PIMCO High Income Fund
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number: 811-21311

PIMCO High Income Fund

(Exact name of registrant as specified in charter)

1633 Broadway, New York, NY 10019

(Address of principal executive offices)

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: July 31

Date of reporting period: January 31, 2016

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.


Table of Contents
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

 

January 31, 2016

 

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PIMCO Corporate & Income Opportunity Fund

PIMCO Corporate & Income Strategy Fund

PIMCO High Income Fund

PIMCO Income Strategy Fund

PIMCO Income Strategy Fund II

 

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Table of Contents

Table of Contents

 

            Page  
     

Letter from the Chairman of the Board & President

        2   

Important Information About the Funds

        4   

Financial Highlights

        14   

Statements of Assets and Liabilities

        16   

Statements of Operations

        17   

Statements of Changes in Net Assets

        18   

Notes to Financial Statements

        63   

Glossary

        83   

Investment Strategy Updates

        84   
     
Fund    Fund
Summary
     Schedule of
Investments
 
     

PIMCO Corporate & Income Opportunity Fund

     9         20   

PIMCO Corporate & Income Strategy Fund

     10         29   

PIMCO High Income Fund

     11         37   

PIMCO Income Strategy Fund

     12         46   

PIMCO Income Strategy Fund II

     13         54   


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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 January 31, 2016

 

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 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 $47 to $34 between July 2015 and January 2016, as OPEC continued pumping at close to full capacity 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 sold off sharply, 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 the Brazilian foreign currency debt rating to below investment grade in September 2015.

 

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 fiscal boost from the increase in federal spending. In the Federal Open Market Committee’s recent announcement and minutes from January 26-27, 2016, the Committee appeared to continue signaling further tightening despite market volatility, although it has acknowledged a degree of softening in the economy. For example, the minutes pointed out that moderating oil companies and foreign countries’ investment have the “potential to further restrain domestic economic activity.” Therefore, low energy prices and disinflationary pressures from a stronger U.S. dollar may slow the pace of Fed hikes.

 

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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 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%, it 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 January 31, 2016.

 

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 of Trustees   President

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   3


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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.

 

A Fund’s use of leverage creates the opportunity for increased income for the Fund’s common shareholders, but also creates special risks. Leverage is a speculative technique that may expose a Fund to greater risk and increased costs. If shorter-term interest rates rise relative to the rate of return on a Fund’s portfolio, the interest and other costs of leverage to the Fund could exceed the rate of return on the debt obligations and other investments held by the Fund, thereby reducing return to the Fund’s common shareholders. In addition, fees and expenses of any form of leverage used by a Fund will be borne entirely by its common shareholders (and not by preferred shareholders, if any) and will reduce the investment return of the Fund’s common shares. There can be no assurance that a Fund’s use of leverage will result in a higher yield on its common shares, and it may result in losses. Leverage creates several major types of risks for a Fund’s common shareholders, including: (1) the likelihood of greater volatility of net asset value and market price of the Fund’s common shares, and of the investment return to the Fund’s common shareholders, than a comparable portfolio without leverage; (2) the possibility either that the Fund’s common share dividends will fall if the interest and other costs of leverage rise, or that dividends paid on the Fund’s common shares will fluctuate because such costs vary over time; and (3) the effects of leverage in a declining market or a rising interest rate environment, as leverage is likely to cause a greater decline in the net asset value of the Fund’s common shares than if the Fund were not leveraged and may result in a greater decline in the market value of the Fund’s common shares.

 

A Fund’s investments in and exposure to foreign securities involve special risks. For example, the value of these investments may decline in response to unfavorable political and legal developments, unreliable or untimely information or economic and financial instability. Foreign securities may experience more rapid and extreme changes in value than investments in securities of U.S. issuers. The securities markets of certain foreign countries are relatively small, with a limited number of companies representing a small number of industries. Issuers of foreign securities are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, auditing and custody standards of foreign countries differ, in some cases significantly, from U.S. standards. Also, nationalization, expropriation or other confiscation,

 

 

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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.

 

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

 

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   5


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Important Information About the Funds (Cont.)

 

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.

 

If a Fund estimates that a portion of one of its dividend distributions may be comprised of amounts from sources other than net investment income, the Fund will notify shareholders of record of the estimated composition of such distribution through a Section 19 Notice. To determine the sources of a 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

 

 

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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
 

PIMCO Corporate & Income Opportunity Fund

      12/27/02        Diversified   

PIMCO Corporate & Income Strategy Fund

      12/21/01        Diversified   

PIMCO High Income Fund

      04/30/03        Diversified   

PIMCO Income Strategy Fund

      08/29/03        Diversified   

PIMCO Income Strategy Fund II

      10/29/04        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 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 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.

 

 

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Important Information About the Funds (Cont.)

 

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.

 

 

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PIMCO Corporate & Income Opportunity Fund

 

Symbol on NYSE - PTY

 

Allocation Breakdown

 

Corporate Bonds & Notes

    33.4%   

Non-Agency Mortgage-Backed Securities

    27.2%   

Asset-Backed Securities

    15.4%   

Short-Term Instruments

    8.1%   

Municipal Bonds & Notes

    7.3%   

Other

    8.6%   
   

% of Investments, at value as of 01/31/16. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of January 31, 2016)(1)

 

Market Price

    $13.10   

NAV

    $12.75   

Premium/(Discount) to NAV

    2.75%   

Market Price Distribution Yield(2)

    11.91%   

NAV Distribution Yield(2)

    12.24%   

Total Effective Leverage(3)

    44%   
 

 

Average Annual Total Return(1) for the period ended January 31, 2016  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(12/27/02)
 
Market Price     (2.76)%        (12.76)%        6.38%        10.78%        12.36%   
NAV     (4.87)%        2.17%        10.84%        12.76%        13.46%   

 

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 Corporate & Income Opportunity Fund’s primary investment objective is to seek high current income, with capital preservation and capital appreciation as secondary objectives.

 

Fund Insights

 

»  

The Fund’s exposure to high yield corporate bonds was the primary detractor from returns, as the sector struggled against a backdrop of commodity weakness and capital outflows. Within high yield, exposure to banking and specialty finance, manufacturing, utilities, entertainment, media and raw materials companies was the main headwind for returns.

 

»  

The Fund’s emerging market holdings were major detractors from returns, due to exposure to local and hard currency-denominated Brazilian debt. Brazil was negatively impacted by slowing economic growth, high inflation and a political crisis. However, gains from holdings of Russian hard currency-denominated debt helped offset some of the negative impact.

 

»  

Additionally within corporate credit, the Fund’s exposure to investment grade corporate bonds was a significant detractor from returns as spreads widened, given abundant new supply and commodity price volatility.

 

»  

The Fund’s allocation to securitized credit detracted significantly from performance, as prices were generally lower during the period.

 

»  

Overall contribution from U.S. interest rate exposure was the primary positive factor for performance. This was due mainly to an emphasis on the intermediate portion of the curve, as it provided attractive carry, the rate of interest earned by holding the respective securities, and intermediate interest rates generally declined over the reporting period. Additionally, tactical exposure to U.K. rates contributed to performance.

 

»  

The Fund’s exposure to select taxable municipal bonds contributed modestly to returns, as these issues gained value during the period and were more insulated from underperformance experienced in corporate credit sectors.

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   9


Table of Contents

PIMCO Corporate & Income Strategy Fund

 

Symbol on NYSE - PCN

 

Allocation Breakdown

 

Corporate Bonds & Notes

    38.0%   

Non-Agency Mortgage-Backed Securities

    30.6%   

Asset-Backed Securities

    15.2%   

Municipal Bonds & Notes

    4.3%   

Short-Term Instruments

    2.1%   

Other

    9.8%   
   

% of Investments, at value as of 01/31/16. Financial derivative instruments, if any, are excluded.

Fund Information (as of January 31, 2016)(1)

 

Market Price

    $13.48   

NAV

    $13.78   

Premium/(Discount) to NAV

    (2.18)%   

Market Price Distribution Yield(2)

    10.01%   

NAV Distribution Yield(2)

    9.80%   

Total Effective Leverage(3)

    21%   
 

 

Average Annual Total Return(1) for the period ended January 31, 2016  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(12/21/01)
 
Market Price     3.44%        (3.53)%        7.11%        10.04%        10.62%   
NAV     (1.91)%        2.98%        10.08%        11.72%        11.67%   

 

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 Corporate & Income Strategy Fund’s primary investment objective is to seek high current income, with a secondary objective of capital preservation and appreciation.

 

Fund Insights

 

»  

The Fund’s exposure to high yield corporate bonds was the primary detractor from returns, as the sector struggled amid a backdrop of commodity weakness and capital outflows. Within high yield, exposure to banking and specialty finance, manufacturing, utilities, entertainment, media and raw materials companies was the main headwind for returns.

 

»  

The Fund’s emerging market holdings were major detractors from returns, due to exposure to local and hard currency-denominated Brazilian debt. Brazil was negatively impacted by slowing economic growth, high inflation and a political crisis.

 

»  

Additionally within corporate credit, the Fund’s exposure to investment grade corporate bonds was a significant detractor from returns as spreads widened, given abundant new supply and commodity price volatility.

 

»  

The Fund’s allocation to securitized credit detracted significantly from performance, as prices were generally lower during the period.

 

»  

Overall contribution from U.S. interest rate exposure was the primary positive factor for performance. This was due mainly to an emphasis on the intermediate portion of the curve, as it provided attractive carry, the rate of interest earned by holding the respective securities, and intermediate interest rates generally declined over the reporting period. Additionally, tactical exposure to U.K. rates contributed to performance.

 

»  

The Fund’s partial redemption of auction rate preferred shares had a major, one-time positive impact on returns, as the redemption was done below face value, which was accretive for common shareholders.

 

»  

The Fund’s exposure to select taxable municipal bonds contributed modestly to returns.

 

10   PIMCO CLOSED-END FUNDS     


Table of Contents

PIMCO High Income Fund

 

Symbol on NYSE - PHK

 

Allocation Breakdown

 

Corporate Bonds & Notes

    49.6%   

Non-Agency Mortgage-Backed Securities

    17.2%   

Asset-Backed Securities

    14.1%   

Municipal Bonds & Notes

    10.5%   

Short-Term Instruments

    2.3%   

Other

    6.3%   
   

% of Investments, at value as of 01/31/16. Financial derivative instruments, if any, are excluded.

 

Fund Information (as of January 31, 2016)(1)

 

Market Price

    $7.84   

NAV

    $6.53   

Premium/(Discount) to NAV

    20.06%   

Market Price Distribution Yield(2)

    15.84%   

NAV Distribution Yield(2)

    19.01%   

Total Effective Leverage(3)

    23%   
 

 

Average Annual Total Return(1) for the period ended January 31, 2016  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(04/30/03)
 
Market Price     (12.59)%        (25.41)%        2.34%        7.93%        8.74%   
NAV     (2.86)%        5.67%        11.17%        10.23%        10.83%   

 

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

 

Fund Insights

 

»  

The Fund’s exposure to high yield corporate bonds was the primary detractor from returns, as the sector struggled amid a backdrop of commodity weakness and capital outflows. Within high yield, exposure to banking and specialty finance, manufacturing, utilities, entertainment, media and energy companies was the main headwind for returns.

 

»  

The Fund’s emerging market holdings were major detractors from returns, due to exposure to hard currency-denominated Brazilian debt. Brazil was negatively impacted by slowing economic growth, high inflation and a political crisis.

 

»  

The Fund’s allocation to securitized credit also detracted significantly from performance due to negative security selection within non-agency residential mortgage-backed securities and exposure to structured credit vehicles (collateralized debt obligations/collateralized loan obligations).

 

»  

Additionally within corporate credit, the Fund’s exposure to investment grade corporate bonds detracted significantly from returns as spreads widened, given abundant new supply and commodity price volatility.

 

»  

Overall contribution from U.S. interest rate exposure was the primary positive factor for performance. This was due mainly to an emphasis on the intermediate portion of the curve, as it provided attractive carry, the rate of interest earned by holding the respective securities, and intermediate interest rates generally declined over the reporting period. Additionally, tactical exposure to U.K. rates contributed to performance.

 

»  

The Fund’s partial redemption of auction rate preferred shares had a significant, one-time positive impact on returns, as the redemption was done below face value, which was accretive for common shareholders.

 

»  

The Fund’s exposure to select taxable municipal bonds contributed modestly to returns.

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   11


Table of Contents

PIMCO Income Strategy Fund

 

Symbol on NYSE - PFL

 

Allocation Breakdown

 

Corporate Bonds & Notes

    44.2%   

Asset-Backed Securities

    21.6%   

Non-Agency Mortgage-Backed Securities

    16.4%   

Municipal Bonds & Notes

    5.2%   

Short-Term Instruments

    4.3%   

Other

    8.3%   
   

% of Investments, at value as of 01/31/16. Financial derivative instruments, if any, are excluded.

Fund Information (as of January 31, 2016)(1)

 

Market Price

    $9.29   

NAV

    $10.08   

Premium/(Discount) to NAV

    (7.84)%   

Market Price Distribution Yield(2)

    11.63%   

NAV Distribution Yield(2)

    10.71%   

Total Effective Leverage(3)

    23%   
 

 

Average Annual Total Return(1) for the period ended January 31, 2016  
    6 Month*     1 Year     5 Year     10 Year     Commencement
of Operations
(08/29/03)
 
Market Price     (5.59)%        (12.40)%        4.63%        4.71%        4.43%   
NAV     (7.55)%        (1.57)%        8.16%        5.41%        5.59%   

 

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 Strategy Fund’s primary investment objective is to seek high current income, consistent with the preservation of capital.

 

Fund Insights

 

»  

The Fund’s exposure to high yield corporate bonds was the primary detractor from returns, as the sector struggled amid a backdrop of commodity weakness and capital outflows. Within high yield, exposure to banking and specialty finance, manufacturing, utilities, entertainment, media and raw materials companies was the main headwind for returns.

 

»  

The Fund’s emerging market holdings were major detractors from returns, due to exposure to local and hard currency-denominated Brazilian debt. Brazil was negatively impacted by slowing economic growth, high inflation and a political crisis.

 

»  

Additionally within corporate credit, the Fund’s exposure to investment grade corporate bonds detracted significantly from returns as spreads widened, given abundant new supply and commodity price volatility.

 

»  

The Fund’s allocation to securitized credit detracted significantly from performance, as prices were generally lower during the period.

 

»  

Overall contribution from U.S. interest rate exposure was the primary positive factor for performance. This was due mainly to an emphasis on the intermediate portion of the curve, as it provided attractive carry, the rate of interest earned by holding the respective securities, and intermediate interest rates generally declined over the reporting period. Additionally, tactical exposure to U.K. rates contributed to performance.

 

»  

The Fund’s exposure to select taxable municipal bonds contributed modestly to returns.

 

12   PIMCO CLOSED-END FUNDS     


Table of Contents

PIMCO Income Strategy Fund II

 

Symbol on NYSE - PFN

 

Allocation Breakdown

 

Corporate Bonds & Notes

    41.3%   

Non-Agency Mortgage-Backed Securities

    23.1%   

Asset-Backed Securities

    15.8%   

Municipal Bonds & Notes

    7.3%   

Short-Term Instruments

    3.8%   

Other

    8.7%   
   

% of Investments, at value as of 01/31/16. Financial derivative instruments, if any, are excluded.

Fund Information (as of January 31, 2016)(1)

 

Market Price

    $8.41   

NAV

    $9.11   

Premium/(Discount) to NAV

    (7.68)%   

Market Price Distribution Yield(2)

    11.41%   

NAV Distribution Yield(2)

    10.54%   

Total Effective Leverage(3)

    23%   
 

 

Average Annual Total Return(1) for the period ended January 31, 2016  
    6 Month*     1 Year     5 Year     10 Year    

Commencement
of Operations

(10/29/04)

 
Market Price     (4.97)%        (8.69)%        6.31%        3.76%        3.29%   
NAV     (6.13)%        (0.10)%        8.58%        4.31%        4.43%   

 

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 Strategy Fund II’s primary investment objective is to seek high current income, consistent with the preservation of capital.

 

Fund Insights

 

»  

The Fund’s exposure to high yield corporate bonds was the primary detractor from returns, as the sector struggled amid a backdrop of commodity weakness and capital outflows. Within high yield, exposure to banking and specialty finance, manufacturing, utilities, entertainment, media and raw materials companies was the main headwind for returns.

 

»  

The Fund’s emerging market holdings were major detractors from returns, due to exposure to local and hard currency-denominated Brazilian debt. Brazil was negatively impacted by slowing economic growth, high inflation and a political crisis.

 

»  

Additionally within corporate credit, the Fund’s exposure to investment grade corporate bonds detracted significantly from returns as spreads widened, given abundant new supply and commodity price volatility.

 

»  

The Fund’s allocation to securitized credit also detracted significantly from performance, as prices were generally lower during the period.

 

»  

Overall contribution from U.S. interest rate exposure was the primary positive factor for performance. This was due mainly to an emphasis on the intermediate portion of the curve, as it provided attractive carry, the rate of interest earned by holding the respective securities, and intermediate interest rates generally declined over the reporting period. Additionally, tactical exposure to U.K. rates contributed to performance.

 

»  

The Fund’s exposure to select taxable municipal bonds contributed modestly to returns.

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   13


Table of Contents

Financial Highlights

 

         

Investment Operations

        Less Distributions to Common Shareholders  
    Net Asset Value
Beginning of
Year or
Period
    Net Investment
Income  (a)
    Net Realized/
Unrealized
Gain (Loss)
   

Distributions on
Preferred Shares
from Net
Investment
Income (b)

    Distributions on
Preferred Shares
from Realized
Gains (b)
    Total          From Net
Investment
Income  (b)
    From Net
Realized
Capital Gain (b)
    Tax Basis
Return of
Capital (b)
    Total  

PIMCO Corporate & Income Opportunity Fund

                     

08/01/2015 - 01/31/2016+

  $ 14.23      $ 0.53      $ (1.19   $ (0.01   $ 0.00      $ (0.67       $ (0.81   $ 0.00      $ 0.00      $ (0.81

12/01/2014 - 07/31/2015(f)

    15.41        0.68        (0.33     (0.00 )^      0.00        0.35            (1.69     0.00        0.00        (1.69 )(i) 

11/30/2014

    16.62        1.14        1.06        (0.00 )^      (0.01     2.19            (1.56     (1.84     0.00        (3.40

11/30/2013

    17.58        1.43        0.19        (0.00 )^      (0.00 )^      1.62            (1.82     (0.76     0.00        (2.58

11/30/2012

    14.22        1.68        3.87        (0.01     0.00        5.54            (2.18     0.00        0.00        (2.18

11/30/2011

    16.29        1.88        (1.87     (0.01     0.00        0.00            (2.07     0.00        0.00        (2.07

11/30/2010

    13.63        1.80        2.83        (0.01     0.00        4.62            (1.96     0.00        0.00        (1.96

PIMCO Corporate & Income Strategy Fund

                     

08/01/2015 - 01/31/2016+

  $ 14.75      $ 0.50      $ (1.28   $ (0.00 )^    $ 0.00      $ (0.78       $ (0.70   $ 0.00      $ 0.00      $ (0.70

11/01/2014 - 07/31/2015(g)

    15.60        0.73        (0.21     (0.00 )^      0.00        0.52            (1.37     0.00        0.00        (1.37 )(i) 

10/31/2014

    16.04        0.99        0.87        (0.00 )^        (0.00 )^      1.86            (1.35       (0.95     0.00        (2.30

10/31/2013

    15.90        1.28        0.44        (0.01     0.00        1.71            (1.57     0.00        0.00        (1.57

10/31/2012

    13.67        1.57        2.47        (0.01     0.00        4.03            (1.80     0.00        0.00        (1.80

10/31/2011

    15.51        1.72        (1.87     (0.01     0.00        (0.16         (1.68     0.00        0.00        (1.68

10/31/2010

    12.88        1.61        2.90        (0.01     0.00        4.50            (1.87     0.00        0.00        (1.87

PIMCO High Income Fund

                     

08/01/2015 - 01/31/2016+

  $ 7.37      $ 0.31      $ (0.77   $ (0.00 )^    $ 0.00      $ (0.46       $ (0.64   $ 0.00      $ 0.00      $   (0.64

04/01/2015 - 07/31/2015(h)

    7.59        0.21        0.06        (0.00 )^      0.00        0.27            (0.33     0.00        (0.16     (0.49 )(i) 

03/31/2015

    8.23        0.94        (0.12     (0.00 )^      0.00        0.82            (1.46     0.00        0.00        (1.46

03/31/2014

    8.65        0.84        0.20        (0.00 )^      0.00        1.04            (1.35     0.00          (0.11     (1.46

03/31/2013

    7.87        0.81        1.43        (0.00 )^      0.00        2.24            (1.42     0.00        (0.04     (1.46

03/31/2012

    9.42        0.96        (1.05     (0.00 )^      0.00        (0.09         (1.39     0.00        (0.07     (1.46

03/31/2011

    8.73        1.13        1.03        (0.01     0.00        2.15            (1.46     0.00        0.00        (1.46

PIMCO Income Strategy Fund

                     

08/01/2015 - 01/31/2016+

  $   11.46      $   0.38      $   (1.21   $   (0.01   $ 0.00      $   (0.84       $   (0.54   $ 0.00      $ 0.00      $ (0.54

07/31/2015

    12.15        0.79        (0.34     (0.03     0.00        0.42            (1.22     0.00        0.00        (1.22

07/31/2014

    11.70        0.79        0.78        (0.04     0.00        1.53            (1.08     0.00        0.00        (1.08

07/31/2013

    11.35        0.92        0.87        (0.04     0.00        1.75            (1.40     0.00        0.00        (1.40

07/31/2012

    11.39        1.16        (0.04     (0.05     0.00        1.07            (1.11     0.00        0.00        (1.11

07/31/2011

    10.62        1.24        0.79        (0.05     0.00        1.98            (1.21     0.00        0.00        (1.21

PIMCO Income Strategy Fund II

                     

08/01/2015 - 01/31/2016+

  $ 10.27      $ 0.46      $ (1.06   $ (0.01   $ 0.00      $ (0.61       $ (0.55   $ 0.00      $ 0.00      $ (0.55

07/31/2015

    10.88        0.70        (0.29     (0.03     0.00        0.38            (1.11     0.00        0.00        (1.11

07/31/2014

    10.29        0.72        0.87        (0.04     0.00        1.55            (0.96     0.00        0.00        (0.96

07/31/2013

    10.23        0.88        0.68        (0.04     0.00        1.52            (1.46     0.00        0.00        (1.46

07/31/2012

    10.04        1.03        0.03        (0.04     0.00        1.02            (0.83     0.00        0.00        (0.83

07/31/2011

    9.29        1.03        0.73        (0.04     0.00        1.72            (0.97     0.00        0.00        (0.97

 

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

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

(d) 

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

(e) 

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

(f) 

Fiscal year end changed from November 30th to July 31st.

(g) 

Fiscal year end changed from October 31st to July 31st.

(h) 

Fiscal year end changed from March 31st to July 31st.

(i) 

Total distributions for the period ended July 31, 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 July 31, 2015.

(j) 

See Note 12 in the Notes to Financial Statements.

 

14   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


Table of Contents
Preferred Share
Transactions
        Common Share         Ratios/Supplemental Data  
                                      Ratios to Average Net Assets              
Increase Resulting
from Tender and
Repurchase
of  Auction-Rate
Preferred Shares (j)
         Net Asset
Value End of
Year or
Period
    Market Price
End of Year
or Period
    Total
Investment
Return  (c)
         Net Assets
Applicable
to Common
Shareholders
(000s)
    Expenses  (d)(e)     Expenses
Excluding
Interest
Expense (d)
    Net Investment
Income (d)
    Preferred
Shares Asset
Coverage
Per Share
    Portfolio
Turnover
Rate
 
                     
                     
$   0.00          $   12.75      $   13.10        (2.76 )%        $ 905,625        0.92 %*      0.87 %*      7.96 %*    $ 120,139        20
  0.16            14.23        14.31        (13.61           1,006,484        0.91     0.90     7.01       130,743        34   
  0.00            15.41        18.50        26.04            1,082,000        0.91        0.91        7.36        108,229        44   
  0.00            16.62        17.75        (0.15         1,149,779        0.91        0.91        8.49        113,443        118   
  0.00            17.58        20.37        36.86            1,205,090        1.05        0.93        10.63        117,697        29   
  0.00            14.22        16.78        9.24            967,195        1.09        0.94        11.76        99,399        53   
  0.00            16.29        17.30        40.36            1,098,920        1.02        0.93        11.98        109,530        70   
                     
                     
$ 0.51          $ 13.78      $ 13.48        3.44       $ 532,601        1.11 %*      1.08 %*      7.13 %*    $ 264,785        21
  0.00            14.75        13.71        (7.12         570,122        1.07     1.07     6.51     109,336        40   
  0.00            15.60        16.18        8.84            599,980        1.09        1.09        6.32        113,753        48   
  0.00            16.04        17.15        3.48            612,225        1.10        1.09        7.91        115,565        108   
  0.00            15.90        18.17        33.21            603,483        1.32        1.14        11.03        114,270        28   
  0.00            13.67        15.27        4.78            515,041        1.30        1.16        11.56        101,188        32   
  0.00            15.51        16.24        41.86            579,963        1.24        1.17        11.64        110,790        52   
                     
$ 0.26          $ 6.53      $ 7.84        (12.59 )%        $ 824,049        1.08 %*      1.02 %*      9.13 %*    $ 227,006        17
  0.00            7.37        9.71        (18.40         925,598        1.05     1.03     8.14     104,245        8   
  0.00            7.59        12.48        12.30            949,880        1.18        1.02        11.53        106,324        58   
  0.00            8.23        12.56        15.51            1,021,120        1.14        1.03        10.14        112,424        159   
  0.00            8.65        12.35        8.53            1,063,863        1.06        1.05        10.00        116,082        70   
  0.00            7.87        12.84        3.28            960,496        1.16        1.07        11.76        107,233        24   
  0.00            9.42        14.01        28.94            1,138,186        1.11        1.04        12.74        122,446        89   
                     
$ 0.00          $ 10.08      $ 9.29        (5.59 )%        $ 255,019        1.17 %*      1.13 %*      7.00 %*    $ 149,316        18
  0.11            11.46        10.39        (2.62         289,909        1.30        1.25        6.67        166,328        67   
  0.00            12.15        11.87        9.95            306,475        1.19        1.18        6.71        122,004        113   
  0.00            11.70        11.83        5.69            294,017        1.24        1.21        7.59        118,058        63   
  0.00            11.35        11.52        12.02            283,285        1.85        1.65        10.93        114,654        23   
  0.00            11.39        12.39        19.67            282,691        1.51        1.41        11.00        114,474        44   
                     
                     
$ 0.00          $ 9.11      $ 8.41        (4.97 )%        $ 538,403        1.14 %*      1.08 %*      9.54 %*    $ 170,561        17
  0.12            10.27        9.41        (0.12         606,974        1.16        1.13        6.58        189,105        63   
  0.00            10.88        10.50        12.39            642,119        1.14        1.14        6.79        124,695        119   
  0.00            10.29        10.24        6.80            605,843        1.16        1.14        8.20        119,060        71   
  0.00            10.23        10.96        16.33            597,683        1.48        1.37        10.87        117,792        17   
  0.00            10.04        10.27        12.53            584,351        1.24        1.21        10.34        115,720        42   

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   15


Table of Contents

Statements of Assets and Liabilities

 

January 31, 2016 (Unaudited)

 

(Amounts in thousands, except per share amounts)   PIMCO
Corporate &
Income
Opportunity
Fund
    PIMCO
Corporate &
Income
Strategy
Fund
    PIMCO High
Income Fund
    PIMCO Income
Strategy
Fund
    PIMCO Income
Strategy
Fund II
 

Assets:

         

Investments, at value

                                       

Investments in securities*

  $ 1,217,978      $ 634,534      $ 1,011,349      $ 320,649     $ 677,455   

Financial Derivative Instruments

                                       

Exchange-traded or centrally cleared

    4,597        2,681        8,457        1,414       3,309   

Over the counter

    10,781        5,315        28,748        3,154       6,924   

Cash

    78        447        0        60       3,436   

Deposits with counterparty

    14,098        4,812        11,575        3,529       5,142   

Foreign currency, at value

    821        302        201        222       514   

Receivable for investments sold

    4,528        17,937        12,559        2,402       8,616   

Interest and dividends receivable

    12,393        5,840        12,942        3,272       6,604   

Other assets

    12        13        85        2       5   

Total Assets

    1,265,286        671,881        1,085,916        334,704       712,005   

Liabilities:

         

Borrowings & Other Financing Transactions

                                       

Payable for reverse repurchase agreements

  $ 20,020      $ 51,083      $ 97,483      $ 9,754     $ 38,036   

Financial Derivative Instruments

                                       

Exchange-traded or centrally cleared

    4,703        2,287        8,255        1,314       3,139   

Over the counter

    76,183        5,780        9,198        3,494       7,328   

Payable for investments purchased

    8,540        15,381        6,199        8,324       20,931   

Deposits from counterparty

    2,161        4,381        24,916        2,889       6,118   

Distributions payable to common shareholders

    9,231        4,350        13,056        2,277       4,728   

Distributions payable to preferred shareholders

    24        4        8        9       21   

Overdraft due to custodian

    0        0        10        0       0   

Accrued management fees

    571        366        542        213       429   

Other liabilities

    278        123        225        136       422   

Total Liabilities

    121,711        83,755        159,892        28,410       81,152   

Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 9,518, 2,221, 4,079, 2,051, 3,698 shares issued and outstanding, respectively)

    237,950        55,525        101,975        51,275       92,450   

Net Assets Applicable to Common Shareholders

  $ 905,625      $ 532,601      $ 824,049      $ 255,019     $ 538,403   

Composition of Net Assets Applicable to Common Shareholders:

         

Common Shares:

                                       

Par value ($0.00001 per share)

  $ 1      $ 0      $ 1      $ 0     $ 1   

Paid in capital in excess of par

      1,029,485        569,619          1,693,567        419,477       950,671   

(Overdistributed) net investment income

    (28,528     (12,037     (80,891     (6,504 )     (8,523

Accumulated undistributed net realized (loss)

    (110,500     (27,585     (850,056       (151,806 )       (402,094

Net unrealized appreciation (depreciation)

    15,167        2,604        61,428        (6,148 )     (1,652
    $ 905,625      $ 532,601      $ 824,049      $ 255,019     $ 538,403   

Common Shares Issued and Outstanding

    71,005        38,665        126,194        25,300       59,103   

Net Asset Value Per Common Share

  $ 12.75      $ 13.78      $ 6.53      $ 10.08     $ 9.11   

Cost of investments in securities

  $ 1,243,266      $   664,214      $ 1,069,807      $ 341,768     $   715,700   

Cost of foreign currency held

  $ 822      $ 304      $ 215      $ 225     $ 517   

Cost or premiums of financial derivative instruments, net

  $ (52,173   $ 755      $ 8,429      $ 279     $ 481   

* Includes repurchase agreements of:

  $ 35,311      $ 5,536      $ 11,451      $ 5,253     $ 16,400   

 

 

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

 

16   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


Table of Contents

Statements of Operations

 

Six Months Ended January 31, 2016 (Unaudited)  
(Amounts in thousands)   PIMCO
Corporate &
Income
Opportunity
Fund
    PIMCO
Corporate &
Income
Strategy
Fund
    PIMCO High
Income Fund
    PIMCO Income
Strategy
Fund
    PIMCO Income
Strategy
Fund II
 

Investment Income:

         

Interest, net of foreign taxes*

  $ 40,527      $ 21,414      $ 43,333      $ 10,535      $ 29,293   

Dividends

    1,779        1,113        900        567        1,224   

Total Income

    42,306        22,527        44,233        11,102        30,517   

Expenses:

         

Management fees

    3,863        2,723        4,123        1,456        2,941   

Auction agent fees and commissions

    243        131        227        59        120   

Trustee fees and related expenses

    51        63        77        13        43   

Interest expense

    230        69        244        49        159   

Auction rate preferred shares related expenses

    21        31        11        19        8   

Total Expenses

    4,408        3,017        4,682        1,596        3,271   

Net Investment Income

    37,898        19,510        39,551        9,506        27,246   

Net Realized Gain (Loss):

         

Investments in securities

    (998     2,150        (2,172     (302     607   

Exchange-traded or centrally cleared financial derivative instruments

    (29,234     (12,966     (44,622     (6,006     (15,157

Over the counter financial derivative instruments

    9,953        743        16,619        389        (264

Foreign currency

    116        (122     7        (18     (5,841

Net Realized (Loss)

    (20,163     (10,195     (30,168     (5,937     (20,655

Net Change in Unrealized Appreciation (Depreciation):

         

Investments in securities

    (67,750       (50,509       (96,923     (28,910     (52,333

Exchange-traded or centrally cleared financial derivative instruments

    19,404        11,798        37,763        4,857        11,644   

Over the counter financial derivative instruments

    (15,748     (923     (8,736     (321     (1,266

Foreign currency assets and liabilities

    (104     (69     (153     (49     (27

Net Change in Unrealized (Depreciation)

    (64,198     (39,703     (68,049     (24,423     (41,982

Net (Decrease) in Net Assets Resulting from Operations

  $   (46,463   $ (30,388   $ (58,666   $ (20,854   $ (35,391

Distributions on Preferred Shares from Net Investment Income

  $ (366   $ (119   $ (224   $ (374   $ (674

Net (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Operations

  $ (46,829   $ (30,507   $ (58,890   $   (21,228   $   (36,065

* Foreign tax withholdings

  $ 0      $ 2      $ 6      $ 0      $ 0   

 

 

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

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   17


Table of Contents

Statements of Changes in Net Assets

 

    PIMCO
Corporate & Income Opportunity Fund
    PIMCO
Corporate & Income Strategy Fund
 
(Amounts in thousands)  

Six Months Ended
January 31, 2016
(Unaudited)

    Period from
December 1, 2014 to
July 31, 2015 (a)
    Year Ended
November 30, 2014
    Six Months Ended
January 31, 2016
(Unaudited)
   

Period from
November 1, 2014 to
July 31, 2015 (b)

    Year Ended
October 31, 2014
 

(Decrease) in Net Assets from:

           

Operations:

           

Net investment income

  $ 37,898      $ 47,744      $ 79,920      $ 19,510      $ 28,166      $ 37,968  

Net realized gain (loss)

    (20,163     (4,996     28,093        (10,195     3,953        17,611  

Net change in unrealized appreciation (depreciation)

    (64,198     (18,369     42,688        (39,703     (12,132     15,590  

Net increase (decrease) in net assets resulting from operations

    (46,463     24,379        150,701        (30,388     19,987        71,169  

Distributions on preferred shares from net investment income(d)

    (366     (313     (125     (119     (160     (41 )

Distributions on preferred shares from net realized gains(d)

    0        0        (296     0        0        (122 )

Net Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Operations

    (46,829     24,066        150,280        (30,507     19,827        71,006  

Distributions to Common Shareholders:

           

From net investment income(d)

    (57,421     (119,032 )(e)      (109,083     (26,872     (52,644 )(e)      (51,774 )

From net realized capital gains(d)

    0        0        (127,359     0        0        (36,294 )

Tax basis return of capital(d)

    0        0        0        0        0        0  

Total Distributions to Common Shareholders

    (57,421     (119,032 )      (236,442     (26,872     (52,644 )      (88,068 )

Preferred Share Transactions:

           

Net Increase resulting from tender and repurchase of Auction-Rate Preferred Shares***

    0        11,317        0        19,858        0        0  

Common Share Transactions**:

           

Issued as reinvestment of distributions

    3,391        8,133        18,383        0        2,959        4,817  

Total (Decrease) in Net Assets

    (100,859     (75,516     (67,779     (37,521     (29,858     (12,245 )

Net Assets Applicable to Common Shareholders:

           

Beginning of year or period

      1,006,484        1,082,000        1,149,779        570,122        599,980        612,225  

End of year or period*

  $ 905,625      $   1,006,484      $   1,082,000      $   532,601      $   570,122      $   599,980  

* Including undistributed (overdistributed) net investment income of:

  $ (28,528   $ (8,639   $ 36,794      $ (12,037   $ (4,556   $ 11,115  

** Common Share Transactions:

           

Shares issued as reinvestment of distributions

    249        530        1,058        0        197        303  

 

 

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

(a) 

Fiscal Year end changed from November 30th to July 31st.

(b) 

Fiscal Year end changed from October 31st to July 31st.

(c) 

Fiscal year end changed from March 31st to July 31st.

(d) 

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

(e) 

Total distributions for the period ended July 31, 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 July 31, 2015.

*** 

See Note 12 in the Notes to Financial Statements.

 

18   PIMCO CLOSED-END FUNDS        See Accompanying Notes   


Table of Contents

 

PIMCO
High Income Fund
    PIMCO
Income Strategy Fund
    PIMCO
Income Strategy Fund II
 
Six Months Ended
January 31, 2016
(Unaudited)
   

Period from
April 1, 2015 to
July 31, 2015 (c)

    Year Ended
March 31, 2015
    Six Months Ended
January 31, 2016
(Unaudited)
    Year Ended
July 31, 2015
    Six Months Ended
January 31, 2016
(Unaudited)
    Year Ended
July 31, 2015
 
           
           
$ 39,551      $ 26,276      $ 117,468      $ 9,506      $ 19,896      $ 27,246      $ 41,101   
  (30,168     (29,322     (29,862     (5,937     (3,515     (20,655     (3,754
  (68,049     35,957        10,866        (24,423     (5,066     (41,982     (12,764
  (58,666     32,911        98,472        (20,854     11,315        (35,391     24,583   
  (224     (130     (356     (374     (815     (674     (1,538
  0        0        0        0        0        0        0   
 
 
    
(58,890
 
    32,781        98,116        (21,228     10,500        (36,065     23,045   
           
  (80,478     (41,672 )(e)      (182,280     (13,662     (30,835     (32,506     (65,838
  0        0        0        0        0        0        0   
  0        (19,452 )(e)      0        0        0        0        0   
  (80,478     (61,124 )      (182,280     (13,662     (30,835     (32,506     (65,838
           
 
 
    
32,304
 
  
    0        0        0        2,770        0        6,855   
           
  5,515        4,061        12,924        0        999        0        793   
    (101,549     (24,282     (71,240     (34,890     (16,566     (68,571     (35,145
           
  925,598        949,880          1,021,120        289,909        306,475        606,974        642,119   
$ 824,049      $   925,598      $ 949,880      $   255,019      $   289,909      $   538,403      $   606,974   
$ (80,891   $ (39,740   $ (32,887   $ (6,504   $ (1,974   $ (8,523   $ (2,589
           
  666        374        1,088        0        86        0        79   

 

  SEMIANNUAL REPORT   JANUARY 31, 2016   19


Table of Contents

Schedule of Investments PIMCO Corporate & Income Opportunity Fund

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 134.5%   
BANK LOAN OBLIGATIONS 2.3%   

Fortescue Metals Group Ltd.

  

4.250% due 06/30/2019

  $     3,768      $     2,633   

Hellenic Republic

  

3.930% due 03/30/2016

  EUR     2,000          1,949   

iHeartCommunications, Inc.

  

7.178% due 01/30/2019

  $     8,198          5,464   

Sequa Corp.

  

5.250% due 06/19/2017

    8,793          5,913   

Westmoreland Coal Co.

  

7.500% due 12/16/2020

    7,401          4,441   
       

 

 

 

Total Bank Loan Obligations (Cost $28,090)

      20,400   
       

 

 

 
CORPORATE BONDS & NOTES 44.9%   
BANKING & FINANCE 23.6%   

AGFC Capital Trust

  

6.000% due 01/15/2067

    1,800          1,233   

Banco do Brasil S.A.

  

6.250% due 04/15/2024 (f)

    4,200          2,048   

9.000% due 06/18/2024 (f)

    9,298          5,625   

Banco Espirito Santo S.A.

  

2.625% due 05/08/2017 ^

  EUR     500          192   

4.000% due 01/21/2019 ^

    5,000          1,923   

4.750% due 01/15/2018 ^

    1,000          385   

Banco Santander S.A.

  

6.250% due 09/11/2021 (f)

    400          396   

Barclays Bank PLC

  

14.000% due 06/15/2019 (f)

  GBP     12,550          22,738   

BGC Partners, Inc.

  

5.375% due 12/09/2019

  $     10,780          11,134   

Blackstone CQP Holdco LP

  

9.296% due 03/19/2019

      4,400          4,413   

BNP Paribas S.A.

  

7.375% due 08/19/2025 (f)

    11,000          10,808   

Cantor Fitzgerald LP

  

6.500% due 06/17/2022

    14,000          14,669   

Co-operative Group Holdings Ltd.

  

6.875% due 07/08/2020

  GBP     400          612   

7.500% due 07/08/2026

    6,200          9,627   

Communications Sales & Leasing, Inc.

  

8.250% due 10/15/2023

  $     5,300          4,704   

Credit Agricole S.A.

  

7.500% due 06/23/2026 (f)

  GBP     300          406   

7.875% due 01/23/2024 (f)

  $     12,300          12,006   

Credit Suisse Group AG

  

7.500% due 12/11/2023 (f)

    2,936          3,021   

Fort Gordon Housing LLC

  

6.124% due 05/15/2051

    12,825          13,915   

GSPA Monetization Trust

  

6.422% due 10/09/2029

    9,240          10,500   

LBG Capital PLC

  

9.125% due 07/15/2020

  GBP     3,400          4,917   

12.750% due 08/10/2020

    400          574   

15.000% due 12/21/2019

    2,000          3,849   

15.000% due 12/21/2019

  EUR     7,800          11,784   

Lloyds Bank PLC

  

12.000% due 12/16/2024 (f)

  $     6,000          8,454   

Lloyds Banking Group PLC

  

7.625% due 06/27/2023 (f)

  GBP     2,100          3,011   

National Bank of Greece S.A.

  

3.875% due 10/07/2016

  EUR     2,550          2,704   

Nationwide Building Society

  

10.250% (f)

  GBP     19          3,510   
        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 

Navient Corp.

  

5.500% due 01/15/2019

  $     5,850      $     5,499   

5.625% due 08/01/2033

    230          152   

Novo Banco S.A.

  

5.000% due 04/04/2019

  EUR     371          319   

5.000% due 04/23/2019

    152          131   

5.000% due 05/14/2019

    315          271   

5.000% due 05/21/2019

    73          62   

5.000% due 05/23/2019

    213          182   

Royal Bank of Scotland Group PLC

  

7.500% due 08/10/2020 (f)

  $     300          305   

Sberbank of Russia Via SB Capital S.A.

  

6.125% due 02/07/2022

      500          510   

Tesco Property Finance PLC

  

5.411% due 07/13/2044

  GBP     8,599          10,104   

6.052% due 10/13/2039

      2,717          3,568   

TIG FinCo PLC

  

8.500% due 03/02/2020

      1,154          1,685   

8.750% due 04/02/2020 (i)

      6,539          8,082   

Vnesheconombank Via VEB Finance PLC

  

6.800% due 11/22/2025

  $     1,400          1,335   

Western Group Housing LP

  

6.750% due 03/15/2057

      10,600          12,408   
       

 

 

 
            213,771