PIMCO High Income Fund

 

 

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:    811-21311
Registrant Name:    PIMCO High Income Fund
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:    July 31
Date of Reporting Period:    October 31, 2015


Item 1. Schedule of Investments


Schedule of Investments

PIMCO High Income Fund

October 31, 2015 (Unaudited)

 

                                         
    PRINCIPAL
AMOUNT
(000s)
    MARKET
VALUE
(000s)
 

INVESTMENTS IN SECURITIES 136.7%

   

BANK LOAN OBLIGATIONS 1.5%

   

Concordia Healthcare Corp.

   

5.250% due 10/20/2021

  $ 1,900      $ 1,832   

iHeartCommunications, Inc.

   

6.938% due 01/30/2019

    10,450        8,782   

Sequa Corp.

   

5.250% due 06/19/2017

    2,593        2,165   
   

 

 

 

Total Bank Loan Obligations

(Cost $13,984)

      12,779   
   

 

 

 

CORPORATE BONDS & NOTES 66.2%

   

BANKING & FINANCE 36.3%

   

AGFC Capital Trust

   

6.000% due 01/15/2067

    27,410        17,816   

American International Group, Inc.

   

6.250% due 03/15/2087

    1,839        2,014   

Banco do Brasil S.A.

   

6.250% due 04/15/2024 (d)

    7,350        3,969   

9.000% due 06/18/2024 (d)

    21,500        14,943   

Banco Santander S.A.

   

6.250% due 09/11/2021 (d)

  EUR 2,300        2,447   

Barclays PLC

   

8.000% due 12/15/2020 (d)

    7,140        8,583   

BGC Partners, Inc.

   

5.375% due 12/09/2019

  $ 10,160        10,638   

BNP Paribas S.A.

   

7.375% due 08/19/2025 (d)

    10,000        10,363   

Cantor Fitzgerald LP

   

6.500% due 06/17/2022

    13,100        13,737   

Co-operative Group Holdings Ltd.

   

7.500% due 07/08/2026

  GBP 3,000        4,978   

Communications Sales & Leasing, Inc.

   

8.250% due 10/15/2023

  $ 5,000        4,648   

Credit Agricole S.A.

   

6.500% due 06/23/2021 (d)

  EUR 600        666   

7.875% due 01/23/2024 (d)

  $ 17,550        18,048   

Doctors Co.

   

6.500% due 10/15/2023

    10,000        10,864   

ERB Hellas PLC

   

4.250% due 06/26/2018

  EUR 700        596   

GSPA Monetization Trust

   

6.422% due 10/09/2029

  $ 8,209        9,318   

ING Groep NV

   

6.500% due 04/16/2025 (d)

    600        580   

International Lease Finance Corp.

   

6.980% due 10/15/2018

    18,000        18,607   

LBG Capital PLC

   

9.000% due 12/15/2019

  GBP 284        473   

9.125% due 07/15/2020

    1,900        3,149   

Lloyds Bank PLC

   

12.000% due 12/16/2024 (d)

  $ 27,700        40,026   

Midwest Family Housing LLC

   

6.631% due 01/01/2051

    4,951        3,998   

Millennium Offshore Services Superholdings LLC

   

9.500% due 02/15/2018

    7,220        6,570   

Navient Corp.

   

5.500% due 01/15/2019

    7,500        7,472   

5.625% due 08/01/2033

    29,295        21,605   

Novo Banco S.A.

   

2.625% due 05/08/2017

  EUR 400        410   

4.750% due 01/15/2018

    6,400        6,586   

5.000% due 04/04/2019

    439        442   

5.000% due 04/23/2019

    1,045        1,057   

5.000% due 05/14/2019

    792        797   

5.000% due 05/21/2019

    387        388   

5.000% due 05/23/2019

    384        390   

5.875% due 11/09/2015

    3,100        3,408   

Rio Oil Finance Trust

   

6.250% due 07/06/2024

  $ 28,300        23,418   

Royal Bank of Scotland Group PLC

   

7.500% due 08/10/2020 (d)

    300        311   

Sberbank of Russia Via SB Capital S.A.

   

3.352% due 11/15/2019

  EUR 6,000        6,492   

5.717% due 06/16/2021

  $ 10,100        10,201   


                                         
             

Tesco Property Finance PLC

   

5.411% due 07/13/2044

  GBP 4,288        5,812   

6.052% due 10/13/2039

    4,768        7,076   

TIG FinCo PLC

   

8.500% due 03/02/2020

    937        1,517   

8.750% due 04/02/2020

    4,815        6,896   

Tri-Command Military Housing LLC

   

5.383% due 02/15/2048

  $ 4,664        4,476   
   

 

 

 
        315,785   
   

 

 

 

INDUSTRIALS 20.5%

   

BMC Software Finance, Inc.

   

8.125% due 07/15/2021

    2,250        1,749   

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

   

9.000% due 10/15/2019 (b)

    8,709        6,260   

Caesars Entertainment Operating Co., Inc.

   

9.000% due 02/15/2020 ^

    19,100        15,471   

11.250% due 06/01/2017 ^

    10,700        8,533   

CCO Safari LLC

   

6.484% due 10/23/2045

    1,537        1,598   

6.834% due 10/23/2055

    1,377        1,402   

Chesapeake Energy Corp.

   

3.571% due 04/15/2019

    750        486   

Enterprise Inns PLC

   

6.875% due 05/09/2025

  GBP 5,000        7,939   

Forbes Energy Services Ltd.

   

9.000% due 06/15/2019

  $ 1,977        1,344   

Ford Motor Co.

   

7.700% due 05/15/2097

    16,610        20,595   

General Shopping Finance Ltd.

   

10.000% due 11/30/2015 (d)

    5,300        2,438   

General Shopping Investments Ltd.

   

12.000% due 03/20/2017 ^(d)

    2,500        638   

GTL Trade Finance, Inc.

   

7.250% due 04/16/2044

    4,500        3,397   

Hampton Roads PPV LLC

   

6.621% due 06/15/2053

    20,614        19,873   

Harvest Operations Corp.

   

6.875% due 10/01/2017

    28,618        24,325   

Hellenic Railways Organization S.A.

   

4.028% due 03/17/2017

  EUR 300        292   

4.500% due 12/06/2016

  JPY 10,000        74   

iHeartCommunications, Inc.

   

9.000% due 09/15/2022

  $ 5,500        4,517   

Intrepid Aviation Group Holdings LLC

   

6.875% due 02/15/2019

    9,030        7,890   

Russian Railways via RZD Capital PLC

   

7.487% due 03/25/2031

  GBP 19,600        28,490   

Sequa Corp.

   

7.000% due 12/15/2017

  $ 17,343        8,802   

Tembec Industries, Inc.

   

9.000% due 12/15/2019

    1,500        1,207   

UCP, Inc.

   

8.500% due 10/21/2017

    10,300        10,339   

Warren Resources, Inc.

   

9.000% due 08/01/2022

    3,000        578   
   

 

 

 
      178,237   
   

 

 

 

UTILITIES 9.4%

   

AK Transneft OJSC Via TransCapitalInvest Ltd.

   

8.700% due 08/07/2018

    5,900        6,543   

CenturyLink, Inc.

   

7.200% due 12/01/2025

    1,122        1,049   

Frontier Communications Corp.

   

8.875% due 09/15/2020

    650        676   

10.500% due 09/15/2022

    1,070        1,113   

11.000% due 09/15/2025

    1,070        1,124   

Gazprom Neft OAO Via GPN Capital S.A.

   

4.375% due 09/19/2022

    10,100        9,014   

6.000% due 11/27/2023

    9,900        9,580   

Gazprom OAO Via Gaz Capital S.A.

   

5.999% due 01/23/2021

    360        366   

Illinois Power Generating Co.

   

7.000% due 04/15/2018 (g)

    16,800        14,364   

7.950% due 06/01/2032

    900        707   

Mountain States Telephone & Telegraph Co.

   

7.375% due 05/01/2030 (g)

    15,200        16,937   

NRG REMA LLC

   

9.237% due 07/02/2017

    175        179   

Odebrecht Drilling Norbe Ltd.

   

6.350% due 06/30/2022

    5,248        2,624   

Odebrecht Offshore Drilling Finance Ltd.

   

6.625% due 10/01/2023

    5,466        1,845   

6.750% due 10/01/2023

    11,671        4,021   


                                         
             

Petrobras Global Finance BV

   

3.214% due 03/17/2020

    2,520        1,934   

6.250% due 12/14/2026

  GBP 8,600        9,273   

6.625% due 01/16/2034

    200        203   

7.875% due 03/15/2019

  $ 700        665   
   

 

 

 
      82,217   
   

 

 

 

Total Corporate Bonds & Notes

(Cost $588,576)

        576,239   
   

 

 

 

MUNICIPAL BONDS & NOTES 14.4%

   

CALIFORNIA 2.3%

   

Anaheim Redevelopment Agency, California Tax Allocation Bonds, (AGM Insured), Series 2007

  

6.506% due 02/01/2031

    2,000        2,336   

Sacramento County, California Revenue Bonds, Series 2013

   

7.250% due 08/01/2025

    1,500        1,724   

San Diego Redevelopment Agency, California Tax Allocation Bonds, Series 2010

   

7.625% due 09/01/2030

    7,500        8,231   

7.750% due 09/01/2040

    6,500        7,148   

San Diego Tobacco Settlement Funding Corp., California Revenue Bonds, Series 2006

  

7.125% due 06/01/2032

    290        325   
   

 

 

 
      19,764   
   

 

 

 

DISTRICT OF COLUMBIA 1.2%

   

District of Columbia Revenue Bonds, Series 2011

   

7.625% due 10/01/2035

    9,740        10,866   
   

 

 

 

ILLINOIS 2.2%

   

Chicago, Illinois General Obligation Bonds, (BABs), Series 2010

   

6.257% due 01/01/2040

    11,000        9,403   

7.517% due 01/01/2040

    9,805        10,020   
   

 

 

 
      19,423   
   

 

 

 

NEBRASKA 2.3%

   

Public Power Generation Agency, Nebraska Revenue Bonds, (BABs), Series 2009

   

7.242% due 01/01/2041

    16,500        19,740   
   

 

 

 

NEVADA 0.4%

   

North Las Vegas, Nevada General Obligation Bonds, (BABs), Series 2010

   

6.572% due 06/01/2040

    3,900        3,535   
   

 

 

 

NEW YORK 0.4%

   

Erie Tobacco Asset Securitization Corp., New York Revenue Bonds, Series 2005

   

6.000% due 06/01/2028

    3,595        3,595   
   

 

 

 

PENNSYLVANIA 3.8%

   

School District of Philadelphia, Pennsylvania General Obligation Bonds, (BABs), Series 2010

  

6.615% due 06/01/2030

    7,000        7,422   

6.765% due 06/01/2040

    24,770        26,052   
   

 

 

 
      33,474   
   

 

 

 

TEXAS 1.0%

   

El Paso Downtown Development Corp., Texas Revenue Bonds, Series 2013

   

7.250% due 08/15/2043

    7,535        8,332   
   

 

 

 

VIRGINIA 0.1%

   

Tobacco Settlement Financing Corp., Virginia Revenue Bonds, Series 2007

   

6.706% due 06/01/2046

    1,375        1,062   
   

 

 

 

WEST VIRGINIA 0.7%

   

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

  

7.467% due 06/01/2047

    6,680        5,861   
   

 

 

 

Total Municipal Bonds & Notes

(Cost $119,150)

      125,652   
   

 

 

 

U.S. GOVERNMENT AGENCIES 4.5%

   

Fannie Mae

   

3.500% due 09/25/2027 (a)

    750        94   

4.000% due 05/25/2020 (a)

    591        9   

5.744% due 04/25/2028

    1,500        1,526   

6.473% due 10/25/2017 - 01/25/2018 (a)

    89,199        4,052   

9.606% due 10/25/2041

    1,497        1,566   

10.000% due 01/25/2034

    220        264   

15.212% due 05/25/2043

    2,701        2,946   

Freddie Mac

   

4.000% due 08/15/2020 (a)

    875        54   

4.500% due 10/15/2037 (a)

    1,476        131   


                                         
             

4.678% due 11/25/2055

    14,489        8,471   

5.000% due 06/15/2033 (a)

    2,613        426   

5.904% due 07/15/2035 (a)

    1,953        321   

6.004% due 02/15/2042 (a)

    3,102        506   

6.944% due 08/15/2036 (a)

    1,087        249   

7.747% due 12/25/2027

    5,300        5,309   

9.397% due 10/25/2027

    4,350        4,956   

10.947% due 03/25/2025

    2,199        2,585   

11.485% due 12/15/2043 - 03/15/2044

    2,568        2,662   

12.609% due 05/15/2033

    73        89   

Ginnie Mae

   

3.500% due 06/20/2042 - 03/20/2043 (a)

    5,903        613   

4.500% due 07/20/2042 (a)

    378        62   

5.000% due 09/20/2042 (a)

    667        130   

6.056% due 02/20/2042 (a)

      20,872        2,369   
   

 

 

 

Total U.S. Government Agencies

(Cost $45,276)

      39,390   
   

 

 

 

U.S. TREASURY OBLIGATIONS 1.1%

   

U.S. Treasury Floating Rate Notes

   

0.097% due 07/31/2017 (i)(k)

    3,700        3,697   

U.S. Treasury Notes

   

0.250% due 10/31/2015

    5,600        5,600   
   

 

 

 

Total U.S. Treasury Obligations

(Cost $9,299)

      9,297   
   

 

 

 

MORTGAGE-BACKED SECURITIES 21.3%

   

American Home Mortgage Assets Trust

   

6.250% due 06/25/2037

    1,167        850   

Banc of America Alternative Loan Trust

   

5.403% due 06/25/2046 ^(a)

    11,947        1,898   

6.000% due 03/25/2036 ^

    5,446        4,757   

6.000% due 06/25/2046 ^

    94        81   

6.000% due 07/25/2046 ^

    3,031        2,511   

Banc of America Funding Trust

   

6.000% due 07/25/2037 ^

    827        664   

6.250% due 10/26/2036

    14,030          10,722   

Banc of America Mortgage Trust

   

2.630% due 02/25/2036 ^

    33        30   

BCAP LLC Trust

   

5.333% due 03/26/2037

    2,974        885   

9.202% due 10/26/2036

    8,220        7,041   

9.853% due 09/26/2036

    8,027        7,194   

28.567% due 06/26/2036

    1,746        553   

Bear Stearns Adjustable Rate Mortgage Trust

   

2.778% due 05/25/2047 ^

    545        491   

2.879% due 11/25/2034

    206        198   

Bellemeade Re Ltd.

   

6.497% due 07/25/2025

    1,250        1,249   

Chase Mortgage Finance Trust

   

2.444% due 12/25/2035 ^

    38        35   

5.456% due 09/25/2036 ^

    202        180   

5.500% due 05/25/2036 ^

    11        10   

Citigroup Mortgage Loan Trust, Inc.

   

0.544% due 07/25/2036

    22        22   

2.655% due 07/25/2046 ^

    128        112   

2.788% due 08/25/2037 ^

    1,189        1,034   

2.797% due 07/25/2037 ^

    238        224   

6.500% due 09/25/2036

    4,807        3,603   

Countrywide Alternative Loan Trust

   

0.367% due 07/25/2046

    18,713        19,274   

2.613% due 02/25/2037 ^

    491        441   

3.110% due 07/25/2046 ^

    1,235        1,021   

4.497% due 07/25/2021 ^

    529        523   

4.803% due 04/25/2035 (a)

    7,261        854   

5.500% due 03/25/2036 ^

    444        379   

6.000% due 05/25/2036 ^

    7,320        6,323   

6.000% due 11/25/2036 ^

    325        288   

6.000% due 02/25/2037 ^

    8,305        6,557   

6.000% due 03/25/2037 ^

    6,468        5,267   

6.000% due 05/25/2037 ^

    8,693        7,289   

6.250% due 12/25/2036 ^

    4,633        3,786   

6.250% due 08/25/2037 ^

    398        341   

6.500% due 06/25/2036 ^

    1,325        1,086   

6.500% due 11/25/2037 ^

    9,965        8,221   

Countrywide Home Loan Mortgage Pass-Through Trust

   

2.563% due 09/20/2036 ^

    804        722   

2.723% due 09/25/2047 ^

    91        82   

5.153% due 12/25/2036 (a)

    5,746        894   

6.000% due 07/25/2037

    2,851        2,460   

Credit Suisse First Boston Mortgage Securities Corp.

   

6.000% due 01/25/2036

    3,177        2,490   

First Horizon Alternative Mortgage Securities Trust

   

6.000% due 05/25/2036 ^

    2,787        2,346   

Grifonas Finance PLC

   

0.319% due 08/28/2039

  EUR 6,265        5,045   


                                         
             

HarborView Mortgage Loan Trust

   

2.656% due 08/19/2036 ^

  $ 706        525   

4.985% due 08/19/2036 ^

    57        52   

IndyMac Mortgage Loan Trust

   

2.944% due 05/25/2037 ^

    3,382        2,606   

JPMorgan Alternative Loan Trust

   

2.526% due 03/25/2037 ^

    11,248        8,875   

JPMorgan Mortgage Trust

   

6.423% due 01/25/2037 ^(a)

    27,975        6,313   

Nomura Asset Acceptance Corp. Alternative Loan Trust

   

3.063% due 04/25/2036 ^

    6,932        4,955   

RBSSP Resecuritization Trust

   

9.505% due 06/26/2037

    6,145        3,675   

Residential Asset Securitization Trust

   

6.250% due 10/25/2036 ^

    802        673   

6.250% due 09/25/2037 ^

    6,110        4,419   

6.500% due 08/25/2036 ^

    1,038        691   

Structured Adjustable Rate Mortgage Loan Trust

   

2.741% due 04/25/2047

    1,115        881   

4.907% due 01/25/2036 ^

    276        213   

WaMu Mortgage Pass-Through Certificates Trust

   

1.793% due 01/25/2037 ^

    173        148   

1.974% due 04/25/2037 ^

    156        133   

2.025% due 11/25/2036 ^

    1,419        1,267   

2.027% due 12/25/2036 ^

    110        98   

2.161% due 05/25/2037 ^

    239        197   

2.197% due 02/25/2037 ^

    298        261   

2.294% due 02/25/2037 ^

    338        304   

Washington Mutual Mortgage Pass-Through Certificates Trust

   

6.000% due 07/25/2036 ^

    7,436        5,909   

6.000% due 06/25/2037 ^

    11,616        10,357   

6.483% due 04/25/2037 (a)

    16,533        5,434   

6.500% due 03/25/2036 ^

    9,899        7,140   
   

 

 

 
Total Mortgage-Backed Securities
(Cost $171,413)
      185,159   
   

 

 

 

ASSET-BACKED SECURITIES 14.2%

   

Apidos CLO

   

0.010% due 07/22/2026

    3,000        1,836   

Argent Securities, Inc. Asset-Backed Pass-Through Certificates

   

0.427% due 01/25/2036

    2,661        2,039   

CIFC Funding Ltd.

   

0.010% due 05/24/2026

    4,000        2,989   

Citigroup Mortgage Loan Trust, Inc.

   

0.297% due 12/25/2036

    15,108        9,562   

Countrywide Asset-Backed Certificates

   

4.949% due 07/25/2036

    13,700        11,090   

5.074% due 10/25/2046 ^

    16,973        16,063   

GSAA Trust

   

5.917% due 03/25/2037 ^

    3,271        1,543   

JPMorgan Mortgage Acquisition Trust

   

4.820% due 01/25/2037 ^

    3,562        2,688   

Morgan Stanley Mortgage Loan Trust

   

5.750% due 11/25/2036 ^

    970        492   

5.965% due 09/25/2046 ^

    10,500        7,072   

NovaStar Mortgage Funding Trust

   

0.357% due 10/25/2036

    41,201        20,902   

People’s Financial Realty Mortgage Securities Trust

   

0.357% due 09/25/2036

    23,991        7,479   

Renaissance Home Equity Loan Trust

   

5.812% due 11/25/2036

    9,869        5,708   

6.998% due 09/25/2037 ^

    8,614        5,229   

7.238% due 09/25/2037 ^

    7,264        4,407   

Sherwood Funding CDO Ltd.

   

0.555% due 11/06/2039

    36,780        11,034   

Taberna Preferred Funding Ltd.

   

0.684% due 08/05/2036

    879        642   

0.684% due 08/05/2036 ^

    17,221        12,571   

Washington Mutual Asset-Backed Certificates Trust

   

0.347% due 05/25/2036

    329        237   
   

 

 

 
Total Asset-Backed Securities
(Cost $123,092)
      123,583   
   

 

 

 

SOVEREIGN ISSUES 0.5%

   

Athens Urban Transportation Organisation

   

4.851% due 09/19/2016

  EUR 800        794   

Republic of Greece Government International Bond

   

3.000% due 02/24/2023

    25        21   

3.000% due 02/24/2024

    25        20   

3.000% due 02/24/2025

    25        20   

3.000% due 02/24/2026

    25        20   

3.000% due 02/24/2027

    25        19   

3.000% due 02/24/2028

    25        19   

3.000% due 02/24/2029

    25        18   

3.000% due 02/24/2030

    25        18   

3.000% due 02/24/2031

    25        18   


                                         
             

3.000% due 02/24/2032

    25        17   

3.000% due 02/24/2033

    25        17   

3.000% due 02/24/2034

    25        17   

3.000% due 02/24/2035

    25        17   

3.000% due 02/24/2036

    25        17   

3.000% due 02/24/2037

    25        16   

3.000% due 02/24/2038

    25        16   

3.000% due 02/24/2039

    25        16   

3.000% due 02/24/2040

    25        16   

3.000% due 02/24/2041

    25        16   

3.000% due 02/24/2042

    25        16   

4.500% due 11/08/2016

  JPY 50,000        381   

4.750% due 04/17/2019

  EUR 3,000        3,024   
   

 

 

 

Total Sovereign Issues

(Cost $3,840)

      4,553   
   

 

 

 
    SHARES        

COMMON STOCKS 0.1%

   

FINANCIALS 0.1%

   

TIG FinCo PLC (e)

    828,934        1,105   
   

 

 

 
Total Common Stocks
(Cost $1,229)
      1,105   
   

 

 

 

PREFERRED SECURITIES 2.3%

   

BANKING & FINANCE 2.3%

   

Farm Credit Bank of Texas

   

10.000% due 12/15/2020 (d)

    15,400        19,443   
   

 

 

 

Total Preferred Securities

(Cost $18,134)

      19,443   
   

 

 

 

SHORT-TERM INSTRUMENTS 10.6%

   

REPURCHASE AGREEMENTS (f) 5.7%

      49,689   
   

 

 

 
    PRINCIPAL
AMOUNT
(000s)
       

SHORT-TERM NOTES 2.9%

   

Fannie Mae

   

0.228% due 01/14/2016

  $ 6,400        6,399   

0.264% due 02/08/2016

    6,700        6,698   

Federal Home Loan Bank

   

0.244% due 01/25/2016 - 01/26/2016

    8,600        8,598   

0.294% due 02/19/2016

    2,800        2,799   

Freddie Mac

   

0.284% due 02/22/2016

    1,000        1,000   
   

 

 

 
      25,494   
   

 

 

 

U.S. TREASURY BILLS 2.0%

   

0.132% due 01/07/2016 - 03/03/2016 (c)(i)(k)

    17,524        17,521   
   

 

 

 

Total Short-Term Instruments

(Cost $92,692)

      92,704   
   

 

 

 

Total Investments in Securities

(Cost $1,186,685)

      1,189,904   
   

 

 

 

Total Investments 136.7%

(Cost $1,186,685)

    $ 1,189,904   

Financial Derivative Instruments (h)(j) 1.6%

(Cost or Premiums, net $8,429)

      13,827   
Preferred Shares (33.5%)       (292,000
Other Assets and Liabilities, net (4.8%)       (40,979
   

 

 

 
Net Assets Applicable to Common Shareholders 100.0%     $ 870,752   
   

 

 

 

 


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) Payment in-kind bond security.

 

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

 

(d) Perpetual maturity; date shown, if applicable, represents next contractual call date.

 

(e) Restricted Securities:

 

Issuer Description    Acquisition Date     Cost     Market
Value
    Market Value
as Percentage
of Net Assets
 

TIG FinCo PLC

     04/02/2015      $   1,229      $   1,105        0.13%   
    

 

 

   

 

 

   

 

 

 

Borrowings and Other Financing Transactions

 

(f) Repurchase Agreements:

 

Counterparty   Lending
Rate
    Settlement
Date
    Maturity
Date
    Principal
Amount
    Collateralized By   Collateral
Received,
at Value
    Repurchase
Agreements,
at Value
    Repurchase
Agreement
Proceeds
to be
Received (1)
 
RDR     0.180%        10/30/2015        11/02/2015      $   35,900      U.S. Treasury Notes 1.875% due 11/30/2021   $ (36,717   $ 35,900      $ 35,901   
SAL     0.160           10/30/2015        11/02/2015        11,100      U.S. Treasury Notes 2.125% due 12/31/2021     (11,350     11,100        11,100   
SSB     0.000           10/30/2015        11/02/2015        2,689      Fannie Mae 2.140% due 11/07/2022     (2,744     2,689        2,689   
           

 

 

   

 

 

   

 

 

 

Total Repurchase Agreements

  $   (50,811   $   49,689      $   49,690   
           

 

 

   

 

 

   

 

 

 

 

(1) Includes accrued interest.

Reverse Repurchase Agreements:

 

Counterparty    Borrowing
Rate
     Borrowing
Date
     Maturity
Date
    Amount
Borrowed (2)
    Payable for
Reverse
Repurchase
Agreements
 

BCY

     (1.500 %)       04/16/2015         04/16/2017      $ (3,648   $ (3,618
     (1.500      09/24/2015         09/23/2017        (4,637     (4,629

FOB

     (4.000      07/20/2015         07/17/2017        (4,915     (4,858

MSC

     0.600         08/21/2015         11/23/2015        (10,649     (10,662
     0.600         10/08/2015         01/08/2016        (5,581     (5,583
            

 

 

 

Total Reverse Repurchase Agreements

  

       $   (29,350
            

 

 

 

 

(2) The average amount of borrowings outstanding during the period ended October 31, 2015 was $34,299 at a weighted average interest rate of (0.591%).

 

(g) Securities with an aggregate market value of $30,548 have been pledged as collateral under the terms of master agreements as of October 31, 2015.

 

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

Swap Agreements:

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

 

                                   Variation Margin  
Index/Tranches   Fixed Deal
Receive Rate
    Maturity
Date
    Notional
Amount (2)
     Market
Value (3)
    Unrealized
Appreciation/
(Depreciation)
    Asset     Liability  

CDX.HY-24 5-Year Index

    5.000     06/20/2020      $   13,167       $ 836      $ (178   $ 16      $ 0   

CDX.HY-25 5-Year Index

    5.000        12/20/2020        7,900         297        145        11        0   
        

 

 

   

 

 

   

 

 

   

 

 

 
         $   1,133      $   (33   $   27      $   0   
        

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 or securities 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 an indicator 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.


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

     2.750      06/17/2025       $   214,710       $ 15,417      $ 1,769      $ 618      $ 0   
Pay   

3-Month USD-LIBOR

     3.500         06/19/2044         617,800         131,982        141,392        5,242        0   
Receive   

3-Month USD-LIBOR

     2.750         12/16/2045         866,200         (32,748     (78,505     0        (7,137
              

 

 

   

 

 

   

 

 

   

 

 

 
               $ 114,651      $ 64,656      $ 5,860      $ (7,137
              

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

  

   $   115,784      $   64,623      $   5,887      $   (7,137
              

 

 

   

 

 

   

 

 

   

 

 

 

 

(i) Securities with an aggregate market value of $14,462 and cash of $2,605 have been pledged as collateral for exchange-traded and centrally cleared financial derivative instruments as of October 31, 2015.

 

(j) Financial Derivative Instruments: Over the Counter

Forward Foreign Currency Contracts:

 

                                 Unrealized Appreciation/(Depreciation)  
Counterparty  

Settlement

Month

    

Currency to

be Delivered

    

Currency to

be Received

    Asset     Liability  

BOA

    11/2015       GBP      47,882       $     72,784      $ 0      $ (1,031
    06/2016       EUR      3,698           5,063        975        0   
    06/2016       $      216       EUR     160        0        (39

BPS

    11/2015       BRL      921       $     228        0        (11
    11/2015       $      239       BRL     921        0        0   

BRC

    06/2016       EUR      692       $     952        186        0   

CBK

    11/2015       GBP      3,276           4,996        0        (54
    11/2015       $      12,183       EUR     10,892        0        (206

DUB

    11/2015       BRL      303       $     75        0        (4
    11/2015       $      79       BRL     303        0        0   
    02/2016       EUR      6,750       $     9,084        1,648        0   
    06/2016            386           529        102        0   

GLM

    11/2015       BRL      40           10        0        0   
    11/2015       GBP      1,109           1,706        4        (8
    11/2015       $      11       BRL     40        0        0   
    11/2015            1,120       GBP     734        11        0   

JPM

    11/2015       BRL      40       $     10        0        0   
    11/2015       GBP      451           691        0        (4
    11/2015       $      10       BRL     40        0        0   
    11/2015            685       GBP     451        11        0   

MSB

    11/2015       JPY      54,443       $     454        3        0   
    11/2015       $        78,663       GBP     51,533        780        0   
    12/2015       EUR      294       $     324        1        0   
    12/2015       GBP      51,057             77,927        0        (768
    06/2016       EUR      971           1,335        262        0   

NAB

    11/2015       $      344       JPY     41,400        0        (1
    12/2015       JPY      41,400       $     344        1        0   
    06/2016       EUR      2,113           2,901        565        0   
    07/2016            268           364        67        0   

UAG

    11/2015            34,428           38,533        674        0   
    11/2015       $      26,012       EUR     23,536        0        (131
    12/2015       EUR      23,536       $     26,022        131        0   
              

 

 

   

 

 

 

Total Forward Foreign Currency Contracts

    $ 5,421      $ (2,257
              

 

 

   

 

 

 

Swap Agreements:

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

 

                                            Swap Agreements, at Value  
Counterparty   Reference Entity   Fixed Deal
Receive Rate
    Maturity
Date
    Implied Credit
Spread at
October 31, 2015 (2)
    Notional
Amount (3)
    Premiums
Paid/(Received)
    Unrealized
(Depreciation)
    Asset     Liability  
BPS  

Novo Banco S.A.

    5.000     09/20/2020        6.358   EUR 5,000      $ 0      $ (250   $ 0      $ (250
 

Petrobras International Finance Co.

    1.000        12/20/2024        7.544      $ 1,700        (332     (298     0        (630
GST  

Petrobras International Finance Co.

    1.000        12/20/2024        7.544        2,200        (437     (378     0        (815
HUS  

Petrobras International Finance Co.

    1.000        12/20/2019        7.557        400        (33     (56     0        (89
 

Petrobras International Finance Co.

    1.000        12/20/2024        7.544        2,800        (581     (457     0        (1,038
MYC  

Chesapeake Energy Corp.

    5.000        09/20/2020        16.433        400        (40     (88     0        (128
 

Petrobras International Finance Co.

    1.000        12/20/2019        7.557        13,700        (1,268     (1,771     0        (3,039
           

 

 

   

 

 

   

 

 

   

 

 

 
        $   (2,691   $   (3,298   $   0      $   (5,989
           

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 or securities 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 corporate issues as of period end serve as an indicator 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.


Interest Rate Swaps

 

                                          Swap Agreements, at Value  
Counterparty   Pay/Receive
Floating Rate
  Floating Rate Index   Fixed Rate     Maturity
Date
    Notional
Amount
    Premiums
Paid
    Unrealized
Appreciation
    Asset     Liability  

MYC

 

Pay

 

3-Month USD-LIBOR

    2.350     02/18/2021      $   1,900,000      $   11,120      $   6,782      $   17,902      $ 0   
           

 

 

   

 

 

   

 

 

   

 

 

 

Total Swap Agreements

  

  $ 8,429      $ 3,484      $ 17,902      $   (5,989
           

 

 

   

 

 

   

 

 

   

 

 

 

 

(k) Securities with an aggregate market value of $3,479 have been pledged as collateral for financial derivative instruments as governed by International Swaps and Derivatives Association, Inc. master agreements as of October 31, 2015.

Fair Value Measurements

The following is a summary of the fair valuations according to the inputs used as of October 31, 2015 in valuing the Fund’s assets and liabilities:

 

Category and Subcategory    Level 1        Level 2        Level 3        Fair Value
at 10/31/2015
 

Investments in Securities, at Value

                 

Bank Loan Obligations

   $ 0         $ 12,779         $ 0         $ 12,779   

Corporate Bonds & Notes

                 

Banking & Finance

     0           306,466           9,319           315,785   

Industrials

     0           167,898           10,339           178,237   

Utilities

     0           82,217           0           82,217   

Municipal Bonds & Notes

                 

California

     0           19,764           0           19,764   

District of Columbia

     0           10,866           0           10,866   

Illinois

     0           19,423           0           19,423   

Nebraska

     0           19,740           0           19,740   

Nevada

     0           3,535           0           3,535   

New York

     0           3,595           0           3,595   

Pennsylvania

     0           33,474           0           33,474   

Texas

     0           8,332           0           8,332   

Virginia

     0           1,062           0           1,062   

West Virginia

     0           5,861           0           5,861   

U.S. Government Agencies

     0           26,867           12,523           39,390   

U.S. Treasury Obligations

     0           9,297           0           9,297   

Mortgage-Backed Securities

     0           183,910           1,249           185,159   

Asset-Backed Securities

     0           123,583           0           123,583   

Sovereign Issues

     0           4,553           0           4,553   

Common Stocks

                 

Financials

     0           0           1,105           1,105   

Preferred Securities

                 

Banking & Finance

     0           19,443           0           19,443   

Short-Term Instruments

                 

Repurchase Agreements

     0           49,689           0           49,689   

Short-Term Notes

     0           25,494           0           25,494   

U.S. Treasury Bills

     0           17,521           0           17,521   

Total Investments

   $ 0         $   1,155,369         $   34,535         $   1,189,904   

Financial Derivative Instruments - Assets

                 

Exchange-traded or centrally cleared

     0           5,887           0           5,887   

Over the counter

     0           23,323           0           23,323   
   $ 0         $ 29,210         $ 0         $ 29,210   

Financial Derivative Instruments - Liabilities

                 

Exchange-traded or centrally cleared

     0           (7,137        0           (7,137

Over the counter

     0           (8,246        0           (8,246
     $ 0         $ (15,383      $ 0         $ (15,383

Totals

   $   0         $ 1,169,196         $ 34,535         $ 1,203,731   

There were no significant transfers between Levels 1 and 2 during the period ended October 31, 2015.


The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) for the Fund during the period ended October 31, 2015:

 

Category and Subcategory   Beginning
Balance
at 07/31/2015
    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 10/31/2015
    Net Change in
Unrealized
Appreciation/
(Depreciation)
on Investments
Held at
10/31/2015 (1)
 
Investments in Securities, at Value   

Corporate Bonds & Notes

                   

Banking & Finance

  $ 9,224      $ 0      $ (50   $ 1      $ 1      $ 143      $ 0      $ 0      $ 9,319      $ 150   

Industrials

    10,339        0        0        3        0        (3     0        0        10,339        (2

U.S. Government Agencies

    5,491        8,559        (11     (1,570     5        49        0        0        12,523        49   

Mortgage-Backed Securities

    3,427        0        (2,124     0        55        (109     0        0        1,249        (1

Common Stocks

                   

Financials

    867        0        0        0        0        238        0        0        1,105        238   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Totals

  $   29,348      $   8,559      $   (2,185   $   (1,566   $   61      $   318      $   0      $   0      $   34,535      $   434   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 10/31/2015
     Valuation Technique   Unobservable Inputs    Input Value(s)
(% Unless Noted Otherwise)
 

Investments in Securities, at Value

  

       

Corporate Bonds & Notes

          

Banking & Finance

   $ 9,319      

Proxy Pricing

 

Base Price

     113.00   

Industrials

     10,339      

Proxy Pricing

 

Base Price

     100.00   

U.S. Government Agencies

     8,471       Proxy Pricing   Base Price      59.03   
     4,052       Third Party Vendor   Broker Quote      4.54   

Mortgage-Backed Securities

     1,249       Proxy Pricing   Base Price      99.97   

Common Stocks

          

Financials

     1,105      

Other Valuation Techniques (2)

 

—  

     —     
  

 

 

         

Total

   $   34,535           
  

 

 

         

 

(1)  Any difference between Net Change in Unrealized Appreciation/(Depreciation) and Net Change in Unrealized Appreciation/(Depreciation) on Investments Held at October 31, 2015 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 a Fund is determined by dividing the total value of portfolio investments and other assets attributable to that Fund, less any liabilities, 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 its respective NAV is calculated if the Fund closes earlier, or as permitted by 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 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 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 (which are discussed below), 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. With respect to any portion of the Fund’s assets that are invested in one or more open-end management investment companies (other than exchange-traded funds (“ETFs”)), the Fund’s NAV will be calculated based upon 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 of the Trust (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 (non-U.S.) 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 Trust 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 you cannot purchase, redeem or exchange 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—Inputs using (unadjusted) 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.

In accordance with the requirements of U.S. GAAP, the amounts of transfers between Levels 1 and 2 and transfers in 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 in and out of the Level 3 category during the period. The end of period timing recognition 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 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 Trust 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.

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 value 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. Prior to July 31, 2015, short-term investments having a maturity of 60 days or less and repurchase agreements were generally valued at amortized cost which approximates fair value. Short-term debt instruments having a remaining maturity of 60 days or less are categorized as Level 2 of the fair value hierarchy.

Equity exchange-traded options and over the counter financial derivative instruments, such as foreign currency contracts, options contracts, or swap agreements, derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors. Other than swap agreements, which are valued using a broker-dealer bid quotation or on market-based prices provided by Pricing Services or other pricing sources, 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 a 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 listed or traded on a multilateral or trade facility platform, such as a registered exchange, are valued at the daily settlement price determined by the respective exchange (if available). For centrally cleared credit default swaps, the clearing facility requires its members to provide actionable price levels across complete term structures. These levels along with external third-party prices are used to produce daily settlement prices. These securities are categorized as Level 2 of the fair value hierarchy. Centrally cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price. 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 the Manager 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.

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 October 31, 2015, 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 ending in 2012-2014, 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 October 31, 2015, 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)
 
$   1,186,685      $   67,643      $   (64,424   $   3,219   

 

(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.   GLM    Goldman Sachs Bank USA   MYC    Morgan Stanley Capital Services, Inc.
BOA    Bank of America N.A.   GST    Goldman Sachs International   NAB    National Australia Bank Ltd.
BPS    BNP Paribas S.A.   HUS    HSBC Bank USA N.A.   RDR    RBC Capital Markets
BRC    Barclays Bank PLC   JPM    JPMorgan Chase Bank N.A.   SAL    Citigroup Global Markets, Inc.
CBK    Citibank N.A.   MSB    Morgan Stanley Bank, N.A   SSB    State Street Bank and Trust Co.
DUB    Deutsche Bank AG   MSC    Morgan Stanley & Co., Inc.   UAG    UBS AG Stamford
FOB    Credit Suisse Securities (USA) LLC          
Currency Abbreviations:         
BRL    Brazilian Real   GBP    British Pound   USD (or $)    United States Dollar
EUR    Euro   JPY    Japanese Yen     
Index/Spread Abbreviations:         
CDX.HY    Credit Derivatives Index - High Yield          
Municipal Bond or Agency Abbreviations:         
AGM    Assured Guaranty Municipal          
Other Abbreviations:         
BABs    Build America Bonds   CLO    Collateralized Loan Obligation   PIK    Payment-in-Kind
CDO    Collateralized Debt Obligation   LIBOR    London Interbank Offered Rate     


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 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 document.

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

PIMCO High Income Fund

 

By: /s/ Peter G. Strelow                                                   
Peter G. Strelow
President (Principal Executive Officer)
Date: December 28, 2015
By: /s/ William G. Galipeau                                            
William G. Galipeau
Treasurer (Principal Financial & Accounting Officer)
Date: December 28, 2015
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: December 28, 2015
By: /s/ William G. Galipeau                                             
William G. Galipeau
Treasurer (Principal Financial & Accounting Officer)
Date: December 28, 2015