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: 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.


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).


Table of Contents

LOGO

 

Your Global Investment Authority

 

PIMCO Closed-End Funds

 

LOGO      LOGO      LOGO

 

LOGO      LOGO     

 

 

Annual Report

 

July 31, 2015

 

LOGO

 

PIMCO Corporate & Income Opportunity Fund

PIMCO Corporate & Income Strategy Fund

PIMCO High Income Fund

PIMCO Income Strategy Fund

PIMCO Income Strategy Fund II

 

LOGO


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

        19   

Notes to Financial Statements

        61   

Report of Independent Registered Public Accounting Firm

        83   

Glossary

        84   

Federal Income Tax Information

        85   

Shareholder Meeting Results

        86   

Changes to Boards of Trustees/Changes to Portfolio Managers

        87   

Investment Strategy Updates

        88   

Dividend Reinvestment Plan

        90   

Management of the Funds

        92   

Matters Relating to the Trustees’ Consideration of the Annual Renewal of the Investment Management Agreement

     

 

95

  

Privacy Policy

        101   
     
Fund    Fund
Summary
     Schedule of
Investments
 
     

PIMCO Corporate & Income Opportunity Fund

     8         21   

PIMCO Corporate & Income Strategy Fund

     9         30   

PIMCO High Income Fund

     10         38   

PIMCO Income Strategy Fund

     11         46   

PIMCO Income Strategy Fund II

     12         53   


Table of Contents

Letter from the Chairman of the Board & President

 

Dear Shareholder:

 

The financial markets experienced periods of volatility during each Fund’s 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 Department’s 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 ECB’s 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, PIMCO’s 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 2008–2009 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 Fund’s fiscal year ends were recently changed to July 31, 2015; therefore, the length of each Fund’s 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     


Table of Contents

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 2008–2009.

 

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,

 

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

 

  ANNUAL REPORT   JULY 31, 2015   3


Table of Contents

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. 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.

 

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

 

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

 

 

4   PIMCO CLOSED-END FUNDS     


Table of Contents

 

 

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

 

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

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

 

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

 

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

 

 

  ANNUAL REPORT   JULY 31, 2015   5


Table of Contents

Important Information About the Funds (Cont.)

 

securities will not generally increase in value if interest rates decline. Inverse floating rate securities may decrease in value if interest rates increase. Inverse floating rate securities may also exhibit greater price volatility than a fixed rate obligation with similar credit quality. When a Fund holds variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Funds’ shares.

 

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

 

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

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

 

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

 

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

 

 

6   PIMCO CLOSED-END FUNDS     


Table of Contents

 

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 of each Fund:

 

Fund Name       Commencement
of Operations
 

PIMCO Corporate & Income Opportunity Fund

      12/27/02   

PIMCO Corporate & Income Strategy Fund

      12/21/01   

PIMCO High Income Fund

      04/30/03   

PIMCO Income Strategy Fund

      08/29/03   

PIMCO Income Strategy Fund II

      10/29/04   

 

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.

 

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.

 

 

  ANNUAL REPORT   JULY 31, 2015   7


Table of Contents

PIMCO Corporate & Income Opportunity Fund

 

 
 
  Symbol on NYSE -  PTY

 

Allocation Breakdown

 

Corporate Bonds & Notes

    37.8%   

Mortgage-Backed Securities

    29.7%   

Asset-Backed Securities

    8.2%   

Municipal Bonds & Notes

    7.8%   

Short-Term Instruments

    5.3%   

U.S. Government Agencies

    5.2%   

Other

    6.0%   
   

% of Investments, at value as of 07/31/15. Financial derivative instruments, if any, are excluded.

 

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

 

Market Price

    $14.31   

NAV

    $14.23   

Premium/(Discount) to NAV

    0.56%   

Market Price Distribution Yield(2)

    10.90%   

NAV Distribution Yield(2)

    10.96%   

Total Effective Leverage(3)

    37%   
 

 

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 Fund’s change from a November 30 to a July 31 fiscal year end. For the period December 1, 2014 through July 31, 2015, the Fund’s 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 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 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 Fund’s 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 Fund’s 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 Fund’s returns for common shareholders.

 

»  

The Fund’s 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 Fund’s 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 Russia’s external geopolitical position.

 

»  

The Fund’s 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 Fund’s exposure to Brazilian hard-currency denominated assets detracted from performance. Investor sentiment for these securities was weighed down by the country’s weaker economic condition, higher inflation and rating downgrades with a negative outlook.

 

»  

The Fund’s 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     


Table of Contents

PIMCO Corporate & Income Strategy Fund

 

 
 
  Symbol on NYSE -  PCN

 

Allocation Breakdown

 

Corporate Bonds & Notes

    38.8%   

Mortgage-Backed Securities

    27.8%   

Short-Term Instruments

    14.4%   

Municipal Bonds & Notes

    5.8%   

Asset-Backed Securities

    4.3%   

Other

    8.9%   
   

% of Investments, at value as of 07/31/15. Financial derivative instruments, if any, are excluded.

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

 

Market Price

    $13.71   

NAV

    $14.75   

Premium/(Discount) to NAV

    -7.05%   

Market Price Distribution Yield(2)

    9.85%   

NAV Distribution Yield(2)

    9.15%   

Total Effective Leverage(3)

    27%   
 

 

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 Fund’s change from a October 31 to a July 31 fiscal year end. For the period November 1, 2014 through July 31, 2015, the Fund’s 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 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 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Russia’s external geopolitical position.

 

»  

The Fund’s exposure to Brazilian local and hard-currency denominated bonds detracted from performance. Investor sentiment for these securities was weighed down by the country’s weaker economic condition, higher inflation and rating downgrades with a negative outlook.

 

»  

The Fund’s exposure to select taxable municipal bonds detracted from returns.

 

  ANNUAL REPORT   JULY 31, 2015   9


Table of Contents

PIMCO High Income Fund

 

 
 
  Symbol on NYSE -  PHK

 

Allocation Breakdown

 

Corporate Bonds & Notes

    49.6%   

Mortgage-Backed Securities

    18.8%   

Municipal Bonds & Notes

    12.3%   

Asset-Backed Securities

    8.2%   

Short-Term Instruments

    3.4%   

Other

    7.7%   
   

% of Investments, at value as of 07/31/15. Financial derivative instruments, if any, are excluded.

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

 

Market Price

    $9.71   

NAV

    $7.37   

Premium/(Discount) to NAV

    31.75%   

Market Price Distribution Yield(2)

    15.06%   

NAV Distribution Yield(2)

    19.84%   

Total Effective Leverage(3)

    29%   
 

 

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 Fund’s change from a March 31 to a July 31 fiscal year end. For the period April 1, 2015 through July 31, 2015, the Fund’s 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 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 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 Fund’s 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 Fund’s 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 Fund’s emerging market holdings contributed substantially to performance, as Russian quasi-sovereign corporate bond holdings posted positive results given stabilizing oil prices and normalization in Russia’s external geopolitical position.

 

»  

Despite widening spreads, the Fund’s 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 Fund’s exposure to select taxable municipal bonds detracted from returns.

 

»  

The Fund’s exposure to Brazilian hard-currency denominated assets detracted from returns. Investor sentiment for these securities was weighed down by the country’s weaker economic conditions, higher inflation and rating downgrades with a negative outlook.

 

»  

The Fund’s 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     


Table of Contents

PIMCO Income Strategy Fund

 

 
 
  Symbol on NYSE -  PFL

 

Allocation Breakdown

 

Corporate Bonds & Notes

    50.0%   

Mortgage-Backed Securities

    15.9%   

Asset-Backed Securities

    15.6%   

Municipal Bonds & Notes

    6.8%   

Preferred Securities

    4.4%   

Other

    7.3%   
   

% of Investments, at value as of 07/31/15. Financial derivative instruments, if any, are excluded.

 

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

 

Market Price

    $10.39   

NAV

    $11.46   

Premium/(Discount) to NAV

    -9.34%   

Market Price Distribution Yield(2)

    10.39%   

NAV Distribution Yield(2)

    9.42%   

Total Effective Leverage(3)

    21%   
 

 

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 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 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’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s exposure to hard-currency denominated Russian bonds posted positive performance as an attractive coupon return helped offset wider spreads.

 

»  

The Fund’s exposure to Brazilian local and hard-currency denominated bonds detracted from performance. Investor sentiment for these securities was weighed down by the country’s weaker economic condition, higher inflation and rating downgrades with a negative outlook.

 

»  

The Fund’s exposure to investment grade corporate bonds detracted from performance as their spreads widened during the reporting period.

 

»  

The Fund’s 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


Table of Contents

PIMCO Income Strategy Fund II

 

 
 
  Symbol on NYSE -  PFN

 

Allocation Breakdown

 

Corporate Bonds & Notes

    47.0%   

Mortgage-Backed Securities

    25.1%   

Municipal Bonds & Notes

    8.6%   

Asset-Backed Securities

    8.1%   

U.S. Government Agencies

    2.5%   

Other

    8.7%   
   

% of Investments, at value as of 07/31/15. Financial derivative instruments, if any, are excluded.

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

 

Market Price

    $9.41   

NAV

    $10.27   

Premium/(Discount) to NAV

    -8.37%   

Market Price Distribution Yield(2)

    10.20%   

NAV Distribution Yield(2)

    9.35%   

Total Effective Leverage(3)

    19%   
 

 

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 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 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 II’s 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 Fund’s 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 Fund’s returns for common shareholders.

 

»  

The Fund’s 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 Fund’s 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 Fund’s 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 Fund’s exposure to Brazilian local and hard-currency denominated bonds detracted significantly from performance. Investor sentiment for these securities was weighed down by the country’s weaker economic condition, higher inflation and rating downgrades with a negative outlook.

 

»  

The Fund’s 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     


Table of Contents

 

 

 

(THIS PAGE INTENTIONALLY LEFT BLANK)

 

  ANNUAL REPORT   JULY 31, 2015   13


Table of Contents

Financial Highlights

 

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   


Table of Contents
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


Table of Contents

Statements of Assets and Liabilities

 

July 31, 2015

 

(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*

  $ 1,305,179      $ 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   


Table of Contents

Statements of Operations

 

    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


Table of Contents

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   


Table of Contents

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


Table of Contents

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   


Table of Contents

Schedule of Investments PIMCO Corporate & Income Opportunity Fund

 

July 31, 2015

 

        PRINCIPAL
AMOUNT
(000S)
        MARKET
VALUE
(000S)
 
INVESTMENTS IN SECURITIES 129.7%   
BANK LOAN OBLIGATIONS 2.7%   

Clear Channel Communications, Inc.

  

6.940% due 01/30/2019

  $     8,198      $     7,549   

FMG Resources Pty. Ltd.

  

3.750% due 06/30/2019

      3,788          3,113   

Sequa Corp.

  

5.250% due 06/19/2017

      8,838          7,844   

Westmoreland Coal Co.

  

7.500% due 12/16/2020

      9,566          8,897   
       

 

 

 

Total Bank Loan Obligations
(Cost $27,628)

      27,403   
       

 

 

 
CORPORATE BONDS & NOTES 49.1%   
BANKING & FINANCE 24.5%   

AGFC Capital Trust

  

6.000% due 01/15/2067

      1,800          1,341   

Banco do Brasil S.A.

  

9.000% due 06/18/2024 (d)

      15,355          13,239   

Banco Santander S.A.

  

6.250% due 09/11/2021 (d)

  EUR     400          436   

Barclays Bank PLC

  

14.000% due 06/15/2019 (d)

  GBP     12,550          25,846   

BGC Partners, Inc.

  

5.375% due 12/09/2019

  $     10,780          11,324   

Cantor Fitzgerald LP

  

6.500% due 06/17/2022 (g)

      14,000          14,642   

Citigroup, Inc.

  

5.950% due 05/15/2025 (d)

      15,900          15,522   

Co-operative Group Holdings Ltd.

  

6.875% due 07/08/2020

  GBP     400          674   

7.500% due 07/08/2026

      3,200          5,449   

Credit Agricole S.A.

  

6.500% due 06/23/2021 (d)

  EUR     700          796   

7.875% due 01/23/2024 (d)

  $     16,500          17,246   

ERB Hellas PLC

  

4.250% due 06/26/2018

  EUR     250          94   

Fort Gordon Housing LLC

  

6.124% due 05/15/2051

  $     12,825          14,218   

GSPA Monetization Trust

  

6.422% due 10/09/2029

      9,361          10,454   

LBG Capital No.2 PLC

  

9.125% due 07/15/2020

  GBP     3,400          5,734   

12.750% due 08/10/2020

      400          766   

15.000% due 12/21/2019

  EUR     7,800          12,892   

15.000% due 12/21/2019

  GBP     2,000          4,434   

Lloyds Bank PLC

  

12.000% due 12/16/2024 (d)

  $     6,000          8,655   

Lloyds Banking Group PLC

  

7.625% due 06/27/2023 (d)

  GBP     2,300          3,764   

Navient Corp.

  

5.500% due 01/15/2019

  $     20,050          19,749   

5.625% due 08/01/2033

      230          166   

8.450% due 06/15/2018

      8,200          8,877   

Novo Banco S.A.

  

2.625% due 05/08/2017

  EUR     500          546   

4.750% due 01/15/2018

      1,000          1,137   

5.000% due 04/04/2019

      371          426   

5.000% due 04/23/2019

      152          175   

5.000% due 05/14/2019

      315          362   

5.000% due 05/21/2019

      73          84   

5.000% due 05/23/2019

      213          245   

5.875% due 11/09/2015