less liquid holdings, the use of leverage, issues relating to trading on a national exchange and attempting to meet a regular dividend. The Trustees were advised by PIMCO that, in light of these additional challenges, different pricing structures for closed-end funds such as the Funds and other products managed by PIMCO are to be expected, and that comparisons of pricing structures across these products may not reflect apt comparisons, even where other products have similar investment objectives and strategies to those of the Funds. With respect to PGP and RCS, the Trustees were advised that PIMCO does not manage any funds or accounts which have an investment strategy or return profile that are substantially similar to those Funds.

 

The Trustees also took into account that all Funds, with the exception of RCS, pay management fees on assets attributable to types of leverage that they use (such as reverse repurchase agreements) under the Agreement (because each Fund’s fees, except those of RCS, are calculated based on total managed assets, including assets attributable to reverse repurchase agreements and/or certain other forms of leverage outstanding). They noted that RCS’s management fees are based on daily net assets, including net assets attributable to any preferred shares that may be outstanding, but that RCS does not have any preferred shares outstanding. In this regard, the Trustees took into account that PIMCO has a financial incentive for the Funds to continue to use leverage, which may create a conflict of interest between PIMCO, on one hand, and the Funds’ common shareholders, on the other. The Trustees further noted that this incentive may be greater under the unitary fee arrangements because the contractual management fee rates under the unitary fee arrangements are higher for each Fund than the Fund’s management fee would otherwise be if it did not cover the Fund’s Operating Expenses — i.e., in comparison to their non-unitary management fee rates in place prior to September 6, 2014 — with the exception of PCI and PDI, which have the same management fee rates at they did prior to September 6, 2014. Therefore, with the exception of PCI and PDI, the total fees paid by each Fund to PIMCO under the unitary fee arrangements will vary more with increases and decreases in applicable leverage incurred by a Fund than under its prior non-unitary fee arrangement, all things being equal. The Trustees considered information provided by PIMCO and related presentations as to why each Fund’s use of leverage continues to be appropriate and in the best interests of the respective Fund under current market conditions. The Trustees also considered PIMCO’s representation that it will use leverage for the Funds solely as it determines to be in the best interests of the Funds from an investment perspective and without regard to the level of compensation PIMCO

 

 

  ANNUAL REPORT   JUNE 30, 2017   135


Approval of Investment Management Agreement (Cont.)

 

(Unaudited

 

receives. The Trustees noted that RCS does not pay fees on assets attributable to the types of leverage that the Fund currently employs.

 

The Trustees also considered estimated profitability analyses provided by PIMCO, which included, among other information, (i) PIMCO’s estimated pre- and post-distribution operating margin for each Fund, as well as PIMCO’s estimated pre- and post-distribution operating margin for all of the closed-end funds advised by PIMCO, including the Funds (collectively, the “Estimated Margins”), in each case for the one-year period ended December 31, 2016; (ii) a comparison of PIMCO’s Estimated Margins for the one-year period ended December 31, 2016, to PIMCO’s Estimated Margins for the one-year period ended December 31, 2015,; and (iii) an overview of PIMCO’s average fee rates with respect to all of the closed-end funds advised by PIMCO, including the Funds, compared to PIMCO’s average fee rates with respect to its other clients, including PIMCO-advised separate accounts, open-end funds and hedge funds and private equity funds. The Trustees also took into account explanations from PIMCO regarding how certain corporate and shared expenses were allocated among the Funds and other funds and accounts managed by PIMCO for purposes of developing profitability estimates. Based on the profitability analyses provided by PIMCO, the Trustees determined, taking into account the various assumptions made, that such profitability did not appear to be excessive.

 

The Trustees also took into account the entrepreneurial and business risk PIMCO has undertaken as investment manager and sponsor of the Funds.

 

The Trustees also took into account that the Funds do not currently have any breakpoints in their management fees. The Trustees considered that, as closed-end investment companies, the Funds do not continually offer new shares to raise additional assets (as does a typical open-end investment company), but may raise additional assets through periodic shelf offerings and may also experience asset growth through investment performance and/or the increased use of leverage. The Trustees considered that the unitary fee arrangements provide inherent economies of scale because a Fund maintains competitive fixed unitary fees even if the particular Fund’s assets decline and/or operating costs rise. The Trustees further considered that, in contrast, breakpoints are a proxy for charging higher fees on lower asset levels and that when a fund’s assets decline, breakpoints may reverse, which causes expense ratios to increase. The Trustees also considered that, unlike the Funds’ unitary fee arrangements, funds with “pass through” administrative fee structures may experience increased expense ratios when fixed dollar fees are charged against declining fund assets. The Trustees also considered that the unitary fee arrangements protect shareholders from a rise in operating costs that may result from, including, among other things, PIMCO’s investments in various

business enhancements and infrastructure. The Trustees noted that PIMCO has made extensive investments in these areas.

 

Additionally, the Trustees considered so-called “fall-out benefits” to PIMCO, such as reputational value derived from serving as investment manager to the Funds and research, statistical and quotation services PIMCO may receive from broker-dealers executing the Funds’ portfolio transactions on an agency basis.

 

After reviewing these and other factors described herein, the Trustees concluded, with respect to each Fund, within the context of their overall conclusions regarding the Agreement and based on the information provided and related representations made by management, that they were satisfied with PIMCO’s responses and efforts relating to the investment performance of the Funds. The Trustees also concluded that the fees payable under the Agreement represent reasonable compensation in light of the nature, extent and quality of services provided by PIMCO. Based on their evaluation of factors that they deemed to be material, including those factors described above, the Trustees, including the Independent Trustees, unanimously concluded that the continuation of the Agreement was in the interests of each Fund and its shareholders, and should be approved.

 

 

136   PIMCO CLOSED-END FUNDS     


Privacy Policy1

 

(Unaudited

 

The Funds2 consider customer privacy to be a fundamental aspect of their relationships with shareholders and are committed to maintaining the confidentiality, integrity and security of their current, prospective and former shareholders’ non-public personal information. The Funds have developed policies that are designed to protect this confidentiality, while allowing shareholder needs to be served.

 

OBTAINING PERSONAL INFORMATION

 

In the course of providing shareholders with products and services, the Funds and certain service providers to the Funds, such as the Funds’ investment adviser or sub-adviser (“Adviser”), may obtain non-public personal information about shareholders, which may come from sources such as account applications and other forms, from other written, electronic or verbal correspondence, from shareholder transactions, from a shareholder’s brokerage or financial advisory firm, financial advisor or consultant, and/or from information captured on applicable websites.

 

RESPECTING YOUR PRIVACY

 

As a matter of policy, the Funds do not disclose any non-public personal information provided by shareholders or gathered by the Funds to non-affiliated third parties, except as required or permitted by law or as necessary for such third parties to perform their agreements with respect to the Funds. As is common in the industry, non-affiliated companies may from time to time be used to provide certain services, such as preparing and mailing prospectuses, reports, account statements and other information, conducting research on shareholder satisfaction and gathering shareholder proxies. The Funds or their affiliates may also retain non-affiliated companies to market Fund shares or products which use Fund shares and enter into joint marketing arrangements with them and other companies. These companies may have access to a shareholder’s personal and account information, but are permitted to use this information solely to provide the specific service or as otherwise permitted by law. In most cases, the shareholders will be clients of a third party, but the Funds may also provide a shareholder’s personal and account information to the shareholder’s respective brokerage or financial advisory firm and/or financial advisor or consultant.

 

SHARING INFORMATION WITH THIRD PARTIES

 

The Funds reserve the right to disclose or report personal or account information to non-affiliated third parties in limited circumstances where the Funds believe in good faith that disclosure is required under law, to cooperate with regulators or law enforcement authorities, to protect their rights or property, or upon reasonable request by any fund advised by PIMCO in which a shareholder has invested. In addition, the Funds may disclose information about a shareholder or a

shareholder’s accounts to a non-affiliated third party at the shareholder’s request or with the consent of the shareholder.

 

SHARING INFORMATION WITH AFFILIATES

 

The Funds may share shareholder information with their affiliates in connection with servicing shareholders’ accounts, and subject to applicable law may provide shareholders with information about products and services that the Funds or their Adviser or its affiliates (“Service Affiliates”) believe may be of interest to such shareholders. The information that the Funds may share may include, for example, a shareholder’s participation in the Funds or in other investment programs sponsored by a Service Affiliate, a shareholder’s ownership of certain types of accounts (such as IRAs), information about the Funds’ experiences or transactions with a shareholder, information captured on applicable websites, or other data about a shareholder’s accounts, subject to applicable law. The Funds’ Service Affiliates, in turn, are not permitted to share shareholder information with non-affiliated entities, except as required or permitted by law.

 

PROCEDURES TO SAFEGUARD PRIVATE INFORMATION

 

The Funds take seriously the obligation to safeguard shareholder non-public personal information. In addition to this policy, the Funds have implemented procedures that are designed to restrict access to a shareholder’s non-public personal information to internal personnel who need to know that information to perform their jobs, such as servicing shareholder accounts or notifying shareholders of new products or services. Physical, electronic and procedural safeguards are in place to guard a shareholder’s non-public personal information.

 

INFORMATION COLLECTED FROM WEBSITES

 

Websites maintained by the Funds or their service providers may use a variety of technologies to collect information that help the Funds and their service providers understand how the website is used. Information collected from your web browser (including small files stored on your device that are commonly referred to as “cookies”) allow the websites to recognize your web browser and help to personalize and improve your user experience and enhance navigation of the website. In addition, the Funds or their Service Affiliates may use third parties to place advertisements for the Funds on other websites, including banner advertisements. Such third parties may collect anonymous information through the use of cookies or action tags (such as web beacons). The information these third parties collect is generally limited to technical and web navigation information, such as your IP address, web pages visited and browser type, and does not include personally identifiable information such as name, address, phone number or email address. If you are a registered user of the Funds’ website, the Funds or their service providers or third party firms engaged by the Funds or their service providers may collect or share

 

 

  ANNUAL REPORT   JUNE 30, 2017   137


Privacy Policy1 (Cont.)

 

(Unaudited)

 

information submitted by you, which may include personally identifiable information. This information can be useful to the Funds when assessing and offering services and website features. You can change your cookie preferences by changing the setting on your web browser to delete or reject cookies. If you delete or reject cookies, some website pages may not function properly. The Funds do not look for web browser “do not track” requests.

 

CHANGES TO THE PRIVACY POLICY

 

From time to time, the Funds may update or revise this privacy policy. If there are changes to the terms of this privacy policy, documents containing the revised policy on the relevant website will be updated.

 

1 Amended as of February 14, 2017.

2 When distributing this Policy, a Fund may combine the distribution with any similar distribution of its investment adviser’s privacy policy. The distributed, combined policy may be written in the first person (i.e., by using “we” instead of “the Funds”).

 

 

138   PIMCO CLOSED-END FUNDS     


General Information

 

Investment Manager

Pacific Investment Management Company LLC

1633 Broadway

New York, NY 10019

 

Custodian

State Street Bank and Trust Company

801 Pennsylvania Avenue

Kansas City, MO 64105

 

Transfer Agent, Dividend Paying Agent and Registrar

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

 

Legal Counsel

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

 

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP

1100 Walnut Street, Suite 1300

Kansas City, MO 64106

 

This report is submitted for the general information of the shareholders of PCM Fund, Inc., PIMCO Global StocksPLUS® & Income Fund, PIMCO Income Opportunity Fund, PIMCO Strategic Income Fund, Inc., PIMCO Dynamic Credit and Mortgage Income Fund and PIMCO Dynamic Income Fund.


 

LOGO

 

CEF3010AR_063017


Item 2. Code of Ethics.

As of the end of the period covered by this report, the Registrant has adopted a code of ethics (the “Code”) that applies to the Registrant’s principal executive officer and principal financial & accounting officer. The Registrant did not grant any waivers, including implicit waivers, from any provisions of the Code to the principal executive officer or principal financial & accounting officer during the period covered by this report.

A copy of the Code is included as an exhibit to this report.

 

Item 3. Audit Committee Financial Expert.

(a) The Board of Trustees has determined that James A. Jacobson, who serves on the Board’s Audit Oversight Committee, qualifies as an “audit committee financial expert” as such term is defined in the instructions to this Item 3. The Board has also determined that Mr. Jacobson is “independent” as such term is interpreted under this Item 3.

 

Item 4. Principal Accountant Fees and Services.

 

(a)

  Fiscal Year Ended    Audit Fees
  June 30, 2017    $            30,275
  June 30, 2016    $            26,788

(b)

  Fiscal Year Ended    Audit-Related Fees(1)
  June 30, 2017    $                —
  June 30, 2016    $                —

(c)

  Fiscal Year Ended    Tax Fees
  June 30, 2017    $                —
  June 30, 2016    $            24,750

(d)

  Fiscal Year Ended    All Other Fees(1)
  June 30, 2017    $                —
  June 30, 2016    $                —

“Audit Fees” represents fees billed for each of the last two fiscal years for professional services rendered for the audit and review of the Registrant’s annual financial statements for those fiscal years or services that are normally provided by the accountant in connection with statutory or regulatory filings or engagements for those fiscal years.

“Audit-Related Fees” represents fees billed for each of the last two fiscal years for assurance and related services that are reasonably related to the performance of the audit or review of the Registrant’s financial statements, but not reported under “Audit Fees” above, and that include accounting consultations, agreed-upon procedure reports, attestation reports and comfort letters for those fiscal years.

“Tax Fees” represents fees billed for each of the last two fiscal years for professional services related to tax compliance, tax advice and tax planning, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, and tax distribution and analysis reviews.

“All Other Fees” represents fees, if any, billed for other products and services rendered by the principal accountant to the Registrant other than those reported above under “Audit Fees,” “Audit-Related Fees” and “Tax Fees” for the last two fiscal years.

(1) There were no “Audit-Related Fees” and “All Other Fees” for the last two fiscal years.


  (e) Pre-approval policies and procedures

(1) The Registrant’s Audit Oversight Committee has adopted pre-approval policies and procedures (the “Procedures”) to govern the Audit Oversight Committee’s pre-approval of (i) all audit services and permissible non-audit services to be provided to the Registrant by its independent accountant, and (ii) all permissible non-audit services to be provided by such independent accountant to the Registrant’s investment adviser and to any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant (collectively, the “Service Affiliates”) if the services provided directly relate to the Registrant’s operations and financial reporting. In accordance with the Procedures, the Audit Oversight Committee is responsible for the engagement of the independent accountant to certify the Registrant’s financial statements for each fiscal year. With respect to the pre-approval of non-audit services provided to the Registrant and its Service Affiliates, the Procedures provide that the Audit Oversight Committee may annually pre-approve a list of types or categories of non-audit services that may be provided to the Registrant or its Service Affiliates, or the Audit Oversight Committee may pre-approve such services on a project-by-project basis as they arise. Unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Oversight Committee if it is to be provided by the independent accountant. The Procedures also permit the Audit Oversight Committee to delegate authority to one or more of its members to pre-approve any proposed non-audit services that have not been previously pre-approved by the Audit Oversight Committee, subject to the ratification by the full Audit Oversight Committee no later than its next scheduled meeting.

(2) With respect to the services described in paragraphs (b) through (d) of this Item 4, no amount was approved by the Audit Oversight Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

  f) Not applicable.

g)

 

        Aggregate Non-Audit Fees Billed to Entity      
Entity   June 30, 2017           June 30, 2016  

PIMCO Global StocksPlus® & Income Fund

    $ —           $ 24,750    

Pacific Investment Management Company LLC (“PIMCO”)

    8,531,028           7,767,308    
 

 

 

 

Total

    $             8,531,028           $             7,792,058    
 

 

 

     

 

 

 

 

  h) The Registrant’s Audit Oversight Committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant which were not pre-approved (not requiring pre-approval) is compatible with maintaining the principal accountant’s independence.

 

Item 5. Audit Committee of Listed Registrants.

The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The audit committee is comprised of:

Deborah A. DeCotis;

Bradford K. Gallagher;

James A. Jacobson;

Hans W. Kertess;

William B. Ogden, IV; and

Alan Rappaport.

 

Item 6. Schedule of Investments.

The Schedule of Investments is included as part of the reports to shareholders under Item 1.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

PIMCO has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Advisers Act. In addition to covering the voting of equity securities, the Proxy Policy also applies generally to voting and/or consent rights of fixed income securities, including but not limited to, plans of reorganization, and waivers and consents under applicable indentures. The Proxy Policy does not apply, however, to consent rights that primarily entail decisions to buy or sell investments, such as tender or exchange offers, conversions, put options, redemption and Dutch auctions. The Proxy Policy is designed and implemented in a manner reasonably expected to ensure that voting and consent rights (collectively, “proxies”) are exercised in the best interests of accounts.


With respect to the voting of proxies relating to equity securities, PIMCO has selected an unaffiliated third party proxy research and voting service (“Proxy Voting Service”), to assist it in researching and voting proxies. With respect to each proxy received, the Proxy Voting Service researches the financial implications of the proposals and provides a recommendation to PIMCO as to how to vote on each proposal based on the Proxy Voting Service’s research of the individual facts and circumstances and the Proxy Voting Service’s application of its research findings to a set of guidelines that have been approved by PIMCO. Upon the recommendation of the applicable portfolio managers, PIMCO may determine to override any recommendation made by the Proxy Voting Service. In the event that the Proxy Voting Service does not provide a recommendation with respect to a proposal, PIMCO may determine to vote on the proposals directly. With respect to the voting of proxies relating to fixed income securities, PIMCO’s fixed income credit research group (the “Credit Research Group”) is responsible for researching and issuing recommendations for voting proxies. With respect to each proxy received, the Credit Research Group researches the financial implications of the proxy proposal and makes voting recommendations specific for each account that holds the related fixed income security. PIMCO considers each proposal regarding a fixed income security on a case-by-case basis taking into consideration any relevant contractual obligations as well as other relevant facts and circumstances at the time of the vote. Upon the recommendation of the applicable portfolio managers, PIMCO may determine to override any recommendation made by the Credit Research Group. In the event that the Credit Research Group does not provide a recommendation with respect to a proposal, PIMCO may determine to vote the proposal directly.

PIMCO may determine not to vote a proxy for an equity or fixed income security if: (1) the effect on the applicable account’s economic interests or the value of the portfolio holding is insignificant in relation to the account’s portfolio; (2) the cost of voting the proxy outweighs the possible benefit to the applicable account, including, without limitation, situations where a jurisdiction imposes share blocking restrictions which may affect the ability of the portfolio managers to effect trades in the related security; or (3) PIMCO otherwise has determined that it is consistent with its fiduciary obligations not to vote the proxy.

In the event that the Proxy Voting Service or the Credit Research Group, as applicable, does not provide a recommendation or the portfolio managers of a client account propose to override a recommendation by the Proxy Voting Service, or the Credit Research Group, as applicable, PIMCO will review the proxy to determine whether there is a material conflict between PIMCO and the applicable account or among PIMCO-advised accounts. If no material conflict exists, the proxy will be voted according to the portfolio managers’ recommendation. If a material conflict does exist, PIMCO will seek to resolve the conflict in good faith and in the best interests of the applicable client account, as provided by the Proxy Policy. The Proxy Policy permits PIMCO to seek to resolve material conflicts of interest by pursuing any one of several courses of action. With respect to material conflicts of interest between PIMCO and a client account, the Proxy Policy permits PIMCO to either: (i) convene a committee to assess and resolve the conflict (the “Proxy Conflicts Committee”); or (ii) vote in accordance with protocols previously established by the Proxy Policy, the Proxy Conflicts Committee and/or other relevant procedures approved by PIMCO’s Legal and Compliance department with respect to specific types of conflicts. With respect to material conflicts of interest between one or more PIMCO-advised accounts, the Proxy Policy permits PIMCO to: (i) designate a PIMCO portfolio manager who is not subject to the conflict to determine how to vote the proxy if the conflict exists between two accounts with at least one portfolio manager in common; or (ii) permit the respective portfolio managers to vote the proxies in accordance with each client account’s best interests if the conflict exists between client accounts managed by different portfolio managers.

PIMCO will supervise and periodically review its proxy voting activities and the implementation of the Proxy Policy. PIMCO’s Proxy Policy, and information about how PIMCO voted a client’s proxies, is available upon request.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

(a)(1)

As of August 28, 2017, the following individuals have primary responsibility for the day-to-day implementation of the PIMCO Global StocksPLUS® & Income Fund (the “Fund”):

Daniel J. Ivascyn

Mr. Ivascyn has been a portfolio manager of the Fund since its inception in May 2005. Mr. Ivascyn is Group Chief Investment Officer and a managing director in the Newport Beach office. Prior to joining PIMCO in 1998, he worked at Bear Stearns in the asset-backed securities group, as well as T. Rowe Price and Fidelity Investments.


Alfred Murata

Mr. Murata has been a portfolio manager of the Fund since June 2017. Mr. Murata is a managing director in the Newport Beach office and a portfolio manager on the mortgage credit team. Prior to joining PIMCO in 2001, he researched and implemented exotic equity and interest rate derivatives at Nikko Financial Technologies.

(a)(2)    

The following summarizes information regarding each of the accounts, excluding the Fund, managed by the Portfolio Managers as of June 30, 2017, including accounts managed by a team, committee, or other group that includes a Portfolio Manager. Unless mentioned otherwise, the advisory fee charged for managing each of the accounts listed below is not based on performance.

 

     

Registered Investment
Companies

 

  

Other Pooled Investment
Vehicles

 

  

Other Accounts

 

             

PM

 

   #

 

   AUM($million)    

 

   #

 

   AUM($million)    

 

   #

 

   AUM($million)    

 

             

  Daniel J. Ivascyn  

 

       15        $106,624.18        10       

 

$47,605.72*

 

       139    

 

   $9,828.37**

 

             

Alfred Murata

 

       18    

 

   $106,124.31

 

         8    

 

   $15,354.41

 

       11    

 

   $1,548.76

 

* Of these Other Pooled Investment Vehicles,     1     account(s) totaling     $24.75     million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.

**Of these Other Accounts,     1     account(s) totaling     $207.50     million in assets pay(s) an advisory fee that is based in part on the performance of the accounts.

From time to time, potential and actual conflicts of interest may arise between a portfolio manager’s management of the investments of the Fund, on the one hand, and the management of other accounts, on the other. Potential and actual conflicts of interest may also arise as a result of PIMCO’s other business activities and PIMCO’s possession of material non-public information about an issuer. Other accounts managed by a portfolio manager might have similar investment objectives or strategies as the Fund, track the same index as the Fund or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. The other accounts might also have different investment objectives or strategies than the Fund. Potential and actual conflicts of interest may also arise as a result of PIMCO serving as investment adviser to accounts that invest in the Fund. In this case, such conflicts of interest could in theory give rise to incentives for PIMCO to, among other things, vote proxies of the Fund in a manner beneficial to the investing account but detrimental to the Fund. Conversely, PIMCO’s duties to the Fund, as well as regulatory or other limitations applicable to the Fund, may affect the courses of action available to PIMCO-advised accounts (including certain funds) that invest in the Fund in a manner that is detrimental to such investing accounts. In addition, regulatory restrictions, actual or potential conflicts of interest or other considerations may cause PIMCO to restrict or prohibit participation in certain investments.

Because PIMCO is affiliated with Allianz, a large multi-national financial institution, conflicts similar to those described below may occur between the Fund and other accounts managed by PIMCO and PIMCO’s affiliates or accounts managed by those affiliates. Those affiliates (or their clients), which generally operate autonomously from PIMCO, may take actions that are adverse to the Fund or other accounts managed by PIMCO. In many cases, PIMCO will not be in a position to mitigate those actions or address those conflicts, which could adversely affect the performance of the Fund or other accounts managed by PIMCO.

Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the portfolio manager’s day-to-day management of the Fund. Because of their positions with the Fund, the portfolio managers know the size, timing and possible market impact of the Fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the Fund.


Investment Opportunities. A potential conflict of interest may arise as a result of the portfolio manager’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both the Fund and other accounts managed by the portfolio manager, but may not be available in sufficient quantities for both the Fund and the other accounts to participate fully. In addition, regulatory issues applicable to PIMCO or the Fund or other accounts may result in the Fund not receiving securities that may otherwise be appropriate for it. Similarly, there may be limited opportunity to sell an investment held by the Fund and another account. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

Under PIMCO’s allocation procedures, investment opportunities are allocated among various investment strategies based on individual account investment guidelines and PIMCO’s investment outlook. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by-side management of the Fund and certain pooled investment vehicles, including investment opportunity allocation issues.

Conflicts potentially limiting the Fund’s investment opportunities may also arise when the Fund and other PIMCO clients invest in different parts of an issuer’s capital structure, such as when the Fund owns senior debt obligations of an issuer and other clients own junior tranches of the same issuer. In such circumstances, decisions over whether to trigger an event of default, over the terms of any workout, or how to exit an investment may result in conflicts of interest. In order to minimize such conflicts, a portfolio manager may avoid certain investment opportunities that would potentially give rise to conflicts with other PIMCO clients or PIMCO may enact internal procedures designed to minimize such conflicts, which could have the effect of limiting the Fund’s investment opportunities. Additionally, if PIMCO acquires material non-public confidential information in connection with its business activities for other clients, a portfolio manager may be restricted from purchasing securities or selling securities for the Fund. Moreover, the Fund or other accounts managed by PIMCO may invest in a transaction in which one or more other funds or accounts managed by PIMCO are expected to participate, or already have made or will seek to make, an investment. Such funds or accounts may have conflicting interests and objectives in connection with such investments, including, for example and without limitation, with respect to views on the operations or activities of the issuer involved, the targeted returns from the investment, and the timeframe for, and method of, exiting the investment. When making investment decisions where a conflict of interest may arise, PIMCO will endeavor to act in a fair and equitable manner as between the Fund and other clients; however, in certain instances the resolution of the conflict may result in PIMCO acting on behalf of another client in a manner that may not be in the best interest, or may be opposed to the best interest, of the Fund.

Performance Fees. A portfolio manager may advise certain accounts with respect to which the management fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to the Fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between the Fund and certain pooled investment vehicles on a fair and equitable basis over time.

(a)(3)

As of June 30, 2017 the following explains the compensation structure of the individuals who have primary responsibility for day-to-day portfolio management of the Fund:

Portfolio Manager Compensation

PIMCO’s approach to compensation seeks to provide professionals with a Total Compensation Plan and process that is driven by PIMCO’s mission and values.

Key Principles on Compensation Philosophy include:

 

    PIMCO’s pay practices are designed to attract and retain high performers;


    PIMCO’s pay philosophy embraces a corporate culture of rewarding strong performance, a strong work ethic and meritocracy;

 

    PIMCO’s goal is to ensure key professionals are aligned to PIMCO’s long-term success through equity participation; and

 

    PIMCO’s “Discern and Differentiate” discipline guides total compensation levels.

The Total Compensation Plan consists of three components. The compensation program for portfolio managers is designed to align with clients’ interests, emphasizing each portfolio manager’s ability to generate long-term investment success for PIMCO’s clients. A portfolio manager’s compensation is not based solely on the performance of the Fund or any other account managed by that portfolio manager:

Base Salary – Base salary is determined based on core job responsibilities, positions/levels and market factors. Base salary levels are reviewed annually, when there is a significant change in job responsibilities or position, or a significant change in market levels.

Performance Bonus – Performance bonuses are designed to reward risk-adjusted performance and contributions to PIMCO’s broader investment process. The compensation process is not formulaic and the following non-exhaustive list of qualitative and quantitative criteria are considered when determining the total compensation for portfolio managers:

 

    Performance measured over a variety of longer- and shorter-term periods, including 5-year, 4-year, 3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax total and risk-adjusted investment performance as judged against the applicable benchmarks (which may include internal investment performance-related benchmarks) for each account managed by a portfolio manager (including the Fund) and relative to applicable industry peer groups; greatest emphasis is placed on 5-year and 3-year performance, followed by 1-year performance;
    Consistency of investment performance across portfolios of similar mandate and guidelines, rewarding low dispersion and consistency of outperformance;
    Appropriate risk positioning and risk management mindset which includes consistency with PIMCO’s investment philosophy, the Investment Committee’s positioning guidance, absence of defaults, and appropriate alignment with client objectives;
    Contributions to mentoring, coaching and/or supervising members of team;
    Collaboration, idea generation, and contribution of investment ideas in the context of PIMCO’s investment process, Investment Committee meetings, and day-to-day management of portfolios;
    With much lesser importance than the aforementioned factors: amount and nature of assets managed by the portfolio manager, contributions to asset retention, and client satisfaction.

PIMCO’s partnership culture further rewards strong long term risk adjusted returns with promotion decisions almost entirely tied to long term contributions to the investment process. 10-year performance can also be considered, though not explicitly as part of the compensation process.

Deferred Compensation – Long Term Incentive Plan (“LTIP”) and/or M Options are awarded to key professionals. Employees who reach a total compensation threshold are delivered their annual compensation in a mix of cash and/or deferred compensation. PIMCO incorporates a progressive allocation of deferred compensation as a percentage of total compensation, which is in line with market practices.

 

    The LTIP provides participants with deferred cash awards that appreciate or depreciate based on PIMCO’s operating earnings over a rolling three-year period. The plan provides a link between longer term company performance and participant pay, further motivating participants to make a long term commitment to PIMCO’s success.
    The M Unit program provides mid-to-senior level employees with the potential to acquire an equity stake in PIMCO over their careers and to better align employee incentives with the Firm’s long-term results. In the program, options are awarded and vest over a number of years and may convert into PIMCO equity which shares in the profit distributions of the Firm. M Units are non-voting common equity of PIMCO and provide a mechanism for individuals to build a significant equity stake in PIMCO over time.


Participation in the LTIP and M Unit program is contingent upon continued employment at PIMCO.

Profit Sharing Plan. Portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO’s net profits. Portfolio managers who are Managing Directors receive an amount determined by the Compensation Committee, based upon an individual’s overall contribution to the firm.

(a)(4)

The following summarizes the dollar range of securities of the Fund the Portfolio Managers beneficially owned as of June 30, 2017:

 

Portfolio Manager

  Dollar Range of Equity Securities of the Fund Owned as of June 30, 2017

Daniel J. Ivascyn

  None

Alfred Murata

  None

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

None.

 

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures by which shareholders may recommend nominees to the Fund’s Board of Trustees since the Fund last provided disclosure in response to this item.

 

Item 11. Controls and Procedures.

 

  (a) The principal executive officer and principal financial & accounting officer have concluded as of a date within 90 days of the filing date of this report, based on their evaluation of the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)), that the design of such procedures is effective to provide reasonable assurance that material information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

 

  (b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

Item 12. Exhibits.

 

  (a)(1) Exhibit 99.CODE— Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002.

 

  (a)(2) Exhibit 99.CERT—Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

  (b) Exhibit 99.906CERT—Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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.

 

PIMCO Global StocksPlus® & Income Fund

By:

  /s/    PETER G. STRELOW
 

 

  Peter G. Strelow
  President (Principal Executive Officer)

Date:

  August 28, 2017

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/    PETER G. STRELOW
 

 

  Peter G. Strelow
  President (Principal Executive Officer)

Date:

  August 28, 2017

By:

  /s/    WILLIAM G. GALIPEAU
 

 

  William G. Galipeau
  Treasurer (Principal Financial & Accounting Officer)

Date:

  August 28, 2017