N-Q 1 d368604dnq.htm PCM FUND INC. PCM Fund Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act File Number:    811-07816
Registrant Name:    PCM Fund Inc.
Address of Principal Executive Offices:    1633 Broadway
   New York, NY 10019
Name and Address of Agent for Service:    William G. Galipeau
   650 Newport Center Drive
   Newport Beach, CA 92660
Registrant’s telephone number, including area code:    (844) 337-4626
Date of Fiscal Year End:    June 30
Date of Reporting Period:   

March 31, 2017

 

Item 1. Schedule of Investments

 

Schedule of Investments

PCM Fund, Inc.

March 31, 2017 (Unaudited)

 

                                         
    PRINCIPAL
AMOUNT
(000S)		     MARKET
VALUE
(000S)		  

INVESTMENTS IN SECURITIES 170.2%

    

LOAN PARTICIPATIONS AND ASSIGNMENTS 3.6%

    

Cactus Wellhead LLC

    

TBD% due 07/31/2020

   $ 487     $ 467  

iHeartCommunications, Inc.

    

TBD% due 01/30/2019

     3,000       2,590  

Sequa Corp.

    

TBD% due 06/19/2017

     1,038       1,027  
   

 

 

  
Total Loan Participations and Assignments
(Cost $4,489)		       4,084  
   

 

 

  

CORPORATE BONDS & NOTES 21.4%

    

BANKING & FINANCE 4.2%

    

Cantor Fitzgerald LP

    

7.875% due 10/15/2019 (j)

     740       815  

CyrusOne LP

    

5.000% due 03/15/2024

     7       7  

5.375% due 03/15/2027

     4       4  

Exeter Finance Corp.

    

9.750% due 05/20/2019

     800       766  

Jefferies Finance LLC

    

7.500% due 04/15/2021 (j)

     187       189  

Jefferies LoanCore LLC

    

6.875% due 06/01/2020 (j)

     1,000       1,018  

Navient Corp.

    

5.875% due 03/25/2021

     465       470  

OneMain Financial Holdings LLC

    

6.750% due 12/15/2019

     9       9  

Springleaf Finance Corp.

    

5.250% due 12/15/2019

     14       14  

7.750% due 10/01/2021

     150       160  

8.250% due 12/15/2020 (j)

     900       986  

Toll Road Investors Partnership LP

    

0.000% due 02/15/2045 (f)

     1,836       416  
   

 

 

  
        4,854  
   

 

 

  

INDUSTRIALS 15.7%

    

BMC Software Finance, Inc.

    

8.125% due 07/15/2021

     72       73  

Boxer Parent Co., Inc. (9.000% Cash or 9.750% PIK)

    

9.000% due 10/15/2019 (d)(j)

     1,017       1,020  

BWAY Holding Co.

    

5.500% due 04/15/2024 (c)

     27       27  

7.250% due 04/15/2025 (c)

     20       20  

Caesars Entertainment Operating Co., Inc.

    

8.500% due 02/15/2020 ^(h)(j)

     3,091       3,594  

9.000% due 02/15/2020 ^(h)

     179       209  

California Resources Corp.

    

8.000% due 12/15/2022

     83       68  

Cardtronics, Inc.

    

5.500% due 05/01/2025 (c)

     6       6  

Charter Communications Operating LLC

    

5.375% due 05/01/2047 (c)

     13       13  

Chesapeake Energy Corp.

    

4.272% due 04/15/2019

     10       10  

Chobani LLC

    

7.500% due 04/15/2025 (c)

     14       14  

CommScope Technologies LLC

    

5.000% due 03/15/2027

     12       12  

Community Health Systems, Inc.

    

6.250% due 03/31/2023

     32       33  

CVS Pass-Through Trust

    

5.880% due 01/10/2028 (j)

     1,298       1,458  

Diamond Resorts International, Inc.

    

10.750% due 09/01/2024 (j)

     500       522  

Dole Food Co., Inc.

    

7.250% due 06/15/2025 (c)

     13       13  

Dynegy, Inc.

    

8.034% due 02/02/2024

     646       614  

Forbes Energy Services Ltd.

    

9.000% due 06/15/2019 ^(h)

     1,900       1,263  

Fresh Market, Inc.

    

9.750% due 05/01/2023 (j)

     350       284  

Gartner, Inc.

    

5.125% due 04/01/2025

     10       10  

                                         

Goodyear Tire & Rubber Co.

    

4.875% due 03/15/2027

     7       7  

Hexion, Inc.

    

10.375% due 02/01/2022

     10       10  

13.750% due 02/01/2022

     11       11  

Intrepid Aviation Group Holdings LLC

    

6.875% due 02/15/2019 (j)

     1,700       1,623  

Prime Security Services Borrower LLC

    

9.250% due 05/15/2023 (j)

     460       505  

Scientific Games International, Inc.

    

10.000% due 12/01/2022 (j)

     440       471  

Sequa Corp.

    

7.000% due 12/15/2017

     1,140       610  

Spanish Broadcasting System, Inc.

    

12.500% due 04/15/2017 (j)

     2,290       2,296  

Team Health Holdings, Inc.

    

6.375% due 02/01/2025

     3       3  

UAL Pass-Through Trust

    

6.636% due 01/02/2024 (j)

     539       584  

UCP, Inc.

    

8.500% due 10/21/2017

     1,300       1,292  

Westmoreland Coal Co.

    

8.750% due 01/01/2022 (j)

     1,264       1,194  
   

 

 

  
        17,869  
   

 

 

  

UTILITIES 1.5%

    

Frontier Communications Corp.

    

11.000% due 09/15/2025 (j)

     150       146  

Sprint Corp.

    

7.125% due 06/15/2024

     846       905  

TerraForm Power Operating LLC

    

6.375% due 02/01/2023 (j)

     600       627  
   

 

 

  
      1,678  
   

 

 

  
Total Corporate Bonds & Notes
(Cost $24,017)		         24,401  
   

 

 

  

MUNICIPAL BONDS & NOTES 1.1%

    

ARKANSAS 0.4%

    

Little Rock Municipal Property Owners Multipurpose Improvement District No. 10, Arkansas Special Tax Bonds, Series 2007

    

7.200% due 03/01/2032

     425       421  
   

 

 

  

WEST VIRGINIA 0.7%

    

Tobacco Settlement Finance Authority, West Virginia Revenue Bonds, Series 2007

    

7.467% due 06/01/2047

     840       806  
   

 

 

  
Total Municipal Bonds & Notes
(Cost $1,213)		       1,227  
   

 

 

  

U.S. GOVERNMENT AGENCIES 2.9%

    

Fannie Mae

    

4.532% due 07/25/2029

     250       253  

6.732% due 07/25/2029

     230       241  

Freddie Mac

    

0.000% due 04/25/2045 (b)(f)

     516       449  

0.100% due 05/25/2020 (a)

     12,115       30  

0.200% due 04/25/2045 (a)

     1,136       4  

0.564% due 01/25/2021 (a)

     2,644       50  

0.697% due 10/25/2020 (a)

     8,588       175  

3.615% due 06/25/2041 (a)(j)

     10,500       1,375  

5.982% due 08/25/2029

     250       247  

8.532% due 12/25/2027

     449       507  
   

 

 

  
Total U.S. Government Agencies
(Cost $3,164)		       3,331  
   

 

 

  

NON-AGENCY MORTGAGE-BACKED SECURITIES 66.7%

    

Adjustable Rate Mortgage Trust

    

3.327% due 01/25/2036 ^

     220       190  

BAMLL Commercial Mortgage Securities Trust

    

4.110% due 12/15/2029

     200       201  

Banc of America Alternative Loan Trust

    

6.245% due 04/25/2037 ^

     283       252  

Banc of America Commercial Mortgage Trust

    

5.695% due 07/10/2046

     267       266  

Banc of America Funding Trust

    

2.982% due 12/20/2034

     368       293  

3.561% due 03/20/2036

     132       119  

5.806% due 03/25/2037 ^

     143       125  

7.000% due 10/25/2037 ^

     799       503  

Banc of America Mortgage Trust

    

3.392% due 11/25/2034

     254       254  

3.494% due 06/20/2031

     438       446  

3.530% due 06/25/2035

     167       163  

                                         

Barclays Commercial Mortgage Securities Trust

    

3.330% due 08/15/2027

     900       874  

BCAP LLC Trust

    

0.981% due 07/26/2036

     87       68  

BCRR Trust

    

5.858% due 07/17/2040 (j)

     1,000       1,001  

Bear Stearns ALT-A Trust

    

1.152% due 04/25/2037 (j)

     1,038       895  

3.125% due 09/25/2034

     106       104  

3.125% due 05/25/2036

     53       41  

3.135% due 11/25/2036 ^

     952       778  

3.140% due 08/25/2036 ^

     718       670  

3.220% due 05/25/2036 ^

     349       273  

3.449% due 01/25/2047

     65       48  

3.527% due 08/25/2036 ^

     384       284  

3.841% due 07/25/2035 ^

     169       139  

Bear Stearns Asset-Backed Securities Trust

    

5.500% due 12/25/2035

     64       54  

Bear Stearns Commercial Mortgage Securities Trust

    

5.716% due 04/12/2038

     40       31  

BRAD Resecuritization Trust

    

2.181% due 03/12/2021

     2,271       143  

6.550% due 03/12/2021

     424       428  

CBA Commercial Small Balance Commercial Mortgage

    

5.540% due 01/25/2039 ^

     509       383  

Chase Mortgage Finance Trust

    

6.000% due 03/25/2037 ^

     292       249  

Citigroup Commercial Mortgage Trust

    

5.779% due 12/10/2049 (j)

     1,464       1,466  

Citigroup Mortgage Loan Trust, Inc.

    

3.207% due 11/25/2036 ^

     198       170  

3.231% due 10/25/2035

     756       567  

3.340% due 08/25/2035 ^

     109       96  

3.746% due 11/25/2035

     1,885       1,065  

Citigroup Mortgage Loan Trust, Inc. Mortgage Pass-Through Certificates

    

3.212% due 09/25/2035 ^

     243       199  

Citigroup/Deutsche Bank Commercial Mortgage Trust

    

5.398% due 12/11/2049

     749       635  

5.688% due 10/15/2048

     900       498  

CitiMortgage Alternative Loan Trust

    

5.500% due 04/25/2022 ^

     49       49  

Commercial Mortgage Asset Trust

    

6.000% due 11/17/2032

     544       541  

Commercial Mortgage Loan Trust

    

6.101% due 12/10/2049

     748       447  

Commercial Mortgage Pass-Through Certificates

    

4.750% due 10/15/2045 (j)

     1,500       1,080  

Commercial Mortgage Trust

    

5.505% due 03/10/2039 (j)

     1,332       1,282  

5.595% due 06/10/2046

     394       338  

6.140% due 07/10/2046

     690       735  

Countrywide Alternative Loan Trust

    

1.262% due 02/25/2037

     312       258  

1.272% due 02/25/2036 ^(j)

     1,035       821  

1.532% due 10/25/2037

     5,835       1,686  

1.638% due 12/25/2035 (j)

     1,657       1,498  

5.500% due 03/25/2035

     721       571  

6.000% due 11/25/2035 ^

     199       87  

6.000% due 04/25/2036 ^(j)

     4,117       3,154  

Countrywide Home Loan Mortgage Pass-Through Trust

    

1.622% due 03/25/2035

     219       186  

2.852% due 03/25/2046 ^(j)

     1,273       724  

3.015% due 09/20/2036 ^

     172       138  

3.140% due 09/25/2047 ^

     774       720  

3.309% due 02/20/2036 ^

     17       15  

6.000% due 05/25/2037 ^

     380       319  

Credit Suisse First Boston Mortgage Securities Corp.

    

7.000% due 02/25/2033

     87       94  

Credit Suisse Mortgage Capital Mortgage-Backed Trust

    

5.896% due 04/25/2036

     310       225  

6.000% due 07/25/2036 (j)

     1,648       1,229  

6.500% due 05/25/2036 ^

     199       127  

First Horizon Alternative Mortgage Securities Trust

    

3.083% due 08/25/2035 ^

     73       15  

First Horizon Mortgage Pass-Through Trust

    

3.178% due 04/25/2035

     86       87  

First Union National Bank Commercial Mortgage

    

6.750% due 10/15/2032

     1,245       1,223  

GE Commercial Mortgage Corp. Trust

    

5.606% due 12/10/2049 (j)

     1,700       1,692  

GS Mortgage Securities Trust

    

1.418% due 08/10/2043 (a)

     14,189       544  

2.319% due 05/10/2045 (a)

     5,108       381  

5.622% due 11/10/2039 (j)

     972       918  

6.061% due 08/10/2043 (j)

     1,670       1,766  

                                         

GSR Mortgage Loan Trust

    

3.277% due 03/25/2047 (j)

     1,902       1,727  

HarborView Mortgage Loan Trust

    

1.228% due 01/19/2036

     933       619  

IndyMac Mortgage Loan Trust

    

1.782% due 11/25/2034

     146       125  

3.178% due 05/25/2036

     216       151  

3.434% due 06/25/2037 (j)

     526       488  

JPMorgan Alternative Loan Trust

    

6.500% due 03/25/2036 (j)

     1,435       1,257  

JPMorgan Chase Commercial Mortgage Securities Corp.

    

1.428% due 03/12/2039 (a)

     430       3  

JPMorgan Chase Commercial Mortgage Securities Trust

    

0.491% due 02/15/2046 (a)

     59,516       1,167  

2.972% due 05/15/2045

     2,200       1,070  

4.000% due 08/15/2046

     1,000       630  

5.505% due 01/12/2043

     284       286  

5.794% due 02/12/2051

     631       636  

5.829% due 02/12/2049 (j)

     289       289  

6.450% due 05/12/2034 (j)

     670       675  

JPMorgan Commercial Mortgage-Backed Securities Trust

    

5.836% due 03/18/2051 (j)

     3,790       3,793  

JPMorgan Mortgage Trust

    

3.198% due 07/25/2035

     116       116  

LB Commercial Mortgage Trust

    

5.600% due 10/15/2035

     8       8  

6.052% due 07/15/2044 (j)

     676       679  

LB-UBS Commercial Mortgage Trust

    

5.350% due 09/15/2040

     1,200       1,178  

5.407% due 11/15/2038 (j)

     382       295  

5.562% due 02/15/2040 (j)

     719       537  

5.757% due 02/15/2040

     200       198  

Lehman Mortgage Trust

    

5.000% due 08/25/2021 ^

     386       377  

5.884% due 04/25/2036

     240       213  

6.000% due 05/25/2037 ^

     495       478  

MASTR Adjustable Rate Mortgages Trust

    

3.263% due 11/25/2035 ^

     602       454  

MASTR Asset Securitization Trust

    

6.000% due 06/25/2036 ^

     573       553  

Merrill Lynch Mortgage Investors Trust

    

1.402% due 07/25/2030

     246       227  

1.642% due 11/25/2029

     143       139  

3.020% due 11/25/2035

     220       220  

Merrill Lynch Mortgage Trust

    

5.841% due 06/12/2050 (j)

     1,800       1,771  

Morgan Stanley Capital Trust

    

0.409% due 11/12/2049 (a)

     6,752       38  

5.399% due 12/15/2043

     870       705  

5.777% due 04/15/2049 (j)

     1,932       1,926  

5.809% due 12/12/2049 (j)

     332       334  

5.942% due 06/11/2049

     500       474  

Morgan Stanley Mortgage Loan Trust

    

3.375% due 01/25/2035 ^

     288       106  

6.000% due 08/25/2037 ^

     321       272  

Morgan Stanley Resecuritization Trust

    

3.308% due 03/26/2037

     5,469       5,060  

Regal Trust

    

2.116% due 09/29/2031

     142       133  

Residential Accredit Loans, Inc. Trust

    

4.306% due 01/25/2036 ^

     488       394  

6.000% due 08/25/2035 ^

     313       287  

6.500% due 09/25/2037 ^

     330       286  

Residential Asset Securitization Trust

    

6.000% due 03/25/2037 ^

     267       174  

Residential Funding Mortgage Securities, Inc. Trust

    

6.000% due 06/25/2036 ^

     323       309  

Royal Bank of Scotland Capital Funding Trust

    

6.068% due 02/17/2051

     2,744       2,755  

Structured Adjustable Rate Mortgage Loan Trust

    

3.233% due 09/25/2036 ^

     286       253  

3.267% due 04/25/2036 ^(j)

     475       374  

3.281% due 01/25/2036 ^

     410       311  

3.316% due 11/25/2036 ^

     105       103  

Structured Asset Mortgage Investments Trust

    

1.192% due 08/25/2036 ^

     1,063       907  

TBW Mortgage-Backed Trust

    

6.000% due 07/25/2036 ^

     180       145  

Wachovia Bank Commercial Mortgage Trust

    

1.049% due 10/15/2041 (a)

     1,171       0  

WaMu Commercial Mortgage Securities Trust

    

4.321% due 03/23/2045

     85       85  

WaMu Mortgage Pass-Through Certificates Trust

    

1.472% due 06/25/2044

     639       560  

2.116% due 11/25/2046

     576       522  

2.770% due 12/25/2036 ^(j)

     484       459  

                                         

Washington Mutual Mortgage Pass-Through Certificates Trust

    

6.500% due 08/25/2036 ^(j)

     1,753       1,301  

Wells Fargo Alternative Loan Trust

    

5.500% due 07/25/2022

     40       40  

Wells Fargo-RBS Commercial Mortgage Trust

    

0.801% due 02/15/2044 (a)(j)

     17,890       437  
   

 

 

  
Total Non-Agency Mortgage-Backed Securities
(Cost $69,393)		         76,030  
   

 

 

  

ASSET-BACKED SECURITIES 64.2%

    

Airspeed Ltd.

    

1.182% due 06/15/2032

     670       556  

Asset-Backed Securities Corp. Home Equity Loan Trust

    

2.077% due 02/25/2035 (j)

     3,374       2,852  

2.707% due 12/25/2034 (j)

     1,933       1,758  

4.226% due 06/21/2029

     152       148  

Associates Manufactured Housing Pass-Through Certificates

    

7.150% due 03/15/2028

     421       506  

Bayview Financial Acquisition Trust

    

1.263% due 12/28/2036

     159       155  

Bear Stearns Asset-Backed Securities Trust

    

1.362% due 04/25/2036 (j)

     2,869       2,035  

1.362% due 06/25/2036

     21       20  

3.041% due 07/25/2036

     339       322  

Bombardier Capital Mortgage Securitization Corp.

    

7.830% due 06/15/2030

     1,185       552  

Centex Home Equity Loan Trust

    

1.732% due 01/25/2035 (j)

     1,643       1,350  

Citigroup Mortgage Loan Trust, Inc.

    

1.142% due 12/25/2036 (j)

     1,810       1,118  

1.202% due 12/25/2036

     945       509  

1.242% due 03/25/2037 (j)

     4,496       3,507  

1.432% due 11/25/2045 (j)

     5,300       5,221  

Conseco Finance Securitizations Corp.

    

7.960% due 05/01/2031

     380       270  

9.163% due 03/01/2033

     929       862  

Countrywide Asset-Backed Certificates

    

1.112% due 12/25/2036 ^(j)

     1,409       1,397  

1.122% due 06/25/2035 (j)

     2,935       2,325  

1.122% due 06/25/2047 ^(j)

     3,277       2,526  

1.132% due 04/25/2047 (j)

     1,351       1,271  

1.182% due 06/25/2037 ^(j)

     920       682  

1.222% due 05/25/2036 (j)

     8,903       4,741  

2.632% due 06/25/2035 (j)

     4,000       3,456  

Countrywide Asset-Backed Certificates Trust

    

1.252% due 09/25/2046

     5,000       2,311  

EMC Mortgage Loan Trust

    

1.828% due 05/25/2040

     675       596  

2.071% due 02/25/2041

     344       338  

Fremont Home Loan Trust

    

1.162% due 04/25/2036

     1,351       1,207  

GE Capital Mortgage Services, Inc. Trust

    

6.705% due 04/25/2029

     132       112  

GSAMP Trust

    

2.782% due 06/25/2035 (j)

     2,200       1,863  

HSI Asset Securitization Corp. Trust

    

1.092% due 04/25/2037 (j)

     4,240       2,468  

IndyMac Home Equity Mortgage Loan Asset-Backed Trust

    

1.222% due 04/25/2037 (j)

     5,457       3,508  

Keystone Owner Trust

    

9.000% due 01/25/2029

     56       36  

Lehman XS Trust

    

5.420% due 11/25/2035 ^

     250       251  

MASTR Asset-Backed Securities Trust

    

1.092% due 08/25/2036 (j)

     3,669       2,001  

Morgan Stanley ABS Capital, Inc. Trust

    

1.762% due 12/25/2034

     195       164  

National Collegiate Commutation Trust

    

0.000% due 03/25/2038

     3,500       1,566  

People’s Financial Realty Mortgage Securities Trust

    

1.112% due 09/25/2036

     1,599       508  

Renaissance Home Equity Loan Trust

    

7.238% due 09/25/2037 ^(j)

     4,224       2,582  

Residential Asset Mortgage Products Trust

    

1.722% due 09/25/2032

     43       39  

2.077% due 12/25/2033

     726       680  

Residential Asset Securities Corp. Trust

    

1.442% due 06/25/2031 (j)

     1,548       1,472  

1.672% due 08/25/2035 (j)

     4,350       3,395  

Securitized Asset-Backed Receivables LLC Trust

    

1.432% due 10/25/2035 (j)

     5,500       4,700  

1.627% due 01/25/2035 (j)

     1,641       1,457  

SoFi Professional Loan Program LLC

    

0.000% due 03/25/2036

     10       344  

0.000% due 01/25/2039

     1,000       637  

0.000% due 05/25/2040

     1,000       522  

                                         

Southern Pacific Secured Asset Corp.

    

1.322% due 07/25/2029

     16       16  

Structured Asset Investment Loan Trust

    

2.707% due 10/25/2034 (j)

     1,986       1,721  

5.482% due 10/25/2033

     68       64  

UCFC Manufactured Housing Contract

    

7.900% due 01/15/2028 ^

     471       463  

UPS Capital Business Credit

    

3.945% due 04/15/2026

     1,856       37  
   

 

 

  
Total Asset-Backed Securities
(Cost $72,503)		         73,197  
   

 

 

  
    SHARES        

COMMON STOCKS 0.1%

    

ENERGY 0.1%

    

SemGroup Corp. ‘A’

     2,654       96  
   

 

 

  

UTILITIES 0.0%

    

Warren Resources, Inc.

     7,681       28  
   

 

 

  
Total Common Stocks
(Cost $1,062)		       124  
   

 

 

  

WARRANTS 0.0%

    

UTILITIES 0.0%

    

Dynegy, Inc. - Exp. 02/02/2024

     26,160       15  
   

 

 

  
Total Warrants
(Cost $69)		       15  
   

 

 

  

SHORT-TERM INSTRUMENTS 10.2%

    

REPURCHASE AGREEMENTS (i) 0.9%

       970  
   

 

 

  
    PRINCIPAL
AMOUNT
(000S)		        

SHORT-TERM NOTES 7.3%

    

Federal Home Loan Bank

    

0.541% due 04/17/2017 (f)(g)

   $ 1,100       1,100  

0.700% due 04/05/2017 (f)(g)

     2,300       2,300  

0.720% due 04/07/2017 (f)(g)

     1,000       1,000  

0.730% due 04/17/2017 (f)(g)

     800       800  

0.751% due 04/17/2017 (f)(g)

     2,800       2,799  

0.761% due 04/21/2017 (f)(g)

     300       300  
   

 

 

  
      8,299  
   

 

 

  

U.S. TREASURY BILLS 2.0%

    

0.485% due 04/20/2017 - 04/27/2017 (e)(f)(m)

     2,267       2,266  
   

 

 

  
Total Short-Term Instruments
(Cost $11,535)		       11,535  
   

 

 

  
Total Investments in Securities
(Cost $187,445)		       193,944  
   

 

 

  
Total Investments 170.2%
(Cost $187,445)		     $   193,944  
Financial Derivative Instruments (k)(l) (1.7)%
(Cost or Premiums, net $(2,017))		       (1,918 ) 
Other Assets and Liabilities, net (68.5)%       (78,078 ) 
   

 

 

  
Net Assets Applicable to Common Shareholders 100.0%     $   113,948  
   

 

 

  

Notes to Schedule of Investments (amounts in thousands*):

 

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

 

^ Security is in default.

 

(a) Interest only security.

 

(b) Principal only security.

 

(c) When-issued security.

 

(d) Payment in-kind security.

 

(e) Coupon represents a weighted average yield to maturity.

 

(f) Zero coupon security.

 

(g) Coupon represents a yield to maturity.

 

(h) Security is subject to a forbearance agreement entered into by the Fund which forbears the Fund from taking action to, among other things, accelerate and collect payments on the subject note with respect to specified events of default.

Borrowings and Other Financing Transactions

 

(i) Repurchase Agreements:

 

Counterparty   Lending
Rate		     Settlement
Date		     Maturity
Date		     Principal
Amount		     Collateralized By   Collateral
(Received)		     Repurchase
Agreements,
at Value		     Repurchase
Agreement
Proceeds
to be
Received (1)		  
SAL     0.960 %      03/31/2017       04/03/2017     $ 100     U.S. Treasury Notes 1.750% due 12/31/2020   $ (103 )    $ 100     $ 100  
SSB     0.050       03/31/2017       04/03/2017       870     U.S. Treasury Notes 3.500% due 05/15/2020 (2)     (889 )      870       870  
             

 

 

    

 

 

    

 

 

  

Total Repurchase Agreements

   $ (992 )    $ 970     $ 970  
             

 

 

    

 

 

    

 

 

  

Reverse Repurchase Agreements:

 

Counterparty   Borrowing
Rate (3)		     Settlement
Date		     Maturity
Date		     Amount
Borrowed (3)		     Payable for
Reverse
Repurchase
Agreements		  

BCY

     0.250 %      03/17/2017       TBD  (4)    $ (547 )    $ (547 ) 
    1.400       03/17/2017       TBD  (4)      (2,142 )      (2,143 ) 
    2.249       01/05/2017       04/05/2017       (286 )      (287 ) 
    2.497       01/03/2017       04/03/2017       (4,133 )      (4,159 ) 
    2.555       03/01/2017       06/01/2017       (899 )      (901 ) 
    2.564       03/02/2017       06/02/2017       (2,934 )      (2,941 ) 
    2.648       04/03/2017       07/03/2017       (4,090 )      (4,090 ) 

BPS

     2.884       01/11/2017       07/10/2017       (1,401 )      (1,410 ) 

DEU

     2.030       02/23/2017       05/24/2017       (1,223 )      (1,226 ) 
    2.050       02/07/2017       05/09/2017       (753 )      (755 ) 
    2.050       03/02/2017       05/30/2017       (1,118 )      (1,120 ) 

GSC

     2.162       03/14/2017       04/17/2017       (780 )      (781 ) 

JPS

     2.564       03/01/2017       06/01/2017       (1,097 )      (1,100 ) 

MSC

     1.920       01/19/2017       04/19/2017       (3,501 )      (3,515 ) 
    2.784       02/06/2017       05/08/2017       (1,366 )      (1,372 ) 

RBC

     2.644       02/07/2017       08/07/2017       (2,697 )      (2,708 ) 
    2.730       03/13/2017       09/13/2017       (1,526 )      (1,528 ) 
    2.730       03/20/2017       09/20/2017       (2,075 )      (2,077 ) 

RDR

     1.490       02/22/2017       05/23/2017       (752 )      (753 ) 
    1.880       02/03/2017       05/02/2017       (679 )      (681 ) 

RTA

     2.209       04/15/2016       04/13/2017       (2,566 )      (2,622 ) 
    2.224       05/09/2016       05/08/2017       (2,643 )      (2,697 ) 
    2.227       05/12/2016       05/11/2017       (5,422 )      (5,531 ) 
    2.230       05/09/2016       05/08/2017       (1,474 )      (1,504 ) 
    2.345       07/26/2016       07/25/2017       (2,856 )      (2,903 ) 
    2.543       11/14/2016       05/15/2017       (697 )      (704 ) 
    2.559       10/07/2016       10/06/2017       (2,678 )      (2,712 ) 
    2.568       11/09/2016       11/08/2017       (2,739 )      (2,767 ) 
    2.574       11/28/2016       05/26/2017       (634 )      (640 ) 
    2.813       02/03/2017       01/31/2018       (1,715 )      (1,723 ) 
    2.918       03/14/2017       03/08/2018       (2,261 )      (2,265 ) 

SAL

     1.848       01/05/2017       04/05/2017       (1,361 )      (1,367 ) 
    1.937       02/16/2017       05/16/2017       (423 )      (424 ) 
    1.985       02/02/2017       05/02/2017       (1,943 )      (1,949 ) 

SOG

     1.600       02/27/2017       05/30/2017       (902 )      (903 ) 
    1.700       03/15/2017       06/15/2017       (1,439 )      (1,440 ) 
    2.665       01/10/2017       07/10/2017       (1,014 )      (1,020 ) 
    2.689       11/15/2016       05/15/2017       (526 )      (528 ) 
    2.759       03/09/2017       04/25/2017       (1,103 )      (1,105 ) 

UBS

     1.890       01/20/2017       04/21/2017       (934 )      (938 ) 
    1.920       03/14/2017       04/12/2017       (1,905 )      (1,907 ) 
    1.920       03/14/2017       06/14/2017       (662 )      (663 ) 
    1.990       01/20/2017       04/21/2017       (1,197 )      (1,202 ) 
    2.500       02/22/2017       05/23/2017       (3,756 )      (3,766 ) 
    2.534       02/03/2017       05/03/2017       (1,681 )      (1,688 ) 
    2.534       02/09/2017       05/09/2017       (2,890 )      (2,901 ) 
    2.550       02/22/2017       05/23/2017         (1,706 )      (1,711 ) 
         

 

 

  

Total Reverse Repurchase Agreements

           $   (83,674 ) 
         

 

 

  

(1)  Includes accrued interest.
(2)  Collateral is held in custody by the counterparty.
(3)  The average amount of borrowings outstanding during the period ended March 31, 2017 was $(81,212) at a weighted average interest rate of 2.081%.
(4)  Open maturity reverse repurchase agreement.

 

(j) Securities with an aggregate market value of $113,293 and cash of $538 have been pledged as collateral under the terms of master agreements as of March 31, 2017.

 

(k) Financial Derivative Instruments: Exchange-Traded or Centrally Cleared

Swap Agreements:

Credit Default Swaps on Corporate Issues - Sell Protection (1)

 

      Variation Margin  
Reference Entity   Fixed
Receive Rate		     Maturity
Date		    

Implied Credit

Spread at
March 31, 2017 (2)

     Notional
Amount (3)		      Market
Value		     Unrealized
Appreciation/
(Depreciation)		     Asset     Liability  

Sprint Communications, Inc.

     5.000%       12/20/2021       2.818%     $   300      $   28     $   20     $   0     $   0  
          

 

 

    

 

 

    

 

 

    

 

 

  

Interest Rate Swaps

 

                                           Variation Margin  
Pay/Receive
Floating Rate		    Floating Rate Index    Fixed Rate      Maturity
Date		      Notional
Amount		      Market
Value		     Unrealized
Appreciation/
(Depreciation)		     Asset     Liability  
Pay   

3-Month USD-LIBOR

      1.750 %       12/21/2023      $   60,000      $ (1,506 )    $   (2,636 )    $ 76     $ 0  
Pay   

3-Month USD-LIBOR

      1.750        12/21/2026        3,200        (170 )      (247 )      6       0  
Pay   

3-Month USD-LIBOR

      2.500        06/15/2046        1,600        42       238       0       (2 ) 
Receive   

3-Month USD-LIBOR

      1.500        12/21/2021        1,500        (31 )      (54 )      1       0  
Receive   

3-Month USD-LIBOR

      2.500        06/15/2036        22,800        392       2,666       0       (34 ) 
              

 

 

    

 

 

    

 

 

    

 

 

  
               $   (1,273 )    $ (33 )    $ 83     $ (36 ) 
              

 

 

    

 

 

    

 

 

    

 

 

  

Total Swap Agreements

      $ (1,245 )    $ (13 )    $   83     $   (36 ) 
              

 

 

    

 

 

    

 

 

    

 

 

  

 

(1)  If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2)  Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on issues as of period end serve as indicators of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
(3)  The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.

Cash of $1,429 has been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of March 31, 2017.

 

(l) Financial Derivative Instruments: Over the Counter

Swap Agreements:

Credit Default Swaps on Credit Indices - Sell Protection (1)

 

                                          Swap Agreements, at Value  (3)  
Counterparty   Index/Tranches    Fixed
Receive Rate		      Maturity
Date		      Notional
Amount (2)		      Premiums
Paid/(Received)		     Unrealized
Appreciation/
(Depreciation)		     Asset     Liability  
DUB  

CMBX.NA.BBB-.6 Index

      3.000 %       05/11/2063      $ 300      $ (16 )    $   (22 )    $ 0     $ (38 ) 
 

CMBX.NA.BBB-.8 Index

      3.000        10/17/2057        600        (69 )      (30 )      0       (99 ) 
 

CMBX.NA.BBB-.9 Index

      3.000        09/17/2058        300        (38 )      3       0       (35 ) 
FBF  

CMBX.NA.BBB-.8 Index

      3.000        10/17/2057        100        (16 )      0       0       (16 ) 
GST  

ABX.HE.AA.6-1 Index

      0.320        07/25/2045          6,242        (1,242 )      240       0       (1,002 ) 
 

ABX.HE.PENAAA.7-1 Index

      0.090        08/25/2037        1,593        (308 )      31       0       (277 ) 
 

CMBX.NA.A.6 Index

      2.000        05/11/2063        500        (25 )      (1 )      0       (26 ) 
 

CMBX.NA.BB.6 Index

      5.000        05/11/2063        300        (41 )      (20 )      0       (61 ) 
 

CMBX.NA.BBB-.6 Index

      3.000        05/11/2063        700        (39 )      (50 )      0       (89 ) 
 

CMBX.NA.BBB-.7 Index

      3.000        01/17/2047        100        (5 )      (4 )      0       (9 ) 
 

CMBX.NA.BBB-.9 Index

      3.000        09/17/2058        700        (87 )      5       0       (82 ) 
MYC  

CMBX.NA.BBB-.6 Index

      3.000        05/11/2063        1,200        (69 )      (84 )      0       (153 ) 
 

CMBX.NA.BBB-.7 Index

      3.000        01/17/2047        300        (13 )      (14 )      0       (27 ) 
 

CMBX.NA.BBB-.8 Index

      3.000        10/17/2057        100        (12 )      (4 )      0       (16 ) 
 

CMBX.NA.BBB-.9 Index

      3.000        09/17/2058        300        (37 )      2       0       (35 ) 
             

 

 

    

 

 

    

 

 

    

 

 

  
              $   (2,017 )    $ 52     $   0     $   (1,965 ) 
             

 

 

    

 

 

    

 

 

    

 

 

  

Total Swap Agreements

      $ (2,017 )    $ 52     $ 0     $ (1,965 ) 
             

 

 

    

 

 

    

 

 

    

 

 

  

(1)  If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash, securities or other deliverable obligations equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index.
(2)  The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement.
(3)  The prices and resulting values for credit default swap agreements on credit indices serve as indicators of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing market values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced indices’ credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.

 

(m) Securities with an aggregate market value of $1,997 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of March 31, 2017.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of March 31, 2017 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory    Level 1        Level 2        Level 3       

Fair Value

at 03/31/2017

  

Investments in Securities, at Value

                  

Loan Participations and Assignments

    $ 0        $ 3,057        $ 1,027        $ 4,084  

Corporate Bonds & Notes

                  

Banking & Finance

      0          4,088          766          4,854  

Industrials

      0          16,577          1,292          17,869  

Utilities

      0          1,678          0          1,678  

Municipal Bonds & Notes

                  

Arkansas

      0          421          0          421  

West Virginia

      0          806          0          806  

U.S. Government Agencies

      0          3,331          0          3,331  

Non-Agency Mortgage-Backed Securities

      0          75,459          571          76,030  

Asset-Backed Securities

      0          70,055          3,142          73,197  

Common Stocks

                  

Energy

      96          0          0          96  

Utilities

      0          0          28          28  

Warrants

                  

Utilities

      15          0          0          15  

Short-Term Instruments

                  

Repurchase Agreements

      0          970          0          970  

Short-Term Notes

      0          8,299          0          8,299  

U.S. Treasury Bills

      0          2,266          0          2,266  

Total Investments

    $ 111        $ 187,007        $ 6,826        $ 193,944  

Financial Derivative Instruments - Assets

                  

Exchange-traded or centrally cleared

    $ 0        $ 83        $ 0        $ 83  

Financial Derivative Instruments - Liabilities

                  

Exchange-traded or centrally cleared

      0          (36 )         0          (36 ) 

Over the counter

      0          (1,965 )         0          (1,965 ) 
     $ 0        $ (2,001 )       $ 0        $ (2,001 ) 

Total Financial Derivative Instruments

    $ 0        $ (1,918 )       $ 0        $ (1,918 ) 

Totals

    $   111        $   185,089        $   6,826        $   192,026  

There were no significant transfers among Levels 1 and 2 during the period ended March 31, 2017.

The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended March 31, 2017:

 

Category and Subcategory  

Beginning

Balance

at 06/30/2016

    

Net

Purchases

    

Net

Sales

   

Accrued

Discounts/

(Premiums)

    

Realized

Gain/

(Loss)

    

Net Change in

Unrealized

Appreciation/

(Depreciation) (1)

    

Transfers

into

Level 3

    

Transfers

out

of Level 3

    

Ending

Balance

at 03/31/2017

    

Net Change in

Unrealized

Appreciation/

(Depreciation)

on Investments

Held at

03/31/2017 (1)

  
Investments in Securities, at Value                

Loan Participations and Assignments

   $ 333     $ 0     $ (4 )    $ 1     $ 0     $ 136     $ 1,028     $ (467 )    $ 1,027     $ 0  

Corporate Bonds & Notes

                    

Banking & Finance

     2,089       0       (1,435 )      6       16       90       0       0       766       10  

Industrials

     1,309       0       0       1       (4 )      (14 )      0       0       1,292       (18 ) 

Non-Agency Mortgage-Backed Securities

     697       0       (29 )      0       (548 )      451       0       0       571       (47 ) 

Asset-Backed Securities

     73       2,971       0       57       0       41       0       0       3,142       42  

Common Stocks

                    

Utilities

     0       988       0       0       0       (960 )      0       0       28       (960 ) 

Warrants

                    

Industrials

     0       0       0       0       (12 )      12       0       0       0       0  
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Totals

   $   4,501     $   3,959     $   (1,468 )    $   65     $   (548 )    $   (244 )    $   1,028     $   (467 )    $   6,826     $   (973 ) 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy:

 

Category and Subcategory  

Ending

Balance

at 03/31/2017

     Valuation Technique   Unobservable Inputs    Input Value(s)
(% Unless Noted Otherwise)		  

Investments in Securities, at Value

         

Loan Participations and Assignments

   $ 1,027     Third Party Vendor   Broker Quote      99.000  

Corporate Bonds & Notes

         

Banking & Finance

     766    

Reference Instrument

  

Spread movement

      204.000 bps 

Industrials

     1,292    

Proxy Pricing

  

Base Price

      99.500  

Non-Agency Mortgage-Backed Securities

     571     Proxy Pricing   Base Price      6.300 -100.800  

Asset-Backed Securities

     3,142     Proxy Pricing   Base Price      1.994 - 3,440.217  

Common Stocks

         

Utilities

     28    

Other Valuation
Techniques (2)

  

—

      —  
 

 

 

         

Total

   $   6,826         
 

 

 

         

 

(1)  Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at March 31, 2017 may be due to an investment no longer held or categorized as Level 3 at period end.
(2)  Includes valuation techniques not defined in the Supplementary Notes to Schedule of Investments as securities valued using such techniques are not considered significant to the Fund.

See Accompanying Notes

Notes to Financial Statements

1. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

(a) Investment Valuation Policies The net asset value (‘NAV”) of the Fund’s shares is determined by dividing the total value of portfolio investments and other assets, less any liabilities attributable to that Fund, by the total number of shares outstanding of that Fund.

On each day that the New York Stock Exchange (“NYSE”) is open, Fund shares are ordinarily valued as of the close of regular trading (“NYSE Close”). Information that becomes known to the Fund or its agents after the time as of which NAV has been calculated on a particular day will not generally be used to retroactively adjust the price of a security or the NAV determined earlier that day. The Fund reserves the right to change the time as of which its respective NAV is calculated if the Fund closes earlier, or as permitted by the U.S. Securities and Exchange Commission (the “SEC”).

For purposes of calculating NAV, portfolio securities and other assets for which market quotes are readily available are valued at market value. Market value is generally determined on the basis of official closing prices or the last reported sales prices, or if no sales are reported, based on quotes obtained from established market makers or prices (including evaluated prices) supplied by the Fund’s approved pricing services, quotation reporting systems and other third-party sources (together, “Pricing Services”). The Fund will normally use pricing data for domestic equity securities received shortly after the NYSE Close and do not normally take into account trading, clearances or settlements that take place after the NYSE Close. A foreign (non-U.S.) equity security traded on a foreign exchange or on more than one exchange is typically valued using pricing information from the exchange considered by Pacific Investment Management Company LLC (“PIMCO” or the “Manager”) to be the primary exchange. A foreign (non-U.S.) equity security will be valued as of the close of trading on the foreign exchange, or the NYSE Close, if the NYSE Close occurs before the end of trading on the foreign exchange. Domestic and foreign (non-U.S.) fixed income securities, non-exchange traded derivatives, and equity options are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services using data reflecting the earlier closing of the principal markets for those securities. Prices obtained from Pricing Services may be based on, among other things, information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Certain fixed income securities purchased on a delayed-delivery basis are marked to market daily until settlement at the forward settlement date. Exchange-traded options, except equity options, futures and options on futures are valued at the settlement price determined by the relevant exchange. Swap agreements are valued on the basis of bid quotes obtained from brokers and dealers or market-based prices supplied by Pricing Services or other pricing sources. The Fund’s investments in open-end management investment companies, other than exchange-traded funds (“ETFs”), are valued at the NAVs of such investments.

If a foreign (non-U.S.) equity security’s value has materially changed after the close of the security’s primary exchange or principal market but before the NYSE Close, the security may be valued at fair value based on procedures established and approved by the Board of Trustees (the “Board”). Foreign (non-U.S.) equity securities that do not trade when the NYSE is open are also valued at fair value. With respect to foreign (non-U.S.) equity securities, the Fund may determine the fair value of investments based on information provided by Pricing Services and other third-party vendors, which may recommend fair value or adjustments with reference to other securities, indices or assets. In considering whether fair valuation is required and in determining fair values, the Fund may, among other things, consider significant events (which may be considered to include changes in the value of U.S. securities or securities indices) that occur after the close of the relevant market and before the NYSE Close. The Fund may utilize modeling tools provided by third-party vendors to determine fair values of non-U.S. securities. Foreign exchanges may permit trading in foreign (non-U.S.) equity securities on days when the Trust is not open for business, which may result in the Fund’s portfolio investments being affected when shareholders are unable to buy or sell shares.

Senior secured floating rate loans for which an active secondary market exists to a reliable degree will be valued at the mean of the last available bid/ask prices in the market for such loans, as provided by a Pricing Service. Senior secured floating rate loans for which an active secondary market does not exist to a reliable degree will be valued at fair value, which is intended to approximate market value. In valuing a senior secured floating rate loan at fair value, the factors considered may include, but are not limited to, the following: (a) the creditworthiness of the borrower and any intermediate participants, (b) the terms of the loan, (c) recent prices in the market for similar loans, if any, and (d) recent prices in the market for instruments of similar quality, rate, period until next interest rate reset and maturity.

Investments valued in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates obtained from Pricing Services. As a result, the value of such investments and, in turn, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of investments traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the Fund is not open for business. As a result, to the extent that the Fund holds foreign (non-U.S.) investments, the value of those investments may change at times when shareholders are unable to buy or sell shares and the value of such investments will be reflected in the Fund’s next calculated NAV.

Investments for which market quotes or market based valuations are not readily available are valued at fair value as determined in good faith by the Board or persons acting at their direction. The Board has adopted methods for valuing securities and other assets in circumstances where market quotes are not readily available, and has delegated to PIMCO the responsibility for applying the fair valuation methods. In the event that market quotes or market based valuations are not readily available, and the security or asset cannot be valued pursuant to a Board approved valuation method, the value of the security or asset will be determined in good faith by the Valuation Oversight Committee of the Board (“Valuation Oversight Committee”), generally based on recommendations provided by the Manager. Market quotes are considered not readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information, bid/ask information, indicative market quotations (“Broker Quotes”), Pricing Services’ prices), including where events occur after the close of the relevant market, but prior to the NYSE Close, that materially affect the values of the Fund’s securities or assets. In addition, market quotes are considered not readily available when, due to extraordinary circumstances, the exchanges or markets on which the securities trade do not open for trading for the entire day and no other market prices are available. The Board has delegated to the Manager the responsibility for monitoring significant events that may materially affect the values of the Fund’s securities or assets and for determining whether the value of the applicable securities or assets should be reevaluated in light of such significant events.

When the Fund uses fair valuation to determine the value of a portfolio security or other asset for purposes of calculating its NAV, such investments will not be priced on the basis of quotes from the primary market in which they are traded, but rather may be priced by another method that the Board or persons acting at their direction believe reflects fair value. Fair valuation may require subjective determinations about the value of a security. While the Fund’s policy is intended to result in a calculation of the Fund’s NAV that fairly reflects security values as of the time of pricing, the Fund cannot ensure that fair values determined by the Board or persons acting at their direction would accurately reflect the price that the Fund could obtain for a security if it were to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Fund may differ from the value that would be realized if the securities were sold.

(b) Fair Value Hierarchy U.S. GAAP describes fair value as the price that the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to valuation methods and requires disclosure of the fair value hierarchy, separately for each major category of assets and liabilities, that segregates fair value measurements into levels (Level 1, 2, or 3). The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Levels 1, 2, and 3 of the fair value hierarchy are defined as follows:

 

•   Level 1—Quoted prices in active markets or exchanges for identical assets and liabilities.

•   Level 2—Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

 

•   Level 3—Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair value of investments.

Assets or liabilities categorized as Level 2 or 3 as of period end have been transferred between Levels 2 and 3 since the prior period due to changes in the valuation method utilized in valuing the investments. Transfers from Level 2 to Level 3 are a result of a change, in the normal course of business, from the use of valuation methods used by third-party pricing services (Level 2) to the use of a broker quote or valuation technique which utilizes significant unobservable inputs due to an absence of current or reliable market-based data (Level 3). Transfers from Level 3 to Level 2 are a result of the availability of current and reliable market-based data provided by Pricing Services or other valuation techniques which utilize significant observable inputs. In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers into and out of Level 3, if material, are disclosed in the Notes to Schedule of Investments for the Fund.

For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to realized gain (loss), unrealized appreciation (depreciation), purchases and sales, accrued discounts (premiums), and transfers into and out of the Level 3 category during the period. The end of period value is used for the transfers between Levels of the Fund’s assets and liabilities. Additionally, U.S. GAAP requires quantitative information regarding the significant unobservable inputs used in the determination of fair value of assets or liabilities categorized as Level 3 in the fair value hierarchy. In accordance with the requirements of U.S. GAAP, a fair value hierarchy, and if material, a Level 3 reconciliation and details of significant unobservable inputs, have been included in the Notes to Schedule of Investments for the Fund.

(c) Valuation Techniques and the Fair Value Hierarchy

Level 1 and Level 2 trading assets and trading liabilities, at fair value The valuation methods (or “techniques”) and significant inputs used in determining the fair values of portfolio securities or other assets and liabilities categorized as Level 1 and Level 2 of the fair value hierarchy are as follows:

Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, sovereign issues, bank loans, convertible preferred securities and non-U.S. bonds are normally valued on the basis of quotes obtained from brokers and dealers or Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The Pricing Services’ internal models use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar assets. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Fixed income securities purchased on a delayed-delivery basis or as a repurchase commitment in a sale-buyback transaction are marked to market daily until settlement at the forward settlement date and are categorized as Level 2 of the fair value hierarchy.

Mortgage-related and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These securities are also normally valued by Pricing Services that use broker-dealer quotations, reported trades or valuation estimates from their internal pricing models. The pricing models for these securities usually consider tranche-level attributes, current market data, estimated cash flows and market-based yield spreads for each tranche, and incorporate deal collateral performance, as available. Mortgage-related and asset-backed securities that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Common stocks, ETFs, exchange-traded notes and financial derivative instruments, such as futures contracts, rights and warrants, or options on futures that are traded on a national securities exchange, are stated at the last reported sale or settlement price on the day of valuation. To the extent these securities are actively traded and valuation adjustments are not applied, they are categorized as Level 1 of the fair value hierarchy.

Investments valued (denominated) in currencies other than the U.S. dollar are converted to the U.S. dollar using exchange rates (currency spot and forward rates) obtained from Pricing Services. As a result, the NAV of the Fund’s shares may be affected by changes in the value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated in currencies other than the U.S. dollar may be affected significantly on a day that the Fund is not open for business. Valuation adjustments may be applied to certain securities that are solely traded on a foreign exchange to account for the market movement between the close of the foreign market and the NYSE Close. These securities are valued using Pricing Services that consider the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments. Securities using these valuation adjustments are categorized as Level 2 of the fair value hierarchy. Preferred securities and other equities traded on inactive markets or valued by reference to similar instruments are also categorized as Level 2 of the fair value hierarchy.

Investments in registered open-end investment companies (other than ETFs) will be valued based upon the NAVs of such investments and are categorized as Level 1 of the fair value hierarchy. Investments in unregistered open-end investment companies will be calculated based upon the NAVs of such investments and are considered Level 1 provided that the NAVs are observable, calculated daily and are the value at which both purchases and sales will be conducted.

Equity exchange-traded options and over the counter financial derivative instruments, such as forward foreign currency contracts and options contracts derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. These contracts are normally valued on the basis of quotes obtained from a quotation reporting system, established market makers or Pricing Services (normally determined as of the NYSE Close). Depending on the product and the terms of the transaction, financial derivative instruments can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as quoted prices, issuer details, indices, bid/ask spreads, interest rates, implied volatilities, yield curves, dividends and exchange rates. Financial derivative instruments that use similar valuation techniques and inputs as described above are categorized as Level 2 of the fair value hierarchy.

Centrally cleared swaps and over the counter swaps derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. They are valued using a broker-dealer bid quotation or based on market-based prices provided by Pricing Services (normally determined as of the NYSE close). Centrally cleared

swaps and over the counter swaps can be valued by Pricing Services using a series of techniques, including simulation pricing models. The pricing models may use inputs that are observed from actively quoted markets such as the overnight index swap rate (“OIS”), London Interbank Offered Rate (“LIBOR”) forward rate, interest rates, yield curves and credit spreads. These securities are categorized as Level 2 of the fair value hierarchy.

Level 3 trading assets and trading liabilities, at fair value When a fair valuation method is applied by PIMCO that uses significant unobservable inputs, investments will be priced by a method that the Board or persons acting at their direction believe reflects fair value and are categorized as Level 3 of the fair value hierarchy. The valuation techniques and significant inputs used in determining the fair values of portfolio assets and liabilities categorized as Level 3 of the fair value hierarchy are as follows:

Proxy pricing procedures set the base price of a fixed income security and subsequently adjust the price proportionally to market value changes of a pre-determined security deemed to be comparable in duration, generally a U.S. Treasury or sovereign note based on country of issuance. The base price may be a broker-dealer quote, transaction price, or an internal value as derived by analysis of market data. The base price of the security may be reset on a periodic basis based on the availability of market data and procedures approved by the Valuation Oversight Committee. Significant changes in the unobservable inputs of the proxy pricing process (the base price) would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

If third-party evaluated vendor pricing is not available or not deemed to be indicative of fair value, the Manager may elect to obtain Broker Quotes directly from the broker-dealer or passed through from a third-party vendor. In the event that fair value is based upon a single sourced Broker Quote, these securities are categorized as Level 3 of the fair value hierarchy. Broker Quotes are typically received from established market participants. Although independently received, the Manager does not have the transparency to view the underlying inputs which support the market quotation. Significant changes in the Broker Quote would have direct and proportional changes in the fair value of the security.

Reference instrument valuation estimates fair value by utilizing the correlation of the security to one or more broad-based securities, market indices, and/or other financial instruments, whose pricing information is readily available. Unobservable inputs may include those used in algorithm formulas based on percentage change in the reference instruments and/or weights of each reference instrument. Significant changes in the unobservable inputs would result in direct and proportional changes in the fair value of the security. These securities are categorized as Level 3 of the fair value hierarchy.

Short-term debt instruments (such as commercial paper) having a remaining maturity of 60 days or less may be valued at amortized cost, so long as the amortized cost of such short-term debt instrument is approximately the same as the fair value of the instrument as determined without the use of amortized cost valuation. Short-term debt instruments having a remaining maturity of 60 days or less are categorized as Level 3 of the fair value hierarchy.

The validity of the fair value is reviewed by the Manager on a periodic basis and may be amended in accordance with the Fund’s valuation procedures.

2. FEDERAL INCOME TAX MATTERS

The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code (the “Code”) and distribute all of its taxable income and net realized gains, if applicable, to shareholders. Accordingly, no provision for Federal income taxes has been made.

The Fund may be subject to local withholding taxes, including those imposed on realized capital gains. Any applicable foreign capital gains tax is accrued daily based upon net unrealized gains, and may be payable following the sale of any applicable investments.

In accordance with U.S. GAAP, the Manager has reviewed the Fund’s tax positions for all open tax years. As of March 31, 2017, the Fund has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions they have taken or expect to take in future tax returns.

The Fund files U.S. tax returns. While the statute of limitations remains open to examine the Fund’s U.S. tax returns filed for the fiscal years from 2014-2016, no examinations are in progress or anticipated at this time. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

As of March 31, 2017, the aggregate cost and the net unrealized appreciation (depreciation) of investments for Federal income tax purposes are as follows (amounts in thousands):

 

                                                              
Federal Tax
Cost		  

Aggregate Gross

Unrealized

Appreciation

  

Aggregate Gross

Unrealized

(Depreciation)

  

Net Unrealized

Appreciation

(Depreciation) (1)

$  187,445   $      14,285   $      (7,786)   $      6,499

 

(1) Primary differences, if any, between book and tax net unrealized appreciation (depreciation) are attributable to wash sale loss deferrals for federal income tax purposes.

Glossary: (abbreviations that may be used in the preceding statements)      (Unaudited)
Counterparty Abbreviations:         
BCY    Barclays Capital, Inc.   GST    Goldman Sachs International   RTA    Bank of New York Mellon Corp.
BPS    BNP Paribas S.A.   JPS    JPMorgan Securities, Inc.   SAL    Citigroup Global Markets, Inc.
DEU    Deutsche Bank Securities, Inc.   MSC    Morgan Stanley & Co., Inc.   SOG    Societe Generale
DUB    Deutsche Bank AG   MYC    Morgan Stanley Capital Services, Inc.   SSB    State Street Bank and Trust Co.
FBF    Credit Suisse International   RBC    Royal Bank of Canada   UBS    UBS Securities LLC
GSC    Goldman Sachs & Co.   RDR    RBC Capital Markets     
Currency Abbreviations:         
USD (or $)    United States Dollar          
Index/Spread Abbreviations:         
ABX.HE    Asset-Backed Securities Index - Home Equity   CMBX    Commercial Mortgage-Backed Index     
Other Abbreviations:         
ABS    Asset-Backed Security   LIBOR    London Interbank Offered Rate   TBD    To Be Determined
ALT    Alternate Loan Trust   PIK    Payment-in-Kind   TBD%    Interest rate to be determined when loan settles

Item 2. Controls and Procedures

 

  (a) The principal executive officer and principal financial & accounting officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))), are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.

 

  (b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits

A separate certification for each principal executive officer and principal financial & accounting officer of the registrant as required by Rule 30a-2 under the 1940 Act is attached as Exhibit 99.CERT.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PCM Fund Inc.

 

By:  

/s/ Peter G. Strelow

   
Peter G. Strelow   
President (Principal Executive Officer)   
Date: May 26, 2017   
By:  

/s/ William G. Galipeau

   
William G. Galipeau   
Treasurer (Principal Financial & Accounting Officer)   
Date: May 26, 2017   
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:  

/s/ Peter G. Strelow

   
Peter G. Strelow   
President (Principal Executive Officer)   
Date: May 26, 2017   
By:  

/s/ William G. Galipeau

   
William G. Galipeau   
Treasurer (Principal Financial & Accounting Officer)   
Date: May 26, 2017