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

811-21311

 

PIMCO High Income Fund

(Exact name of registrant as specified in charter)

 

1633 Broadway, New York, NY

 

10019

(Address of principal executive offices)

 

(Zip code)

 

Lawrence G. Altadonna – 1633 Broadway, New York, NY 10019

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

212-739-3371

 

 

Date of fiscal year end:

March 31, 2013

 

 

Date of reporting period:

September 30, 2012

 

 



 

ITEM 1: REPORT TO SHAREHOLDERS

 

 

September 30, 2012

 

 

 

PIMCO Dynamic Income Fund

 

PIMCO Global StocksPLUS® & Income Fund

 

PIMCO High Income Fund

 

 


 

 

Contents

 

 

 

 

 

Letter to Shareholders

2–3

 

 

 

 

Fund Insights

4–8

 

 

 

 

Performance & Statistics

9–11

 

 

 

 

Schedules of Investments

12–38

 

 

 

 

Statements of Assets and Liabilities

39–40

 

 

 

 

Statements of Operations

41

 

 

 

 

Statements of Changes in Net Assets

42–44

 

 

 

 

Statements of Cash Flows

45

 

 

 

 

Notes to Financial Statements

46–79

 

 

 

 

Financial Highlights

80–82

 

 

 

 

Annual Shareholder Meetings Results/Proxy Voting Policies & Procedures

83

 

 

 

 

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements

84–90

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

1

 


 

Dear Shareholder:

 

Stock markets in the United States reached their highest levels in four years during the six month fiscal reporting period ended September 30, 2012. These gains occurred despite economic slowdowns in the U.S., the European Union (“E.U.”) and China, and the growing uncertainty over future levels of U.S. taxes and spending. U.S. Treasury Bond interest rates reached all-time lows during the reporting period.

 

For the reporting period ended September 30, 2012

·                  PIMCO Dynamic Income Fund returned 19.91% on net asset value (“NAV”) and 15.18% on market price since its inception on May 30, 2012.

 

·                  PIMCO Global StocksPLUS® & Income Fund returned 13.87% on NAV and 16.05% on market price.

 

·                  PIMCO High Income Fund returned 15.84% on NAV and 15.35% on market price.

 

The Standard & Poor’s 500 Index, a proxy for the U.S. stock market, advanced 3.43%, the MSCI Europe, Australasia and Far East Index (“EAFE”) declined –0.70% in U.S. dollar terms, and the BofA Merrill Lynch High Yield Master II Index advanced 6.53% for the six months ended September 30, 2012. The broad bond market, as measured by the Barclays U.S. Aggregate Index, rose 3.68%, while the Barclays U.S. Treasury Bond Index rose 0.07% during the six months ended September 30, 2012.

Hans W. Kertess

Chairman

 

Brian S. Shlissel

President & CEO

 

The sovereign debt crisis in the E.U. appeared to deepen during the six month period. Growth in the 17 member euro zone declined to a 0.2% annual pace during the second quarter of 2012, and the unemployment rate in the E.U. reached 11.4%. According to the World Bank, growth in Asia dropped to an eleven-year low due to the slowing Chinese economy.

 

In the United States, the slowing economy was reflected in gross domestic product (“GDP”), the value of goods and services produced in the country, the broadest measure of economic activity and the principal indicator of economic performance, during the fiscal reporting period. As the period opened, GDP was growing at 2.0% annually. During the second quarter of 2012, GDP slowed to an annual pace of 1.3%, and economic data indicated that growth in the July to September 2012 period would be similarly anemic. In contrast, the housing market showed signs of recovery, consumer confidence grew, and the unemployment rate fell to 7.8% in September 2012, the lowest level since January 2009.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

2

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The Federal Reserve (the “Fed”) announced that it would launch a third round of “quantitative easing.” The Fed agreed to purchase $40 billion of mortgage securities each month for the foreseeable future. The objective is to continue to lower already record low mortgage rates in an effort to boost the housing market. The Fed also indicated that it would continue “Operation Twist,” which involves selling debt obligations with short-term maturities and purchasing debt obligations with longer-term maturities. The Fed also announced that the Fed Funds interest rate is expected to be held in the 0.0% to 0.25% range through 2015, longer than previously stated. Fed Chairman Ben Bernanke indicated that the goal of these policies “is to quicken the recovery and to help the economy begin to grow quickly enough to generate new jobs.”

 

The Road Ahead

Problems in the U.S., China and the E.U have fed on one another due to the intertwined nature of their respective economies. Exports have slowed, manufacturing has eased, and each country has been forced to unveil new stimulus measures to boost their economies.

 

 

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There are also concerns regarding the future levels of federal spending and taxes in the U.S. The actions of the President in the upcoming months will likely have an impact on interest rates and the financial markets.

 

For specific information on the Funds and their performance, please review the following pages. If you have any questions regarding the information provided, we encourage you to contact your financial advisor or call the Funds’ shareholder servicing agent at (800) 254-5197. In addition, a wide range of information and resources is available on our website, www.allianzinvestors.com/closedendfunds.

 

Together with Allianz Global Investors Fund Management LLC, the Funds’ investment manager, and Pacific Investment Management Company LLC (“PIMCO”), the Funds’ sub-adviser, we thank you for investing with us.

 

We remain dedicated to serving your investment needs.

 

Sincerely,

 

 

 

 

 

Hans W. Kertess

 

Brian S. Shlissel

Chairman

 

President & Chief Executive Officer

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

3

 


 

PIMCO Dynamic Income Fund Fund Insights

September 30, 2012 (unaudited)

 

For the period from its inception on May 30, 2012 through September 30, 2012 (the “reporting period”), PIMCO Dynamic Income Fund (the “Fund”) returned 19.91% on net asset value (“NAV”) and 15.18% on market price.

 

A host of macro issues caused the financial markets to experience periods of volatility during the reporting period. These included the ongoing European sovereign debt crisis, moderating global economic growth and aggressive central bank intervention. Against this backdrop, investor sentiment fluctuated between heightened risk aversion and robust risk appetite. The overall U.S. fixed income market, as measured by the Barclays U.S. Aggregate Bond Index, returned 1.62% since the Fund’s inception. The yield curve steepened over the reporting period, as short-term yields declined more than their longer-term counterparts.

 

Spread sectors (non-Treasuries) generally outperformed equal-duration Treasuries during the reporting period as investors looked for yield in the low interest rate environment. For instance, emerging market debt advanced 10.42% since the Fund’s inception, as measured by the JPMorgan EMBI Global Index. The global high yield corporate bond market, as measured by the Barclays Global High Yield Index, returned 8.98%, compared to the global credit market advance of 6.21%, as measured by the Barclays Global Credit Index.

 

Sector positioning produces mixed results

The Fund posted strong absolute and relative returns during the reporting period. The Fund’s allocation to non-agency mortgage-backed securities was rewarded as these securities outperformed like-duration Treasuries given generally strong demand for high quality income. An allocation to high yield corporate bonds contributed positively to returns due to narrowing credit spreads during the reporting period. An emphasis on banking issues enhanced performance, as these bonds outperformed the broader market. An overweighting to the Insurance sector aided results, as this sector outperformed the broader market. The Fund’s underweighting to the long end of the yield curve added to performance as the curve steepened during the reporting period.

 

The Fund’s underweight position in the Energy and Communication sectors detracted from results, as both sectors outperformed the broader market during the reporting period.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

4

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 


 

PIMCO Global StocksPLUS® & Income Fund Fund Insights

September 30, 2012 (unaudited)

 

For the six month fiscal period ended September 30, 2012, PIMCO Global StocksPLUS® & Income Fund (the “Fund”) returned 13.87% on net asset value (“NAV”) and 16.05% on market price.

 

A host of macro issues caused the global financial markets to experience periods of volatility during the reporting period. These included the ongoing European sovereign debt crisis, moderating global economic growth and aggressive central bank intervention. Against this backdrop, investor sentiment fluctuated between heightened risk aversion and robust risk appetite.

 

Despite strong performance as the reporting period progressed, the global equity markets produced mixed results during the six months ended September 30, 2012. Over this period, the U.S. stock market advanced 3.43%, as measured by the S&P 500 Index (the “S&P”). The S&P fell sharply during the first two months of the period, as investor risk aversion spiked due to fears of contagion from European sovereign debt crisis and weaker-than-expected economic data in the U.S. The S&P then rallied over the last four months of the period, given some signs of progress in Europe, coupled with additional quantitative easing by the Federal Reserve and the European Central Bank. While international developed equities, as measured by the MSCI EAFE Index, moved higher during three of the last four months of the period, it was not enough to offset earlier weakness. All told, international developed equities returned –0.70% for the six months ended September 30, 2012.

 

After initially rising in early April 2012, U.S. Treasury yields moved lower during much of the remainder of the reporting period. In late July, the yield on the 10-year Treasury reached an all-time low. The yield curve flattened during the six months ended September 30, 2012, as longer-term yields fell more than their short-term counterparts. The spread sectors (non-Treasuries) generally outperformed equal-duration Treasuries during the period as investors looked for yield in the low interest rate environment.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

5

 


 

PIMCO Global StocksPLUS® & Income Fund Fund Insights

September 30, 2012 (unaudited) (continued)

 

Equity exposure produces mixed results

Performance benefited on average by a 52% exposure to U.S. equities during the reporting period, as the Fund utilized S&P 500 futures contracts, along with a defensive option strategy that sought to generate income and limit losses. Detracting from results was the decline in foreign equity positions during the period. The Fund utilized total return swaps to gain access to the MSCI EAFE Index. The Fund’s average exposure to foreign stocks was 48% during the reporting period. A defensive option strategy was utilized which generated income from the premiums of written “at-the-money” or slightly “out-of-the-money” call options to generate income and purchased “out-of-the-money” put options to limit losses. The U.S. equity market rally had an adverse impact on the option strategy due to its defensive nature.

 

Allocations to spread sectors produced positive results

A minor portion of the Fund’s assets are invested in futures contracts and total return swaps. These instruments permit participation in the returns of the S&P 500 and MSCI EAFE indexes without having to hold the individual stocks which comprise these indexes. The majority of the Fund’s assets are actively managed in a portfolio of fixed income securities to add incremental return.

 

The Fund’s fixed income securities contributed to performance during the reporting period. Allocations to high yield and investment grade corporate bonds, with an emphasis on the Financial and Industrials sectors, had a positive impact on returns due to narrowing credit spreads during the six-month period. Allocations to non-agency mortgage-backed securities including commercial mortgage-backed securities, were rewarded as that asset class outperformed like-duration Treasuries given generally strong demand for high quality income. An allocation to the U.S. dollar-denominated debt of select corporate and quasi-sovereign entities in Mexico and Brazil enhanced performance as spreads tightened.

 

The Fund’s U.S. interest rate strategy, which called for an overweighting to the intermediate portion of the U.S. yield curve, enhanced performance as interest rates in the U.S. declined during the six month reporting period.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

6

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 


 

PIMCO High Income Fund Fund Insights

September 30, 2012 (unaudited)

 

For the fiscal six month period ended September 30, 2012, PIMCO High Income Fund (the “Fund”), returned 15.84% on net asset value (“NAV”) and 15.35% on market price.

 

A host of macro issues caused the financial markets to experience periods of volatility during the reporting period. These included the ongoing European sovereign debt crisis, moderating global economic growth and aggressive central bank intervention. Against this backdrop, investor sentiment fluctuated between heightened risk aversion and robust risk appetite. The overall U.S. fixed income market, as measured by the Barclays U.S. Aggregate Index, returned 3.68% during the six months ended September 30, 2012. After initially rising in early April 2012, U.S. Treasury yields moved lower during much of the remainder of the reporting period. In late July, the yield on the 10-year Treasury reached an all-time low. The yield curve flattened during the six months ended September 30, 2012, as longer-term yields declined more than their short-term counterparts. The spread sectors (non-Treasuries) generally outperformed equal-duration Treasuries during the period as investors looked for yield in the low interest rate environment.

 

The U.S. high yield market advanced 6.53% during the six months ended September 30, 2012, as measured by the BofA Merrill Lynch High Yield Master II Index (the “Index”). After a strong start in April 2012, the Index declined in May, due to fears of contagion from European sovereign debt crisis and weaker then expected economic data in the U.S. The Index then rallied over the last four months of the period, due to strong investor demand and some signs of progress in Europe. In addition, investor sentiment was buoyed by additional quantitative easing by the Federal Reserve Board and the European Central Bank. In aggregate, during the six month period, lower quality securities generally underperformed their higher quality counterparts, with CCC and lower-rated bonds returning 6.39% and BB/B-rated securities in the Index returning 6.55%.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

7

 


 

PIMCO High Income Fund Fund Insights

September 30, 2012 (unaudited) (continued)

 

Sector positioning produces mixed results

The Fund posted strong absolute and relative returns during the reporting period. The Fund’s allocation to non-agency mortgage-backed securities was rewarded as these securities outperformed like-duration Treasuries given generally strong demand for high quality income. An emphasis on select high quality banking issues enhanced performance, as these bonds outperformed the broader market. Both an overweighting to the Insurance sector, as this sector outperformed the broader market, as well as security selection within the Insurance sector, contributed positively to results. The Fund’s long duration added to performance as interest rates in the U.S. declined during the six month period.

 

Detracting from these positive results was the Fund’s underweight positions in the Energy and Communication sectors, as both sectors outperformed the broader market.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

8

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PIMCO Dynamic Income Fund
Performance & Statistics

September 30, 2012 (unaudited)

 

Total Return(1):

 

Market Price

 

NAV

Commencement of Operations (5/30/12) to 9/30/12

 

15.18%

 

19.91%

 

Market Price/NAV Performance:

 

Market Price/NAV:

 

 

Commencement of Operations (5/30/12) to 9/30/12

 

Market Price

 

$28.23

 

 Market Price

 NAV

 

 

NAV

 

$28.02

 

Premium to NAV

 

0.75%

 

Market Price Yield(2)

 

7.52%

 

Leverage Ratio(3)

 

48.01%

 

 

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of less than one year is not annualized.

 

Performance at market price will differ from results at NAV. Although market price returns typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund ‘s shares, or changes in the Fund’s dividends.

 

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and, once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly dividend per share (comprised of net investment income and short-term capital gains, if any) by the market price per share at September 30, 2012.

 

(3) Represents Reverse Repurchase Agreements (“Leverage”) outstanding, as a percentage of total Managed assets. Total Managed assets refer to total assets (including assets attributable to Leverage) minus accrued liabilities (other than liabilities representing Leverage).

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

9

 


 

PIMCO Global StocksPLUS® & Income Fund
Performance & Statistics

September 30, 2012 (unaudited)

 

Total Return(1):

 

Market Price

 

NAV

Six Month

 

16.05%

 

13.87%

1 Year

 

39.02%

 

43.37%

5 Year

 

19.92%

 

8.93%

Commencement of Operations (5/31/05) to 9/30/12

 

16.37%

 

11.28%

 

Market Price/NAV Performance:

 

Market Price/NAV:

 

 

Commencement of Operations (5/31/05) to 9/30/12

 

Market Price

 

$22.18

 

 Market Price

 NAV

 

 

NAV

 

$13.06

 

Premium to NAV

 

69.83%

 

Market Price Yield(2)

 

9.92%

 

Leverage Ratio(3)

 

44.65%

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends, capital gain and return of capital distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of less than one year is not annualized. 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 typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund’s shares, or changes in the Fund’s dividends.

 

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one time public offering and, once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly dividend per share (comprised of net investment income) by the market price per share at September 30, 2012.

 

(3) Represents Reverse Repurchase Agreements (“Leverage”) outstanding, as a percentage of total Managed assets. Total Managed assets refer to total assets (including assets attributable to Leverage) minus accrued liabilities (other than liabilities representing Leverage).

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

10

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PIMCO High Income Fund
Performance & Statistics

September 30, 2012 (unaudited)

 

Total Return(1):

 

Market Price

 

NAV

Six Month

 

15.35%

 

15.84%

1 Year

 

38.23%

 

34.55%

5 Year

 

16.20%

 

10.01%

Commencement of Operations (4/30/03) to 9/30/12

 

13.66%

 

11.07%

 

Market Price/NAV Performance:

 

Market Price/NAV:

 

 

Commencement of Operations (4/30/03) to 9/30/12

 

Market Price

 

$14.00

 

 Market Price

 NAV

 

 

NAV

 

$8.31

 

Premium to NAV

 

68.47%

 

Market Price Yield(2)

 

9.12%

 

Leverage Ratio(3)

 

22.29%

 

 

 

 

 

 

(1) Past performance is no guarantee of future results. Total return is calculated by determining the percentage change in NAV or market price (as applicable) in the specified period. The calculation assumes that all income dividends, capital gain and return of capital distributions, if any, have been reinvested. Total return does not reflect broker commissions or sales charges in connection with the purchase or sale of Fund shares. Total return for a period of less than one year is not annualized. 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 typically reflect investment results over time, during shorter periods returns at market price can also be influenced by factors such as changing views about the Fund, market conditions, supply and demand for the Fund ‘s shares, or changes in the Fund’s dividends.

 

An investment in the Fund involves risk, including the loss of principal. Total return, market price, market price yield and NAV will fluctuate with changes in market conditions. This data is provided for information purposes only and is not intended for trading purposes. Closed-end funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and, once issued, shares of closed-end funds are traded in the open market through a stock exchange. NAV is equal to total assets attributable to common shareholders less total liabilities divided by the number of common shares outstanding. Holdings are subject to change daily.

 

(2) Market Price Yield is determined by dividing the annualized current monthly dividend per common share (comprised of net investment income) by the market price per common share at September 30, 2012.

 

(3) Represents Preferred Shares (“Leverage”) outstanding, as a percentage of total Managed assets. Total Managed assets refer to total assets (including assets attributable to Leverage) minus accrued liabilities (other than liabilities representing Leverage).

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

11

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited)

Principal
Amount
(000s)

 

 

 

 

Value

 

MORTGAGE-BACKED SECURITIES – 105.5%

 

 

 

 

 

 

 

 

 

£13,565

 

Alba PLC, 0.913%, 12/15/38, CMO (i)

 

$13,049,074

 

$13,627

 

American Home Mortgage Assets LLC, 0.507%, 8/25/37, CMO (i)

 

2,828,029

 

 

 

American Home Mortgage Investment Trust, CMO (i),

 

 

 

10,879

 

0.517%, 9/25/45 (l)

 

7,760,251

 

9,739

 

0.817%, 2/25/44

 

2,508,991

 

 

 

Banc of America Alternative Loan Trust, CMO,

 

 

 

418

 

0.617%, 5/25/35 (i)

 

299,853

 

382

 

6.00%, 6/25/46

 

296,441

 

 

 

Banc of America Funding Corp., CMO (i),

 

 

 

15,300

 

zero coupon, 7/26/36 (a) (d)

 

8,393,739

 

39,148

 

0.429%, 4/20/47 (l)

 

28,124,409

 

4,612

 

0.669%, 2/20/35

 

1,196,226

 

636

 

2.817%, 1/20/47

 

467,262

 

921

 

2.956%, 1/25/35

 

552,710

 

5,608

 

3.04%, 3/20/36

 

4,531,241

 

 

 

Banc of America Mortgage Trust, CMO (i),

 

 

 

701

 

2.66%, 10/20/46

 

376,644

 

2,744

 

5.419%, 1/25/36

 

2,445,985

 

 

 

Banc of America ReRemic Trust, CMO (a) (d),

 

 

 

13,000

 

5.383%, 12/15/16 (l)

 

13,091,500

 

38,264

 

Bank of America Large Loan, 5.665%, 2/17/51 (a) (d) (g) (i)

 

39,338,632

 

 

 

BCAP LLC Trust, CMO (a) (d),

 

 

 

14,380

 

3.05%, 5/26/36 (i)

 

6,749,524

 

8,051

 

5.017%, 3/26/35 (i)

 

6,701,938

 

27,771

 

5.085%, 4/26/37 (i)

 

14,307,655

 

6,052

 

5.168%, 10/26/35 (i)

 

4,126,730

 

13,221

 

5.50%, 12/26/35

 

8,012,520

 

4,770

 

5.676%, 7/26/35 (i)

 

3,126,076

 

13,581

 

Bear Stearns ALT-A Trust, 0.417%, 2/25/34, CMO (i) (l)

 

8,855,821

 

€25,552

 

Celtic Residential Irish Mortgage Securitisation, 0.36%, 11/13/47, CMO (i)

 

24,626,595

 

$6,475

 

Chase Mortgage Finance Corp., 5.356%, 3/25/37, CMO (i) (l)

 

5,525,082

 

 

 

Citigroup Mortgage Loan Trust, Inc., CMO (i),

 

 

 

2,064

 

2.53%, 3/25/36

 

1,872,136

 

11,694

 

3.109%, 9/25/37 (l)

 

8,809,886

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

72,592

 

0.762%-1.543%, 12/25/35, IO

 

2,122,399

 

31,429

 

0.407%, 9/25/46 (i) (l)

 

20,001,786

 

34,945

 

0.947%, 11/25/35 (i) (l)

 

24,508,766

 

18,229

 

0.998%, 11/25/46 (i) (l)

 

9,725,255

 

595

 

5.50%, 2/25/20

 

596,700

 

5,998

 

5.50%, 7/25/35 (l)

 

5,307,365

 

21,851

 

5.50%, 12/25/35 (l)

 

17,310,198

 

421

 

5.50%, 1/25/36

 

350,248

 

5,886

 

5.50%, 4/25/37

 

4,350,119

 

598

 

5.75%, 1/25/36

 

460,766

 

20,334

 

5.75%, 1/25/37 (l)

 

15,153,773

 

6,925

 

5.75%, 4/25/37 (l)

 

5,535,031

 

1,009

 

6.00%, 6/25/36

 

804,754

 

402

 

6.00%, 12/25/36

 

282,911

 

5,607

 

6.00%, 1/25/37 (l)

 

4,392,216

 

697

 

6.00%, 2/25/37

 

481,245

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

12

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

$14,153

 

6.00%, 4/25/37 (l)

 

$10,242,089

 

14,197

 

6.00%, 5/25/37 (l)

 

10,691,779

 

5,117

 

6.00%, 7/25/37 (l)

 

4,268,964

 

25,424

 

6.934%, 7/25/36, IO (i)

 

6,462,556

 

2,748

 

37.701%, 5/25/37 (b) (i)

 

4,950,743

 

 

 

Countrywide Home Loan Mortgage Pass Through Trust, CMO,

 

 

 

636

 

0.517%, 3/25/35 (i)

 

462,670

 

4,633

 

0.557%, 3/25/36 (i)

 

1,985,188

 

460

 

5.50%, 12/25/34

 

392,722

 

251

 

5.50%, 11/25/35

 

248,155

 

28,119

 

5.595%, 6/25/47 (i) (l)

 

25,467,327

 

914

 

6.00%, 7/25/37

 

773,545

 

12,298

 

6.00%, 8/25/37 (l)

 

11,037,429

 

656

 

6.00%, 1/25/38

 

595,714

 

 

 

Credit Suisse Mortgage Capital Certificates, CMO,

 

 

 

3,000

 

1.441%, 10/15/21 (a) (d) (i)

 

2,627,430

 

15,380

 

5.187%, 7/26/37 (a) (d) (i) (l)

 

7,964,079

 

96,182

 

5.188%, 2/27/47 (a) (d) (g) (i) (l)

 

61,579,036

 

12,950

 

5.588%, 2/15/39 (i) (l)

 

13,384,673

 

10,000

 

5.692%, 4/16/49 (a) (d) (i) (l)

 

10,873,650

 

14,123

 

5.896%, 4/25/36 (l)

 

11,345,225

 

11,208

 

6.058%, 7/26/49 (a) (d) (i)

 

5,335,776

 

8,425

 

6.50%, 10/25/21 (l)

 

6,556,640

 

21,326

 

6.50%, 7/26/36 (l)

 

10,862,148

 

25,665

 

7.00%, 8/26/36 (a) (d)

 

10,285,003

 

5,397

 

7.00%, 8/27/36 (a) (d)

 

3,962,102

 

3,163

 

Deutsche ALT-A Securities, Inc., 6.00%, 10/25/21, CMO

 

2,534,116

 

 

 

Diversity Funding Ltd., CMO (g) (i),

 

 

 

£10,860

 

2.001%, 2/10/46

 

15,187,276

 

£1,310

 

2.373%, 2/10/46

 

1,160,168

 

£1,193

 

2.842%, 2/10/46

 

749,213

 

£1,170

 

3.336%, 2/10/46

 

263,675

 

£702

 

4.623%, 2/10/46

 

73,452

 

£247

 

4.979%, 2/10/46 (b) (f)

 

3,980

 

£234

 

5.071%, 2/10/46 (b) (f)

 

3,767

 

€28,532

 

Emerald Mortgages PLC, 0.24%, 7/15/48, CMO (i)

 

26,674,093

 

€23,357

 

Fastnet Securities PLC, 0.361%, 8/10/43, CMO (i)

 

21,720,538

 

$16,139

 

First Horizon Alternative Mortgage Securities, 2.608%, 8/25/35, CMO (i)

 

3,743,285

 

1,620

 

First Horizon Asset Securities, Inc., 5.50%, 8/25/37, CMO

 

1,492,159

 

7,958

 

GMAC Commercial Mortgage Securities, Inc., 4.915%, 12/10/41, CMO (l)

 

7,936,338

 

5,869

 

Greenpoint Mortgage Funding Trust, 0.417%, 12/25/46, CMO (i)

 

1,931,262

 

 

 

GSR Mortgage Loan Trust, CMO,

 

 

 

101

 

3.129%, 11/25/35 (i)

 

86,331

 

511

 

5.50%, 5/25/36

 

452,530

 

2,227

 

6.50%, 8/25/36 (i)

 

1,820,759

 

 

 

Harborview Mortgage Loan Trust, CMO (i),

 

 

 

27,160

 

0.459%, 3/19/36 (l)

 

16,806,004

 

15,298

 

0.469%, 1/19/36 (l)

 

9,901,910

 

16,680

 

0.869%, 6/20/35 (l)

 

8,106,277

 

3,744

 

1.119%, 6/20/35

 

864,929

 

599

 

Impac CMB Trust, 0.937%, 10/25/34, CMO (i)

 

453,914

 

9,567

 

IndyMac IMSC Mortgage Loan Trust, 3.069%, 6/25/37, CMO (i) (l)

 

5,673,720

 

184

 

Indymac INDA Mortgage Loan Trust, 5.356%, 3/25/37, CMO (i)

 

151,457

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

13

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

 

 

Indymac Index Mortgage Loan Trust, CMO (i),

 

 

 

$7,695

 

0.417%, 11/25/46 (l)

 

$2,999,809

 

4,700

 

0.467%, 2/25/37

 

1,515,259

 

755

 

0.517%, 7/25/36

 

542,007

 

371

 

2.71%, 2/25/35

 

319,478

 

 

 

JPMorgan Alternative Loan Trust, CMO (l),

 

 

 

61,575

 

0.417%, 6/25/37 (i)

 

29,863,258

 

14,186

 

5.85%, 11/25/36 (i)

 

12,896,922

 

10,000

 

5.96%, 12/25/36

 

7,328,330

 

5,000

 

6.31%, 8/25/36

 

3,553,865

 

76,289

 

JPMorgan Chase Commercial Mortgage Securities Corp., 2.234%, 6/16/45, CMO, IO (i) (l)

 

8,930,688

 

 

 

JPMorgan Mortgage Trust, CMO (i),

 

 

 

14,083

 

2.997%, 6/25/37 (l)

 

11,126,823

 

10,512

 

5.571%, 4/25/37 (l)

 

9,436,503

 

2,996

 

5.831%, 10/25/36

 

2,797,209

 

8,050

 

Lavendar Trust, 5.50%, 9/26/35, CMO (a) (d) (g)

 

4,717,675

 

10,912

 

LB Commercial Mortgage Trust, 6.086%, 7/15/44, CMO (i) (l)

 

11,617,382

 

 

 

LB-UBS Commercial Mortgage Trust, CMO (i),

 

 

 

301,571

 

0.186%, 2/15/40, IO (a) (d)

 

4,283,517

 

7,751

 

5.452%, 9/15/39 (l)

 

8,016,243

 

 

 

Lehman Mortgage Trust, CMO,

 

 

 

339

 

5.50%, 11/25/35

 

340,457

 

2,823

 

6.00%, 8/25/36

 

2,206,353

 

1,737

 

6.00%, 9/25/36

 

1,259,938

 

13,475

 

6.50%, 9/25/37 (l)

 

11,179,156

 

51,053

 

7.25%, 9/25/37 (l)

 

26,996,491

 

6,016

 

Lehman XS Trust, 0.717%, 7/25/47, CMO (i)

 

278,669

 

 

 

MASTR Adjustable Rate Mortgages Trust, CMO (i),

 

 

 

34,383

 

0.417%, 5/25/47 (l)

 

22,361,367

 

6,708

 

0.557%, 5/25/47

 

976,538

 

 

 

MASTR Alternative Loans Trust, CMO (i),

 

 

 

29,291

 

0.567%, 3/25/36 (l)

 

4,795,473

 

37,435

 

0.617%, 3/25/36

 

6,479,506

 

729

 

MASTR Asset Securitization Trust, 5.26%, 11/25/33, CMO (a) (b) (d) (i) (m)
(acquisition cost-$106,157; purchased 9/28/12)

 

171,971

 

 

 

Morgan Stanley Reremic Trust, CMO (a) (d),

 

 

 

11,082

 

2.61%, 1/26/35 (i)

 

7,824,859

 

6,285

 

2.61%, 2/26/37 (i)

 

4,433,487

 

26,634

 

3.008%, 7/26/35 (i) (l)

 

16,240,575

 

4,998

 

5.32%, 9/26/35 (i)

 

3,841,861

 

7,969

 

6.00%, 4/26/36

 

4,742,610

 

 

 

Newgate Fund PLC, CMO (i),

 

 

 

€2,750

 

1.502%, 12/15/50

 

1,922,992

 

€5,250

 

1.752%, 12/15/50

 

3,175,882

 

£4,150

 

1.903%, 12/15/50

 

3,635,519

 

£2,200

 

Newgate Funding PLC, 0.853%, 12/15/50, CMO (i)

 

1,887,297

 

 

 

Nomura Asset Acceptance Corp., CMO,

 

 

 

$1,184

 

5.82%, 3/25/47

 

1,119,863

 

19,333

 

6.138%, 3/25/47 (l)

 

18,288,910

 

36,863

 

6.347%, 3/25/47 (l)

 

34,871,891

 

 

 

Residential Accredit Loans Trust, CMO,

 

 

 

14,312

 

0.397%, 7/25/36 (i) (l)

 

8,469,492

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

14

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

$35,590

 

0.407%, 5/25/37 (i) (l)

 

$24,482,501

 

12,922

 

1.148%, 1/25/46 (i) (l)

 

8,182,029

 

1,885

 

6.00%, 8/25/35 (l)

 

1,700,686

 

469

 

6.00%, 6/25/36 (l)

 

346,161

 

646

 

6.00%, 6/25/36

 

476,329

 

10,844

 

6.00%, 8/25/36 (l)

 

8,275,999

 

2,133

 

6.024%, 1/25/36 (i)

 

1,427,424

 

25,436

 

7.00%, 10/25/37 (l)

 

18,999,939

 

 

 

RBSSP Resecuritization Trust, CMO (a) (d),

 

 

 

10,960

 

3.114%, 2/26/36 (i) (l)

 

3,779,365

 

10,000

 

6.00%, 3/26/36

 

6,065,485

 

19,175

 

6.969%, 11/21/35 (i) (l)

 

11,673,203

 

34,872

 

7.289%, 11/26/35 (i) (l)

 

18,257,095

 

 

 

Residential Asset Securitization Trust, CMO,

 

 

 

2,527

 

5.50%, 7/25/35

 

2,356,078

 

6,137

 

6.25%, 8/25/37

 

3,461,411

 

 

 

Residential Funding Mortgage Securities I Trust, CMO,

 

 

 

626

 

5.85%, 11/25/35

 

556,282

 

8,722

 

5.883%, 8/25/36 (i) (l)

 

7,617,310

 

4,889

 

6.00%, 4/25/37

 

4,305,060

 

2,857

 

Sequoia Mortgage Trust, 0.589%, 7/20/36, CMO (i) (l)

 

1,896,101

 

£2,722

 

Southern Pacific Securities PLC, 4.176%, 12/10/42, CMO (i)

 

3,759,262

 

 

 

Structured Adjustable Rate Mortgage Loan Trust, CMO (i) (l),

 

 

 

$8,081

 

4.891%, 8/25/36

 

5,786,868

 

16,325

 

5.151%, 2/25/37

 

10,439,000

 

6,360

 

5.189%, 4/25/47

 

4,953,667

 

 

 

Structured Asset Mortgage Investments, Inc., CMO (i),

 

 

 

5,548

 

0.387%, 3/25/37

 

811,197

 

33,382

 

0.407%, 7/25/46 (l)

 

21,762,303

 

 

 

Suntrust Alternative Loan Trust, CMO (i),

 

 

 

32,212

 

0.567%, 4/25/36 (l)

 

7,038,073

 

8,706

 

6.934%, 4/25/36, IO

 

2,315,069

 

 

 

TBW Mortgage-Backed Pass Through Certificates, CMO (l),

 

 

 

9,884

 

5.80%, 3/25/37

 

4,835,912

 

15,000

 

6.12%, 3/25/37

 

7,562,715

 

36,137

 

6.50%, 7/25/36

 

18,990,577

 

 

 

Vanwall Finance PLC, CMO (i),

 

 

 

£8,494

 

1.181%, 4/12/16

 

12,112,558

 

£7,494

 

1.441%, 4/12/16

 

10,226,047

 

 

 

WaMu Mortgage Pass Through Certificates, CMO (i),

 

 

 

$589

 

0.67%, 6/25/44

 

489,386

 

23,016

 

0.898%, 6/25/47 (l)

 

7,683,383

 

41,054

 

0.958%, 7/25/47 (l)

 

32,439,339

 

964

 

1.028%, 10/25/46

 

676,311

 

3,712

 

1.128%, 7/25/46

 

2,746,406

 

115

 

1.148%, 2/25/46

 

103,261

 

1,739

 

2.344%, 7/25/47

 

1,274,419

 

12,414

 

5.216%, 3/25/37 (l)

 

10,983,879

 

861

 

5.238%, 2/25/37

 

792,909

 

 

 

Washington Mutual Alternative Mortgage Pass-Through Certificates, CMO (l),

 

 

 

25,683

 

0.457%, 1/25/47 (i)

 

13,561,423

 

10,404

 

6.00%, 4/25/37

 

8,340,403

 

1,543

 

Wells Fargo Alternative Loan Trust, 5.75%, 7/25/37, CMO

 

1,282,971

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

15

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

$28,600

 

Wells Fargo Mortgage Loan Trust, 5.596%, 4/27/36, CMO (a) (d) (i)

 

$21,901,178

 

 

 

Wells Fargo Mortgage-Backed Securities Trust, CMO,

 

 

 

1,537

 

2.648%, 10/25/35 (i)

 

1,498,855

 

1,053

 

6.00%, 7/25/36

 

1,053,684

 

2,131

 

6.00%, 9/25/36

 

2,109,534

 

647

 

6.00%, 4/25/37

 

617,241

 

1,595

 

6.00%, 6/25/37

 

1,581,391

 

3,220

 

6.00%, 8/25/37

 

3,047,360

 

Total Mortgage-Backed Securities (cost-$1,226,395,664)

 

1,333,585,442

 

 

 

 

 

 

 

CORPORATE BONDS & NOTES – 34.6%

 

 

 

 

 

 

 

 

 

Banking – 4.7%

 

 

 

12,500

 

Banco do Brasil S.A., 5.875%, 1/19/23 (a) (d) (l)

 

13,531,250

 

€15,800

 

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, 6.875%, 3/19/20 (l)

 

21,420,494

 

$6,000

 

Intesa Sanpaolo SpA, 6.50%, 2/24/21 (a) (b) (d) (l) (m)
(acquisition cost-$5,125,000; purchased 5/31/12-6/26/12)

 

5,871,246

 

€15,800

 

LBG Capital No.2 PLC, 6.385%, 5/12/20

 

18,680,295

 

 

 

 

 

59,503,285

 

Building Products – 1.2%

 

 

 

$5,000

 

Corp GEO S.A.B. De C.V., 9.25%, 6/30/20 (a) (d) (l)

 

5,200,000

 

5,000

 

Desarrolladora Homex S.A.B. De C.V., 9.75%, 3/25/20 (a) (d) (l)

 

5,125,000

 

5,000

 

Urbi Desarrollos Urbanos S.A.B. De C.V., 9.75%, 2/3/22 (a) (d) (l)

 

4,412,500

 

 

 

 

 

14,737,500

 

Chemicals – 2.1%

 

 

 

25,980

 

Ineos Finance PLC, 7.50%, 5/1/20 (a) (d) (l)

 

26,499,600

 

Commercial Services – 0.7%

 

 

 

8,550

 

Stonemor Operating LLC, 10.25%, 12/1/17 (l)

 

8,592,750

 

Construction & Engineering – 0.8%

 

 

 

10,723

 

Alion Science and Technology Corp., 12.00%, 11/1/14, PIK (l)

 

10,106,687

 

Consumer Products – 1.6%

 

 

 

4,536

 

Armored Autogroup, Inc., 9.25%, 11/1/18

 

4,082,400

 

 

 

Reynolds Group Issuer, Inc. (l),

 

 

 

6,000

 

6.875%, 2/15/21

 

6,360,000

 

9,000

 

7.875%, 8/15/19

 

9,765,000

 

 

 

 

 

20,207,400

 

Financial Services – 12.8%

 

 

 

12,900

 

AGFC Capital Trust I, 6.00%, 1/15/67, (converts to FRN on 1/15/17) (a) (d) (l)

 

7,288,500

 

€7,100

 

Caisse Centrale du Credit Immobilier de France S.A., 4.00%, 1/12/18

 

8,619,076

 

$9,600

 

Cantor Fitzgerald L.P., 7.875%, 10/15/19 (a) (b) (d) (l) (m)
(acquisition cost-$9,607,000; purchased 5/30/12-6/4/12)

 

10,050,595

 

€25,000

 

Cedulas TDA 6 Fondo de Titulizacion de Activos, 4.25%, 4/10/31 (l)

 

21,057,981

 

 

 

Citigroup, Inc. (l),

 

 

 

€3,000

 

3.625%, 11/30/17, (converts to FRN on 11/30/12)

 

3,490,533

 

€6,000

 

4.75%, 2/10/19, (converts to FRN on 2/10/14)

 

7,128,171

 

 

 

Eksportfinans ASA (l),

 

 

 

$700

 

2.00%, 9/15/15

 

654,961

 

1,700

 

5.50%, 5/25/16

 

1,735,705

 

1,900

 

5.50%, 6/26/17

 

1,940,405

 

3,500

 

Lazard Group LLC, 6.85%, 6/15/17 (l)

 

3,954,940

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

16

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

Financial Services (continued)

 

 

 

$36,500

 

Morgan Stanley, 7.30%, 5/13/19 (l)

 

$43,134,569

 

 

 

Royal Bank of Scotland NV (i) (l),

 

 

 

€5,446

 

1.016%, 6/8/15

 

6,342,283

 

$5,000

 

1.108%, 3/9/15

 

4,570,750

 

€9,000

 

Royal Bank of Scotland PLC, 6.934%, 4/9/18 (l)

 

11,810,427

 

 

 

SLM Corp. (l),

 

 

 

$5,000

 

6.00%, 1/25/17

 

5,468,750

 

6,245

 

7.25%, 1/25/22

 

7,025,625

 

 

 

Societe Generale S.A. (l),

 

 

 

1,100

 

5.20%, 4/15/21

 

1,182,699

 

15,237

 

5.20%, 4/15/21 (a) (d)

 

16,382,533

 

 

 

 

 

161,838,503

 

Food – 0.7%

 

 

 

2,500

 

BRF - Brasil Foods S.A., 5.875%, 6/6/22 (a) (d) (l)

 

2,737,500

 

5,000

 

Minerva Luxembourg S.A., 12.25%, 2/10/22 (a) (d) (l)

 

5,793,500

 

 

 

 

 

8,531,000

 

Hotels/Gaming – 0.3%

 

 

 

12,000

 

Buffalo Thunder Development Authority, 9.375%, 12/15/14 (a) (b) (d) (f) (m) (n)
(acquisition cost-$4,320,000; purchased 6/28/12)

 

4,440,000

 

Insurance – 1.3%

 

 

 

£8,500

 

American International Group, Inc., 8.625%, 5/22/68, (converts to FRN on 5/22/18) (l)

 

15,921,921

 

Oil & Gas – 3.6%

 

 

 

$5,000

 

Afren PLC, 10.25%, 4/8/19 (l)

 

5,712,500

 

5,000

 

Alliance Oil Co., Ltd., 9.875%, 3/11/15

 

5,316,750

 

15,000

 

NGPL PipeCo LLC, 7.768%, 12/15/37 (a) (d) (l)

 

15,075,000

 

16,500

 

OGX Austria GmbH, 8.50%, 6/1/18 (a) (d) (l)

 

14,932,500

 

7,000

 

Petroleos de Venezuela S.A., 5.50%, 4/12/37 (l)

 

4,270,000

 

 

 

 

 

45,306,750

 

Oil, Gas & Consumable Fuels – 0.4%

 

 

 

5,000

 

Mongolian Mining Corp., 8.875%, 3/29/17 (a) (d) (l)

 

5,087,500

 

Retail – 2.5%

 

 

 

£500

 

Enterprise Inns PLC, 6.50%, 12/6/18

 

712,530

 

£4,066

 

Punch Taverns Finance PLC, 6.82%, 7/15/20 (l)

 

6,236,872

 

£12,120

 

Spirit Issuer PLC, 5.472%, 12/28/34 (i)

 

14,874,239

 

£6,800

 

Unique Pub Finance Co. PLC, 6.542%, 3/30/21

 

9,992,378

 

 

 

 

 

31,816,019

 

Technology – 0.8%

 

 

 

 

 

First Data Corp. (a) (d) (l),

 

 

 

$5,000

 

7.375%, 6/15/19

 

5,181,250

 

5,000

 

8.75%, 1/15/22, PIK

 

5,062,500

 

 

 

 

 

10,243,750

 

Telecommunications – 1.1%

 

 

 

8,500

 

Nokia Oyj, 5.375%, 5/15/19 (l)

 

7,161,250

 

7,000

 

VimpelCom Holdings BV, 7.504%, 3/1/22 (l)

 

7,358,750

 

 

 

 

 

14,520,000

 

Total Corporate Bonds & Notes (cost-$397,631,206)

 

437,352,665

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

17

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

ASSET-BACKED SECURITIES – 21.7%

 

 

 

 

 

 

 

 

 

 

 

Bear Stearns Asset Backed Securities Trust (i),

 

 

 

$4,000

 

0.767%, 6/25/36 (l)

 

$2,614,122

 

592

 

2.683%, 10/25/36

 

333,291

 

2,943

 

Bombardier Capital Mortgage Securitization Corp., 7.44%, 12/15/29 (i) (l)

 

1,905,792

 

 

 

Citigroup Mortgage Loan Trust, Inc.,

 

 

 

687

 

5.852%, 5/25/36

 

419,634

 

4,086

 

5.923%, 3/25/36

 

2,893,536

 

 

 

Conseco Finance Securitizations Corp.,

 

 

 

6,228

 

7.96%, 5/1/31

 

5,184,301

 

18,519

 

7.97%, 5/1/32 (l)

 

13,372,603

 

33,049

 

8.20%, 5/1/31 (l)

 

28,127,636

 

7,000

 

Conseco Financial Corp., 7.06%, 2/1/31 (i) (l)

 

6,799,450

 

 

 

Countrywide Asset-Backed Certificates,

 

 

 

15,000

 

0.387%, 6/25/47 (i) (l)

 

10,112,948

 

6,059

 

0.417%, 4/25/36 (i) (l)

 

4,783,854

 

38

 

1.017%, 3/25/33 (i)

 

31,318

 

2,405

 

1.597%, 12/25/32 (i)

 

1,549,423

 

1,600

 

4.915%, 2/25/36 (i)

 

1,432,032

 

2,828

 

5.348%, 7/25/36 (i)

 

2,339,041

 

4,645

 

5.505%, 4/25/36 (i) (l)

 

4,001,840

 

4,918

 

5.588%, 8/25/36 (i)

 

4,227,602

 

5,561

 

5.657%, 3/25/34 (i)

 

5,757,447

 

555

 

5.859%, 10/25/46

 

354,226

 

13,581

 

CSAB Mortgage Backed Trust, 5.50%, 5/25/37 (l)

 

11,675,739

 

 

 

EMC Mortgage Loan Trust (a) (d) (i),

 

 

 

301

 

0.667%, 12/25/42

 

245,307

 

14,869

 

0.687%, 4/25/42 (l)

 

11,241,547

 

1,658

 

2.467%, 4/25/42

 

776,551

 

13,141

 

GMAC Mortgage Corp. Loan Trust, 6.249%, 12/25/37 (l)

 

11,313,555

 

5,150

 

GSAA Trust, 6.205%, 3/25/46

 

4,925,597

 

2,169

 

Indymac Home Equity Loan Asset-Backed Trust, 7.559%, 12/25/31

 

952,313

 

13,473

 

Lehman XS Trust, 6.17%, 6/25/46 (l)

 

11,573,144

 

326

 

Long Beach Mortgage Loan Trust, 1.267%, 2/25/34 (i)

 

258,374

 

27,500

 

Morgan Stanley Home Equity Loan Trust, 0.447%, 4/25/37 (i) (l)

 

12,351,556

 

 

 

Oakwood Mortgage Investors, Inc. (i),

 

 

 

9,736

 

5.92%, 9/15/17

 

4,699,851

 

5,942

 

6.61%, 2/15/21

 

3,152,127

 

27,166

 

7.40%, 7/15/30 (l)

 

19,997,215

 

7,719

 

7.405%, 12/15/30

 

4,519,863

 

6,550

 

7.84%, 11/15/29 (l)

 

6,519,872

 

 

 

Popular ABS Mortgage Pass-Through Trust,

 

 

 

3,663

 

1.467%, 8/25/35 (i)

 

1,405,039

 

8,422

 

5.105%, 7/25/35 (l)

 

6,025,709

 

11,872

 

Residential Asset Mortgage Trust, 1.192%, 4/25/34 (i) (l)

 

7,847,307

 

10,865

 

RASC Trust, 0.377%, 6/25/36 (i) (l)

 

8,579,131

 

47

 

Renaissance Home Equity Loan Trust, 0.717%, 12/25/33 (i)

 

42,038

 

2,738

 

Soundview Home Equity Loan Trust, 5.562%, 10/25/36

 

2,038,913

 

200,127

 

South Coast Funding, 0.72%, 1/6/41 (a) (b) (d) (g) (i) (m)
(acquisition cost-$42,902,163; purchased 8/16/12)

 

44,021,858

 

8,564

 

Structured Asset Securities Corp., 4.217%, 5/25/32 (i)

 

3,548,104

 

399

 

Vanderbilt Mortgage Finance, 9.25%, 11/7/32 (i)

 

405,801

 

Total Asset-Backed Securities (cost-$262,023,364)

 

274,356,607

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

18

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

SENIOR LOANS (a) (c) – 7.2%

 

 

 

 

 

 

 

 

 

Automotive – 0.9%

 

 

 

$12,000

 

Keystone Automotive Operations, Inc., 9.75%-10.25%, 2/15/16, Term B (b) (m)
(aquisition cost-$12,000,000; purchased 7/19/12-8/8/12)

 

$12,180,000

 

Financial Services – 3.2%

 

 

 

13500

 

RFC Borrower LLC, 5.00%-6.75%, 11/18/13

 

13,634,690

 

27,000

 

Springleaf Finance Corp., 5.50%, 5/10/17

 

26,487,000

 

 

 

 

 

40,121,690

 

Food & Beverage – 0.5%

 

 

 

5,985

 

Candy Intermediate Holdings, Inc., 7.50%-8.50%, 6/18/18

 

6,063,553

 

Hotels/Gaming – 1.2%

 

 

 

15,200

 

Stockbridge SBE Holdings LLC, 13.00%, 5/2/17, Term B (b) (m)
(acquisition cost-$14,963,250; purchased 5/30/12-7/10/12)

 

15,200,000

 

Telecommunications – 1.4%

 

 

 

17,588

 

Univision Communications, Inc., 4.466%, 3/31/17

 

17,453,630

 

Total Senior Loans (cost-$87,439,037)

 

91,018,873

 

 

 

 

 

 

 

U.S. GOVERNMENT AGENCY SECURITIES – 5.1%

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae,

 

 

 

30,333

 

5.704%, 7/25/41, CMO, IO (i) (l)

 

4,276,223

 

39,930

 

5.854%, 10/25/40, CMO, IO (i) (l)

 

5,822,165

 

3,207

 

6.084%, 1/25/38, CMO, IO (i)

 

451,257

 

1,560

 

6.134%, 12/25/37, CMO, IO (i)

 

235,237

 

3,495

 

6.184%, 12/25/37, CMO, IO (i)

 

544,004

 

1,112

 

6.194%, 6/25/37, CMO, IO (i)

 

189,813

 

13,120

 

6.224%, 3/25/37, CMO, IO (i) (l)

 

2,031,655

 

80,406

 

6.224%, 4/25/37, CMO, IO (i) (l)

 

11,826,673

 

3,118

 

6.234%, 4/25/37, CMO, IO (i)

 

619,448

 

805

 

6.284%, 2/25/37, CMO, IO (i)

 

126,867

 

2,598

 

6.304%, 9/25/37, CMO, IO (i)

 

486,341

 

89,100

 

6.344%, 6/25/41, CMO, IO (i) (l)

 

13,348,905

 

595

 

6.384%, 11/25/35, CMO, IO (i)

 

108,000

 

866

 

6.434%, 11/25/36, CMO, IO (i)

 

127,962

 

3,158

 

6.504%, 6/25/37, CMO, IO (i)

 

460,271

 

6,994

 

6.534%, 10/25/35, CMO, IO (i)

 

1,168,877

 

6,229

 

6.554%, 5/25/37, CMO, IO (i)

 

1,280,626

 

7,499

 

6.584%, 11/25/36, CMO, IO (i)

 

1,459,758

 

7,585

 

6.764%, 3/25/38, CMO, IO (i)

 

1,683,267

 

6,097

 

6.784%, 2/25/38, CMO, IO (i)

 

1,016,042

 

5,829

 

6.884%, 6/25/23, CMO, IO (i)

 

1,091,401

 

5,985

 

11.888%, 1/25/41, CMO (b) (i) (l)

 

8,132,693

 

 

 

 

 

56,487,485

 

 

 

Freddie Mac,

 

 

 

1,414

 

6.189%, 5/15/37, CMO, IO (i)

 

231,495

 

8,243

 

6.249%, 7/15/36, CMO, IO (i)

 

1,604,054

 

3,592

 

6.359%, 9/15/36, CMO, IO (i)

 

591,587

 

8,753

 

6.479%, 4/15/36, CMO, IO (i)

 

1,286,601

 

6,056

 

7.559%, 9/15/36, CMO, IO (i)

 

1,480,100

 

1,579

 

13.858%, 9/15/41, CMO (b) (i)

 

1,873,194

 

881

 

16.323%, 9/15/34, CMO (b) (i)

 

1,167,561

 

 

 

 

 

8,234,592

 

Total U.S. Government Agency Securities (cost-$66,011,485)

 

64,722,077

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

19

 


 

PIMCO Dynamic Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

Value

 

CONVERTIBLE PREFERRED STOCK – 1.9%

 

 

 

 

 

 

 

 

 

Aerospace & Defense – 0.3%

 

 

 

70,000

 

United Technologies Corp., 7.50%, 8/1/15

 

$3,927,000

 

Electric Utilities – 0.7%

 

 

 

151,700

 

PPL Corp., 8.75%, 5/1/14

 

8,297,990

 

Financial Services – 0.9%

 

 

 

10,000

 

General Electric Capital Corp., 7.125%, 6/15/22 (h)

 

11,187,710

 

Total Convertible Preferred Stock (cost-$21,480,278)

 

23,412,700

 

 

 

 

 

 

 

Principal
Amount
(000)

 

 

 

 

 

 

SHORT-TERM INVESTMENTS – 14.0%

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations (j) (p) – 4.6%

 

 

 

$57,879

 

U.S. Treasury Bills, 0.117%-0.206%, 1/31/13-8/22/13 (cost-$57,809,748)

 

57,817,645

 

Repurchase Agreements – 9.4%

 

 

 

12,600

 

Barclays Capital, Inc.,
dated 9/28/12, 0.25%, due 10/1/12, proceeds $12,600,263; collateralized by U.S. Treasury Inflation Indexed Notes, 0.125%, due 7/15/22, valued at $12,828,867 including accrued interest

 

12,600,000

 

105,000

 

Credit Suisse Securities (USA) LLC,
dated 9/28/12, 0.28%, due 10/1/12, proceeds $105,002,450; collateralized by U.S. Treasury Notes, 0.25%, due 2/28/14, valued at $107,400,794 including accrued interest

 

105,000,000

 

1,417

 

State Street Bank & Trust Co.,
dated 9/28/12, 0.01%, due 10/1/12, proceeds $1,417,001; collateralized by U.S. Treasury Bonds, 4.50%, due 5/15/38, valued at $1,448,400 including accrued interest

 

1,417,000

 

Total Repurchase Agreements (cost-$119,017,000)

 

119,017,000

 

Total Short-Term Investments (cost-$176,826,748)

 

176,834,645

 

Total Investments (cost-$2,237,807,782) – 190.0%

 

2,401,283,009

 

Liabilities in excess of other assets – (90.0)%

 

(1,137,293,105

)

Net Assets – 100%

 

$1,263,989,904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

20

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited)

Principal
Amount
(000s)

 

 

 

 

Value

 

MORTGAGE-BACKED SECURITIES – 67.7%

 

 

 

 

 

 

 

 

 

 

 

Banc of America Funding Corp., CMO (i),

 

 

 

$273

 

0.439%, 7/20/36

 

$238,747

 

1,014

 

2.817%, 12/20/34

 

845,710

 

1,994

 

5.572%, 3/20/36

 

1,672,532

 

572

 

5.846%, 1/25/37

 

431,240

 

2,000

 

Banc of America Merrill Lynch Commercial Mortgage, Inc., 5.473%, 3/11/41, CMO (a) (d) (i)

 

1,441,394

 

9

 

Banc of America Mortgage Trust, 6.00%, 7/25/46, CMO

 

7,724

 

756

 

BCAP LLC Trust, 6.25%, 11/26/36, CMO (a) (d)

 

750,999

 

3,000

 

BCRR Trust, 5.858%, 7/17/40, CMO (a) (d) (i) (l)

 

3,291,483

 

 

 

Bear Stearns Adjustable Rate Mortgage Trust, CMO (i),

 

 

 

458

 

2.901%, 3/25/35

 

400,518

 

1,245

 

2.959%, 2/25/34 (l)

 

1,233,348

 

851

 

5.607%, 7/25/36

 

640,227

 

 

 

Bear Stearns Alt-A Trust, CMO (i),

 

 

 

568

 

2.766%, 4/25/35

 

431,721

 

227

 

2.768%, 11/25/35

 

166,683

 

350

 

3.006%, 9/25/35

 

284,125

 

 

 

Bear Stearns Commercial Mortgage Securities, CMO (i),

 

 

 

1,000

 

5.694%, 6/11/50

 

1,183,019

 

1,300

 

5.702%, 3/13/40 (a) (d) (l)

 

1,232,070

 

1,000

 

5.94%, 2/11/41 (a) (d)

 

817,400

 

 

 

Bear Stearns Structured Products, Inc., CMO (i),

 

 

 

563

 

2.837%, 12/26/46

 

327,930

 

1,648

 

2.84%, 1/26/36

 

1,040,423

 

1,362

 

CBA Commercial Small Balance Commercial Mortgage, 5.54%, 1/25/39, CMO (a) (b) (d) (m)
(acquisition cost-$767,923; purchased 11/18/09)

 

729,976

 

 

 

CC Mortgage Funding Corp., CMO (a) (d) (i),

 

 

 

319

 

0.517%, 8/25/35

 

245,889

 

20

 

0.557%, 10/25/34

 

18,747

 

 

 

Celtic Residential Irish Mortgage Securitisation, CMO (i),

 

 

 

€2,721

 

0.36%, 11/13/47

 

2,622,112

 

£2,463

 

0.916%, 12/14/48

 

2,992,826

 

$964

 

Charlotte Gateway Village LLC, 6.41%, 12/1/16, CMO (a) (b) (d) (g) (m)
(acquisition cost-$1,021,797; purchased 1/9/06)

 

978,904

 

1,481

 

Citigroup Mortgage Loan Trust, Inc., 3.046%, 3/25/37, CMO (i)

 

1,039,318

 

1,015

 

Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.393%, 7/15/44, CMO (i)

 

941,064

 

760

 

Commercial Mortgage Pass Through Certificates, 6.118%, 7/10/46, CMO (a) (d) (i)

 

832,913

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

1,592

 

0.429%, 5/20/46 (i)

 

986,473

 

304

 

0.457%, 12/25/46 (i)

 

106,514

 

1,927

 

0.547%, 10/25/35 (i)

 

1,207,208

 

3,779

 

0.567%, 5/25/36 (i)

 

2,063,672

 

521

 

2.897%, 2/25/37 (i)

 

397,407

 

481

 

5.276%, 10/25/35 (i)

 

358,728

 

1,257

 

5.50%, 8/25/34

 

1,079,756

 

66

 

5.50%, 2/25/36

 

49,803

 

1,155

 

5.50%, 3/25/36

 

777,913

 

1,470

 

6.00%, 5/25/37

 

1,106,914

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

21

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

 

$182

 

6.25%, 9/25/34

 

$180,557

 

2,743

 

6.934%, 7/25/36, IO (i)

 

697,327

 

 

 

Countrywide Home Loan Mortgage Pass Through Trust, CMO,

 

 

 

365

 

0.457%, 3/25/36 (i)

 

270,748

 

2,294

 

0.537%, 3/25/35 (i)

 

1,698,594

 

259

 

0.607%, 2/25/35 (i)

 

155,875

 

298

 

2.788%, 10/20/35 (i)

 

185,475

 

526

 

2.945%, 10/20/35 (i)

 

457,779

 

637

 

3.012%, 8/25/34 (i)

 

552,690

 

635

 

3.296%, 3/25/37 (i)

 

379,924

 

1,460

 

5.102%, 10/20/35 (i)

 

1,144,979

 

167

 

5.50%, 8/25/35

 

167,282

 

144

 

6.00%, 3/25/36

 

5,683

 

2,600

 

Credit Suisse First Boston Mortgage Securities Corp., 5.745%, 12/15/36, CMO (a) (d) (i)

 

2,012,172

 

 

 

Credit Suisse Mortgage Capital Certificates, CMO,

 

 

 

900

 

5.467%, 7/18/16 (a) (d) (i)

 

954,694

 

453

 

6.00%, 11/25/36

 

449,772

 

2,000

 

6.407%, 2/15/41 (i) (l)

 

2,341,017

 

926

 

First Horizon Alternative Mortgage Securities, 2.504%, 11/25/36, CMO (i)

 

601,960

 

2,000

 

First Horizon Asset Securities, Inc., 2.589%, 1/25/37, CMO (i)

 

1,622,474

 

 

 

GE Capital Commercial Mortgage Corp., CMO (i),

 

 

 

1,000

 

5.298%, 7/10/45 (a) (d)

 

768,883

 

1,000

 

5.38%, 5/10/43

 

967,526

 

336

 

GMAC Mortgage Corp. Loan Trust, 3.454%, 6/25/34, CMO (i)

 

331,322

 

730

 

GS Mortgage Securities Corp. II, 6.134%, 8/10/43, CMO (a) (d) (i)

 

797,413

 

 

 

GSR Mortgage Loan Trust, CMO,

 

 

 

333

 

2.647%, 9/25/35 (i)

 

335,729

 

655

 

2.924%, 4/25/35 (i)

 

570,353

 

379

 

3.053%, 5/25/35 (i)

 

318,196

 

422

 

5.50%, 6/25/36

 

392,359

 

 

 

Harborview Mortgage Loan Trust, CMO (i),

 

 

 

45

 

0.519%, 4/19/34

 

43,001

 

214

 

2.55%, 11/19/34

 

152,462

 

86

 

3.01%, 2/25/36

 

57,113

 

83

 

5.322%, 8/19/36

 

69,296

 

1,033

 

5.606%, 6/19/36

 

720,828

 

938

 

HSBC Asset Loan Obligation, 2.826%, 1/25/37, CMO (i)

 

644,798

 

2

 

Impac CMB Trust, 0.857%, 10/25/33, CMO (i)

 

2,202

 

 

 

Indymac Index Mortgage Loan Trust, CMO (i),

 

 

 

3,043

 

0.487%, 6/25/37

 

880,395

 

84

 

0.497%, 3/25/35

 

65,564

 

429

 

2.732%, 6/25/37

 

272,451

 

326

 

JPMorgan Alternative Loan Trust, 7.00%, 12/25/35, CMO

 

15,740

 

1,500

 

JPMorgan Chase Commercial Mortgage Securities Corp., 5.443%, 5/15/41, CMO (a) (d) (i)

 

1,063,958

 

 

 

JPMorgan Mortgage Trust, CMO,

 

 

 

2,089

 

2.903%, 4/25/37 (i)

 

1,493,641

 

618

 

5.42%, 5/25/36 (i)

 

507,925

 

204

 

5.50%, 1/25/36

 

186,843

 

228

 

5.50%, 6/25/37

 

218,915

 

 

 

Luminent Mortgage Trust, CMO (i),

 

 

 

1,373

 

0.387%, 12/25/36

 

946,508

 

1,333

 

0.417%, 10/25/46

 

1,023,208

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

22

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

 

 

MASTR Adjustable Rate Mortgage Trust, CMO (i),

 

 

 

$1,479

 

2.843%, 11/25/35 (a) (d)

 

$817,614

 

410

 

3.332%, 10/25/34

 

331,448

 

433

 

Merrill Lynch Alternative Note Asset, 0.287%, 1/25/37, CMO (i)

 

164,532

 

297

 

Merrill Lynch Investors Trust, 1.986%, 10/25/35, CMO (i)

 

288,917

 

1,000

 

Merrill Lynch/Countrywide Commercial Mortgage Trust, 5.378%, 8/12/48, CMO (l)

 

1,133,172

 

 

 

Morgan Stanley Capital I, Inc., CMO,

 

 

 

100

 

5.379%, 8/13/42 (a) (d) (i)

 

53,220

 

500

 

5.383%, 11/14/42 (i)

 

371,991

 

1,415

 

5.569%, 12/15/44 (l)

 

1,604,629

 

1,200

 

Morgan Stanley Reremic Trust, zero coupon, 7/17/56, CMO, PO (a) (b) (d) (l) (m)
(acquisition cost-$1,074,221; purchased 4/6/11)

 

1,059,000

 

468

 

Opteum Mortgage Acceptance Corp., 0.487%, 7/25/36, CMO (i)

 

281,584

 

277

 

Provident Funding Mortgage Loan Trust, 2.907%, 10/25/35, CMO (i)

 

272,373

 

3,000

 

RBSCF Trust, 6.068%, 2/17/51, CMO (a) (d) (i)

 

3,092,754

 

 

 

Residential Accredit Loans Trust CMO,

 

 

 

617

 

3.254%, 12/26/34 (i)

 

472,178

 

1,570

 

3.937%, 1/25/36 (i)

 

1,107,835

 

1,010

 

6.00%, 9/25/35

 

755,441

 

709

 

6.00%, 8/25/36

 

541,141

 

213

 

Residential Asset Mortgage Products Trust, 7.50%, 12/25/31, CMO

 

222,134

 

2,618

 

RBSSP Resecuritization Trust, 5.00%, 9/26/36, CMO (a) (d)

 

771,277

 

 

 

Structured Adjustable Rate Mortgage Loan Trust, CMO (i),

 

 

 

1,232

 

1.553%, 5/25/35

 

799,225

 

217

 

3.09%, 9/25/35

 

181,977

 

576

 

4.72%, 9/25/36

 

302,667

 

873

 

5.091%, 11/25/36

 

802,590

 

1,162

 

5.285%, 4/25/36

 

932,367

 

850

 

5.392%, 1/25/36

 

603,913

 

 

 

Structured Asset Mortgage Investments, Inc., CMO (i),

 

 

 

688

 

0.447%, 2/25/36

 

441,698

 

586

 

0.497%, 2/25/36

 

385,356

 

345

 

Suntrust Adjustable Rate Mortgage Loan Trust, 3.022%, 1/25/37, CMO (i)

 

303,465

 

 

 

Wachovia Bank Commercial Mortgage Trust, CMO,

 

 

 

1,020

 

4.982%, 2/15/35 (a) (d)

 

976,299

 

1,500

 

5.617%, 1/15/41 (a) (d) (i)

 

960,629

 

2,500

 

6.122%, 2/15/51 (i) (l)

 

2,934,255

 

1,000

 

WaMu Commercial Mortgage Securities Trust, 6.306%, 3/23/45, CMO (a) (d) (i)

 

881,764

 

 

 

WaMu Mortgage Pass Through Certificates, CMO (i),

 

 

 

229

 

0.507%, 7/25/45

 

210,899

 

209

 

0.878%, 1/25/47

 

172,321

 

1,042

 

2.657%, 12/25/36

 

821,697

 

876

 

2.704%, 2/25/37 (l)

 

685,776

 

345

 

5.187%, 7/25/37

 

318,276

 

1,268

 

5.247%, 4/25/37

 

193,293

 

55

 

5.341%, 8/25/36

 

4,095

 

3,840

 

Washington Mutual Alternative Mortgage Pass Through Certificates, 0.918%, 4/25/47, CMO (i)

 

985,258

 

1,112

 

Wells Fargo Mortgage-Backed Securities Trust, 6.00%, 3/25/37, CMO

 

1,045,249

 

1,000

 

WFDB Commercial Mortgage Trust, 6.403%, 7/5/24, CMO (a) (d)

 

1,045,585

 

Total Mortgage-Backed Securities (cost-$74,269,960)

 

91,028,955

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

23

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

CORPORATE BONDS & NOTES – 55.8%

 

 

 

 

 

 

 

 

 

Airlines – 3.4%

 

 

 

$1,000

 

American Airlines, Inc., 10.50%, 10/15/12 (f)

 

$1,107,500

 

744

 

Northwest Airlines, Inc., 1.184%, 11/20/15, (MBIA) (i) (l)

 

719,498

 

 

 

United Air Lines Pass Through Trust (l),

 

 

 

1,895

 

6.636%, 1/2/24

 

1,980,498

 

728

 

10.40%, 5/1/18

 

839,070

 

 

 

 

 

4,646,566

 

Banking – 7.0%

 

 

 

£100

 

Barclays Bank PLC, 14.00%, 6/15/19 (h)

 

203,042

 

€150

 

BPCE S.A., 9.25%, 4/22/15 (h)

 

190,348

 

 

 

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA (l),

 

 

 

€1,000

 

6.875%, 3/19/20

 

1,355,728

 

$1,600

 

11.00%, 6/30/19 (a) (b) (d) (h) (m)
(acquisition cost-$1,600,000; purchased 5/29/09)

 

2,113,966

 

2,800

 

Discover Bank, 7.00%, 4/15/20 (l)

 

3,378,278

 

2,000

 

Regions Financial Corp., 7.75%, 11/10/14 (l)

 

2,230,000

 

 

 

 

 

9,471,362

 

Chemicals – 0.5%

 

 

 

600

 

Ineos Finance PLC, 7.50%, 5/1/20 (a) (d) (l)

 

612,000

 

Commercial Services – 1.3%

 

 

 

1,500

 

PHH Corp., 9.25%, 3/1/16 (l)

 

1,728,750

 

Construction & Engineering – 1.4%

 

 

 

2,020

 

Alion Science and Technology Corp., 12.00%, 11/1/14, PIK (l)

 

1,903,850

 

Diversified Manufacturing – 0.5%

 

 

 

1,000

 

Colt Defense LLC, 8.75%, 11/15/17 (l)

 

695,000

 

Energy – 0.6%

 

 

 

800

 

Berau Coal Energy Tbk PT, 7.25%, 3/13/17 (a) (d) (l)

 

754,000

 

Financial Services – 16.5%

 

 

 

1,000

 

AGFC Capital Trust I, 6.00%, 1/15/67, (converts to FRN on 1/15/17) (a) (d) (l)

 

565,000

 

 

 

Ally Financial, Inc.,

 

 

 

31

 

6.00%, 3/15/19

 

30,501

 

9

 

6.10%, 9/15/19

 

8,891

 

45

 

6.15%, 3/15/16

 

44,280

 

60

 

6.25%, 4/15/19

 

59,105

 

98

 

6.30%, 8/15/19

 

97,279

 

7

 

6.35%, 4/15/16

 

6,961

 

10

 

6.35%, 4/15/19

 

9,953

 

23

 

6.50%, 10/15/16

 

22,855

 

10

 

6.55%, 12/15/19

 

9,934

 

12

 

6.60%, 8/15/16

 

11,945

 

29

 

6.65%, 6/15/18

 

28,957

 

10

 

6.65%, 10/15/18

 

9,961

 

29

 

6.70%, 6/15/18

 

28,796

 

29

 

6.75%, 8/15/16

 

29,011

 

10

 

6.75%, 9/15/16

 

9,931

 

3

 

6.75%, 6/15/17

 

2,977

 

56

 

6.75%, 3/15/18

 

55,566

 

5

 

6.75%, 7/15/18

 

4,989

 

20

 

6.75%, 9/15/18

 

19,488

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

24

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

 

Financial Services (continued)

 

 

 

$3

 

6.75%, 6/15/19

 

$3,000

 

18

 

6.85%, 4/15/16

 

17,926

 

19

 

6.85%, 7/15/16

 

18,926

 

37

 

6.85%, 5/15/18

 

36,639

 

2

 

6.875%, 8/15/16

 

1,991

 

18

 

6.875%, 7/15/18

 

17,751

 

30

 

6.90%, 6/15/17

 

29,922

 

50

 

6.90%, 7/15/18

 

49,974

 

5

 

6.90%, 8/15/18

 

4,987

 

8

 

6.95%, 6/15/17

 

7,984

 

18

 

7.00%, 1/15/17

 

17,833

 

28

 

7.00%, 6/15/17

 

27,708

 

60

 

7.00%, 7/15/17

 

59,299

 

129

 

7.00%, 2/15/18

 

127,924

 

1

 

7.00%, 3/15/18

 

994

 

42

 

7.00%, 8/15/18

 

41,442

 

223

 

7.05%, 3/15/18 (l)

 

220,243

 

4

 

7.05%, 4/15/18

 

3,991

 

80

 

7.15%, 9/15/18

 

79,372

 

15

 

7.20%, 10/15/17

 

14,973

 

109

 

7.25%, 9/15/17

 

108,350

 

181

 

7.25%, 1/15/18

 

179,039

 

293

 

7.25%, 4/15/18

 

292,049

 

5

 

7.25%, 8/15/18

 

4,971

 

91

 

7.25%, 9/15/18

 

90,339

 

199

 

7.30%, 1/15/18

 

197,654

 

57

 

7.35%, 4/15/18

 

56,564

 

2

 

7.375%, 4/15/18

 

1,973

 

55

 

7.40%, 12/15/17

 

54,589

 

12

 

7.50%, 6/15/16

 

11,897

 

7

 

7.50%, 11/15/16

 

7,011

 

51

 

7.50%, 8/15/17

 

50,912

 

18

 

7.50%, 11/15/17

 

17,923

 

22

 

7.50%, 12/15/17

 

21,988

 

4

 

7.55%, 5/15/16

 

3,998

 

12

 

7.75%, 10/15/17

 

12,001

 

46

 

8.00%, 11/15/17

 

45,702

 

2

 

8.125%, 11/15/17

 

1,987

 

326

 

9.00%, 7/15/20 (l)

 

325,878

 

2,700

 

C10 Capital SPV Ltd., 6.722%, 12/31/16 (b) (h) (l)

 

1,930,500

 

1,300

 

CIT Group, Inc., 5.25%, 4/1/14 (a) (d) (l)

 

1,361,750

 

 

 

Credit Agricole S.A. (h),

 

 

 

£450

 

5.136%, 2/24/16

 

528,543

 

£200

 

7.589%, 1/30/20

 

255,548

 

£200

 

8.125%, 10/26/19

 

285,585

 

 

 

Ford Motor Credit Co. LLC (l),

 

 

 

$400

 

8.00%, 6/1/14

 

441,945

 

3,850

 

8.00%, 12/15/16

 

4,612,392

 

1,000

 

HSBC Finance Corp., 6.676%, 1/15/21 (l)

 

1,161,832

 

3,000

 

International Lease Finance Corp., 6.625%, 11/15/13 (l)

 

3,150,000

 

£100

 

LBG Capital No.2 PLC, 15.00%, 12/21/19

 

210,732

 

$970

 

Odebrecht Drilling Norbe VIII/IX Ltd., 6.35%, 6/30/21 (a) (d) (l)

 

1,095,615

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

25

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

Financial Services (continued)

 

 

 

 

 

SLM Corp.,

 

 

 

$200

 

3.714%, 2/1/14 (i)

 

$200,366

 

1,000

 

8.00%, 3/25/20 (l)

 

1,160,000

 

1,250

 

8.45%, 6/15/18 (l)

 

1,470,610

 

1,000

 

Stone Street Trust, 5.902%, 12/15/15 (a) (d) (l)

 

1,052,386

 

 

 

 

 

22,241,888

 

Healthcare & Hospitals – 2.0%

 

 

 

2,586

 

Biomet, Inc., 11.625%, 10/15/17 (l)

 

2,757,322

 

Hotels/Gaming – 0.9%

 

 

 

1,100

 

MGM Resorts International, 9.00%, 3/15/20 (l)

 

1,233,375

 

Insurance – 6.2%

 

 

 

 

 

American International Group, Inc. (l),

 

 

 

4,565

 

5.60%, 10/18/16

 

5,206,296

 

1,350

 

6.25%, 5/1/36

 

1,735,731

 

1,100

 

6.40%, 12/15/20

 

1,342,373

 

 

 

 

 

8,284,400

 

Multi-Media – 1.2%

 

 

 

1,500

 

McClatchy Co., 11.50%, 2/15/17 (l)

 

1,620,000

 

Oil & Gas – 7.8%

 

 

 

2,900

 

BP Capital Markets PLC, 4.75%, 3/10/19 (l)

 

3,373,819

 

357

 

Global Geophysical Services, Inc., 10.50%, 5/1/17 (l)

 

342,720

 

1,500

 

NGPL PipeCo LLC, 9.625%, 6/1/19 (a) (b) (d) (l) (m)
(acquisition cost-$1,500,000; purchased 5/22/12)

 

1,713,750

 

 

 

OGX Austria GmbH (a) (d) (l),

 

 

 

1,000

 

8.375%, 4/1/22

 

872,500

 

1,200

 

8.50%, 6/1/18

 

1,086,000

 

3,000

 

Quicksilver Resources, Inc., 11.75%, 1/1/16 (l)

 

3,045,000

 

 

 

 

 

10,433,789

 

Real Estate Investment Trust – 1.8%

 

 

 

2,000

 

SL Green Realty Corp., 7.75%, 3/15/20 (l)

 

2,392,262

 

Retail – 2.1%

 

 

 

2,457

 

CVS Pass Through Trust, 5.88%, 1/10/28 (l)

 

2,766,686

 

Telecommunications – 1.4%

 

 

 

2,000

 

Wind Acquisition Finance S.A., 11.75%, 7/15/17 (a) (d) (l)

 

1,895,000

 

Transportation – 0.8%

 

 

 

1,075

 

Navios Maritime Holdings, Inc., 8.875%, 11/1/17 (l)

 

1,108,594

 

Utilities – 0.4%

 

 

 

500

 

Energy Future Holdings Corp., 10.00%, 1/15/20 (l)

 

553,750

 

Total Corporate Bonds & Notes (cost-$66,563,636)

 

75,098,594

 

 

 

 

 

 

 

U.S. GOVERNMENT AGENCY SECURITIES – 27.9%

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae,

 

 

 

102

 

4.50%, 9/1/25, MBS (l)

 

112,491

 

247

 

4.50%, 3/1/29, MBS (l)

 

267,887

 

1,056

 

4.50%, 10/1/33, MBS (l)

 

1,148,231

 

175

 

4.50%, 6/1/38, MBS (l)

 

189,031

 

277

 

4.50%, 9/1/39, MBS (l)

 

299,714

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

26

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

 

$237

 

4.50%, 2/1/40, MBS (l)

 

$257,573

 

409

 

4.50%, 9/1/40, MBS (l)

 

444,279

 

623

 

4.50%, 7/1/41, MBS (l)

 

678,021

 

21,592

 

5.50%, 6/1/38, MBS (l)

 

23,681,870

 

1,943

 

5.834%, 3/25/37, CMO, IO (b) (i)

 

287,442

 

1,860

 

5.934%, 11/25/39, CMO, IO (b) (i)

 

279,225

 

2,676

 

6.00%, 8/1/34, MBS (l)

 

3,019,938

 

967

 

6.00%, 12/1/34, MBS (l)

 

1,087,794

 

1,381

 

6.00%, 11/1/36, MBS (l)

 

1,552,959

 

306

 

6.00%, 12/1/37, MBS (l)

 

339,040

 

420

 

6.00%, 3/1/38, MBS (l)

 

463,919

 

1,851

 

6.164%, 3/25/37, CMO, IO (b) (i)

 

277,984

 

1,754

 

6.224%, 4/25/37, CMO, IO (i)

 

257,990

 

1,882

 

6.984%, 2/25/37, CMO, IO (b) (i)

 

315,370

 

179

 

7.00%, 12/25/23, CMO

 

218,552

 

113

 

7.50%, 6/1/32, MBS

 

128,512

 

15

 

7.80%, 6/25/26, ABS (i)

 

14,816

 

175

 

8.748%, 12/25/42, CMO (i)

 

203,784

 

494

 

13.894%, 8/25/22, CMO (b) (i)

 

674,948

 

 

 

Freddie Mac,

 

 

 

2,820

 

6.219%, 3/15/37, CMO, IO (b) (i)

 

401,148

 

1,747

 

6.349%, 9/15/36, CMO, IO (b) (i)

 

320,827

 

3,485

 

6.359%, 9/15/36, CMO, IO (i)

 

573,984

 

18

 

7.00%, 8/15/23, CMO

 

21,290

 

Total U.S. Government Agency Securities (cost-$36,649,174)

 

37,518,619

 

 

 

 

 

 

 

ASSET-BACKED SECURITIES – 8.9%

 

 

 

 

 

 

 

 

 

475

 

Aircraft Certificate Owner Trust, 6.455%, 9/20/22 (a) (d)

 

477,625

 

219

 

Ameriquest Mortgage Securities, Inc., 5.842%, 2/25/33 (i)

 

14,780

 

428

 

Bayview Financial Asset Trust, 1.167%, 12/25/39 (a) (d) (i)

 

316,296

 

933

 

Bear Stearns Asset Backed Securities Trust, 6.50%, 8/25/36

 

727,033

 

1,548

 

Bombardier Capital Mortgage Securitization Corp., 7.83%, 6/15/30 (i)

 

974,778

 

100

 

Carrington Mortgage Loan Trust, 0.367%, 8/25/36 (i)

 

41,159

 

253

 

Centex Home Equity, 0.667%, 6/25/35 (i)

 

181,639

 

 

 

Citigroup Mortgage Loan Trust, Inc.,

 

 

 

317

 

0.377%, 1/25/37 (i)

 

163,397

 

985

 

5.972%, 1/25/37

 

671,801

 

 

 

Countrywide Asset-Backed Certificates (i),

 

 

 

252

 

0.367%, 1/25/37

 

199,295

 

51

 

0.767%, 9/25/34 (a) (d)

 

39,725

 

225

 

Denver Arena Trust, 6.94%, 11/15/19 (a) (b) (d) (m)
(acquisition cost-$182,230; purchased 9/24/09)

 

229,744

 

333

 

EMC Mortgage Loan Trust, 0.687%, 5/25/39 (a) (d) (i)

 

292,249

 

 

 

Lehman XS Trust,

 

 

 

672

 

5.42%, 11/25/35

 

659,068

 

673

 

5.72%, 5/25/37

 

558,798

 

438

 

MASTR Asset-Backed Securities Trust, 5.233%, 11/25/35

 

439,315

 

202

 

Morgan Stanley ABS Capital I, 0.277%, 5/25/37 (i)

 

151,398

 

119

 

Quest Trust, 0.337%, 8/25/36 (a) (d) (i)

 

110,483

 

 

 

Residential Asset Mortgage Products Trust (i),

 

 

 

97

 

0.897%, 3/25/33

 

71,108

 

141

 

5.572%, 6/25/32

 

115,873

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

27

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

 

 

 

 

 

 

$123

 

Residential Funding Securities Trust, 0.667%, 6/25/33 (a) (d) (i)

 

$118,191

 

249

 

Soundview Home Equity Loan Trust, 0.277%, 11/25/36 (a) (d) (i)

 

80,487

 

17,796

 

South Coast Funding, 0.72%, 1/6/41 (a) (b) (d) (g) (i) (m)
(acquisition cost-$3,814,959; purchased 8/16/12)

 

3,914,525

 

 

 

Structured Asset Securities Corp. (i),

 

 

 

765

 

0.367%, 5/25/36

 

609,725

 

887

 

0.517%, 6/25/35

 

703,419

 

155

 

Washington Mutual Asset-Backed Certificates, 0.277%, 10/25/36 (i)

 

98,409

 

Total Asset-Backed Securities (cost-$10,812,260)

 

11,960,320

 

 

 

 

 

 

 

SENIOR LOANS (a) (c) – 4.8%

 

 

 

 

 

 

 

 

 

Financial Services – 3.7%

 

 

 

5,000

 

Springleaf Finance Corp., 5.50%, 5/10/17

 

4,905,000

 

Hotels/Gaming – 0.9%

 

 

 

1,200

 

Stockbridge SBE Holdings LLC, 13.00%, 5/2/17, Term B (b) (m)
(acquisition cost-$1,148,250; purchased 5/1/12-7/10/12)

 

1,200,000

 

Utilities – 0.2%

 

 

 

478

 

Texas Competitive Electric Holdings Co. LLC, 4.728%-4.938%, 10/10/17

 

330,698

 

Total Senior Loans (cost-$6,265,698)

 

6,435,698

 

 

 

 

 

 

 

MUNICIPAL BONDS – 1.1%

 

 

 

 

 

 

 

 

 

West Virginia – 1.1%

 

 

 

1,865

 

Tobacco Settlement Finance Auth. Rev., 7.467%, 6/1/47, Ser. A (cost-$1,755,666)

 

1,428,105

 

 

 

 

 

 

 

U.S. TREASURY OBLIGATIONS (e) (j) – 0.6%

 

 

 

 

 

 

 

 

 

845

 

U.S. Treasury Notes, 2.375%, 8/31/14 (cost-$877,774)

 

879,494

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK – 0.3%

 

 

 

 

 

 

 

 

 

Electric Utilities – 0.3%

 

 

 

8,600

 

PPL Corp., 9.50%, 7/1/13 (cost-$430,000)

 

460,530

 

 

 

 

 

 

 

WARRANTS – 0.0%

 

 

 

 

 

 

 

 

 

Construction & Engineering – 0.0%

 

 

 

1,975

 

Alion Science and Technology Corp., expires 11/01/14 (a) (d) (g) (k) (cost-$20)

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

28

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
Amount
(000s)

 

 

 

 

Value

 

SHORT-TERM INVESTMENTS – 14.4%

 

 

 

 

 

 

 

 

 

U.S. Treasury Obligations (j) (p) – 9.2%

 

 

 

$12,316

 

U.S. Treasury Bills, 0.137%-0.189%, 10/4/12-8/22/13 (cost-$12,301,028)

 

$12,303,160

 

Repurchase Agreements – 5.2%

 

 

 

4,900

 

Barclays Capital, Inc., dated 9/28/12, 0.25%, due 10/1/12, proceeds $4,900,102; collateralized by U.S. Treasury Inflation Indexed Notes, 0.125%, due 7/15/22, valued at $4,989,730 including accrued interest

 

4,900,000

 

2,137

 

State Street Bank & Trust Co., dated 9/28/12, 0.01%, due 10/1/12, proceeds $2,137,002; collateralized by U.S. Treasury Bonds, 4.50%, due 5/15/38, valued at $2,182,800 including accrued interest

 

2,137,000

 

Total Repurchase Agreements (cost-$7,037,000)

 

7,037,000

 

Total Short-Term Investments (cost-$19,338,028)

 

19,340,160

 

 

 

 

 

 

 

Contracts

 

 

 

 

 

 

 

 

 

 

 

 

OPTIONS PURCHASED (k) – 0.1%

 

 

 

 

 

 

 

 

 

Put Options – 0.1%

 

 

 

182

 

S&P 500 Index Futures (CME), strike price $1,375, expires 10/19/12 (cost-$182,468)

 

191,100

 

Total Investments, before options written (cost-$217,144,684) – 181.6%

 

244,341,595

 

 

 

 

 

 

 

OPTIONS WRITTEN (k) – (0.3)%

 

 

 

 

 

 

 

 

 

Call Options – (0.3)%

 

 

 

182

 

S&P 500 Index Futures (CME), strike price $1,450, expires 10/19/12 (premiums received-$932,282)

 

(441,350

)

Total Investments, net of options written (cost-$216,212,402) – 181.3%

 

243,900,245

 

Other liabilities in excess of other assets – (81.3)%

 

(109,354,920

)

Net Assets – 100%

 

$134,545,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

29

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited)

Principal
 Amount
    (000s)

 

 

 

Value

 

CORPORATE BONDS & NOTES – 68.3%

 

 

 

 

 

 

 

Airlines – 1.5%

 

 

 

 

 

American Airlines Pass Through Trust,

 

 

 

$4,789

 

10.18%, 1/2/13 (b) (f)

 

$4,884,502

 

858

 

10.375%, 1/2/21

 

930,753

 

11,721

 

United Air Lines Pass Through Trust, 10.40%, 5/1/18

 

13,509,026

 

 

 

 

 

19,324,281

 

Automotive – 3.6%

 

 

 

 

 

Ford Motor Co.,

 

 

 

5,000

 

7.125%, 11/15/25

 

5,675,000

 

5,900

 

7.50%, 8/1/26

 

6,829,250

 

24,131

 

7.70%, 5/15/97 (e)

 

26,664,755

 

5,000

 

9.215%, 9/15/21

 

6,375,000

 

 

 

 

 

45,544,005

 

Banking – 16.9%

 

 

 

5,000

 

AgFirst Farm Credit Bank, 7.30%, 10/29/12 (a) (b) (d) (h) (m)
(acquisition cost-$4,500,000; purchased 12/7/10)

 

4,998,300

 

£38,655

 

Barclays Bank PLC, 14.00%, 6/15/19 (h)

 

78,485,744

 

 

 

BPCE S.A. (h),

 

 

 

€20,000

 

9.00%, 3/17/15

 

25,508,237

 

€2,000

 

9.25%, 4/22/15

 

2,537,973

 

$5,000

 

12.50%, 9/30/19 (a) (d)

 

5,676,520

 

47,500

 

Lloyds TSB Bank PLC, 12.00%, 12/16/24 (a) (d) (h)

 

53,357,843

 

£21,600

 

Santander Finance Preferred S.A. Unipersonal, 11.30%, 7/27/14 (h)

 

35,148,239

 

 

 

Santander Issuances S.A. Unipersonal,

 

 

 

$2,000

 

5.911%, 6/20/16 (a) (b) (d) (m)
(acquisition cost-$1,872,600; purchased 5/3/12)

 

1,980,056

 

£6,300

 

7.30%, 7/27/19, (converts to FRN on 9/27/14)

 

9,583,188

 

 

 

 

 

217,276,100

 

Consumer Products – 0.5%

 

 

 

$6,300

 

Reynolds Group Issuer, Inc., 9.00%, 4/15/19

 

6,457,500

 

Electric – 0.0%

 

 

 

420

 

GenOn REMA LLC, 9.237%, 7/2/17

 

445,291

 

Entertainment – 0.0%

 

 

 

550

 

Speedway Motorsports, Inc., 8.75%, 6/1/16

 

597,437

 

Financial Services – 23.1%

 

 

 

25,710

 

AGFC Capital Trust I, 6.00%, 1/15/67, (converts to FRN on 1/15/17) (a) (d)

 

14,526,150

 

 

 

Ally Financial, Inc.,

 

 

 

97

 

5.85%, 5/15/13

 

96,995

 

280

 

5.90%, 1/15/19

 

271,846

 

82

 

5.90%, 2/15/19

 

80,099

 

1,256

 

6.00%, 2/15/19

 

1,233,327

 

1,534

 

6.00%, 3/15/19

 

1,503,038

 

120

 

6.00%, 4/15/19

 

118,854

 

50

 

6.00%, 9/15/19

 

49,519

 

652

 

6.10%, 9/15/19

 

644,133

 

241

 

6.125%, 10/15/19

 

236,539

 

1,620

 

6.15%, 3/15/16

 

1,594,093

 

2,351

 

6.20%, 3/15/16

 

2,320,303

 

127

 

6.20%, 4/15/19

 

126,039

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

30

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

Financial Services (continued)

 

 

 

$170

 

6.25%, 3/15/13

 

$171,033

 

20

 

6.25%, 2/15/16

 

19,847

 

30

 

6.25%, 12/15/18

 

29,746

 

622

 

6.25%, 1/15/19

 

610,596

 

199

 

6.25%, 4/15/19

 

196,032

 

7

 

6.25%, 5/15/19

 

6,917

 

385

 

6.25%, 7/15/19

 

382,581

 

25

 

6.30%, 3/15/13

 

25,039

 

2,680

 

6.30%, 3/15/16

 

2,642,319

 

543

 

6.35%, 2/15/16

 

541,366

 

643

 

6.35%, 4/15/16

 

639,442

 

82

 

6.35%, 4/15/19

 

81,612

 

141

 

6.35%, 7/15/19

 

136,006

 

112

 

6.40%, 3/15/13

 

111,739

 

2,641

 

6.40%, 3/15/16

 

2,619,209

 

250

 

6.40%, 12/15/18

 

244,711

 

361

 

6.40%, 11/15/19

 

357,141

 

209

 

6.45%, 2/15/13

 

211,090

 

239

 

6.50%, 2/15/13

 

239,640

 

160

 

6.50%, 4/15/13

 

162,274

 

3,069

 

6.50%, 2/15/16

 

3,064,384

 

1,155

 

6.50%, 3/15/16

 

1,145,467

 

2,036

 

6.50%, 9/15/16

 

2,006,085

 

453

 

6.50%, 6/15/18

 

450,393

 

164

 

6.50%, 12/15/18

 

162,176

 

456

 

6.50%, 5/15/19

 

451,015

 

40

 

6.50%, 2/15/20

 

39,717

 

1,160

 

6.55%, 10/15/16

 

1,136,433

 

112

 

6.55%, 12/15/19

 

111,262

 

1,093

 

6.60%, 8/15/16

 

1,087,975

 

282

 

6.60%, 5/15/18

 

279,321

 

753

 

6.60%, 6/15/19

 

750,612

 

969

 

6.65%, 4/15/16

 

964,793

 

649

 

6.65%, 8/15/16

 

638,301

 

1,437

 

6.65%, 10/15/18

 

1,429,454

 

48

 

6.70%, 5/15/14

 

47,742

 

571

 

6.70%, 8/15/16

 

564,287

 

65

 

6.70%, 6/15/18

 

64,543

 

10

 

6.70%, 11/15/18

 

9,961

 

412

 

6.70%, 6/15/19

 

410,789

 

20

 

6.70%, 12/15/19

 

19,856

 

45

 

6.75%, 4/15/13

 

45,768

 

1,391

 

6.75%, 7/15/16

 

1,375,390

 

2,916

 

6.75%, 8/15/16

 

2,894,995

 

261

 

6.75%, 9/15/16

 

259,193

 

113

 

6.75%, 7/15/18

 

112,750

 

41

 

6.75%, 9/15/18

 

39,950

 

330

 

6.75%, 10/15/18

 

329,372

 

6

 

6.75%, 11/15/18

 

5,925

 

1,121

 

6.75%, 5/15/19

 

1,113,067

 

2,137

 

6.75%, 6/15/19

 

2,130,697

 

255

 

6.80%, 4/15/13

 

252,765

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

31

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

Financial Services (continued)

 

 

 

$890

 

6.80%, 9/15/16

 

$884,751

 

10

 

6.80%, 9/15/18

 

9,986

 

13

 

6.80%, 10/15/18

 

12,974

 

2,861

 

6.85%, 4/15/16

 

2,846,440

 

646

 

6.85%, 5/15/16

 

643,198

 

526

 

6.85%, 7/15/16

 

523,951

 

679

 

6.875%, 8/15/16

 

675,837

 

169

 

6.875%, 7/15/18

 

166,665

 

50

 

6.90%, 6/15/17

 

49,870

 

52

 

6.90%, 7/15/18

 

51,973

 

141

 

6.90%, 8/15/18

 

140,620

 

30

 

6.95%, 6/15/17

 

29,941

 

593

 

7.00%, 1/15/13

 

597,831

 

873

 

7.00%, 5/15/16

 

872,906

 

120

 

7.00%, 6/15/16

 

117,689

 

638

 

7.00%, 7/15/16

 

633,530

 

1,106

 

7.00%, 8/15/16

 

1,101,016

 

256

 

7.00%, 11/15/16

 

250,125

 

100

 

7.00%, 12/15/16

 

98,204

 

71

 

7.00%, 6/15/17

 

70,260

 

1,445

 

7.00%, 2/15/18

 

1,436,371

 

905

 

7.00%, 5/15/18

 

892,541

 

1,466

 

7.00%, 8/15/18

 

1,446,533

 

85

 

7.00%, 9/15/18

 

84,201

 

168

 

7.00%, 6/15/22

 

166,491

 

183

 

7.05%, 3/15/18

 

180,704

 

332

 

7.05%, 4/15/18

 

331,226

 

3,012

 

7.10%, 1/15/13

 

3,022,755

 

253

 

7.125%, 10/15/17

 

251,347

 

545

 

7.15%, 6/15/16

 

540,430

 

1,087

 

7.15%, 9/15/18

 

1,078,467

 

43

 

7.20%, 10/15/17

 

42,851

 

2,153

 

7.25%, 6/15/16

 

2,132,327

 

1,225

 

7.25%, 9/15/17

 

1,227,911

 

324

 

7.25%, 1/15/18

 

320,489

 

238

 

7.25%, 4/15/18

 

237,136

 

273

 

7.25%, 8/15/18

 

269,750

 

180

 

7.25%, 9/15/18

 

178,692

 

80

 

7.30%, 1/15/18

 

79,522

 

235

 

7.35%, 1/15/17

 

231,321

 

22

 

7.35%, 4/15/18

 

21,832

 

356

 

7.375%, 11/15/16

 

355,293

 

10

 

7.375%, 4/15/18

 

9,863

 

210

 

7.50%, 10/15/12

 

209,989

 

1,037

 

7.50%, 5/15/16

 

1,036,889

 

784

 

7.50%, 6/15/16

 

777,242

 

20

 

7.50%, 11/15/16

 

20,031

 

1,260

 

7.50%, 8/15/17

 

1,257,835

 

12

 

7.50%, 11/15/17

 

11,949

 

1,505

 

7.50%, 12/15/17

 

1,503,755

 

1,324

 

7.55%, 5/15/16

 

1,323,276

 

79

 

8.00%, 10/15/17

 

78,997

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

32

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

Financial Services (continued)

 

 

 

$197

 

8.00%, 11/15/17

 

$195,723

 

20

 

8.125%, 11/15/17

 

19,873

 

25

 

8.25%, 3/15/17

 

25,023

 

35

 

8.65%, 8/15/15

 

35,172

 

121

 

9.00%, 7/15/20

 

120,955

 

5,100

 

BankAmerica Institutional Capital B, 7.70%, 12/31/26 (a) (b) (d) (m)
(acquisition cost-$4,094,076; purchased 1/6/09)

 

5,214,750

 

 

 

Credit Agricole S.A. (h),

 

 

 

£1,000

 

8.125%, 10/26/19

 

1,427,927

 

$3,100

 

8.375%, 10/13/19 (a) (d)

 

3,030,250

 

13,002

 

ILFC E-Capital Trust I, 4.52%, 12/21/65 (a) (d) (i)

 

8,906,370

 

28,430

 

ILFC E-Capital Trust II, 6.25%, 12/21/65, (converts to FRN on 12/21/15) (a) (d)

 

22,601,850

 

18,000

 

International Lease Finance Corp., 6.98%, 10/15/17 (g) (i)

 

17,320,835

 

 

 

LBG Capital No.1 PLC,

 

 

 

€1,885

 

7.375%, 3/12/20

 

2,246,943

 

£900

 

7.588%, 5/12/20

 

1,414,661

 

£3,400

 

7.869%, 8/25/20

 

5,377,327

 

$2,000

 

8.50%, 12/17/21 (a) (b) (d) (h) (m)
(acquisition cost-$1,275,174; purchased 10/22/09)

 

1,860,000

 

 

 

LBG Capital No.2 PLC,

 

 

 

£284

 

9.00%, 12/15/19

 

461,079

 

£5,500

 

9.125%, 7/15/20

 

8,985,309

 

£850

 

11.25%, 9/14/23

 

1,464,679

 

$6,300

 

National City Preferred Capital Trust I, 12.00%, 12/10/12 (h)

 

6,450,835

 

43,895

 

NSG Holdings LLC, 7.75%, 12/15/25 (a) (b) (d) (m)
(acquisition cost-$39,831,650; purchased 6/18/08-7/14/10)

 

45,870,275

 

8,800

 

Royal Bank of Scotland Group PLC, 7.648%, 9/30/31 (h)

 

8,624,000

 

2,000

 

Royal Bank of Scotland PLC, 9.50%, 3/16/22 (i)

 

2,245,724

 

 

 

SLM Corp.,

 

 

 

9,000

 

8.00%, 3/25/20

 

10,440,000

 

33,135

 

8.45%, 6/15/18

 

38,982,930

 

 

 

Springleaf Finance Corp.,

 

 

 

10,000

 

5.40%, 12/1/15

 

9,031,200

 

9,100

 

6.90%, 12/15/17

 

7,780,500

 

 

 

 

 

296,293,686

 

Hotels/Gaming – 0.2%

 

 

 

2,100

 

MGM Resorts International, 11.125%, 11/15/17

 

2,333,625

 

Insurance – 17.6%

 

 

 

 

 

American International Group, Inc.,

 

 

 

€8,200

 

8.00%, 5/22/68, (converts to FRN on 5/22/18)

 

11,830,316

 

$87,250

 

8.175%, 5/15/68, (converts to FRN on 5/15/38)

 

107,208,438

 

£6,650

 

8.625%, 5/22/68, (converts to FRN on 5/22/18) (a) (b) (d) (m)
(acquisition cost-$9,722,734; purchased 8/10/10-5/4/12)

 

12,456,562

 

£28,650

 

8.625%, 5/22/68, (converts to FRN on 5/22/18)

 

53,666,240

 

€23,300

 

Cloverie PLC for Zurich Insurance Co., Ltd., 12.00%, 7/15/14 (g) (h)

 

33,542,637

 

$2,000

 

Pacific Life Insurance Co., 7.90%, 12/30/23 (a) (d)

 

2,462,988

 

3,500

 

Transatlantic Holdings, Inc., 8.00%, 11/30/39

 

4,385,871

 

 

 

 

 

225,553,052

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

33

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

Oil & Gas – 0.1%

 

 

 

$1,000

 

Cie Generale de Geophysique-Veritas, 7.75%, 5/15/17

 

$1,040,625

 

Real Estate – 0.6%

 

 

 

5,041

 

Midwest Family Housing LLC, 6.631%, 1/1/51, (CIFG) (a) (b) (d) (g) (m)
(acquisition cost-$4,052,645; purchased 9/25/12)

 

4,059,606

 

4,807

 

Tri-Command Military Housing LLC, 5.383%, 2/15/48 (a) (b) (d) (m)
(acquisition cost-$4,055,093; purchased 9/19/12)

 

4,157,059

 

 

 

 

 

8,216,665

 

Telecommunications – 1.4%

 

 

 

1,122

 

CenturyLink, Inc., 7.20%, 12/1/25

 

1,258,580

 

15,200

 

Mountain States Telephone & Telegraph Co., 7.375%, 5/1/30

 

16,725,814

 

 

 

 

 

17,984,394

 

Utilities – 2.8%

 

 

 

7,300

 

AES Andres Dominicana Ltd., 9.50%, 11/12/20 (a) (d)

 

7,957,000

 

2,162

 

Ameren Energy Generating Co., 7.95%, 6/1/32

 

1,994,445

 

23,990

 

Dynegy Roseton LLC/Danskammer Pass Through Trust, 7.67%, 11/8/16, Ser. B (b) (f)

 

14,873,800

 

4,455

 

Energy Future Holdings Corp., 9.75%, 10/15/19

 

4,789,125

 

5,445

 

Energy Future Intermediate Holding Co. LLC, 9.75%, 10/15/19

 

5,853,375

 

 

 

 

 

35,467,745

 

Total Corporate Bonds & Notes (cost-$707,578,448)

 

876,534,406

 

 

 

 

 

MORTGAGE-BACKED SECURITIES – 12.5%

 

 

 

1,958

 

American Home Mortgage Assets LLC, 6.25%, 6/25/37, CMO

 

1,177,045

 

9,473

 

Banc of America Alternative Loan Trust, 6.00%, 3/25/36, CMO

 

6,820,669

 

67

 

Banc of America Mortgage Trust, 3.00%, 2/25/36, CMO (i)

 

53,429

 

 

 

BCAP LLC Trust, CMO (a) (d) (i),

 

 

 

4,700

 

5.491%, 3/26/37

 

632,150

 

2,679

 

11.084%, 6/26/36

 

494,365

 

 

 

Bear Stearns Adjustable Rate Mortgage Trust, CMO (i),

 

 

 

13,191

 

2.974%, 8/25/35

 

10,336,854

 

853

 

3.117%, 5/25/47

 

655,390

 

531

 

5.259%, 11/25/34

 

499,412

 

 

 

Chase Mortgage Finance Corp., CMO,

 

 

 

60

 

2.73%, 12/25/35 (i)

 

53,278

 

26

 

5.50%, 5/25/36

 

25,327

 

346

 

5.774%, 9/25/36 (i)

 

333,395

 

 

 

Citigroup Mortgage Loan Trust, Inc., CMO (i),

 

 

 

414

 

2.834%, 7/25/37

 

312,126

 

211

 

2.895%, 7/25/46

 

162,295

 

1,585

 

3.109%, 9/25/37

 

1,194,065

 

3,379

 

5.587%, 8/25/37

 

2,486,396

 

3,937

 

5.773%, 3/25/37

 

3,771,011

 

 

 

Countrywide Alternative Loan Trust, CMO,

 

 

 

710

 

2.897%, 2/25/37 (i)

 

541,919

 

4,361

 

4.371%, 7/25/46 (i)

 

2,911,611

 

1,543

 

5.268%, 7/25/21 (i)

 

1,444,977

 

682

 

5.50%, 3/25/36

 

459,460

 

1,784

 

6.00%, 2/25/35

 

1,594,780

 

535

 

6.00%, 11/25/36

 

382,274

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

34

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

$5,512

 

6.00%, 1/25/37

 

$4,397,327

 

8,649

 

6.00%, 2/25/37

 

6,556,831

 

303

 

6.50%, 6/25/36

 

203,077

 

 

 

Countrywide Home Loan Mortgage Pass Through Trust, CMO,

 

 

 

1,238

 

2.895%, 9/20/36 (i)

 

746,570

 

142

 

3.729%, 9/25/47 (i)

 

103,879

 

4,328

 

5.50%, 10/25/35

 

4,255,323

 

4,728

 

5.75%, 3/25/37

 

4,109,808

 

3,723

 

5.75%, 6/25/37

 

3,415,089

 

1,361

 

6.00%, 5/25/36

 

1,187,101

 

856

 

6.00%, 4/25/37

 

780,004

 

12,824

 

6.00%, 5/25/37

 

11,347,229

 

435

 

6.25%, 9/25/36

 

352,064

 

2,807

 

Credit Suisse Mortgage Capital Certificates, 6.00%, 2/25/37, CMO

 

2,377,358

 

177

 

First Horizon Asset Securities, Inc., 2.57%, 5/25/37, CMO (i)

 

124,333

 

 

 

GSR Mortgage Loan Trust, CMO,

 

 

 

1,142

 

5.50%, 5/25/36

 

1,011,698

 

1,279

 

6.00%, 7/25/37

 

1,193,076

 

 

 

Harborview Mortgage Loan Trust, CMO (i),

 

 

 

124

 

5.322%, 8/19/36

 

103,944

 

1,166

 

5.75%, 8/19/36

 

837,583

 

11,763

 

JPMorgan Alternative Loan Trust, 5.722%, 3/25/37, CMO (i)

 

7,965,301

 

 

 

JPMorgan Mortgage Trust, CMO,

 

 

 

734

 

5.618%, 1/25/37 (i)

 

647,039

 

986

 

5.75%, 1/25/36

 

919,744

 

492

 

Merrill Lynch Alternative Note Asset, 3.05%, 6/25/37, CMO (i)

 

298,911

 

316

 

Merrill Lynch Mortgage-Backed Securities Trust, 5.145%, 4/25/37, CMO (i)

 

242,121

 

 

 

Residential Asset Securitization Trust, CMO,

 

 

 

1,846

 

6.00%, 9/25/36

 

1,173,197

 

6,076

 

6.00%, 5/25/37

 

5,429,002

 

1,293

 

6.25%, 10/25/36

 

929,498

 

582

 

6.50%, 8/25/36

 

388,443

 

5,133

 

Residential Funding Mortgage Securities I Trust, 6.25%, 8/25/36, CMO

 

4,635,828

 

 

 

Sequoia Mortgage Trust, CMO (i),

 

 

 

148

 

2.743%, 1/20/47

 

122,835

 

1,899

 

5.316%, 7/20/37

 

1,601,173

 

 

 

Structured Adjustable Rate Mortgage Loan Trust, CMO (i),

 

 

 

1,676

 

5.189%, 4/25/47

 

1,305,068

 

425

 

5.392%, 1/25/36

 

301,957

 

10,057

 

5.526%, 7/25/36

 

6,547,960

 

 

 

Suntrust Adjustable Rate Mortgage Loan Trust, CMO (i),

 

 

 

2,618

 

5.488%, 4/25/37

 

2,261,995

 

2,083

 

5.809%, 2/25/37

 

1,709,705

 

 

 

WaMu Mortgage Pass Through Certificates, CMO (i),

 

 

 

266

 

2.14%, 1/25/37

 

201,647

 

2,078

 

2.228%, 11/25/36

 

1,658,037

 

169

 

2.314%, 12/25/36

 

135,015

 

225

 

2.422%, 4/25/37

 

168,082

 

476

 

2.534%, 2/25/37

 

348,700

 

1,096

 

2.704%, 2/25/37

 

857,220

 

227

 

2.757%, 3/25/37

 

203,149

 

420

 

4.764%, 5/25/37

 

319,195

 

571

 

5.098%, 2/25/37

 

462,194

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

35

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 

 

 

 

$12,692

 

5.187%, 7/25/37

 

$11,724,690

 

 

 

Washington Mutual Alternative Mortgage Pass Through Certificates, CMO,

 

 

 

11,086

 

6.00%, 6/25/37

 

9,014,184

 

6,950

 

6.50%, 3/25/36

 

4,140,828

 

18,598

 

Wells Fargo Alternative Loan Trust, 6.25%, 7/25/37, CMO

 

15,576,943

 

241

 

Wells Fargo Mortgage-Backed Securities Trust, 3.04%, 9/25/36, CMO (i)

 

199,213

 

Total Mortgage-Backed Securities (cost-$147,424,028)

 

160,933,396

 

 

 

 

 

 

 

Shares 

 

 

 

 

 

 

 

 

 

 

PREFERRED STOCK – 6.6%

 

 

 

 

 

 

 

Banking – 4.0%

 

 

 

758,600

 

CoBank Acb, 11.00%, 7/1/13, Ser. C (a) (b) (d) (h) (m)
(acquisition cost-$42,106,600; purchased 8/23/10-2/1/11)

 

39,447,200

 

10,000

 

Farm Credit Bank, 10.00%, 12/15/20, Ser. 1 (h)

 

11,712,500

 

 

 

 

 

51,159,700

 

Financial Services – 1.2%

 

 

 

 

 

Ally Financial, Inc. (h),

 

 

 

3,000

 

7.00%, 10/29/12 (a) (d)

 

2,806,594

 

150,000

 

8.50%, 5/15/16, Ser. A (o)

 

3,669,000

 

150,000

 

Bank of America Corp., 8.20%, 5/1/13, Ser. H (h)

 

3,898,500

 

200,000

 

GMAC Capital Trust I, 8.125%, 2/15/40, Ser. 2 (o)

 

5,022,000

 

7

 

Union Planters Preferred Funding Corp., 7.75%, 7/15/23 (a) (b) (d) (h) (m)
(acquisition cost-$630,000; purchased 3/3/11)

 

710,500

 

 

 

 

 

16,106,594

 

Real Estate Investment Trust – 1.4%

 

 

 

14,470

 

Sovereign Real Estate Investment Trust, 12.00%, 5/16/20 (a) (b) (d) (h) (m)
(acquisition cost-$15,965,050; purchased 12/3/09-6/6/12)

 

17,506,718

 

Total Preferred Stock (cost-$83,519,150)

 

84,773,012

 

 

 

 

 

 Principal   Amount       (000s)

 

 

 

 

 

 

 

 

 

 

 

 

ASSET-BACKED SECURITIES – 4.4%

 

 

 

 

 

 

 

 

 

 

 

Countrywide Asset-Backed Certificates,

 

 

 

$3,000

 

5.595%, 8/25/35

 

2,074,001

 

13,700

 

5.884%, 7/25/36

 

6,842,027

 

34,069

 

Greenpoint Manufactured Housing, 8.45%, 6/20/31 (i)

 

32,641,969

 

 

 

GSAA Trust,

 

 

 

652

 

0.517%, 3/25/37 (i)

 

381,256

 

5,534

 

5.80%, 3/25/37

 

3,337,986

 

17,691

 

Indymac Residential Asset-Backed Trust, 0.377%, 7/25/37 (i)

 

9,551,059

 

2,558

 

Morgan Stanley Mortgage Loan Trust, 6.25%, 7/25/47 (i)

 

1,835,933

 

463

 

Washington Mutual Asset-Backed Certificates, 0.367%, 5/25/36 (i)

 

243,572

 

Total Asset-Backed Securities (cost-$59,284,652)

 

56,907,803

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

36

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO High Income Fund Schedule of Investments

September 30, 2012 (unaudited) (continued)

Principal
 Amount
    (000s)

 

 

 

Value

 

 MUNICIPAL BONDS – 1.3%

 

 

 

 

 

 

 

 

 

 Louisiana – 0.4%

 

 

 

$3,850

 

New Orleans, Public Improvements, GO, 8.55%, 12/1/34, Ser. A

 

$4,342,608

 

 Texas – 0.9%

 

 

 

9,995

 

North Texas Tollway Auth. Rev., 8.91%, 2/1/30

 

11,671,961

 

 Total Municipal Bonds (cost-$14,353,819)

 

16,014,569

 

 

 

 

 

 

 

Shares 

 

 

 

 

 

 

 

 

 

 

 CONVERTIBLE PREFERRED STOCK – 0.1%

 

 

 

 

 

 

 

 Financial Services – 0.1%

 

 

 

1,000

 

Wells Fargo & Co., 7.50%, 3/15/13, Ser. L (h) (cost-$1,235,000)

 

1,238,000

 

 

 

 

 

 

 

 Principal   Amount       (000s)

 

 

 

 

 

 

 

 

 

 

 

 

 SHORT-TERM INVESTMENTS – 6.8%

 

 

 

 

 

 

 

 U.S. Treasury Obligations (j) (p) – 0.5%

 

 

 

 

 

U.S. Treasury Bills,

 

 

 

$5,920

 

0.043%-0.095%, 10/4/12-11/15/12 (cost-$5,919,845)

 

5,919,845

 

 Repurchase Agreements – 6.3%

 

 

 

8,300

 

Bank of America Corp., dated 9/28/12, 0.22%, due 10/1/12, proceeds $8,300,152; collateralized by U.S. Treasury Notes, 0.875%, due 2/28/17, valued at $8,468,875 including accrued interest

 

8,300,000

 

4,100

 

Goldman Sachs & Co., dated 9/28/12, 0.21%, due 10/1/12, proceeds $4,100,072; collateralized by Freddie Mac, 4.50%, due 10/1/41, valued at $4,225,923 including accrued interest

 

4,100,000

 

2,200

 

JPMorgan Securities, Inc., dated 9/28/12, 0.28%, due 10/1/12, proceeds $2,200,051; collateralized by Freddie Mac, 0.50%, due 9/25/15, valued at $2,253,945 including accrued interest

 

2,200,000

 

65,500

 

Royal Bank of Scotland, dated 9/28/12, 0.26%, due 10/1/12 proceeds $65,501,419; collateralized by U.S. Treasury Notes, 1.00%, due 5/15/14, valued at $66,860,086 including accrued interest

 

65,500,000

 

819

 

State Street Bank & Trust Co., dated 9/28/12, 0.01%, due 10/1/12, proceeds $819,001; collateralized by U.S. Treasury Bonds, 4.50%, due 5/15/38, valued at $836,400 including accrued interest

 

819,000

 

 Total Repurchase Agreements (cost-$80,919,000)

 

80,919,000

 

 Total Short-Term Investments (cost-$86,838,845)

 

86,838,845

 

 Total Investments (cost-$1,100,233,942) – 100.0%

 

$1,283,240,031

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

37

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Schedules of Investments

September 30, 2012 (unaudited)

 

 

(a)

 

Private Placement–Restricted as to resale and may not have a readily available market. Securities with an aggregate value of $614,383,381, $50,732,047 and $260,713,106, representing 48.6% and 37.7% of net assets and 20.3% of total investments in Dynamic Income, Global StocksPLUS® and High Income, respectively.

(b)

Illiquid.

(c)

These securities generally pay interest at rates which are periodically pre-determined by reference to a base lending rate plus a premium. These base lending rates are generally either the lending rate offered by one or more major European banks, such as the “LIBOR” or the prime rate offered by one or more major United States banks, or the certificate of deposit rate. These securities are generally considered to be restricted as the Funds are ordinarily contractually obligated to receive approval from the agent bank and/or borrower prior to disposition. Remaining maturities of senior loans may be less than the stated maturities shown as a result of contractual or optional payments by the borrower. Such prepayments cannot be predicted with certainty. The interest rate disclosed reflects the rate in effect on September 30, 2012.

(d)

144A–Exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, typically only to qualified institutional buyers. Unless otherwise indicated, these securities are not considered to be illiquid.

(e)

Delayed-delivery. To be delivered after September 30, 2012.

(f)

In default.

(g)

Fair-Valued–Securities with an aggregate value of $167,098,732, $4,893,449 and $54,923,078, representing 13.2% and 3.6% of net assets and 4.3% of total investments in Dynamic Income, Global StocksPLUS® and High Income, respectively. See Note 1(a) and Note 1(b) in the Notes to Financial Statements.

(h)

Perpetual maturity. The date shown is the next call date. For Corporate Bonds & Notes, the interest rate is fixed until the first call date and variable thereafter.

(i)

Variable or Floating Rate Security–Security with an interest rate that changes periodically. The interest rate disclosed reflects the rate in effect on September 30, 2012.

(j)

All or partial amount segregated for the benefit of the counterparty as collateral for derivatives.

(k)

Non-income producing.

(l)

All or partial amount transferred for the benefit of the counterparty as collateral for reverse repurchase agreements.

(m)

Restricted. The aggregate acquisition cost of such securities is $89,023,570, $11,109,380 and $128,105,622 for Dynamic Income, Global StocksPLUS® and High Income, respectively. The aggregate market value is $91,935,670, $11,939,865 and $138,261,026, representing 7.3% and 8.9% of net assets and 10.8% of total investments in Dynamic Income, Global StocksPLUS® and High Income, respectively.

(n)

Security is subject to a forbearance agreement entered into by Dynamic Income 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.

(o)

Dividend rate is fixed until the first call date and variable thereafter.

(p)

Rates reflect the effective yields at purchase date.

 

 

 

 

Glossary:

 

ABS

-

Asset-Backed Securities

£

-

British Pound

CIFG

-

insured by CDC IXIS Financial Guaranty Services, Inc.

CME

-

Chicago Mercantile Exchange

CMO

-

Collateralized Mortgage Obligation

-

Euro

FRN

-

Floating Rate Note

GO

-

General Obligation Bond

IO

-

Interest Only

LIBOR

-

London Inter-Bank Offered Rate

MBIA

-

insured by Municipal Bond Investors Assurance

MBS

-

Mortgage-Backed Securities

PIK

-

Payment-in-Kind

PO

-

Principal Only

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

38

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Statements of Assets and Liabilities

September 30, 2012 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dynamic
Income

 

 

Global
StocksPLUS
®

 

 

High Income

 

Assets:

 

 

 

 

 

 

 

 

 

Investments, at value (cost-$2,237,807,782, $217,144,684 and $1,100,233,942, respectively)

 

$2,401,283,009

 

 

$244,341,595

 

 

$1,283,240,031

 

Cash

 

 

 

2,755

 

 

2,145,513

 

Foreign currency, at value (cost-$0, $91,336 and $4,850, respectively)

 

 

 

90,747

 

 

4,329

 

Receivable for investments sold

 

100,602,315

 

 

795,425

 

 

40,440,749

 

Interest and dividends receivable

 

20,414,886

 

 

2,373,175

 

 

25,101,286

 

Swap premiums paid

 

1,762,500

 

 

155,594

 

 

1,606,217

 

Unrealized appreciation of OTC swaps

 

1,615,306

 

 

5,660,934

 

 

6,602,747

 

Unrealized appreciation of forward foreign currency contracts

 

84,064

 

 

91,059

 

 

1,238,335

 

Tax reclaims receivable

 

4,918

 

 

 

 

 

Receivable for principal paydowns

 

3,017

 

 

 

 

 

Receivable for terminated swaps

 

145

 

 

 

 

 

Deposits with brokers for futures contracts collateral

 

 

 

2,193,000

 

 

 

Deposits with brokers for swaps collateral

 

 

 

1,135,000

 

 

7,001,000

 

Receivable from broker

 

 

 

124,328

 

 

506,487

 

Receivable for variation margin on centrally cleared swaps

 

 

 

103,252

 

 

381,850

 

Deposits with brokers for forward foreign currency contracts collateral

 

 

 

 

 

7,354,000

 

Prepaid expenses

 

20,733

 

 

12,608

 

 

97,699

 

Total Assets

 

2,525,790,893

 

 

257,079,472

 

 

1,375,720,243

 

Liabilities:

 

 

 

 

 

 

 

 

 

Payable for reverse repurchase agreements

 

1,167,197,914

 

 

108,524,220

 

 

 

Swap premiums received

 

52,321,118

 

 

3,764,494

 

 

727,365

 

Payable to brokers for cash collateral received

 

17,590,000

 

 

4,470,000

 

 

6,490,000

 

Payable for investments purchased

 

10,303,070

 

 

 

 

36,820,504

 

Dividends payable to common and preferred shareholders

 

7,985,279

 

 

1,888,612

 

 

14,929,808

 

Investment management fees payable

 

2,182,825

 

 

202,520

 

 

747,389

 

Unrealized depreciation of forward foreign currency contracts

 

1,549,177

 

 

255,054

 

 

5,805,326

 

Interest payable for reverse repurchase agreements

 

1,297,619

 

 

78,370

 

 

 

Payable for terminated swaps

 

666,838

 

 

3,216

 

 

 

Unrealized depreciation of OTC swaps

 

317,786

 

 

1,655,197

 

 

 

Payable to custodian for overdrafts

 

153,649

 

 

 

 

 

Interest payable for cash collateral received

 

4,225

 

 

541

 

 

267

 

Options written, at value (premiums received-$932,282 for Global StocksPLUS®)

 

 

 

441,350

 

 

 

Payable for sale-buyback financing transactions

 

 

 

795,839

 

 

 

Payable to broker

 

 

 

2,006

 

 

 

Payable for variation margin on futures contracts

 

 

 

346,035

 

 

 

Accrued expenses and other liabilities

 

231,489

 

 

106,693

 

 

399,855

 

Total Liabilities

 

1,261,800,989

 

 

122,534,147

 

 

65,920,514

 

Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 11,680 shares issued and outstanding for High Income)

 

 

 

 

 

292,000,000

 

Net Assets Applicable to Common Shareholders

 

$1,263,989,904

 

 

$134,545,325

 

 

$1,017,799,729

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

See accompanying Notes to Financial Statements. | 9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

39

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Statements of Assets and Liabilities

September 30, 2012 (unaudited) (continued)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dynamic
Income

 

 

Global
StocksPLUS
®

 

 

High Income

 

Composition of Net Assets Applicable to Common Shareholders:

 

 

 

 

 

 

 

 

 

Common Shares:

 

 

 

 

 

 

 

 

 

Par value ($0.00001 per share)

 

$451

 

 

$103

 

 

$1,224

 

Paid-in-capital in excess of par

 

1,075,933,244

 

 

231,234,222

 

 

1,704,177,390

 

Undistributed (dividends in excess of) net investment income

 

15,533,928

 

 

(4,939,415

)

 

(53,870,038

)

Accumulated net realized gain (loss)

 

11,634,199

 

 

(145,506,938

)

 

(818,534,482

)

Net unrealized appreciation of investments, futures contracts, options written, swaps and foreign currency transactions

 

160,888,082

 

 

53,757,353

 

 

186,025,635

 

Net Assets Applicable to Common Shareholders

 

$1,263,989,904

 

 

$134,545,325

 

 

$1,017,799,729

 

Common Shares Issued and Outstanding

 

45,114,568

 

 

10,300,581

 

 

122,448,027

 

Net Asset Value Per Common Share

 

$28.02

 

 

$13.06

 

 

$8.31

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

40

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Statements of Operations

Period or Six Months ended September 30, 2012 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dynamic
Income*

 

 

Global
StocksPLUS
®

 

 

High Income

 

Investment Income:

 

 

 

 

 

 

 

 

 

Interest

 

$48,002,002

 

 

$8,797,754

 

 

$53,588,303

 

Dividends

 

165,922

 

 

20,425

 

 

3,868,725

 

Facility and other fee income

 

135,825

 

 

324

 

 

814,151

 

Total Investment Income

 

48,303,749

 

 

8,818,503

 

 

58,271,179

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

Investment management fees

 

6,499,075

 

 

1,193,509

 

 

4,415,137

 

Interest expense

 

2,019,415

 

 

388,649

 

 

142,899

 

Custodian and accounting agent fees

 

92,567

 

 

46,109

 

 

171,495

 

Shareholder communications

 

61,849

 

 

36,035

 

 

132,546

 

Trustees’ fees and expenses

 

52,183

 

 

6,295

 

 

53,400

 

Legal fees

 

40,644

 

 

5,437

 

 

37,234

 

Audit and tax services

 

35,217

 

 

60,730

 

 

69,348

 

Transfer agent fees

 

12,695

 

 

20,042

 

 

21,159

 

Insurance expense

 

3,493

 

 

2,688

 

 

13,587

 

Auction agent fees and commissions

 

 

 

 

 

144,350

 

New York Stock Exchange listing fees

 

 

 

12,973

 

 

59,137

 

Miscellaneous expense

 

10,603

 

 

996

 

 

13,679

 

Total Expenses

 

8,827,741

 

 

1,773,463

 

 

5,273,971

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

39,476,008

 

 

7,045,040

 

 

52,997,208

 

 

 

 

 

 

 

 

 

 

 

Realized and Change in Unrealized Gain (Loss):

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

Investments

 

1,680,035

 

 

(1,130,248

)

 

52,399,147

 

Futures contracts

 

 

 

4,113,723

 

 

 

Options written

 

 

 

(92,918

)

 

 

Swaps

 

13,612,431

 

 

(22,925,621

)

 

3,000,311

 

Foreign currency transactions

 

(3,658,267

)

 

96,261

 

 

2,141,905

 

Net change in unrealized appreciation/depreciation of: Investments

 

163,475,227

 

 

9,672,468

 

 

24,861,083

 

Futures contracts

 

 

 

(2,224,670

)

 

 

Options written

 

 

 

364,697

 

 

 

Swaps

 

1,297,520

 

 

21,157,695

 

 

5,797,127

 

Foreign currency transactions

 

(3,884,665

)

 

(80,220

)

 

118,295

 

Net realized and change in unrealized gain on investments, futures contracts, options written, swaps and foreign currency transactions

 

172,522,281

 

 

8,951,167

 

 

88,317,868

 

Net Increase in Net Assets Resulting from Investment Operations

 

211,998,289

 

 

15,996,207

 

 

141,315,076

 

Dividends on Preferred Shares from Net Investment Income

 

 

 

 

 

(220,861

)

 

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Investment Operations

 

$211,998,289

 

 

$15,996,207

 

 

$141,094,215

 

 

*  For the period May 30, 2012 (commencement of operations) through September 30, 2012.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 See accompanying Notes to Financial Statements. | 9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

41

 


 

PIMCO Dynamic Income Fund
Statements of Changes in Net Assets

 

 

 

 

 

 

For the period
May 30, 2012*
through
September 30, 2012
(unaudited)

 

Investment Operations:

 

 

 

Net investment income

 

$39,476,008

 

Net realized gain on investments, swaps and foreign currency transactions

 

11,634,199

 

Net unrealized appreciation of investments, swaps and foreign currency transactions

 

160,888,082

 

Net increase in net assets resulting from investment operations

 

211,998,289

 

 

 

 

 

Dividends to Shareholders from Net Investment Income

 

(23,942,080

)

 

 

 

 

Share Transactions:

 

 

 

Net proceeds from the sale of shares

 

1,075,768,154

 

Offering costs charged to paid-in capital in excess of par

 

(1,290,630

)

Reinvestment of dividends

 

1,356,159

 

Net increase from share transactions

 

1,075,833,683

 

Total increase in net assets

 

1,263,889,892

 

 

 

 

 

Net Assets:

 

 

 

Beginning of period

 

100,012

 

End of period (including undistributed net investment income of $15,533,928)

 

$1,263,989,904

 

 

 

 

 

Shares Issued and Reinvested:

 

 

 

Issued

 

45,058,352

 

Issued in reinvestment of dividends

 

52,027

 

Net Increase

 

45,110,379

 

 

*  Commencement of operations.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

42

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 

 

 


 

PIMCO Global StocksPLUS® & Income Fund
Statements of Changes in Net Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months
ended
September 30, 2012
(unaudited)

 

Year ended
March 31, 2012

 

Investment Operations:

 

 

 

 

 

Net investment income

 

$7,045,040

 

$16,410,385

 

Net realized gain (loss) on investments, futures contracts, options written, swaps and foreign currency transactions

 

(19,938,803)

 

4,024,404

 

Net change in unrealized appreciation/depreciation of investments, futures contracts, options written, swaps, securities sold short and foreign currency transactions

 

28,889,970

 

(22,224,245)

 

Net increase (decrease) in net assets resulting from investment operations

 

15,996,207

 

(1,789,456)

 

 

 

 

 

 

 

Dividends to Shareholders from Net Investment Income

 

(11,311,550)

 

(22,450,402)

 

 

 

 

 

 

 

Share Transactions:

 

 

 

 

 

Reinvestment of dividends

 

908,900

 

2,310,225

 

Total increase (decrease) in net assets

 

5,593,557

 

(21,929,633)

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

Beginning of period

 

128,951,768

 

150,881,401

 

End of period (including dividends in excess of net investment income of $(4,939,415) and $(672,905), respectively)

 

$134,545,325

 

$128,951,768

 

 

 

 

 

 

 

Shares Issued in Reinvestment of Dividends

 

45,530

 

113,364

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

See accompanying Notes to Financial Statements. | 9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

43

 


 

PIMCO High Income Fund
Statements of Changes in Net Assets Applicable to Common Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months
ended
September 30, 2012
(unaudited)

 

Year ended
March 31, 2012

 

Investment Operations:

 

 

 

 

 

Net investment income

 

$52,997,208

 

$116,574,442

 

Net realized gain (loss) on investments, futures contracts, swaps and foreign currency transactions

 

57,541,363

 

(99,822,004)

 

Net change in unrealized appreciation/depreciation of investments, futures contracts, swaps and foreign currency transactions

 

30,776,505

 

(30,566,495)

 

Net increase (decrease) in net assets resulting from investment operations

 

141,315,076

 

(13,814,057)

 

 

 

 

 

 

 

Dividends on Preferred Shares from Net Investment Income

 

(220,861)

 

(286,376)

 

Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations

 

141,094,215

 

(14,100,433)

 

 

 

 

 

 

 

Dividends and Distributions to Common Shareholders from:

 

 

 

 

 

Net investment income

 

(89,408,881)

 

(169,036,361)

 

Return of capital

 

 

(8,629,563)

 

Total dividends and distributions to common shareholders

 

(89,408,881)

 

(177,665,924)

 

 

 

 

 

 

 

Common Share Transactions:

 

 

 

 

 

Reinvestment of dividends

 

5,617,966

 

14,076,761

 

Total increase (decrease) in net assets applicable to common shareholders

 

57,303,300

 

(177,689,596)

 

 

 

 

 

 

 

Net Assets Applicable to Common Shareholders:

 

 

 

 

 

Beginning of period

 

960,496,429

 

1,138,186,025

 

End of period (including dividends in excess of net investment income of $(53,870,038) and $(17,237,504), respectively)

 

$1,017,799,729

 

$960,496,429

 

 

 

 

 

 

 

Common Shares Issued in Reinvestment of Dividends

 

441,066

 

1,148,069

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

44

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund
Statements of Cash Flows

Period or Six Months ended September 30, 2012 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

Dynamic
Income**

 

Global
StocksPLUS
®

Increase (Decrease) in Cash and Foreign Currency from:

 

 

 

 

 

 

 

 

 

Cash Flows provided by (used for) Operating Activities:

 

 

 

 

Net increase in net assets resulting from investment operations

 

$211,998,289

 

$15,996,207

 

 

 

 

 

Adjustments to Reconcile Net Increase in Net Assets Resulting from Investment Operations to Net Cash provided by (used for) Operating Activities:

 

 

 

 

Purchases of long-term investments

 

(2,195,319,869)

 

(23,985,413)

Proceeds from sales of long-term investments

 

140,397,573

 

30,936,540

Purchases of short-term portfolio investments, net

 

(176,826,747)

 

(609,587)

Net change in unrealized appreciation/depreciation of investments, futures contracts, options written, swaps and foreign currency transactions

 

(160,888,082)

 

(28,889,970)

Net realized (gain) loss on investments, futures contracts, options written, swaps and foreign currency transactions

 

(11,634,199)

 

19,938,803

Net amortization/accretion on investments

 

(4,378,704)

 

(655,907)

(Increase) decrease in receivable for investments sold

 

(100,602,315)

 

3,388,856

Increase in interest and dividends receivable

 

(20,414,886)

 

(123,832)

Increase in tax reclaims receivable

 

(4,918)

 

(Increase) decrease in receivable for principal paydowns

 

(3,017)

 

1,046

Proceeds from futures contracts transactions

 

 

2,470,338

Increase in deposits with brokers for futures contracts collateral

 

 

(1,871,000)

Decrease in deposits with brokers for swaps collateral

 

 

660,000

Decrease in receivable from broker

 

 

88,476

(Increase) decrease in prepaid expenses

 

(20,733)

 

8,549

Increase (decrease) in payable for investments purchased

 

10,303,070

 

(2,301,587)

Increase (decrease) in payable to brokers for cash collateral received

 

17,590,000

 

(950,000)

Net cash provided by (used for) swap transactions

 

64,837,742

 

(1,055,179)

Net cash provided by (used for) foreign currency transactions

 

(6,077,819)

 

125,810

Increase in investment management fees payable

 

2,182,825

 

51

Increase (decrease) in interest payable for reverse repurchase agreements

 

1,297,619

 

(6,981)

Increase in interest payable for cash collateral received

 

4,225

 

541

Increase (decrease) in accrued expenses and other liabilities

 

231,489

 

(48,024)

Net cash provided by (used for) operating activities*

 

(2,227,328,457)

 

13,117,737

 

 

 

 

 

Cash Flows provided by (used for) Financing Activities:

 

 

 

 

Increase (decrease) in payable for reverse repurchase agreements

 

1,167,197,914

 

(3,352,264)

Cash dividends paid (excluding reinvestment of dividends of $1,356,159 and $908,900, respectively)

 

(14,600,642)

 

(10,394,302)

Net proceeds from shares sold

 

1,075,768,154

 

Offering costs paid

 

(1,290,630)

 

Increase (decrease) in payable to custodian for overdrafts

 

153,649

 

(73,823)

Payable for sale-buyback financing activity

 

 

795,839

Net cash provided by (used for) financing activities

 

2,227,228,445

 

(13,024,550)

Net increase (decrease) in cash

 

(100,012)

 

93,187

Cash and foreign currency, at beginning of period

 

100,012

 

315

Cash and foreign currency, at end of period

 

$0

 

$93,502

 

*                 Included in operating expenses is cash paid by Dynamic Income and Global StocksPLUS® for interest primarily related to participation in reverse repurchase agreement transactions of $717,571 and $395,089, respectively.

 

**          Commencement of operations was May 30, 2012.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

See accompanying Notes to Financial Statements. | 9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

45

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

1. Organization and Significant Accounting Policies

PIMCO Dynamic Income Fund (“Dynamic Income”), PIMCO Global StocksPLUS® & Income Fund (“Global StocksPLUS®”) and PIMCO High Income Fund (‘‘High Income’’), each a “Fund” and collectively the “Funds”, were organized as Massachusetts business trusts on January 19, 2011, February 16, 2005 and February 18, 2003, respectively. Prior to commencing operations on May 30, 2012, May 31, 2005 and April 30, 2003, respectively, the Funds had no operations other than matters relating to their organization as non-diversified (for Dynamic Income and Global StocksPLUS®) and diversified (for High Income), closed-end management investment companies registered under the Investment Company Act of 1940, as amended, and the rules and regulations thereunder, and the sale and issuance of 4,189 shares at an aggregate price of $100,012 for Dynamic Income to Allianz Asset Management of America L.P. (“AAM”). Allianz Global Investors Fund Management LLC (the “Investment Manager”) and Pacific Investment Management Company LLC (“PIMCO” or the “Sub-Adviser”) serve as the Funds’ investment manager and Sub-Adviser, respectively, and are indirect, wholly-owned subsidiaries of AAM. AAM is an indirect, wholly-owned subsidiary of Allianz SE, a publicly traded European insurance and financial services company. Each Fund has authorized an unlimited amount of common shares with $0.00001 par value.

 

Dynamic Income issued 40,600,000 shares of common stock in its initial public offering. An additional 4,458,352 shares were issued in connection with the underwriter’s over-allotment option. These shares were all issued at $25.00 per share before an underwriting discount of $1.125 per share. Offering costs of $1,290,630 (representing approximately $0.03 per share) were offset against the proceeds of the offering and over-allotment option and have been charged to paid-in capital in excess of par. The Sub-Adviser has paid all organizational costs of approximately $25,000.

 

Dynamic Income’s primary investment objective is to seek current income. Capital appreciation is a secondary objective. The Fund seeks to achieve its investment objectives to produce total return for shareholders by utilizing a dynamic asset allocation strategy among multiple fixed-income sectors, including below investment grade (commonly referred to as “high yield” securities or “junk bonds”), mortgage-related and any other asset-backed securities, government and sovereign debt, corporate debt (including fixed and floating-rate bonds, bank loans and convertible securities), taxable municipal bonds and other income producing securities of U.S. and foreign issuers, including emerging market issuers. As a matter of fundamental policy, the Fund will normally invest at least 25% of its total assets in privately-issued (commonly known as “non-agency”) mortgage-related securities. The Fund utilizes leverage as part of its investment strategy.

 

Global StocksPLUS®’s investment objective is to seek total return comprised of current income, current gains and long-term capital appreciation. Global StocksPLUS®’s normally attempts to achieve its investment objective through holdings of stocks and/or through the use of index and other derivative instruments that have economic characteristics similar to U.S. and non-U.S. stocks. The Fund’s investments in index and other derivative instruments are backed by an actively-managed, debt portfolio that will have a low-to-intermediate average portfolio duration, ranging from one year to a duration that is two years above the duration of the Barclays Capital U.S. Aggregate Bond Index, although it may be longer or shorter at any time or from time to time based on the Sub-Adviser’s forecast for interest rates and other factors. The Fund may invest without limit in securities that are rated below investment grade and may invest without limit in securities of any rating. The Fund currently intends to gain substantially all of its equity index exposure by investing in equity index derivatives based on the Standard & Poor’s 500 Composite Stock Price Index (“S&P 500 Index”) and the Morgan Stanley Capital International® Europe, Australasia and Far East Index (the “MSCI EAFE Index”). The Fund also employs a strategy of writing (selling) call options on U.S. equity indexes, seeking to generate gains from option premiums which may limit the Fund’s gains from increases in the S&P 500 Index.

 

High Income’s primary investment objective is to seek high current income. Capital appreciation is a secondary objective. The Fund normally attempts to achieve these objectives by investing at least 50% of its net assets in debt securities that are, at the time of purchase, rated below investment grade, and which may be represented by forward contracts or derivatives such as options, futures contracts or swap agreements.

 

There can be no assurance that the Funds will meet their stated objectives.

 

The preparation of the Funds’ financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in each Fund’s financial statements. Actual results could differ from those estimates.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

46

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

 

In the normal course of business, the Funds enter into contracts that contain a variety of representations that provide general indemnifications. 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.

 

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update No. 2011-11, “Disclosures About Offsetting Assets and Liabilities”, which requires enhanced disclosures that will enable users to evaluate the effect or potential effect of netting arrangements on an entity’s financial position, including the effect or potential effect of rights of setoff associated with certain financial instruments and derivative instruments. The amendments are effective for fiscal years beginning on or after January 1, 2013. The Funds’ management is currently evaluating the effect that the guidance may have on the Funds’ financial statements.

 

The following is a summary of significant accounting policies consistently followed by the Funds:

 

(a) Valuation of Investments

Portfolio securities and other financial instruments for which market quotations are readily available are stated at market value. Market value is generally determined on the basis of last reported sales prices, or if no sales are reported, on the basis of quotes obtained from a quotation reporting system, established market makers, or independent pricing services. The Funds’ investments are valued daily using prices supplied by an independent pricing service or dealer quotations, or by using the last sale price on the exchange that is the primary market for such securities, or the mean between the last quoted bid and ask price. Independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Centrally cleared swaps and exchange traded futures are valued at the price determined by the relevant exchange. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily until settlement at the forward settlement date.

 

The Board of Trustees (the “Board”) has adopted procedures for valuing portfolio securities and other financial derivative instruments in circumstances where market quotes are not readily available, and has delegated the responsibility for applying the valuation methods to the Investment Manager and the Sub-Adviser, an affiliate of the Investment Manager. The Funds’ Valuation Committee was established by the Board to oversee the implementation of the Funds’ valuation methods and to make fair value determinations on behalf of the Board, as instructed. The Sub-Adviser monitors the continued appropriateness of methods applied and determines if adjustments should be made in light of market changes, events affecting the issuer, or other factors. If the Sub-Adviser determines that a valuation method may no longer be appropriate, another valuation method may be selected, or the Valuation Committee will be convened to consider the matter and take any appropriate action in accordance with procedures set forth by the Board. The Board shall review the appropriateness of the valuation methods and these methods may be amended or supplemented from time to time by the Valuation Committee.

 

Benchmark pricing procedures are used as the basis for setting the base price of a fixed-income security and for subsequently adjusting 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 Committee. The validity of the fair value is reviewed by the Sub-Adviser on a periodic basis and may be amended as the availability of market data indicates a material change.

 

Short-term securities maturing in 60 days or less are valued at amortized cost, if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term to maturity exceeded 60 days.

 

Investments initially 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 net asset value (“NAV”) of each Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

47


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

 

United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the New York Stock Exchange (“NYSE”) is closed.

 

The prices used by the Funds to value securities may differ from the value that would be realized if the securities were sold, and these differences could be material to the Funds’ financial statements. Each Fund’s NAV is normally determined as of the close of regular trading (normally, 4:00 p.m. Eastern time) on the NYSE on each day the NYSE is open for business.

 

(b) Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants. The three levels of the fair value hierarchy are described below:

 

·                  Level 1 – quoted prices in active markets for identical investments that the Funds have the ability to access

·                  Level 2 – valuations based on other significant observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates or other market corroborated inputs

·                  Level 3 – valuations based on significant unobservable inputs (including the Sub-Adviser’s or Valuation Committee’s own assumptions and single broker quotes in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following are certain inputs and techniques that the Funds generally use to evaluate how to classify each major category of assets and liabilities for Level 2 and Level 3, in accordance with Generally Accepted Accounting Principles (“GAAP”).

 

Equity Securities (Common and Preferred Stock) — Equity securities traded in inactive markets are valued using inputs which include broker-dealer quotes, recently executed transactions adjusted for changes in the benchmark index, or evaluated price quotes received from independent pricing services that take into account the integrity of the market sector and issuer, the individual characteristics of the security, and information received from broker-dealers and other market sources pertaining to the issuer or security. To the extent that these inputs are observable, the values of equity securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

U.S. Treasury Obligations — U.S. Treasury obligations are valued by independent pricing services based on pricing models that evaluate the mean between the most recently quoted bid and ask price. The models also take into consideration data received from active market makers and broker-dealers, yield curves, and the spread over comparable U.S. Treasury issues. The spreads change daily in response to market conditions and are generally obtained from the new issue market and broker-dealer sources. To the extent that these inputs are observable, the values of U.S. Treasury obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Government Sponsored Enterprise and Mortgage-Backed Securities — Government sponsored enterprise and mortgage-backed securities are valued by independent pricing services using pricing models based on inputs that include issuer type, coupon, cash flows, mortgage prepayment projection tables and Adjustable Rate Mortgage evaluations that incorporate index data, periodic and life caps, the next coupon reset date, and the convertibility of the bond. To the extent that these inputs are observable, the values of government sponsored enterprise and mortgage-backed securities are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Municipal Bonds — Municipal bonds are valued by independent pricing services based on pricing models that take into account, among other factors, information received from market makers and broker-dealers, current trades, bid-want lists, offerings, market movements, the callability of the bond, state of issuance, benchmark yield curves, and bond insurance. To the extent that these inputs are observable, the values of municipal bonds are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

48

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

 

Corporate Bonds & Notes — Corporate bonds & notes are generally comprised of two main categories: investment grade bonds and high yield bonds. Investment grade bonds are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, live trading levels, recently executed transactions in securities of the issuer or comparable issuers, and option adjusted spread models that include base curve and spread curve inputs. Adjustments to individual bonds can be applied to recognize trading differences compared to other bonds issued by the same issuer. High yield bonds are valued by independent pricing services based primarily on broker-dealer quotations from relevant market makers and recently executed transactions in securities of the issuer or comparable issuers. The broker-dealer quotations received are supported by credit analysis of the issuer that takes into consideration credit quality assessments, daily trading activity, and the activity of the underlying equities, listed bonds and sector-specific trends. To the extent that these inputs are observable, the values of corporate bonds & notes are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Asset-Backed Securities and Collateralized Mortgage Obligations — Asset-backed securities and collateralized mortgage obligations are valued by independent pricing services using pricing models based on a security’s average life volatility. The models also take into account tranche characteristics such as coupon, average life, collateral types, ratings, the issuer and tranche type, underlying collateral and performance of the collateral, and discount margin for certain floating rate issues. To the extent that these inputs are observable, the values of asset-backed securities and collateralized mortgage obligations are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Option Contracts — Option contracts traded over-the-counter (“OTC”) are valued by independent pricing services based on pricing models that incorporate various inputs such as interest rates, credit spreads, currency exchange rates and volatility measurements for in-the-money, at-the-money, and out-of-the-money contracts based on a given strike price. To the extent that these inputs are observable, the values of OTC option contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Forward Foreign Currency Contracts — Forward foreign currency contracts are valued by independent pricing services using various inputs and techniques, which include broker-dealer quotations, actual trading information and foreign currency exchange rates gathered from leading market makers and foreign currency exchange trading centers throughout the world. To the extent that these inputs are observable, the values of forward foreign currency contracts are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Interest Rate Swaps — OTC interest rate swaps are valued by independent pricing services using pricing models that are based on real-time intraday snapshots of relevant interest rate curves that are built using the most actively traded securities for a given maturity. The pricing models also incorporate cash and money market rates. In addition, market data pertaining to interest rate swaps is monitored regularly to ensure that interest rates are properly depicting the current market rate. Centrally cleared interest rate swaps are valued at the price determined by the relevant exchange. To the extent that these inputs are observable, the values of interest rate swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Credit Default Swaps — OTC credit default swaps are valued by independent pricing services using pricing models that take into account, among other factors, information received from market makers and broker-dealers, default probabilities from index specific credit spread curves, recovery rates, and cash flows. To the extent that these inputs are observable, the values of OTC credit default swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Total Return Swaps — OTC total return swaps are valued by independent pricing services using pricing models that take into account among other factors, index spread curves, nominal values, modified duration values and cash flows. To the extent that these inputs are observable, the values of OTC total return swaps are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

Senior Loans — Senior Loans are valued by independent pricing services based on the average of quoted prices received from multiple dealers or valued relative to other benchmark securities when broker-dealer quotes are unavailable. To

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

49


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

1. Organization and Significant Accounting Policies (continued)

 

the extent that these inputs are observable, the values of Senior Loans are categorized as Level 2. To the extent that these inputs are unobservable, the values are categorized as Level 3.

 

The valuation techniques used by the Funds to measure fair value during the fiscal period or six months ended September 30, 2012 were intended to maximize the use of observable inputs and to minimize the use of unobservable inputs.

 

The Funds’ policy is to recognize transfers between levels at the end of the reporting period. An investment asset’s or liability’s level within the fair value hierarchy is based on the lowest level input, individually or in aggregate, that is significant to the fair value measurement. The objective of fair value measurement remains the same even when there is a significant decrease in the volume and level of activity for an asset or liability and regardless of the valuation techniques used. Assets categorized as Level 1 or 2 as of period end may have been transferred between Levels 1 and 2 since the prior period due to changes in the valuation method utilized in valuing the investments.

 

A summary of the inputs used at September 30, 2012 in valuing Dynamic Income’s assets and liabilities is listed below (refer to the Schedules of Investments and Notes 5(c) and 5(f) for more detailed information on Investments in Securities and Other Financial Instruments):

 

Dynamic Income:

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

 

$1,210,508,568

 

$123,076,874

 

$1,333,585,442

 

Corporate Bonds & Notes

 

 

437,352,665

 

 

437,352,665

 

Asset-Backed Securities

 

 

230,334,749

 

44,021,858

 

274,356,607

 

Senior Loans:

 

 

 

 

 

 

 

 

 

Hotels/Gaming

 

 

 

15,200,000

 

15,200,000

 

All Other

 

 

75,818,873

 

 

75,818,873

 

U.S. Government Agency Securities

 

 

64,722,077

 

 

64,722,077

 

Convertible Preferred Stock

 

$12,224,990

 

11,187,710

 

 

23,412,700

 

Short-Term Investments

 

 

176,834,645

 

 

176,834,645

 

Total Investments in Securities – Assets

 

$12,224,990

 

$2,206,759,287

 

$182,298,732

 

$2,401,283,009

 

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$1,615,306

 

 

$1,615,306

 

Foreign Exchange Contracts

 

 

84,064

 

 

84,064

 

Total Other Financial Instruments* – Assets

 

 

$1,699,370

 

 

$1,699,370

 

Other Financial Instruments* – Liabilities

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$(317,786

)

 

$(317,786

)

Foreign Exchange Contracts

 

 

(1,549,177

)

 

(1,549,177

)

Total Other Financial Instruments* – Liabilities

 

 

$(1,866,963

)

 

$(1,866,963

)

Total Investments

 

$12,224,990

 

$2,206,591,694

 

$182,298,732

 

$2,401,115,416

 

 

At September 30, 2012, there were no transfers between of Levels 1 and 2.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

50

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for Dynamic Income for the period ended September 30, 2012, was as follows:

 

Dynamic Income:

 

 

 

Beginning
Balance
5/30/12****

 

Purchases

 

Sales

 

Accrued
Discounts
(Premiums)

 

Net
Realized
Gain (Loss)

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3

 

Transfers
out of
Level 3

 

Ending
Balance
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

 

$116,326,446

 

$(1,570,535

)

$81,163

 

$427,616

 

$7,812,184

 

 

 

$123,076,874

 

Asset-Backed Securities

 

 

42,902,163

 

 

188,968

 

 

930,727

 

 

 

44,021,858

 

Senior Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotels/Gaming

 

 

14,963,250

 

 

13,427

 

 

223,323

 

 

 

15,200,000

 

Total Investments

 

 

$174,191,859

 

$(1,570,535

)

$283,558

 

$427,616

 

$8,966,234

 

 

 

$182,298,732

 

 

The following table presents additional information about valuation techniques and inputs used for investments in Dynamic Income that are measured at fair value and categorized within Level 3 at September 30, 2012:

 

Dynamic Income:

 

 

 

Ending Balance
at 9/30/12

 

Valuation
Techniques Used

 

Unobservable
Inputs

 

Input
Values

 

Investment in Securities – Assets

 

 

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

$123,076,874

 

Benchmark Pricing

 

Security Price Reset

 

$1.61 – $139.85

 

Asset-Backed Securities

 

44,021,858

 

Benchmark Pricing

 

Security Price Reset

 

$22.00

 

Senior Loans

 

15,200,000

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$100.00

 

Total Investments

 

$182,298,732

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

51

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

A summary of the inputs used at September 30, 2012 in valuing Global StocksPLUS®’s assets and liabilities is listed below (refer to the Schedules of Investments and Notes 5(a), 5(c), 5(d), 5(e) and 5(f) for more detailed information on Investments in Securities and Other Financial Instruments):

 

Global StocksPLUS®:

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

 

$88,991,051

 

$2,037,904

 

$91,028,955

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

Airlines

 

 

1,826,998

 

2,819,568

 

4,646,566

 

All Other

 

 

70,452,028

 

 

70,452,028

 

U.S. Government Agency Securities

 

 

37,518,619

 

 

37,518,619

 

Asset-Backed Securities

 

 

7,568,170

 

4,392,150

 

11,960,320

 

Senior Loans:

 

 

 

 

 

 

 

 

 

Hotels/Gaming

 

 

 

1,200,000

 

1,200,000

 

All Other

 

 

5,235,698

 

 

5,235,698

 

Municipal Bonds

 

 

1,428,105

 

 

1,428,105

 

U.S. Treasury Obligations

 

 

879,494

 

 

879,494

 

Convertible Preferred Stock

 

$460,530

 

 

 

460,530

 

Warrants

 

 

 

20

 

20

 

Short-Term Investments

 

 

19,340,160

 

 

19,340,160

 

Options Purchased:

 

 

 

 

 

 

 

 

 

Market Price

 

 

191,100

 

 

191,100

 

Total Investments in Securities – Assets

 

$460,530

 

$233,431,423

 

$10,449,642

 

$244,341,595

 

Investments in Securities – Liabilities

 

 

 

 

 

 

 

 

 

Options Written, at value:

 

 

 

 

 

 

 

 

 

Market Price

 

 

$(441,350)

 

 

$(441,350

)

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$2,529,689

 

$176,862

 

$2,706,551

 

Foreign Exchange Contracts

 

 

91,059

 

 

91,059

 

Interest Rate Contracts

 

 

23,160,165

 

 

23,160,165

 

Market Price

 

 

2,604,517

 

 

2,604,517

 

Total Other Financial Instruments* – Assets

 

 

$28,385,430

 

$176,862

 

$28,562,292

 

Other Financial Instruments* – Liabilities

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$(1,655,197)

 

 

$(1,655,197

)

Foreign Exchange Contracts

 

 

(255,054)

 

 

(255,054

)

Market Price

 

$(588,364)

 

 

 

(588,364

)

Total Other Financial Instruments* – Liabilities

 

$(588,364)

 

$(1,910,251)

 

 

$(2,498,615

)

Total Investments

 

$(127,834)

 

$259,465,252

 

$10,626,504

 

$269,963,922

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

52

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

At September 30, 2012, there were no transfers between of Levels 1 and 2.

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for Global StocksPLUS® for the six months ended September 30, 2012, was as follows:

 

Global StocksPLUS®:

 

 

 

Beginning
Balance
3/31/12

 

Purchases

 

Sales

 

Accrued
Discounts
(Premiums)

 

Net
Realized
Gain (Loss)

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3**

 

Transfers
out of
Level 3***

 

Ending
Balance
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

$3,275,263

 

$37,866

 

$(39,264

)

$2,144

 

$12,850

 

$172,164

 

$978,904

 

$(2,402,023

)

$2,037,904

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

3,754,974

 

 

(205,771

)

(11,915

)

14,013

 

(12,235

)

 

(719,498

)

2,819,568

 

Asset-Backed Securities

 

539,206

 

3,814,959

 

(72,168

)

16,775

 

(96

)

93,474

 

 

 

4,392,150

 

Senior Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hotels/Gaming

 

 

1,148,250

 

 

3,929

 

 

47,821

 

 

 

1,200,000

 

Warrants

 

 

20

 

 

 

 

 

 

 

20

 

Total Investments in Securities – Assets

 

$7,569,443

 

$5,001,095

 

$(317,203

)

$10,933

 

$26,767

 

$301,224

 

$978,904

 

$(3,121,521

)

$10,449,642

 

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Contracts

 

$1,071,165

 

 

 

 

 

$(549,131

)

 

$(345,172

)

$176,862

 

Other Financial Instruments* – Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Contracts

 

$(441,831

)

 

 

 

 

$(5,636

)

 

$447,467

 

 

Total Investments

 

$8,198,777

 

$5,001,095

 

$(317,203

)

$10,933

 

$26,767

 

$(253,543

)

$978,904

 

$(3,019,226

)

$10,626,504

 

 

The following table presents additional information about valuation techniques and inputs used for investments in Global StocksPLUS® that are measured at fair value and categorized within Level 3 at September 30, 2012:

 

Global StocksPLUS®:

 

 

 

Ending Balance
at 9/30/12

 

Valuation
Techniques Used

 

Unobservable
Inputs

 

Input
Values

 

Investments in Securities – Assets

 

 

 

 

 

 

 

Mortgage-Backed Securities

 

$978,904

 

 

Benchmark Pricing

 

Security Price Reset

 

$101.50

 

 

 

1,059,000

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$88.25

 

Corporate Bonds & Notes

 

2,819,568

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$104.05 – $115.25

 

Asset-Backed Securities

 

477,625

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$100.20

 

 

 

3,914,525

 

 

Benchmarked Pricing

 

Security Price Reset

 

$22.00

 

Senior Loans

 

1,200,000

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$100.00

 

Warrants

 

20

 

 

Portfolio Manager’s Recommendation

 

Stale Pricing

 

$0.01

 

Total Investments in Securities – Assets

 

$10,449,642

 

 

 

 

 

 

 

 

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

Credit Contracts

 

$176,862

 

 

Third-Party Pricing

 

Single Broker Quote

 

$18.12

 

Total Investments

 

$10,626,504

 

 

 

 

 

 

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

53

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

A summary of the inputs used at September 30, 2012 in valuing High Income’s assets and liabilities is listed below (refer to the Schedules of Investments and Notes 5(c), 5(d) and 5(f) for more detailed information on Investments in Securities and Other Financial Instruments):

 

High Income:

 

 

 

Level 1 –
Quoted Prices

 

Level 2 –
Other Significant
Observable
Inputs

 

Level 3 –
Significant
Unobservable
Inputs

 

Value at
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

Airlines

 

 

 

$19,324,281

 

$19,324,281

 

Electric

 

 

 

445,291

 

445,291

 

Financial Services

 

 

$278,972,851

 

17,320,835

 

296,293,686

 

Insurance

 

 

192,010,415

 

33,542,637

 

225,553,052

 

Real Estate Investment Trust

 

 

4,157,059

 

4,059,606

 

8,216,665

 

Utilities

 

 

20,593,945

 

14,873,800

 

35,467,745

 

All Other

 

 

291,233,686

 

 

291,233,686

 

Mortgage-Backed Securities

 

 

159,806,881

 

1,126,515

 

160,933,396

 

Preferred Stock:

 

 

 

 

 

 

 

 

 

Financial Services

 

$12,589,500

 

3,517,094

 

 

16,106,594

 

All Other

 

 

68,666,418

 

 

68,666,418

 

Asset-Backed Securities

 

 

56,907,803

 

 

56,907,803

 

Municipal Bonds

 

 

16,014,569

 

 

16,014,569

 

Convertible Preferred Stock

 

1,238,000

 

 

 

1,238,000

 

Short-Term Investments

 

 

86,838,845

 

 

86,838,845

 

Total Investments in Securities – Assets

 

$13,827,500

 

$1,178,719,566

 

$90,692,965

 

$1,283,240,031

 

Other Financial Instruments* – Assets

 

 

 

 

 

 

 

 

 

Credit Contracts

 

 

$175,471

 

 

$175,471

 

Foreign Exchange Contracts

 

 

1,238,335

 

 

1,238,335

 

Interest Rate Contracts

 

 

19,362,901

 

 

19,362,901

 

Total Other Financial Instruments* – Assets

 

 

$20,776,707

 

 

$20,776,707

 

Other Financial Instruments* – Liabilities

 

 

 

 

 

 

 

 

 

Foreign Exchange Contracts

 

 

$(5,805,326)

 

 

$(5,805,326

)

Interest Rate Contracts

 

 

(12,098,769)

 

 

(12,098,769

)

Total Other Financial Instruments* – Liabilities

 

 

$(17,904,095)

 

 

$(17,904,095

)

Total Investments

 

$13,827,500

 

$1,181,592,178

 

$90,692,965

 

$1,286,112,643

 

 

At September 30, 2012, there were no transfers between of Levels 1 and 2.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

54

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

A roll forward of fair value measurements using significant unobservable inputs (Level 3) for High Income for the six months ended September 30, 2012, was as follows:

 

High Income:

 

 

 

Beginning
Balance
3/31/12

 

Purchases

 

Sales

 

Accrued
Discounts
(Premiums)

 

Net
Realized
Gain (Loss)

 

Net Change
in Unrealized
Appreciation/
Depreciation

 

Transfers
into
Level 3

 

Transfers
out of
Level 3**

 

Ending
Balance
9/30/12

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airlines

 

$18,661,529

 

 

$(681,313

)

$(66,191

)

 

$(59,263

)

 

$1,469,519

 

 

 

$19,324,281

 

Electric

 

465,903

 

 

(55,325

)

(1,197

)

 

(1,832

)

 

37,742

 

 

 

445,291

 

Financial Services

 

16,460,217

 

 

 

323,785

 

 

 

 

536,833

 

 

 

17,320,835

 

Insurance

 

31,438,829

 

 

 

 

 

 

 

2,103,808

 

 

 

33,542,637

 

Real Estate Investment Trust

 

 

$4,052,645

 

 

 

 

 

 

6,961

 

 

 

4,059,606

 

Utilities

 

14,873,800

 

 

 

 

 

 

 

 

 

 

14,873,800

 

Mortgage-Backed Securities

 

739,670

 

 

(605,469

)

134,360

 

 

507,677

 

 

350,277

 

 

 

1,126,515

 

Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Services

 

563,937

 

 

 

 

 

 

 

146,563

 

 

$(710,500

)

 

Total Investments

 

$83,203,885

 

$4,052,645

 

$(1,342,107

)

$390,757

 

 

$446,582

 

 

$4,651,703

 

 

$(710,500

)

$90,692,965

 

 

The following table presents additional information about valuation techniques and inputs used for investments in High Income that are measured at fair value and categorized within Level 3 at September 30, 2012:

 

High Income:

 

 

 

Ending Balance
at 9/30/12

 

Valuation
Techniques Used

 

Unobservable
Inputs

 

Input
Values

 

Investments in Securities – Assets

 

 

 

 

 

 

 

 

 

Corporate Bonds & Notes

 

$54,923,078

 

 

Benchmark Pricing

 

Security Price Reset

 

$80.53 – $96.23;

 

 

 

 

 

 

 

 

 

 

EUR 112.03

 

Corporate Bonds & Notes

 

34,643,372

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$62.00 – $115.25

 

Mortgage-Backed Securities

 

1,126,515

 

 

Third-Party Pricing Vendor

 

Single Broker Quote

 

$13.45 – $18.45

 

Total Investments

 

$90,692,965

 

 

 

 

 

 

 

 

 

*

Other financial instruments are derivatives not reflected in the Schedules of Investments, such as futures contracts, swap agreements and forward foreign currency contracts, which are valued at the unrealized appreciation (depreciation) of the instrument.

**

Transferred out of Level 2 into Level 3 because single broker quote provided by third-party pricing vendor was unobservable.

***

Transferred out of Level 3 into Level 2 because evaluated price from a third-party pricing vendor was available.

****

Commencement of operations.

 

The net change in unrealized appreciation/depreciation of Level 3 investments and other financial instruments, which Global StocksPLUS® held at September 30, 2012, was $86,220 and $(50,587), respectively. The net change in unrealized appreciation/depreciation of Level 3 investments which Dynamic Income and High Income held at September 30, 2012, was $8,966,234 and $4,508,043, respectively.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

55

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

Net realized gain (loss) and net change in unrealized appreciation/depreciation are reflected on the Statements of Operations.

 

(c) Investment Transactions and Investment Income

Investment transactions are accounted for on the trade date. Securities purchased and sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date. Realized gains and losses on investments are determined on an identified cost basis. Interest income adjusted for the accretion of discount and amortization of premiums is recorded on an accrual basis. Discounts or premiums on debt securities purchased are accreted or amortized, respectively, to interest income over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Facility fees and other fees received after settlement date relating to senior loans, consent fees relating to corporate actions and commitment fees received relating to unfunded purchase commitments are recorded as other fee income upon receipt. Paydown gains and losses are netted and recorded as interest income on the Statements of Operations.

 

(d) Federal Income Taxes

The Funds intend to distribute all of their taxable income and to comply with the other requirements of Subchapter M of the U.S. Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, no provision for U.S. federal income taxes is required.

 

Accounting for uncertainty in income taxes establishes for all entities, including pass-through entities such as the Funds, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Funds’ management has determined that its evaluation has resulted in no material impact to the Funds’ financial statements at September 30, 2012. The federal tax returns for the prior three years for Global StocksPLUS® and High Income remain subject to examination by the Internal Revenue Service.

 

(e) Dividends and Distributions — Common Shares

Dynamic Income intends to declare dividends and distributions from net investment income and gains from the sale of portfolio securities and other sources to its shareholders monthly. Global StocksPLUS® and High Income declare dividends from net investment income to common shareholders monthly. Distributions of net realized capital gains, if any, are paid at least annually. The Funds record dividends and distributions on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains is determined in accordance with federal income tax regulations, which may differ from GAAP. These “book-tax” differences are considered either temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal income tax treatment; temporary differences do not require reclassification. To the extent dividends and/or distributions exceed current and accumulated earnings and profits for federal income tax purposes, they are reported as dividends and/or distributions to shareholders from return of capital.

 

(f) Foreign Currency Translation

The Funds’ accounting records are maintained in U.S. dollars as follows: (1) the foreign currency market value of investments and other assets and liabilities denominated in foreign currencies are translated at the prevailing exchange rate at the end of the period; and (2) purchases and sales, income and expenses are translated at the prevailing exchange rate on the respective dates of such transactions. The resulting net foreign currency gain (loss) is included in the Funds’ Statements of Operations.

 

The Funds do not generally isolate that portion of the results of operations arising as a result of changes in the foreign currency exchange rates from the fluctuations arising from changes in the market prices of securities. Accordingly, such foreign currency gain (loss) is included in net realized and unrealized gain (loss) on investments. However, the Funds do isolate the effect of fluctuations in foreign currency exchange rates when determining the gain (loss) upon the sale or maturity of foreign currency denominated debt obligations pursuant to U.S. federal income tax regulations; such amount is categorized as foreign currency gain (loss) for both financial reporting and income tax reporting purposes.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

56

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

(g) Senior Loans

The Funds may purchase assignments of, and participations in, Senior Loans originated, negotiated and structured by a U.S. or foreign commercial bank, insurance company, finance company or other financial institution (the “Agent”) for a lending syndicate of financial institutions (the “Lender”). When purchasing an assignment, the Funds succeed to all the rights and obligations under the loan agreement with the same rights and obligations as the assigning Lender. Assignments may, however, be arranged through private negotiations between potential assignees and potential assignors, and the rights and obligations acquired by the purchaser of an assignment may differ from, and be more limited than, those held by the assigning Lender.

 

(h) Repurchase Agreements

The Funds enter into transactions with their custodian bank or securities brokerage firms whereby they purchase securities under agreements to resell such securities at an agreed upon price and date (“repurchase agreements”). The Funds, through their custodian, take possession of securities collateralizing the repurchase agreement. Such agreements are carried at the contract amount in the financial statements, which is considered to represent fair-value. Collateral pledged (the securities received), which consists primarily of U.S. government obligations and asset-backed securities, is held by the custodian bank for the benefit of the Funds until maturity of the repurchase agreement. Provisions of the repurchase agreements and the procedures adopted by the Funds require that the market value of the collateral, including accrued interest thereon, be sufficient in the event of default by the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Funds may be delayed or limited.

 

(i) Reverse Repurchase Agreements

In a reverse repurchase agreement, the Funds sell securities to a bank or broker-dealer and agree to repurchase the securities at a mutually agreed upon date and price. Generally, the effect of such a transaction is that the Funds can recover and reinvest all or most of the cash invested in portfolio securities involved during the term of the reverse repurchase agreement and still be entitled to the returns associated with those portfolio securities. Such transactions are advantageous if the interest cost to the Funds of the reverse repurchase transaction is less than the returns they obtain on investments purchased with the cash. To the extent the Funds do not cover their positions in reverse repurchase agreements (by segregating liquid assets at least equal in amount to the forward purchase commitment), the Funds’ uncovered obligations under the agreements will be subject to the Funds’ limitations on borrowings. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Funds are obligated to repurchase under the agreements may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the agreement may be restricted pending determination by the other party, or their trustee or receiver, whether to enforce the Funds’ obligation to repurchase the securities.

 

(j) Sale-Buybacks

A Fund 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 Statement 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 the 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. A Fund will segregate assets determined to be liquid by the Investment Manager or otherwise cover its obligations under sale-buyback transactions.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

57

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

1. Organization and Significant Accounting Policies (continued)

 

(k) Mortgage-Related and Other Asset-Backed Securities

Investments in mortgage-related or other asset-backed securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial 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. The value of some mortgage-related or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose the Funds to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. The decline in liquidity and prices of these types of securities may make it more difficult to determine fair market value. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.

 

(l) U.S. Government Agencies or Government-Sponsored Enterprises

Securities issued by U.S. Government agencies or government-sponsored enterprises may not be guaranteed by the U.S. Treasury. The Government National Mortgage Association (“GNMA” or “Ginnie Mae”), a wholly-owned U.S. Government corporation, is authorized to guarantee, with the full faith and credit of the U.S. Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA and backed by pools of mortgages insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Government-related guarantors not backed by the full faith and credit of the U.S. Government include the Federal National Mortgage Association (“FNMA” or “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). 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 guarantees the timely payment of interest and ultimate collection of principal, but its participation certificates are not backed by the full faith and credit of the U.S. Government.

 

(m) Restricted Securities

The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expenses, and prompt sale at an acceptable price may be difficult.

 

(n) Interest Expense

Interest expense primarily relates to the Funds’ participation in reverse repurchase agreement transactions. Interest expense is recorded as it is incurred.

 

(o) Custody Credits on Cash Balances

The Funds benefit from an expense offset arrangement with their custodian bank, whereby uninvested cash balances may earn credits that reduce monthly custodian and accounting agent expenses. Had these cash balances been invested in income-producing securities, they would have generated income for the Funds. Cash overdraft charges, if any, are included in custodian and accounting agent fees.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

58

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Notes to Financial Statements

September 30, 2012 (unaudited)

 

 

2. 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, among other things, changes in the market (market risk) or failure of the other party to a transaction to perform (counterparty risk). The Funds are also exposed to other risks such as, but not limited to, interest rate, foreign currency, credit and leverage risks.

 

Interest rate risk is the risk that fixed income securities will decline in value because of changes in interest rates. As nominal interest rates rise, the value of certain fixed income securities held by the Funds are likely to decrease. A nominal interest rate can be described as the sum of a real interest rate and an expected inflation rate. 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 used primarily as a measure of the sensitivity of a fixed income security’s market price to interest rate (i.e. yield) movements.

 

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 the Funds hold 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.

 

Mortgage-related and other asset-backed securities often involve risks that are different from or 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. This is known as extension 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.

 

The Funds are exposed to credit risk, which is the risk of losing money if the issuer or guarantor of a fixed income security is unable or unwilling, or is perceived (whether by market participants, rating agencies, pricing services or otherwise) as 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.

 

To the extent the Funds directly invest in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, or in derivatives that provide exposure to foreign currencies, they will be subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedging positions, that the U.S. dollar 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 economic growth, inflation, 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 the imposition of currency controls or other political developments in the United States or abroad. As a result, the Funds’ investments in foreign currency-denominated securities may reduce the returns of the Funds.

 

The Funds are subject to elements of risk not typically associated with investments in the U.S., due to concentrated investments in foreign issuers located in a specific country or region. Such concentrations will subject the Funds to additional risks resulting from future political or economic conditions in such country or region and the possible imposition of adverse governmental laws or currency exchange restrictions affecting such country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable U.S. companies.

 

The market values of securities may decline due to general market conditions (market risk) which are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

2. Principal Risks (continued)

 

for corporate earnings, changes in interest or currency rates or adverse investor sentiment. They may also decline due to factors that 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.

 

The Funds are exposed to counterparty risk, or the risk that an institution or other entity with which the Funds have unsettled or open transactions will default. The potential loss to the Funds could exceed the value of the financial assets recorded in the Funds’ financial statements. Financial assets, which potentially expose the Funds to counterparty risk, consist principally of cash due from counterparties and investments. The Sub-Adviser seeks to minimize the Funds’ counterparty risk by performing reviews of each counterparty and by minimizing concentration of counterparty risk by undertaking transactions with multiple customers and counterparties on recognized and reputable exchanges. Delivery of securities sold is only made once the Funds have 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.

 

The Funds are exposed to risks associated with leverage. Leverage may cause the value of the Funds’ shares to be more volatile than if the Funds did not use leverage. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of the Funds’ portfolio securities. The Funds may engage in transactions or purchase instruments that give rise to forms of leverage. Obligations to settle reverse repurchase agreements may be detrimental to a Fund’s performance. In addition, to the extent the Funds employ leverage, dividend and interest costs may not be recovered by any appreciation of the securities purchased with the leverage proceeds and could exceed the Funds’ investment returns, resulting in greater losses.

 

The Funds are party to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with select counterparties that govern transactions, over-the-counter derivatives and foreign exchange contracts entered into by the Funds and those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements, collateral 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 of the Funds.

 

The considerations and factors surrounding the settlement of certain purchases and sales made on a delayed-delivery basis are governed by Master Securities Forward Transaction Agreements (“Master Forward Agreements”) between the Funds and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral.

 

The Funds are also a party to Master Repurchase Agreements (“Master Repo Agreements”) with select counterparties. The Master Repo Agreements maintain provisions for initiation, income payments, events of default, and maintenance of collateral.

 

The counterparty risk associated with certain contracts may be reduced by master netting arrangements to the extent that if an event of default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Funds’ overall exposure to counterparty risk with respect to transactions subject to master netting arrangements can change substantially within a short period, as it is affected by each transaction subject to the arrangement.

 

Global StocksPLUS® and High Income had security transactions outstanding with Lehman Brothers entities as counterparty at the time the relevant Lehman Brothers entities filed for bankruptcy protection or were placed in administration. Global StocksPLUS®’s security transactions associated with Lehman Brothers Special Financing Inc. (“LBSF”) and Lehman Brothers International (Europe) (“LBI”) and High Income’s security transactions associated with Lehman Commercial Paper, Inc. (“LCPI”) and LBSF as counterparties were written down to their estimated recoverable values. Adjustments to anticipated losses for securities transactions associated with LBSF, LBI and LCPI have been incorporated as net realized gain (loss) on the Funds’ Statements of Operations. The remaining balances, if any, due from LBSF, LBI and LCPI and due to Lehman Brothers, Inc. are included in receivable from/payable to broker on the Funds’ Statements of Assets and Liabilities. The estimated recoverable value of the receivables is determined by independent broker quotes. In April 2012 and October 2012, Global StocksPLUS® received $87,915 and $7,345, respectively, from LBSF.

 

 

PIMCO Dynamic Income Fund

 

PIMCO Global StocksPLUS® & Income Fund

60

 

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments

 

Disclosure about derivatives and hedging activities requires qualitative disclosure regarding objectives and strategies for using derivatives, quantitative disclosure about fair value amounts of gains and losses on derivatives, and disclosure about credit-risk-related contingent features in derivative agreements. The disclosure requirements distinguish between derivatives, which are accounted for as “hedges”, and those that do not qualify for such accounting. Although the Funds sometimes use derivatives for hedging purposes, the Funds reflect derivatives at fair value and recognize changes in fair value through the Funds’ Statements of Operations, and such derivatives do not qualify for hedge accounting treatment.

 

(a) Futures Contracts

The Funds use futures contracts to manage their exposure to the securities markets or the movements in interest rates and currency values. A futures contract is an agreement between two parties to buy and sell a financial instrument at a set price on a future date. Upon entering into such a contract, the Funds are required to pledge to the broker an amount of cash or securities equal to the minimum “initial margin” requirements of the exchange. Pursuant to the contracts, the Funds agree to receive from or pay to the broker an amount of cash or securities equal to the daily fluctuation in the value of the contracts. Such receipts or payments are known as “variation margin” and are recorded by the Funds as unrealized appreciation or depreciation. When the contracts are closed, the Funds record a realized gain or loss equal to the difference between the value of the contracts at the time they were opened and the value at the time they were closed. Any unrealized appreciation or depreciation recorded is simultaneously reversed. The use of futures transactions involves various risks, including the risk of an imperfect correlation in the movements in the price of futures contracts, interest rates and underlying hedging assets, and possible inability or unwillingness of counterparties to meet the terms of their contracts.

 

(b) Option Transactions

The Funds purchase put and call options on securities and indices for hedging purposes, risk management purposes or otherwise as part of their investment strategies. The risks associated with purchasing an option include the risk that the Funds pay a premium whether or not the option is exercised. Additionally, the Funds bear the risk of loss of premiums and changes in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. The cost of securities acquired through the exercise of call options is increased by the premiums paid. The proceeds from securities sold through the exercise of put options are decreased by the premiums paid.

 

The Funds write (sell) put and call options on securities and indices to earn premiums, for hedging purposes, risk management purposes or otherwise as part of their investment strategies. When an option is written, the premium received is recorded as an asset with an equal liability that is subsequently marked to market to reflect the market value of the option written. These liabilities, if any, are reflected as options written in the Funds’ Statements of Assets and Liabilities. Premiums received from writing options which expire unexercised are recorded on the expiration date as a realized gain. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option written is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a put option written is exercised, the premium reduces the cost basis of the security. In writing an option, the Funds bear the market risk of an unfavorable change in the price of the security underlying the written option. Exercise of a written option could result in the Funds purchasing a security at a price different from its current market value.

 

(c) Swap Agreements

Swap agreements are bilaterally negotiated agreements between the Funds and a counterparty to exchange or swap investment cash flows, assets, foreign currencies or market or event-linked returns at specified, future intervals. Swap agreements may be privately negotiated in the over-the-counter market (“OTC swaps”) or may be executed in a multilateral or other trade facility platform, such as a registered commodities exchange (“centrally cleared swaps”). The Funds may enter into credit default, cross-currency, interest rate, total return, variance and other forms of swap agreements in order to, among other things, manage their exposure to credit, currency and interest rate risk. In connection with these agreements, securities may be identified as collateral or margin in accordance with the terms

 

 

PIMCO Dynamic Income Fund

 

 

PIMCO Global StocksPLUS® & Income Fund

 

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.

 

OTC swap payments received or made at the beginning of the measurement period are reflected as such on the Funds’ Statements of Assets and Liabilities and represent payments made 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). These upfront payments are recorded as realized gains or losses on the Funds’ 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 or loss on the Funds’ Statements of Operations. Net periodic payments received or paid by the Funds are included as part of realized gains or losses on the Funds’ Statements of Operations. Changes in market value, if any, are reflected as a component of net changes in unrealized appreciation/depreciation on the Funds’ Statements of Operations. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable, as applicable, for variation margin on centrally cleared swaps on the Funds’ Statements of Assets and Liabilities.

 

Entering into these agreements involves, to varying degrees, elements of credit, legal, market and documentation risk in excess of the amounts recognized on the Funds’ Statements of Assets and Liabilities. Such risks include the possibility that there will be no liquid market for these agreements, that the counterparties to the agreements may default on their 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.

 

Credit Default Swap Agreements — Credit default swap agreements involve one party (referred to as the buyer of protection) making a stream of payments to another party (the seller of protection) in exchange for the right to receive a specified return in the event of a default or other credit event for the referenced entity, obligation or index. As sellers of protection on credit default swap agreements, the Funds 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 sellers, the Funds would effectively add leverage to their investment portfolios because, in addition to their total net assets, the Funds would be subject to investment exposure on the notional amount of the swap.

 

If the Funds are sellers 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 the Funds are buyers 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 assumed 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.

 

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). The Funds use credit default swaps on corporate or sovereign issues to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Funds own or have 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.

 

 

PIMCO Dynamic Income Fund

 

PIMCO Global StocksPLUS® & Income Fund

62

 

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

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 of a default or other credit events. Unlike credit default swaps on corporate or sovereign 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 agreement will be adjusted by corresponding amounts. The Funds 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, or in the case of a tranched index credit default swap, the credit event is settled based on the name’s weight in the index that falls within the tranche for which the Funds bear exposure. The composition of the indices changes periodically, usually every six months, and for most indices, each name has an equal weight in the index. The Funds use credit default swaps on credit indices to hedge a portfolio of credit default swaps or bonds with a credit default swap on indices, which is less expensive than it would be to buy many credit default swaps to achieve a similar effect. Credit-default swaps on indices are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality.

 

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 are disclosed later in the Notes to Financial Statements (see 5(c)) and serve as an indicator 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. 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. Wider credit spreads and 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 the Funds as sellers of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of September 30, 2012 for which the Funds are sellers of protection are disclosed later in the Notes to Financial Statements (see 5(c)). 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 the Funds for the same referenced entity or entities.

 

Interest Rate Swap Agreements — Interest rate swap agreements involve the exchange by the Funds with a counterparty of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments, with respect to 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

 

 

PIMCO Dynamic Income Fund

 

 

PIMCO Global StocksPLUS® & Income Fund    

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

63

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

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 counterparty may terminate the swap transaction in whole at zero cost by 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 money markets.

 

Total Return Swap Agreements — Total return swap agreements involve commitments to pay interest in exchange for a market-linked return, both based on notional amounts. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Funds will receive a payment from or make a payment to the counterparty.

 

(d) Forward Foreign Currency Contracts

A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. The Funds enter into forward foreign currency contracts for the purpose of hedging against foreign currency risk arising from the investment or anticipated investment in securities denominated in foreign currencies. The Funds also enter into these contracts for purposes of increasing exposure to a foreign currency or shifting exposure to foreign currency fluctuations from one country to another. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. All commitments are marked to market daily at the applicable exchange rates and any resulting unrealized appreciation or depreciation is recorded. Realized gains or losses are recorded at the time the forward contract matures or by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. In addition, these contracts may involve market risk in excess of the unrealized appreciation (depreciation) reflected in the Funds’ Statements of Assets and Liabilities.

 

The following is a summary of the fair valuation of the Funds’ derivatives categorized by risk exposure.

 

The effect of derivatives on the Statements of Assets and Liabilities at September 30, 2012:

 

Dynamic Income:

 

Location

 

Credit
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Asset derivatives:

 

 

 

 

 

 

 

Unrealized appreciation of OTC swaps

 

$1,615,306

 

 

$1,615,306

 

Unrealized appreciation of forward foreign currency contracts

 

 

$84,064

 

84,064

 

Total asset derivatives

 

$1,615,306

 

$84,064

 

$1,699,370

 

 

 

 

 

 

 

 

 

Liability derivatives:

 

 

 

 

 

 

 

Unrealized depreciation of OTC swaps

 

$(317,786)

 

 

$(317,786

)

Unrealized depreciation of forward foreign currency contracts

 

 

$(1,549,177)

 

(1,549,177

)

Total liability derivatives

 

$(317,786)

 

$(1,549,177)

 

$(1,866,963

)

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

64

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

Global StocksPLUS®:

 

Location

 

Market
Price

 

Interest Rate
Contracts

 

Credit
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Asset derivatives:

 

 

 

 

 

 

 

 

 

 

 

Investments, at value (options purchased)

 

$191,100

 

 

 

 

$191,100

 

Unrealized appreciation of OTC swaps

 

2,604,517

 

$349,866

 

$2,706,551

 

 

5,660,934

 

Receivable for variation margin on centrally cleared swaps**

 

 

103,252

 

 

 

103,252

 

Unrealized appreciation of forward foreign currency contracts

 

 

 

 

$91,059

 

91,059

 

Total asset derivatives

 

$2,795,617

 

$453,118

 

$2,706,551

 

$91,059

 

$6,046,345

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability derivatives:

 

 

 

 

 

 

 

 

 

 

 

Unrealized depreciation of OTC swaps

 

 

 

$(1,655,197)

 

 

$(1,655,197

)

Payable for variation margin on futures contracts*

 

$(346,035)

 

 

 

 

(346,035

)

Options written, at value

 

(441,350)

 

 

 

 

(441,350

)

Unrealized depreciation of forward foreign currency contracts

 

 

 

 

$(255,054)

 

(255,054

)

Total liability derivatives

 

$(787,385)

 

 

$(1,655,197)

 

$(255,054)

 

$(2,697,636

)

 

High Income:

 

Location

 

Interest Rate
Contracts

 

Credit
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Asset derivatives:

 

 

 

 

 

 

 

 

 

Unrealized appreciation of OTC swaps

 

$6,427,276

 

$175,471

 

 

$6,602,747

 

Receivable for variation margin on centrally cleared swaps**

 

381,850

 

 

 

381,850

 

Unrealized appreciation of forward foreign currency contracts

 

 

 

$1,238,335

 

1,238,335

 

Total asset derivatives

 

$6,809,126

 

$175,471

 

$1,238,335

 

$8,222,932

 

 

 

 

 

 

 

 

 

 

 

Liability derivatives:

 

 

 

 

 

 

 

 

 

Unrealized depreciation of forward foreign currency contracts

 

 

 

$(5,805,326)

 

$(5,805,326

)

 

*                      Included in the net unrealized depreciation of $588,364 on futures contracts, for Global StocksPLUS® as reported in section 5(a) of the Notes to Financial Statements.

 

**               Included in the net unrealized appreciation of $22,810,299 and $836,856 on centrally cleared interest rate swaps for Global StocksPLUS® and High Income, respectively, as reported in section 5(d) of the Notes to Financial Statements.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

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PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

The effect of derivatives on the Statements of Operations for the period or six months ended September 30, 2012:

 

Dynamic Income:

 

Location

 

Credit
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

Swaps

 

$13,612,431

 

 

$13,612,431

 

Foreign currency transactions (forward foreign currency contracts)

 

 

$(4,687,632)

 

(4,687,632

)

Total net realized gain (loss)

 

$13,612,431

 

$(4,687,632)

 

$8,924,799

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

Swaps

 

$1,297,520

 

 

$1,297,520

 

Foreign currency transactions (forward foreign currency contracts)

 

 

$(1,465,113)

 

(1,465,113

)

Total net change in unrealized appreciation/depreciation

 

$1,297,520

 

$(1,465,113)

 

$(167,593

)

 

Global StocksPLUS®:

 

Location

 

Market
Price

 

 

Interest Rate
Contracts

 

 

Credit
Contracts

 

 

Foreign
Exchange
Contracts

 

 

Total

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments (options purchased)

 

$(1,987,371

)

 

 

 

 

 

 

 

$(1,987,371

)

Futures contracts

 

4,113,723

 

 

 

 

 

 

 

 

4,113,723

 

Options written

 

(92,918

)

 

 

 

 

 

 

 

(92,918

)

Swaps

 

 

 

$(21,666,413

)

 

$(1,259,208

)

 

 

 

(22,925,621

)

Foreign currency transactions (forward foreign currency contracts)

 

 

 

 

 

 

 

$74,921

 

 

74,921

 

Total net realized gain (loss)

 

$2,033,434

 

 

$(21,666,413

)

 

$(1,259,208

)

 

$74,921

 

 

$(20,817,266

)

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments (options purchased)

 

$224,033

 

 

 

 

 

 

 

 

$224,033

 

Futures contracts

 

(2,224,670

)

 

 

 

 

 

 

 

(2,224,670

)

Options written

 

364,697

 

 

 

 

 

 

 

 

364,697

 

Swaps

 

(530,539

)

 

$21,866,004

 

 

$(177,770

)

 

 

 

21,157,695

 

Foreign currency transactions (forward foreign currency contracts)

 

 

 

 

 

 

 

$(109,769

)

 

(109,769

)

Total net change in unrealized appreciation/depreciation

 

$(2,166,479

)

 

$21,866,004

 

 

$(177,770

)

 

$(109,769

)

 

$19,411,986

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

66

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

3. Financial Derivative Instruments (continued)

 

High Income:

 

Location

 

Interest Rate
Contracts

 

Credit
Contracts

 

Foreign
Exchange
Contracts

 

Total

 

Net realized gain (loss) on:

 

 

 

 

 

 

 

 

 

Swaps

 

$2,696,058

 

$304,253

 

 

$3,000,311

 

Foreign currency transactions (forward foreign currency contracts)

 

 

 

$1,575,916

 

1,575,916

 

Total net realized gain (loss)

 

$2,696,058

 

$304,253

 

$1,575,916

 

$4,576,227

 

Net change in unrealized appreciation/depreciation of:

 

 

 

 

 

 

 

 

 

Swaps

 

$5,621,656

 

$175,471

 

 

$5,797,127

 

Foreign currency transactions (forward foreign currency contracts)

 

 

 

$131,553

 

131,553

 

Total net change in unrealized appreciation/depreciation

 

$5,621,656

 

$175,471

 

$131,553

 

$5,928,680

 

 

The average volume (measured at each fiscal quarter-end) of derivative activity during the period or six months ended September 30, 2012:

 

 

 

Options

 

Options

 

Futures
Contracts (1)

 

Forward Foreign
Currency Contracts (2)

 

 

 

Purchased (1)

 

Written (1)

 

Long

 

Purchased

 

Sold

 

Dynamic Income

 

 

 

 

$20,406,640

 

$169,698,092

 

Global StocksPLUS®

 

174

 

174

 

423

 

7,760,963

 

13,976,189

 

High Income

 

 

 

 

195,000,118

 

487,646,358

 

 

 

 

Credit 
Default Swap 
Agreements (3)

 

Interest Rate
Swap

 

Total Return
Swap

 

 

 

Buy

 

Sell

 

Agreements (3)

 

Agreements (3)

 

Dynamic Income

 

 

$197,250

 

 

 

 

 

 

€7,000

 

 

 

Global StocksPLUS®

 

$5,371

 

$15,239

 

$456,000

 

$60,299

 

High Income

 

 

10,000

 

2,486,667

 

 

 

 

 

 

(1)  Number of contracts

(2)  U.S. $ value on origination date

(3)  Notional amount (in thousands)

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

67

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

4. Investment Manager/Sub-Adviser

 

Each Fund has an Investment Management Agreement (each an ‘‘Agreement’’) with the Investment Manager. Subject to the supervision of each Fund’s Board, the Investment Manager is responsible for managing, either directly or through others selected by it, each Fund’s investment activities, business affairs and administrative matters. Pursuant to each Agreement, the Investment Manager receives an annual fee, payable monthly, at the annual rate of 1.15% of Dynamic Income’s average daily total managed assets, 1.00% of Global StocksPLUS®’s average daily total managed assets and 0.70% of High Income’s average daily net assets, inclusive of net assets attributable to any Preferred Shares outstanding. For Dynamic Income and Global StocksPLUS®, total managed assets refer to the total assets of each Fund (including any assets attributable to any borrowings that may be outstanding) minus accrued liabilities (other than liabilities representing borrowings).

 

The Investment Manager has retained the Sub-Adviser to manage the Funds’ investments. Subject to the supervision of the Investment Manager, the Sub-Adviser is responsible for making all of the Funds’ investment decisions. The Investment Manager, not the Funds, pays a portion of the fees it receives as Investment Manager to the Sub-Adviser in return for its services.

 

5. Investments in Securities

For the fiscal period or six months ended September 30, 2012, purchases and sales of investments, other than short-term securities were:

 

 

 

U.S. Government Obligations

 

All Other

 

 

 

 

Purchases

 

Sales

 

Purchases

 

Sales

 

 

Dynamic Income

 

$72,984,206

 

$1,362,272

 

$2,122,314,252

 

$155,722,690

 

 

Global StocksPLUS®

 

2,736,617

 

10,312,916

 

21,210,884

 

23,776,969

 

 

High Income

 

 

 

442,006,069

 

603,417,709

 

 

 

(a) Futures contracts outstanding at September 30, 2012:

 

Global StocksPLUS®:

 

Type

 

Contracts

 

Market
Value
(000s)

 

Expiration
Date

 

Unrealized
Depreciation

Long: E-mini S&P 500 Index

 

348

 

$24,955

 

12/21/12

 

 

$(298,854

)

          S&P 500 Index

 

131

 

46,970

 

12/20/12

 

 

(289,510

)

 

 

 

 

 

 

 

 

 

$(588,364

)

 

(b) Transactions in options written for the six months ended September 30, 2012:

 

Global StocksPLUS®:

 

 

 

Contracts

 

Premiums

Options outstanding, March 31, 2012

 

181

 

 

$995,035

 

Options written

 

1,021

 

 

6,308,201

 

Options terminated in closing transactions

 

 

(1,020

)

 

 

(6,370,954

)

Options outstanding, September 30, 2012

 

 

182

 

 

 

$932,282

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

68

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

(c) OTC credit default swap agreements outstanding at September 30, 2012:

 

Buy protection swap agreements:

 

Global StocksPLUS®:

 

Swap
Counterparty/
Referenced 
Debt Issuer

 

Notional 
Amount
(000s) 
(1)

 

Credit
Spread

 

Termination
Date

 

Payments
Made

 

Market
Value 
(2)

 

Upfront
Premiums
Paid

 

Unrealized
Appreciation

Citigroup:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIFC

 

$1,000

 

 

10/20/20

 

(2.15)%

 

$176,862

 

 

 

 

$176,862

 

Goldman Sachs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CIFC

 

478

 

 

10/20/20

 

(4.50)%

 

91,151

 

 

 

 

91,151

 

TELOS

 

1,500

 

 

10/11/21

 

(5.00)%

 

254,021

 

 

 

 

254,021

 

JPMorgan Chase:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indymac Home Equity Loan

 

1,097

 

 

6/25/30

 

(0.45)%

 

244,673

 

 

 

 

244,673

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aegis Asset Backed Securities Trust

 

1,272

 

492.14%   

 

6/25/34

 

(1.15)%

 

 

776,794

 

 

 

 

 

776,794

 

 

 

 

 

 

 

 

 

 

 

 

$1,543,501

 

 

 

 

 

$1,543,501

 

 

Sell protection swap agreements:

 

Dynamic Income:

 

Swap 
Counterparty/
Referenced 
Debt Issuer

 

Notional
Amount
(000s) 
(1)

 

Credit
Spread

 

Termination
Date

 

Payments
Received

 

Market
Value 
(2)

 

Upfront
Premiums
Paid(Received)

Unrealized
Appreciation
(Depreciation)

Bank of America:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nokia Oyj

 

€2,000

 

8.85%

 

6/20/17

 

5.00%

 

$(350,496

)

$(250,220

)

$(100,276

)

Credit Suisse First Boston:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markit ABX.HE Index 06-2

 

$41,589

 

 

5/25/46

 

0.17%

 

(37,103,168

)

(36,962,400

)

(140,768

)

Nokia Oyj

 

€3,000

 

8.85%

 

6/20/17

 

5.00%

 

(525,744

)

(568,125

)

42,381

 

Nokia Oyj

 

€2,000

 

8.99%

 

9/20/17

 

5.00%

 

(374,758

)

(431,885

)

57,127

 

Goldman Sachs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markit ABX.HE Index 06-1

 

$15,261

 

 

7/25/45

 

0.54%

 

(13,199,464

)

(13,295,988

)

96,524

 

HSBC Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dow Jones CDX EM-17 Index

 

25,000

 

2.15%

 

6/20/17

 

5.00%

 

3,181,774

 

1,762,500

 

1,419,274

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

J.C. Penney Corp., Inc.

 

5,000

 

7.21%

 

6/20/17

 

5.00%

 

(417,108

)

(400,000

)

(17,108

)

J.C. Penney Corp., Inc.

 

5,000

 

7.41%

 

9/20/17

 

5.00%

 

(472,134

)

 

(412,500

)

 

(59,634

)

 

 

 

 

 

 

 

 

 

 

$(49,261,098

)

 

$(50,558,618

)

 

$1,297,520

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

69

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

Global StocksPLUS®:

 

Swap 
Counterparty/
Referenced 
Debt Issuer

 

Notional 
Amount
(000s) 
(1)

 

Credit
Spread

 

Termination
Date

 

Payments
Received

 

Market
Value 
(2)

 

Upfront
Premiums
Paid(Received)

Unrealized
Appreciation
(Depreciation)

Bank of America:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long Beach Mortgage Loan Trust

 

$564

 

 

7/25/33

 

6.25%

 

$(447,467

)

 

$(447,467

)

SLM

 

500

 

0.86%

 

12/20/13

 

5.00%

 

26,193

 

$(70,000

)

96,193

 

Citigroup:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SLM

 

1,800

 

0.86%

 

12/20/13

 

5.00%

 

94,293

 

155,594

 

(61,301

)

SLM

 

900

 

0.86%

 

12/20/13

 

5.00%

 

47,147

 

(141,750

)

188,897

 

Deutsche Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SLM

 

700

 

0.86%

 

12/20/13

 

5.00%

 

36,670

 

(98,000

)

134,670

 

Morgan Stanley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indymac Home Equity Loan

 

1,097

 

 

6/25/30

 

1.82%

 

(226,520

)

 

(226,520

)

Morgan Stanley Dean Witter

 

155

 

308.10%

 

8/25/32

 

3.22%

 

(147,034

)

(2,931

)

(144,103

)

Royal Bank of Scotland:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markit ABX.HE Index 07-1

 

2,944

 

 

8/25/37

 

0.09%

 

(1,200,732

)

(1,457,154

)

256,422

 

Markit ABX.HE Index 06-1

 

3,034

 

 

7/25/45

 

3.23%

 

(1,334,790

)

(1,786,085

)

451,295

 

UBS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aegis Asset Backed Securities Trust

 

1,272

 

492.14%

 

6/25/34

 

1.50%

 

(775,806

)

 

(775,806

)

J.C. Penney Corp., Inc.

 

1,000

 

7.41%

 

9/20/17

 

5.00%

 

(94,427

)

(130,000

)

35,573

 

 

 

 

 

 

 

 

 

 

 

$(4,022,473

)

 

$(3,530,326

)

 

$(492,147

)

 

High Income:

 

Swap 
Counterparty/
Referenced 
Debt Issuer

 

Notional 
Amount
(000s) 
(1)

 

Credit
Spread

 

Termination
Date

 

Payments
Received

 

Market
Value 
(2)

 

Upfront
Premiums
Received

 

Unrealized
Appreciation

Barclays Bank:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Argentine Republic Government International Bond

 

$15,000

 

5.15%

 

6/20/13

 

5.00%

 

 

$6,362

 

 

 

$(169,109

)

 

 

$175,471

 

 

 

 

 

CMBX — Commercial Mortgage Backed Securities Index

€ — Euro

      Credit spread not quoted for asset-backed securities.

(1)   This represents the maximum potential amount the Funds could be required to make available as sellers of credit protection or receive as buyers of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

(2)  The quoted market prices and resulting values for credit default swap agreements serve as an indicator of the status at September 30, 2012 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 been closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

70

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

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.

 

(d)  Interest rate swap agreements outstanding at September 30, 2012:

 

Global StocksPLUS®:

 

OTC swap agreements:

 

 

 

Notional

 

 

 

Rate Type

 

 

 

Upfront

 

 

 

Swap
Counterparty

 

Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Market
Value

 

Premiums
Received

 

Unrealized
Appreciation

 

Deutsche Bank

 

$50,000

 

11/16/19

 

3-Month
USD-LIBOR

 

1.60%

 

$271,292

 

$(78,574

)

 

 

$349,866

 

 

 

Centrally cleared swap agreements:

 

 

 

Notional

 

 

 

Rate Type

 

 

 

 

 

Broker (Exchange)

 

Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Market
Value

 

Unrealized
Appreciation

 

Morgan Stanley (CME)

 

$228,000

 

12/19/42

 

2.50%

 

3-Month
USD LIBOR

 

$6,519,246

 

$10,737,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan Stanley (CME)

 

200,000

 

12/21/41

 

3-Month
USD LIBOR

 

2.85%

 

12,372,223

 

12,073,053

 

 

 

 

 

 

 

 

 

 

 

 

$18,891,469

 

$22,810,299

 

 

 

High Income:

 

OTC swap agreements:

 

 

 

Notional

 

 

 

Rate Type

 

 

 

Upfront

 

 

 

Swap
Counterparty

 

Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Market
Value

 

Premiums
Paid(Received)

 

Unrealized
Appreciation

 

Goldman Sachs

 

$600,000

 

11/16/19

 

3-Month
USD-LIBOR

 

1.60%

 

$3,255,534

 

 

$(558,256

)

 

 

$3,813,790

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royal Bank of Scotland

 

330,000

 

5/29/18

 

3-Month
USD-LIBOR

 

1.75%

 

4,219,703

 

 

1,606,217

 

 

 

2,613,486

 

 

 

 

 

 

 

 

 

 

 

 

$7,475,237

 

 

$1,047,961

 

 

 

$6,427,276

 

 

 

Centrally cleared swap agreements:

 

 

 

Notional

 

 

 

Rate Type

 

 

 

Unrealized

 

Broker (Exchange)

 

Amount
(000s)

 

Termination
Date

 

Payments
Made

 

Payments
Received

 

Market
Value

 

Appreciation
(Depreciation)

 

Barclays Bank (CME)

 

$200,000

 

6/16/20

 

3-Month
USD-LIBOR

 

4.00%

 

$42,193,113

 

 

$7,681,292

 

 

Goldman Sachs (CME)

 

500,000

 

6/20/17

 

3-Month
USD-LIBOR

 

3.75%

 

75,892,039

 

 

5,254,333

 

 

Goldman Sachs (CME)

 

500,000

 

12/19/17

 

1.00%

 

3-Month USD-LIBOR

 

(4,146,858

)

 

(8,931,857

)

 

Goldman Sachs (CME)

 

200,000

 

12/19/22

 

1.75%

 

3-Month USD-LIBOR

 

307,089

 

 

(3,166,912

)

 

 

 

 

 

 

 

 

 

 

 

$114,245,383

 

 

$836,856

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

71


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

 

 

 

ABX — Asset-Backed Securities Index

CME — Chicago Mercantile Exchange

LIBOR — London Inter-Bank Offered Rate

 

(e) OTC total return swap agreements outstanding at September 30, 2012:

 

Global StocksPLUS®:

 

Pay/Receive
Total Return
on Reference Index

 

Index

 

# of Units

 

Floating Rate*

 

Notional
Amount
(000s)

 

Maturity
Date

 

Counterparty

 

Unrealized
Appreciation

 

Receive 

 

MSCI Daily Total Return EAFE

 

16,105

 

1-Month
USD-LIBOR
Plus 0.04%

 

$60,299

 

2/28/13

 

Bank of
America

 

 

$2,604,517

 

 

 

 

 

*  Floating rate is based upon predetermined notional amounts, which may be a multiple of the number of units disclosed.

 

EAFE—Europe and Australasia, Far East Equity Index

MSCI—Morgan Stanley Capital International

 

(f) Forward foreign currency contracts outstanding at September 30, 2012:

 

Dynamic Income:

 

 

 

Counterparty

 

U.S.$
Value on
Origination
Date

 

U.S.$ Value
September 30, 2012

 

Unrealized
Appreciation
(Depreciation)

 

Purchased:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242,000 British Pound settling 12/12/12

 

BNP Paribas

 

 

$391,881

 

 

 

$390,701

 

 

 

$(1,180

)

 

73,000 British Pound settling 12/12/12

 

HSBC Bank

 

 

117,750

 

 

 

117,856

 

 

 

106

 

 

166,000 British Pound settling 12/12/12

 

UBS

 

 

268,188

 

 

 

268,002

 

 

 

(186

)

 

90,000 Euro settling 12/17/12

 

Barclays Bank

 

 

117,101

 

 

 

115,748

 

 

 

(1,353

)

 

102,000 Euro settling 12/17/12

 

UBS

 

 

132,227

 

 

 

131,182

 

 

 

(1,045

)

 

Sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,135,000 British Pound settling 12/12/12

 

BNP Paribas

 

 

36,787,125

 

 

 

37,350,747

 

 

 

(563,622

)

 

29,405,000 British Pound settling 12/12/12

 

Deutsche Bank

 

 

46,959,050

 

 

 

47,473,470

 

 

 

(514,420

)

 

518,000 Euro settling 12/17/12

 

Barclays Bank

 

 

671,939

 

 

 

666,196

 

 

 

5,743

 

 

55,947,000 Euro settling 12/17/12

 

BNP Paribas

 

 

72,031,261

 

 

 

71,953,046

 

 

 

78,215

 

 

18,391,000 Euro settling 12/17/12

 

HSBC Bank

 

 

23,185,166

 

 

 

23,652,537

 

 

 

(467,371

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$(1,465,113

)

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

72

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

Global StocksPLUS®:

 

 

 

Counterparty

 

U.S.$
Value on
Origination
Date

 

U.S.$ Value
September 30, 2012

 

Unrealized
Appreciation
(Depreciation)

 

Purchased:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129,776 Australian Dollar settling 10/11/12

 

Bank of America

 

 

$133,864

 

 

 

$134,522

 

 

 

$658

 

 

2,412,000 British Pound settling 10/2/12

 

HSBC Bank

 

 

3,905,486

 

 

 

3,894,896

 

 

 

(10,590

)

 

1,014,000 Euro settling 10/15/12

 

Royal Bank of Scotland

 

 

1,314,418

 

 

 

1,303,206

 

 

 

(11,212

)

 

1,347,076 Euro settling 10/15/12

 

UBS

 

 

1,659,011

 

 

 

1,731,280

 

 

 

72,269

 

 

1,483,000 Hong Kong Dollar settling 11/6/12

 

JPMorgan Chase

 

 

191,284

 

 

 

191,256

 

 

 

(28

)

 

26,090,000 Japanese Yen settling 12/10/12

 

Credit Suisse First Boston

 

 

330,592

 

 

 

334,518

 

 

 

3,926

 

 

183,000 Swedish Krona settling 11/21/12

 

Barclays Bank

 

 

27,425

 

 

 

27,818

 

 

 

393

 

 

184,000 Swedish Krona settling 11/21/12

 

UBS

 

 

27,626

 

 

 

27,970

 

 

 

344

 

 

121,000 Swiss Franc settling 11/21/12

 

Westpac

 

 

125,795

 

 

 

128,770

 

 

 

2,975

 

 

Sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,412,000 British Pound settling 10/2/12

 

Goldman Sachs

 

 

3,814,534

 

 

 

3,894,896

 

 

 

(80,362

)

 

2,412,000 British Pound settling 11/2/12

 

HSBC Bank

 

 

3,905,028

 

 

 

3,894,534

 

 

 

10,494

 

 

1,962,000 Euro settling 10/15/12

 

Barclays Bank

 

 

2,436,993

 

 

 

2,521,588

 

 

 

(84,595

)

 

2,148,000 Euro settling 10/15/12

 

Deutsche Bank

 

 

2,692,371

 

 

 

2,760,638

 

 

 

(68,267

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$(163,995

)

 

 

High Income:

 

 

 

Counterparty

 

U.S.$
Value on
Origination
Date

 

U.S.$ Value
September 30, 2012

 

Unrealized
Appreciation
(Depreciation)

 

Purchased:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63,364,000 British Pound settling 10/2/12

 

BNP Paribas

 

$103,017,191

 

 

 

$102,320,144

 

 

 

$(697,047

)

 

69,459,000 British Pound settling 10/2/12

 

Citigroup

 

112,315,203

 

 

 

112,162,346

 

 

 

(152,857

)

 

461,000 British Pound settling 11/2/12

 

UBS

 

747,774

 

 

 

744,353

 

 

 

(3,421

)

 

16,463,000 Euro settling 10/2/12

 

Bank of America

 

21,154,955

 

 

 

21,155,774

 

 

 

819

 

 

13,878,209 Euro settling 10/2/12

 

BNP Paribas

 

17,861,255

 

 

 

17,834,189

 

 

 

(27,066

)

 

15,463,000 Euro settling 10/2/12

 

Citigroup

 

20,036,956

 

 

 

19,870,724

 

 

 

(166,232

)

 

14,525,000 Euro settling 10/2/12

 

JPMorgan Chase

 

18,745,965

 

 

 

18,665,347

 

 

 

(80,618

)

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

73

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

 

 

Counterparty

 

 

U.S.$
Value on
Origination
Date

 

U.S.$ Value
September 30, 2012

 

Unrealized
Appreciation
(Depreciation)

 

Sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63,364,000 British Pound settling 11/2/12

 

BNP Paribas

 

 

$103,005,152

 

 

 

$102,310,639

 

 

 

$694,513

 

 

69,459,000 British Pound settling 11/2/12

 

Citigroup

 

 

112,304,090

 

 

 

112,151,927

 

 

 

152,163

 

 

34,810,000 British Pound settling 10/2/12

 

Credit Suisse First Boston

 

 

54,996,041

 

 

 

56,211,165

 

 

 

(1,215,124

)

 

77,560,000 British Pound settling 10/2/12

 

Deutsche Bank

 

 

122,397,436

 

 

 

125,243,835

 

 

 

(2,846,399

)

 

20,453,000 British Pound settling 10/2/12

 

JPMorgan Chase

 

 

33,120,422

 

 

 

33,027,490

 

 

 

92,932

 

 

16,463,000 Euro settling 11/2/12

 

Bank of America

 

 

21,161,869

 

 

 

21,162,194

 

 

 

(325

)

 

13,878,000 Euro settling 11/2/12

 

BNP Paribas

 

 

17,866,426

 

 

 

17,839,333

 

 

 

27,093

 

 

21,888,000 Euro settling 10/2/12

 

Citigroup

 

 

27,988,186

 

 

 

28,127,169

 

 

 

(138,983

)

 

15,463,000 Euro settling 11/2/12

 

Citigroup

 

 

20,042,831

 

 

 

19,876,754

 

 

 

166,077

 

 

13,283,000 Euro settling 10/2/12

 

Goldman Sachs

 

 

16,616,967

 

 

 

17,069,316

 

 

 

(452,349

)

 

2,053,000 Euro settling 11/2/12

 

Goldman Sachs

 

 

2,640,343

 

 

 

2,639,008

 

 

 

1,335

 

 

21,887,000 Euro settling 10/2/12

 

HSBC Bank

 

 

28,107,132

 

 

 

28,125,883

 

 

 

(18,751

)

 

2,231,209 Euro settling 10/2/12

 

JPMorgan Chase

 

 

2,890,000

 

 

 

2,867,214

 

 

 

22,786

 

 

14,525,000 Euro settling 11/2/12

 

JPMorgan Chase

 

 

18,751,629

 

 

 

18,671,012

 

 

 

80,617

 

 

1,040,000 Euro settling 10/2/12

 

UBS

 

 

1,330,297

 

 

 

1,336,451

 

 

 

(6,154

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$(4,566,991

)

 

 

At September 30, 2012, Dynamic Income, Global StocksPLUS® and High Income held cash collateral of $3,510,000, $4,470,000 and $6,490,000, respectively, and Global StocksPLUS® and High Income pledged cash collateral of $3,328,000 and $14,355,000, respectively, for derivative contracts. Cash collateral received may be invested in accordance with the Funds’ investment strategies.

 

(g) Open reverse repurchase agreements at September 30, 2012:

 

Dynamic Income:

 

Counterparty

 

Rate

 

Trade Date

 

Due Date

 

Principal & Interest

 

 

Principal

 

 

Bank of America

 

1.367

%

 

9/21/12

 

10/18/12

 

$12,550,764

 

 

 

$12,546,000

 

 

 

 

1.367

%

 

9/21/12

 

10/19/12

 

12,146,611

 

 

 

12,142,000

 

 

Barclays Bank

 

0.23

%

 

9/27/12

 

10/29/12

 

8,002,280

 

 

 

8,002,075

 

 

 

 

0.46

%

 

6/27/12

 

12/27/12

 

9,156,222

 

 

 

9,145,004

 

 

 

 

0.70

%

 

8/24/12

 

2/25/13

 

3,822,823

 

 

 

3,820,000

 

 

 

 

0.727

%

 

9/12/12

 

10/11/12

 

4,590,760

 

 

 

4,589,000

 

 

 

 

0.75

%

 

9/24/12

 

12/24/12

 

28,723,188

 

 

 

28,719,000

 

 

 

 

0.75

%

 

9/28/12

 

1/4/13

 

33,548,000

 

 

 

33,548,000

 

 

 

 

0.80

%

 

6/26/12

 

10/1/12

 

19,411,753

 

 

 

19,370,000

 

 

 

 

0.80

%

 

7/26/12

 

10/1/12

 

14,970,256

 

 

 

14,948,000

 

 

 

 

0.80

%

 

8/27/12

 

11/27/12

 

17,983,978

 

 

 

17,970,000

 

 

 

 

0.80

%

 

8/31/12

 

11/27/12

 

14,851,225

 

 

 

14,841,000

 

 

 

 

0.80

%

 

8/31/12

 

11/28/12

 

2,420,666

 

 

 

2,419,000

 

 

 

 

0.85

%

 

9/20/12

 

10/22/12

 

14,390,777

 

 

 

14,387,040

 

 

 

 

1.10

%

 

8/24/12

 

2/25/13

 

10,478,152

 

 

 

10,466,000

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

74

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

Counterparty

 

Rate

 

Trade Date

 

Due Date

 

Principal & Interest

 

 

Principal

 

 

 

 

1.297

%

 

7/27/12

 

10/26/12

 

$14,857,244

 

 

 

$14,822,000

 

 

 

 

1.298

%

 

7/26/12

 

10/26/12

 

28,505,696

 

 

 

28,437,000

 

 

 

 

1.617

%

 

9/26/12

 

12/21/12

 

11,675,622

 

 

 

11,673,000

 

 

 

 

1.626

%

 

9/21/12

 

12/20/12

 

5,196,346

 

 

 

5,194,000

 

 

 

 

1.631

%

 

9/20/12

 

12/20/12

 

7,228,601

 

 

 

7,225,000

 

 

 

 

1.639

%

 

9/18/12

 

12/18/12

 

5,537,275

 

 

 

5,534,000

 

 

 

 

1.658

%

 

9/11/12

 

12/12/12

 

6,179,687

 

 

 

6,174,000

 

 

 

 

1.66

%

 

9/6/12

 

12/5/12

 

5,872,762

 

 

 

5,866,000

 

 

 

 

1.692

%

 

8/27/12

 

11/1/12

 

1,093,796

 

 

 

1,092,000

 

 

 

 

1.693

%

 

8/21/12

 

11/1/12

 

1,303,509

 

 

 

1,301,000

 

 

 

 

1.703

%

 

8/16/12

 

10/24/12

 

8,247,909

 

 

 

8,230,000

 

 

Citigroup

 

1.016

%

 

9/27/12

 

10/29/12

 

6,350,717

 

 

 

6,350,000

 

 

Credit Suisse First Boston

 

0.35

%

 

9/17/12

 

10/17/12

 

4,661,556

 

 

 

4,660,921

 

 

 

 

0.50

%

 

9/18/12

 

12/18/12

 

20,464,694

 

 

 

20,461,000

 

 

 

 

1.25

%

 

9/20/12

 

10/19/12

 

4,647,423

 

 

 

4,645,648

 

 

 

 

1.50

%

 

9/13/12

 

10/12/12

 

25,368,012

 

 

 

25,349,000

 

 

 

 

1.60

%

 

8/13/12

 

10/2/12

 

12,881,993

 

 

 

12,854,000

 

 

 

 

1.60

%

 

8/15/12

 

10/2/12

 

21,726,289

 

 

 

21,681,000

 

 

 

 

1.60

%

 

8/16/12

 

10/3/12

 

1,308,670

 

 

 

1,306,000

 

 

 

 

1.60

%

 

8/17/12

 

10/1/12

 

8,557,080

 

 

 

8,540,000

 

 

 

 

1.60

%

 

8/17/12

 

10/2/12

 

13,473,894

 

 

 

13,447,000

 

 

 

 

1.60

%

 

8/20/12

 

10/2/12

 

1,862,470

 

 

 

1,859,000

 

 

 

 

1.60

%

 

8/24/12

 

10/24/12

 

10,349,450

 

 

 

10,332,000

 

 

 

 

1.60

%

 

9/12/12

 

11/13/12

 

17,643,887

 

 

 

17,629,000

 

 

 

 

1.60

%

 

9/14/12

 

11/16/12

 

47,715,024

 

 

 

47,679,000

 

 

 

 

1.60

%

 

9/19/12

 

11/19/12

 

37,526,003

 

 

 

37,506,000

 

 

 

 

1.60

%

 

9/26/12

 

11/27/12

 

3,581,796

 

 

 

3,581,000

 

 

 

 

1.60

%

 

9/25/12

 

11/26/12

 

7,922,056

 

 

 

7,921,000

 

 

 

 

1.60

%

 

9/28/12

 

12/3/12

 

8,541,000

 

 

 

8,541,000

 

 

 

 

1.60

%

 

9/28/12

 

12/3/12

 

52,186,000

 

 

 

52,186,000

 

 

Deutsche Bank

 

(0.50)

%

 

6/29/12

 

6/28/14

 

5,066,377

 

 

 

5,073,000

 

 

 

 

0.60

%

 

8/28/12

 

11/28/12

 

3,691,090

 

 

 

3,689,000

 

 

 

 

0.60

%

 

9/25/12

 

1/2/13

 

5,072,254

 

 

 

5,072,000

 

 

 

 

0.75

%

 

7/5/12

 

10/5/12

 

3,704,780

 

 

 

3,698,000

 

 

 

 

0.75

%

 

9/25/12

 

1/2/13

 

43,172,698

 

 

 

43,170,000

 

 

 

 

0.80

%

 

9/10/12

 

12/6/12

 

6,626,091

 

 

 

6,623,000

 

 

 

 

0.85

%

 

7/5/12

 

10/5/12

 

7,062,644

 

 

 

7,048,000

 

 

Goldman Sachs

 

0.75

%

 

9/14/12

 

10/11/12

 

25,359,980

 

 

 

25,351,001

 

 

JPMorgan Chase

 

1.647

%

 

8/10/12

 

10/31/12

 

19,341,905

 

 

 

19,296,000

 

 

 

 

1.647

%

 

8/13/12

 

10/31/12

 

8,824,739

 

 

 

8,805,000

 

 

 

 

1.647

%

 

8/15/12

 

10/31/12

 

13,909,846

 

 

 

13,880,000

 

 

Morgan Stanley

 

1.35

%

 

7/30/12

 

10/30/12

 

16,002,718

 

 

 

15,965,000

 

 

Royal Bank of Canada

 

1.408

%

 

9/10/12

 

12/11/12

 

8,362,863

 

 

 

8,356,000

 

 

 

 

1.431

%

 

8/23/12

 

11/27/12

 

11,688,091

 

 

 

11,670,000

 

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

75

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

Counterparty

 

Rate

 

Trade Date

 

Due Date

 

Principal & Interest

 

Principal

 

 

 

1.431

%

 

8/27/12

 

11/27/12

 

$2,412,352

 

 

$2,409,000

 

 

 

 

1.437

%

 

8/8/12

 

11/9/12

 

22,935,330

 

 

22,886,000

 

 

 

 

1.442

%

 

8/2/12

 

11/7/12

 

57,121,953

 

 

56,985,000

 

 

 

 

1.447

%

 

7/30/12

 

11/1/12

 

19,198,492

 

 

19,150,000

 

 

 

 

1.447

%

 

8/15/12

 

10/9/12

 

3,506,612

 

 

3,500,000

 

 

 

 

1.447

%

 

8/15/12

 

11/2/12

 

3,977,500

 

 

3,970,000

 

 

 

 

1.447

%

 

8/16/12

 

11/1/12

 

5,162,528

 

 

5,153,000

 

 

 

 

1.447

%

 

8/17/12

 

11/2/12

 

4,804,675

 

 

4,796,000

 

 

 

 

1.448

%

 

8/13/12

 

10/29/12

 

11,244,117

 

 

11,222,000

 

 

 

 

1.448

%

 

8/15/12

 

10/29/12

 

5,871,078

 

 

5,860,000

 

 

 

 

1.448

%

 

8/16/12

 

10/29/12

 

5,377,932

 

 

5,368,000

 

 

 

 

1.448

%

 

8/24/12

 

10/29/12

 

3,403,194

 

 

3,398,000

 

 

 

 

1.451

%

 

8/17/12

 

10/26/12

 

15,347,787

 

 

15,320,000

 

 

 

 

1.46

%

 

8/13/12

 

10/9/12

 

4,997,912

 

 

4,988,000

 

 

 

 

1.46

%

 

8/14/12

 

10/9/12

 

17,517,032

 

 

17,483,000

 

 

 

 

1.46

%

 

8/20/12

 

10/9/12

 

4,958,431

 

 

4,950,000

 

 

 

 

1.937

%

 

9/25/12

 

12/11/12

 

6,735,173

 

 

6,733,000

 

 

Royal Bank of Scotland

 

1.217

%

 

9/27/12

 

10/26/12

 

20,946,832

 

 

20,944,000

 

 

 

 

1.227

%

 

9/14/12

 

10/16/12

 

5,440,151

 

 

5,437,000

 

 

 

 

1.567

%

 

9/25/12

 

10/24/12

 

2,162,565

 

 

2,162,000

 

 

 

 

1.569

%

 

9/20/12

 

10/19/12

 

45,722,910

 

 

45,701,000

 

 

 

 

1.578

%

 

9/7/12

 

10/5/12

 

9,699,193

 

 

9,689,000

 

 

 

 

1.771

%

 

9/5/12

 

12/5/12

 

6,681,535

 

 

6,673,000

 

 

UBS

 

0.48

%

 

7/24/12

 

10/24/12

 

19,519,728

 

 

19,501,786

 

 

 

 

0.65

%

 

6/22/12

 

12/21/12

 

29,014,815

 

 

28,962,000

 

 

 

 

0.70

%

 

6/22/12

 

12/21/12

 

13,484,430

 

 

13,458,000

 

 

 

 

0.73

%

 

7/24/12

 

10/24/12

 

9,861,758

 

 

9,847,979

 

 

 

 

0.78

%

 

7/24/12

 

10/24/12

 

13,618,790

 

 

13,598,460

 

 

 

 

1.316

%

 

9/25/12

 

10/17/12

 

7,134,564

 

 

7,133,000

 

 

 

 

2.617

%

 

9/26/12

 

10/4/13

 

3,236,176

 

 

3,235,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$1,167,197,914

 

 

 

Global StocksPLUS®:

 

Counterparty

 

Rate

 

Trade Date

 

Due Date

 

Principal & Interest

 

Principal

 

Barclays Bank

 

0.40

%

 

9/14/12

 

12/14/12

 

$1,303,466

 

 

$1,303,220

 

 

 

 

0.60

%

 

7/16/12

 

10/16/12

 

2,806,598

 

 

2,803,000

 

 

 

 

0.60

%

 

7/20/12

 

10/22/12

 

3,426,164

 

 

3,422,000

 

 

 

 

0.60

%

 

8/27/12

 

11/27/12

 

623,363

 

 

623,000

 

 

 

 

0.60

%

 

9/20/12

 

12/20/12

 

1,082,198

 

 

1,082,000

 

 

 

 

0.65

%

 

9/14/12

 

10/18/12

 

1,771,544

 

 

1,771,000

 

 

 

 

0.66

%

 

7/11/12

 

10/11/12

 

984,478

 

 

983,000

 

 

 

 

0.80

%

 

7/16/12

 

10/16/12

 

2,766,727

 

 

2,762,000

 

 

 

 

0.80

%

 

8/16/12

 

11/15/12

 

1,106,129

 

 

1,105,000

 

 

 

 

0.80

%

 

8/21/12

 

11/15/12

 

3,882,534

 

 

3,879,000

 

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

76

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

5. Investments in Securities (continued)

 

Counterparty

 

Rate

 

Trade Date

 

Due Date

 

Principal & Interest

 

Principal

 

 

 

0.80

%

 

9/7/12

 

10/16/12

 

$2,561,365

 

 

$2,560,000

 

 

Deutsche Bank

 

(0.25)

%

 

9/7/12

 

9/6/14

 

1,657,724

 

 

1,658,000

 

 

 

 

0.62

%

 

8/22/12

 

11/21/12

 

3,211,211

 

 

3,209,000

 

 

 

 

0.65

%

 

7/11/12

 

10/11/12

 

1,058,565

 

 

1,057,000

 

 

 

 

0.65

%

 

8/10/12

 

11/8/12

 

618,580

 

 

618,000

 

 

 

 

0.65

%

 

9/6/12

 

12/6/12

 

1,542,696

 

 

1,542,000

 

 

 

 

0.75

%

 

8/10/12

 

11/8/12

 

3,034,283

 

 

3,031,000

 

 

 

 

0.77

%

 

9/17/12

 

12/17/12

 

3,874,160

 

 

3,873,000

 

 

 

 

0.80

%

 

7/5/12

 

10/5/12

 

2,994,845

 

 

2,989,000

 

 

 

 

0.80

%

 

7/11/12

 

10/11/12

 

3,294,993

 

 

3,289,000

 

 

 

 

0.80

%

 

8/1/12

 

10/22/12

 

1,130,531

 

 

1,129,000

 

 

 

 

0.80

%

 

8/9/12

 

11/8/12

 

982,155

 

 

981,000

 

 

 

 

0.80

%

 

8/10/12

 

11/8/12

 

1,662,919

 

 

1,661,000

 

 

 

 

0.80

%

 

8/14/12

 

11/16/12

 

2,662,837

 

 

2,660,000

 

 

 

 

0.80

%

 

8/17/12

 

11/19/12

 

2,995,993

 

 

2,993,000

 

 

 

 

0.80

%

 

9/10/12

 

12/6/12

 

3,034,415

 

 

3,033,000

 

 

Goldman Sachs

 

0.33

%

 

9/13/12

 

10/11/12

 

32,510,365

 

 

32,505,000

 

 

JPMorgan Chase

 

0.80

%

 

7/25/12

 

10/25/12

 

1,140,721

 

 

1,139,000

 

 

Morgan Stanley

 

1.35

%

 

7/9/12

 

10/10/12

 

785,466

 

 

783,000

 

 

 

 

1.35

%

 

8/28/12

 

10/30/12

 

2,624,342

 

 

2,621,000

 

 

Royal Bank of Scotland

 

1.128

%

 

9/11/12

 

10/10/12

 

1,468,920

 

 

1,468,000

 

 

 

 

1.228

%

 

9/10/12

 

10/9/12

 

1,442,032

 

 

1,441,000

 

 

 

 

1.228

%

 

9/11/12

 

10/10/12

 

5,211,553

 

 

5,208,000

 

 

 

 

1.578

%

 

9/10/12

 

10/9/12

 

449,413

 

 

449,000

 

 

UBS

 

0.54

%

 

7/20/12

 

10/26/12

 

1,946,129

 

 

1,944,000

 

 

 

 

0.70

%

 

8/29/12

 

2/28/13

 

4,953,176

 

 

4,950,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$108,524,220

 

 

 

The weighted average daily balance of reverse repurchase agreements outstanding during the six months ended September 30, 2012 for Dynamic Income, Global StocksPLUS® and High Income was $570,602,507, $112,975,908 and $71,663,079, respectively, at a weighted average interest rate of 1.09%, 0.67% and 0.67%, respectively. The total market value of underlying collateral (refer to the Schedules of Investments for positions transferred for the benefit of the counterparty as collateral) for open reverse repurchase agreements at September 30, 2012 was $1,474,744,864 and $117,315,722 for Dynamic Income and Global StocksPLUS®, respectively.

 

At September 30, 2012, Dynamic Income and Global StocksPLUS® held $4,065,315 and $890,953 in principal value of U.S. Treasury Obligations as collateral for open reverse repurchase agreements. Dynamic Income held $4,668,948 in Mortgage-Backed Securities and $14,080,000 in cash as collateral for open reverse repurchase agreements. Cash collateral held may be invested in accordance with the Fund’s investment strategy. Securities held as collateral will not be pledged and are not reflected in the Schedules of Investments.

 

(h) Sale-buybacks for the six months ending September 30, 2012:

 

The weighted average borrowing for sale-buybacks during the six months ended September 30, 2012 for Global StocksPLUS® was $795,376 at a weighted average interest rate of 0.22%.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

77

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

6. Income Tax Information

 

At September 30, 2012, the aggregate cost basis and the net unrealized appreciation (depreciation) of investments (before options written) for federal income tax purposes were:

 

 

 

Federal Tax
Cost Basis

 

Unrealized
Appreciation

 

Unrealized
Depreciation

 

Net
Unrealized
Appreciation

 

Dynamic Income

 

$2,237,807,782

 

$172,044,628

 

$8,569,401

 

$163,475,227

 

Global StocksPLUS®

 

217,549,706

 

29,885,758

 

3,093,869

 

26,791,889

 

High Income

 

1,101,486,619

 

195,447,563

 

13,694,151

 

181,753,412

 

 

Differences, if any, between book and tax cost basis were attributable to wash sale loss deferrals.

 

7. Auction-Rate Preferred Shares — High Income

High Income has 2,336 shares of Preferred Shares Series M, 2,336 shares of Preferred Shares Series T, 2,336 shares of Preferred Shares Series W, 2,336 shares of Preferred Shares Series TH and 2,336 shares of Preferred Shares Series F outstanding, each with a liquidation preference of $25,000 per share plus any accumulated, unpaid dividends.

 

Dividends are accumulated daily at an annual rate (typically re-set every seven days) through auction procedures (or through default procedures in the event of failed auctions). Distributions of net realized capital gains, if any, are paid annually.

 

For the six months ended September 30, 2012, the annualized dividend rates ranged from:

 

 

 

High

 

Low

 

At September 30, 2012

 

Series M

 

0.240%

 

0.075%

 

0.176%

 

 

 

 

 

 

 

 

 

Series T

 

0.240%

 

0.045%

 

0.160%

 

 

 

 

 

 

 

 

 

Series W

 

0.240%

 

0.030%

 

0.144%

 

 

 

 

 

 

 

 

 

Series TH

 

0.208%

 

0.075%

 

0.160%

 

 

 

 

 

 

 

 

 

Series F

 

0.208%

 

0.075%

 

0.160%

 

 

The Fund is subject to certain limitations and restrictions while Preferred Shares are outstanding. Failure to comply with these limitations and restrictions could preclude the Fund from declaring or paying any dividends or distributions to common shareholders or repurchasing common shares and/or could trigger the mandatory redemption of Preferred Shares at their liquidation preference plus any accumulated, unpaid dividends.

 

Preferred shareholders, who are entitled to one vote per share, generally vote together with the common shareholders but vote separately as a class to elect two Trustees and on any matters affecting the rights of the Preferred Shares.

 

Since mid-February 2008, holders of auction-rate preferred shares (“ARPS”) issued by the Fund have been directly impacted by an unprecedented lack of liquidity, which has similarly affected ARPS holders in many of the nation’s closed-end funds. Since then, regularly scheduled auctions for ARPS issued by the Fund have consistently “failed” because of insufficient demand (bids to buy shares) to meet the supply (shares offered for sale) at each auction. In a failed auction, ARPS holders cannot sell all, and may not be able to sell any, of their shares tendered for sale. While repeated auction failures have affected the liquidity for ARPS, they do not constitute a default or automatically alter the credit quality of the ARPS, and ARPS holders have continued to receive dividends at the defined “maximum rate”, the 7-day “AA” Financial Composite Commercial Paper Rate multiplied by a minimum of 160%, depending on the credit rating of the ARPS (which is a function of short-term interest rates and typically higher than the rate that would have otherwise been set through a successful auction). If the Fund’s ARPS auctions continue to fail and the “maximum rate” payable on the ARPS rises as a result of changes in short-term interest rates, returns for the Fund’s common shareholders could be adversely affected.

 

In July 2012, Moody’s Investor Service (“Moody’s”) downgraded its ratings for each series of the High Income’s Preferred Shares from Aa3 to A1.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

78

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund
Notes to Financial Statements

September 30, 2012 (unaudited)

 

8. Transfer Agent Change

 

American Stock Transfer & Trust Company, LLC (“AST”) assumed responsibility as the Funds’ transfer agent effective September 17, 2012 (the “Effective Date”). The amended Dividend Reinvestment Plan (the “Plan”) and AST’s role as transfer agent for Participants under the Plan commenced as of the Effective Date.

 

9. Subsequent Events

On October 1, 2012, the following dividends were declared to common shareholders payable November 1, 2012 to shareholders of record on October 11, 2012:

 

Dynamic Income

 

$0.177 per common share

 

Global StocksPLUS®

 

$0.18335 per common share

 

High Income

 

$0.121875 per common share

 

 

On November 1, 2012, the following dividends were declared to common shareholders payable December 3, 2012 to shareholders of record on November 13, 2012:

 

Dynamic Income

 

$0.177 per common share

 

Global StocksPLUS®

 

$0.18335 per common share

 

High Income

 

$0.121875 per common share

 

 

There were no other subsequent events that require recognition or disclosure. 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.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

79

 


 

PIMCO Dynamic Income Financial Highlights
For a share outstanding for the period May 30, 2012* through September 30, 2012 (unaudited)

 

Net asset value, beginning of period

 

$23.88

 

 

 

 

 

Investment Operations:

 

 

 

Net investment income

 

0.87

 

Net realized and unrealized gain on investments, swaps and foreign currency transactions

 

3.83

 

Total from investment operations

 

4.70

 

 

 

 

 

Dividends to Shareholders from Net Investment Income

 

(0.53

)

 

 

 

 

Share Transactions:

 

 

 

Offering costs charged to paid-in capital in excess of par

 

(0.03

)

Net asset value, end of period

 

$28.02

 

Market price, end of period

 

$28.23

 

Total Investment Return (1)

 

15.18%

 

 

 

 

 

RATIOS/SUPPLEMENTAL DATA:

 

 

 

Net assets, end of period (000s)

 

$1,263,990

 

Ratio of expenses to average net assets, including interest expense (2)

 

2.30

%(3)

Ratio of expenses to average net assets, excluding interest expense (2)

 

1.78

%(3)

Ratio of net investment income to average net assets

 

10.31

%(3)

Portfolio turnover rate

 

14%

 

 

 

*

Commencement of operations.

(1)

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 period reported. Dividends and distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges in connection with the purchase or sale of Fund shares. Total investment return for a period of less than one year is not annualized.

(2)

Interest expense relates to participation in reverse repurchase agreement transactions.

(3)

Annualized.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

80

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 

 


 

PIMCO Global StocksPLUS® & Income Financial Highlights

For a share outstanding throughout each period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months
ended
September 30, 2012

 

Year ended March 31,

 

 

(Unaudited)

 

2012

 

2011

 

2010

 

2009

 

2008

Net asset value, beginning of
period

 

$12.57

 

 

$14.88

 

 

$12.52

 

 

$6.59

 

 

$22.88

 

 

$27.56

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.69

 

 

1.61

 

 

1.75

 

 

1.24

 

 

0.63

 

 

1.22

 

Net realized and change in unrealized gain (loss) on investments, futures contracts, options written, swaps, securities sold short, unfunded loan commitments and foreign currency transactions

 

0.90

 

 

(1.72

)

 

2.81

 

 

6.89

 

 

(12.03

)

 

(2.88

)

Total from investment operations

 

1.59

 

 

(0.11

)

 

4.56

 

 

8.13

 

 

(11.40

)

 

(1.66

)

Dividends and Distributions to Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(1.10

)

 

(2.20

)

 

(2.20

)

 

(1.66

)

 

(2.82

)

 

(2.61

)

Net realized gains

 

 

 

 

 

 

 

 

 

(2.07

)

 

(0.41

)

Return of capital

 

 

 

 

 

 

 

(0.54

)

 

 

 

 

Total dividends and distributions to shareholders

 

(1.10

)

 

(2.20

)

 

(2.20

)

 

(2.20

)

 

(4.89

)

 

(3.02

)

Net asset value, end of period

 

$13.06

 

 

$12.57

 

 

$14.88

 

 

$12.52

 

 

$6.59

 

 

$22.88

 

Market price, end of period

 

$22.18

 

 

$20.18

 

 

$24.48

 

 

$19.05

 

 

$8.64

 

 

$22.20

 

Total Investment Return (1)

 

16.05

%

 

(8.00

)%

 

43.45

%

 

155.94

%

 

(40.72

)%

 

(8.02

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of period (000s)

 

$134,545

 

 

$128,952

 

 

$150,881

 

 

$125,370

 

 

$64,444

 

 

$214,858

 

Ratio of expenses to average net assets, including interest expense (3)

 

2.88

%(4)

 

2.71

%

 

2.81

%

 

2.90

%

 

3.25

%(2)

 

3.14

%(2)

Ratio of expenses to average net assets, excluding interest expense (3)

 

2.25

%(4)

 

2.12

%

 

2.20

%

 

2.32

%

 

1.88

%(2)

 

1.51

%(2)

Ratio of net investment income to average net assets

 

11.46

%(4)

 

12.70

%

 

13.07

%

 

12.27

%

 

3.43

%

 

4.62

%

Portfolio turnover rate

 

11

%

 

90

%

 

80

%

 

135

%

 

214

%

 

156

%

 

(1)

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 period reported. Dividends, capital gains and return of capital distributions, if any, are assumed, for purposes of this calculation, to be reinvested at prices obtained under the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions or sales charges in connection with the purchase or sale of Fund shares. Total investment return for a period of less than one year is not annualized.

(2)

Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank (See note 1(o) in Notes to Financial Statements).

(3)

Interest expense primarily relates to participation in reverse repurchase agreement transactions.

(4)

Annualized.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

See accompanying Notes to Financial Statements. | 9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

81

 

 

 


 

PIMCO High Income Fund Financial Highlights

For a common share outstanding throughout each period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months
ended
September 30, 2012

 

Year ended March 31,

 

 

(Unaudited)

 

2012

 

2011

 

2010

 

2009

 

2008

Net asset value, beginning of
period

 

$7.87

 

 

$9.42

 

 

$8.73

 

 

$3.49

 

 

$11.28

 

 

$15.19

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

0.43

 

 

0.96

 

 

1.13

 

 

1.13

 

 

1.37

 

 

1.71

 

Net realized and change in unrealized gain (loss) on investments, futures contracts, options written, swaps, unfunded loan commitments and foreign currency transactions

 

0.74

 

 

(1.05

)

 

1.03

 

 

5.58

 

 

(7.55

)

 

(2.64

)

Total from investment operations

 

1.17

 

 

(0.09

)

 

2.16

 

 

6.71

 

 

(6.18

)

 

(0.93

)

Dividends and Distributions on Preferred Shares from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

*

 

*

 

(0.01

)

 

(0.01

)

 

(0.15

)

 

(0.36

)

Net realized gains

 

 

 

 

 

 

 

 

 

 

 

(0.04

)

Total dividends and distributions on preferred shares

 

*

 

*

 

(0.01

)

 

(0.01

)

 

(0.15

)

 

(0.40

)

Net increase (decrease) in net assets applicable to common shareholders resulting from investment operations

 

1.17

 

 

(0.09

)

 

2.15

 

 

6.70

 

 

(6.33

)

 

(1.33

)

Dividends and Distributions to Common Shareholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

(0.73

)

 

(1.39

)

 

(1.46

)

 

(1.39

)

 

(1.46

)

 

(1.46

)

Net realized gains

 

 

 

 

 

 

 

 

 

 

 

(1.12

)

Return of capital

 

 

 

(0.07

)

 

 

 

(0.07

)

 

 

 

 

Total dividends and distributions to common shareholders

 

(0.73

)

 

(1.46

)

 

(1.46

)

 

(1.46

)

 

(1.46

)

 

(2.58

)

Net asset value, end of period

 

$8.31

 

 

$7.87

 

 

$9.42

 

 

$8.73

 

 

$3.49

 

 

$11.28

 

Market price, end of period

 

$14.00

 

 

$12.84

 

 

$14.01

 

 

$12.24

 

 

$5.57

 

 

$11.72

 

Total Investment Return (1)

 

15.35

%

 

3.28

%

 

28.94

%

 

156.33

%

 

(42.27

)%

 

(10.55

)%

RATIOS/SUPPLEMENTAL DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets applicable to common shareholders, end of period (000s)

 

$1,017,800

 

 

$960,496

 

 

$1,138,186

 

 

$1,046,236

 

 

$412,833

 

 

$1,319,726

 

Ratio of expenses to average net assets, including interest expense (2)(4)

 

1.09

%(5)

 

1.16

%

 

1.11

%

 

1.25

%

 

1.64

%(3) 

 

1.53

%(3)

Ratio of expenses to average net assets, excluding interest expense (2)(4)

 

1.06

%(5)

 

1.07

%

 

1.04

%

 

1.15

%

 

1.62

%(3)

 

1.32

%(3)

Ratio of net investment income to average net assets (2)

 

10.94

%(5)

 

11.76

%

 

12.74

%

 

16.69

%

 

17.16

%

 

12.49

%

Preferred shares asset coverage per share

 

$112,138

 

 

$107,233

 

 

$122,446

 

 

$114,573

 

 

$55,773

 

 

$61,644

 

Portfolio turnover rate

 

36

%

 

24

%

 

89

%

 

138

%

 

261

%

 

99

%

 

*

Less than $(0.005) per common share.

(1)

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

(2)

Calculated on the basis of income and expenses applicable to both common and preferred shares relative to the average net assets of common shareholders.

(3)

Inclusive of expenses offset by custody credits earned on cash balances at the custodian bank (See note 1(o) in Notes to Financial Statements).

(4)

Interest expense primarily relates to participation in reverse repurchase agreement transactions.

(5)

Annualized.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

 

82

PIMCO High Income Fund Semi-Annual Report | 9.30.12 | See accompanying Notes to Financial Statements.

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Annual Shareholder Meeting Results/Proxy Voting Policies & Procedures (unaudited)

 

Global StocksPLUS® – Annual Shareholder Meeting Results:

The Fund held its annual meeting of shareholders on July 19, 2012.

 

Shareholders voted as indicated below:

 

 

 

Affirmative

 

Withheld
Authority

 

Re-election of Hans W. Kertess – Class I to serve until the Annual Meeting for the 2014 – 2015 fiscal year

 

8,942,865

 

298,483

 

 

 

 

 

 

 

Re-election of William B. Ogden, IV – Class I to serve until the Annual Meeting for the 2014 – 2015 fiscal year

 

8,942,518

 

298,830

 

 

The other members of the Board of Trustees as of the time of the meeting, namely, Ms. Deborah A. DeCotis and Messrs. Bradford K. Gallagher, James A. Jacobson, John C. Maney† and Alan Rappaport, continued to serve as Trustees of the Fund.

 


†  Interested Trustee

 

 

 

Proxy Voting Policies & Procedures:

A description of the policies and procedures that the Funds have adopted to determine how to vote proxies relating to portfolio securities and information about how the Funds voted proxies relating to portfolio securities held during the most recent twelve month period ended June 30 is available (i) without charge, upon request, by calling the Funds’ shareholder servicing agent at (800) 254-5197; (ii) on the Funds’ website at www.allianzinvestors.com/closedendfunds; and (iii) on the Securities and Exchange Commission website at www.sec.gov.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

83

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited)

 

Dynamic Income:

 

The Investment Company Act of 1940, as amended, requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested Trustees (the “Independent Trustees”), voting separately, approve the Fund’s Investment Management Agreement with the Investment Manager (the “Advisory Agreement”) and Portfolio Management Agreement between the Investment Manager and the Sub-Adviser (the “Sub-Advisory Agreement,” and together with the Advisory Agreement, the “Agreements”). The Trustees met in person on May 7, 2012 (the “contract review meeting”) for the specific purpose of considering whether to approve the Agreements. The Independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting.

 

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Trustees, including a majority of the Independent Trustees, concluded that the Agreements should be approved.

 

In connection with their deliberations regarding the approval of the Agreements, 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. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services to be performed by the Investment Manager or the Sub-Adviser under the applicable Agreement.

 

In connection with their contract review meeting, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. (“Lipper”) on the investment performance of a group of funds with substantially similar investment classifications/objectives as the Fund, (ii) information on the management fees and other expenses of comparable funds identified by Lipper, (iii) information regarding the investment performance and management fees of comparable portfolios of other clients of the Sub-Adviser including institutional separate accounts and other clients, (iv) an estimate of the profitability to the Investment Manager and Sub-Adviser from their relationship with the Fund, (v) descriptions of various functions proposed to be performed by the Investment Manager and Sub-Adviser for the Fund, such as portfolio management, compliance monitoring and portfolio trading practices and administrative services, and (vi) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel proposed to provide investment management, administrative and other services to the Fund.

 

The Trustees’ conclusions as to the approval of the Agreements 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.

 

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s abilities to provide high quality investment management and other services to the Fund. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Fund; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and the Sub-Adviser; and the level of skill required to manage the Fund. In addition, the Trustees reviewed the quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Fund; the nature and quality of certain administrative services the Investment Manager would be responsible for providing to the Fund; and conditions that might affect the Investment Manager’s or the Sub-Adviser’s ability to provide high quality services to the Fund in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Fund given its investment objectives and policies, and that the Investment Manager and the Sub-Adviser would be able to meet any reasonably foreseeable obligations under the Agreements.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

84

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

In assessing the reasonableness of the Fund’s fees under the Agreements, the Trustees considered, among other information, the Fund’s proposed management fee and its projected total expense ratio as a percentage of anticipated average net assets attributable to common shares and the management fee and total expense ratios of comparable funds identified by Lipper.

 

The Trustees specifically took note of how the Fund was expected to compare to its Lipper peers as to management fee expense and total net expenses. The Trustees noted that while the Fund would not be charged a separate administration fee, it was not clear whether the peer funds in the Lipper categories were separately charged such a fee by their investment managers, so that the total expense ratio (rather than any individual expense component) represented the most relevant comparison. It was noted that the total expense ratio reflects the effect of expense waivers/reimbursements (although none exist for the Fund) and does not reflect interest expense.

 

The Trustees also considered the management fees charged by the Sub-Adviser to other clients, including institutional separate accounts with investment strategies similar to those of the Fund. The Trustees noted that the management fee to be paid by the Fund is generally higher than the fees paid by the Sub-Adviser’s other clients offered for comparison but were advised that there are additional portfolio management challenges in managing the Fund, such as the types of investments the Fund can invest in.

 

The Trustees also took into account that the Fund intends to use leverage, such as by the use of reverse repurchase agreements, which would increase total assets and thus the amount of fees received by the Investment Manager and the Sub-Adviser under the Agreements (because the fees are calculated based on total managed assets). In this regard, the Trustees took into account that the Investment Manager and the Sub-Adviser have a financial incentive for the Fund to make continuous use of leverage, which may create a conflict of interest between the Investment Manager and the Sub-Adviser, on the one hand, and the Fund’s shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and the Sub-Adviser and the presentations by portfolio managers and determined that the Fund’s use of leverage would be appropriate and in the best interests of the Fund’s shareholders.

 

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability of the Investment Manager and the Sub-Adviser from their relationship with the Fund and determined that such profitability did not appear to be excessive.

 

The Trustees also took into account that, as a closed-end investment company, the Fund does not currently intend to raise additional assets following its initial public offering of common shares, so the assets of the Fund are expected to grow (if at all) only through the investment performance of the Fund. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

 

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and the Sub-Adviser, such as reputational value derived from serving as Investment Manager and Sub-Adviser to the Fund.

 

After reviewing these and other factors described herein, the Trustees concluded with respect to the Fund, within the context of their overall conclusions regarding the Agreements and based on the information provided and related representations made by management, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services to be provided by the Investment Manager and Sub-Adviser to the Fund.

 

Global StocksPLUS®:

 

The Investment Company Act of 1940, as amended, requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested Trustees (the “Independent Trustees”), voting separately, approve the Fund’s Management Agreement with the Investment Manager (the “Advisory Agreement”) and Portfolio Management Agreement between the Investment Manager and the Sub-Adviser (the “Sub-Advisory Agreement”, and together with the Advisory Agreement, the “Agreements”). The Trustees met in person on June 26-27, 2012 (the “contract review meeting”) for

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

85

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

the specific purpose of considering whether to approve the continuation of the Advisory Agreement and the Sub-Advisory Agreement. The Independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting.

 

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Trustees, including a majority of the Independent Trustees, concluded that the continuation of the Fund’s Advisory Agreement and the Sub-Advisory Agreement should be approved for a one-year period commencing July 1, 2012.

 

In connection with their deliberations regarding the continuation of the Agreements, 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. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services performed by the Investment Manager or the Sub-Adviser under the applicable Agreement.

 

In connection with their contract review meetings, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. (“Lipper”) on the total return investment performance (based on net assets) of the Fund for various time periods, the investment performance of a group of funds with substantially similar investment classifications/objectives as the Fund identified by Lipper and the performance of an applicable benchmark index, (ii) information provided by Lipper on the Fund’s management fees and other expenses and the management fees and other expenses of comparable funds identified by Lipper, (iii) information regarding the investment performance and management fees of any comparable portfolios of other clients of the Sub-Adviser, (iv) the estimated profitability to the Investment Manager from its relationship with the Fund for the one year period ended December 31, 2011, (v) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Fund, such as portfolio management, compliance monitoring and portfolio trading practices, and (vi) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Fund.

 

The Trustees’ conclusions as to the continuation of the Agreements 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.

 

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s abilities to provide high quality investment management and other services to the Fund. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Fund; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and the Sub-Adviser; and the level of skill required to manage the Fund. In addition, the Trustees reviewed the quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Fund; the nature and quality of certain administrative services the Investment Manager is responsible for providing to the Fund; and conditions that might affect the Investment Manager’s or the Sub-Adviser’s ability to provide high quality services to the Fund in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Fund given its investment objective and policies, and that the Investment Manager and the Sub-Adviser would be able to continue to meet any reasonably foreseeable obligations under the Agreements.

 

Based on information provided by Lipper, the Trustees also reviewed the Fund’s total return investment performance as well as the performance of comparable funds identified by Lipper. In the course of their deliberations, the Trustees took into account information provided by the Investment Manager in connection with the contract review meeting, as well

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

86

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance.

 

In assessing the reasonableness of the Fund’s fees under the Agreements, 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 the management fee and total expense ratios of comparable funds identified by Lipper.

 

The Trustees specifically took note of how the Fund compared to its Lipper peers as to performance, management fee expense and total net expenses. The Trustees noted that while the Fund is not charged a separate administration fee, it was not certain if the peer funds in the Lipper categories were separately charged such a fee by their investment managers, so that the total expense ratio (rather than any individual expense component) represented the most relevant comparison. It was noted that the total expense ratio reflects the effect of expense waivers/reimbursements (although none exist for the Fund) and does not reflect interest expense.

 

The Trustees noted that the expense group for the Fund provided by Lipper consisted of a total of seven closed-end funds including the Fund. The Trustees noted that only leveraged closed-end funds were considered for inclusion in the group. The Trustees also noted that average net assets of the common shares of the funds in the peer group ranged from $121.4 million to $169.9 million, and that five of the funds are larger in asset size than the Fund. The Trustees also noted that the Fund was ranked seventh out of seven funds in the expense peer group for total expense ratio based on common share assets, third out of seven funds in the expense peer group for total expense ratio based on common share and leveraged assets combined, seventh out of seven funds in actual management fees based on common share assets and fourth out of seven funds in actual management fees based on common share and leveraged assets combined (with funds ranked first having the lowest fees/expenses and ranked seventh having the highest fees/expenses in the peer group).

 

With respect to Fund performance (based on net asset value), the Trustees noted that the Fund ranked second out of two funds for the one-year period, first out of two funds for the three-year period and first out of one fund for the five-year period ended February 29, 2012.

 

In addition to their review of Fund performance based on net asset value, the Trustees also considered the market value performance of the Fund’s common shares and related share price premium and/or discount information based on the materials provided by Lipper and management.

 

Because the Sub-Adviser does not manage any funds or institutional separate accounts with investment strategies similar to the Fund, the Trustees did not consider the management fees charged by the Sub-Adviser to other clients.

 

The Trustees also took into account that the Fund uses leverage, such as by the use of reverse repurchase agreements, which increase total assets and thus the amount of fees received by the Investment Manager and the Sub-Adviser under the Agreements (because the fees are calculated based on total managed assets). In this regard, the Trustees took into account that the Investment Manager and the Sub-Adviser have a financial incentive for the Fund to continue to have leverage outstanding, which may create a conflict of interest between the Investment Manager and the Sub-Adviser, on the one hand and the Fund’s shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and the Sub-Adviser and the presentations by portfolio managers and determined that the Fund’s use of leverage continues to be appropriate and in the best interests of the Fund’s shareholders.

 

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability of the Investment Manager from its relationship with the Fund and determined that such profitability did not appear to be excessive.

 

The Trustees also took into account that, as a closed-end investment company, the Fund does not currently intend to raise additional assets, so the assets of the Fund will grow (if at all) only through the investment performance of the

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

87

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

Fund. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

 

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and the Sub-Adviser, such as reputational value derived from serving as Investment Manager and Sub-Adviser to the Fund.

 

After reviewing these and other factors described herein, the Trustees concluded with respect to the Fund, within the context of their overall conclusions regarding the Agreements and based on the information provided and related representations made by management, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services being provided by the Investment Manager and Sub-Adviser to the Fund.

 

High Income:

 

The Investment Company Act of 1940, as amended, requires that both the full Board of Trustees (the “Trustees”) and a majority of the non-interested Trustees (the “Independent Trustees”), voting separately, approve the Fund’s Management Agreement with the Investment Manager (the “Advisory Agreement”) and Portfolio Management Agreement between the Investment Manager and the Sub-Adviser (the “Sub-Advisory Agreement”, and together with the Advisory Agreement, the “Agreements”). The Trustees met in person on June 26-27, 2012 (the “contract review meeting”) for the specific purpose of considering whether to approve the continuation of the Advisory Agreement and the Sub-Advisory Agreement. The Independent Trustees were assisted in their evaluation of the Agreements by independent legal counsel, from whom they received separate legal advice and with whom they met separately from Fund management during the contract review meeting.

 

Based on their evaluation of factors that they deemed to be material, including those factors described below, the Trustees, including a majority of the Independent Trustees, concluded that the continuation of the Fund’s Advisory Agreement and the Sub-Advisory Agreement should be approved for a one-year period commencing July 1, 2012.

 

In connection with their deliberations regarding the continuation of the Agreements, 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. As described below, the Trustees considered the nature, quality, and extent of the various investment management, administrative and other services performed by the Investment Manager or the Sub-Adviser under the applicable Agreement.

 

In connection with their contract review meetings, the Trustees received and relied upon materials provided by the Investment Manager which included, among other items: (i) information provided by Lipper Inc. (“Lipper”) on the total return investment performance (based on net assets) of the Fund for various time periods, the investment performance of a group of funds with substantially similar investment classifications/objectives as the Fund identified by Lipper and the performance of an applicable benchmark index, (ii) information provided by Lipper on the Fund’s management fees and other expenses and the management fees and other expenses of comparable funds identified by Lipper, (iii) information regarding the investment performance and management fees of any comparable portfolios of other clients of the Sub-Adviser, including institutional separate accounts and other clients; (iv) the estimated profitability to the Investment Manager from its relationship with the Fund for the one year period ended December 31, 2011, (v) descriptions of various functions performed by the Investment Manager and the Sub-Adviser for the Fund, such as portfolio management, compliance monitoring and portfolio trading practices, and (vi) information regarding the overall organization of the Investment Manager and the Sub-Adviser, including information regarding senior management, portfolio managers and other personnel providing investment management, administrative and other services to the Fund.

 

The Trustees’ conclusions as to the continuation of the Agreements 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

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

88

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

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.

 

As part of their review, the Trustees examined the Investment Manager’s and the Sub-Adviser’s abilities to provide high quality investment management and other services to the Fund. The Trustees considered the investment philosophy and research and decision-making processes of the Sub-Adviser; the experience of key advisory personnel of the Sub-Adviser responsible for portfolio management of the Fund; the ability of the Investment Manager and the Sub-Adviser to attract and retain capable personnel; the capability and integrity of the senior management and staff of the Investment Manager and the Sub-Adviser; and the level of skill required to manage the Fund. In addition, the Trustees reviewed the quality of the Investment Manager’s and the Sub-Adviser’s services with respect to regulatory compliance and compliance with the investment policies of the Fund; the nature and quality of certain administrative services the Investment Manager is responsible for providing to the Fund; and conditions that might affect the Investment Manager’s or the Sub-Adviser’s ability to provide high quality services to the Fund in the future under the Agreements, including each organization’s respective business reputation, financial condition and operational stability. Based on the foregoing, the Trustees concluded that the Sub-Adviser’s investment process, research capabilities and philosophy were well suited to the Fund given its investment objectives and policies, and that the Investment Manager and the Sub-Adviser would be able to continue to meet any reasonably foreseeable obligations under the Agreements.

 

Based on information provided by Lipper, the Trustees also reviewed the Fund’s total return investment performance as well as the performance of comparable funds identified by Lipper. In the course of their deliberations, the Trustees took into account information provided by the Investment Manager in connection with the contract review meeting, as well as during investment review meetings conducted with portfolio management personnel during the course of the year regarding the Fund’s performance.

 

In assessing the reasonableness of the Fund’s fees under the Agreements, 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 the management fee and total expense ratios of comparable funds identified by Lipper.

 

The Trustees specifically took note of how the Fund compared to its Lipper peers as to performance, management fee expense and total net expenses. The Trustees noted that while the Fund is not charged a separate administration fee, it was not certain if the peer funds in the Lipper categories were separately charged such a fee by their investment managers, so that the total expense ratio (rather than any individual expense component) represented the most relevant comparison. It was noted that the total expense ratio reflects the effect of expense waivers/reimbursements (although none exist for the Fund) and does not reflect interest expense.

 

The Trustees noted that the expense group for the Fund provided by Lipper consisted of a total of six closed-end funds, including the Fund. The Trustees noted that only leveraged closed-end funds were considered for inclusion in the group. The Trustees also noted that average net assets of the common shares of the six funds in the peer group ranged from $59.5 million to $991.3 million, and that no other fund is larger in asset size than the Fund. The Trustees also noted that the Fund was ranked second out of six funds in the expense peer group for total expense ratio based on common share assets and based on common share and leveraged assets combined, fourth out of six funds in actual management fees based on common share assets and fifth out of six funds in actual management fees based on common share and leveraged assets combined (with funds ranked first having the lowest fees/expenses and ranked sixth having the highest fees/expenses in the peer group).

 

With respect to Fund performance (based on net asset value), the Trustees noted that the Fund had fifth quintile performance for the one-year period, first quintile performance for the three-year period and third quintile performance for the five-year period ended February 29, 2012.

 

In addition to their review of Fund performance based on net asset value, the Trustees also considered the market value performance of the Fund’s common shares and related share price premium and/or discount information based on the materials provided by Lipper and management.

 

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

9.30.12 | 

PIMCO High Income Fund Semi-Annual Report

89

 

 


 

PIMCO Dynamic Income Fund/PIMCO Global StocksPLUS® & Income Fund/PIMCO High Income Fund

Matters Relating to the Trustees’ Consideration of the Investment Management & Portfolio Management Agreements (unaudited) (continued)

 

The Trustees also considered the management fees charged by Sub-Adviser to other clients, including institutional separate accounts with investment strategies similar to those of the Fund. Regarding the institutional separate accounts, they noted that the management fees paid by the Fund are generally higher than the fees paid by these clients of the Sub-Adviser, but the Trustees were advised by the Sub-Adviser that the administrative burden for the Investment Manager and the Sub-Adviser with respect to the Fund are also relatively higher, due in part to the more extensive regulatory regime to which the Fund are subject in comparison to institutional separate accounts. The Trustees noted that the management fees paid by the Fund are generally higher than the fees paid by the open-end funds offered for comparison but were advised that there are additional portfolio management challenges in managing the Fund, such as those associated with the use of leverage and meeting a regular dividend level.

 

The Trustees also took into account that the Fund has preferred shares outstanding, which increases the amount of fees received by the Investment Manager and the Sub-Adviser under the Agreements (because the fees are calculated based on the Fund’s net assets, including any assets attributable to preferred shares outstanding). In this regard, the Trustees took into account that the Investment Manager and the Sub-Adviser have a financial incentive for the Fund to continue to have preferred shares outstanding, which may create a conflict of interest between the Investment Manager and the Sub-Adviser, on one hand, and the Fund’s shareholders, on the other. In this regard, the Trustees considered information provided by the Investment Manager and the Sub-Adviser and the presentations by portfolio managers and determined that the Fund’s use of leverage continues to be appropriate and in the best interests of the Fund’s shareholders.

 

Based on a profitability analysis provided by the Investment Manager, the Trustees also considered the estimated profitability of the Investment Manager from its relationship with the Fund and determined that such profitability did not appear to be excessive.

 

The Trustees also took into account that, as a closed-end investment company, the Fund does not currently intend to raise additional assets, so the assets of the Fund will grow (if at all) only through the investment performance of the Fund. Therefore, the Trustees did not consider potential economies of scale as a principal factor in assessing the fee rates payable under the Agreements.

 

Additionally, the Trustees considered so-called “fall-out benefits” to the Investment Manager and the Sub-Adviser, such as reputational value derived from serving as Investment Manager and Sub-Adviser to the Fund.

 

After reviewing these and other factors described herein, the Trustees concluded with respect to the Fund, within the context of their overall conclusions regarding the Agreements and based on the information provided and related representations made by management, that the fees payable under the Agreements represent reasonable compensation in light of the nature and quality of the services being provided by the Investment Manager and Sub-Adviser to the Fund.

 

 

PIMCO Dynamic Income Fund

 

 

 

PIMCO Global StocksPLUS® & Income Fund

 

 

90

 

PIMCO High Income Fund Semi-Annual Report | 9.30.12

 

 

 


 

Trustees

Fund Officers

Hans W. Kertess

Brian S. Shlissel

Chairman of the Board of Trustees

President & Chief Executive Officer

Deborah A. DeCotis

Lawrence G. Altadonna

Bradford K. Gallagher

Treasurer, Principal Financial & Accounting Officer

James A. Jacobson

Thomas J. Fuccillo

John C. Maney

Vice President, Secretary & Chief Legal Officer

William B. Ogden, IV

Scott Whisten

Alan Rappaport

Assistant Treasurer

 

Richard J. Cochran

 

Assistant Treasurer

 

Orhan Dzemaili

 

Assistant Treasurer

 

Youse E. Guia

 

Chief Compliance Officer

 

Lagan Srivastava

 

Assistant Secretary

 

Investment Manager

Allianz Global Investors Fund Management LLC
1633 Broadway
New York, NY 10019

 

Sub-Adviser

Pacific Investment Management Company LLC
840 Newport Center Drive
Newport Beach, CA 92660

 

Custodian & Accounting Agent

State Street Bank & Trust Co.
801 Pennsylvania Avenue
Kansas City, MO 64105-1307

 

Transfer Agent, Dividend Paying Agent and Registrar

American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219

 

Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP
300 Madison Avenue
New York, NY 10017

 

Legal Counsel

Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, MA 02199

 

This report, including the financial information herein, is transmitted to the shareholders of PIMCO Dynamic Income Fund, PIMCO Global StocksPLUS® & Income Fund and PIMCO High Income Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase of shares of the Funds or any securities mentioned in this report.

 

The financial information included herein is taken from the records of the Funds without examination by an independent registered public accounting firm, who did not express an opinion herein.

 

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that from time to time the Funds may purchase their common shares in the open market.

 

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of their fiscal year on Form N-Q. Each Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. The information on Form N-Q is also available on the Funds’ website at www.allianzinvestors.com/closedendfunds.

 

Information on the Funds is available at www.allianzinvestors.com/closedendfunds or by calling the Funds’ shareholder servicing agent at (800) 254-5197.

 


 

 

 

 

 

Receive this report electronically and eliminate paper mailings.

To enroll, go www.allianzinvestors.com/edelivery.

 

AGI-2012-09-28-4752

 

AZ607SA_093012


 

ITEM 2. CODE OF ETHICS

 

Not required in this filing.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT

 

Not required in this filing.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Not required in this filing.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANT

 

Not required in this filing.

 

ITEM 6. INVESTMENTS

 

(a)

The registrant’s Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this form.

(b)

Not applicable

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not required in this filing.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

 

Not required in this filing.

 

ITEM 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Companies

 

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 registrant’s President and Chief Executive Officer and Treasurer, Principal Financial & Accounting Officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 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 document.

 

(b) There were no significant changes in internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d))) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 



 

ITEM 12. EXHIBITS

 

(a) (1) Not required in this filing.

 

(a) (2) Exhibit 99.302 Cert. — Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

(a) (3) Not Applicable

 

(b) Exhibit 99.906 Cert. — Certification 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 High Income Fund

 

By:

/s/ Brian S. Shlissel

 

President & Chief Executive Officer

 

 

 

 

Date:

November 29, 2012

 

 

 

 

By:

/s/ Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

 

Date:

November 29, 2012

 

 

 

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/ Brian S. Shlissel

 

President & Chief Executive Officer

 

 

 

 

Date:

November 29, 2012

 

 

 

 

By:

/s/ Lawrence G. Altadonna

 

Treasurer, Principal Financial & Accounting Officer

 

 

 

 

Date:

November 29, 2012