PIMCO California Municipal Income Fund II

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number:    811-21077
Registrant Name:    PIMCO California Municipal Income Fund II
Address of Principal Executive Offices:   

1633 Broadway

New York, NY 10019

Name and Address of Agent for Service:   

William G. Galipeau

650 Newport Center Drive

Newport Beach, CA 92660

Registrant’s telephone number, including area code:    (844) 337-4626
Date of Fiscal Year End:    December 31
Date of Reporting Period:    September 30, 2017


Item 1. Schedule of Investments


Schedule of Investments

PIMCO California Municipal Income Fund II

September 30, 2017 (Unaudited)

 

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

INVESTMENTS IN SECURITIES 177.3%

   

MUNICIPAL BONDS & NOTES 173.3%

   

CALIFORNIA 166.7%

   

Alhambra, California Revenue Bonds, Series 2010

   

7.625% due 01/01/2040

  $ 2,000     $ 2,290  

Bay Area Toll Authority, California Revenue Bonds, Series 2009

   

5.000% due 04/01/2039

    20,000       20,405  

Bay Area Toll Authority, California Revenue Bonds, Series 2014

   

5.000% due 10/01/2054

    3,000       3,394  

Bay Area Toll Authority, California Revenue Bonds, Series 2017

   

4.000% due 04/01/2047

    3,000       3,148  

California County Tobacco Securitization Agency Revenue Bonds, Series 2002

   

5.875% due 06/01/2043

    1,800       1,824  

California County Tobacco Securitization Agency Revenue Bonds, Series 2006

   

5.600% due 06/01/2036

    1,500       1,532  

California Health Facilities Financing Authority Revenue Bonds, Series 2008

   

5.250% due 11/15/2040

    5,400       6,070  

California Health Facilities Financing Authority Revenue Bonds, Series 2009

   

5.750% due 09/01/2039

    250       272  

6.000% due 07/01/2039

    3,000       3,259  

6.500% due 11/01/2038

    500       556  

California Health Facilities Financing Authority Revenue Bonds, Series 2011

   

5.000% due 08/15/2035

    1,000       1,115  

California Health Facilities Financing Authority Revenue Bonds, Series 2012

   

5.000% due 11/15/2034

    1,000       1,098  

5.000% due 11/15/2040

    4,000       4,452  

5.000% due 08/15/2051

    5,555       6,150  

California Health Facilities Financing Authority Revenue Bonds, Series 2015

   

5.000% due 08/15/2054

    5,000       5,530  

California Health Facilities Financing Authority Revenue Bonds, Series 2016

   

5.000% due 11/15/2046

    1,000       1,145  

5.000% due 08/15/2055

    6,275       7,146  

California Health Facilities Financing Authority Revenue Bonds, Series 2017

   

5.000% due 11/15/2038

    1,500       1,754  

California Infrastructure & Economic Development Bank Revenue Bonds, Series 2008

   

5.250% due 02/01/2038

    175       177  

California Infrastructure & Economic Development Bank Revenue Bonds, Series 2013

   

5.000% due 02/01/2039

    10,000       11,165  

California Municipal Finance Authority Revenue Bonds, Series 2011

   

7.750% due 04/01/2031

    985       1,166  

California Pollution Control Financing Authority Revenue Bonds, Series 2010

   

5.250% due 08/01/2040

    1,500       1,645  

California Pollution Control Financing Authority Revenue Bonds, Series 2012

   

5.000% due 07/01/2037

    1,000       1,005  

5.000% due 11/21/2045

    1,000       1,005  

California School Finance Authority Revenue Bonds, Series 2017

   

5.000% due 07/01/2047

    555       627  

California State General Obligation Bonds, Series 2003

   

0.820% due 05/01/2033

    2,890       2,890  

California State General Obligation Bonds, Series 2009

   

6.000% due 04/01/2038

    10,000       10,712  

California State General Obligation Bonds, Series 2013

   

5.000% due 11/01/2043

    7,000       8,053  

California State Public Works Board Revenue Bonds, Series 2008

   

5.000% due 03/01/2033

    7,915       8,050  

California State Public Works Board Revenue Bonds, Series 2009

   

5.750% due 10/01/2030

    3,000       3,284  

6.000% due 11/01/2034

    2,000       2,207  

California State Public Works Board Revenue Bonds, Series 2011

   

5.000% due 12/01/2029

    2,000       2,269  

California State Public Works Board Revenue Bonds, Series 2013

   

5.000% due 03/01/2038

    2,500       2,813  

California State University Revenue Bonds, Series 2015

   

5.000% due 11/01/2038

    7,500       8,768  

5.000% due 11/01/2047

    5,000       5,755  

California State University Revenue Bonds, Series 2016

   

5.000% due 11/01/2041 (c)

    11,435       13,284  

California Statewide Communities Development Authority Revenue Bonds, (FGIC Insured), Series 2007

   

5.750% due 07/01/2047

    3,700       3,832  

California Statewide Communities Development Authority Revenue Bonds, (FHA Insured), Series 2009

   

6.625% due 08/01/2029

    2,135       2,352  

6.750% due 02/01/2038

    7,860       8,678  

California Statewide Communities Development Authority Revenue Bonds, Series 2008

   

5.250% due 11/15/2048

    5,490       5,636  

California Statewide Communities Development Authority Revenue Bonds, Series 2010

   

7.000% due 07/01/2040

    3,760       4,192  


                                         
             

7.500% due 06/01/2042

    965       1,057  

California Statewide Communities Development Authority Revenue Bonds, Series 2011

   

6.000% due 08/15/2042

    5,600       6,294  

California Statewide Communities Development Authority Revenue Bonds, Series 2012

   

5.000% due 04/01/2042

    9,705       10,937  

5.375% due 05/15/2038

    4,500       4,917  

California Statewide Communities Development Authority Revenue Bonds, Series 2016

   

4.000% due 08/15/2051

    225       231  

5.000% due 12/01/2036

    1,500       1,639  

5.000% due 06/01/2046

    2,000       2,078  

5.000% due 12/01/2046

    2,000       2,156  

5.250% due 12/01/2056

    9,200       10,020  

California Statewide Financing Authority Revenue Bonds, Series 2002

   

6.000% due 05/01/2037

    2,000       2,048  

Chula Vista, California Revenue Bonds, Series 2004

   

5.875% due 02/15/2034

    1,000       1,074  

Coronado Community Development Agency, California Tax Allocation Bonds, (AMBAC Insured), Series 2005

   

4.875% due 09/01/2035

    7,900       7,919  

Fremont Community Facilities District No. 1, California Special Tax Bonds, Series 2015

   

5.000% due 09/01/2045

    1,400       1,532  

Golden State, California Tobacco Securitization Corp. Revenue Bonds, Series 2007

   

5.125% due 06/01/2047

    8,500       8,404  

5.750% due 06/01/2047

    22,680       22,728  

Hayward Unified School District, California General Obligation Bonds, Series 2015

   

5.000% due 08/01/2038

    3,000       3,372  

Imperial Irrigation District Electric System, California Revenue Bonds, Series 2011

   

5.000% due 11/01/2041

    4,500       4,905  

Irvine Unified School District, California Special Tax Bonds, Series 2010

   

6.700% due 09/01/2035

    515       567  

Lancaster Redevelopment Agency, California Tax Allocation Bonds, Series 2009

   

6.875% due 08/01/2039

    1,000       1,106  

Long Beach Bond Finance Authority, California Revenue Bonds, Series 2007

   

5.500% due 11/15/2037

    7,500       9,628  

Long Beach Unified School District, California General Obligation Bonds, Series 2009

   

5.250% due 08/01/2019

    9,395       10,127  

5.250% due 08/01/2033

    605       649  

Long Beach, California Airport System Revenue Bonds, Series 2010

   

5.000% due 06/01/2040

    500       538  

Los Angeles Community College District, California General Obligation Bonds, Series 2009

   

11.942% due 08/01/2033 (d)

    4,000       4,392  

Los Angeles Department of Water & Power, California Revenue Bonds, Series 2014

   

5.000% due 07/01/2043

    3,000       3,412  

Los Angeles Department of Water & Power, California Revenue Bonds, Series 2016

   

5.000% due 07/01/2046 (c)

    10,000       11,545  

Los Angeles Department of Water, California Revenue Bonds, Series 2017

   

5.000% due 07/01/2044

    3,000       3,500  

Los Angeles Unified School District, California General Obligation Bonds, Series 2009

   

5.000% due 01/01/2034

    11,000       11,737  

Los Angeles, California Wastewater System Revenue Bonds, Series 2017

   

5.000% due 06/01/2039

    1,000       1,184  

M-S-R Energy Authority, California Revenue Bonds, Series 2009

   

6.500% due 11/01/2039

    16,445       23,508  

7.000% due 11/01/2034

    1,000       1,441  

Manteca Redevelopment Agency, California Tax Allocation Bonds, (AMBAC Insured), Series 2004

   

5.000% due 10/01/2036

    10,000       10,006  

Oakland Unified School District/Alameda County, California General Obligation Bonds, Series 2009

   

6.125% due 08/01/2029

    5,000       5,469  

Palomar Health, California Certificates of Participation Bonds, Series 2009

   

6.750% due 11/01/2039

    4,750       5,309  

Poway Unified School District, California General Obligation Bonds, Series 2011

   

0.000% due 08/01/2040 (a)

    11,000       4,627  

0.000% due 08/01/2046 (a)

    16,000       5,099  

River Islands Public Financing Authority, California Special Tax Bonds, Series 2015

   

5.500% due 09/01/2045

    3,000       3,204  

Sacramento Area Flood Control Agency, California Special Assessment Bonds, Series 2016

   

5.000% due 10/01/2041 (c)

    2,800       3,246  

5.000% due 10/01/2047 (c)

    1,700       1,946  

San Diego Community College District, California General Obligation Bonds, Series 2009

   

8.997% due 08/01/2033 (d)

    5,000       5,760  

San Diego Public Facilities Financing Authority Sewer, California Revenue Bonds, Series 2009

   

5.250% due 05/15/2039

    1,000       1,069  

San Diego Public Facilities Financing Authority Water, California Revenue Bonds, Series 2009

   

5.250% due 08/01/2038

    4,000       4,142  

San Diego Regional Building Authority, California Revenue Bonds, Series 2009

   

5.375% due 02/01/2036

    2,800       2,963  

San Francisco Bay Area Rapid Transit District, California General Obligation Bonds, Series 2017

   

5.000% due 08/01/2047

    1,000       1,183  

San Francisco, California City & County Certificates of Participation Bonds, Series 2009

   

5.250% due 04/01/2031

    300       317  

San Jose, California Hotel Tax Revenue Bonds, Series 2011

   

6.500% due 05/01/2036

    1,000       1,172  

San Marcos Redevelopment Agency Successor Agency, California Tax Allocation Bonds, Series 2015

   

5.000% due 10/01/2032

    850       994  

5.000% due 10/01/2033

    1,125       1,310  

San Marcos Unified School District, California General Obligation Bonds, Series 2011

   

5.000% due 08/01/2038

    1,300       1,459  


                                         
             

San Mateo County, California Community College District General Obligation Bonds, (NPFGC Insured), Series 2006

   

0.000% due 09/01/2034 (a)

    12,000       7,015  

Santa Cruz County, California Redevelopment Agency Tax Allocation Bonds, Series 2009

   

7.000% due 09/01/2036

    1,500       1,668  

Santa Rosa, California Wastewater Revenue Bonds, Series 2016

   

5.000% due 09/01/2028

    1,000       1,220  

Tender Option Bond Trust Receipts/Certificates, California Revenue Bonds, Series 2010

   

8.510% due 05/15/2040 (d)

    7,500       8,860  

Torrance, California Revenue Bonds, Series 2010

   

5.000% due 09/01/2040

    3,100       3,288  

Turlock Irrigation District, California Revenue Bonds, Series 2011

   

5.500% due 01/01/2041

    1,700       1,908  

Tustin Unified School District, California Special Tax Bonds, Series 2010

   

6.000% due 09/01/2040

    1,000       1,139  

University of California Revenue Bonds, Series 2016

   

4.000% due 05/15/2046

    3,000       3,140  

5.000% due 05/15/2037 (c)

    11,900       13,921  

Washington Township Health Care District, California General Obligation Bonds, Series 2013

   

5.000% due 08/01/2043

    3,000       3,400  
   

 

 

 
      460,184  
   

 

 

 

ILLINOIS 4.1%

   

Chicago, Illinois General Obligation Bonds, Series 2007

   

5.500% due 01/01/2042

    2,350       2,533  

Chicago, Illinois General Obligation Bonds, Series 2015

   

5.250% due 01/01/2028

    6,035       6,624  

Chicago, Illinois General Obligation Bonds, Series 2017

   

6.000% due 01/01/2038

    2,000       2,322  
   

 

 

 
      11,479  
   

 

 

 

NEW JERSEY 1.5%

   

Tobacco Settlement Financing Corp., New Jersey Revenue Bonds, Series 2007

   

4.750% due 06/01/2034

    1,300       1,276  

5.000% due 06/01/2041

    3,000       2,919  
   

 

 

 
      4,195  
   

 

 

 

NEW YORK 0.6%

   

New York Liberty Development Corp. Revenue Bonds, Series 2005

   

5.250% due 10/01/2035

    1,250       1,600  
   

 

 

 

U.S. VIRGIN ISLANDS 0.4%

   

Virgin Islands Public Finance Authority, U.S. Virgin Islands Revenue Bonds, Series 2010

   

5.000% due 10/01/2029

    1,400       1,006  
   

 

 

 

Total Municipal Bonds & Notes

(Cost $430,217)

      478,464  
   

 

 

 

SHORT-TERM INSTRUMENTS 4.0%

   

REPURCHASE AGREEMENTS (e) 3.8%

      10,400  

SHORT-TERM NOTES 0.2%

   

Federal Home Loan Bank

   

1.045% due 10/11/2017 (a)(b)

    500       500  
   

 

 

 

Total Short-Term Instruments

(Cost $10,900)

      10,900  
   

 

 

 

Total Investments in Securities

(Cost $441,117)

      489,364  
   

 

 

 

Total Investments 177.3%

(Cost $441,117)

    $ 489,364  
Preferred Shares (59.1)%       (163,000
Other Assets and Liabilities, net (18.2)%       (50,294
   

 

 

 
Net Assets Applicable to Common Shareholders 100.0%     $ 276,070  
   

 

 

 


Notes to Schedule of Investments (amounts in thousands*):

 

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

 

(a) Zero coupon security.

 

(b) Coupon represents a yield to maturity.

 

(c) Represents an underlying municipal bond transferred to a tender option bond trust established in a tender option bond transaction in which the Fund sold, or caused the sale of, the underlying municipal bond and purchased the residual interest certificate. The security serves as collateral in a financing transaction.

 

(d) Represents an investment in a tender option bond residual interest certificate purchased in a secondary market transaction. The interest rate shown bears an inverse relationship to the interest rate on a tender option bond floating rate certificate. The interest rate disclosed reflects the rate in effect on September 30, 2017.

Borrowings and Other Financing Transactions

 

(e) 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

    1.240%       09/29/2017       10/02/2017     $ 10,400       Fannie Mae 4.000% due 04/01/2047     $   (10,736   $   10,400     $   10,401  
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

 

    $   (10,736   $   10,400     $   10,401  
           

 

 

   

 

 

   

 

 

 

 

(1) Includes accrued interest.

Fair Value Measurements

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

 

Category and Subcategory    Level 1        Level 2        Level 3        Fair Value
at 09/30/2017
 

Investments in Securities, at Value

 

Municipal Bonds & Notes

 

California

   $ 0        $ 460,184        $ 0        $ 460,184  

Illinois

     0          11,479          0          11,479  

New Jersey

     0          4,195          0          4,195  

New York

     0          1,600          0          1,600  

U.S. Virgin Islands

     0          1,006          0          1,006  

Short-Term Instruments

 

Repurchase Agreements

     0          10,400          0          10,400  

Short-Term Notes

     0          500          0          500  

Total Investments

   $   0        $   489,364        $   0        $   489,364  

There were no significant transfers among Levels 1, 2, or 3 during the period ended September 30, 2017.

See Accompanying Notes


Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The net asset value (“NAV”) of the 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 the 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 Fund or its 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. The Fund reserves the right to change the time as of which its NAV is calculated if the Fund closes earlier, or as permitted by the U.S. Securities and Exchange Commission (the “SEC”).

For purposes of calculating a 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 Fund’s approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Fund will normally use pricing data for domestic equity securities received shortly after the NYSE Close and does 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 Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) 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. The Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments. Open-end management investment companies may include affiliated funds.

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 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 the 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 the 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 the 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 Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that the 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 the 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 the 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.

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 Schedule of Investments for the 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 the 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 the 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 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.

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.

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.

2. FEDERAL INCOME TAX MATTERS

The 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 Fund 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 Fund’s tax positions for all open tax years. As of September 30, 2017, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions it has taken or expects to take in future tax returns.

The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

As of September 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
  Aggregate Gross
Unrealized
Appreciation
    Aggregate Gross
Unrealized
(Depreciation)
    Net Unrealized
Appreciation/
(Depreciation)  (1)
 
$  441,117   $   51,290     $   (3,043   $   48,247  

 

(1) Primary differences, if any, between book and tax net unrealized appreciation (depreciation) are attributable to wash sale loss deferrals for Federal income tax purposes.


GLOSSARY: (abbreviations that may be used in the preceding statements)    (Unaudited)
Counterparty Abbreviations:                  
BCY    Barclays Capital, Inc.          
Currency Abbreviations:                  
USD (or $)    United States Dollar          
Municipal Bond or Agency Abbreviations:              
AMBAC    American Municipal Bond Assurance Corp.   FHA    Federal Housing Administration   NPFGC    National Public Finance Guarantee Corp.
FGIC    Financial Guaranty Insurance Co.        
Other Abbreviations:                  
TBA    To-Be-Announced          


Item 2. Controls and Procedures

(a) The principal executive officer and principal financial & accounting officer have concluded that 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”) (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

(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 registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial & accounting officer of the registrant as required by Rule 30a-2 under the 1940 Act is attached as Exhibit 99.CERT.

 


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 California Municipal Income Fund II

 

By:  

/s/ Peter G. Strelow

Peter G. Strelow
President (Principal Executive Officer)
Date: November 27, 2017
By:  

/s/ William G. Galipeau

William G. Galipeau
Treasurer (Principal Financial & Accounting Officer)
Date: November 27, 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: November 27, 2017
By:  

/s/ William G. Galipeau

William G. Galipeau
Treasurer (Principal Financial & Accounting Officer)
Date: November 27, 2017