PCM Fund, Inc.

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: 811-07816

PCM Fund Inc.

(Exact name of registrant as specified in charter)

1633 Broadway, New York, NY 10019

(Address of principal executive offices)

William G. Galipeau

Treasurer (Principal Financial & Accounting Officer)

650 Newport Center Drive

Newport Beach, CA 92660

(Name and address of agent for service)

Copies to:

David C. Sullivan

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, MA 02199

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

Date of fiscal year end: June 30

Date of reporting period: December 31, 2015

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

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


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


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PIMCO Closed-End Funds

 

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Semiannual Report

 

December 31, 2015

 

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PCM Fund, Inc.

PIMCO Global StocksPLUS® & Income Fund

PIMCO Income Opportunity Fund

PIMCO Strategic Income Fund, Inc.

PIMCO Dynamic Credit Income Fund

PIMCO Dynamic Income Fund

 

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Table of Contents

 

            Page  
     

Letter from the Chairman of the Board & President

        2   

Important Information About the Funds

        4   

Financial Highlights

        16   

Statements of Assets and Liabilities

        18   

Consolidated Statements of Assets and Liabilities

        19   

Statements of Operations

        20   

Consolidated Statements of Operations

        21   

Statements of Changes in Net Assets

        22   

Consolidated Statements of Changes in Net Assets

        24   

Statements of Cash Flows

        25   

Consolidated Statements of Cash Flows

        26   

Notes to Financial Statements

        89   

Glossary

        109   

Investment Strategy Updates

        110   
     
Fund    Fund
Summary
     Schedule of
Investments
 
     

PCM Fund, Inc.

     9         27   

PIMCO Global StocksPLUS® & Income Fund

     10         34   

PIMCO Income Opportunity Fund

     11         44   

PIMCO Strategic Income Fund, Inc.

     12         55   

PIMCO Dynamic Credit Income Fund

     13         64   

PIMCO Dynamic Income Fund

     14         78   


Letter from the Chairman of the Board & President

 

Dear Shareholder:

 

The financial markets experienced periods of volatility during the reporting period. Investor sentiment was challenged at times given mixed economic data, uncertainties surrounding future global monetary policy, falling commodity prices and geopolitical issues.

 

For the six-month reporting period ended December 31, 2015

 

The U.S. economy expanded during the reporting period, but the pace was uneven. Looking back, U.S. gross domestic product (“GDP”), which represents the value of goods and services produced in the country, the broadest measure of economic activity and the principal indicator of economic performance, expanded at a 3.9% annual pace during the second quarter of 2015. Economic activity then decelerated, as GDP grew at a 2.0% annual pace during the third quarter of 2015. Finally, the Commerce Department’s initial reading — released after the reporting period had ended — showed that fourth quarter 2015 GDP grew at an annual pace of 0.7%.

 

After nearly a decade of highly accommodative monetary policy, the Federal Reserve (“Fed”) raised interest rates at its meeting in mid-December 2015. The Fed’s action pushed rates from a range between 0% and 0.25% to a range between 0.25% and 0.50%. In its official statement following the meeting, the Fed said, “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

 

Economic activity outside the U.S. was mixed during the reporting period. Anemic growth and concerns of deflation in the eurozone caused the European Central Bank (“ECB”) to announce that beginning in March 2015, it would start a 60 billion-a-month bond-buying program that was expected to run until at least September 2016. In December 2015, continued economic headwinds prompted the ECB to extend its monthly bond-buying program by six months, until at least March 2017.

 

Commodities and emerging markets dominated the news over the reporting period. Crude oil declined from $64 to $37 between June and December, as OPEC continued pumping at close to full capacity and even as U.S. production started to contract. In August 2015, China surprised the markets by allowing its currency to depreciate by nearly 2% against the U.S. dollar, and then spent over $180 billion in foreign reserves over the course of the fourth quarter to support its currency. Meanwhile, Chinese equity markets continued their sharp sell-off, casting a shadow on global risk assets. Elsewhere in emerging markets, the Brazilian political and economic situation continued to deteriorate, culminating in Standard & Poor’s and Fitch downgrading Brazilian foreign currency debt rating to below investment grade.

 

Outlook

 

PIMCO’s baseline view sees U.S. economic growth in the range of 2.0% - 2.5% over the next four quarters — in line with the average growth rate of the U.S. economy during the current expansion — and headline CPI (Consumer Price Index) inflation in a range of 1.5% - 2%. In PIMCO’s view, given moderate global recovery and the strong U.S. dollar, there will be little if any boost to aggregate demand from international trade. On the positive side of the ledger, PIMCO believes that the recent budget agreement between Congress and President Obama will provide the U.S. economy a modest and unexpected fiscal boost from the increase in federal spending. With respect to the Fed, after December’s initial rate hike, the market is pricing in two further quarter-point increases in 2016. PIMCO believes there is a risk that the Fed will deliver more rate hikes than the market is currently pricing in.

 

Overseas, PIMCO’s baseline view for the eurozone is economic growth of around 1.5% over the next four quarters, with inflation from roughly zero in 2015 to about 1% in 2016. PIMCO believes that ECB quantitative easing will have a positive impact on loan growth. However, while net exports should benefit from the cumulative weakening of the

euro, it is PIMCO’s belief that slower growth from the eurozone’s major trading partners may limit the contribution to growth from net exports in 2016. PIMCO sees the prospects of a modest pickup in Japanese growth to about 1% in

 

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2016, versus an estimated 0.6% in 2015. In PIMCO’s view, headline inflation will remain positive in 2016, but at around 0.5 - 1% is well below the Bank of Japan’s target of 2%.

 

In the following pages of this PIMCO Closed-End Funds Semiannual Report, please find specific details regarding investment performance and a discussion of factors that most affected the Funds’ performance over the six months ended December 31, 2015.

 

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

 

Sincerely,

 

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

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   3


Important Information About the Funds

 

We believe that bond funds have an important role to play in a well-diversified investment portfolio. It is important to note, however, that in an environment where interest rates trend upward, rising rates would negatively impact the performance of most bond funds, and fixed-income securities held by a Fund are likely to decrease in value. A number of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions, etc.). Accordingly, changes in interest rates can be sudden, and there is no guarantee that Fund Management will anticipate such movement. As of the date of this report, interest rates in the U.S. are at or near historically low levels. As such, bond funds may currently face an increased exposure to the risks associated with rising interest rates. This is especially true since the Federal Reserve Board has concluded its quantitative easing program and, at its meeting on December 16, 2015, raised interest rates for the first time since 2006 from a target range of 0% to 0.25% to a target range of 0.25% to 0.50%. Further, while the U.S. bond market has steadily grown over the past three decades, dealer inventories of corporate bonds have remained relatively stagnant. As a result, there has been a significant reduction in the ability of dealers to “make markets” in corporate bonds. All of the factors mentioned above, individually or collectively, could lead to increased volatility and/or lower liquidity in the fixed income markets, which could result in increased losses to a Fund. Bond funds and individual bonds with a longer duration (a measure of the sensitivity of a security’s price to changes in interest rates) tend to be more sensitive to changes in interest rates, usually making them more volatile than securities or funds with shorter durations. In addition, in the current low interest rate environment, the market price of the Funds’ common shares may be particularly sensitive to changes in interest rates or the perception that there will be a change in interest rates.

 

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

instruments. If it does, a Fund’s investment exposure could far exceed the value of its portfolio securities and its investment performance could be primarily dependent upon securities it does not directly own. Changes in regulation relating to a mutual fund’s use of derivatives and related instruments could potentially limit or impact a Fund’s ability to invest in derivatives, limit a Fund’s ability to employ certain strategies that use derivatives and adversely affect the value or performance of derivatives and a Fund.

 

For purposes of applying a Fund’s investment policies and restrictions, swap agreements are generally valued by the Fund at market value. In the case of a credit default swap, however, in applying certain of a Fund’s investment policies and restrictions, the Fund will value the credit default swap at its notional value or its full exposure value (i.e., the sum of the notional amount for the contract plus the market value), but may value the credit default swap at market value for purposes of applying certain of the Fund’s other investment policies and restrictions. For example, a Fund may value credit default swaps at full exposure value for purposes of the Fund’s credit quality guidelines (if any) because such value reflects the Fund’s actual economic exposure during the term of the credit default swap agreement. In this context, both the notional amount and the market value may be positive or negative depending on whether a Fund is selling or buying protection through the credit default swap. The manner in which certain securities or other instruments are valued by a Fund for purposes of applying investment policies and restrictions may differ from the manner in which those investments are valued by other types of investors.

 

A Fund’s use of leverage creates the opportunity for increased income for the Fund’s common shareholders, but also creates special risks. Leverage is a speculative technique that may expose a Fund to greater risk and increased costs. If shorter-term interest rates rise relative to the rate of return on a Fund’s portfolio, the interest and other costs to the Fund of leverage could exceed the rate of return on the debt obligations and other investments held by the Fund, thereby reducing return to the Fund’s common shareholders. In addition, fees and expenses of any form of leverage used by a Fund will be borne entirely by its common shareholders (and not by preferred shareholders, if any) and will reduce the investment return of the Fund’s common shares. There can be no assurance that a Fund’s use of leverage will result in a higher yield on its common shares, and it may result in losses. Leverage creates several major types of risks for a Fund’s common shareholders, including: (1) the likelihood of greater volatility of net asset value and market price of the Fund’s common shares, and of the investment return to the Fund’s common shareholders, than a comparable portfolio without leverage; (2) the possibility either that the Fund’s common share dividends will fall if the interest and other costs of leverage rise, or that dividends paid on the Fund’s common shares will fluctuate

 

 

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because such costs vary over time; and (3) the effects of leverage in a declining market or a rising interest rate environment, as leverage is likely to cause a greater decline in the net asset value of the Fund’s common shares than if the Fund were not leveraged and may result in a greater decline in the market value of the Fund’s common shares.

 

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

 

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

associated with initiating the loan, irrespective of whether the loan transaction is ultimately consummated or closed. This may include significant legal and due diligence expenses, which will be indirectly borne by a Fund and its shareholders.

 

Mortgage-related and other asset-backed securities 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 experience additional volatility since individual mortgage holders are less likely to exercise prepayment options, thereby putting additional downward pressure on the value of these securities and potentially causing the Fund to lose money. This is known as extension risk. Mortgage-backed securities can be highly sensitive to rising interest rates, such that even small movements can cause an investing Fund to lose value. Mortgage-backed securities, and in particular those not backed by a government guarantee, are subject to credit risk. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner than expected. This can reduce the returns of the Funds because the Funds may have to reinvest that money at the lower prevailing interest rates. The Funds’ investments in other asset-backed securities are subject to risks similar to those associated with mortgage-related securities, as well as additional risks associated with the nature of the assets and the servicing of those assets. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities, and asset-backed securities may not have the benefit of any security interest in the related assets.

 

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

 

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   5


Important Information About the Funds (Cont.)

 

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

 

The global economic crisis brought several small economies in Europe to the brink of bankruptcy and many other economies into recession and weakened the banking and financial sectors of many European countries. For example, the governments of Greece, Spain, Portugal, and the Republic of Ireland have all experienced large public budget deficits, the effects of which are still yet unknown and may slow the overall recovery of the European economies from the global economic crisis. In addition, due to large public deficits, some European countries may be dependent on assistance from other European governments and institutions or other central banks or supranational agencies such as the International Monetary Fund. Assistance may be dependent on a country’s implementation of reforms or reaching a certain level of performance. Failure to reach those objectives or an insufficient level of assistance could result in a deep economic downturn which could significantly affect the value of a Fund’s European investments. It is possible that one or more Economic and Monetary Union of the European Union (“EMU”) member countries could abandon the euro and return to a national currency and/or that the euro will cease to exist as a single currency in its current form. The exit of any country out of the euro may have an extremely destabilizing effect on other eurozone countries and their economies and a negative effect on the global economy as a whole. Such an exit by one country may also increase the possibility that additional countries may exit the euro should they face similar financial difficulties.

 

The Funds may invest in securities and instruments that are economically tied to Russia. Investments in Russia are subject to various risks such as political, economic, legal, market and currency risks. The risks include uncertain political and economic policies, short term market volatility, poor accounting standards, corruption and crime, an inadequate regulatory system, and unpredictable taxation. Investments in Russia are particularly subject to the risk that economic sanctions may be imposed by the United States and/or other countries. Such sanctions — which may impact companies in many sectors, including energy, financial services and defense, among others — may negatively impact the Funds’ performance and/or ability to achieve their investment objectives. The Russian securities market is characterized by

limited volume of trading, resulting in difficulty in obtaining accurate prices. The Russian securities market, as compared to U.S. markets, has significant price volatility, less liquidity, a smaller market capitalization and a smaller number of traded securities. There may be little publicly available information about issuers. Settlement, clearing and registration of securities transactions are subject to risks because of registration systems that may not be subject to effective government supervision. This may result in significant delays or problems in registering the transfer of securities. Russian securities laws may not recognize foreign nominee accounts held with a custodian bank, and therefore the custodian may be considered the ultimate owner of securities they hold for their clients. Ownership of securities issued by Russian companies is recorded by companies themselves and by registrars instead of through a central registration system. It is possible that the ownership rights of the Funds could be lost through fraud or negligence. While applicable Russian regulations impose liability on registrars for losses resulting from their errors, it may be difficult for the Funds to enforce any rights it may have against the registrar or issuer of the securities in the event of loss of share registration. Adverse currency exchange rates are a risk and there may be a lack of available currency hedging instruments. Investments in Russia may be subject to the risk of nationalization or expropriation of assets. Oil, natural gas, metals, and timber account for a significant portion of Russia’s exports, leaving the country vulnerable to swings in world prices.

 

The common shares of the Funds trade on the New York Stock Exchange. As with any stock, the price of a Fund’s common shares will fluctuate with market conditions and other factors. If you sell your common shares of a Fund, the price received may be more or less than your original investment. Shares of closed-end management investment companies frequently trade at a discount from their net asset value. The common shares of a Fund may trade at a price that is less than the initial offering price and/or the net asset value of such shares. Further, if a Fund’s shares trade at a price that is more than the initial offering price and/or the net asset value of such shares, including at a substantial premium and/or for an extended period of time, there is no assurance that any such premium will be sustained for any period of time and will not decrease, or that the shares will not trade at a discount to net asset value thereafter.

 

Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. GAAP. Differences between tax regulations and U.S. GAAP may cause timing differences between income and capital gain recognition. Further, the character of investment income and capital gains may be different for certain transactions under the two methods of accounting. As a result, income distributions and capital gain distributions declared during a fiscal period may differ significantly from the net investment income (loss) and realized gains (losses) reported on each Fund’s annual financial statements presented under U.S. GAAP.

 

 

6   PIMCO CLOSED-END FUNDS     


 

If the Fund estimates that a portion of one of its dividend distributions may be comprised of amounts from sources other than net investment income, the Fund will notify shareholders of record of the estimated composition of such distribution through a Section 19 Notice. To determine the sources of the Fund’s distributions, the Fund references its accounting records at the time the distribution is paid. If, based on such accounting records, a particular distribution does not include capital gains or paid-in surplus or other capital sources, a Section 19 Notice generally will not be issued. It is important to note that differences exist between a Fund’s accounting entries maintained on a day-to-day basis, the Fund’s financial statements presented in accordance with U.S. GAAP, and accounting practices under income tax regulations. Examples of such differences may include the treatment of paydowns on mortgage-backed securities purchased at a discount and periodic payments under interest rate swap contracts. A Fund may not issue a Section 19 Notice in situations where the Fund’s financial statements prepared later and in accordance with U.S. GAAP or the final tax character of those distributions might later report that the sources of those distributions included capital gains and/or a return of capital. Please visit www.pimco.com for the most recent Section 19 Notice, if applicable, for additional information regarding the composition of distributions. Final determination of a distribution’s tax character will be reported on Form 1099 DIV sent to shareholders each January.

 

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

sale risk and convertible securities risk. A description of certain of these risks is available in the Notes to Financial Statements of this Report.

 

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

 

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

 

Fund Name       Commencement
of Operations
    Diversification
Status

PCM Fund, Inc.

      09/02/93      Diversified

PIMCO Global StocksPlus® & Income Fund

      05/31/05      Diversified

PIMCO Income Opportunity Fund

      11/30/07      Diversified

PIMCO Strategic Income Fund, Inc.

      02/24/94      Diversified

PIMCO Dynamic Credit Income Fund

      01/31/13      Diversified

PIMCO Dynamic Income Fund

      05/30/12      Diversified

 

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

 

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

 

 

 

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

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   7


Important Information About the Funds (Cont.)

 

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

 

PIMCO has adopted written proxy voting policies and procedures (“Proxy Policy”) as required by Rule 206(4)-6 under the Investment Advisers Act of 1940. The Proxy Policy has been adopted by the Funds as the policies and procedures that PIMCO will use when voting proxies on behalf of the Funds. A description of the policies and procedures

that PIMCO uses to vote proxies relating to portfolio securities of each Fund, and information about how each Fund voted proxies relating to portfolio securities held during the most recent twelve-month period ended June 30, are available without charge, upon request, by calling the Funds at (844) 33-PIMCO (844-337-4626), on the Funds’ website at www.pimco.com, and on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

Each Fund files a complete schedule of its portfolio holdings with the SEC for the first and third quarters of its fiscal year on Form N-Q. A copy of each Fund’s Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and is available without charge, upon request by calling the Funds at (844) 33-PIMCO (844-337-4626) and on the Funds’ website at www.pimco.com. Updated portfolio holdings information about a Fund will be available at www.pimco.com approximately 15 calendar days after such Fund’s most recent fiscal quarter end, and will remain accessible until such Fund files a Form N-Q or a shareholder report for the period which includes the date of the information. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

 

8   PIMCO CLOSED-END FUNDS     


PCM Fund, Inc.

 

Symbol on NYSE - PCM

 

Allocation Breakdown

 

Non-Agency Mortgage-Backed Securities

    43.1%   

Asset-Backed Securities

    31.7%   

Corporate Bonds & Notes

    16.7%   

Short-Term Instruments

    3.6%   

Bank Loan Obligations

    2.9%   

Other

    2.0%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $9.24   

NAV

    $9.82   

Premium/(Discount) to NAV

    (5.91)%   

Market Price Distribution Yield(2)

    10.39%   

NAV Distribution Yield(2)

    9.78%   

Total Effective Leverage(3)

    45%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(09/02/93)
 
Market Price     (3.38)%        (4.62)%        6.78%        6.75%        7.90%   
NAV     (3.68)%        0.37%        10.23%        9.52%        8.79%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

For the period from July 1, 2015 through December 31, 2015, the Fund’s allocation to high yield corporate bonds was the primary detractor from performance. The asset class sold off amid broad commodity weakness and retail fund outflows late in the reporting period.

 

»  

Within high yield, the Fund’s exposure to energy, as well as select names in media and telecommunications, were the key detractors. Exposure to utilities, manufacturing and raw materials credits further dampened returns.

 

»  

The Fund’s allocation to commercial mortgage-backed securities was a significant contributor to performance, supported by their attractive carry, the rate of interest earned by holding the respective securities.

 

»  

The Fund’s exposure to U.S. interest rates was a significant contributor to performance, due mainly to an emphasis on the intermediate portion of the curve, which provided an attractive carry during a period when rates were mostly flat.

 

»  

The Fund’s allocation to non-agency mortgage-backed securities was a modest contributor to returns. The sector continued to benefit from an improving U.S. housing market and limited outstanding supply.

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   9


PIMCO Global StocksPLUS® & Income Fund

 

Symbol on NYSE - PGP

 

Allocation Breakdown

 

Non-Agency Mortgage-Backed Securities

    44.4%   

Corporate Bonds & Notes

    27.3%   

Short-Term Instruments

    13.8%   

Asset-Backed Securities

    8.5%   

Bank Loan Obligations

    1.9%   

Other

    4.1%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $18.12   

NAV

    $10.88   

Premium/(Discount) to NAV

    66.54%   

Market Price Distribution Yield(2)

    12.14%   

NAV Distribution Yield(2)

    20.22%   

Total Effective Leverage(3)

    41%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(05/31/05)
 
Market Price     14.55%        5.41%        7.65%        12.92%        11.79%   
NAV     (7.30)%        0.60%        11.60%        10.83%        11.28%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

Exposure to the S&P 500 Index and the MSCI EAFE Index through equity index derivatives was a primary detractor from absolute returns. During the reporting period, international equities (as represented by the MSCI EAFE Index) declined -6.01% and U.S. equities (as represented by the S&P 500 Index) were basically flat.

 

»  

The fixed income portfolio that backs the equity index derivatives also detracted from returns, alongside weakness in corporate and emerging market credits.

 

»  

Exposure to high yield corporate bonds had a major negative impact on performance. High yield spreads widened amid broad commodity weakness and retail fund outflows late in the reporting period. Corporate credits associated with energy and raw materials, as well as select names in manufacturing, media and telecommunications, were among the worst performers.

 

»  

Exposure to local and hard currency-denominated Brazilian debt was another significant detractor from returns. During the reporting period, Brazil was negatively impacted by its slowing economy, high inflation and a political crisis.

 

»  

A yield curve-steepening strategy implemented through U.S. dollar interest rate swaps detracted from performance as the swap curve flattened.

 

»  

Exposure to residential non-agency mortgages added modestly to performance, as these securities benefited from an improving housing market and limited supply.

 

»  

A defensive option strategy involving written at-the-money calls and purchased out-of-the-money puts on S&P 500 futures contracts had a positive impact on performance.

 

10   PIMCO CLOSED-END FUNDS     


PIMCO Income Opportunity Fund

 

Symbol on NYSE - PKO

 

Allocation Breakdown

 

Corporate Bonds & Notes

    31.5%   

Asset-Backed Securities

    29.6%   

Non-Agency Mortgage-Backed Securities

    27.4%   

Short-Term Instruments

    3.2%   

Convertible Preferred Securities

    3.0%   

Other

    5.3%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $21.17   

NAV

    $22.68   

Premium/(Discount) to NAV

    (6.66)%   

Market Price Distribution Yield(2)

    10.77%   

NAV Distribution Yield(2)

    10.05%   

Total Effective Leverage(3)

    42%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     5 Year     Commencement
of Operations
(11/30/07)
 
Market Price     (5.86)%        (4.91)%        8.18%        9.92%   
NAV     (6.41)%        (1.70)%        9.42%        11.49%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

For the period from July 1, 2015 through December 31, 2015, the Fund’s allocation to high yield corporate bonds was the primary detractor from performance, as the asset class struggled amid broad commodity weakness and retail fund outflows late in the reporting period.

 

»  

Within high yield, exposure to banking and brokerage, utilities, energy, telecommunications, media, raw materials and manufacturing credits detracted from results.

 

»  

Exposure to local and hard currency-denominated Brazilian debt was a major detractor from returns. Brazil was negatively impacted by its slowing economy, high inflation and a political crisis.

 

»  

The Fund’s exposure to U.S. dollar-denominated Russian quasi-sovereign bonds contributed meaningfully to returns. Spreads on these issues continued to retrace much of the widening that occurred during the second half of 2014 as geopolitical tensions in the region eased and investor sentiment improved.

 

»  

The Fund’s exposure to U.S. interest rates was modestly positive for performance given the carry, the rate of interest earned by holding the respective securities, associated with such exposure. This positive impact, however, was partially offset by strategies designed to benefit from rising long-term interest rates, as long-term yields fell during the reporting period.

 

»  

The Fund’s allocation to securitized credit was a modest contributor to performance. Positive contributions from commercial mortgage-backed securities, structured credit and lower-beta non-agency residential mortgage-backed securities were partially offset by negative contributions from higher-beta non-agency residential mortgage-backed securities.

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   11


PIMCO Strategic Income Fund, Inc.

 

Symbol on NYSE - RCS

 

Allocation Breakdown

 

U.S. Government Agencies

    57.0%   

Non-Agency Mortgage-Backed Securities

    16.1%   

Corporate Bonds & Notes

    10.7%   

U.S. Treasury Obligations

    7.4%   

Asset-Backed Securities

    6.4%   

Short-Term Instruments

    0.9%   

Other

    1.5%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $8.95   

NAV

    $8.03   

Premium/(Discount) to NAV

    11.46%   

Market Price Distribution Yield(2)

    10.73%   

NAV Distribution Yield(2)

    11.96%   

Total Effective Leverage(3)

    28%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(02/24/94)
 
Market Price     9.45%        5.96%        9.15%        10.22%        8.93%   
NAV     (0.36)%        3.89%        8.97%        10.37%        8.62%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

For the period from July 1, 2015 through December 31, 2015, the Fund’s allocation to securitized credit was a primary contributor to performance. In particular, the positive contribution from exposure to both agency and non-agency residential mortgage-backed securities boosted returns given an improving U.S. housing market.

 

»  

The Fund’s exposure to local and hard currency-denominated Brazilian debt was a major detractor from returns. Brazil was negatively impacted by its slowing economy, high inflation and a political crisis.

 

»  

The Fund’s exposure to U.S. interest rates was substantially negative for performance. In particular, strategies designed to benefit from rising long-term interest rates hurt performance as long-term yields fell during the reporting period.

 

»  

The Fund’s allocation to high yield corporate bonds modestly detracted from performance. The asset class struggled amid broad commodity weakness and retail fund outflows late in the reporting period.

 

»  

The Fund’s exposure to U.S. dollar-denominated Russian quasi-sovereign bonds contributed meaningfully to returns. Spreads on these issues continued to retrace much of the widening that occurred during the second half of 2014 as geopolitical tensions in the region eased and investor sentiment improved.

 

»  

Within investment grade credit, exposure to banking/brokerage and utilities modestly contributed to returns, as balance sheet strengthening and improving profitability in the former and the defensive nature of the latter benefited the Fund.

 

12   PIMCO CLOSED-END FUNDS     


PIMCO Dynamic Credit Income Fund

 

Symbol on NYSE - PCI

 

Allocation Breakdown

 

Asset-Backed Securities

    44.4%   

Non-Agency Mortgage-Backed Securities

    25.3%   

Corporate Bonds & Notes

    22.9%   

Bank Loan Obligations

    2.9%   

Short-Term Instruments

    2.2%   

Other

    2.3%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $18.03   

NAV

    $20.42   

Premium/(Discount) to NAV

    (11.70)%   

Market Price Distribution Yield(2)

    10.92%   

NAV Distribution Yield(2)

    9.64%   

Total Effective Leverage(3)

    46%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     Commencement
of Operations
(01/31/13)
 
Market Price     (4.74)%        (2.62)%        (0.97)%   
NAV     (6.18)%        (1.53)%        4.25%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

For the period July 1, 2015 through December 31, 2015, the Fund’s allocation to high yield corporate bonds was the primary detractor from performance, as the asset class struggled amid broad commodity weakness and retail fund outflows late in the reporting period.

 

»  

Exposure to local and hard currency-denominated Brazilian debt was a significant detractor from returns. Brazil was negatively impacted by its slowing economy, high inflation and a political crisis.

 

»  

The Fund’s allocation to securitized credit detracted from performance. On the upside, positions in prime and lower-beta non-agency residential mortgage-backed securities and commercial mortgage-back securities contributed to returns. However, this was more than offset by weakness in the Fund’s higher-beta non-agency residential mortgage-backed securities.

 

»  

The Fund’s exposure to dollar-denominated Russian quasi-sovereign bonds had a positive impact on performance. The spreads on these issues continued to retrace much of the widening that occurred during the second half of 2014, as geopolitical tensions in the region eased and investor sentiment improved.

 

»  

The Fund’s exposure to U.S. interest rates was modestly positive for performance given the carry, the rate of interest earned by holding the respective securities, associated with such exposure. This positive impact, however, was partially offset by strategies designed to benefit from rising long-term interest rates, as long-term yields fell during the reporting period.

 

»  

Within investment grade credit, exposure to banking/brokerage and utilities modestly contributed to returns, as balance sheet strengthening and improving profitability in the former and the defensive nature of the latter benefited the Fund.

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   13


PIMCO Dynamic Income Fund

 

Symbol on NYSE - PDI

 

Allocation Breakdown

 

Non-Agency Mortgage-Backed Securities

    55.6%   

Asset-Backed Securities

    23.8%   

Corporate Bonds & Notes

    12.8%   

Short-Term Instruments

    3.7%   

Sovereign Issues

    1.4%   

Other

    2.7%   
   

% of Investments, at value as of 12/31/15. Financial derivative instruments, if any, are excluded.

Fund Information (as of December 31, 2015)(1)

 

Market Price

    $27.36   

NAV

    $27.17   

Premium/(Discount) to NAV

    0.70%   

Market Price Distribution Yield(2)

    9.67%   

NAV Distribution Yield(2)

    9.74%   

Total Effective Leverage(3)

    48%   
 

 

Average Annual Total Return(1) for the period ended December 31, 2015  
    6 Month*     1 Year     Commencement
of Operations
(05/30/12)
 
Market Price     7.31%        6.16%        17.12%   
NAV     (0.96)%        4.54%        18.56%   

 

All Fund returns are net of fees and expenses.

 

* Cumulative return

 

(1) 

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

 

(2) 

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

 

(3) 

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

 

Investment Objective and Strategy Overview

 

»  

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

 

Fund Insights

 

»  

For the period July 1, 2015 through December 31, 2015, exposure to local and hard currency-denominated Brazilian debt was a primary detractor from returns. Brazil was negatively impacted by its slowing economy, high inflation and a political crisis.

 

»  

The Fund’s allocation to high yield corporate bonds significantly detracted from performance, as the asset class struggled amid broad commodity weakness and retail fund outflows late in the reporting period.

 

»  

The Fund’s allocation to securitized credit contributed to performance. Positions in prime and lower-beta non-agency residential mortgage-backed securities and commercial mortgage-back securities contributed to returns. However, this was partially offset by weakness in the Fund’s higher-beta non-agency residential mortgage-backed securities.

 

»  

The Fund’s exposure to dollar-denominated Russian quasi-sovereign bonds had a positive impact on performance. The spreads on these issues continued to retrace much of the widening that occurred during the second half of 2014, as geopolitical tensions in the region eased and investor sentiment improved.

 

»  

Within investment grade credit, exposure to banking/brokerage and utilities modestly contributed to returns, as balance sheet strengthening and improving profitability in the former and the defensive nature of the latter benefited the Fund.

 

»  

The Fund’s exposure to U.S. interest rates was modestly positive for performance given the carry, the rate of interest earned by holding the respective securities, associated with such exposure. This positive impact, however, was partially offset by strategies designed to benefit from rising long-term interest rates, as long-term yields fell during the reporting period.

 

14   PIMCO CLOSED-END FUNDS     


 

 

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  SEMIANNUAL REPORT   DECEMBER 31, 2015   15


Financial Highlights

 

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

PCM Fund, Inc.

                 

07/01/2015 - 12/31/2015+

  $ 10.68      $ 0.42      $   (0.80   $   (0.38       $   (0.48   $ 0.00      $ 0.00      $ (0.48

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

    10.72        0.44        0.00     0.44            (0.48     0.00        0.00        (0.48 )(j) 

12/31/2014

    11.17        0.94        (0.34     0.60            (1.05     0.00        0.00        (1.05

12/31/2013

    11.35        1.12        (0.20     0.92            (1.10     0.00        0.00        (1.10

12/31/2012

    9.48        1.06        1.93        2.99            (1.12     0.00        0.00        (1.12

12/31/2011

    9.88        1.13        (0.47     0.66            (1.06     0.00        0.00        (1.06

12/31/2010

    7.73        1.12        2.29        3.41            (1.26     0.00        0.00        (1.26

PIMCO Global StocksPLUS® & Income Fund

                 

07/01/2015 - 12/31/2015+

  $ 12.88      $ 0.52      $ (1.42   $ (0.90       $ (1.10   $ 0.00      $ 0.00      $ (1.10

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

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

03/31/2015

    14.72        1.15        (0.85     0.30            (2.20     0.00        0.00        (2.20

03/31/2014

    14.32        1.39        1.21        2.60            (2.20     0.00        0.00        (2.20

03/31/2013

    12.57        1.38        2.57        3.95            (2.20     0.00        0.00        (2.20

03/31/2012

    14.88        1.61        (1.72     (0.11         (2.20     0.00        0.00        (2.20

03/31/2011

    12.52        1.75        2.81        4.56            (2.20     0.00        0.00        (2.20

PIMCO Income Opportunity Fund

                 

07/01/2015 - 12/31/2015+

  $ 25.94      $ 1.11      $ (2.72   $ (1.61       $ (1.14   $   (0.51   $ 0.00      $ (1.65

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

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

10/31/2014

    28.67        2.71        (0.12     2.59            (2.88     0.00        0.00        (2.88

10/31/2013

    27.86        2.87        0.77        3.64            (2.83     0.00        0.00        (2.83

10/31/2012

    24.62        2.61        3.69        6.30            (3.06     0.00        0.00        (3.06

10/31/2011

    26.97        3.24        (2.20     1.04            (3.39     0.00        0.00        (3.39

10/31/2010

    21.40        3.11        4.58        7.69            (2.12     0.00        0.00        (2.12

PIMCO Strategic Income Fund, Inc.

                 

07/01/2015 - 12/31/2015+

  $ 8.58      $ 0.35      $ (0.38   $ (0.03       $ (0.52   $ 0.00      $ 0.00      $ (0.52

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

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

01/31/2015

    9.24        0.90        (0.55     0.35            (1.02     0.00        0.00        (1.02

01/31/2014

    9.66        0.99        (0.30     0.69            (1.11     0.00        0.00        (1.11

01/31/2013

    8.91        1.05        0.95        2.00            (1.25     0.00        0.00        (1.25

01/31/2012

    9.97        1.36        (1.03     0.33            (1.39     0.00        0.00        (1.39

01/31/2011

    9.08        1.27        1.04        2.31            (1.42     0.00        0.00        (1.42

PIMCO Dynamic Credit Income Fund (Consolidated)

                 

07/01/2015 - 12/31/2015+

  $ 23.00      $ 0.57      $ (1.95   $ (1.38       $ (1.20   $ 0.00      $ 0.00      $ (1.20

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

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

12/31/2014

    24.04        1.79        (0.53     1.26            (2.47     0.00        0.00        (2.47

01/31/2013 - 12/31/2013

    23.88        1.33        0.76        2.09            (1.68     (0.24     0.00        (1.92

PIMCO Dynamic Income Fund (Consolidated)

                 

07/01/2015 - 12/31/2015+

  $   31.38      $   1.44      $ (1.74   $ (0.30       $ (2.92   $ (0.99   $ 0.00      $   (3.91

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

    30.74        0.80        0.47        1.27            (0.63     0.00        0.00        (0.63 )(j) 

03/31/2015

    32.11        3.25        (0.49     2.76            (4.13     0.00        0.00        (4.13

03/31/2014

    30.69        3.70        1.24        4.94            (3.29     (0.23     0.00        (3.52

05/30/2012 - 03/31/2013

    23.88        2.79        6.50        9.29            (2.18     (0.27     0.00        (2.45

 

+ Unaudited
* Annualized
^ Reflects an amount rounding to less than one cent.
(a)

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

(b) 

Determined in accordance with federal income tax regulations, see Note 2(c) in the Notes to Financial Statements for more information.

(c)

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

 

16   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


      Common Share         Ratios/Supplemental Data  
                                  Ratios to Average Net Assets  
Offering
Cost
Charged to
Paid in Capital
in Excess of Par
    Net Asset
Value End of
Year or
Period
    Market Price
End of Year
or Period
    Total
Investment
Return  (c)
         Net Assets
End of Year or
Period (000s)
    Expenses (d)     Expenses
Excluding
Interest
Expense (d)
    Expenses
Excluding
Interest
Expense and
Waivers
    Net
Investment
Income
    Portfolio
Turnover
Rate
 
                   
$ N/A      $ 9.82      $ 9.24        (3.38 )%        $ 113,316        2.54 %*      1.58 %*      1.58 %*      8.00 %*      9
  N/A        10.68        10.05        (1.28         123,235        2.26     1.54     1.54     8.32     20   
  N/A        10.72        10.65        0.34            123,633        1.89        1.40        1.40        8.38        11   
  N/A        11.17        11.65        6.49            128,672        2.05        1.52        1.52        9.75        6   
  N/A        11.35        12.02        23.34            130,461        2.59        1.76        1.76        10.05        13   
  N/A        9.48        10.77        10.43            108,810        2.44        1.75        1.75        11.30        26   
  N/A        9.88        10.80        54.01            113,020        2.41        1.75        1.75        11.91        28   
                   
$ N/A      $ 10.88      $ 18.12        14.55       $ 115,016        2.45 %*      1.73 %*      1.73 %*      8.58 %*      9
  N/A        12.88        16.92        (21.82         135,468        2.34     1.72     1.72     10.35     3   
  N/A        12.82        22.27        4.05            134,594        2.30        1.78        1.78        8.29        92   
  N/A        14.72        23.67        19.44            153,393        1.94        1.67        1.67        9.62        197   
  N/A        14.32        21.95        21.57            148,170        2.64        2.10        2.10        10.75        33   
  N/A        12.57        20.18        (8.00         128,952        2.71        2.12        2.12        12.70        90   
  N/A        14.88        24.48        43.45            150,881        2.81        2.20        2.20        13.07        80   
                   
$ N/A      $ 22.68      $ 21.17        (5.86 )%        $ 339,424        2.50 %*      1.72 %*      1.72 %*      8.78 %*      5
  N/A        25.94        24.20        0.22            388,353        2.43     1.79     1.79     8.93     14   
  N/A        28.38        27.26        4.39            424,632        2.01        1.65        1.65        9.44        175   
  N/A        28.67        28.90        6.81            426,561        1.93        1.66        1.66        10.03        65   
  N/A        27.86        29.85        26.98            411,976        2.29        1.86        1.86        10.38        57   
  N/A        24.62        26.45        11.68            359,909        2.44        1.93        1.93        12.40        194   
  N/A        26.97        26.92        39.51            391,730        2.36        1.86        1.86        13.07        77   
                   
$ N/A      $ 8.03      $ 8.95        9.45       $ 336,374        1.24 %*      0.96 %*      0.96 %*      8.31 %*      35
  N/A        8.58        8.69        (5.81         357,692        1.16     0.96     0.96     8.58     17   
  N/A        8.57        9.65        5.92            355,942        1.18        0.98        0.98        10.01        90   
  N/A        9.24        10.12        (4.58         379,762        1.39        1.00        1.00        10.48        208   
  N/A        9.66        11.84        12.21            392,317        1.55        1.00        1.00        11.14        293   
  N/A        8.91        11.80        28.34            357,712        1.48        1.01        1.01        14.27        147   
  N/A        9.97        10.44        11.82            394,695        1.43        1.04        1.04        12.98        168   
                   
$ N/A      $   20.42      $   18.03        (4.74 )%        $   2,801,620        2.95 %*      1.99 %*      1.99 %*      5.12 %*      14
  N/A        23.00        20.18        2.23            3,155,689        2.63     1.97     1.97     6.71     31   
    (0.00 )^      22.83        20.65        2.68            3,132,146        2.36        1.91        1.91        7.29        35   
  (0.01     24.04        22.48        (2.79         3,298,673        1.52     1.42     1.42     6.06     76   
                   
$ N/A      $ 27.17      $ 27.36        7.31       $ 1,246,052        3.34 %*      2.07 %*      2.07 %*      9.29 %*      6
  N/A        31.38        29.21        2.87            1,426,891        2.83     2.01     2.01     10.23     5   
  N/A        30.74        29.00        9.04            1,397,987        3.12        2.12        2.12        9.97        10   
  N/A        32.11        30.32        9.62            1,458,961        3.15        2.17        2.17        11.90        18   
  (0.03     30.69        31.10        35.21            1,393,099        2.91     2.04     2.04     12.04     16   

 

(d)

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

(e)

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

(f)

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

(g)

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

(h)

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

(i)

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

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   17


Statements of Assets and Liabilities

 

(Unaudited)

December 31, 2015

 

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

Assets:

       

Investments, at value

                               

Investments in securities*

  $ 195,235      $ 170,159      $ 552,769      $ 870,919   

Financial Derivative Instruments

                               

Exchange-traded or centrally cleared

    8        1,220        16        92   

Over the counter

    0        693        507        1,171   

Cash

    12        280        0        439   

Deposits with counterparty

    591        28,381        2,918        12,724   

Foreign currency, at value

    0        69        189        140   

Receivable for investments sold

    2,578        7,568        10,703        2   

Receivable for mortgage dollar rolls

    0        0        0        299,865   

Interest and dividends receivable

    1,110        1,384        4,329        3,369   

Other assets

    2        2        3        9   

Total Assets

    199,536        209,756        571,434          1,188,730   

Liabilities:

       

Borrowings & Other Financing Transactions

                               

Payable for reverse repurchase agreements

  $ 82,849      $ 75,066      $ 211,969      $ 122,275   

Payable for sale-buyback transactions

    0        0        0        57,103   

Payable for mortgage dollar rolls

    0        0        0        299,865   

Financial Derivative Instruments

                               

Exchange-traded or centrally cleared

    13        2,421        248        1,062   

Over the counter

    1,661        6,881        12,492        2,726   

Payable for investments purchased

    582        7,840        2,850        452   

Payable for TBA investments purchased

    0        0        0        364,210   

Deposits from counterparty

    0        399        210        840   

Distributions payable to common shareholders

    923        1,938        2,844        3,350   

Overdraft due to custodian

    0        0        849        0   

Accrued management fees

    169        194        548        299   

Other liabilities

    23        1        0        174   

Total Liabilities

    86,220        94,740        232,010        852,356   

Net Assets

  $   113,316      $   115,016      $   339,424      $ 336,374   

Net Assets Consist of:

       

Shares:

                               

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

  $ 12      $ 0      $ 0      $ 0   

Paid in capital in excess of par

    125,541        232,983        343,103        427,496   

(Overdistributed) net investment income

    (1,363     (7,315     (5,932     (3,651

Accumulated undistributed net realized (loss)

    (13,722     (131,019     (2,705     (97,728

Net unrealized appreciation

    2,848        20,367        4,958        10,257   
    $ 113,316      $ 115,016      $ 339,424      $ 336,374   

Common Shares Issued and Outstanding

    11,538        10,567        14,968        41,890   

Net Asset Value Per Common Share

  $ 9.82      $ 10.88      $ 22.68      $ 8.03   

Cost of investments in securities

  $ 192,280      $ 160,925      $ 542,704      $ 860,061   

Cost of foreign currency held

  $ 0      $ 70      $ 195      $ 139   

Cost or premiums of financial derivative instruments, net

  $ (1,676   $ (692   $ (6,418   $ (762

* Includes repurchase agreements of:

  $ 268      $ 983      $ 0      $ 3,612   

 

 

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

 

18   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


Consolidated Statements of Assets and Liabilities

 

(Unaudited)

December 31, 2015

 

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

Assets:

   

Investments, at value

               

Investments in securities*

  $ 4,880,995      $ 2,326,446   

Financial Derivative Instruments

               

Exchange-traded or centrally cleared

    3,465        1,130   

Over the counter

    36,343        6,844   

Cash

    0        5,961   

Deposits with counterparty

    46,042        20,687   

Foreign currency, at value

    23,790        189   

Receivable for investments sold

    48,394        22,968   

Interest and dividends receivable

    30,598        13,042   

Other assets

    12        5   

Total Assets

    5,069,639        2,397,272   

Liabilities:

   

Borrowings & Other Financing Transactions

               

Payable for reverse repurchase agreements

  $ 2,134,233      $ 1,100,940   

Financial Derivative Instruments

               

Exchange-traded or centrally cleared

    4,071        1,921   

Over the counter

    46,343        17,335   

Payable for investments purchased

    26,644        11,614   

Deposits from counterparty

    27,037        6,810   

Distributions payable to common shareholders

    22,513        10,028   

Overdraft due to custodian

    1,844        0   

Accrued management fees

    5,333        2,572   

Other liabilities

    1        0   

Total Liabilities

    2,268,019        1,151,220   

Net Assets Applicable to Common Shareholders

  $ 2,801,620      $ 1,246,052   

Composition of Net Assets Applicable to Common Shareholders:

   

Par value ($0.00001 per share)

  $ 1      $ 0   

Paid in capital in excess of par

    3,274,224        1,096,765   

(Overdistributed) net investment income

    (94,646     (32,279

Accumulated undistributed net realized gain (loss)

    (68,411     11,659   

Net unrealized appreciation (depreciation)

    (309,548     169,907   
    $   2,801,620      $   1,246,052   

Common Shares Issued and Outstanding

    137,221        45,851   

Net Asset Value Per Common Share

  $ 20.42      $ 27.17   

Cost of investments in securities

  $ 5,161,818      $ 2,175,482   

Cost of foreign currency held

  $ 23,768      $ 187   

Cost or premiums of financial derivative instruments, net

  $ 1,590      $ (27,080

* Includes repurchase agreements of:

  $ 49,000      $ 62,569   

 

 

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

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   19


Statements of Operations

 

Six Months Ended December 31, 2015 (Unaudited)                        
(Amounts in thousands)   PIMCO
PCM Fund,
Inc.
    PIMCO
Global
StocksPLUS® &
Income
Fund
    PIMCO
Income
Opportunity
Fund
    PIMCO
Strategic
Income Fund,
Inc.
 

Investment Income:

       

Interest, net of foreign taxes*

  $ 6,396      $ 6,997      $ 20,669      $ 16,916   

Dividends

    2        14        592        7   

Total Income

    6,398        7,011        21,261        16,923   

Expenses:

       

Management fees

    955        1,095        3,219        1,692   

Trustee fees and related expenses

    5        5        26        16   

Interest expense

    582        455        1,465        495   

Total Expenses

    1,542        1,555        4,710        2,203   

Net Investment Income

    4,856        5,456        16,551        14,720   

Net Realized Gain (Loss):

       

Investments in securities

    1,899        989        3,346        2,529   

Exchange-traded or centrally cleared financial derivative instruments

    (133     (9,980     (3,342     (9,216

Over the counter financial derivative instruments

    3,324        1,835        9,659        3,176   

Foreign currency

    0        2        271        (15

Net Realized Gain (Loss)

    5,090        (7,154     9,934        (3,526

Net Change in Unrealized Appreciation (Depreciation):

       

Investments in securities

      (10,980       (10,022     (36,303       (12,572

Exchange-traded or centrally cleared financial derivative instruments

    (95     7,155        313        804   

Over the counter financial derivative instruments

    (3,252     (5,436     (15,782     (611

Foreign currency assets and liabilities

    0        357        1,056        (29

Net Change in Unrealized (Depreciation)

    (14,327     (7,946     (50,716     (12,408

Net (Decrease) in Net Assets Resulting from Operations

  $ (4,381   $ (9,644   $   (24,231   $ (1,214

* Foreign tax withholdings

  $ 0      $ 0      $ 1      $ 0   

 

 

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

 

20   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


Consolidated Statements of Operations

 

Six Months Ended December 31, 2015 (Unaudited)            
(Amounts in thousands)   PIMCO
Dynamic
Credit Income
Fund
    PIMCO
Dynamic
Income Fund
 

Investment Income:

   

Interest, net of foreign taxes*

  $ 124,287      $ 88,732   

Dividends

    0        336   

Total Income

    124,287        89,068   

Expenses:

   

Management fees

    30,305        14,450   

Trustee fees and related expenses

    197        94   

Interest expense

    14,840        8,971   

Miscellaneous Expense

    91        61   

Total Expenses

    45,433        23,576   

Net Investment Income

    78,854        65,492   

Net Realized Gain (Loss):

   

Investments in securities

    (46,446     (9,365

Exchange-traded or centrally cleared financial derivative instruments

    17,690        2,409   

Over the counter financial derivative instruments

    34,869        25,445   

Foreign currency

    (1,685     (824

Net Realized Gain

    4,428        17,665   

Net Change in Unrealized Appreciation (Depreciation):

   

Investments in securities

    (228,517     (85,201

Exchange-traded or centrally cleared financial derivative instruments

    (29,151     (10,246

Over the counter financial derivative instruments

    (26,922     (5,918

Foreign currency assets and liabilities

    11,733        5,153   

Net Change in Unrealized (Depreciation)

    (272,857     (96,212

Net (Decrease) in Net Assets Resulting from Operations

  $   (189,575   $   (13,055

* Foreign tax withholdings

  $ 12      $ 0   

 

 

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

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   21


Statements of Changes in Net Assets

 

    PCM Fund, Inc.         PIMCO Global StocksPLUS® & Income Fund  
(Amounts in thousands)   Six Months Ended
December 31, 2015
    Period from
January 1, 2015 to
June 30, 2015 (a)
    Year Ended
December 31, 2014
        Six Months Ended
December 31, 2015
   

Period from
April 1, 2015 to
June 30, 2015 (b)

    Year Ended
March 31, 2015
 

Increase (Decrease) in Net Assets from:

             

Operations:

             

Net investment income

  $ 4,856      $ 5,058      $ 10,813          $ 5,456      $ 3,559      $ 12,039   

Net realized gain (loss)

    5,090        5,586        64            (7,154     8,310        (19,967

Net change in unrealized appreciation (depreciation)

    (14,327     (5,577     (4,000         (7,946     (5,604     10,460   

Net Increase (Decrease) in Net assets Resulting from Operations

    (4,381     5,067        6,877            (9,644     6,265        2,532   

Distributions to Common Shareholders:

             

From net investment income(e)

    (5,538     (5,537     (12,094         (11,602     (5,782     (23,021

From net realized capital gains(e)

    0        0        0            0        0        0   

Tax basis return of capital(e)

    0        0        0            0        0        0   

Total Distributions to Common Shareholders

    (5,538     (5,537 )(f)      (12,094         (11,602     (5,782 )(f)      (23,021

Common Share Transactions**:

             

Issued as reinvestment of distributions

    0        72        178            794        391        1,690   

Total Increase (Decrease) in Net Assets

    (9,919     (398     (5,039         (20,452     874        (18,799

Net Assets Applicable to Common Shareholders:

             

Beginning of year or period

    123,235        123,633        128,672            135,468        134,594        153,393   

End of year or period*

  $   113,316      $   123,235      $   123,633          $   115,016      $   135,468      $   134,594   

* Including undistributed (overdistributed) net investment income of:

  $ (1,363   $ (681   $ (540       $ (7,315   $ (1,169   $ (3,939

** Common Share Transactions:

             

Shares issued as reinvestment of distributions

    0        7        16            49        18        78   

 

 

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

(a) 

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

(b) 

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

(c) 

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

(d)

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

(e) 

Determined in accordance with federal income tax regulations, see Note 2(c) in the Notes to Financial Statements for more information.

(f) 

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

 

22   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


 

PIMCO Income Opportunity Fund         PIMCO Strategic Income Fund, Inc.  
Six Months Ended
December 31, 2015
    Period from
November 1, 2014 to
June 30, 2015 (c)
    Year Ended
October 31, 2014
        Six Months Ended
December 31, 2015
   

Period from
February 1, 2015 to
June 30, 2015 (d)

    Year Ended
January 31, 2015
 
           
           
$ 16,551      $ 23,106      $ 40,467          $ 14,720      $ 12,571      $ 37,303   
  9,934        (3,967     18,425            (3,526     11,358        15,398   
  (50,716     (9,047     (20,170         (12,408     (7,166     (38,494
  (24,231     10,092        38,722            (1,214     16,763        14,207   
           
    (17,064     (34,865     (42,972         (21,736     (16,651     (42,226
  (7,634     (11,498     0            0        0        0   
  0        (224     0            0        0        0   
  (24,698     (46,587 )(f)      (42,972         (21,736     (16,651 )(f)      (42,226
           
  0        216        2,321            1,632        1,638        4,199   
  (48,929     (36,279     (1,929         (21,318     1,750        (23,820
           
  388,353        424,632        426,561            357,692        355,942        379,762   
$ 339,424      $   388,353      $   424,632          $   336,374      $   357,692      $   355,942   
$ (5,932   $ (5,419   $ 6,094          $ (3,651   $ 3,365      $ 2,692   
           
  0        8        82            190        182        432   

 

  SEMIANNUAL REPORT   DECEMBER 31, 2015   23


Consolidated Statements of Changes in Net Assets

 

     PIMCO Dynamic Credit Income Fund          PIMCO Dynamic Income Fund  
(Amounts in thousands)    Six Months Ended
December 31, 2015
    

Period from
January 1, 2015 to
June 30, 2015 (a)

     Year Ended
December 31, 2014
         Six Months Ended
December 31, 2015
    Period from
April 1, 2015 to
June 30, 2015 (b)
    Year Ended
March 31, 2015
 

Increase (Decrease) in Net Assets from:

                 

Operations:

                 

Net investment income

   $ 78,854       $ 104,043       $ 245,912           $ 65,492      $ 36,172      $ 147,564   

Net realized gain (loss)

     4,428         29,622         12,922             17,665        37,320        76,891   

Net change in unrealized appreciation (depreciation)

     (272,857      18,523         (85,852          (96,212     (15,937     (99,042

Net Increase (Decrease) in Net Assets Resulting from Operations

     (189,575      152,188         172,982             (13,055     57,555        125,413   

Distributions to Common Shareholders:

                 

From net investment income(c)

     (164,494      (128,645      (339,486          (132,888     (28,651     (187,696

From net realized capital gains(c)

     0         0         0             (45,024     0        0   

Total Distributions to Common Shareholders

     (164,494      (128,645 )(d)       (339,486          (177,912     (28,651 )(d)      (187,696

Common Share Transactions**: