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
Registrants telephone number, including area code: (844) 337-4626
Date of fiscal year end: July 31
Date of reporting period: July 31, 2015
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (OMB) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. | Reports to Shareholders. |
The following is a copy of the report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the 1940 Act) (17 CFR 270.30e-1).
Your Global Investment Authority
PIMCO Closed-End Funds
Annual Report
July 31, 2015
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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Letter from the Chairman of the Board & President
Dear Shareholder:
The financial markets experienced periods of volatility during each Funds reporting period.1 Investor sentiment was challenged at times given mixed economic data, uncertainties surrounding future global monetary policy, geopolitical issues and, most recently, the debt crisis in Greece.
For the periods ended July 31, 2015
After expanding in the third and fourth quarters of 2014, economic growth in the U.S. moderated during the first quarter of 2015. 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 4.3% and 2.2% annual pace during the third and fourth quarters of 2014, respectively. According to the Commerce Department, GDP grew at a tepid annual pace of 0.6% for the first quarter of 2015. This was attributed to contractions in net exports, nonresidential fixed investment (i.e. spending on plants and equipment) and state and local government spending. In addition, consumer spending decelerated, as it grew a modest 1.8% during the first quarter of 2015 versus 4.4% for the fourth quarter of 2014. However, this appeared to be a temporary setback due to colder than usual weather and labor disputes at West Coast ports, as the Commerce Departments second estimate released after the reporting periods had ended showed that GDP grew at an annual pace of 3.7% for the second quarter of 2015.
Federal Reserve (Fed) monetary policy remained accommodative. However, the central bank appeared to be moving closer to raising interest rates for the first time since 2006. As expected, following its meeting in October 2014, the Fed announced that it had concluded its asset purchase program. Then, at its March 2015 meeting, the Fed eliminated the word patient from its official statement regarding when it may start raising rates. Finally, at its meeting in July, the Fed said that it currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Economic growth outside the U.S. was mixed over the past few quarters. 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 is expected to run until September 2016, or longer if needed to achieve an inflation rate consistent with the ECBs longer-term target. The ECB announcement and a still-benign U.S. rates environment were supportive for emerging market asset prices initially, although toward the end of the reporting period, riskier asset classes succumbed to pressures from slower economic growth, volatility in Chinese equities, increased uncertainty over the resolution of the Greek crisis and higher volatility in commodity markets.
Outlook
PIMCO continues to see a multi-speed world of economies converging to modest trend growth rates, a view now shared by the International Monetary Fund, which, in its most recent world economic outlook, materially marked down its estimates of potential growth in both developed and emerging economies. PIMCO also sees a global economy that is no longer restrained by private sector delevering but, instead, is learning to live with record levels of public and private debt, without a cushion that would be provided by more rapid growth or higher inflation.
While the threat of deflation in Japan and the eurozone has diminished due to quantitative easing programs put in place by the ECB and the Bank of Japan, PIMCOs baseline forecast does not foresee an imminent rise in prices toward the 2% inflation targets these central banks aim to achieve. Regarding financial markets, PIMCO believes that we participate in a global financial system that is better capitalized than before the financial crisis of 20082009 and perhaps less vulnerable to a systemic run. That being said, PIMCO understands that this environment potentially offers less liquidity to investors as the global balance sheet available for market-making shrinks.
1 Please note that several of the Funds fiscal year ends were recently changed to July 31, 2015; therefore, the length of each Funds reporting period will differ depending on its former fiscal year end. Please see Notes to Financial Statements for further detail.
2 | PIMCO CLOSED-END FUNDS |
For all these reasons, PIMCO continues to believe that we are now, and will be for some time, operating in a new neutral world in which central banks will be constrained to set policy rates at levels well below those that prevailed before the financial crisis of 20082009.
In the following pages of this PIMCO Closed-End Funds Annual Report, please find specific details regarding investment performance and a discussion of factors that most affected the Funds performance over the periods ended July 31, 2015.
Thank you for investing with us. We value your trust and will continue to work diligently to meet your investment needs. If you have questions regarding any of your PIMCO Closed-End Funds investments, please contact your financial advisor or call the Funds shareholder servicing agent at (844) 33-PIMCO or (844) 337-4626. We also invite you to visit our website at www.pimco.com to learn more about our views.
We remain dedicated to serving your investment needs.
Sincerely,
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Hans W. Kertess | Peter G. Strelow | |
Chairman of the Board of Trustees | President |
ANNUAL REPORT | JULY 31, 2015 | 3 |
Important Information About the Funds
4 | PIMCO CLOSED-END FUNDS |
ANNUAL REPORT | JULY 31, 2015 | 5 |
Important Information About the Funds (Cont.)
6 | PIMCO CLOSED-END FUNDS |
ANNUAL REPORT | JULY 31, 2015 | 7 |
PIMCO Corporate & Income Opportunity Fund
Symbol on NYSE - PTY |
Average Annual Total Return(1) for the period ended July 31, 2015 | ||||||||||||||||
1 Year | 5 Year | 10 Year | Commencement of Operations (12/27/02) |
|||||||||||||
Market Price | -8.63% | 10.99% | 11.48% | 13.14% | ||||||||||||
NAV | 5.28% | 15.28% | 13.47% | 14.49% |
All Fund returns are net of fees and expenses.
The average annual total returns shown above have been restated from previous reports to shareholders to align with the Funds change from a November 30 to a July 31 fiscal year end. For the period December 1, 2014 through July 31, 2015, the Funds total return was -13.61% and 3.75% on a market price and NAV basis, respectfully.
(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 distributions 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 swaps 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. 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 Funds primary investment objective is to seek high current income, with capital preservation and capital appreciation as secondary objectives. |
Fund Insights
» | For the period from December 1, 2014 through July 31, 2015, an allocation to non-agency mortgage-backed securities was a major contributor to performance, as the sector continued to benefit from the improving U.S. housing market. |
» | The Funds partial redemption of auction rate preferred shares (ARPS)± had a significant, one-time positive impact on returns, as redemption was done below face value. This was accretive to the Funds returns for common shareholders. |
» | The Funds exposure to select high yield corporate bonds significantly contributed to performance. In particular, an allocation to bank capital securities at the junior parts of capital structure was beneficial. In addition, security selection in the entertainment sector was also positive for performance. |
» | The Funds emerging market holdings contributed modestly to performance, as Russian hard-currency denominated bonds posted solid performance given stabilizing oil prices later in the reporting period and normalization in Russias external geopolitical position. |
» | The Funds exposure to U.S. interest rate duration was positive for performance. Nevertheless, short interest rate exposure at the long end of the yield curve detracted from returns, as long-term rates declined during the period. The overall impact to the portfolio from U.S. interest rate exposure and yield curve positioning was neutral. |
» | The Funds exposure to Brazilian hard-currency denominated assets detracted from performance. Investor sentiment for these securities was weighed down by the countrys weaker economic condition, higher inflation and rating downgrades with a negative outlook. |
» | The Funds exposure to select taxable municipal bonds detracted from returns. |
± | See Note 12 in the Notes to Financial Statements for more information. |
8 | PIMCO CLOSED-END FUNDS |
PIMCO Corporate & Income Strategy Fund
Symbol on NYSE - PCN |
Average Annual Total Return(1) for the period ended July 31, 2015 | ||||||||||||||||
1 Year | 5 Year | 10 Year | Commencement of Operations (12/21/01) |
|||||||||||||
Market Price | -4.40% | 9.33% | 10.59% | 10.76% | ||||||||||||
NAV | 5.53% | 13.64% | 12.14% | 12.29% |
All Fund returns are net of fees and expenses.
The average annual total returns shown above have been restated from previous reports to shareholders to align with the Funds change from a October 31 to a July 31 fiscal year end. For the period November 1, 2014 through July 31, 2015, the Funds total return was -7.12% and 3.55% on a market price and NAV basis, respectfully.
(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 distributions 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 swaps 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. 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 Funds primary investment objective is to seek high current income, with a secondary objective of capital preservation and appreciation. |
Fund Insights
» | For the period from November 1, 2014 through July 31, 2015, an allocation to non-agency mortgage-backed securities was a primary contributor to performance, as the sector continued to benefit from the improving U.S. housing market. |
» | The Funds exposure to U.S. interest rate duration contributed significantly to returns. However, short interest rate exposure at the long end of the yield curve mitigated some gains, as long-term rates declined during the reporting period. The overall impact to the portfolio from U.S. interest rate exposure and yield curve positioning was modestly positive for performance. |
» | The Funds exposure to select high yield corporate bonds contributed to performance. In particular, an allocation to bank capital securities at the junior parts of capital structure was beneficial. |
» | The Funds emerging market holdings contributed to returns, as exposure to Russian bonds posted solid results given stabilizing oil prices in the later part of the reporting period and normalization in Russias external geopolitical position. |
» | The Funds exposure to Brazilian local and hard-currency denominated bonds detracted from performance. Investor sentiment for these securities was weighed down by the countrys weaker economic condition, higher inflation and rating downgrades with a negative outlook. |
» | The Funds exposure to select taxable municipal bonds detracted from returns. |
ANNUAL REPORT | JULY 31, 2015 | 9 |
Symbol on NYSE - PHK |
Average Annual Total Return(1) for the period ended July 31, 2015 | ||||||||||||||||
1 Year | 5 Year | 10 Year | Commencement of Operations (04/30/03) |
|||||||||||||
Market Price | -14.12% | 6.98% | 10.05% | 10.32% | ||||||||||||
NAV | 5.12% | 15.63% | 10.79% | 11.57% |
All Fund returns are net of fees and expenses.
The average annual total returns shown above have been restated from previous reports to shareholders to align with the Funds change from a March 31 to a July 31 fiscal year end. For the period April 1, 2015 through July 31, 2015, the Funds total return was -18.40% and 3.55% on a market price and NAV basis, respectfully.
(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 distributions 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 swaps 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. 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 Funds primary investment objective is to seek high current income, with capital appreciation as a secondary objective. |
Fund Insights
» | For the period from April 1, 2015 through July 31, 2015, an allocation to non-agency mortgage-backed securities was a primary contributor to performance, as the sector continued to benefit from the improving U.S. housing market. |
» | The Funds U.S. short interest rate exposure at the long end of the U.S. Treasury yield curve contributed significantly to returns. This position helped to offset the negative impact of higher U.S. interest rates elsewhere in the portfolio, resulting in an overall positive impact to the portfolio from U.S. interest rates exposure. |
» | The Funds emerging market holdings contributed substantially to performance, as Russian quasi-sovereign corporate bond holdings posted positive results given stabilizing oil prices and normalization in Russias external geopolitical position. |
» | Despite widening spreads, the Funds exposure to select high yield corporate bonds contributed to performance as these holdings generated an attractive coupon return. In addition, security selection in the entertainment sector was positive for performance. |
» | The Funds exposure to select taxable municipal bonds detracted from returns. |
» | The Funds exposure to Brazilian hard-currency denominated assets detracted from returns. Investor sentiment for these securities was weighed down by the countrys weaker economic conditions, higher inflation and rating downgrades with a negative outlook. |
» | The Funds tactical interest rate exposure in the United Kingdom was modestly negative for performance, as rates rose across the yield curve in the country given the strength of its economy. |
10 | PIMCO CLOSED-END FUNDS |
Symbol on NYSE - PFL |
Average Annual Total Return(1) for the period ended July 31, 2015 | ||||||||||||||||
1 Year | 5 Year | 10 Year | Commencement of Operations (08/29/03) |
|||||||||||||
Market Price | -2.62% | 8.67% | 5.69% | 5.13% | ||||||||||||
NAV | 4.66% | 12.76% | 6.59% | 6.53% |
All Fund returns are net of fees and expenses.
(1) | Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO. |
(2) | Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income, 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 distributions 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 swaps 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. 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 Funds primary investment objective is to seek high current income, consistent with the preservation of capital. |
Fund Insights
» | For the period from August 1, 2014 through July 31, 2015, an allocation to certain agency mortgage derivatives was a major contributor to performance given positive security selection and attractive income. |
» | The Funds partial redemption of auction rate preferred shares (ARPS)± had a significant, one-time positive impact on returns, as redemption was done below face value. This was accretive to the Funds returns for common shareholders. |
» | An allocation to non-agency mortgage-backed securities was a significant contributor to performance, as the sector continued to benefit from the improving U.S. housing market. |
» | The Funds exposure to U.S. interest rate duration contributed significantly to returns. Nevertheless, short interest rate exposure at the long end of the yield curve offset some of the gains, as long-term rates declined during the reporting period. |
» | The Funds exposure to select high yield corporate bonds contributed to performance. In particular, an allocation to bank capital securities (especially at junior parts of the capital structure), as well as security selection in the utilities and entertainment sectors, was positive for performance. In contrast, security selection in the manufacturing sector was negative for performance. |
» | The Funds exposure to hard-currency denominated Russian bonds posted positive performance as an attractive coupon return helped offset wider spreads. |
» | The Funds exposure to Brazilian local and hard-currency denominated bonds detracted from performance. Investor sentiment for these securities was weighed down by the countrys weaker economic condition, higher inflation and rating downgrades with a negative outlook. |
» | The Funds exposure to investment grade corporate bonds detracted from performance as their spreads widened during the reporting period. |
» | The Funds exposure to select taxable municipal bonds detracted from returns. |
± | See Note 12 in the Notes to Financial Statements for more information. |
ANNUAL REPORT | JULY 31, 2015 | 11 |
Symbol on NYSE - PFN |
Average Annual Total Return(1) for the period ended July 31, 2015 | ||||||||||||||||
1 Year | 5 Year | 10 Year | Commencement of Operations (10/29/04) |
|||||||||||||
Market Price | -0.12% | 9.43% | 4.94% | 3.94% | ||||||||||||
NAV | 4.97% | 13.17% | 5.27% | 5.26% |
All Fund returns are net of fees and expenses.
(1) | Performance quoted represents past performance. Past performance is not a guarantee or a reliable indicator of future results. Current performance may be lower or higher than performance shown. Investment return and the principal value of an investment will fluctuate. Total return, market price, NAV, market price distribution yield, and NAV distribution yield will fluctuate with changes in market conditions. For performance current to the most recent month-end, visit www.pimco.com or call (844) 33-PIMCO. |
(2) | Distribution yields are not performance and are calculated by annualizing the most recent distribution per share and dividing by the NAV or Market Price, as applicable, as of the reported date. Distributions may be comprised of ordinary income, net capital gains, and/or a return of capital (ROC) of your investment in the Fund. Because the distribution rate may include a ROC, it should not be confused with yield or income. If the Fund estimates that a portion of its distribution may be comprised of amounts from sources other than net investment income, 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 distributions 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 swaps 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. 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 IIs primary investment objective is to seek high current income, consistent with the preservation of capital. |
Fund Insights
» | For the period from August 1, 2014 through July 31, 2015, an allocation to non-agency mortgage-backed securities was a major contributor to performance, as the sector continued to benefit from the improving U.S. housing market. |
» | The Funds partial redemption of auction rate preferred shares (ARPS)± had a significant, one-time positive impact on returns, as redemption was done below face value. This was accretive to the Funds returns for common shareholders. |
» | The Funds exposure to U.S. interest rate duration was significantly positive for performance. However, short interest rate exposure at the long end of the yield curve detracted from performance, as long-term rates declined during the reporting period. The overall impact to the portfolio from U.S. interest rate exposure and yield curve positioning plus an attractive carry, or the rate of interest earned by holding the respective securities, was positive. |
» | The Funds exposure to select high yield corporate bonds contributed to performance. In particular, an allocation to bank capital securities (especially at junior parts of the capital structure), as well as security selection in the utilities and entertainment sectors, was positive for performance. In contrast, security selection in the manufacturing sector was negative for performance. |
» | The Funds exposure to hard-currency denominated Russian corporate and quasi-sovereign bonds was positive for performance as an attractive coupon return helped offset wider spreads. |
» | The Funds exposure to Brazilian local and hard-currency denominated bonds detracted significantly from performance. Investor sentiment for these securities was weighed down by the countrys weaker economic condition, higher inflation and rating downgrades with a negative outlook. |
» | The Funds exposure to select taxable municipal bonds was a detractor from performance given wider spreads, as the market overall was impacted by negative news flow out of Puerto Rico, as well as a supply/demand imbalance. In addition, security selection within this sector detracted from performance, as a specific very long-dated bond sold off due to issue-specific factors. |
± | See Note 12 in the Notes to Financial Statements for more information. |
12 | PIMCO CLOSED-END FUNDS |
(THIS PAGE INTENTIONALLY LEFT BLANK)
ANNUAL REPORT | JULY 31, 2015 | 13 |
Selected Per Share Data for the Year or Period Ended: |
Net Asset Value Beginning of Year or Period |
Net Investment Income (a) |
Net Realized/ Unrealized Gain (Loss) |
Total from Investment Operations |
Distributions on Preferred Shares from Net Investment Income and Realized Gains |
Net Increase (Decrease) in Net Assets Applicable to Common Shareholders Resulting from Investment Operations |
Distributions to Common Shareholders from Net Investment Income |
Distributions to Common Shareholders from Net Realized Capital Gain |
||||||||||||||||||||||||
PIMCO Corporate & Income Opportunity Fund |
||||||||||||||||||||||||||||||||
12/01/2014 - 07/31/2015(f) |
$ | 15.41 | $ | 0.68 | $ | (0.33 | ) | $ | 0.35 | $ | (0.00 | )^ | $ | 0.35 | $ | (1.69 | ) | $ | 0.00 | |||||||||||||
11/30/2014 |
16.62 | 1.14 | 1.06 | 2.20 | (0.01 | ) | 2.19 | (1.56 | ) | (1.84 | ) | |||||||||||||||||||||
11/30/2013 |
17.58 | 1.43 | 0.19 | 1.62 | (0.00 | ) | 1.62 | (1.82 | ) | (0.76 | ) | |||||||||||||||||||||
11/30/2012 |
14.22 | 1.68 | 3.87 | 5.55 | (0.01 | ) | 5.54 | (2.18 | ) | 0.00 | ||||||||||||||||||||||
11/30/2011 |
16.29 | 1.88 | (1.87 | ) | 0.01 | (0.01 | ) | 0.00 | (2.07 | ) | 0.00 | |||||||||||||||||||||
11/30/2010 |
13.63 | 1.80 | 2.83 | 4.63 | (0.01 | ) | 4.62 | (1.96 | ) | 0.00 | ||||||||||||||||||||||
PIMCO Corporate & Income Strategy Fund |
||||||||||||||||||||||||||||||||
11/01/2014 - 07/31/2015(g) |
$ | 15.60 | $ | 0.73 | $ | (0.21 | ) | $ | 0.52 | $ | (0.00 | )^ | $ | 0.52 | $ | (1.37 | ) | $ | 0.00 | |||||||||||||
10/31/2014 |
16.04 | 0.99 | 0.87 | 1.86 | (0.00 | )^ | 1.86 | (1.35 | ) | (0.95 | ) | |||||||||||||||||||||
10/31/2013 |
15.90 | 1.28 | 0.44 | 1.72 | (0.01 | ) | 1.71 | (1.57 | ) | 0.00 | ||||||||||||||||||||||
10/31/2012 |
13.67 | 1.57 | 2.47 | 4.04 | (0.01 | ) | 4.03 | (1.80 | ) | 0.00 | ||||||||||||||||||||||
10/31/2011 |
15.51 | 1.72 | (1.87 | ) | (0.15 | ) | (0.01 | ) | (0.16 | ) | (1.68 | ) | 0.00 | |||||||||||||||||||
10/31/2010 |
12.88 | 1.61 | 2.90 | 4.51 | (0.01 | ) | 4.50 | (1.87 | ) | 0.00 | ||||||||||||||||||||||
PIMCO High Income Fund |
||||||||||||||||||||||||||||||||
04/01/2015 - 07/31/2015(h) |
$ | 7.59 | $ | 0.21 | $ | 0.06 | $ | 0.27 | $ | (0.00 | )^ | $ | 0.27 | $ | (0.33 | ) | $ | 0.00 | ||||||||||||||
03/31/2015 |
8.23 | 0.94 | (0.12 | ) | 0.82 | (0.00 | )^ | 0.82 | (1.46 | ) | 0.00 | |||||||||||||||||||||
03/31/2014 |
8.65 | 0.84 | 0.20 | 1.04 | (0.00 | )^ | 1.04 | (1.35 | ) | 0.00 | ||||||||||||||||||||||
03/31/2013 |
7.87 | 0.81 | 1.43 | 2.24 | (0.00 | )^ | 2.24 | (1.42 | ) | 0.00 | ||||||||||||||||||||||
03/31/2012 |
9.42 | 0.96 | (1.05 | ) | (0.09 | ) | (0.00 | )^ | (0.09 | ) | (1.39 | ) | 0.00 | |||||||||||||||||||
03/31/2011 |
8.73 | 1.13 | 1.03 | 2.16 | (0.01 | ) | 2.15 | (1.46 | ) | 0.00 | ||||||||||||||||||||||
PIMCO Income Strategy Fund |
||||||||||||||||||||||||||||||||
07/31/2015 |
$ | 12.15 | $ | 0.79 | $ | (0.34 | ) | $ | 0.45 | $ | (0.03 | ) | $ | 0.42 | $ | (1.22 | ) | $ | 0.00 | |||||||||||||
07/31/2014 |
11.70 | 0.79 | 0.78 | 1.57 | (0.04 | ) | 1.53 | (1.08 | ) | 0.00 | ||||||||||||||||||||||
07/31/2013 |
11.35 | 0.92 | 0.87 | 1.79 | (0.04 | ) | 1.75 | (1.40 | ) | 0.00 | ||||||||||||||||||||||
07/31/2012 |
11.39 | 1.16 | (0.04 | ) | 1.12 | (0.05 | ) | 1.07 | (1.11 | ) | 0.00 | |||||||||||||||||||||
07/31/2011 |
10.62 | 1.24 | 0.79 | 2.03 | (0.05 | ) | 1.98 | (1.21 | ) | 0.00 | ||||||||||||||||||||||
PIMCO Income Strategy Fund II |
||||||||||||||||||||||||||||||||
07/31/2015 |
$ | 10.88 | $ | 0.70 | $ | (0.29 | ) | $ | 0.41 | $ | (0.03 | ) | $ | 0.38 | $ | (1.11 | ) | $ | 0.00 | |||||||||||||
07/31/2014 |
10.29 | 0.72 | 0.87 | 1.59 | (0.04 | ) | 1.55 | (0.96 | ) | 0.00 | ||||||||||||||||||||||
07/31/2013 |
10.23 | 0.88 | 0.68 | 1.56 | (0.04 | ) | 1.52 | (1.46 | ) | 0.00 | ||||||||||||||||||||||
07/31/2012 |
10.04 | 1.03 | 0.03 | 1.06 | (0.04 | ) | 1.02 | (0.83 | ) | 0.00 | ||||||||||||||||||||||
07/31/2011 |
9.29 | 1.03 | 0.73 | 1.76 | (0.04 | ) | 1.72 | (0.97 | ) | 0.00 |
* | Annualized |
^ | Reflects an amount rounding to less than one cent. |
(a) | Per share amounts based on average number of shares outstanding during the year or period. |
(b) | Determined in accordance with federal income tax regulations, see Note 2(c) in the Notes to Financial Statements for more information. |
(c) | Total investment return is calculated assuming a purchase of a 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 |
Tax Basis Return of Capital |
Total Distributions to Common Shareholders (b) |
Increase Resulting from Tender and Repurchase of Auction- Rate Preferred Shares |
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) |
Ratio of Expenses to Average Net Assets (d)(e) |
Ratio of Expenses to Average Net Assets Excluding Interest Expense (d) |
Ratio of Net Investment Income to Average Net Assets |
Preferred Shares Asset Coverage Per Share |
Portfolio Turnover Rate |
|||||||||||||||||||||||||||||||||||
$ | 0.00 | $ | (1.69 | )(i) | $ | 0.16 | (j) | $ | 14.23 | $ | 14.31 | (13.61 | )% | $ | 1,006,484 | 0.91 | %* | 0.90 | %* | 7.01 | %* | 130,743 | 34 | % | ||||||||||||||||||||||
0.00 | (3.40 | ) | 0.00 | 15.41 | 18.50 | 26.04 | 1,082,000 | 0.91 | 0.91 | 7.36 | 108,229 | 44 | ||||||||||||||||||||||||||||||||||
0.00 | (2.58 | ) | 0.00 | 16.62 | 17.75 | (0.15 | ) | 1,149,779 | 0.91 | 0.91 | 8.49 | 113,443 | 118 | |||||||||||||||||||||||||||||||||
0.00 | (2.18 | ) | 0.00 | 17.58 | 20.37 | 36.86 | 1,205,090 | 1.05 | 0.93 | 10.63 | 117,697 | 29 | ||||||||||||||||||||||||||||||||||
0.00 | (2.07 | ) | 0.00 | 14.22 | 16.78 | 9.24 | 967,195 | 1.09 | 0.94 | 11.76 | 99,399 | 53 | ||||||||||||||||||||||||||||||||||
0.00 | (1.96 | ) | 0.00 | 16.29 | 17.30 | 40.36 | 1,098,920 | 1.02 | 0.93 | 11.98 | 109,530 | 70 | ||||||||||||||||||||||||||||||||||
$ | 0.00 | $ | (1.37 | )(i) | $ | 0.00 | $ | 14.75 | $ | 13.71 | (7.12 | )% | $ | 570,122 | 1.07 | %* | 1.07 | %* | 6.51 | %* | 109,336 | 40 | % | |||||||||||||||||||||||
0.00 | (2.30 | ) | 0.00 | 15.60 | 16.18 | 8.84 | 599,980 | 1.09 | 1.09 | 6.32 | 113,753 | 48 | ||||||||||||||||||||||||||||||||||
0.00 | (1.57 | ) | 0.00 | 16.04 | 17.15 | 3.48 | 612,225 | 1.10 | 1.09 | 7.91 | 115.565 | 108 | ||||||||||||||||||||||||||||||||||
0.00 | (1.80 | ) | 0.00 | 15.90 | 18.17 | 33.21 | 603,483 | 1.32 | 1.14 | 11.03 | 114,270 | 28 | ||||||||||||||||||||||||||||||||||
0.00 | (1.68 | ) | 0.00 | 13.67 | 15.27 | 4.78 | 515,041 | 1.30 | 1.16 | 11.56 | 101,188 | 32 | ||||||||||||||||||||||||||||||||||
0.00 | (1.87 | ) | 0.00 | 15.51 | 16.24 | 41.86 | 579,963 | 1.24 | 1.17 | 11.64 | 110,790 | 52 | ||||||||||||||||||||||||||||||||||
$ | (0.16 | ) | $ | (0.49 | )(i) | $ | 0.00 | $ | 7.37 | $ | 9.71 | (18.40 | )% | $ | 925,598 | 1.05 | %* | 1.03 | %* | 8.14 | %* | 104,245 | 8 | % | ||||||||||||||||||||||
0.00 | (1.46 | ) | 0.00 | 7.59 | 12.48 | 12.30 | 949,880 | 1.18 | 1.02 | 11.53 | 106,324 | 58 | ||||||||||||||||||||||||||||||||||
(0.11 | ) | (1.46 | ) | 0.00 | 8.23 | 12.56 | 15.51 | 1,021,120 | 1.14 | 1.03 | 10.14 | 112,424 | 159 | |||||||||||||||||||||||||||||||||
(0.04 | ) | (1.46 | ) | 0.00 | 8.65 | 12.35 | 8.53 | 1,063,863 | 1.06 | 1.05 | 10.00 | 116,082 | 70 | |||||||||||||||||||||||||||||||||
(0.07 | ) | (1.46 | ) | 0.00 | 7.87 | 12.84 | 3.28 | 960,496 | 1.16 | 1.07 | 11.76 | 107,233 | 24 | |||||||||||||||||||||||||||||||||
0.00 | (1.46 | ) | 0.00 | 9.42 | 14.01 | 28.94 | 1,138,186 | 1.11 | 1.04 | 12.74 | 122,446 | 89 | ||||||||||||||||||||||||||||||||||
$ | 0.00 | $ | (1.22 | ) | $ | 0.11 | (j) | $ | 11.46 | $ | 10.39 | (2.62 | )% | $ | 289,909 | 1.30 | % | 1.25 | % | 6.67 | % | 166,328 | 67 | % | ||||||||||||||||||||||
0.00 | (1.08 | ) | 0.00 | 12.15 | 11.87 | 9.95 | 306,475 | 1.19 | 1.18 | 6.71 | 122,004 | 113 | ||||||||||||||||||||||||||||||||||
0.00 | (1.40 | ) | 0.00 | 11.70 | 11.83 | 5.69 | 294,017 | 1.24 | 1.21 | 7.59 | 118,058 | 63 | ||||||||||||||||||||||||||||||||||
0.00 | (1.11 | ) | 0.00 | 11.35 | 12.52 | 12.02 | 283,285 | 1.85 | 1.65 | 10.93 | 114,654 | 23 | ||||||||||||||||||||||||||||||||||
0.00 | (1.21 | ) | 0.00 | 11.39 | 12.39 | 19.67 | 282,691 | 1.51 | 1.41 | 11.00 | 114,474 | 44 | ||||||||||||||||||||||||||||||||||
$ | 0.00 | $ | (1.11 | ) | $ | 0.12 | (j) | $ | 10.27 | $ | 9.41 | (0.12 | )% | $ | 606,974 | 1.16 | % | 1.13 | % | 6.58 | % | 189,105 | 63 | % | ||||||||||||||||||||||
0.00 | (0.96 | ) | 0.00 | 10.88 | 10.50 | 12.39 | 642,119 | 1.14 | 1.14 | 6.79 | 124,695 | 119 | ||||||||||||||||||||||||||||||||||
0.00 | (1.46 | ) | 0.00 | 10.29 | 10.24 | 6.80 | 605,843 | 1.16 | 1.14 | 8.20 | 119,060 | 71 | ||||||||||||||||||||||||||||||||||
0.00 | (0.83 | ) | 0.00 | 10.23 | 10.96 | 16.33 | 597,683 | 1.48 | 1.37 | 10.87 | 117,792 | 17 | ||||||||||||||||||||||||||||||||||
0.00 | (0.97 | ) | 0.00 | 10.04 | 10.27 | 12.53 | 584,351 | 1.24 | 1.21 | 10.34 | 115,720 | 42 |
ANNUAL REPORT | JULY 31, 2015 | 15 |
Statements of Assets and Liabilities
July 31, 2015
(Amounts in thousands, except per share amounts) | PIMCO Corporate & Income Opportunity Fund |
PIMCO Fund |
PIMCO High Income Fund |
PIMCO Income Fund |
PIMCO Income Fund II |
|||||||||||||||
Assets: |
||||||||||||||||||||
Investments, at value |
||||||||||||||||||||
Investments in securities* |
$ | 1,305,179 | $ | 741,235 | $ | 1,249,379 | $ | 345,872 | $ | 704,420 | ||||||||||
Financial Derivative Instruments |
||||||||||||||||||||
Exchange-traded or centrally cleared |
3,873 | 1,816 | 5,747 | 1,177 | 2,627 | |||||||||||||||
Over the counter |
7,780 | 2,467 | 23,927 | 1,385 | 3,918 | |||||||||||||||
Cash |
4,093 | 1,079 | 1 | 0 | 0 | |||||||||||||||
Deposits with counterparty |
24,587 | 7,472 | 10,384 | 5,946 | 9,444 | |||||||||||||||
Foreign currency, at value |
2,320 | 170 | 1,116 | 185 | 478 | |||||||||||||||
Receivable for investments sold |
247 | 147 | 1,425 | 1,726 | 14,655 | |||||||||||||||
Interest and dividends receivable |
12,100 | 5,675 | 14,361 | 2,963 | 6,538 | |||||||||||||||
Other assets |
6 | 3 | 40 | 2 | 5 | |||||||||||||||
Total Assets |
1,360,185 | 760,064 | 1,306,380 | 359,256 | 742,085 | |||||||||||||||
Liabilities: |
||||||||||||||||||||
Borrowings & Other Financing Transactions |
||||||||||||||||||||
Payable for reverse repurchase agreements |
$ | 13,551 | $ | 0 | $ | 37,237 | $ | 5,596 | $ | 13,417 | ||||||||||
Financial Derivative Instruments |
||||||||||||||||||||
Exchange-traded or centrally cleared |
3,461 | 1,688 | 5,828 | 1,025 | 2,372 | |||||||||||||||
Over the counter |
41,469 | 3,875 | 4,214 | 2,446 | 5,137 | |||||||||||||||
Payable for investments purchased |
42,471 | 8,254 | 2,759 | 4,523 | 8,736 | |||||||||||||||
Deposits from counterparty |
4,470 | 2,090 | 22,401 | 1,000 | 2,980 | |||||||||||||||
Distributions payable to common shareholders |
9,198 | 4,350 | 15,299 | 2,277 | 4,728 | |||||||||||||||
Distributions payable to preferred shareholders |
6 | 3 | 5 | 8 | 18 | |||||||||||||||
Overdraft due to custodian |
0 | 0 | 0 | 561 | 4,202 | |||||||||||||||
Accrued management fees |
734 | 544 | 844 | 272 | 533 | |||||||||||||||
Other liabilities |
391 | 138 | 195 | 364 | 538 | |||||||||||||||
Total Liabilities |
115,751 | 20,942 | 88,782 | 18,072 | 42,661 | |||||||||||||||
Preferred Shares ($0.00001 par value and $25,000 liquidation preference per share applicable to an aggregate of 9,518, 6,760, 11,680, 2,051, 3,698 shares issued and outstanding, respectively) |
237,950 | 169,000 | 292,000 | 51,275 | 92,450 | |||||||||||||||
Net Assets Applicable to Common Shareholders |
$ | 1,006,484 | $ | 570,122 | $ | 925,598 | $ | 289,909 | $ | 606,974 | ||||||||||
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 |
1,026,094 | 549,761 | 1,655,748 | 419,477 | 950,671 | |||||||||||||||
(Overdistributed) net investment income |
(8,639 | ) | (4,556 | ) | (39,740 | ) | (1,974 | ) | (2,589 | ) | ||||||||||
Accumulated undistributed net realized (loss) |
(90,337 | ) | (17,390 | ) | (819,888 | ) | (145,869 | ) | (381,439 | ) | ||||||||||
Net unrealized appreciation |
79,365 | 42,307 | 129,477 | 18,275 | 40,330 | |||||||||||||||
$ | 1,006,484 | $ | 570,122 | $ | 925,598 | $ | 289,909 | $ | 606,974 | |||||||||||
Common Shares Issued and Outstanding |
70,756 | 38,665 | 125,528 | 25,300 | 59,103 | |||||||||||||||
Net Asset Value Per Common Share |
$ | 14.23 | $ | 14.75 | $ | 7.37 | $ | 11.46 | $ | 10.27 | ||||||||||
Cost of Investments in securities |
$ | 1,262,717 | $ | 720,406 | $ | 1,210,914 | $ | 338,083 | $ | 690,335 | ||||||||||
Cost of Foreign Currency Held |
$ | 2,345 | $ | 171 | $ | 1,136 | $ | 198 | $ | 507 | ||||||||||
Cost or Premiums of Financial Derivative Instruments, net |
$ | (36,208 | ) | $ | (1,110 | ) | $ | (144 | ) | $ | (763 | ) | $ | (1,599 | ) | |||||
* Includes repurchase agreements of: |
$ | 30,731 | $ | 98,739 | $ | 8,584 | $ | 0 | $ | 0 |
| A zero balance may reflect actual amounts rounding to less than one thousand. |
16 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
PIMCO Corporate & Income Opportunity Fund |
PIMCO Corporate & Income Strategy Fund |
|||||||||||||||
(Amounts in thousands) | Period from December 1, 2014 to July 31, 2015 (b) |
Year Ended November 30, 2014 |
Period from November 1, 2014 to July 31, 2015 (c) |
Year Ended October 31, 2014 |
||||||||||||
Investment Income: |
||||||||||||||||
Interest |
$ | 51,537 | $ | 83,525 | $ | 30,930 | $ | 43,441 | ||||||||
Dividends |
2,432 | 6,298 | 1,959 | 1,075 | ||||||||||||
Total Income |
53,969 | 89,823 | 32,889 | 44,516 | ||||||||||||
Expenses: |
||||||||||||||||
Management fees |
5,607 | 8,628 | 4,529 | 5,852 | ||||||||||||
Auction agent fees and commissions |
383 | 521 | 140 | 201 | ||||||||||||
Trustee fees and related expenses |
69 | 102 | 43 | 50 | ||||||||||||
Interest expense |
73 | 35 | 4 | 5 | ||||||||||||
Auction rate preferred shares related expenses |
93 | 20 | 7 | 32 | ||||||||||||
Miscellaneous expense |
0 | 0 | 0 | 2 | ||||||||||||
Operating expenses pre-transition(a) |
||||||||||||||||
Custodian and accounting agent |
0 | 272 | 0 | 185 | ||||||||||||
Audit and tax services |
0 | 86 | 0 | 62 | ||||||||||||
Shareholder communications |
0 | 98 | 0 | 79 | ||||||||||||
New York Stock Exchange listing |
0 | 41 | 0 | 25 | ||||||||||||
Transfer agent |
0 | 19 | 0 | 21 | ||||||||||||
Legal |
0 | 49 | 0 | 9 | ||||||||||||
Insurance |
0 | 31 | 0 | 21 | ||||||||||||
Other expenses |
0 | 1 | 0 | 4 | ||||||||||||
Total Expenses |
6,225 | 9,903 | 4,723 | 6,548 | ||||||||||||
Net Investment Income |
47,744 | 79,920 | 28,166 | 37,968 | ||||||||||||
Net Realized Gain (Loss): |
||||||||||||||||
Investments in securities |
24,639 | 20,828 | 10,936 | 23,674 | ||||||||||||
Exchange-traded or centrally cleared financial derivative instruments |
(38,600 | ) | (38,505 | ) | (10,029 | ) | (23,734 | ) | ||||||||
Over the counter financial derivative instruments |
8,647 | 45,375 | 2,910 | 17,577 | ||||||||||||
Foreign currency |
318 | 395 | 136 | 94 | ||||||||||||
Net Realized Gain (Loss) |
(4,996 | ) | 28,093 | 3,953 | 17,611 | |||||||||||
Net Change in Unrealized Appreciation (Depreciation): |
||||||||||||||||
Investments in securities |
(36,582 | ) | 41,910 | (16,394 | ) | 5,701 | ||||||||||
Exchange-traded or centrally cleared financial derivative instruments |
21,492 | 779 | 6,213 | 12,196 | ||||||||||||
Over the counter financial derivative instruments |
(3,374 | ) | 164 | (1,974 | ) | (2,252 | ) | |||||||||
Foreign currency assets and liabilities |
95 | (165 | ) | 23 | (55 | ) | ||||||||||
Net Change in Unrealized Appreciation (Depreciation) |
(18,369 | ) | 42,688 | (12,132 | ) | 15,590 | ||||||||||
Distributions on Preferred Shares from Net Investment Income and Net Realized Capital Gains |
$ | (313 | ) | $ | (421 | ) | $ | (160 | ) | $ | (163 | ) | ||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations |
$ | 24,066 | $ | 150,280 | $ | 19,827 | $ | 71,006 |
| A zero balance may reflect actual amounts rounding to less than one thousand. |
(a) | These expenses were incurred by the Fund prior to the close of business on September 5, 2014. Subsequent to the close of business on September 5, 2014, any such operating expenses are borne by PIMCO. |
(b) | Fiscal year end changed from November 30th to July 31st. |
(c) | Fiscal year end changed from October 31st to July 31st. |
See Accompanying Notes | ANNUAL REPORT | JULY 31, 2015 | 17 |
Statements of Operations (Cont.)
PIMCO High Income Fund |
PIMCO Income Strategy Fund |
PIMCO Income Strategy Fund II |
||||||||||||||
(Amounts in thousands) | Period from April 1, 2015 to July 31, 2015 (b) |
Year Ended March 31, 2015 |
Year Ended July 31, 2015 |
Year Ended July 31, 2015 |
||||||||||||
Investment Income: |
||||||||||||||||
Interest |
$ | 28,921 | $ | 127,958 | $ | 22,566 | $ | 45,398 | ||||||||
Dividends |
770 | 1,540 | 1,240 | 2,999 | ||||||||||||
Total Income |
29,691 | 129,498 | 23,806 | 48,397 | ||||||||||||
Expenses: |
||||||||||||||||
Management fees |
3,198 | 9,612 | 3,268 | 6,343 | ||||||||||||
Auction agent fees and commissions |
111 | 334 | 209 | 274 | ||||||||||||
Trustee fees and related expenses |
36 | 87 | 29 | 55 | ||||||||||||
Interest expense |
68 | 1,661 | 140 | 182 | ||||||||||||
Auction rate preferred shares related expenses |
2 | 11 | 181 | 359 | ||||||||||||
Miscellaneous expense |
0 | 0 | 0 | 0 | ||||||||||||
Operating expenses pre-transition(a) |
||||||||||||||||
Custodian and accounting agent |
0 | 114 | 18 | 23 | ||||||||||||
Audit and tax services |
0 | 30 | 12 | 12 | ||||||||||||
Shareholder communications |
0 | 90 | 7 | 10 | ||||||||||||
New York Stock Exchange listing |
0 | 62 | 3 | 6 | ||||||||||||
Transfer agent |
0 | 11 | 2 | 2 | ||||||||||||
Legal |
0 | 15 | 5 | 8 | ||||||||||||
Insurance |
0 | 3 | 1 | 2 | ||||||||||||
Other expenses |
0 | 0 | 35 | 20 | ||||||||||||
Total Expenses |
3,415 | 12,030 | 3,910 | 7,296 | ||||||||||||
Net Investment Income |
26,276 | 117,468 | 19,896 | 41,101 | ||||||||||||
Net Realized Gain (Loss): |
||||||||||||||||
Investments in securities |
2,468 | 52,437 | 6,733 | 13,770 | ||||||||||||
Exchange-traded or centrally cleared financial derivative instruments |
(19,889 | ) | (116,469 | ) | (16,497 | ) | (43,466 | ) | ||||||||
Over the counter financial derivative instruments |
(12,038 | ) | 35,308 | 6,013 | 25,519 | |||||||||||
Foreign currency |
137 | (1,138 | ) | 236 | 423 | |||||||||||
Net Realized (Loss) |
(29,322 | ) | (29,862 | ) | (3,515 | ) | (3,754 | ) | ||||||||
Net Change in Unrealized Appreciation (Depreciation): |
||||||||||||||||
Investments in securities |
(13,587 | ) | (27,718 | ) | (11,804 | ) | (21,574 | ) | ||||||||
Exchange-traded or centrally cleared financial derivative instruments |
34,777 | 38,997 | 5,695 | 16,291 | ||||||||||||
Over the counter financial derivative instruments |
15,116 | (634 | ) | 1,057 | (7,467 | ) | ||||||||||
Foreign currency assets and liabilities |
(349 | ) | 221 | (14 | ) | (14 | ) | |||||||||
Net Change in Unrealized Appreciation (Depreciation) |
35,957 | 10,866 | (5,066 | ) | (12,764 | ) | ||||||||||
Distributions on Preferred Shares from Net Investment Income |
$ | (130 | ) | $ | (356 | ) | $ | (815 | ) | $ | (1,538 | ) | ||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations |
$ | 32,781 | $ | 98,116 | $ | 10,500 | $ | 23,045 |
| A zero balance may reflect actual amounts rounding to less than one thousand. |
(a) | These expenses were incurred by the Fund prior to the close of business on September 5, 2014. Subsequent to the close of business on September 5, 2014, any such operating expenses are borne by PIMCO. |
(b) | Fiscal year end changed from March 31st to July 31st. |
18 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Statements of Changes in Net Assets
PIMCO Corporate & Income Opportunity Fund |
PIMCO Corporate & Income Strategy Fund |
|||||||||||||||||||||||
(Amounts in thousands) | Period from December 1, 2014 to July 31, 2015 (a) |
Year Ended November 30, 2014 |
Year Ended November 30, 2013 |
Period from November 1, 2014 to July 31, 2015 (b) |
Year Ended October 31, 2014 |
Year Ended October 31, 2013 |
||||||||||||||||||
Increase (Decrease) in Net Assets from: |
||||||||||||||||||||||||
Operations: |
||||||||||||||||||||||||
Net investment income |
$ | 47,744 | $ | 79,920 | $ | 98,201 | $ | 28,166 | $ | 37,968 | $ | 48,375 | ||||||||||||
Net realized gain (loss) |
(4,996 | ) | 28,093 | 129,672 | 3,953 | 17,611 | 93,577 | |||||||||||||||||
Net change in unrealized appreciation (depreciation) |
(18,369 | ) | 42,688 | (116,841 | ) | (12,132 | ) | 15,590 | (76,826 | ) | ||||||||||||||
Net increase in net assets resulting from operations |
24,379 | 150,701 | 111,032 | 19,987 | 71,169 | 65,126 | ||||||||||||||||||
Distributions on preferred shares from net investment income |
(313 | ) | (125 | ) | (290 | ) | (160 | ) | (41 | ) | (201 | ) | ||||||||||||
Distributions on preferred shares from net realized capital gains |
0 | (296 | ) | (192 | ) | 0 | (122 | ) | 0 | |||||||||||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations |
24,066 | 150,280 | 110,550 | 19,827 | 71,006 | 64,925 | ||||||||||||||||||
Distributions to Common Shareholders: |
||||||||||||||||||||||||
From net investment income |
(119,032 | ) | (109,083 | ) | (124,978 | ) | (52,644 | ) | (51,774 | ) | (59,574 | ) | ||||||||||||
From net realized capital gains |
0 | (127,359 | ) | (52,475 | ) | 0 | (36,294 | ) | 0 | |||||||||||||||
Total Distributions to Common Shareholders(c) |
(119,032 | )(d) | (236,442 | ) | (177,453 | ) | (52,644 | )(d) | (88,068 | ) | (59,574 | ) | ||||||||||||
Preferred Share Transactions: |
||||||||||||||||||||||||
Net increase resulting from tender and repurchase of Auction-Rate Preferred Shares*** |
11,317 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Common Share Transactions**: |
||||||||||||||||||||||||
Issued as reinvestment of distributions |
8,133 | 18,383 | 11,592 | 2,959 | 4,817 | 3,391 | ||||||||||||||||||
Total Increase (Decrease) in Net Assets |
(75,516 | ) | (67,779 | ) | (55,311 | ) | (29,858 | ) | (12,245 | ) | 8,742 | |||||||||||||
Net Assets Applicable to Common Shareholders: |
||||||||||||||||||||||||
Beginning of year or period |
1,082,000 | 1,149,779 | 1,205,090 | 599,980 | 612,225 | 603,483 | ||||||||||||||||||
End of year or period* |
$ | 1,006,484 | $ | 1,082,000 | $ | 1,149,779 | $ | 570,122 | $ | 599,980 | $ | 612,225 | ||||||||||||
* Including undistributed (overdistributed) net investment income of: |
$ | (8,639 | ) | $ | 36,794 | $ | (17,126 | ) | $ | (4,556 | ) | $ | 11,115 | $ | (5,218 | ) | ||||||||
** Common Share Transactions: |
||||||||||||||||||||||||
Shares issued as reinvestment of distributions |
530 | 1,058 | 615 | 197 | 303 | 199 |
| 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) | Determined in accordance with federal income tax regulations, see Note 2(c) in the Notes to Financial Statements for more information. |
(d) | 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. |
See Accompanying Notes | ANNUAL REPORT | JULY 31, 2015 | 19 |
Statements of Changes in Net Assets (Cont.)
PIMCO High Income Fund |
PIMCO Income Strategy Fund |
PIMCO Income Strategy Fund II |
||||||||||||||||||||||||||
(Amounts in thousands) | Period from April 1, 2015 to July 31, 2015 (a) |
Year Ended March 31, 2015 |
Year Ended March 31, 2014 |
Year Ended July 31, 2015 |
Year Ended July 31, 2014 |
Year Ended July 31, 2015 |
Year Ended July 31, 2014 |
|||||||||||||||||||||
Increase (Decrease) in Net Assets from: |
||||||||||||||||||||||||||||
Operations: |
||||||||||||||||||||||||||||
Net investment income |
$ | 26,276 | $ | 117,468 | $ | 103,264 | $ | 19,896 | $ | 19,940 | $ | 41,101 | $ | 42,061 | ||||||||||||||
Net realized gain (loss) |
(29,322 | ) | (29,862 | ) | 104,341 | (3,515 | ) | 14,120 | (3,754 | ) | 35,833 | |||||||||||||||||
Net change in unrealized appreciation (depreciation) |
35,957 | 10,866 | (81,613 | ) | (5,066 | ) | 5,796 | (12,764 | ) | 15,693 | ||||||||||||||||||
Net increase in net assets resulting from operations |
32,911 | 98,472 | 125,992 | 11,315 | 39,856 | 24,583 | 93,587 | |||||||||||||||||||||
Distributions on preferred shares from net investment income |
(130 | ) | (356 | ) | (286 | ) | (815 | ) | (1,090 | ) | (1,538 | ) | (2,217 | ) | ||||||||||||||
Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations |
32,781 | 98,116 | 125,706 | 10,500 | 38,766 | 23,045 | 91,370 | |||||||||||||||||||||
Distributions to Common Shareholders: |
||||||||||||||||||||||||||||
From net investment income |
(41,672 | ) | (182,280 | ) | (167,013 | ) | (30,835 | ) | (27,203 | ) | (65,838 | ) | (56,598 | ) | ||||||||||||||
From net realized capital gains |
0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Tax basis return of capital |
(19,452 | ) | 0 | (13,720 | ) | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total Distributions to Common Shareholders(b) |
(61,124 | )(c) | (182,280 | ) | (180,733 | ) | (30,835 | ) | (27,203 | ) | (65,838 | ) | (56,598 | ) | ||||||||||||||
Preferred Share Transactions: |
||||||||||||||||||||||||||||
Net increase resulting from tender and repurchase of Auction-Rate Preferred Shares*** |
0 | 0 | 0 | 2,770 | 0 | 6,855 | 0 | |||||||||||||||||||||
Common Share Transactions**: |
||||||||||||||||||||||||||||
Issued as reinvestment of distributions |
4,061 | 12,924 | 12,285 | 999 | 895 | 793 | 1,504 | |||||||||||||||||||||
Total Increase (Decrease) in Net Assets |
(24,282 | ) | (71,240 | ) | (42,742 | ) | (16,566 | ) | 12,458 | (35,145 | ) | 36,276 | ||||||||||||||||
Net Assets Applicable to Common Shareholders: |
||||||||||||||||||||||||||||
Beginning of year or period |
949,880 | 1,021,120 | 1,063,862 | 306,475 | 294,017 | 642,119 | 605,843 | |||||||||||||||||||||
End of year or period* |
$ | 925,598 | $ | 949,880 | $ | 1,021,120 | $ | 289,909 | $ | 306,475 | $ | 606,974 | $ | 642,119 | ||||||||||||||
* Including (overdistributed) net investment income of: |
$ | (39,740 | ) | $ | (32,887 | ) | $ | (31,891 | ) | $ | (1,974 | ) | $ | (1,643 | ) | $ | (2,589 | ) | $ | (8,851 | ) | |||||||
** Common Share Transactions: |
||||||||||||||||||||||||||||
Shares issued as reinvestment of distributions |
374 | 1,088 | 1,076 | 86 | 76 | 79 | 143 |
| A zero balance may reflect actual amounts rounding to less than one thousand. |
(a) | Fiscal year end changed from March 31st to July 31st. |
(b) | Determined in accordance with federal income tax regulations, see Note 2(c) in the Notes to Financial Statements for more information. |
(c) | 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. |
20 | PIMCO CLOSED-END FUNDS | See Accompanying Notes |
Schedule of Investments PIMCO Corporate & Income Opportunity Fund
July 31, 2015